Higgs & Hill warns over spending cuts

CUTS IN government spending would further damage the battered building industry, according to John Theakston, chief executive of Higgs & Hill.

Although the group has no significant interest in road building, where spending appears most at risk, it competes for contracts to build prisons, hospitals and other public buildings, so could be affected by cuts. 'Cutting the Budget will have a significant impact on the industry,' Mr Theakston said.

His comments came as the group revealed pre-tax profits for the first half had fallen 37 per cent to pounds 673,000, and warned that conditions in the second half remained uncertain. Earnings per share fell from 1.7p to 1p and the interim dividend was slashed from 6p to 1p. The shares shed 2p to close at 36p.

The results were hit by pounds 872,000 of redundancy costs, up from pounds 592,000 last time, as the group shed a further 200 jobs. Most were in construction, where the order book has fallen from pounds 220m at the start of the year to pounds 145m as the group refused contracts rather than take on unprofitable business.

House prices have continued to fall and Colin Archer, finance director, warned that was likely to mean further provisions at the year-end. Last year, the group wrote off pounds 13.6m and Mr Archer said he had hoped that would be enough.

The group is reducing its land bank, which has traditionally been enough for about six years' sales, and only small purchases are likely. It sold one plot of housing land to a retailer during the period and a similar sale is under discussion. It also sold a development in France, which has now been let. These disposals, with cash generated from operations, helped to cut gearing from 20 to about 10 per cent. Interest costs fell from pounds 1.8m to pounds 500,000, although this was partly due to the benefits of last year's pounds 25m rights issue.

Tilbury Douglas, the construction and property group, reported pre-tax profits slightly ahead at pounds 7m ( pounds 6.7m) for the half-year to 30 June. But earnings per share fell to 13.9p from 23.2p because of the dilution caused by the merger of Tilbury Group and Robert Douglas last year.

Michael Bottjer, chief executive, said the combined group had made 500 redundancies since the merger, but added that Tilbury was holding its own because of its wide spread of niche markets in specialist contracting.

'All we can do is plan on the basis that things will not improve for the next 18 months,' he said.