ADT alarms ring after US accounting rule changes

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The Independent Online
A US accounting change has plunged burglar alarms group ADT deep into the red in the first three months of the year. The Bermuda-registered group, which is being reshaped under long-standing chairman and chief executive Michael Ashcroft, yesterday reported a pre-tax loss of $371m (pounds 245m) for the first quarter, compared with profits of $36.4m last time. The shares fell 15p to pounds 11.08p in London after the news despite the announcement that the board had approved the purchase of 5 million of the company's own shares.

Following the introduction of more stringent accounting rules in the US, where ADT is based, the group has been forced to take a $410m charge, most of which relates to goodwill associated with its electronic security business. Of the total, $395m has fallen in this area of the business, with the US bearing the brunt. ADT said without the charge it would have reported earnings per share of 23 cents, instead of a loss of $2.94.

Adding back the one-off charge, net profits after tax rose 14 per cent to $31m on sales cut from $373m to $354m, mostly due to the absence of ADT's European vehicle-auction business, the old British Car Auctions.

Mr Ashcroft said new channels of distribution, through strategic alliances in the retail, financial services and real estate sectors and its new authorised dealer programme, meant ADT "is well positioned to achieve growth in market share and to increase customer density in chosen markets".

He added: "The reorganisation of the electronic security services business in North America along business lines is proceeding well and we are optimistic that the benefits of this reorganisation will start to come through towards the end of 1996 and beyond."

The US market for residential security systems remains "very competitive", with mass marketing initiatives across the industry keeping prices down.

But the UK provided a bright spot, with the group seeing "significant" growth in closed-circuit television business, including a $3.5m contract won in the first quarter from Railtrack for systems to be installed on 72 railway platforms.

The remaining vehicle auction business in the US was hit by last winter's extreme weather, with profits broadly flat at $11.6m in the quarter. ADT said snow removal alone cost $500,000 and a number of days' sales were lost.