Hanson launches its dustbin

THE INVESTMENT COLUMN

Next Wednesday is decision day for shareholders in Hanson, the UK conglomerate. The end of the month marks the effective demerger of US Industries, the "dustbin" into which Hanson is pouring some of its smaller American businesses, along with pounds 858m of debt. After that, shares in Hanson trade ex-entitlement to the USI scrip - being issued on the basis of one for every 100 shares held - and shareholders must decide whether to sell or hang on to their new holdings.

The consensus has been, ever since the radical demerger move was announced in February, that most will want to sell, but the argument is not all one-way. Indeed USI has a number of attractions:

r The 34 businesses involved include many well known US brand names and occupy strong positions in their markets. They include Jacuzzi, maker of the famous baths, Ertl, a maker of die-cast toys including Thomas the Tank Engine, and Lighting Group, one of the biggest lighting manufacturers in the US.

r It will be a large company in its own right, being the 160th-largest in the country. Net income has grown from $54m (pounds 34m) on sales of $2.63bn (pounds 1.67bn) in 1992 to $81m on $2.99bn last year.

r Management will be strong, led by the chairman David Clarke, who for 22 years was Lord White's right-hand man at the US-based Hanson Industries.

r Added interest is given by the declared interest of Kohlberg Kravis Roberts, the US leveraged buy-out group, in the shares, although that has been downplayed recently.

All these pluses are balanced by one, rather large, negative factor, however, namely the debt which USI's erstwhile parent is dumping on it.

That means it starts life with gearing of around 400 per cent - perilously high by UK standards although a figure less uncommon on Wall Street - ensuring that no dividends will be paid for years to come.

Foreseeing that such an unattractive proposition may turn off a number of small investors, Hanson has laid on a cheap dealing service to allow them to sell, or make up their holdings to a more economic level.

Special arrangements available until the end of July will allow holders who receive less than 100 USI shares - ie those with fewer than 10,000 Hanson shares - to sell for three cents a share, equivalent to less than pounds 2 for 100 shares. Bigger holders can deal at what are said to be competitive rates through Barclays Stockbrokers.

Mr Clarke believes USI's gearing can be rapidly brought down by cash flow and disposals. The plan then is for the group to turn acquisitive and attempt to repeat the success of Hanson Industries.

Assuming no nasty rise in US interest rates or a downturn on America's main streets, USI could then become quite an interesting vehicle to be aboard. But it could take a couple of years before the success of the strategy becomes clear and investors could be in for a rocky ride in the meantime. Selling pressure from UK investors is likely to be strong over the next two months, with the grey market in New York already indicating an opening price at the bottom end of the range in our table. Even so, the small shareholder would be well advised to take the opportunity to get out now while the low-cost dealing service lasts.

Brewer must tap into new market

It is a long time since Wolverhampton & Dudley Breweries last announced a poor set of trading results. Yesterday, the brewer produced them in spades. Not only did the 4.2 per cent rise in interim taxable profits to pounds 17.9m fail to beat the most pessimistic forecast in the City, but there was a paltry rise in the dividend. The interim payout of 5.4p is up only six per cent on last time, compared to the customary increase of 10 per cent.

More worrying is a 1.5 per cent decline in trading profit to pounds 19.4m for the six months to 2 April. This comes when the outlook for regional brewers is brighter than for some time.

W&D is under heavy fire in its Midlands heartland, the main battleground of the beer price war between Bass and Courage. Though wholesale prices have recently been rising, there is a strong chance that hostilities will resume following this week's warning from Bass that it will fight hard if Scottish & Newcastle gains regulatory approval to take over Courage.

Profit margins on beer in the Midlands are already the thinnest in the UK, with pubs selling ale at pounds 1.15 a pint, a good 20p cheaper than the national average outside London. Moreover, much of W&D's pub estate is made up of traditional boozers which rely heavily on low-margin beer sales. The pubs lag well behind the rest of the market on higher margin food sales.

W&D's problems can really only be resolved by purchasing a few hundred pubs. The Camerons brewery in the North-east, which W&D bought a couple of years ago, is operating well below capacity and it will lose out to Vaux, the Sunderland-based brewer, unless it can tie beer sales to more houses in the area.

Century Inns, the pub company that failed to float on the stock market, would fit the bill nicely. Most of its 320 pubs are in North Yorkshire and the North-east, which would dovetail neatly with Cameron and broaden W&D's geographical coverage the other side of the Pennines.

The pressure is now on W&D to restore investor confidence. The shares, which have outperformed the regional brewing sector all year, dropped 15p to 529p. On reduced annual pre-tax profit projections by analysts of circa pounds 39m, the shares now trade at a 7 per cent discount to the market on a p/e of 13.46. And the gross yield, on forecast dividends of 14.7p, is an unattractive 4 per cent.

Sport
Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Voices
Poor teachers should be fearful of not getting pay rises or losing their job if they fail to perform, Steve Fairclough, headteacher of Abbotsholme School, suggested
voicesChris Sloggett explains why it has become an impossible career path
Sport
world cup 2014
Sport
Ray Whelan was arrested earlier this week
PROMOTED VIDEO
Arts and Entertainment
In a minor key: Keira Knightley in the lightweight 'Begin Again'
film
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
books
News
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
News
Wayne’s estate faces a claim for alleged copyright breaches
newsJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Life and Style
It beggars belief: the homeless and hungry are weary, tortured, ghosts of people – with bodies contorted by imperceptible pain
lifeRough sleepers exist in every city. Hear the stories of those whose luck has run out
News
Mick Jagger performing at Glastonbury
people
Life and Style
fashionJ Crew introduces triple zero size to meet the Asia market demand
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Santi Cazorla, Mikel Arteta and Mathieu Flamini of Arsenal launch the new Puma Arsenal kits at the Puma Store on Carnaby Street
sportMassive deal worth £150m over the next five years
Arts and Entertainment
Welsh opera singer Katherine Jenkins
musicHolyrood MPs 'staggered' at lack of Scottish artists performing
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
Arts and Entertainment
Currently there is nothing to prevent all-male or all-female couples from competing against mixed sex partners at any of the country’s ballroom dancing events
Potential ban on same-sex partners in ballroom dancing competitions amounts to 'illegal discrimination'
News
business
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

Business Analyst Consultant (Financial Services)

£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

£60000 per annum: Harrington Starr: A leading provider in investment managemen...

AVS, JVS Openlink Endur Developer

£600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

Technical Support Analyst (C++, Windows, Linux, Perl, Graduate)

£30000 per annum: Harrington Starr: A global leader in trading platforms and e...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice