Homeserve hit by cost of retraining sales team
Homeserve, the home maintenance and insurance firm, expects to incur £10m in annual costs to retrain staff, admitting substandard sales practices.
The firm also said it expects to lose customers and revenue after suspending its telesales service last month.
Shares closed down 10% on the news.
Meanwhile, Homeserve reported £18.2m in pre-tax profits in the six months to the end of September, slightly up from last year. But it expects customer numbers to fall by 5% this year.
Investec Securities analyst Wayne Gerry said the firm had provided: "a good set of interim results showing a strong financial and operational performance. However, this is overshadowed by the UK sales and marketing issues."
An internal review into sales techniques last month led to the suspension of its telesales team.
The company estimates that the fall in customer numbers will reduce income from renewals by £15m in the beginning of the fiscal year starting in April 2012.
The firm is taking its staff through a comprehensive retraining programme, based on feedback from the Financial Services Authority (FSA).
It reported initial additional costs of £10m for restructuring, fees and other expenses, and a further £10m per year for "reinvigorating [its] customer focus".
"A particular concern was identified around the way in which 'Complete Cover' policies had been sold as an upgrade to existing customers by outbound telesales staff," said chairman Barry Gibson.
"The process may, in a number of cases, have left the customer unclear on the details of their cover and the price they were paying."
The FSA declined to comment on whether the firm would face a fine for mis-selling, but Homeserve and the FSA have been working together since the suspension was announced last month.