Repairs group feeling benefit of overhaul

The group, which repairs burst water pipes, covers boilers against breakdown and replaces fuses, revealed it has renewed deals with two of its larger water company business partners.

The firm has tie-ups to sell its emergency services to a number of water utilities’ customers, including Yorkshire Water.

The company, whose chief executive Richard Harpin lives near York, is recovering after last year finding a number of flaws in its sales and marketing, complaints handling, associated governance and controls.

In May, it revealed the Financial Services Authority was investigating these lapses, which sent its shares tumbling. The company is awaiting the results of the FSA probe – which it said could take a number of months to complete – and could include a fine.

Mr Harpin said overhauls in the UK are starting to show benefits, with increased customer satisfaction and reduced complaints.

Changes included new telesales scripts, re-training for sales agents, improved compliance and monitoring, a review of bonuses and clearer sales and marketing material.

“Transition of our UK business to a smaller, customer-focused business will take time to fully deliver but I’m pleased with the progress,” he said.

“One of my biggest worries following the issues in the UK business last year was whether we would be able to hold on to all our water company partners.

“I’m therefore delighted to announce that not only have we held on to all our partners, but that the team have managed to renew two of our larger water company partners on new, long-term agreements.” It did not name the water firms.

The FSA probe focuses on potential misdemeanours over the past couple of years, Mr Harpin added.

The low-value general insurance sector has come under increasing scrutiny by the FSA in recent years, and last week was criticised by the regulator’s managing director Martin Wheatley. The FSA is also investigating York-based ‘life assistance’ company CPP Group, which insures mobile phones and credit cards.

However, Mr Harpin said he does not anticipate a wave of cancellations from customers once the outcome of the probe is known.

He said when HomeServe first revealed the FSA’s involvement in October 2011, only 1,200 customers called up to cancel their policies.

“That’s the reassurance from a customer base of almost three million at the time,” he said.

He added: “We’re not expecting any recommendations which will affect the management of the business going forward. There were a large number of business improvement initiatives and the vast majority of these have now been completed.”

The group said adjusted half-year profits are expected to be higher than the £23.5m a year earlier. Shares in the group dipped 2.6p to 218.5p.

Panmure Gordon analyst Andy Brown said: “Overall this is a better statement than we had expected. First-half profits are likely to be ahead and while it is addressing its UK issues, water partner renewal is encouraging.

“Good progress is being made in its international operations. That said, the FSA investigation remains ongoing and could take many months to complete. With this uncertainty, we stay cautious for now.”

He added: “The share price has had a spike up mid-year due to speculation around private equity interest. It retains a decent dividend yield which provides some support to the share price although for us to go positive we would want better yield support. Sell.”

A global expansion

HomeServe was founded by current chief executive Richard Harpin as a joint venture with South Staffordshire Water in 1993, with an investment of £100,000.

The home emergency business grew quickly and within 10 years accounted for two thirds of the company’s profits.

In 2001 it launched Doméo, a joint venture with Veolia in France, and expanded into the US in 2003. In 2004, South Staffordshire Water split from the group and the company changed its name to HomeServe plc. In 2005/6 the group entered the Spanish market.