FOR some considerable time, BICC has been on brokers' sell lists on the grounds that its current rating anticipated earnings recovery up to three years away.

So it came as something of a surprise when the #170m rights issue was announced yesterday morning, although overall share price reaction was muted.

First impressions were of a comparatively small sum for shareholders to stump up into a company, which at the time of its interim had gearing of 80% and where strains in liquidity had the effect of removing any dividend growth for the subsequent two or three years.

The net effect will be to reduce gearing to 32% and enable the cables and construction group to invest much more quickly in relatively rapid payback situations.

That is the case with investment in cables in the Asia-Pacific region with the concentration on optical fibres receiving the lion's share of the #215m overall capital programme.

There will not be any significant impact upon earnings for at least a year, apart from a fall in interest charges as money waits to be spent. And with interest rates at current levels, the return will be less than from manufacturing.

However, BICC should soon begin to benefit from its costly reorganisation programme, which included the shedding of businesses such as housebuilding into which it should never have strayed, and also the recognition in the half-time figures that Balfour Beatty contract margins will be less than originally calculated.

The enigma remains the Private Finance Initiative and how quickly that will lead to substantial new work as many in the construction industry complain about the expenses of tendering and the delay in contracts being awarded.

Over the past dozen or so years, the stock has underperformed the market quite significantly although there does seem now to be the first signs of a way out of the trough.

The rights issue does bring forward the day when dividend growth can begin and BICC starts to move away from the current 12!sp plateau back to the 19!sp seen in the days when the company

was heavily overdistributing. That will not recur.

One should now be a cautious buyer.