AI plans pounds 60m buying spree

AGGREGATE INDUSTRIES, the building materials group, is to spend pounds 50m to pounds 60m on bolt-on acquisitions this year to boost its presence in the UK and US markets.

AI, whose talks about a pounds 1.8bn merger with its rival Tarmac collapsed in acrimony last year, yesterday said it did not need a mega-deal to drive growth. It is understood that the failed merger cost AI around pounds 1m.

Peter Tom, the chief executive, said that consolidation in the UK and US building materials industries would offer opportunities for in-fill buys.

In 1998 AI, formed from the merger of Bardon and Camas, bought 10 businesses for pounds 43m. This year it has already spent $80m on two US aggregates' producers and Mr Tom hinted at further buys. "There are a few independent businesses in the UK that would have a good fit, while in the US consolidation is going apace," he said.

Mr Tom, whose disagreements with Neville Simms, Tarmac's chief executive, were behind the collapse of the merger, dashed hopes of new talks with Tarmac, saying that the company wanted to "move on".

His strategy was underlined by a good set of final results, the first since the Bardon-Camas merger. In 1998, AI posted a 68 per cent rise in pre-tax profit to pounds 76.1m on turnover up 39 per cent to pounds 833.7m. Growth was driven by a positive performance from AI's operations in the US, where spending on public infrastructure boosted demand.

In the UK, volumes were flat but AI managed to push prices up by 6 per cent, improving margins. AI will also benefit from a multi-billion dollar investment on road spending in the US, which accounts for 45 per cent of its business, while the UK is set for further margin improvements.

The downside for AI is that the shares, which yesterday rose 4.5p to an all-time high of 77.75p, are highly-valued. On 15 times 1999 earnings, forecast at around pounds 93m, they are at a premium to many of AI's peers.

But as one analyst said: "They are a firm hold, because people are prepared to pay for consistent earnings growth."

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