H&R Block says break-up not in the cards

H&R Block Inc. has no plans to break itself up or sell some businesses to private equity firms to improve the company's value to shareholders, Chief Financial Officer William Trubeck said on Wednesday.

At this point in time, that's not in the cards, though H&R Block suffers from a conglomerate discount from having several units under one roof, Trubeck said at a Morgan Stanley conference monitored by Webcast.

What we're looking at is successfully trying to run each one of these operations on an independent basis, and looking at the potential they have for growth and expansion, he said.

Trubeck spoke two weeks after the largest U.S. tax preparer said profit in the quarter ended April 30 fell 4 percent from a year earlier to $587.5 million, or $1.77 per share, hurt by lawsuits and a 55 percent drop in pre-tax mortgage earnings.

The quarter is H&R Block's most important by far, coinciding with the time when most U.S. taxpayers file their returns. Quarterly profit from tax services rose 4 percent. H&R Block's other units include business services and investment services.

Kansas City, Missouri-based H&R Block has struggled with litigation in the last several months.

It had faced lawsuits over high-rate refund anticipation loans to taxpayers awaiting refunds, and been accused by New York Attorney General Eliot Spitzer of fraudulently steering thousands of people into high-fee retirement accounts.

Meanwhile, H&R Block's mortgage business, like many others, has struggled with narrowing margins as interest rates rise.

Quarterly mortgage revenue, including at H&R Block Mortgage and subprime lender Option One Mortgage, fell 20 percent to $304.1 million.

Analysts expect many subprime lenders to be sold or dissolve this year.

Asked if H&R Block would sell Option One, Trubeck said: Option One is not for sale ... We certainly look at Option One as a successful business ... That still generates significant return for our shareholders and has an interesting future.

In afternoon trading, H&R Block shares rose 53 cents to $24.06 on the New York Stock Exchange. They have lost one-fifth of their value since reaching a 52-week high on July 14.