Morgan Sindall posts £27m half-year loss

Jessica Middleton-Pugh

The diverse group’s half-year results were impacted by an exceptional charge of £39.4m related to two old construction contracts, leading to a pre-tax loss of £27.2m, compared to £13m in June 2014.

Turnover was up 15% for the Lovell, Muse Developments, Overbury and Morgan Sindall Construction owner, from £998m in June 2014 to £1.15bn in June 2015.

The exceptional charge of £39.4m was a write-down against amounts recoverable on contracts related to Faslane Naval Base, transferred as part of the acquisition of the design and project services division of Amec in 2007.

The profits posted for the separate divisions were adjusted to account for exceptional items.

For Overbury, operating profit was up 89% to £10.4m, from £5.5m in June 2014. For construction, operating profit was down to £300,000, compared to £5.9m in June 2014, which according to the statement to the stock market had been impacted by continued challenges from older construction contracts in London and the South.

At Muse Development, operating profit was up to £5m, from £3.5m in the same period last year.

For the loss-making affordable housing division Lovell, Morgan Sindall posted a loss reduction of £800,000, compared to a loss in the same period last year of £1.7m.

John Morgan, chief executive, 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.

“Consequently, the group remains on track to deliver results for the full year in line with the board’s expectations and the outlook for 2016 and beyond remains unchanged.”

Projects for the construction division include a £300m eight-year redevelopment programme at BAE Systems’ submarine-building site in Barrow-in-Furness. The company is also on site at Manchester Victoria Train Station and is doing a £32m refurbishment of Oldham Old Town Hall as well as school construction projects across Liverpool.

Muse Developments currently has multi-million pound developments underway at Chapel Street and New Bailey in Salford and Talbot Gateway in Blackpool, alongside a 7.5-acre commercial development at City Place in Chester.

Shares in Morgan Sindall were down 25.25p this morning to 784.5p.

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