BICC warns of 'difficult outlook': Profit fall and gloomy statement depress shares

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The Independent Online
SHARES in BICC, the cables to civil engineering and property group, fell 14p to 403p yesterday as analysts downgraded their profit forecasts following a gloomy trading statement.

Sir Robin Biggam, chairman, said that the rate of recovery in the economies of the UK, North America and Australia had been 'disappointingly slow', while Continental European markets had deteriorated rapidly.

'As a result the short-term trading outlook remains difficult. We are encouraged, however, by the downward trend in European interest rates which, in due course, should benefit our business.'

The group's half-year figures, showing a 12 per cent fall in pre-tax profits from pounds 58m to pounds 51m and a 25 per cent fall in earnings, were hit by continuing losses in Spain. The interim dividend is held at 6p.

Taking its cue from the downbeat statement on prospects, NatWest Securities has cut its 1993 pre-tax profits forecast from pounds 133m to pounds 110m.

Volumes in Spanish energy cables fell by 30 per cent compared with a year ago in an economy that has shrunk rapidly since the end of the Barcelona Olympics last summer.

First-half losses, despite a positive contribution from telecommunications cables, were running into 'several millions' of pounds and two of BICC's five Spanish energy cable plants have been closed. Some 370 jobs or 22 per cent of the workforce have been shed.

Another 339 jobs, 25 per cent of the payroll, have been removed in US utility cables. North American cable operations ran into trouble, falling from profits of pounds 1m to losses of pounds 3m on pounds 224m of sales, as speciality cables laboured under the loss of defence business and Canada struggled to adjust to a lower level of demand that BICC now regards as permanent.

These problems, exacerbated by a downturn in Italy, more than offset improvement at Balfour Beatty, the group's civil engineering subsidiary, which increased profits from pounds 15m to pounds 17m, and a sharp recovery in Australasian profits from pounds 13m to pounds 20m.

In the UK cables is seeing higher orders helped by a pick-up in exports, mainly to the Far East. Business with BT has now stabilised but at lower prices. Some 430 jobs, or 20 per cent of the workforce, were lost in communications cables during the first half.

Order books at Balfour Beatty have fallen by 11 per cent since June 1992 but Sir Robin said that this was not a disadvantage given the low prices being offered by rival contractors. Overseas work had increased to 17 per cent of sales compared with 9 per cent in 1990 and greater efforts were underway to boost overseas content further.

The recent truce between Eurotunnel and TML, the contracting consortium in which BICC has a 10 per cent stake, released pounds 200m of a claim by TML for money owed and a further pounds 235m of claims is due to be paid in stages before December.

(Photograph omitted)

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