DOMESTIC repair giant Homeserve has revealed its customer service problems could cost it as much as £35m.

The firm, which insures three million people in the UK against burst pipes, broken-down boilers and electrical problems, recently stopped making outbound sales calls and retrained staff amid fears it has mis-sold policies.

Although it is gradually resuming taking calls, it yesterday revealed that the issues will cost it £10m in restructuring costs and fees in the second half of its financial year, while it will pay a further £10m a year to reinvigorate its sales processes.

It estimates that customer numbers will be cut by up to 5% – equivalent to 150,000 in the UK – as a result of the reduced marketing activity, which will lead to a £15m drop in contract renewals income next year.

Shares fell 13% yesterday after the hit from the customer services problems overshadowed a 10% rise in underlying pre-tax profits to £23.5m in the six months to September 30. They have now lost more than half of their value since the problems emerged last month.

Homeserve has started the process of developing new sales scripts but said outbound calls will not be resumed until it is fully confident it can meet the required standards. It is also reviewing its direct marketing material.