BICC is still turning that corner

The Investment Column

The switch-back share price of BICC over the past five years reflects the number of times hopes have been dashed that the cables and construction group might at last have turned the corner. Optimism is now riding on prospects that Alan Jones of Westland, who arrived as chief executive last year, is at last sorting things out. The latest interim figures suggest the group's recovery has a long way to go, despite the enthusiasm of the market in pushing the shares 5p higher to 320p yesterday.

Profits before exceptional items edged up pounds 3m to pounds 63m in the six months to June, leaving underlying earnings per share fractionally higher at 6.6p (6.5p). The real disappointment lay in a further swathe of exceptional items and provisions after last year's whacking pounds 127m write-off, which looked like a kitchen sink job at the time. BICC is taking a further pounds 65m of exceptional charges, of which the German cables business accounts for pounds 25m and most of the remainder relates to a belated act of realism about the development site in London's Spitalfields, cutting its value to just pounds 30m.

To be fair, Mr Jones hinted strongly at the time of the full-year results in February that Germany would require further action in view of deteriorating market conditions in the wake of a price war there. Following the decision to get out of cable for the building industry, the knife is being taken to the retained high-voltage power cable operation. That should boost margins and there is welcome news that the market is showing signs of stabilising after the recent action to reduce capacity by the big players, which as well as BICC include Alcatel and Siemens.

There is scope for optimism that Mr Jones can deliver on his aim to raise return on capital in cables to 20 per cent. Action taken so far was predominantly responsible for lifting profits from BICC Cables, which groups operations in Europe, the Middle East and Asia, from pounds 37m to pounds 51m. Meanwhile, the consolidation and refocusing of the North American business saw underlying profits rise from pounds 6m to pounds 8m, when stock gains and losses are ignored.

More of a question mark hangs over BICC's ability to revitalise Balfour Beatty in the forecast 18 months. Stripping out a maiden contribution of around pounds 9m from three British Rail track maintenance operations acquired in April, there was a loss in the region of pounds 8m in the half-year. Success in winning private finance initiative projects and management changes will not be sufficient in themselves to do the trick while markets remain so difficult. Mr Jones is doing a decent job, but circumstances remain against him. Pre-exceptional profits of pounds 134m this year would put the shares on a forward multiple of 20, which is pretty demanding.

Glynwed rescued by acquisition

Thank goodness for Victaulic, the plastic pipes and fittings group that Glynwed acquired a year ago for pounds 150m. Without its pounds 8.3m contribution in the half year to June, the Aga stove to metal processing group's interim figures would have looked even more disappointing.

Victaulic's profits limited the damage at the pre-tax profits line to a 3.1 per cent decline from pounds 41.5m to pounds 40.2m but there was a price to pay. Earnings per share, the more important measure of course, emerged 17 per cent lower at 10.99p (13.23p) as the profits were spread more thinly over an enlarged share register.

The problem with Glynwed is that despite its best efforts it remains wedded to the UK and German economies and especially their consumer and construction industries. The Victaulic acquisition added a slug of less cyclical utility pipework but the group is more dependent than it might admit on a marked upturn in the general economy.

It is also a victim of, and unable to control, the volatile metals price cycle. The price of stainless steel last month dipped below the previous low for the metal struck in January 1994. Aluminium has also been on a downward trend for more than a year. That led to a 6 per cent reduction in turnover from the division and a halving in profits to pounds 6.1m.

That took the shine off Pipe Sytems, which benefited from the inclusion of Victaulic to see sales rise 84 per cent to pounds 182.5m and profits up a handy 49 per cent to pounds 15.8m. It is now second only in profit terms to the metal processing arm, which chipped in a broadly unchanged pounds 17.1m as the mix of business changed to higher-margin steel work.

The last of Glynwed's four divisions (down from six as part of an ongoing attempt to refocus the group into growth areas) was a curate's egg. While consumer items such as cookers and sinks grew strongly, the demand for drainage systems, covers and gratings, especially in Germany, was weak.

Full year forecasts emerged from yesterday's quite heavy downgrades at about pounds 85m this year and pounds 96m next. The recovery will come eventually, but in the meantime a prospective price/earnings multiple of 14, at 332p, falling to 12 is high enough.

MAID is worth waiting for

MAID has always been the ultimate jam tomorrow stock, investing heavily for a pay-off later. Now, just as the supplier of on-line information and research looks to be fulfilling its promise, there is talk of takeover. Potential predators include Reuters and Reed-Elsevier, though any takeover would need to be agreed by founder Dan Wagner and the other directors, who control around 40 per cent of the shares between them.

MAID has a highly regarded product but is a relatively small player in a market being scrapped over by giants. Rivals include Reuters, Dow Jones, Reed Elsevier's Lexis-Nexis and Knight Ridder's Dialog, to name a few. These companies have deep pockets but their systems lack some of the refinements of MAID's higher- price service which supplies business information such as newspaper cuttings and market research to its subscribers. MAID has a head start, the challenge is to make that count.

The crock of gold is the huge US market, which is where MAID is investing heavily. It was largely expansion across the Atlantic that caused it to slip to a pre-tax loss of pounds 1.9m in the second quarter compared to profits of pounds 197,000 in the same period last year.

MAID now has 11 US offices, of which seven have opened this year. Some 1,200 new corporate subscribers were signed up in the second half, of which two-thirds came on stream in the second quarter, more than forecast.

MAID has already signed partnerships with manufacturers like IBM and service providers such as CompuServe. Other deals are likely with cable and telephone companies or even manufacturers of hand-held computers such as Psion. Internet growth will also help.

Losses of pounds 5m are predicted this year before bouncing back to profits of pounds 15m the year after. The shares finished 3p higher at 271p yesterday, capping a good, if volatile, run since flotation at the beginning of 1994. If you can stand the ups and downs, hold on.

Arts and Entertainment
Sydney and Melbourne are locked in a row over giant milk crates
art
News
Kenny Ireland, pictured in 2010.
peopleActor, from House of Cards and Benidorm, was 68
News
A scene from the video shows students mock rioting
newsEnd-of-year leaver's YouTube film features staging of a playground gun massacre
Travel
travel
PROMOTED VIDEO
Voices
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
News
i100This Instagram photo does not prove Russian army is in Ukraine
News
Morrissey pictured in 2013
people
Sport
sportVan Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Environment
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
Life and Style
Martha Stewart wrote an opinion column for Time magazine this week titled “Why I Love My Drone”
lifeLifestyle guru Martha Stewart reveals she has flying robot... to take photos of her farm
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
filmReview: Sometimes the immersive experience was so good it blurred the line between fiction and reality
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
i100
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Environment
Tyred out: should fair weather cyclists have a separate slow lane?
environmentFormer Labour minister demands 'pootling lanes' for women cyclists
News
people
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Day In a Page

Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup
Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices