Outlook: BICC

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The Independent Online
IS BICC just accident-prone, or is there something more sinister going on? The cables and contracting group seems to be locked in a permanent state of crisis. Whenever one of its divisions is rescued from collapse, a whole new set of problems pop up elsewhere.

Over the past three years, Alan Jones, the chief executive, has charged a whopping pounds 250m against profits, partly funded out of the proceeds of a rights issue, to cover the cost of sorting out the company's Balfour Beatty contracting arm and its energy cables division.

Then, just as the City is looking forward to some long-awaited profit growth, the bottom falls out of the fibre-optic cable market and BICC has to set aside another pounds 25m to cover the cost of sacking another 500 workers.

BICC can hardly be blamed for market conditions. Turmoil in Russia and Asia has caused telecom companies to delay investment, landing the cable industry with a glut of capacity. However, the group should perhaps have thought more carefully about spending heavily on new product development in the division last year.

What's more, there is little prospect of a recovery. Alcatel and Pirelli - BICC's main competitors in the fibre-optic cable business - can afford to use their cable operations as a loss-leader for drawing in lucrative orders for other telecoms equipment. BICC does not have that option.

Shareholders are unlikely to put up with this much longer. It is hard to credit now, but BICC was once a substantial company and a member of the FTSE 100 index to boot. Today it is valued at just pounds 177m. What to do? More restructuring looks out of the question. Another option is to sell Balfour Beatty, possibly to a foreign player keen on breaking into the UK market.

In the light of the expected economic slowdown, however, Balfour Beatty's pounds 2bn of turnover and pounds 60m of profits would do well to fetch more than pounds 250m. It also begs the question of what would be left. The cable interests must be worth something to someone, but BICC is carrying pounds 300m of debt and convertible preference shares. On the face of it, it is hard to see how the shares can be worth even as much as they are.