Hastings Direct turns fortunes around to post £5.9m profit

Personal lines broker Hastings Insurance Services Ltd, which trades as Hastings Direct, has seen a sharp improvement in its fortunes, posting a £5.9m profit after tax for the year to 30 June 2010.

The 2009/10 result compares with a £1.2m after-tax profit in the 2008/09 year of account – largely helped by a £6.4m tax credit. The company, which plans to float on the stock market next year, made a loss before tax of £5.1m in 2008/09 compared with a £5.8m profit before tax in 2009/10.

The 2008/09 results were restated because the directors determined that the treatment of certain deferred marketing costs, while in line with accounting practices, was not the most appropriate treatment, or prevalent industry practice.

The turnaround in Hastings’ fortunes follows a torrid 2007/08, during which the broker was fined £735,000 by the FSA for treating customers unfairly, was hit by an £8.6m VAT charge relating to a dispute with HM Revenue & Customs, and paid a £3.6m settlement relating to a commercial dispute with German reinsurer Hannover Re.

The main driver behind the improved 2009/10 result was a £10m (21%) increase in turnover to £58m from £47m. The company also cut administrative expenses by 1.1% to £52.7m from £53.3m. Interest payable has dropped steeply to just £933 from £794,954.

Average staff numbers fell 3.4% to 701 in 2009/10 compared with 726 in 2008/09. The company announced this week that it planned to hire 150 staff this year in preparation for next year’s stock market listing.

Hastings secured a £20m investment last year from Lloyds Banking Group. The company also restructured its operations, transferring all the shares in Hastings 888 (UK) Ltd, the immediate parent of Hastings Direct, to a newly created holding company called Hastings 888 (Holdings) Ltd.

Shares in the new holding company were then redistributed to the original holders of Hastings 888 (UK) Ltd shares.

Non-executive director Neil Utley was the single biggest shareholder at the date of the transfer, with 24,122 ordinary class E shares.

Hastings 888 (UK) Ltd made an after-tax profit of £8.175m in the year to 30 June 2010, largely unchanged from the £8.157m it made the previous financial year. Hastings 888 (Holdings) Ltd made a £2m profit in the same period. The company is ultimately owned by Lucky 888 Global.