View from City Road: Key test for McAlpine

AS Graeme Odgers prepares to leave Alfred McAlpine for the Monopolies Commission, he may regret that he has not been able to prove he could grow the business. Instead, the key outcome of his three-year tenure has been to shrink it.

Profits have fallen from pounds 23.7m in the year before he joined to pounds 3.6m in the year to October, while earnings have sunk from 31p to 5.1p. Yesterday, the dividend was cut for a second time, from 10.3p to 6.5p, compared with 16.1p in 1989.

To be fair, Mr Odgers' tenure as chief executive coincided with the worst slump in the building industry in living memory. While he clearly believed he was doing enough in his first year - when he wrote pounds 46.4m off the value of the group's assets, made the first dividend cut, and launched a pounds 38.8m rights issue - to ensure that future results would show a smooth upward trend, he reckoned without the continued slump. And he is at least leaving the business in better shape than many of its competitors.

The key test will be where the business goes from here. Like its competitors, it is enjoying a surge of interest from housebuyers, so the division's profits should show a sharp improvement this year. The US is also showing improvement, but the performance of the contracting and minerals division will worsen. Analysts are forecasting pounds 5.8m profits this year - only a marginal improvement on last year, before exceptional redundancy costs - putting the shares, down 8p to 131p yesterday, on a multiple of 18.7. The 6.5 per cent yield is less generous than it looks, as it will be at least two years before the reduced dividend is twice covered. Mr Odgers' replacement will have to be very dynamic to persuade shareholders to buy.