ALFRED McALPINE'S £200m-a-year civil engineering business is achieving 4.2% margins – almost three times the sector norm, the firm revealed last week.

Reporting pre-tax profit up 41% to £34m for 1998, the firm said its civils arm had made £8.3m and has been set the target of contributing 30% of group profit by next year.

McAlpine's civils business achieved its margin by shifting its workload from roads to pipeline and water contracts. Roads work has fallen to 14% of the firm's portfolio from 76% in 1996.

It has also increased the amount of negotiated work it undertakes, from 34% of total business in 1996 to 53% now.

McAlpine chief executive Oliver Whitehead said the firm has no regrets about pulling out of the tendered building sector, and that its alternative special projects arm is performing well.

This division, under Richard Baldwin, carries out only negotiated work. It is currently wrestling with a first-round private finance initiative hospital deal, at Hereford, which it hopes to close soon.

Group turnover rose from £658m in 1997 to £719m in 1998, with the acquisition of Hassall Homes lifting housing completions from £245m to £310m.

Whitehead also said the firm is looking at further housebuilding acquisitions to strengthen its southern housing division.

He said: "We are always looking to see if we can find a bolt-on, and we are always attentive to anything pretty big which we could add to our housebuilding business. But for a deal of any size, it would have to be absolutely right."