Investment: Tarmac bucks trend in dull construction sector
Wednesday 23 September 1998
The Square Mile was expecting a dull, RMC-style performance to confirm the gloom in the building materials sector. Moreover, the rumour mill was pointing to a demerger of Tarmac's construction division from the heavy materials' side, with a possible further split between building and supply services.
Wrong on both counts. Tarmac came up with sparkling results, with interim pre-tax profits up 29 per cent to pounds 49.7m and turnover up 5.1 per cent to pounds 1.5bn, well ahead of analysts' expectations. As for the demerger, Sir Neville Simms said that there was no reason to dismantle a successful group.
On yesterday's performance, it is hard to disagree. Margins went up in both building materials and construction. In materials, where Tarmac makes most of its profits, they rose to a healthy 10.2 per cent, as Tarmac managed to counteract a fall in volumes in most of its products with robust price increases.
In construction, which makes up the bulk of turnover, margins rose slightly but are still a wafer-thin 1.4 per cent. The company is working hard to move away from cut-throat project work to higher-quality maintenance jobs, where longer-term contracts ensure margins in the 5 per cent region. But there is still a long way to go to push up profitability in the construction division.
Sceptics point out that seasonal factors will make for a worse second half. The UK economic downturn also means price rises in building materials are harder to sustain. Tarmac's shares, up 2.5p to 87.5p yesterday, trade on nine-times forward earnings of around pounds 135m. Given the uncertainties about Tarmac's markets, they are no more than a hold but any further weakness is an opportunity to buy.
- 1 If you're not already angry about the migrant crisis, here's a history lesson to remind you why you really should be
- 2 David De Gea transfer collapses: Manchester United goalkeeper's £29m move to Real Madrid off - because paperwork 'not done in time'
- 3 Pansexual: What is it - and when did the word become popular?
- 4 Isis releases graphic video showing four Shia 'spies' being burned alive in Anbar, Iraq
- 5 Blood Moon and Supermoon: September to bring brightest – and dimmest – full Moon of the year on same night
Miley Cyrus calls out hypocrisy of women’s nipples being taboo
The man who sold Minecraft to Microsoft for £2.5 billion says it's made him miserable
Nazi 'gold train': Fire engulfs suspected location of vehicle
Blood Moon and Supermoon: September to bring brightest – and dimmest – full Moon of the year on same night
Isis releases graphic video showing four Shia 'spies' being burned alive in Anbar, Iraq
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
Jeremy Corbyn calls Osama bin Laden's killing a 'tragedy' - but was it taken out of context?
Tony Blair attacks Jeremy Corbyn's 'Alice In Wonderland' politics
Theresa May says migrants should be banned from entering the UK unless they have jobs lined up
Iain Duncan Smith 'should resign over disability benefit death figures', says Jeremy Corbyn
UN investigating British Government over human rights abuses caused by IDS welfare reforms
iJobs Money & Business
£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...
£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...
£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...
£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...