Wassall shakes Hanson's curse:The Investment Column

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Wassall is proof that in investment, as in other areas of life, the truth will eventually come out. For three years the shares have suffered the curse of Hanson, studiously ignoring earnings growth during that period of well in excess of 20 per cent a year. Yesterday they jumped 16p to 308.5p as investors realised that not all diversified industrial groups are made equal.

Underlying profits growth of 32 per cent, an increase in earnings per share of a fraction more and a dividend rise of 35 per cent to 2.1p confirmed another exceptional set of figures, the most striking feature of which was another cracking period from General Cable, which is turning out to have been a first-rate acquisition.

Margin growth is right at the top end of expectations and fast heading towards the 7 per cent target management set when it saw what its most efficient competitors were able to achieve. Cost cuts are also building up nicely from reduced stocks to better distribution, the addition of more value-added products and better marketing.

All that led to an extremely impressive jump in divisional profits from pounds 11.6m to pounds 17.9m, quite the best performer from what is easily Wassall's biggest division. Elsewhere, adhesives, sealants and other building materials group DAP benefited from tough cost controls in otherwise quite difficult markets and profits rose from pounds 3.5m to pounds 4.5m on flattish sales.

Wassall needs to find its next acquisition to keep the momentum going, but even without it earnings per share are forecast to grow at 13 per cent this year and 19 per cent next time on the basis of expected profits of pounds 64m this year and pounds 77m next.

In that context, a prospective p/e ratio of 15 falling to 12 is not demanding. Even if the shares only track the company's earnings growth they should see reasonable growth by the end of 1997. Good value.