Gadget and phone retailer Dixons Carphone (DC.L) has set aside an extra £30m to cover compensation for mis-sold insurance.
Dixons Carphone said Thursday it was setting aside the extra cash to cover claims for mis-sold ‘Geek Squad’ insurance for mobile phones. The huge extra provision takes the total set aside to £35m.
Dixons Carphone was fined £29.1m in March by the Financial Conduct Authority (FCA) for historic mis-selling. The FCA found sales people weren’t given proper training on the Geek Squad cover, after a whistleblower complaint.
Dixons Carphone initially set aside just £2.3m to cover claims. The retailer said Thursday it has so far paid out £1m to customers.
“Taking into account the short period of time elapsed since [the FCA fine] and the small proportion of customers who have made claims, the volume and value of any potential future claims is highly uncertain,” the company said.
The FCA investigated mis-selling between December 2008 and June 2015, during which time £444.7m-worth of Geek Squad insurance cover was sold. 35% of cover was cancelled within the first three months.
Geek Squad cover cost around £5-a-month and was meant to be an own-brand rival to Apple’s Genius cover. Dixons Carphone has subsequently stopped offering the service.
News of the increased provision came as Dixons Carphone reported a tough first half of its financial year. Revenue fell 4% to £4.7bn in the six months to October 26 and the group made a pre-tax loss of £86m in the period. Sales at the company’s mobile phone division cratered 18%.
Chief executive Alex Baldock said the company had “taken important strides in our transformation” but was “still nowhere near its full potential.” He said the mobile phone business would remain “challenging.”
Investors had been expecting even worse numbers from Dixons Carphone and shares rose 7.5%.