TEST Valley's direct services organisations achieved a combined profit of £5,538 on a turnover of £1.274 million in the six months to September 2001.

But the figures disguise wide variations in the performance of the four parts of the service. Grounds maintenance made a surplus of £110,000 but street sweeping, highways and the vehicle workshop all returned losses.

Members of the borough council's executive have been told that measures designed to cut costs were being looked at but it is 'quite possible' that the services will struggle to break even by the end of the year.

Staff in parks section are to receive a pay rise of 3.5 per cent and a profit share payment of £200, but the pay rise for the highways section has been withheld because of performance problems.

But Cllr Mark Cooper, said: "Not giving a pay rise is going to hammer some more nails into the coffin.

"Should they not have at least inflation increases?"

But head of contract services at the council, Mrs Margaret Smith, said: "We did set performance targets for the highways section and they were not achieved."

The section made a loss of £51,000 on a turnover of £131,000 in the six months to September.