Court ruling blow to Heath

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AN ADVERSE Australian High Court judgment last week held back profits at CE Heath, one of Britain's biggest insurance brokers, writes Diane Coyle.

The decision, overturning lower courts' findings that the Victoria Accident Compensation Commission should make disputed payments to Heath's Australian subsidiary, led to a pounds 22.7m write-off.

Peter Presland, Heath's chief executive, said the dividend would be held at 16p as a result. 'The judgment has come as a great disappointment to us right at the end of the year,' he said. 'It would otherwise have been an excellent result.'

Profits before tax and after exceptional items were pounds 11.8m in the year to 31 March, up from pounds 1.5m. Operating profits rose 21 per cent to pounds 30.4m. Profits from broking rose from pounds 15.4m to pounds 18.5m. UK business outside London grew 10 per cent and it was an 'excellent' year in Mexico.

Broking expenses rose only 4 per cent. A cost control programme begun 18 months ago means Heath is now making a trading profit on broking rather than relying on investment income. Lower interest rates cut investment earnings from pounds 12.5m to pounds 10.2m.

Heath further reduced its underwriting activities - which accounted for 3.5 per cent of group turnover last year compared with 50 per cent four years ago - with the disposal of nearly half its stake in Heath International Holdings, independently quoted in Australia.

Underwriting profits rose from pounds 7m to pounds 8.4m. The shares rose 41 2 p to 340p.