British Steel to revive shares with buy-back
Friday 18 July 1997
The company's brokers, Cazenove, have repurchased just under 100 million shares - about 5 per cent of British Steel's equity - at a maximum of 155p each.
The market reacted favourably to the buy-back, marking British Steel shares up by 10p to 159.5p.
British Steel gained shareholder approval to buy back up to 10 per cent of its share capital at last year's annual meeting, and it hinted that a repurchase might be on the cards alongside its preliminary results last month.
These showed that profits collapsed by 60 per cent to pounds 451m last year because of the pound's strength against the German mark - the currency in which steel is traded in Europe - and price weakness.
At the time analysts were pencilling in a further drop in profits this year to between pounds 150m and pounds 200m.
Since then sterling has strengthened still further, breaching the DM3 mark, while the Budget inflicted more pain with the abolition of dividend tax credits. There has also been another rise in interest rates, boosting the pound further.
Although steel prices have begun to harden and British Steel is accelerating its programme of job cuts, John Bowden, director of investor relations, said it would only partially offset the strength of sterling.
The company is assuming an average exchange rate this year of DM2.75 to the pound against DM1.46 last year.
"Essentially our balance sheet was healthy but our shares were very depressed and we thought they were also undervalued," Mr Bowden said.
British Steel had net cash of pounds 785m at the end of last year and paid a dividend of 10p.
Even with the share buy-back, the dividend may not be covered by earnings this year if British Steel holds the payout and profits fall as sharply as analysts forecast.
One broker believes British Steel will actually make a loss this year.
The shares had been propped up by heavy US buying, with investors in New York treating British Steel as a highly-geared play on currency movements. and prices. A 2 per cent movement in prices this year will be enough to raise or lower profits by pounds 150m.
- 3 Russian girl takes her own life after parents find pornography on her computer
- 4 Ball pool for adults opens in London
- 5 Amal Clooney gives excellent response to fashion question at European Court of Human Rights
Michelle Obama highlights harsh restrictions faced by Saudi women after meeting King Salman without wearing a headscarf
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Kim Kardashian on Bruce Jenner's 'story': 'We support him no matter what, and I think when the time is right, he'll talk'
Russian girl takes her own life after parents find pornography on her computer
Ball pool for adults opens in London
9 reasons Greece's experiment with the radical left is doomed to failure
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
Have we reached 'peak food'? Shortages loom as global production rates slow
Greece elections: Syriza and EU on collision course after election win for left-wing party
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
iJobs Money & Business
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...
Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...