Muse confident despite lower profits

EMERGING occupier confidence and a high level of expiring leases has made management at Muse Developments confident about future returns.

Revenue was flat at Morgan Sindall’s urban regeneration arm which is working on projects in Stockport, Salford and Warrington, but the group said this reflected the nature of the business, “where the timing of profit recognition depends on the mixture of schemes and stages of completion”.

In the year to December sales were static at £62m while adjusted operating profit fell by 63% to £1m.

Muse, which has its Northern headquarters in Salford, said levels of activity across its portfolio of 35 active projects are significantly higher than in previous years, with £250m of construction contracts placed during the year.  

In the region it has secured forward funding deals with Canada Life and Legal & General for Stockport Exchange, formerly Grand Central, and an office scheme at the New Bailey site in Salford respectively. It is also working on plans with Warrington Borough Council for a large mixed-use scheme off Bridge Street.

The company said: “Looking ahead, Urban Regeneration’s current pipeline of opportunities places the division in a good position to benefit from market improvements in 2014 and beyond and to deliver significantly increased profits as schemes mature.  

“On the commercial side, emerging occupier confidence, high levels of lease expiries and a generally supply-constrained market should enable the division to benefit, whilst on the residential front, the continuing demand for housing aligned with Government support for homebuyers and the expected growth of the institutional private rented sector, should allow Urban Regeneration to maximise the returns from its investments.”

Rugby-based Morgan Sindall saw revenue increase to £2.09bn from £2.04bn but profit before tax was down 59% from £34.2m to £13.9m on a reported basis.

Once adjusted – to take into account such as exceptional operating items and deferred tax credit – the dip in profits narrows to 34%.

However, the firm said there were some signs of increased activity and market confidence in the second half of the year and that its order book is up by 8%.