Reborn BICC cagey on bids

Engineering and cables group BICC could be on the verge of recovery after drastic restructuring that led to a full-year loss of £94m last week. But it is still exposed to over-capacity in the cables market, and the prospect of a takeover bid from acquisitive conglomerate Wassall still affects the share price. Chief executive Alan […]

Engineering and cables group BICC could be on the verge of recovery after drastic restructuring that led to a full-year loss of £94m last week.

But it is still exposed to over-capacity in the cables market, and the prospect of a takeover bid from acquisitive conglomerate Wassall still affects the share price.

Chief executive Alan Jones admitted last week that the group faces an ‘interesting challenge’ in the immediate future, hugely downplaying the degree to which BICC remains vulnerable to events beyond its control.

BICC has travelled a great distance over the past 18 months. Massive reorganisation and disposals have resulted in a loss of 2,000 jobs and the sell-off of a number of under-performing subsidiaries.

The disposals have continued into this year, with the sale just weeks ago of its loss-making telecoms cable business to Corning for £83m. Whether or not the rest of the cables business comprising data cables, in which sales grew last year, and energy cables will remain core to BICC’s business is uncertain.

Conditions in the markets it operates in have not eased. In a reversal of fortunes, the best prospects for growth are now coming from the railway engineering, construction and asset management operation in Balfour Beatty. A full-scale disposal, leaving the company as a construction group, cannot be ruled out. Jones would not be drawn on the likely outcome for the cables business last week.

BICC’s next task is improving the energy cable operation’s profits without being distracted by the takeover speculation. A cut in the dividend should not be taken as all bad news: it will help cash generation and strengthen the balance sheet.

Meanwhile, Jones is keen to play down takeover talk, which is not surprising given recent events. BICC shares have soared on the back of bid talk, up from 64p in early February to 89p last week. The increase is rumoured to have attracted the attention of the Takeover Panel, which may before too long insist that Wassall reveals its intentions.