British blue chips' cash holdings up by a third since 2008 - Capita

Reuters

LONDON (Reuters) - Britain's top companies have boosted cash holdings by more than a third in the past five years, opening the door to future acquisitions or bumper shareholder returns, research showed on Monday.

Gross cash holdings of FTSE 100 companies have risen by 42.2 billion pounds ($66.78 billion) since 2008, according to research by Capita Asset Services.

That leaves companies with a collective 166 billion pounds on their balance sheets, which would be enough cash to buy more than 8.5 percent of the FTSE 100, or more than triple 2013's forecast dividend payout for the index.

While unlikely to be returned to shareholders in one fell swoop, the cash, accumulated and held onto in the fall-out from the financial crisis, could find its way back to productive usage as growth returns to the economy.

Following the crisis in 2008, companies diverted cash usually returned to investors or used for new business investments in order to shore up their balance sheets.

"The credit crunch was a huge shock (and) companies re-engineered their balance sheets to a more defensive structure as the recession bit, paying off debt and stockpiling cash ... With the economy back on its feet, the key question is what companies will do with their cash reserves," Justin Damer, commercial director of Capita Asset Services, said.

"There is a delicate balance between balance sheet conservatism and maximising shareholder returns. I just wonder whether we might have reached a tipping point."

Capita Asset Services carried out the study by manually analysing 200 individual balance sheets.

The top sector for cash accumulation has been oil and gas, which has stockpiled 30.4 billion pounds in extra cash since 2008, while miners and mobile telecoms have both accumulated in excess of 7 billion pounds each.

Wireless telecoms are expected to increase dividend yields next year by 20 basis points compared to this year, Thomson Reuters StarMine SmartEstimates show, putting their payouts second only to traditionally high-yielding utilities.

Investment in capital expenditure is another option. For instance, British telecoms group Vodafone (LSE:VOD) is looking to boost capex by 300 million pounds in the current financial year, according to the report.

(Reporting by Alistair Smout; Editing by Susan Fenton)

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