Contract bids deepen losses at Prospect

COSTS of bidding for new contracts and seasonal factors at Prospect Industries pushed the Hull-based engineer into a sharply higher interim loss to 31 March, writes Neil Thapar.

The taxable deficit jumped from pounds 740,000 to pounds 1.24m despite a 50 per cent rise in turnover to pounds 22.1m. However, the interim dividend rises from 0.25p to 0.275p as it expects a strong performance in the second half.

The higher losses stemmed largely from the pounds 10m acquisition of Davenport Holdings, which makes cooling towers for power stations, last year. The purchase exacerbated the seasonal effect of the group's first half, when it traditionally makes a loss.

However, the group incurred additional costs in bidding for new contracts. But the spending, together with Davenport's contribution, trebled its overall order book to a record pounds 75m despite fierce competition.

Sara Wrigglesworth, an analyst with Panmure Gordon, is forecasting taxable profits to jump from pounds 4.4m to pounds 5m this year and pounds 5.7m in 1994.

The group's net borrowings for the full year are expected to be broadly unchanged at about pounds 600,000, equivalent to 8 per cent of net assets.

Philip Wilbraham, Prospect's chairman, said that although the repair and maintenance market had continued to experience price-cutting, group trading looked encouraging.

The shares rose 0.75p to 10.75p yesterday, rating them on 10 times prospective earnings.