Morgan Sindall reports ‘solid’ results

Construction giant Morgan Sindall Group said its half year report for the six months to 30 June 2011 produced solid results and was in line with expectations.

In an announcement on the London Stock Exchange on Monday, the group said profit before tax, amortisation of intangible assets and non-recurring items dropped 16% to £19.5m from £23.1m in the same period in 2010.

The company said revenue had increased by 11% to £1.09bn compared to £982m last year.

Morgan Sindall 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.

The group also reports an order book of £3.5bn supplemented by a £1.8bn pipeline of regeneration schemes. A further £800m of these schemes are at preferred bidder stage. Adjusted earnings per share for the period were 35.1p (2010: 42.0p). The board has declared a maintained interim dividend of 12.0p (2010: 12.0p).

In Manchester, Muse, which has its head offices at Salford Quays, announced on Monday that it has acquired a 3.5-acre development site in Chester city centre from Lloyds Banking Group for an undisclosed sum.

The site is identified by Cheshire West & Chester Council as the location for the city's proposed new Central Business District.

The existing Premier House building will be demolished to make way for the first two phases which will comprise of two, six storey Grade A office buildings totalling 150,000 sq ft, with an 'excellent' BREEAM rating.

The development will include new public realm providing direct links to Chester station. A planning application is expected to be submitted in early 2012, with construction anticipated to start by 2013.

When complete, the scheme will comprise over 500,000 sq ft of Grade A office space and associated ground floor active uses.

Phil Mayall, the company's senior development surveyor, said: "We have worked closely with Lloyds to ensure that the new development complements its campus whilst creating an exciting new business destination for the city of Chester.

"We feel that the location with its strong transport links, amenities and close proximity to the historic Chester city centre will prove attractive to businesses looking for modern, sustainable premises."

GVA advised Muse Developments on the acquisition. Simon Reynolds, GVA director, added: "This an exciting opportunity which will enable Chester city centre to compete with other key regional centres such as Liverpool and Manchester, in attracting inward investment and a wide range of blue chip occupiers to the city."

Elsewhere, Muse is also a development partner for Warrington Council on the £130m Bridge Street quarter regeneration scheme. The town will be provide with shops, restaurants, a gym, cinema, new indoor market, cultural centre, hotel and council offices. Construction is expected to begin in 2013.

Mike Horner, regional director for the North West, said: "We've enjoyed an extremely busy half of 2011 making excellent progress on existing projects, and securing a number of exciting new agreements. Being selected as development partner in Warrington and Chester demonstrates our strong track record and attractive proposition in the marketplace.

"This leaves us ideally poised to take advantage of any new development opportunities that arise this year and beyond."

In Liverpool, construction company Morgan Sindall, which has local offices at Enterprise Way in the city, secured projects wins including a £4.6m scheme to build Croxteth Primary School for Liverpool City Council and a £2.8m contract with Land Securities to build a 59,400 sq ft retail unit at Greyhound Retail Park in Chester, which will house a John Lewis At Home store.

The company is also continuing work on a £19m regeneration project in Stockbridge Village for Knowsley Council. Phases one and two of the scheme, which include the construction of a new retail unit and a primary school with library resource centre, are set to be handed over this summer. Phase three of the project, which features the creation of a neighbourhood centre, is due for completion in January and phase four, the public realm works, is due for completion in spring 2012.

Graham Shennan, managing director of Morgan Sindall, said: "In addition, we remain committed to maintaining strong relationships with our supply chain and joint venture partners as this underpins the outstanding quality of our projects. Looking ahead, we are well positioned to take advantage of emerging opportunities across a range of existing and emerging market sectors."

Breakdown of subsidiary performance

Construction and infrastructure, Morgan Sindall

• Operating profit £9.5m (2010: £12.2m)
• Revenue £617m (2010: £612m)
• Margin dropped to 1.5% (2010: 2.0%)
• Order book of £1.9bn (2010: £2.1bn) maintained since the start of the year

Affordable housing, Lovell

• Operating profit up 20% to £8.3m (2010: £6.9m)
• Revenue £228m (2010: £173m)
• Margin 3.6% (2010: 4.0%)
• Order book improved to £1.5bn (2010: £1.4bn)

Fit-out, Morgan Lovell and Overbury

• Operating profit dipped to £6.1m (2010: £6.9m)
• Revenue up by 24% to £222m (2010: £179m)
• Margin 2.7% (2010: 3.8%)
• Order book of £133m (2010: £213m)
• Gradual market recovery expected from 2012

Urban regeneration, Muse Developments

• Operating profit of £1.0m (2010: £0.8m)
• Revenue £19m (2010: £15m)
• Division continues to secure opportunities and is benefitting from a lack of competition from developers
• Outlook set to continue to improve with division shortlisted on a number of development opportunities
• Regeneration pipeline of £1.4bn, with a further £0.4bn at preferred bidder stage

Investments, Morgan Sindall Investments

• Directors' portfolio valuation of £42m (2010: £39m)
• Total equity invested of £14m with further £12m committed; carrying value at 30 June 2011 of £19m
• Division closed some notable schemes in the period; £0.4bn Bournemouth regeneration scheme and next phase of the £0.4bn Hull Building Schools for the Future programme
• £0.4bn Southampton regeneration scheme at preferred bidder stage
• Short-term focus on developing innovative financing for a number of complex land swap schemes
• PFI expected to emerge later this year in a different form