Allen gross margin goes up 1.6%

Allen Building, the building contracting division of the Allen Group, produced a gross margin of 4.5% last year, well up on the 1994 figure of 1.6%.

Announcing the group's annual results last week, chairman Donald Greenhalgh said: "The operating profit more than doubled on less turnover.

"We've been helped by Alfred McAlpine pulling out of building, while Amec doesn't touch jobs under œ10 million. Other competitors, such as Donelon Tyson and Kilroe, have gone bust, which has also helped the market improve.

"The statement by credit agencies that there is a 1-in-3 chance of 40% of the top contractors going bust means there is a further shake-out to come. It is a worry to our plant hire division."

Twelve months ago, Greenhalgh reported, Birse was the worst for tendering at negative margins. "If Birse was on a tender list we didn't want to go on," he said.

Annual results for the 12 months to March showed pre-tax profit up to œ7.9 million (œ6.2 million) from a turnover of œ109 million (œ107 million). Operating profits from Allen's five divisions were: hire services (œ4.4 million), civil engineering (œ1.7 million), building contracting (œ1.5 million), house building (œ1.5 million) and property development (œ800,000).

Greenhalgh said that Allen had dropped its offer of mortgage protection as "no-one was asking for it". He said house prices would rise by 3% this year on a like-to-like basis. He forecast completions of 420.

Allen wants to expand its hire outlets from 99 to 140 during the current year: to date it has bought 12 and opened three new sites. It is currently looking at three further hire businesses in Kent and four in the East Midlands.

"A hundred depots have been offered to us to buy - we obviously need to sort them out," said Greenhalgh.

"Hire rates are flat. They've been unchanged for three years. Every builder gets a discount: some get 50% off. We turn more business away than we take on. Some credit ratings are not worth anything, the balance sheets are so out of date.

"We offer a further discount for early payment of bills. Anyone who doesn't take it is put on close watch - we know which contractors are still going in a stupid prices so we keep a close eye on what we hire out to them."