Homeserve to sell off emergency services
Household emergencies insurer Homeserve has put its Emergency Services operation up for sale after it failed to meet expectations.
The company, Walsall’s biggest employer, said it now planned to concentrate on growing its UK Membership business, which underpins about 1,200 jobs in the town.
Homeserve chairman Brian Whitty said Emergency Services, which employs 2,400 people at centres in Beverley, Norwich and Nottingham, was meant to be a “unique, national, multi-trade network” for insurers.
“Whilst we have validated the benefit to insurers of such an integrated hub proposition, we have not progressed strategic partnerships of this type at a rate consistent with our original objectives.
“Accordingly, we have decided to exit UK Emergency Services and are currently progressing a number of approaches.”
Homeserve said that as a result it had booked an impairment charge of £97 million which had resulted in a statutory pre-tax loss of £21.7 million for the year to March 31.
Stripping out the one-off charge resulted in a profit before tax of £96.1 million for the year, 13 per cent ahead of the previous 12 months.
Revenue from Homeserve’s core membership operations rose by eight per cent to £283.8 million while headline operating profit rose by 22 per cent to £92.3 million.
The group, which provides cover for emergencies ranging from burst water pipes to broken boilers to 56 million households throughout the world, was also able to announce that its overseas operations had turned a profit for the first time.
Ventures spanning France, Spain, Belgium and the US recorded an operating surplus of £5.1 million compared with a loss of £500,000 last time.
Chief executive Richard Harpin said he expected a fast and efficient outcome from the UK Emergency Services sell-off, which was a “tough but necessary” decision “on the back of the ongoing tough operating environment”.
The stock market liked the announcement, however, and marked Homeserve’s shares up by one per cent in early trading, valuing the business at about £775 million.
The stock, which has gained about a quarter in recent weeks, closed last night up 1.25 per cent, or 15p, at 1215p. Sentiment was summed up by Panmure Gordon analyst Andy Brown who said the sale would remove a “key uncertainty” behind the share price.
Jane Sparrow, at Royal Bank of Scotland, agreed, saying the move “simplifies the group”.
She noted, however, that the group would probably get back only a fraction of its investment.
Panmure, which recently raised its target price for Homeserve to 1300p, was upbeat on prospects.
Homeserve said that it had sold 1.83 million new policies in Britain, which brought the total to 9.2 million.
Mr Harpin said it was “fantastic news for Walsall” where the group was still expanding. “We are probably one of the few businesses to be recruiting at the moment,” he said.
He said Homeserve was proving resilient to recession because its policies relieved cash-strapped households of the worry of facing big and unexpected bills for repairs.
The company is paying a final dividend of 25p, bringing the total for the year to 35.5p, an increase of 14 per cent.
Homeserve separately announced that chief financial officer Jonathan Simpson-Dent had decided to leave at the end of June.
He will he be replaced by Martin Bennett, currently finance director of the UK Membership division.