Hanson set to increase deal-flow as industry consolidation gathers pace , UK

Hanson PLC’s full year results will be viewed with more than the usual interest by investors next Thursday  following a number of high profile takeovers in the sector. 

Holcim’s recent UK£1.78bn stage takeover of Aggregate Industries PLC and last year’s UK£2.3bn purchase of RMC Group by Cemex has reignited interest in the sector and analysts reckon more deals are likely. 

Hanson, which has built a dominant position in both the UK and North American cement markets through acquisitions, is one company likely to step-up its bolt-on strategy in 2005. 

It spent about UK£85m on acquisitions in 2004. But with debt now down to around UK£750m and some UK£500m of free cash flow there is scope to accelerate the deal-flow and a number of acquisitions are thought to be under consideration. 

Next week’s results from the company are also likely to show an improving picture in North America, where the first half was hit by rising input and raw material costs. 

In a recent trading update, the group painted a more positive picture on second half prices and margins and said cost savings are now off-setting rises in raw material and fuel costs. 

For 2004, analysts look for pre-tax profits of about UK£370-380m. This would correspond to a figure of UK£376.6m last time. 

The group also identified UK$17m  of cost savings in 2004 rising to US$30m in 2005, while price increases are sticking and helping to mitigate sharp rises in input costs. Hanson has also pledged to keep its share buy-back scheme rolling into 2005 after initiating a UK£26m programme in 2004.