Builders forecast year of low profit: Contractors show improvement but blame flood of competition for squeeze on margins

Tilbury Douglas and Higgs & Hill yesterday became the latest contractors to warn that margins are likely to remain under pressure. But both reported improved results for 1993, partly because of the absence of exceptional charges.

Higgs & Hill made a pounds 1.2m pre- tax profit, compared with a pounds 22m loss the previous year - although the loss was after pounds 22m provisions for redundancies, write-offs and disposals.

The best performance came from the property division. The sale of a site in Southend to the supermarket group Waitrose, which the construction division is now building, and office development in France, produced a pounds 4m operating profit compared with a pounds 14.3m loss, after provisions, last time.

Housing also registered a sharp turnaround from a pounds 1.7m loss to a pounds 2.2m profit as sales rose 27 per cent to 332. John Theakston, group chief executive, said that he would be happy for that to rise to 400 this year.

The contracting division, however, remained in loss although pounds 900,000 lower at pounds 2.1m. Mr Theakston echoed recent comments from other contractors about over-capacity in the market. Higgs & Hill is increasing the proportion of negotiated work which has more realistic margins.

Earnings per share were 0.3p, compared with a 48.4p loss, and the dividend was held at 2.5p via a 1.5p final. The shares rose 3p to 127p.

At Tilbury Douglas, one-off costs in construction and a drop in house sales in Scotland meant operating profits dropped from pounds 13.4m to pounds 9.8m. At the pre-tax level, the group turned last year's pounds 1.9m loss, after a pounds 16.8m provision, to a pounds 20.9m profit.

Margins in contracting dipped from 4.1 per cent to 2.4 per cent, leaving profit 42 per cent lower at pounds 7.6m. But Michael Bottjer, group chief executive, said margins should recover this year. He added that the order book is 47 per cent at pounds 225m.

Housebuilding profits dipped from pounds 4m to pounds 3.8m as sales fell from 353 to 278. This year, sales are expected to rise above 300 again.

Earnings per share were 46.2p, compared with a 2p loss last time, and the final dividend is held at 22.5p, making an unchanged total of 33p. The shares fell 3p to 725p.

Wilson (Connolly) confirmed its position as one of the premier housebuilders with a 68 per cent rise in profits to pounds 28.2m, on sales 36 per cent ahead at pounds 274.4m.

House sales rose 33 per cent to 3,480 while average prices rose from pounds 53,000 to pounds 54,500, producing a 48 per cent rise in profits to pounds 22.5m.

The group warned that there was unlikely to be a return to the house price inflation, making it essential that the group worked through its high-cost land and increased its volumes.

Property profits also jumped from pounds 547,000 to pounds 4.7m as developments in Northampton and Oxford were completed.

Earnings per share were 10.2p, up from 6.1p, and the dividend was increased by 5 per cent to to 4.13p via a 2.86p final. The shares rose 10p to 196p.