Heath optimistic despite hard year: Payout cut after pre-tax profits slump to pounds 1.5m

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The Independent Online
DESPITE a post-tax loss of pounds 14.4m and a dividend cut, CE Heath is 'quite bullish' about the coming year, encouraged by strengthening insurance rates.

Peter Presland, the insurance broker's chief executive, said rates were up for most lines of business, and by 50 per cent or more in some areas. Roman Cizdyn of Smith New Court is forecasting that Heath will bounce back to a profit of pounds 31m this year.

Heath warned two months ago that it would be pushed into loss by an pounds 18.4m provision to meet escalating claims on a discontinued aviation underwriting account in Australia. The reduced final dividend of 11p, cutting the total by 40 per cent to 16p a share, was also forewarned.

Even with a smaller payout to shareholders, Heath still suffered a retained loss of pounds 24.6m in the year to end-March.

The underlying performance was reasonably good. The fall in pre- exceptional profits from pounds 31.5m to pounds 25.1m was partly due to last year's flotation of Heath's Australian underwriting business. Brokerage income grew by 13 per cent to pounds 114.8m in a contracting market.

But profits were wiped out by a series of one-offs. Besides the aviation provisions, Heath was hit by a pounds 5.6m loss on disposals (including the Australian flotation) and the pounds 5.3m cost of closures and 70 redundancies.

This last item included more than pounds 2m to account for vacant property that Heath is having difficulty selling. 'We should have adopted (this accounting policy) a couple of years ago, if we are honest,' said Mr Presland.

Heath was left with pre-tax profits of pounds 1.5m, a fall from a restated pounds 19m. It is taking a tougher line on expenses, freezing salaries and recruitment. Underlying expenses grew by 8 per cent last year, but Mr Presland said he hoped to push that down.

The computer services division contributed profits of pounds 4.7m.