British home repair and insurance company HomeServe said profit this year and next would be hit by lower customer numbers and restructuring costs as it deals with the impact of mis-selling concerns.
Shares in Homeserve, which suspended telesales operations in October to review sale scripts, marketing mail, and customer complaints, were down 13 percent at 217.5 pence at 1000 GMT on Tuesday.
The company posted a 10 percent rise in adjusted first-half pretax profit to 23.5 million pounds.
Homeserve, which sells cover for, and fixes boilers and burst pipes and has around 5.1 million customers, is not under investigation by the Financial Services Authority but has been in contact with the regulatory body.
Homeserve, whose telesales remain suspended at what is one of its busiest periods, said reduced marketing activity would hit customer numbers by up to 5 percent and, as a result, renewals income in 2013 would fall about 15 million pounds.
It forecast one-off restructuring costs of up to 10 million pounds in the second half as it retrains staff and produces new sales scripts, with ongoing additional annual costs of up to 10 million as it factors in a likely fall in new customer levels.
There is going to inevitably be higher costs of acquiring customers in the UK because the likelihood is that our conversations with customers are going to be longer and the conversion rates could potentially be lower. We have built that in conservatively for the numbers next year, chief executive Richard Harpin told Reuters.
Harpin said no timeline had been set to show the FSA the improvements, adding detailed feedback from the authority had been consistent with issues the company has been addressing.
Everything is on track in terms of the action plan we have put together, said Harpin, who has brought Jonathan King back from the United States to oversee the changes in Britain -- Homeserve also operates in France, Italy and Spain.
HomeServe said business in the six months to end-September had been boosted by a doubling of revenue in its U.S. market, with group sales up 25 percent to 213 million pounds.
Customer retention rates in Britain, which accounts for over 80 percent of operating profit, remained stable at around 82.5 percent, and the company said it remained confident of delivering a good financial performance in 2012 and beyond.
Investec Securities analyst Wayne Gerry, who kept his Hold rating on Homeserve stock, said: A good set of interim results showing a strong financial and operational performance. However, this is overshadowed by the UK sales and marketing issues. Addressing these issues will attract a level of additional cost higher than we, and probably the market, had been anticipating.
(Reporting by Neil Maidment; Editing by Sarah Young and Dan Lalor)