McAlpine hits record-breaking £1bn mark

Alfred McAlpine achieved a margin of 3.6% last year as turnover broke through the £1bn barrier for the first time.

Ian Grice, chief executive, said: “We enter 2006 with a record £3.5bn orderbook and over £800m of new business already secured this year. We believe we are well placed to deliver the double-digit growth that we are targeting for 2006.”

Turnover (12 months to 31 December 2005) was £1bn (£930m). Pre-tax profit of £38m was well ahead of last year’s £8m result, although the 2004 figure was severely cut back by a one-off £25m charge.

This year’s pre-tax profit was also in danger of being nobbled as McAlpine took a £13m hit in its infrastructure services division. However, this was off-set by the one-off, £14m profit resulting from the group’s disposal of its interest in Core Utility Solutions (Core) and the sale of two PFI equity stakes – in Mercia Healthcare and South Manchester Healthcare.

The clear-out of the top brass in McAlpine’s infrastructure services division has resulted in three new faces: Alan Robertson as managing director, Rob Memmott as finance director and Steve Hudson in the post of commercial director.

Dominic Lavelle, group finance director, itemised the £13m hit into two main elements: exit costs running to £7.6m, a combination of one contract and closing two small businesses; along with a figure of £5.6m as a result of the new management taking a more cautious approach to the valuation of work in progress.

Scottish Power was the majority shareholder in McAlpine’s Core joint venture. “We never wanted to sell,” said Grice. “In fact we wanted to buy and had been negotiating such a move for four months. But our partner was also our client and following a strategic review, it wanted to buy us out and we didn’t have much choice over that.” The sale generated £10m.

McAlpine made a “multiple of over three times” its initial investment in Mercia Healthcare, while the second sale generated an eye-watering fourfold multiple.

“Both sales were instigated by another partner in each and we said we would go along with the situation,” said Grice. “The four-time multiple was a good price and is why we sold.”

McAlpine has already invested £19m in other PFI equity stakes and is committed to further investments totalling £8m. “We’re traders,” said Lavelle. “It’s a route to procurement. If offered a great price, we would sell the lot.”

McAlpine results

12 months to 31 December 2005

Turnover £1bn ▲ 8%

Pre-tax profit £38m ▲ 375%