Stock Watch Hanson: Hanson, the company that made its name in the 1980s as an acquisitive corporate raider before "conglomerate" was a dirty word, is now a more down-to-earth business. Aggregates, cement and ready-mix concrete form the basis of a group that is worldwide but is much more focused than in the swashbuckling days of Lords Hanson and White.
The main drivers of the share price in the past couple of years have been asbestos litigation and the international consolidation of the building materials industry. The scale of compensation claims from workers affected by asbestos has put downward pressure on the shares. This has been compensated for in part by the prospect of a takeover bid for Hanson from the likes of Lafarge, the French supplier of building materials, although Hanson's asbestos exposure is seen as an indigestible "poison pill" against a bid.
Some analysts have downgraded their recommendations in recent months as takeover fever has cooled but others have become more optimistic as draft legislation to resolve the asbestos issue makes its way through the US Senate.
During the Thatcherite heyday of the takeover bid, Hanson carried out a string of acquisitions that culminated in two bitterly fought battles: for SCM, a US chemicals and typewriter group, and for Imperial Group, owner of Courage brewing and Golden Wonder crisps.
However, by the early 1990s, Hanson had become one of the market's worst-performing shares. In 1992 it was decided to break the group up and, after the sale of US Industries in 1995, the last four parts of what had been a £10 billion (€14.9 billion) business - Imperial Tobacco, Millennium Chemicals, Energy Group and the building materials operations still known as Hanson - were floated.
Analysts took a while to come to terms with the new Hanson but finally accepted that it had become a firm focused on making money from its operations and not from buying and selling other businesses. Acquisitions still make up a part of Hanson's strategy, as they do for others in the building materials and merchants business. But they are now generally small-scale bolt ons of family owned concerns to achieve scale in regional markets in Europe and North America.
With a lot of construction activity dependent on government programmes, Hanson's fortunes are tied up with TEA-21, the US federal infrastructure programme, where a review has held up the implementation of some schemes. In the UK, road building is also expected to remain lacklustre.
Rob Griffiths, analyst at Arden Partners, sees little growth in Hanson's underlying markets, leaving the firm dependent on cost-cutting to boost margins. He moved his recommendation from "hold" to "reduce" in April on the grounds that the shares had been artificially boosted by takeover speculation following the bid for Aggregate Industries by Swiss cement group Holcim.
He is sceptical of anyone making an offer for Hanson until it has resolved its asbestos problems. Legislation to create a $140 billion (€113.6 billion) fund from payments from companies and insurers is going through the US Senate but progress is slow.
Stephen Rawlinson at Arbuthnot Securities has Hanson as a "hold" and plans no change until the asbestos issue is resolved. Until then he believes subdued business conditions will hold back the share price.
Simon Brown at Williams de Broë takes a more upbeat view of a resolution to the asbestos question. He upgraded the company from "hold" to "buy" in February. Cost cutting has improved margins, he wrote, while a management restructure makes it more responsive.
Leaving aside the asbestos problem, Hanson's shares are cheap within its sector, says David Taylor, analyst at Teather & Greenwood, who has had the shares on "hold" for some time.
While shareholders wait for an outcome to the asbestos issue and a possible bid, they can console themselves with an attractive dividend yield - a prospective 4 per cent on 2005 earnings.
Investor will return next week
