Securicor casts its net wide

The Investment Column:
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Valuations for Securicor, the communications to security group, inevitably focus on the fate of its 40 per cent stake in Cellnet.

The question facing the group is how to realise the pounds 1.3bn-pounds 1.6bn the stake is estimated to be worth, now that a sale to BT has been blocked by the Government. Securicor needs to find a suitable partner with deep pockets, persuade BT to allow a flotation or just hope that Cellnet will keep on rolling in the profits as competition in the market increases.

The management is clearly keen to sell, partly to return some value to shareholders, perhaps in the form of a special dividend.

A sale would also release funds for investment in other parts of the group although a reduction in gearing is not a stated aim. Whatever happens to the cash, the key to disposal of the Cellnet stake remains with BT, which is likely to veto most likely buyers in the industry.

The attention given to the Cellnet puzzle has taken the spotlight away from the rest of the group, which remains a hotch-potch of disparate businesses. These include escort and security services, parcel delivery, telecommunications, containers and warehousing. There are also three hotels, with plans to build and manage a brand-new prison also on the cards.

The risk is that once Cellnet is gone, interest in the rump of Securicor, and the reason for holding the shares, will go, too. That minority stake accounts for two-thirds of the profits of the whole group.

The 29 per cent increase in pre-tax profits for the group to pounds 47.6m for the six months to March announced yesterday was largely in line with expectations. City forecasts for the full year are virtually unchanged at about pounds 100m- pounds 105m compared with the previous pounds 80.6m. Earnings should hit 48p, up from last year's 37.5p, putting the 'A' shares, down 15p at 978p, on a forward multiple of 20. The company claims that the future is bright and exciting, whatever happens to the Cellnet stake. The rating discounts all of that and more.