Double success boosts McAlpine

Alfred McAlpine's improved margins in both its housebuilding and construction divisions led to the group's pre-tax profit in the first half of 1998 doubling to more than £11 million. Chief executive Oliver Whitehead said last week: "These are good results."

Turnover (six months to 30 June) was ahead at £320 million (£250 million).

Segmental analysis showed McAlpine's Homes division well ahead. Turnover in private housing was £130 million (£76 million), producing an operating profit of £12 million (£5 million)

Operating margins climbed from 6.9 per cent to 9.0 per cent. "By the end of 1998 we'll have got to 10 per cent," said Whitehead, "and that takes us to first base. There are now many housebuilders below us, with a few well-publicised firms still above us." McAlpine's medium-term strategy is to lift operating margins to 12 per cent by the end of 2000.

The purchase of Raine might have given McAlpine the hunger to transform itself into a top housebuilder by staging further major acquisitions.

Not so, insisted Whitehead. "It is not the plan to go for volume until we've got the margin up to 12 per cent." In the full year, McAlpine will probably complete 3,700-4,000 houses.

Of McAlpine's 126 housebuilding sites, more than 60 per cent were previously brownfield sites.

Partnership Housing has been restructured. Operating profit was unchanged at £200,000 despite turnover jumping to £24 million (£16 million).

Construction Services comprises civil engineering, special projects, slate and USA. Civil Engineering improved its operating profit, up from £1.3 million to £1.8 million on a turnover of £96 million (£89 million).

McAlpine is rapidly shifting the ratio of its traditional adversarial service work. By the first quarter of 1999, the former will account for less than 25 per cent of McAlpine's workload.

The division's operating margin has improved to 1.9 per cent. "Add to that the fact that we've managed our cash well, so the bottom line is 3 per cent, which is as good, or better, than any other construction group," said Whitehead.

Jeffrey Hume, McAlpine's new finance director, said service work is making "much better margins" though the task is still to "get to grips" with this business's returns in order to push them higher still. Service work, which accounted for £50 million of turnover last year, will grow to £70 million in the current 12-month period. McAlpine is currently bidding a Railtrack maintenance contract and is seeking to break into track renewal work as well.

Special Projects expanded its portfolio, winning an "encouraging" volume of work from existing customers. In addition, it is an equity partner in the PFI consortium that is to redevelop Wythenshawe hospital.