Profit slump and poor outlook for Morgan Sindall

Simon Donohue

Morgan Sindall Group today blamed difficult market conditions and reduced margins for a first-half profit slump and warned that it didn't expect much improvement during the rest of its financial year.

Profit before tax in the six months ended 30 June 2013 was down 24% to £15.4m from £20.3m in the same period last year, in spite of a 2% increase in revenues from £1bn to £1.019bn.

Morgan Sindall Group is maintaining its interim dividend at 12p.

Shares fell by 1% – or 7p – to 652p in early trading.

Morgan Sindall Group is the parent company of North West construction, infrastructure and design company, Morgan Sindall, which is delivering a major office scheme at Liverpool Science Park. Muse Developments and affordable housing specialist Lovell are also part of the group.

MSG chief executive John Morgan said: "The first half has seen difficult market conditions across all of our markets, with competitive pressures impacting on margins and profitability.

"Looking ahead to the second half, overall market conditions are not expected to significantly improve.

"The business will continue to focus on cash management and will look to improve the order book selectively, such that it is well-positioned to take advantage of the growth and investment opportunities in its markets as they arise."

Morgan Sindall Group reported an order book of £3.1bn, up 1% since year end, supported by a £2.2bn pipeline of regeneration schemes, up 5% on year end.

Adjusted earnings per share for the period are 31.5p (half year 2012: 38.4p).

Highlights at Morgan Sindall during the period under review include a £19m contract with Maro Developments to construct retailer Matalan's new head office at Knowsley Industrial Park. The project will involve the construction of a bespoke office development at the former Petrolite site off Acornfield Road.

Morgan Sindall has secured a £7m contract to expand Liverpool Science Park and construct a new building which will provide 42,000 sq ft of additional office and laboratory space. The project will see the company construct a new four-storey block at the site which will be named Innovation Centre 3.

Other key project wins in the North West include a £7.9m contract to design and build a 1,000 space, seven-storey car park in Stockport. The new car park, for sister company Muse Developments and Stockport Council, forms part of the first phase of developments of a multi-million pound transformation of the Grand Central leisure complex into a high specification office quarter.

Morgan Sindall has been awarded a £4.1m contract to refurbish the Righton Building at Manchester Metropolitan University. The project will see the Morgan Sindall team deliver a complete internal refurbishment of the building to upgrade faculties for the university's students and staff members.

The company has also won a £1.9m contract to extend White Rose Shopping Centre in Leeds. The project for Land Securities will see the Morgan Sindall team expand existing facilities and make way for additional retail units

Graham Shennan, managing director of Morgan Sindall, said: "Morgan Sindall has continued to secure key contracts in the region.

"This achievement, against a backdrop of ongoing challenging trading conditions, is testament to the professionalism of our people, our ability to provide a fully integrated offering on complex projects and the strength of relationships we have with our customers, supply chain and joint venture partners.

"Our commitment to working safely and sustainably, providing exceptional service to our stakeholders and ensuring effective cost management, remains paramount and we believe we are well positioned to capitalise on further opportunities throughout the remainder of the year."

The group said construction activity in the North had been "impacted by lower volumes and increased competition".

During the period, the group increased its banking facilities in order "to take advantage of strategic investments as they arise". Total committed facilities are now £125m, of which £110m expire in September 2015 and £15m in May 2016.

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