Diverse property and construction giant Morgan Sindall Group reported slightly reduced pre-tax profits of £40.7m for the year to the end of 2010 compared to £44.7m in 2009.
In its preliminary, unaudited annual results released to the stock exchange on Tuesday, the company said revenue dipped 5% from £2.2bn to £2.1bn.
See breakdown of subsidiaries' performances below
The group is made up of several sector-specific subsidiaries with offices around the North West including fit-out firm Overbury, the construction and infrastructure business, also called Morgan Sindall, social housing specialist Lovell and Muse Developments.
During the year the group bought part of collapsed social housing contractor Connaught and continued its cost-cutting programme, finding another £21m of annual savings to go on top of the £30m found in the previous two years.
The group is showing a strong balance sheet with net cash balance at £149m (2009: £118m), £100m of undrawn facilities and a defined benefit pension deficit of only £2m (2009: £3m).
The forward order book increased to £3.6bn (2009: £3.2bn), supplemented by the estimated end value of Muse developments' project pipeline of £1.4bn (2009: £1.4bn).
In Manchester, Muse is continuing work on the Smithfield Market scheme in the Northern Quarter, now in its fifth phase, a 192-bedroom Holiday Inn Express hotel due to be completed in autumn 2011 with two further phases of construction to follow. Muse is currently undertaking detailed feasibility studies in respect of the final two phases of development at Smithfield. Phase six, a clear site that was formerly a surface car park, occupies a prominent position in the scheme and is suitable for a variety of uses. There is also the unique opportunity to restore the superb Grade II listed Mackie Mayor building to its former glory. Negotiations into appropriate uses are currently under way, but these may include bespoke office elements, public art, a visitor attraction and new public space.
In Blackpool, Muse anticipates an imminent start on site at the £220m m Talbot Gateway scheme. Working in partnership with Blackpool Council, Muse will deliver a comprehensive 30-acre redevelopment of the north eastern part of the town. The scheme will create new retail, commercial, community, residential and civic office space, in addition to town centre parking and transport facilities. It will also include a new public square, council offices, a courthouse, a supermarket, two hotels, and a multi-screen cinema. The first phase will include offices for Blackpool Council.
Working as part of English Cities Fund, a joint venture with Legal & General and the Homes & Communities Agency, Muse is currently completing the final phase of construction at St Paul's Square in Liverpool, due to be complete in May of this year. The final phase, 4 St Paul's Square, will be 109,000 sq ft of BREEAM 'excellent' office space in off Old Hall Street and Pall Mall. Through ECF, Muse has also received planning permission for the 45-acre Salford Central regeneration scheme of offices, retail, leisure, housing, apartments and public realm and civic spaces.
"Our presence in a number of long-term joint venture partnerships and strong open-market residential sales helped us to enjoy a productive year in 2010," says Matt Crompton, joint managing director of Muse Developments.
"Although the market remains challenging, we're starting to see an improvement including an increase in demand from the commercial sector. Our forward development pipeline remains extremely healthy and we expect another solid year in 2011."
Mike Horner, regional director for the North West, adds: "These are exciting times for Muse in the North West. The continuing development at the award-winning Smithfield Market and work at the huge Salford Central scheme demonstrates our ability to bring forward major regeneration projects in a difficult market. We remain confident in our ability to identify and lead on more successful regeneration programmes which will put us in a strong position for continued growth over the coming year."
Breakdown of subsidiary performance
Construction and infrastructure, Morgan Sindall
- Operating profit £26.9m (2009: £30.1m)
- Revenue £1.3bn (2009: £1.5bn)
- Margin improved to 2.2% (2009: 2.0%)
- Order book increased by 21% to £2.0bn (2009: £1.6bn), providing good visibility and underlying stability
- Significant opportunities in power generation and utilities infrastructure
Affordable housing, Lovell
- Operating profit up 8% to £16.1m (2009: £14.9m)
- Revenue £387m (2009: £374m)
- Margin 4.2% (2009: 4.0%)
- Order book improved to £1.5bn (2009: £1.3bn)
Fit-out, Morgan Lovell and Overbury
- Operating profit increased 7% to £14.8m (2009: £13.8m)
- Revenue up 43% to £415m (2009: £291m)
- Margin 3.6% (2009: 4.7%)
- Order book £180m (2009: £171m)
- Market expected to tighten in short-term in 2011
Urban regeneration, Muse Developments
- Operating profit £2.0m (2009: £0.7m)
- Revenue £46m (2009: £32m)
- Improved performance achieved through increased open market residential sales, an increase in fee income and by exploiting land trading opportunities
- Project portfolio enhanced by acquisition of joint venture interests in three schemes; £2.0m one-off gain in addition to £2.0m operating profit
- Share of development pipeline held at £1.4bn (2009: £1.4bn); future potential enhanced as a result of development contracts being restructured in 2010
- Joint venture interests in three schemes acquired including Crosby's 50% stake in Smithfield Market, Manchester where the one-time joint venture Ician Developments is now a wholly owned part of Muse. The other two are in Glasgow and Reading
Investments, Morgan Sindall Investments
- Operating loss £3.3m (2009: £3.0m)
- Directors' valuation of portfolio up 39% to £53m (2009: £38m)
- Rise in portfolio value mainly due to increased value created from existing schemes and by reaching financial close on Hull BSF and Tayside Mental Health PFI
- £221m of construction revenue generated from contracts financed by the unit and its partners
John Morgan, executive chairman, said: "2010 was a year of important strategic and operational progress for the group. The restructuring we conducted to create [the merged division] construction and infrastructure leaves us better placed than ever to meet our clients' needs, while Lovell's expansion in response and planned maintenance opens up exciting new market opportunities.
"Trading remains challenging, but we continue to secure profitable projects. We are well placed to exploit opportunities presented in the short-term, whilst carefully monitoring market trends to maximise long-term growth potential. The group remains financially strong with an exciting future."
A dividend of 42.0p is proposed. Shares in Morgan Sindall were down 3p at 713p by 9.30am.