Homeserve in shares crisis

Midlands-based home repairs group Homeserve saw a staggering £500 million wiped off its market value in just a few hours today as investors deserted the firm amid fears that policies had been mis-sold.

The firm insures three million people in the UK against burst pipes, broken-down boilers and electrical problems. It suspended its sales operation over the weekend after a review by accountant Deloitte.

The review highlighted cases where the sales practices by cold callers fell short of required standards. Homeserve has now been forced to retrain nearly 500 call centre staff in the wake of the findings.

The FTSE 250-listed group, which saw shares fall 30 per cent to value the group at £1.1 billion, gave no details on how many customers may have been affected by the problems, which are understood to relate to the scripts used by sales people to explain pricing and policy details.

Homeserve runs repair services across Shropshire, including plumbers, electricians, heating engineers and drainage engineers.

Chief executive Richard Harpin said the firm would resume marketing once it was confident 'the sales processes meet the standards that we and our customers expect'.

Inbound calls, where potential customers contact the company, are due to resume tomorrow but cold calling will take longer to start again. Homeserve said it will meet its market expectations for the year to March, but analysts warned a lack of sales this winter would impact the results for the following year.

Henry Carver, an analyst at broker Peel Hunt, said the autumn/winter period to March is key for winning new customers and no sales growth in the UK during this period will hit profits in 2013.

In total the group has more than five million customers across its businesses, which also include divisions in the US, France and Spain as well as the UK.

The Financial Services Authority has been in-formed and is likely to investigate, which could mean a hefty fine for Homeserve if it is found to have breached rules for selling of financial products. There is also the possibility of compensation for customers if it is found they have been mis-sold a policy.

By David Burrows