The importance of this transformation is emphasised when Cellnet, which accounts for more than 80 per cent of Securicor's profits and maybe the same proportion of its share price, stumbles as it did in its first half.
So far there is little dramatic to report. Progress on privatisations has been slow and the future of mail and parcels is unknown. Moves to set up security in the Far East and Caribbean and to take parcels into Europe have begun on a small scale but surgery on the non-Cellnet businesses is having mixed results.
The interim results, showing rises in pre-tax profits of 27 per cent at Securicor and 37 per cent at Security Services, are flattered by the restatement of the previous year's figures. Ignoring this there was an underlying rise in profits of 8 per cent at both companies.
Security benefited from past cost-cutting and the absence of heavy redundancies. Parcels, excluding Federal Express, were flat and communications cut its losses. But non-Cellnet pre-tax profits of pounds 7.6m on sales of pounds 317m is still woeful.
Cellnet paid heavily for its 106,693 cheap-rate Lifetime customers. After launch costs of up to pounds 10m, the mobile phone operator's pre-tax profits fell from pounds 57m to pounds 54m.
Profits should bounce back in the second half but such heavy marketing costs may be a foretaste of the war to come when Mercury launches its own, cheaper mobile product this autumn.
Nomura expects pounds 63.5m from Securicor and pounds 43m from Security Services for the full year, placing both on price-earnings ratios of 21 at 645p and 549p respectively. Given the uncertainties this seems a high enough rating for the time being.Reuse content