McAlpine bleeds as profits slump

Alfred McAlpine is yet another famous construction group being bled white by its contracting division. The problems have been known about for some time, but the extent stunned the market yesterday, knocking 26p off the shares to leave them at 109p, almost half last year's 205p rights price.

Pre-tax profits have slumped to a negligible pounds 264,000 in the six months to June, compared with pounds 3.25m in an eight month period in 1994. Earnings per share slid to just 0.9p from 3.1p over the same two periods.

The figures are complicated by a change in the year end, but the underlying picture is clear. Construction, which still accounts for 70 per cent of McAlpine's pounds 361m turnover, contributed losses of pounds 2.37m after a pounds 400,000 deficit last time.

Most of the pain is concentrated on the building business. Margins have been slashed and McAlpine is seeking to cut back to profitable work, which will result in job losses amongst the remaining 3,500 construction employees and further restructuring charges.

The latest round of cuts comes on top of a near halving in the size of the construction operation over the past 18 months. The building order book has fallen to just over pounds 100m from close to pounds 200m at the end of 1993, and in civil engineering the figure is down to around pounds 150m from pounds 220m.

Housing, where profits dipped pounds 1.7m in the half year, is now the mainstay of the group. If McAlpine achieves full-year profits of pounds 5m, the shares stand on a prospective p/e of 15 and despite a maintained interim dividend of 3p, the final payment must be in doubt. Sell.