Hanson hits 7-year low in run-up to demerger

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The Independent Online
Hanson's shares hit a seven-year low yesterday after the Anglo-American industrial conglomerate unveiled accounting changes that cut the value of its coal and mineral reserves by almost pounds 3bn and knocked pounds 70m a year off profits at its Peabody coal unit.

The company, which is in the throes of splitting itself into four separately quoted firms, said the asset write-downs would not affect operational cash flow or future dividend policy.

However, Hanson's shares came under renewed selling pressure within minutes of the news and dipped to 166.5p. And despite staging a recovery later in the session, the shares still closed at the seven-year low - 171.5p, down 0.5p.

The shares have been in the doldrums ever since Lord Hanson stunned the City earlier this year with his break-up plan.

Commenting on the share price weakness, Hanson vice-chairman Christopher Collins said: "The market hasn't yet seen full information about the new companies. It has caused some uncertainty and there has been some selling by yield funds."

In a demerger update, Hanson said it remained on track to spin off its Millennium Chemicals and Imperial Tobacco units in October, while unbundling the new energy company, to be called The Energy Group plc, should be completed in January 1997. That will leave a Hanson "rump" to focus on building materials.

Hanson said Peabody's operating profits will be pounds 70m a year lower due to changes in the accounting treatment of provisions for coal-related illness and environment funds. Future payments due to the US Federal Coal Industry Black Lung and Abandoned Mined Land Funds total pounds 1.2bn. Under the new accounting policy, payments will be recognised as taxes and treated as a revenue charge based on production volumes, in line US coal company practice.

In turn, the book value of mineral reserves for Hanson's cornerstone construction and materials division has been slashed by pounds 2.3bn to pounds 1.3bn while the value of coal reserves at Peabody has been cut by pounds 600m to pounds 1.5bn.

Hanson said both reductions "will have no impact on operational cash flow but will cause a small reduction in future depletion charges and a consequent small increase in profit".

The Anglo-American conglomerate added that clearance had been given by the Inland Revenue for the demerger of its chemical and tobacco units to be tax-free for shareholders. US counsel also advised a similar scenario for American investors.

Hanson also disclosed that fees payable to financial advisers involved in the demerger, which include Rothschilds and Hoare Govett, are expected to be less than pounds 20m. "These are rather less than other corporate transactions," Mr Collins claimed.However, he declined to reveal the size of other expenses and one-off tax costs, except to say they were "containable''.

A series of shareholder roadshows in the US and Britain to drum up institutional interest is planned for September before the first demergers occur the following month.