Alfred McAlpine shares leap on boost for housing: Disappointing results from minerals and US

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The Independent Online
SHARES in Alfred McAlpine continued their recent surge, closing 35p higher at 329p after the housebuilder and construction company announced a 43 per cent rise in underlying profits.

Yesterday's 12 per cent jump means the shares have risen more than 60 per cent since the beginning of December. They have outperformed the rest of the market by almost 50 per cent.

Operating profits of pounds 7.67m ( pounds 5.4m) in the year to October, driven by a more than doubled return from the homes division, were struck despite a pounds 1.4m loss from discontinued businesses and associates. The strong performance of UK housing more than made up for persistently tight margins in construction and disappointing results from minerals and the US operations.

Oliver Whitehead, chief executive since last May, said that the housing division would be the focus of growth while trading conditions remained difficult in the rest of the business. Completions, which grew 21 per cent to 1,521, are expected to increase to 2,500.

During the year, the average selling price of McAlpine's houses fell from pounds 81,000 to pounds 79,400, reflecting a sharp fall in the first half. The average this year is expected to be pounds 90,000 as the company reduces the number of houses aimed at first- time buyers. Despite yesterday's announcement of a price rise by Pilkington, the glass-maker, Mr Whitehead said construction costs had remained steady during the year. He gave a warning, however, that rising land prices would put pressure on margins.

Halved operating profits from construction, despite a 7 per cent increase in turnover to pounds 368m, confirmed pressures on the industry. Mr Whitehead said a doubling of the company's ongoing workload to pounds 350m reflected a decision to continue tendering despite low margins.

Minerals were affected by the low level of work in the construction industry, profits falling to pounds 2m ( pounds 3.2m). Prices stabilised during the period thanks to a reduction in excess capacity.

In the US, management changes had been made to improve the division's performance, which had been hit by an estimated pounds 500,000 loss on a single construction contract.

Pre-tax profits of pounds 1.2m ( pounds 3.4m) were hit by exceptional provisions against two disputed contracts, a pounds 500,000 loss on the disposal of a peripheral business and redundancy costs of pounds 2.3m. Earnings per share before exceptional charges were 9.6p (7.3p), allowing the dividend to be maintained at 6.5p. After exceptionals they were 0.7p (4.8p).