Homeserve sets aside £6m for fine

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BoilerHome emergency business Homeserve has set aside £6 million as it braces itself for a possible fine from City regulators for a mis-selling scandal.

The boiler repair company expects the fine from the Financial Conduct Authority (FCA) on top of the £24.2 million already set aside to cover the compensation process for customers and overhauling working practices.

The investigation, 700 UK job cuts and falling UK sales sent pre-tax profits plunging by more than half to £66.5 million for the year to the end of March.

Walsall-based Homeserve has been under a cloud since first revealing problems with its sales calls in October 2011. It said the FCA's investigation will take a "number of months" to complete and that £6 million was its best estimate on a potential fine and associated costs.
The probe is thought to centre on mis-selling of policies and poor handling of customer complaints. The company said it spent £9.5 million of its £24.2 million provision over the year on contacting and compensating customers, plus reviewing complaints from winter 2010.

Homeserve has already been fined £750,000 by telecoms watchdog Ofcom for silent and abandoned calls. Its UK workforce shrunk by 377 staff over the year and in March it revealed another 300 jobs will be cut at a cost of £4 million.

Homeserve's policies include boiler and central heating breakdown cover from £4 per month and insurance against blocked drains from £2.50 per month. It has tie-ups with major utility firms such as Thames Water and United Utilities.

The company was founded by chief executive Richard Harpin, who has about 12% of its shares.

Mr Harpin said: "Our products and services continue to meet clear customer needs and we are confident that our business model can continue to deliver long-term value for all stakeholders."

Shares in the company surged more than 11% on relief that the estimated fine was not greater. Homeserve held its total dividend at 11.3p per share.

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