McAlpine scraps share buybacks after profits halve

The construction and support services company Alfred McAlpine shelved its share buyback programme yesterday as it announced profits in 2002 had halved. Shares in the company dropped 13 per cent, or 28p, to close at 187p after it said it had decided "not to continue with any further return of capital".

The company, which bought back £23.4m worth of shares last year, blamed "fundamental changes to financial markets" for its change of heart, saying it thought it would be better to retain a "strong and secure financial position" instead.

The U-turn came as the company reported pre-tax profits of £21.7m in 2002 – slightly less than half the £43.9m profit it reported a year before. Stripping out a £6.2m goodwill amortisation charge as well as a £2.3m exceptional charge to cover a legal settlement, profits were £30.2m – a 30 per cent rise. Revenue from continuing operations rose to £768.3m from £554m.

Analysts at HSBC described the results as "okay" but noted: "Stepping back from the share buyback programme takes away major support for the shares."

The company said yesterday it thought there would be "sufficient opportunities" over the medium term to "achieve value enhancing returns" organically and through acquisitions instead.

"Although we will renew our authority to purchase our own shares at the annual general meeting in the normal way, the board intends to focus on the growth opportunities available to it by having a strong, cash-backed balance sheet," Alfred McAlpine said.

Oliver Whitehead, the chief executive, insisted yesterday the marketplace for the company's businesses looked "positive" with "good opportunities" in both the facilities management and utilities sectors. The company said it had a secured forward order book of £2.6bn, up 30 per cent from June of last year. Nearly £2bn of the order book is in its support services and investments arm.

While the company confessed the building market remained "somewhat depressed", it insisted its prospects in general looked good. "We cannot ignore that financial markets are experiencing their toughest times for very many years," it said, but added: "We believe that this will not prevent us from creating opportunities for continued solid growth for McAlpine."

But the company warned that it expected to have to top up its pension plan. An actuarial valuation of its pension plan is underway and is expected to result in an extra contribution of £3.4m a year. On an FRS17 basis, there are shortfalls of £44.7m.

Mr Whitehead is stepping down as chief executive in August to become non-executive chairman. Ian Grice, who has headed up the support services business, was yesterday made chief executive designate.

The company also appointed two new non-executive directors – Phillip Swatman, a board member of NM Rothschild, and Robert Hough, the deputy chairman of Peel Holdings.