Williams plunges 14% as margins shrink

Shares in Williams, the former conglomerate, plunged by almost 14 per cent yesterday as the City reacted badly to news of lower margins and the prospect of reduced dividend payments as the group prepares to demerge its Kidde and Chubb businesses. The company also said the break-up, first announced in March, would result in exceptional costs of £80m.

Shares in Williams, the former conglomerate, plunged by almost 14 per cent yesterday as the City reacted badly to news of lower margins and the prospect of reduced dividend payments as the group prepares to demerge its Kidde and Chubb businesses. The company also said the break-up, first announced in March, would result in exceptional costs of £80m.

The company said the reorganisation will cause a reduction in margins at both the Kidde fire protection business and the Chubb security division of around 1 per cent this year. Future dividends will be lower as the company invests in its growing fire protection and security services operations.

Williams shares shed 54p to 342p, having been as low as 331p at one stage. Analysts said Williams was paying the penalty for poor communication with the City and a track record that includes a history of exceptional charges being attached to trading updates. "There is a sentiment issue here," one analyst said. "People have got tired of continual charges dribbling out."

It has also emerged that £10m of the exceptional charges are to cover bonuses for the group's top 100 managers. The company declined to comment on how much would be paid to Sir Nigel Rudd, Williams long-standing chairman, and Roger Carr, its chief executive. "This is not a case of fat cats paying each other lots of money. It is all share price related," a company spokesman said.

The share price fall stripped away all the gains made since the break-up of Williams was announced in March. The company has since sold its Yale locks business for £825m and is in the process of spinning off Chubb and Kidde into two separately quoted companies.

Yesterday Williams said the demerger was on track and that current trading was good. Sales at Chubb are up by around 12 per cent in the first half, though UK growth is slower. At Kidde, sales are up by around 13 per cent.

Several management changes have also been announced. At Chubb, Jonathan Findler joins from Enodis as finance director, while Sir Victor Blank and Sir David Rowe-Harn have become non-executive directors. As previously announced, Sir Roger Carr will become non-executive chairman of Chubb following the demerger. Sir Nigel Rudd will take the same role at Kidde.

Some analysts felt yesterday's share price reaction was overdone. Jamie Brandwood of HSBC Securities, said: "The fall has knocked £480m off the market value, which is a massive over-reaction."