LONDON (Reuters) - British motoring group AA (>> AA) said on Tuesday acting Chief Executive Simon Breakwell will remain in the role permanently while lowering its full-year profit forecast as it seeks to stabilise the business after firing its executive chairman last month.

Shares in the roadside recovery and motor insurance services company fell 9.3 percent to 152 pence by 0850 GMT to be the biggest mid-cap faller.

Bob Mackenzie's sudden dismissal in August from his roles as both chief executive and chairman and the news that costs related to an "erratic work load", particularly in June and July, had dragged on profits hit shares in AA.

AA cut its forecast for earnings before interest, tax, depreciation and amortisation (EBITDA) for the full-year ending January 2018 to 390-395 million pounds.

The company had lowered its profit forecast to be "broadly in line" with last year's 403 million pounds on Aug. 1, when it dismissed Mackenzie for gross misconduct.

Hedge funds AQR Capital Management, GLG Partners and Miura Global Management all held outstanding short positions in AA on Monday, according to filings with the British regulator, suggesting they were positioned for a fall in the stock price.

Veteran investor Neil Woodford's firm Woodford Investment Management owns 13 percent of AA after increasing its stake on Aug. 1, according to Thomson Reuters Eikon.

Core profit for the half-year ending July 31 was flat at 193 million pounds.

The firm said planned capital expenditure would increase by 35 million pounds more than expected due to delays to an IT transformation.

Analysts at Jefferies said that while Breakwell's appointment was welcome, earnings per share downgrades and increased capital spending were not.

"We remain concerned that the business cannot generate sufficient cash flow to satisfy both debt and equity holders," they added.

A trader who declined to be named told Reuters that delays to restructuring and increased spending were concerns.

Speaking to Reuters by telephone, Breakwell said there was "nothing fundamentally wrong" with the business.

"The business is strong and stable and pretty robust," he said, adding it would invest in its insurance business and look carefully at how to create a distinctive service for customers.

A merger with insurer Hastings (>> Hastings Group Hldg PLC) was discussed for "less than a minute" by AA's board, Breakwell said.

The two companies previously said they held preliminary merger talks during the summer, but Hastings said these had ended.

The firm maintained its interim dividend at 3.6 pence per share.

(Additional reporting by Maiya Keidan, Alasdair Pal, Tricia Wright and Carolyn Cohn; editing by Rachel Armstrong and Louise Heavens)

By Emma Rumney

Stocks treated in this article : AA, Hastings Group Hldg PLC