Shares in retailer N Brown fell by as much as 5.4 per cent on Thursday after the company said it expects one-off costs of up to £40m to pay customer redress on a flawed insurance product.
The company, which owns Simply Be, Jacamo and JD Williams, said it had identified flaws in historical insurance products which it sold between 2006 and 2014. The products were provided by a third-party underwriter.
Although the group expects to take an exceptional hit of between £35m and £40m as a result, it said it thought there may be mitigating actions to reduce the overall cost. It confirmed the issue would not impact underlying operations.
Shares initially fell by as much as eight per cent but recovered modestly through the day. At time of writing N Brown group shares were down 4.3 per cent at 291.30p.
Analysts at Peel Hunt said cuts to dividends were "very unlikely", although they raised the possibility that a new finance deal or covenance reset may be required.
This follows a separate announcement in the last financial year that the group would pay out £22.9m in compensation for missold PPI.