H&R Block loss narrows, affirms view, shares rise
NEW YORK (Reuters) - H&R Block Inc (HRB.N), the largest U.S. tax preparer, reported a smaller quarterly loss as higher revenue from tax returns helped offset costs for job cuts and the closing of a money-losing subprime mortgage unit.
The net loss for the fiscal third quarter that ended January31, totaled $47.4 million, or 14 cents per share. That compared with a loss of $60.3 million, or 18 cents, a year earlier, Kansas City, Missouri-based H&R Block said late Wednesday.
Excluding charges of 17 cents per share for discontinued operations, including Option One Mortgage Corp and 5 cents per share for job cuts and severance, profit from continuing operations was $25 million, or 8 cents per share.
On that basis, analysts expected a profit of 9 cents per share, according to Reuters Estimates.
Revenue rose 4 percent to $972.6 million, below the average forecast for $989 million. The number of retail clients fell 3.5 percent, but tax services revenue rose 5.4 percent. In February, retail clients rose 6.8 percent from a year earlier, and tax preparation fees rose 12.6 percent.
"Our tax performance during the quarter and in the month of February has certainly been gratifying" despite a "very uncertain economy," Chairman Richard Breeden said on a conference call.
H&R Block is refocusing on tax preparation after incurring about $1 billion of losses at Option One, which made home loans to people with poor credit. It no longer offers mortgages.
The company expects fiscal 2008 profit to be toward the low end of its $1.30- to $1.45-per-share forecast range, including the third-quarter severance charge. Analysts on average expected profit of $1.29 per share.
H&R Block's shares rose 89 cents, or 5.2 percent, to $18.13 in morning trading on the New York Stock Exchange.
The period was the first full quarter since Breeden, the activist investor and former U.S. Securities and Exchange Commission chairman, won three seats on H&R Block's board.
H&R Block replaced Mark Ernst as chairman and chief executive on November 20, installing Breeden as chairman and Alan Bennett as interim chief executive. Breeden said a permanent chief executive should be in place by early summer.
H&R Block tried in 2007 to sell Option One to private equity firm Cerberus Capital Management LP CBS.UL, but the transaction fell apart.
Breeden said H&R Block is in "advanced" talks with more than one buyer to sell its remaining mortgage servicing operations. He said H&R Block may also consider "realignments" of other businesses. The company operates H&R Block Financial Advisors, H&R Block Bank, and the RSM McGladrey consultant.
In January, H&R Block announced 505 job cuts, representing 23 percent of corporate support staff.
On Tuesday, Jackson Hewitt Tax Service Inc JTX.N, the second-largest tax preparer, posted a surprisingly large 34 percent decline in quarterly profit and said full-year results would fall short of analyst forecasts.
Through Wednesday, H&R Block shares had fallen 20 percent in the last year.
(Additional reporting by Yinka Adegoke; Editing by Steve Orlofsky and Maureen Bavdek)