Higgs & Hill warns of worse conditions

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The Independent Online

Higgs & Hill yesterday warned of worsening trading conditions for its construction and housing businesses this year, laying much of the blame on Government initiatives.

John Theakston, chief executive of the Surrey-based construction group, said the requirement for major works to be undertaken under the private finance initiative had led to a sharp slow-down in new public projects.

Echoing Taylor Woodrow's claim last week that the PFI was now constipated, he said it was extremely slow and costly, with no standard procedures for either risks or returns. "The Government is in the happy position of not having to spend in the conventional way and seeing its books balance in the run up to the election."

The current public expenditure round would probably to lead to further cuts, he forecast. "I don't get a sense that the Government will be increasing spending on projects which will benefit the construction industry. They will be squeezing the pips again."

Although the construction order book was maintained at around pounds 230m at the end of June, private work has increased its share from 60-80 per cent, while the public portion has halved to 20 per cent.

Losses from construction recorded in the first half of the year are not expected to get worse in the second, Mr Theakston said, resulting in a "relatively small" construction deficit for the year.

The gloomy tidings trimmed Higgs' shares by 7p to 78p, well below last year's 105p rights price, despite the announcement of half-year profits before tax almost maintained at pounds 593,000 against pounds 650,000 last time. Turnover rose from pounds 120m to pounds 166m in the six months to June and the interim dividend is maintained at 1p, although it is again uncovered by earnings per share which fell from 0.9p to 0.7p.

The main profits in the half year came from the property division, where Higgs decided 18 months ago to put more effort. There was a small contribution from the pounds 75m warehouse and distribution joint venture entered into with Norwich Union at Swan Valley in Northampton earlier in the year.

David Hill, deputy chairman, is to retire from the board at the end of October, the company said.