Morgan Sindall has seen “early indications” of market improvement in fit-out, but warned of upward pressure on material and subcontractor costs to come.
In its interim management statement for the third quarter, the firm said its order book was £3.3bn, up 6 per cent from the half-year results.
Net debt at 31 October 2013 was £15m. The average daily net debt from the start of the year up to 31 October was £23m, down from its half-year average of £32m. Average daily net debt in Q3 was £13m.
The firm said: “Group revenue held up well when compared with Q3 2012, while group margin was impacted primarily by margin contraction in the Construction & Infrastructure division.”
The company announced plummeting profits in its half-year update in August, when pre-tax profit shrank by 95 per cent to just £1m in the first half of 2013, down from £18.8m in the same period last year.
In Construction & Infrastructure, the firm said its focus remained on “operational delivery, contract selectivity through the risk management of contractual terms & conditions and working capital management”.
But it warned of upward pressure on material costs and subcontractor costs as markets recover, which would “provide additional management challenges”.
The firm has seen a number of high-profile departures in recent months, including London and aviation managing director Peter Jacobs, who will step down early next year, Fit-out managing director Steve Elliott, who has been replaced by chief operating officer Chris Booth, and Fit-out commercial director Tim Smith.
Analyst Liberum Capital said this “higher churn” of senior staff increased the risk of wage inflation and “increased the challenge of maintaining control of a business that has already taken out a layer of management”.
Morgan Sindall reported an increase in open market house sale completions of 41 per cent in the first nine months of 2013 compared with the same period in 2012.
It said: “Based upon current progress across all its activities, the group is on course to deliver a result for the year in line with the board’s expectations.
“Looking further ahead, the board remains confident that the business is well-positioned to benefit from profitable opportunities as its markets recover.”