Appliance warranties specialist Domestic & General yesterday praised its Midlands operations just as it waited to see whether a bid approach from rival Homeserve would come to anything.
D&G has major operations in Bedworth and Coventry – the former employs 250, the latter 130. Coventry is largely a mailing operation while Bedworth is an administrative centre.
“They are both very much inherent to Domestic & General’s business,” said chief executive John Pearmund. Coventry pumps out some 49 million items of mailing each year and D&G is looking to develop the unit.
D&G is playing the Homeserve move with a straight bat. It has confirmed an approach but emphasises that it may or may not lead to something happening.
Walsall-based Homeserve made its interest public earlier this week – a full bid could cost it some £520 million. Homeserve has said the move is at a preliminary stage. Its results proved good – pretax profits up 22 per cent to £61.1 million on the back of revenues 30 per cent ahead at £477 million.
D&G meanwhile saw pre-tax profits rise 4.3 per cent at £36.5 million on revenues up ten per cent at £304.6 million. Operating profit before investment return was up 11.3 per cent to £23.6 million. The company saw a good performance in its UK warranty business and a doubling of international warranty revenue.
It reported a strong start to trading in the new financial year. Nicholas Rochez, chairman, said: “We continue to invest in our warranty product and nurture close relationships with our trade partners with the aim of maximising the sale of warranties on their products.
“Various innovations have been introduced both to increase the capture of data and to effect the sale of warranties. The UK warranty business continues to make good progress with strong growth both in new business and renewal income.
“We have seen impressive growth of our European markets over the past two years and this, coupled with our recent entry into the Australian market, provides a tangible base for our international warranty business. The international business is now operating in seven countries with a further three expected to go live within the next few months.
“Significant steps have been taken in the last few years to strengthen the business and to provide it with the capability of further development. Benefits are already coming through and we are well positioned to unlock further potential.”
D&G is based in Wimbledon, besides Coventry and Bedworth, it has a further office at Redhill in Surrey, and call centres in Nottingham, Brighton and Slough.
It primarily aims at the non-point of sale market, providing cover beyond the period of manufacturers’ guarantee.
This means it is only marginally affected by the recent interest rates rises.
“We are fairly resilient,” said Mr Pearmund. “We are less affected by short term trends in the sales of new appliances. In 2006/07 appliance sales were generally lower, except for flat panel televisions but in spite of this we achieved an 11 per cent increase in registrations of appliances to add to our database.”
The firm protects more than six million appliances for 4.4 million customers, generated by direct marketing through mailings, over 7,000 different campaigns, six million telephone conversations, and more than 500,000 web transactions during the year.
The group operates warranty programmes for over 110 companies, supporting more than 150 brands.
Other activities include provision of call centre, mailing and fulfilment services to third parties and a specialist pet healthcare insurance arm.
The warranty division accounts for more than 88 per cent of total group revenue – total warranty revenue increased by 9.4 per cent in the last year.
UK revenue grew by 6.6 per cent. Mr Pearmund said the total weight of regulation, both UK and EU, Continued to grow.
D&G stated: “During the course of this year, we are expecting the Office of Fair Trading to commence its follow-up review of the point of sale extended warranty market.
“We welcome the move of the Financial Services Authority to more principle based regulation and note the Green Paper published by the EU on consumer law, which includes items such as distant selling and consumer guarantees. In addition, the EU directive on Waste Electrical and Electronic Equipment (WEEE) on disposal of electric appliances comes into full force from July 1.
“We do not expect any of these items to have significant short term effect on our activities, both in the UK and internationally.”
The final dividend is 25.50p per share, making a total for year 12.3 per cent up at 36.50p.
From ic Birmingham