BICC lays new plans for cable division as profits dive 15%

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The Independent Online
BICC , the cables to construction group, unveiled a 15 per cent drop in annual profits yesterday and warned the first half of the year would be challenging for its cable operations.

But BICC, which has seen demand for cables across Europe depressed as governments have privatised electricity utilities or cut investment in state-owned operations, expects to see some benefits from a restructuring in the second half of the year.

The group saw pre-tax profits before exceptionals slide to pounds 110m in 1997 from pounds 129m previously. It also cut its total dividend payout to 8p pence from 12.5p. This compared with market expectations between pounds 98m and pounds 120m. Its shares shed 8p to close at 138.5p.

"The market in energy cables in Europe has been pretty horrendous and sterling hasn't helped ... we have had to take radical action," said BICC's chief executive Alan Jones. This has seen the firm embark on a radical restructuring, with the loss of 2,000 jobs in Europe in a push to drive its power cables operations back to profitability and the removal of pounds 45m from its cost base.

As part of the company's decision to become more focused on power and high-voltage cables, it sold its UK construction and building wire business to Delta , which in turn sold BICC its power utilities, accessories and elastomeric cables business.

This move followed BICC's decision last year to merge its German cable business with NFK of Holland and make severe job cuts in Italy.

These measures are not expected to deliver any benefits in the first half of the year, although the company does see a slightly healthier marketplace for its products.

"We expect the first half of the year will continue to be challenging for our cable operations but in the latter part of the year we anticipate seeing evidence of the results of the action we have taken," said Viscount Weir, BICC's chairman .

The moves were made against a background of overcapacity and poor prices in most parts of the European energy and cable markets and a strong pound. They resulted in a charge of pounds 140m in the 1997 accounts for asset writedowns and other rationalisation costs.

After exceptionals the group made a pre-tax loss of pounds 30m versus a profit of pounds 64m.

BICC was more upbeat about near-term prospects for its construction arm, Balfour Beatty. The division, which has about half the group's turnover, was the star performer in 1997 with operating profits of pounds 42m from pounds 10m last time. A recent reorganisation that saw Balfour create a single organisation responsible for winning and executing large projects is expected to improve margins, currently around 3 per cent.

Elsewhere, BICC does not expect the Asian crisis to have any real impact.