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Morgan Sindall profit falls 19 per cent for FY 2014

Morgan Sindall has posted a 19 per cent drop in its group profit before tax for the year ended 31 December 2014.

In its latest accounts, the contactor said profit before tax had fallen to £25.2m for the period, from £31.3m the year before.

The firm said it had suffered from problem contracts in its construction and infrastructure division, which had adversely affected the group.

Group operating profit was also down by 14 per cent to £28.9m from £33.6m in 2013, and earnings per sharing dropped 23 per cent to 46.7p from 60.9p the year before.

Group operating margin dipped to 1.3 per cent, from 1.6 per cent in 2013.

Chief executive John Morgan said the year had been “disappointing”, despite strong performances from its fit-out and urban regeneration divisions.

He said the group’s construction and infrastructure division would continue to see lower returns for at least the first half of 2015 as lower-margin construction contracts tendered in 2012/13 were worked through to completion.

But he added: “The continued positive momentum expected within fit-out, affordable housing and urban regeneration… provides confidence that the group is well positioned to deliver overall growth in 2015 and beyond.”

Group revenue for the year was up 6 per cent to £2.2bn, with the group’s fit-out and affordable housing divisions posting revenue growth.

Fit-out recorded a 19 per cent increase in revenue to £507m in 2014 from £427m in 2013, while affordable housing saw an 11 per cent rise in revenue to £423m from £381m.

The group said its urban regeneration division “delivered a strong performance”, with an increase in operating profit to £10m.

It added that four new development agreements worth £300m had been secured during the year, including a deal covering Warrington’s town centre and an agreement with Lambeth Council to deliver a £135m regeneration in Brixton.

As a result, the group said further working capital will be invested through 2015 and 2016 for the division’s “ongoing developments and overall regeneration strategy”.

Construction and infrastructure division:

  • Revenue was down 5 per cent to £1.17bn, from £1.23bn in 2013.
  • Operating profit plummeted 72 per cent to £3.5m from £12.7m in 2013.
  • Operating margin dropped to 0.3 per cent, from 1 per cent in 2013.

Within the division, construction accounted for 55 per cent of divisional revenue at £639m, which was down 11 per cent compared with the previous year, while infrastructure accounted for 45 per cent of divisional revenue at £533m, up 3 per cent.

Cause

Delivery pressures related mainly to a small number of construction contracts that are all due to complete within the first half of 2015.

These contracts all experienced programme slippage and increases in costs to complete as a result of inflation and additional unexpected resource requirements.

The group said management teams had been changed at both local and divisional levels during the year to address the divisions operational issues.

Construction News reported this month that three directors have left, or are set to leave the company, following the departure of group head of construction for London and the South-east Tony Dixon.

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