Homeserve, the insurer and boiler repair group, is still awaiting the outcome of an FSA investigation into misselling allegations, which led to the company cutting its UK operations while trying to grow overseas.
It said in early February that the regulatory probe was likely to continue for a number of months yet, but in the meantime it had been re-contacting customers who "may have suffered detriment as a result of the way in which they were sold their policy."
Now its new strategy has been called into question by analysts at Espirito Santo who have moved their recommendation from buy to sell. Espirito's David Brockton said:
It has become increasingly clear to us that Homeserve's new marketing is much less effective than we had hoped. We change our UK forecasts to reflect lower policy sales. We also reduce our international forecasts to reflect greater marketing spend in the US and weaker growth in France.
Together these changes dent our confidence in the investment case, contributing to earnings per share downgrades of 4% and 12% for 2014 and 2015 respectively. As a result, even with a favourable conclusion to the current FSA investigation, we now expect the shares to underperform. We reduce our fair value from 288p to 210p and downgrade from to sell.
The news has helped send Homeserve 5.5p lower to 236.2p.
