Revenue up for Morgan Sindall, but profits take a fall

CONSTRUCTION and regeneration group Morgan Sindall is reporting a 15% increase in revenue to £1.152bn in its half year results to June 30 (HY 2014: £998m).

But the company, which owns urban regeneration specialist Muse Developments – with offices in London, Glasgow and Leeds – affordable housing firm Lovell, and construction, infrastructure and design company Morgan Sindall which has local offices at Salford, also suffered a 6% fall in pre-tax profits to £13.3m (HY 2014: £14.2m).

The company reported a strong performance from its fit out operations, with operating profit up 89% to £10.4m (HY 2014: £5.5m) and good growth expected to continue through the second half.

Construction and infrastructure adjusted operating profit was down to £0.3m (HY 2014: £5.9m), impacted by continued challenges from older construction contracts in London and the South and completion taking longer than previously expected.

Urban regeneration operating profit was up to £5m (HY 2014: £3.5m) as a consequence of the ongoing and focused, long-term investment in the development portfolio, the company said.

There was improved performance from response maintenance in Affordable Housing, with loss reduced to £0.8m (HY 2014: loss £1.7m) and further progress expected in the second half towards its target break-even position by 2016.

The company was hit by,an exceptional charge of £39.4m taken as a write-down against amounts recoverable on two old construction contracts.

Its average net debt of £35m reflected the expected increase in investment in urban regeneration and the regeneration activities of affordable housing. The interim dividend held at 12p per share (HY 2014: 12p).

Chief executive John Morgan said: “We’ve seen a strong performance from fit out in the first half and urban regeneration continues to deliver good growth as a result of our focused and long-term investment in the development portfolio.

“Construction and infrastructure continues to be impacted by the poor performance of its older and lower margin construction contracts in London and the South and, whilst these are working through to completion, this is happening at a slower rate than previously anticipated which will hold back the divisional performance in the second half of the year. 

“However, it is expected that fit out will produce a further strong performance in the second half, with urban regeneration and affordable housing both making good progress.”