Hanson's pounds 2bn disposals bring an era to an end

TOM STEVENSON

Deputy City Editor

Hanson is planning to raise up to pounds 2bn from disposals of non-core businesses in a move that has been seen as marking the end of the conglomerate, the acquisition-driven, unfocused and financially based grouping of companies of which Hanson was the most flamboyantly successful during the 1980s.

The move has partly been forced on the company by soaring borrowings following the acquisition of Eastern Group, the regional electricity company. The pounds 2.5bn cost of that deal will take Hanson's gearing to 130 per cent of shareholders' funds.

Some observers believe it also reflects a change of strategy following the death earlier this year of Gordon White, the driving force behind Hanson's acquisition programme during the group's growth years.

But the City's disenchantment with diversified industrial groups has also played a part - Hanson's shares, which were worth 20 times as much at the end of the 1980s as at the start, are now trading at less than they were five years ago as investors have focused on the fact that it is increasingly difficult for a group valued at pounds 10bn to do deals that make a meaningful difference.

They closed unchanged yesterday at 192.5p, where they yield 7.8 per cent, much higher than the market average.

Derek Bonham, the chief executive, refused to be drawn on which businesses were up for sale. Recent speculation has focused on Cavenham, the American lumber operation, and Suburban Propane, the gas business, both of which suffered a sharp fall in profits last year.

Following the demerger during the year to September of US Industries, a collection of smaller American subsidiaries, Hanson is now presenting itself as having a clearly defined focus on four core areas. These are energy, chemicals, building materials and equipment, and consumer goods, including Imperial Tobacco.

News of the asset disposal plan accompanied full-year figures for the 12 months to September, showing a sharp rise in underlying profits on the back of soaring chemicals prices. Operating profits from continuing operations jumped from pounds 1.03bn to pounds 1.49bn although at the reported pre- tax level there was a decline from pounds 1.37bn to pounds 1.28bn after last year's one-off profit, mainly from the sale of Beazer Homes.

The City was disappointed by Hanson's failure to raise its quarterly dividend, which has been 3p for six consecutive quarters, giving a total of 12p.

Investment Column, page 26