Hepworth ready to spend pounds 300m

Francesco Guerrera
Sunday 23 October 2011 06:29

HEPWORTH, the building materials group, is ready to spend pounds 300m on a European boiler-maker in an effort to boost its presence in the shrinking market for heating products.

The company, one of Europe's top five boiler manufacturers, yesterday said it was looking at a number of rivals in the fiercely competitive continental market.

Hepworth has been hit by a downturn in volumes and prices for its appliances, amid overcapacity and aggressive price-cutting by some of its European rivals.

Its main European rivals are the three German companies, Bosch, Buderus and Vaillent, and the Italian group Riello. Together, they control around half of the market for combination boilers. City analysts said that it would be difficult for Hepworth to buy one of the top four as they are all privately owned apart from Buderus. However, they added that the UK group could take a stake or form joint ventures.

Industry experts stressed that Hepworth needed a deal to counter the tough market conditions. Last year, the slump in boiler prices wiped out a large chunk of the pounds 8.5m savings achieved through an aggressive cost- cutting programme. However, the disappearance of 700 jobs and a sharp cut in overheads helped Hepworth back into the black with a 1998 pre-tax profit of pounds 64.5m compared with a loss of pounds 11.7m in 1997, when the group took a pounds 69m restructuring provision.

Mark Hake, an analyst with Merrill Lynch, said: "Hepworth is running to stand still." He rates the shares, up 7.5p to 187.5p yesterday, a "hold". He believes that, on around 10 times his 1999 earnings forecast of pounds 69m, the stock could benefit from an acquisition by Hepworth or by a takeover of the UK group.

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