The Investment Column: Bid talk makes Hanson a solid long-term investment
Thursday 04 August 2005
That means the snaffling not just of BPB, but also of Hanson, whose shares have been driven to their best levels in six years because of all the speculation.
Hanson is a world major in heavy building materials. It is the largest aggregates business - crushed rock, sand and gravel - and one of the largest producers of concrete products, particularly pipes, clay bricks and readymix concrete. But in the league of multinational building materials companies, it is First Division rather than Premiership. Alan Murray, the chief executive, argued yesterday that it was difficult to generate the financial pay-back to justify big acquisitions, but that won't necessarily stop an empire-building foreigner.
The bid talk means that you wouldn't want to sell Hanson shares, and the company remains a very solid performer, as its interim results yesterday testified. Sales in the first half of the year were up 9.3 per cent, and profit before tax jumped 28 per cent.
The stock market was a little disappointed with the volume of sales in the North American aggregates business, which Hanson put down to poor weather dampening construction work in California, Arizona and Georgia. But there was more in the results to cheer than to fear. There is still no indication of any slowdown in US housebuilding activity, which more than makes up for the sluggish pace of the equivalent market in the UK. A new multi-billion dollar round of Federal infrastructure spending is due to be signed in the next few weeks. And there was a continued decline in the sums being paid out to builders exposed to asbestos in old Hanson products, with fewer new claimants coming forward, too. Although the likelihood is there will be no growth in the volume of sales in the second half of the year, Hanson is proving able to pass on much of the higher costs of fuel and raw materials to its customers.
Aggregates, literally the building blocks of economic growth, are a relatively scarce resource, and household growth means more residential building in the medium term. Hanson is a solid long-term investment and though its shares look generously priced after their recent run, with a dividend yield down to 3.3 per cent, they are a hold.
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