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Home repairs and insurance provider HomeServe (LSE:HSV) has commenced consultation with employees on the prospect of cutting 200 jobs from their outbound operations to reduce operating costs as a result of fewer customers in the UK.
The decision came after the FTSE 250 company projected a loss of 8% of their customer, 3% higher than their estimates, which will result to £10 million less revenue for 2013.
This downtrend was due to the delay in marketing strategies for their utility partners which “has taken longer to restart than…originally expected”.
HomeServe also pegged some £20 million in re-organisation, redundancy costs, and additional third party support for the current year, doubling the earlier target of £10 million.
To offset these expected losses and increase in expenses, a job cut of some 200 positions is needed to reduce operating costs by £5 million.
Changes in the management team were made by the appointment of Martin Bennett as the new Chief Operating Officer who will take care of claims and network management, underwriting, systems, and efficiency in the UK operations and the hiring of a new Compliance Director.
It is in constant communication with the FSA in a constructive dialogue in the areas of governance and controls.
Growth Potential
Notwithstanding, HomeServe still reported a strong retention rate of 80% for insurance policies held for more than two years.
Inbound calls have resumed for 14 out of their 15 water partners, with the last one waiting for approval. Sales operations in the UK was suspended in October 2011 over issues of call abandonment that prompted a review on marketing strategies for fears of mis-selling as well as reopening customer complaints.
Elsewhere in its international operations, HomeServe is making good business in the United States with 20% more sales than the previous year and a 15% increase for 2012. The National Grid acquisition is seen to provide the company with 11% operating margin for this year.
Spanish operation targets a 50% increase in both customers and policy figures despite volatile economic conditions of the country.
The company has completed the purchase of Veolia’s 51% stake in Domeo, a France-based complementary business, as well as increased investment in Italy. Both investments are expected to create losses in the beginning. Net debt reached £109 million as a result of the Veolia transaction.
HomeServe profits before tax will still be well within market expectations between £122 million and £132 million, or a mean average of £127 million, the company said.
Shares of HomeServe are down by 27.5 pence, or 10% from its previous day’s close, to 247.5 pence, with a volume of 3.7 million at 1:30 PM GMT.
Company Spotlight
HomeServe started as a home emergencies and repairs provider and is now providing appliance replairs, locksmith servicing, boiler servicing, along with related comprehensive insurance. The company has presence in the United Kingdom, United States, France, Spain, Belgium, Italy.
References
↑ HomeServe Company Overview
↑ Repair Firm HomeServe To Shed 200 UK Jobs
↑ Homeserve ‘set to lose customers’
↑ Homeserve’s woes continue
↑ HomeServe Stock Quote Information
