City cool to Chubb advance

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Two years into a four-year restructuring programme, Chubb Security yesterday reported that it remained on track to deliver the promised market share and margin growth.

David Peacock, chief executive of the locks-to-electronic security group, said it intended to improve profitability over four years. "Half-way through, we are in line with our expectations."

But the market was less impressed with the results so far, lopping 8p off the share price, leaving it at 314p, after Chubb unveiled pre-tax profits up from pounds 77.1m to pounds 89.1m for the year to March. Sales advanced from pounds 701m to pounds 727m, while the dividend rises 17 per cent to 7.32p after a final of 5p.

Nyren Scott-Malden of the brokers Barclays de Zoete Wedd said there had been some disappointment with the growth in sales and underlying operating profits. Yesterday's figures were in line with forecasts, but only because restructuring costs were lower than expected.

Even if Chubb hit the targets two years out, growth would only be in line with the market, he said. He is forecasting profits of pounds 100m this year, rising to pounds 110m the year after.

Mr Peacock said the company was on course to increase its share of the pounds 7.2bn "accessible" security market worldwide by 2 per cent. Chubb had started the year with 9.1 per cent and ended with 10.3 per cent, based on an order intake of pounds 740m.

Turnover had grown by pounds 61m over the past two years, leaving a further pounds 110m to be achieved to meet the market-share objective, but there would be "a hockey stick effect" as future increases built on a higher sales base.

Mr Peacock said that half last year's profits growth came from margin improvement and half from higher volumes. UK profits dipped from pounds 39.5m to pounds 38.5m, hit by pounds 2.8m of redundancy and reorganisation costs after 250 staff were paid off. But for that, the UK results would have been flat, held back by investment in new salesmen and the timing of purchases of safes by customers.

Chubb is an important supplier to makers of automated teller machines for banks and building societies and the delay was "a normal aspect of their scheduled programmes", he suggested.

There were strong results from Asia, an important area of growth for the company, with operating profits up a third at pounds 12.3m. Chubb now has 12 branches in China and an operation in Vietnam. Of an additional pounds 9m invested in new equipment and plant across the group last year, pounds 2m went to Asian projects.

Australasia was also a strong performer, with operating profits up 28 per cent to pounds 19.7m.

Group profits were boosted by a turnaround in the interest bill from a pounds 1.58m charge to a pounds 444,000 receipt following a strong cash inflow, leaving the net cash position at the year-end pounds 35.3m higher at pounds 69m.

Chubb benefited from a reduction in losses from pounds 1.08m to pounds 387,000 at discontinued businesses, a French alarms company and a small Australian locksmiths. Their sale was part of the restructuring programme and there are no plans for further big disposals.

The sale of a half-share in an Australian prisons joint venture to Chubb's partner, Correction Corporation of Australia, formed the bulk of a pounds 1.3m exceptional loss. There are no plans to put in bids for any of the private prison operations put out to tender by the UK government.

Earnings per share rose 17 per cent to 19.2p.