Bottom Line: A time of drift as BICC looks limited

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The Independent Online
BICC has not paid a dividend covered by earnings since 1990 and, if yesterday's profits downgradings by analysts are an accurate guide, 1993 will be no different.

But having touched shareholders for pounds 154m by way of a rights issue in May of last year few believe that the BICC board would have the gall to cut the final dividend payment for 1993.

The prospect of a safe, fat yield has propelled BICC shares steadily skywards since the winter from a beleaguered low of 207p in October to a high of 445p earlier this month.

Even after yesterday's 14p fall to 403p, following a sobering assessment of trading prospects from the company, the yield on a maintained 19.25p total is still 6 per cent.

NatWest Securities was sufficiently moved by BICC's warnings of difficult trading - hardly surprising since more than 50 per cent of the sales of BICC Cables come from a rapidly deteriorating Continental European marketplace - to knock more than pounds 20m off its profit forecast for 1993 to pounds 110m pre-tax or earnings of 18.5p.

This would be more disquieting if BICC were not expecting cash flows to behave themselves in the second half of the year. There was a small outflow from operations of pounds 14m compared with a pounds 37m surplus in the comparable half a year earlier while debt payments on recent cable acquisitions led to a total outflow of pounds 118m and borrowings of pounds 151m.

But BICC expects the pounds 140m seasonal inflow from operations chalked up in the second half of 1992 to repeat itself, helped by pounds 40m of cash saved from the enhanced scrip alternative for last year's final dividend.

If BICC appears to have a tight enough grip on its cash management it is certainly getting little or no help from its marketplace even after commendable success in generating exports.

Its costly excursion into Spain has turned into a nightmare of collapsing demand and massive rationalisation while its move into North America is making appalling returns on pounds 224m of sales. At best some benefits from cost-cutting may soon start to show through.

Balfour Beatty continues to defy gravity in an impressive fashion but with order books down by 11 per cent there is surely a limit to how long this high-wire act can continue once old contracts are run off.

Public infrastructure spending is hardly a high priority anywhere and competition is tough where it is. Dividend growth prospects therefore look limited and a period of drift seems in view for the shares.

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