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Shares in home emergency cover firm Homeserve dipped 7.68 per cent despite a rise in profits for the year on a cautious outlook.

Profit before tax increased by 26 per cent to £85.3 million and earnings per share increased by 25 per cent to 93p, the company said.

Chairman Brian Whitty said: "We are delighted to report another set of strong results.

"Homeserve remains focused on delivering sustainable growth through the economic cycle and is ideally positioned to make selective investments in the UK and internationally.

"Whilst we are carefully monitoring the potential impacts of the current economic climate, our policy businesses continue to show resilience through stable take-up rates from our direct marketing and retention rates remaining high."

Homeserve said its UK Emergency Services business has increased revenues by ten per cent to £326 million as its subcontract and franchised networks responded well to the summer floods – although the volatility of insurance claims impacted margins, the company said.

The floods generated £41 million in revenue, Homeserve said.

"Excluding the floods, there has been a gradual reduction in household claims," the company said, and, as a consequence, operating margins are flat year on year at 5.4 per cent.

Homeserve added: "We do not intend to replace the unique floods workload by chasing low margin job volumes, but instead, are focusing on driving more value from less activity.

"We have taken a number of actions to improve operating margins, including increasing the level of directly employed where volumes are stable and delivering more value from our franchise and subcontractor relationships."

The company said after buying building repair business Anglia last year, it is rolling out the business model across the group.