Chubb's surge to pounds 77m fails to impress the City

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The Independent Online
SHARES in Chubb Security closed 25p lower at 335p, despite a 25 per rise in pre-tax profits to pounds 77.1m on turnover up 11 per cent at pounds 701m in the year to March - below City expectations.

Sir Ernest Harrison, chairman, said: 'We are confident of achieving our targets.'

Chubb is starting the second year of a four-year plan to raise its share of the pounds 7bn world security market from 9.5 to 11.5 per cent.

Profits rose in Britain and the Asia-Pacific region but fell in the rest of Europe and the US. Demand for electronic and physical security products was weak in Europe.

The electronic market was flat in the US, and the group's fire systems subsidiary had fewer orders from the petrochemicals industry. Chubb said this was not a short- term problem, and it had taken action to cut costs.

Redundancy and reorganisation costs fell from pounds 8.4m last year, the first after the group's demerger from Racal Electronics, to pounds 4.9m. The number of employees dipped by about 500 outside the UK, to 18,500, and by about 100 in Britain.

David Peacock, chief executive, said: 'The substantial phase of restructuring is behind us. Obviously, we are still trying to improve our productivity.' Cost savings in the current year would be about the same as last year.

The plan to increase market share includes new product launches, price-cutting and increasing the number of sales staff. Chubb is also making selective investments in new control centres - including two new ones to add to an existing total of eight in China, where the group last year made pounds 34m in sales.

Mike Styles, an analyst at Credit Lyonnais Laing, said: 'The management have done all the right things and the group has a good, steady income, but they have done the easy part.'

Although strong cash flow left Chubb with pounds 35.3m net cash at the year-end, Mr Peacock said it would concentrate on organic growth rather than acquisitions to meet its market share target.