Bottom Line: An each way BET

Click to follow
FIRST the good news from BET. Extensive restructuring of the company is complete, there is cash in the balance sheet and an unchanged dividend in 1993/4 of 3.25p, covered more than twice by earnings, is set to resume an upward trend after being halved two years ago. It has even won over the Financial Reporting Review Panel by restating its treatment of exceptional items in its 1993 accounts.

The bad news is that it could be tough going to build up any significant momentum in earnings growth at BET because of the pricing and volume pressures that still exist in significant parts of its business.

Signs of pressure are all too evident in the company's 1993/4 results. A recovery from a loss of pounds 9.8m to pre-tax profits of pounds 92m looks impressive. But the fact is that severe cost reduction programmes continue to be heavily diluted by poor market conditions. In 1992/3 BET made exceptional restructuring charge of pounds 67m in its continuing businesses but the upshot was a mere pounds 15.8m increase in trading profits and a modest improvement in margin from 6.1 per cent to 6.5 per cent.

Cleaning services is under the cosh, chalking up losses in New York and facing a grim market in the UK, which meant margins scarcely improved in the business services sector.

Plant hire, despite pounds 11m of restructuring charges in 1992/3, saw profits drop by 29 per cent as a dire UK performance offset progress in the US. Price competition remains fearsome in UK textile services.

BET's target of 10 per cent margins - implying a 50 per cent rise in profits - seems a long way off as it must rely on productivity gains rather than higher prices.

A yield of 3.1 per cent at 130.5p is looking for above-average dividend growth and this may be hard to deliver.