Hanson warns of pounds 275m increase in its interest bill: Shares tumble as profits fall to pounds 1bn

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The Independent Online
HANSON, the industrial conglomerate, shocked the City yesterday when it warned that its interest bill will rise by pounds 275m this year because of acquisitions, lower interest rates on deposits and the ending of long- term bank contracts.

The group earned interest of pounds 14m in the year to September but had been expected to pay interest this year because of the acquisition of Quantum, the US chemicals group, which has pushed borrowings up from pounds 774m to pounds 3.4bn. However, the size of the interest bill surprised the City.

William Landuyt, finance director, said the group had locked into fixed-rate deposits, paying 10.5 per cent, last year - boosting the results by pounds 110m. Since then, interest rates have fallen to 5.5 per cent. A further pounds 85m of the increase is due to acquisitions, while the group will also lose pounds 80m through the narrowing of the gap between UK and US rates, and an increase in dollar deposits to hedge its US borrowings.

That warning, combined with a fall in pre-tax profits from pounds 1.3bn to pounds 1bn, sent Hanson's shares down 16p to 268.5p, despite a positive statement on current trading.

'A positive recovery is now evident in most of our major markets and we believe trading will continue to improve in 1994,' Lord Hanson, chairman, said.

Hanson has embarked on a programme of asset disposals to cut its debt, raising pounds 166m from the sale of two US businesses. Yesterday, it announced that it intends to float its British and US housebuilding businesses, acquired as part of the purchase of Beazer two years ago.

The group would give no indication of the likely value of the flotations, but analysts expect the UK housebuilding business to raise about pounds 400m, while the smaller US operation - where Hanson will keep a 30 per cent stake - will bring in about pounds 100m.

In Britain, Beazer sold 4,805 houses last year, becoming the fourth-largest housebuilder, and made a pounds 42m pre-tax profit. It has been expanded by the purchase of Walker Group in Scotland. Beazer Homes USA sold 2,100 houses. The sales are expected to be completed by next March, but Derek Bonham, chief executive, made it clear that the group would consider offers from trade buyers.

The results were hit by the pounds 125m cost of the strike at the Peabody coal subsidiary, although that was offset by an pounds 87m exchange rate benefit.

The star performers were once again Imperial, the tobacco company, which raised profits by 10 per cent to pounds 307m, and Cavenham, the US forestry business, which improved from pounds 69m to pounds 106m. But the group warned that the Budget tax rise could hit Imperial.

Earnings per share were 15.1p, down from 22.2p, and the next quarterly dividend is unchanged at 2.85p. Mr Bonham made it clear, however, that it will be increased as soon as possible.

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