Shares in HomeServe crashed by 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.
But HomeServe said yesterday: "The FSA has informed us that they intend to investigate certain historic issues. The investigation will take a number of months to complete."
Homeserve first flagged up problems in the way staff sold its Complete Cover product.
Chairman J M Barry Gibson said that 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 regulator Ofcom fined the firm £750,000 for making 50,000 silent or abandoned calls to UK households in just two months.
Despite that, HomeServe reported an adjusted, pre-tax profit up by 8 per cent to £126m for the year to April.
- More about: