Hanson drives into a dead-end

Investment Column

The decision not to raise the dividend at Hanson confirmed what has been becoming increasingly obvious of late - that the conglomerate is a spent force, forced into cosmetic changes to convince the City (as Williams, its smaller rival, has had to do) that far from being a sprawling mish-mash of businesses it is actually sharply focused on four clearly defined operations.

The reality of Hanson's plight is that its strategy has been driving it into a cul-de-sac for years. Buying underperforming, basic businesses to slash costs can only ever lead to a grouping of performing basic businesses with unexceptional growth prospects. As the parent grows bigger, it becomes more and more difficult to do deals of a sufficient size to make a difference.

The company put a cheerful gloss on these figures, which superficially were not at all bad. Pre-tax profits, down slightly at pounds 1.28bn (pounds 1.37bn) were put in an unfairly harsh light by a pounds 440m swing in exceptional, one- off charges compared with last year.

At the trading level in the US, Quantum and SCM continued to power ahead, riding the chemicals price cycle. Peabody benefited from the absence of last year's strike and Grove, the crane business, is running fast and still not keeping up with demand.

At home, ARC continues to squeeze better margins out of flat demand, Imperial Tobacco continues to shrug off the relentless decline of its market, rising 6 per cent during the year, and Hanson Brick bounced pleasingly.

All that drove operating profits to a record pounds 1.49bn, 35 per cent better than last year after funnies like the coal strike and acquisition profits have been stripped out. Underlying earnings per share, ignoring last year's one-off Beazer Homes profit, were up sharply from 15p to 19.7p. That left the dividend, at 12p, covered safely, if not exactly lavishly. But since the Quantum acquisition, Hanson has become a much more cyclical, volatile earnings stream and a dramatic fall in ethylene prices in the final quarter of the year to September points to the Quantum success running out of steam.

So how best to value Hanson now it has reached the corporate pipe and slippers stage? Now it is talking seriously about selling off non-core but sizeable businesses such as Cavenham or Suburban Propane, a break- up valuation is pertinent. At between 174p and 226p, according to one broker, that offers little upside from the current 192.5p, unchanged yesterday.

As a quasi-gilt, the current yield of 7.8 per cent is attractive, but with little growth in prospect that is only right and proper. Hanson's shares are worth less now than they were five years ago and although well supported, they are still unattractive.

One for the road at Grand Met

Yesterday's results from Grand Metropolitan were remarkable for a number of reasons. There were no nasty surprises or complicated restructurings; the results themselves were bang on target; and analysts held their forecasts or even upgraded for the current year.

Perhaps this was because these figures were Lord Sheppard's last before he steps down as chairman next March. So much nicer to go out on a steady, upbeat note than a controversial one.

Of course, given the company's record further restructurings, with the usual barrow-load of provisions and re-stated figures, can never be ruled out. But for now at least the company looks set for a reasonable period of organic growth. Pearle, the opticians business, will no doubt be sold before long, leaving Grand Met focused on branded food and drink.

Pre-tax profits for the year to September were up 40.7 per cent to pounds 920m, though the underlying profits were 3 per cent lower at pounds 912m. Overall, Pillsbury, the US food business, is doing well while the IDV drinks division and Burger King are suffering from some minor localised difficulties.

Pillsbury, which now includes Pet, the US foods group that was acquired in February, pushed up profits by almost 50 per cent. Burger King is not for sale, the company says, and like-for-like profits increased by a healthy 6 per cent. However, profits dropped from pounds 224m to pounds 196m over the year due to lower franchise sales - which fell from pounds 64m to pounds 30m.

IDV, which includes the Malibu and J&B Scotch brands, is still suffering from the loss of the Absolut vodka franchise. The group hopes to push through a 2 per cent price increase next year though this may be wishful thinking. Rivals such as Guinness and Seagram have been cautious on price recently.

Grant Met shares have had a good run this year, up from 355p in January to 442p yesterday, when it climbed 8p. Analysts are forecasting profits of pounds 980m for the current year, which puts the shares on a forward rating of 14. With bid speculation falling away, the shares look no more than a hold.

BPB still faces price worries

BPB's plans to open a new pounds 50m plasterboard plant in Berlin by the middle of next year is a bold move. Despite commanding half the European market for the product, the company failed to hold on to any of the 10 per cent price rise posted in Germany earlier this year.

Although it fared better in the UK and France, the revelation that much of the pain was caused by an aggressive attempt to win back market share by its rival Gyproc Benelux is a worrying reminder of the price war of five years ago.

It is against this apparently unpromising background that BPB is now attempting to push through a new round of price increases. Ranging from 2-3 per cent in France to 12 per cent in the UK, the hope is that the rises will recover some of the margin lost so far this year to higher paper costs.

But this is not the whole story, as yesterday's better than expected interim results demonstrate. Pre-tax profits advanced from pounds 76.1m to pounds 78.9m in the six months to September, an underlying rise of over 13 per cent when a pounds 7.5m loss on sale is stripped out. The dividend goes up 8 per cent to 3.1p.

Mr Cuny argues that things have changed markedly since the early 1990s, when the two major Continental groups Lafarge and Knauf were fighting their way into new markets. And although the slowdown in Germany has hit volumes, growth there and in Austria and Eastern Europe combined was still a healthy 15 per cent in the latest period.

The theory is that the new factory will only make up for the shortfall between current German production and demand. The problem is that others are also adding capacity, not all of which can be absorbed by the admittedly fast-expanding eastern European market.

Full year profits of pounds 181m would put the shares at 317p, up 6p, on a forward rating of 13. Fairly rated until the picture in Germany clears.

News
Jacqueline Bisset has claimed that young women today are obsessed with being 'hot', rather than 'charming', 'romantic' or 'beautiful'
people
Arts and Entertainment
Lena Dunham
booksLena Dunham's memoirs - written at the age of 28 - are honest to the point of making you squirm
Arts and Entertainment
A bit rich: Maggie Smith in Downton Abbey
tvDownton Abbey review: It's six months since we last caught up with the Crawley clan
Sport
Frank Lampard and his non-celebration
premier leagueManchester City vs Chelsea match report from the Etihad Stadium
PROMOTED VIDEO
News
people
Life and Style
A new app has been launched that enables people to have a cuddle from a stranger
techNew app offers 'PG alternative' to dating services like Tinder
Sport
Greg Dyke insists he will not resign as Football Association chairman after receiving a watch worth more than £16,000 but has called for an end to the culture of gifts being given to football officials
football
Arts and Entertainment
Jake Quickenden sings his heart out in his second audition
tvX Factor: How did the Jakes - and Charlie Martinez - fare?
Sport
premier league
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvOnly remaining original cast-member to leave crime series
Sport
Mario Balotelli celebrates his first Liverpool goal
premier leagueLiverpool striker expressed his opinion about the 5-3 thriller with Leicester - then this happened
News
ebooksAn unforgettable anthology of contemporary reportage
News
Britain's shadow chancellor Ed Balls (L) challenges reporter Rob Merrick for the ball during the Labour Party versus the media soccer match,
peopleReporter left bleeding after tackle from shadow Chancellor in annual political football match
Arts and Entertainment
Female fans want more explicit male sex in Game of Thrones, George R R Martin says
tvSpoiler warning: Star of George RR Martin's hit series says viewers have 'not seen the last' of him/her
News
i100
News
i100
Sport
Plenty to ponder: Amir Khan has had repeated problems with US immigration because of his Muslim faith and now American television may shun him
boxing
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments