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November 17, 1995

LOSS-MAKING C E HEATH TO SPIN SOFTWARE ARM OFF TO ITS SHAREHOLDERS

By CBR Staff Writer

C E Heath Plc, insurance and reinsurance broker with computer interests including Peterborough Software and Datasure Holdings Ltd, has seen interim losses and announced plans to buy the minority interest in its Datasure subsidiary and demerge its computer services division. The company, which reported net losses for the six months to September 30 of ú4.1m on turnover almost static at ú82m, said the computer services contribution to group profits had continued to grow steadily. However, chairman Michael Kier said we believe the quality of these earnings has not been reflected in our share price, and he believed that shareholders would be better served if the computer services were floated as a separate company. Peter Presland, who resigned yesterday as group chief executive to become chief executive of the new computer company, said computer companies’ profits were more highly valued by the city these days than those of insurance brokers. With the city viewing insurance as being in the doldrums, the price-earnings ratio tends to be lower than for computer companies. Therefore the shareholders would be better served by a demerger. More details are likely to be available in early 1996, the company said. In a move which it says will facilitate the demerger, C E Heath has conditionally agreed to buy the 30% minority interest in Datasure from Lowndes Lambert Holdings Plc for ú6.2m payable in two installments. The first installment of ú3.2m is payable in cash on completion, and the second of ú3m in cash by December 1996. In addition, an interim dividend of ú300,000 net will be paid by Datasure to Lowndes Lambert by March 1996. Lowndes Lambert will continue to use Datasure for facilities management for at least four years, and will waive its royalty entitlements to some of Datasure’s products. The group’s interim figures include a pre-tax profit of ú3.9m, shown as an exceptional item, from the sale of its 22% holding in Australian underwriting company C E Heath International Holdings Ltd in July. This sale is part of the group’s plan to get out of the high capital-risk underwriting business and concentrate solely on broking. It also sold its 50% holding in HHL Holdings Ltd, a Hong Kong-based joint venture with Aon Corp’s Rollins Hudig Hall Holdings BV for ú16m cash in October, because Presland said, Rollins Hudig now sees itself in retail insurance where Heath is in the wholesale business. The company says it expects a gain on the sale of ú13m to be shown as an exceptional item in its full year results. Due to continuing pressure on its insurance margins, the company said that it is reducing the level of dividends paid, and will pay an interim of threepence, down from fivepence last year.

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