Mowlem edges back into profit: Company expects another year of poor margins despite turnaround in fortunes

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MARGINS in contracting are likely to stay depressed until at least the end of next year, according to John Mowlem, the construction company that also owns London City Airport.

John Marshall, chief executive, said: 'Although volumes have lifted, cost pressures are starting to come back.'

The contracting division made pounds 2.6m profit, including interest earned of about pounds 1.9m, in the six months to June - similar to last year. Turnover was boosted by the acquisition of part of the Property Services Agency, now Mowlem Facilities Management, which will add about pounds 120m in a full year.

That also added pounds 180m to the order book, helping to boost it to pounds 900m compared with pounds 566m the year before. It also benefited from a number of large contracts, including new stands at Aston Villa and Tottenham Hotspur football grounds and at Twickenham rugby stadium.

Pre-tax profits for the group were pounds 700,000 compared with a pounds 41.8m loss after pounds 32m of exceptional charges. The return to profit was fuelled by the scaffolding hire business, where operating profits rose from pounds 2.4m to pounds 6.3m.

Earlier this year Mowlem launched a pounds 124.2m rights issue to repair its balance sheet and it has sold its housebuilding operation as it could not afford the investment needed to buy land. This has left it with cash at the end of June, while interest charges in the six months fell from pounds 5.3m to pounds 3.9m.

The group has been seeking buyers for its 90 per cent stake in London City Airport.

Earnings per share were 0.5p (38.4p loss). There is no dividend but the group repeated its promise of a 2p payout for the year.

Rugby, the building materials group, lifted profits by 17 per cent to pounds 35.6m in the six months to June. It said conditions in Britain continued to improve but the US, where profits fell from pounds 1.5m to pounds 1m, was affected by bad weather.

Earnings per share rose 16.2 per cent to 4.02p and the interim dividend rises 5.3 per cent to 1.5p.

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