With profit outpacing turnover, pre-tax margins improved, albeit moderately, from 4.2% in 1997 to an average of almost 4.7%.
This is still way short of the 9% that was par for the course a decade ago.
Housebuilders increased their total turnover to just above 拢9bn. Contracting turnover rose 25% to about 拢21bn. Most companies shed their property development businesses in the first half of the 1990s, but property development and investment turnover doubled last year to more than 拢1bn. However, even at this inflated level, it is half that achieved a decade earlier, when property accounted for 10% of the top 50 companies' total turnover.
Housebuilding profits have risen dramatically. Looking at different sectors' performance in 1998, it is evident that housebuilding continues to deliver the best results, with operating profit increasing almost 25% to 拢1.1bn. This is the best performance of the 1990s and compares with a figure of just below 拢1bn in 1988, although taking account of inflation, today's profit is about 30% lower than a decade earlier.
Average housebuilding operating margins rose to almost 12%, compared with 10% in the previous year, although some firms did much better than others. The best performances came from last year's league leaders: Berkeley, Wilson Bowden and Bovis all delivered operating margins in excess of 16%, with Bovis achieving almost 20%. Wimpey, the largest housebuilder, and Countryside Properties both returned margins below 10%.
Contracting profits made relatively good progress, rising more than 40% to 拢270m. However, margins remain poor at an average 1.3%, which compares with 1.1% in the previous year. Those achieving above-average margins included Alfred McAlpine, Tilbury Douglas and Morrison. Overall, though, the performance was poor, and, what is more, current market conditions look like being as good as it gets.
There is a trend among contractors, led by Jarvis, Amey and Morrison, to bolster their business by taking on associated activities such as facilities management and repair and maintenance (these types of activity are included under "other" in the turnover and margin tables). This category is a fraction of the size of contracting yet far more profitable, with margins of about 8%.
1998 was the best year this decade, with profit the highest for a decade. However, most of the money continues to be made by housebuilders, and it is their improved performance that has largely driven up profit of the top 50 firms. Meanwhile, contracting remains a hard slog 鈥� with little scope for improvement.
