BET fires its last shot with payout pledge

MAGNUS GRIMOND

BET yesterday forecast a rise of at least 20 per cent in next year's dividend, in what is likely to be its final attempt to see off Rentokil in the pounds 1.9bn bid battle for the services to distribution group.

BET said in document sent to shareholders last night that dividends for the year to 29 March next year would increase to not less than 6.15p from the 5.1p already forecast for the current year which ended on Friday.

The move is being seen as BET's last shot before day 39 of the bid this Friday, when no further material information can be released to the market under bid rules. The group saw a group of 35 key institutions on Wednesday and intends to use the latest document to ram home its defence in individual briefings to large shareholders.

The forecast will increase the pressure on Rentokil to raise its offer, although BET shares at 203p, unchanged on Friday, were standing only fractionally clear of Rentokil's terms. With the bidder 4p ahead at 362p, the offer of nine new shares plus 800p in cash for every 20 shares in BET valued the latter at 202.9p.

Sir Christopher Harding, chairman of BET, said the dividend demonstrated once again the board's confidence in BET's future as an independent company. "Rentokil asks you `who do you really think will deliver value?' The answer is BET. As an independent company, BET is well positioned to deliver future growth."

But Rentokil hit back last night. Clive Thompson, chief executive, said he did not place much credibility in the forecast. The dividend was lower than most people had expected, certainly in the circumstances of a bid, he claimed.

"Having said that, any forecast from BET can have very little credibility, because this was the board which halved the dividend twice in 1992 and 1993, despite promises to the contrary." Mr Thompson cited the 1992 annual report, in which it was stated the dividend was being "rebased" to a level from which a progressive dividend policy could be pursued.

He went on: "Dividends can only reasonably be financed from cash flow and at the date of last reporting, at the interim [results], they had net debt of pounds 114m." That reflected a negative cash flow from the previous period, he said.

Mr Thompson's claims drew an angry response from BET. A spokesman said no analyst had been forecasting such a high dividend for this year, while at the time of the previous dividend cuts management had been clearing up the business and attempting to raise cash. Gearing at 30 per cent was reasonable, he suggested, and reflected an impressive performance, given that capital expenditure was running at up to pounds 170m a year, including pounds 80m of acquisitions in 1995.

The BET document set a series of targets for its six highest growth businesses, which aim for margins of from 10 per cent or more for distribution services to 33 per cent or more for the education and training division. By way of contrast, it claimed that operating margins outside Rentokil's traditional core sectors have fallen from 18.9 per cent in 1992 to 15.2 per cent last year, suggesting its diversification strategy had failed.

BET's dividend forecast follows its estimate that profits for last year to 29 March would rise 28 per cent to not less than pounds 142m. The group had forecast a dividend of 5.1p for 1995/96.

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