Bid rumours boost McAlpine
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Hopes for the long-awaited consolidation of the beleaguered construction industry sent shares in Alfred McAlpine 10p higher to 124p yesterday. Speculation that a bidder was eyeing the contractor followed the leak of a letter from the company's biggest shareholder to its chairman urging a sale to a larger building group.
Oliver Whitehead, chief executive of McAlpine, dismissed the letter, sent in April by Sir Chips Keswick, deputy chairman of Hambros, on behalf of McAlpine family trusts which own 15 per cent of the company. He said Sir John Milne, chairman of McAlpine, had sent a "strong rebuttal" of the points raised in the letter.
Sir Chips had written: "We are concerned that Alfred McAlpine, in common with many other small or medium-sized contractors, has no viable future in the current fiercely competitive environment as an independent."
The over-capacity in the construction industry has been evident for several years now and is accepted by all the major players. None however, has been prepared to make the first move, either by taking over another sizeable company, or by pulling out of the business.
Although a shake-out of the industry's weaker players is needed, consolidation is seen as unlikely. Even if the McAlpine family trusts were willing to give a 15 per cent headstart to a potential bidder it is not clear that a buyer could be found.
The at best wafer-thin margins available were confirmed last week when McAlpine itself announced a fall in profits from pounds 3.1m to pounds 100,000 on sales of pounds 361m for the six months to June. Earlier this week Tarmac announced profits of just pounds 2.9m from sales of pounds 451m in its contracting arm - a profit margin of less than 1 per cent.
The industry's problems include delays in the Government's private finance initiative, which was planned to provide incremental work, in addition to existing public sector infrastructure spending. In practice PFI work is replacing Government-funded projects and the complexities of the tendering process have resulted in very few contracts being let.
McAlpine is one of the great names of British contracting to have been brought low by the recession. In 1987, at the height of the last construction boom the shares were worth more than 600p. The company is now valued at only pounds 86m.
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