View from City Road: Unspectacular, but Hanson looks solid

Hanson's first-quarter profits may not have matched the best expectations but underlying growth of around 9 per cent, excluding the effects of the Peabody coal strike, a first-time contribution from the US Quantum acquisition and currency benefits, looks a good base to build on for the rest of the year.

Indeed the cold weather afflicting the US North-east, reinforced by the bounce back from the Peabody strike, should see calendar 1994 off to a lively start.

Quantum's heating propane operations are in heavier demand than usual, while US utilities, severely understocked during the coal strike and faced with frozen stocks at the moment, are prominent buyers on the spot market where prices are rising.

Elsewhere, the US recovery and California earthquakes are filtering through to firmer lumber and aggregates prices.

Quantum covered its cash financing costs by about pounds 5m in the first quarter and as the year goes on may well start to enhance earnings per share.

Intriguingly, Hanson's portfolio of businesses looks firmly tilted towards the cyclical. But on forecasts of pounds 1.1bn pre-tax and exceptionals, the shares are only on a 10 per cent p/e premium at 283.5p, and yield more than 5 per cent on an unchanged dividend.

This unambitious if not incongruous rating is a legacy of past doubts about Hanson's earnings quality and of gearing that is set to top 50 per cent even after the Beazer float. Sentiment could be changing.