Investment: A security risk at Williams

WILLIAMS REMAINS a company in transition. Since it bought Chubb for pounds 1.3bn the former conglomerate has shed more than pounds 800m worth of underperforming or cyclical businesses such as do-it-yourself and paints in order to reinvent itself as a security group concentrating on its locks, alarms and fire protection businesses.

Yesterday's interim results are a step in the right direction. The leaner and fitter Williams reported a 12 per cent increase in pre-tax profits to pounds 133m on sales up 32 per cent to pounds 1.23bn.

The performance was driven chiefly by strong growth in the electronic systems division, which showed profit growth of 15 per cent. The locks and hardware division was also on the up, with earnings growth of 7 per cent.

Despite these encouragingly good results, Williams's second half is fraught with uncertainties. The management is partly responsible for this: its promise that 60 per cent of its yearly earnings will come in the latter part of the year has set Williams a demanding target. With markets set to remain broadly the same, Williams's ability to meet its goal hinges on whether it can deliver the pounds 40m in cost savings promised at the time of the Chubb buy.

Despite the company's confidence, many in the City remain sceptical and fear that the savings could be required to make up for some unexpected market downturn.

Also, the completion of the disposal programme has been delayed indefinitely by the decision to freeze the sale of the US paints division due to tough market conditions.

This means that the company will have to carry some of its unwanted baggage for a little while longer and that management's time and efforts will be diverted away from the core businesses.

The shares, which closed unchanged at 316p, have underperformed the market recently. They are now on 13 times expected earnings of pounds 315m.

That's not demanding, but given the doubts over prospects for the company's second half-year, the shares are no more than a hold.