Mis-selling inquiry by watchdog sparks shares crash at HomeServe
Shares in HomeServe crashed nearly 30 per cent yesterday after it admitted the Financial Services Authority (FSA) is investigating it in a potential mis-selling scandal.
Britain's biggest emergency plumber and electrician company had already admitted the debacle will cost up to £35m over the next two years, but has always insisted it was working with the watchdog rather than being investigated.
Yesterday, however, HomeServe said: "The FSA has informed us that they intend to investigate certain historic issues. The investigation will take a number of months to complete."
The news saw its shares plunge 66.5p to 160.9p, taking them down 67 per cent since October, when HomeServe first flagged up problems in the way staff sold its Complete Cover product.
That means the paper value of chief executive and company founder Richard Harpin's 12 per cent stake is down by a huge £118m – his 39 million shares are now worth less than £70m, down from nearly £190m last autumn.
The chairman JM Barry Gibson said the past year had been "the most challenging in HomeServe's history".
The investigations into the company's sales techniques were "taking longer and costing more to implement than originally planned," he added. As a result, HomeServe set out plans to slash the size of its UK business to create "a more sustainable business from which to grow".
The group responded to the potential mis-selling by suspending all telephone sales and marketing activity.
Last month, HomeServe had more damaging evidence of problems at its call centres when the regulator Ofcom fined the company £750,000 for making 50,000 silent or abandoned calls to UK households in just two months.
Despite that, HomeServe reported adjusted, pre-tax profits up by 8 per cent to £126m for the year to April.
Also yesterday, the company said it had hired Johnathan Ford – currently finance director at Aim-listed agriculture company NWF Group – as its finance director.
He is expected to join HomeServe in October, succeeding Martin Bennett, who became the group's chief operating officer in January.
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