View from City Road: More work to be done at BET

L JOHN CLARK sounds more boring than he is. The chief executive of BET talks at length about following a sequential programme, of keeping to a plan and delivering promised changes. It could almost be an automaton speaking.

But the timing of the company's one-for- four rights issue to raise pounds 201m hints at a degree of market opportunism that is reassuring. Mr Clark may be human after all.

First, the action programme. Mr Clark initially set about reducing debt, which he has. Then about generating cash, which he has. Then about reducing operating costs, which he has. Then about making disposals, which he has. Then about adopting more cautious accounting policies, which he has.

Next on the list of jobs to be accomplished was redeeming the company's auction market preference shares, a form of paper issued to raise dollars 500m before March 1990. The rights issue is being launched to replace most of these shares. There is no doubting the attractions of redeeming Amps. They are an uncertain form of financing, as the cost depends on current market conditions. BET is not alone in wanting to replace its Amps - English China Clays has done the same. In BET's case the reasons are stronger as its Amps account for 72 per cent of its shareholders' funds and 25 per cent of the non- US Amps traded.

In a revealing moment, Mr Clark admitted that the fall in the value of the dollar was a factor in the timing of the planned redemption, though by no means the main factor. He wanted to exploit the market opportunity though it is not all beneficial. The fall in dollar interest rates means that the cash cost of paying dividends to Amps holders would probably have been less than the cost of dividends on the new equity.

The timing of the rights issue means that BET is issuing shares at 110p when it could have issued them at two-thirds more than that last autumn. The shares have underperformed the market by almost 30 per cent in the past year.

Mr Clark says he waited until now so he could demonstrate he had done what he set out to do. But this has yet to be reflected in the share price.

At the ex-rights price, the shares are trading on 14 times earnings, which looks high enough given that, by his own admission, Mr Clark has two more years' work to do at BET before it is a dynamic growth company.

(Photograph omitted)