CE Heath nets 21m pounds from Australian sale

CE HEATH, the insurance broker, has sold a near-20 per cent stake in its Australian associate in a pounds 21m deal that will reduce its debt-equity ratio to 'a level not known in living memory'.

Peter Presland, chief executive, said the proceeds from placing the 32.4 million shares in CE Heath International Holdings would give the group borrowings of about pounds 20m on net assets of around pounds 80m.

He said the share sale would dilute earnings but improve cash flow. Since last year Heath has based its dividend payments on cash flow - a move prompted by the flotation of Heath International on the Australian stock exchange.

The Heath International shares were placed with institutions at Adollars 1.40 - 10 cents less than Heath received in last year's flotation, and two cents less than yesterday's market price.

Mr Presland said Australian stockbrokers had suggested there was substantial institutional demand for Heath International. But shares in the Australian underwriting business had fallen as low as Adollars 1, partly because of the weakness of the Australian market but also because Heath was perceived as a potential seller.

'We've removed a large chunk of the overhang,' Mr Presland said.

Heath considered selling the whole of its stake but has retained 25 per cent, which it has 'no present intention' of selling.

Heath expects to pay tax of no more than pounds 4.5m on the pounds 21m disposal. The stake had a book value of pounds 14.3m. Heath will reduce its bank borrowings by pounds 11m and will use the rest of the money to expand its business.

The shares closed 2p higher at 275p.