Cellnet holds key to Securicor

SECURICOR, the security and distribution group, disappointed the City with results at the low end of expectations and downbeat comments about the economic outlook.

The results offered few new clues to the important issue for Securicor's stock market value: when, and at what price, it will sell its 40 per cent shareholding in mobile phone group Cellnet.

Shares in Securicor fell by 3p to 477.5p as the company reported that flagging consumer confidence resulted in volumes of parcel deliveries in its distribution division - which has a large exposure to high-street retailers - being lower than the company had expected.

"It seems that Christmas has been postponed this year," said Chris Shirtcliffe, Securicor's finance director.

Overall, pre-tax profits for the 12 months to September jumped to pounds 83.5m from pounds 31.4m the previous year, when Securicor profits were dented by a number of one-off items.

The figures showed large swings in the company's different divisions. Profits in the security business jumped by 34 per cent to pounds 33.5m as price competition eased and investment in information technology systems paid off.

But profits in the distribution division fell to pounds 24.3m from pounds 28.8m, reflecting the justification for its pounds 200m joint venture with Deutsche Post, the German postal group, which was announced last month.

In Securicor's communications division losses widened to pounds 21.6m, reflecting the investment in Intek, the US private radio network operator. The group is planning to sink another pounds 25m into Intek in the coming year, most of it to pay for the radio spectrum which the company won in the recent radio auction in the US. Mr Shirtcliffe confidently predicted that the communications division would turn a profit in 2000.

Nevertheless, Cellnet remains the key. Booming share prices for mobile phone stocks have helped to propel Securicor shares into the FTSE 100 earlier this year. Analysts estimate that, at current valuations, Securicor's 40 per cent stake is worth as much as pounds 3bn.

However, the question is whether British Telecom will pay the market price for the stake. Other analysts believe that the agreement between the two shareholders means that Securicor cannot sell its stake without first offering it to BT. The issue is set to hot up this year as BT decides whether to use Cellnet as its vehicle to bid for a licence to operate a third-generation mobile network.

"BT is simply not going to overpay for Cellnet," one observer said. "Meanwhile, the profit forecasts just keep coming down."