The Investment Column: Upbeat Williams calms the City

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The Independent Online
ALARM bells finally stopped ringing yesterday at Williams, the fire protection and security group. Bears had been worried about problems inside Chubb, which was acquired by Williams for a steep price tag of pounds 1.3bn last year.

Critics were also raised concerns about Williams exposure to trading woes in South-east Asia. This had helped to depress the share price but upbeat results yesterday brought out the bulls.

Williams said Chubb was on line to deliver pounds 40m of performance improvement benefits by the end of this year while the tiger economies accounted for only 4 per cent of its sales. Williams' stock rose another 22p to 410p yesterday after a similar rise the day before.

The positive response from the City was also generated by better than expected group profits plus confirmation, finally, that the home improvements division was up for sale.

Demonstrating this further commitment to further focus activities, Williams announced details of a $242.5 (pounds 148m) cash disposal of its US door chimes and bathroom cabinets business. Analysts say Williams could raise another pounds 800m hiving off its home improvement division which takes in household names like Polyfilla, Polycell and Hammerite. The group insists there will be no rush, pointing out that sales from this division have been increasing on the back of strong demand in the US and expansion into Eastern Europe. But there is no interest in second division activities. Future strategy is to concentrate on fire and security where Williams can claim to be global market leaders.

Group pre-tax profits fell from pounds 340.2m to pounds 254.m but analysts had their eyes on underlying earnings. This showed a rise from pounds 248.5m to pounds 285.1m in 1997, higher than many had predicted.

Turnover increased from pounds 1.8bn to pounds 2.2bn while the dividend was increased 5 per cent to 15.8p. Management said the bigger pay out was justified by confidence in the growth prospects for the group which has already seen sales rising strongly in the first months of 1998.

Roger Carr, the chief executive, said the proceeds of forthcoming disposals will be used in the interests of shareholder value. That could mean acquisitions, but more likely share buybacks. Williams hinted at the possibility of buying back at least 10 per cent of its shares.

Analysts at Panmure Gordon expect Williams to produce a pre-tax profit of pounds 340m this year putting it on a forward multiple of16 times. Compared with blue-chip rivals in the support services sector, Williams looks extremely cheap, but then the former conglomerate still has something to prove. Hold.

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