The Investment Column: Hanson

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The Independent Online
The Investment Column: Hanson

HANSON'S SHARE price, like the former conglomerate itself, has come a long away. Three years ago, it was in the doldrums at 248p. Recently it hit a high of 632p. The driver has been US expansion. It's now the third-largest producer of sand and gravel there. With half of Hanson's revenues now sourced in the US, its shares have tracked the soaraway performance of the US stock market. Some argue the US economy will continue to storm ahead, others are more sceptical. So is it time to buy or sell Hanson shares?

While Hanson's share price appears pegged to the Dow, the fundamental business is not really tied to the US private sector. The key driver of growth is the Federal government's T-21 programme, a massive increase in spending on highways infrastructure over the next six years, due to start later this year. It's guaranteed - and all the more so if the private sector hit a downturn.

The problem with valuing Hanson, however, is that much of the benefit of T-21 will come from its acquisitions.

Aggregates is a local business - it's uneconomical to transport material far from a quarry - and Hanson needs to snap up some of the 4,000 or so smaller rivals it has in the US. It spent pounds 216m in the first half of the year on acquisitions, against pounds 190m in the whole of 1998.

At home, the group is expecting a weak performance in the UK to be turned around as housebuilding activity increases. Europe will remain unexciting.

Analysts expect pre-tax profits of around pounds 285m and earnings of around 33.3p this year. Higher tax charges mean that rises to only pounds 310m and 34.3p the following year. That puts the shares, down 19.5p yesterday at 561.5p, on a forward price-earnings ratio of