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Positives shine through in interims


THE INTERIM figures that have appeared so far suggest the City could be pleasantly surprised by the results of quoted construction and house building companies over the coming reporting season.

Last week, first-half results from Alfred McAlpine and George Wimpey both proved better than expected and triggered sharp increases in their respective share prices.

Not only were the results good but both firms painted an optimistic picture of prospects and hiked up their dividends.

McAlpine, of course, sold its housing business to George Wimpey as part of a strategy to focus on higher-margin business (above 5 per cent) in sectors that are planning long-term increases in capital spending. Last week's figures, showing a 23 per cent increase in pre-tax profits to £14.8 million, suggest this appears to be broadly paying off.

In common with every other major contractor, McAlpine says it is avoiding growing turnover at the expense of margin.

Yet the firm's capital projects arm, where the operating margin fell from 5.6 per cent to 4.4 per cent, is clearly seeing tougher times and points to a depressed building sector.

But the City preferred to focus on the strength of its civils and infrastructure operations, its growing order book and the success it is having in integrating recent facilities management acquisitions.

George Wimpey also unveiled some of the fruits of recent changes when it reported a 42 per cent increase in pre-tax profits, despite a 22 per cent fall in private UK housing completions.

The company has been transformed by a combination of acquisitions and action to improve its margins, which have leapt to 16.5 per cent from 11.4 per cent.

Moreover its strong order book and its plans to raise the dividend growth rate suggest it is confident the improvement can continue.

Like McAlpine, Wimpey has done well in tough markets. Companies that fall short of expectations over the coming weeks will need to be ready with some good excuses.