Hanson results disappoint

TOM STEVENSON

City Editor

Hanson said work on its proposed four-way demerger "continues apace", but refused to add any detail as it yesterday announced lower-than-expected first-quarter profits. Profits for the first three months suffered from higher interest charges following last year's pounds 2.5bn acquisition of Eastern Group, and the absence of profits from non-core businesses spun off last year into US Industries.

Derek Bonham, chief executive, said: "Inevitably some time will lapse before details of the early demergers, chemicals and tobacco, are available. Meanwhile our disposal programme is on track with good progress being made with Suburban Propane and Cavenham."

Analysts said the decline in first-quarter profits from pounds 272m to pounds 262m was in line with expectations, but the news sent Hanson's shares 3.25p lower to 180.25p, compounding their marked underperformance since the announcement of the conglomerate's planned break-up.

Since news broke of Hanson's proposed demerger, the shares have lost more than 30p, wiping pounds 1.6bn from the market value of the group, as the market worried that, unlike in the cases of ICI and Courtaulds, breaking Hanson up would fail to release any hidden shareholder value. There is also concern that the aggregate dividend paid by Hanson's constituent parts will be lower than the 12p paid by the group as a whole. Yesterday's first-quarter payout was maintained at 3p.

The strongest performer in the first three months was Eastern, the former regional electricity company Hanson acquired last autumn. It contributed pounds 75m and is expected to enhance earnings per share in its first full year to a greater extent than the company had originally budgeted for.

Quantum, the US chemicals company, failed, as expected, to match its performance 12 months previously thanks to lower polyethylene and methanol prices. Profits slipped from pounds 84m to pounds 58m, but the company said customer destocking appeared to have ended. In line with other producers, Quantum has announced price increases for later this month.

The building businesses which, after the demerger of chemicals, tobacco and energy, will form the rump Hanson, maintained profits at pounds 36m despite weakening road-building, construction and house-building markets in the UK. Tobacco, which some observers expect to be an early bid target after the split, saw profits slip from pounds 87m to pounds 81m but Hanson said the shortfall should be made up later in the year.