Mowlem has decided not to tender for track maintenance contracts with Railtrack because of high barriers to entry and falling margins.

Reporting a 10% rise in pre-tax profit to £43.5m for 1999, chief executive John Gains said: "Track maintenance contracts have proved very difficult to get in on, and the likely margin return is not attractive." Gains said Mowlem, which lost Brian May, its managing director of building, to Laing last week, would continue its drive to do more design-and-build and negotiated work in a bid to hit margins of 3% by 2004.

He said that in 1999 half of the firm's work was negotiated. Margins were up to 1.4% from 1% on turnover up from £1.5bn to £1.6bn.

Facilities management division Aqumen saw operating profit increase 41% to £3.1m from £2.2m, on a turnover up 12% from £130m to £146m.

But despite services contributing to 40% of turnover, Mowlem has no plans to follow Amey and Jarvis into a support services listing on the stock market. "I am not contemplating that at this stage. As an industry, we can deliver consistent profits from construction," declared a bullish Gains.

However, one analyst said: "The City is losing patience with Mowlem. The results are good but there is too much jam the day after tomorrow. The company is well managed but in the Internet age Mowlem's progress seems glacial."