Morgan Sindall’s preliminary results for 2010 have shown a 5 per cent year-on-year drop in revenue and 9 per cent drop on pre-tax profit.
The firm experienced a 9 per cent drop in pre-tax profits to £40.7 million for the year ending 31 December, which was smaller than the £46.9m predicted following a poll of five analysts in a Thomson Reuters I/B/E/S survey.
In early trading shares in Morgan Sindall fell 6 pence to 710, a fall of just under 1 per cent, as the London market reacted to the turmoil in Libya with losses across the board.
But the firm’s Lovell affordable housing arm boosted revenue from £374m to £387m with profits up from £14.9m to £16.1m.
Morgan Sindall has seen an increase in the number of orders it has taken on which has resulted in the firm bringing in £3.6bn, up from £3.2bn during the previous year. The company has benefited from Connaught’s financial problems and picked up many of the group’s assets.
The executive chairman of Morgan Sindall said he expects the coming year to be worse again for the construction industry than previous years.
Speaking to CN, John Morgan said one of the highlights of 2010 had been the firm’s acquisition of the majority of Connaught’s assets in September.
The move saw Lovell, the firm’s social housing arm, pick up the bulk of Connaught’s contracts for £28m.
He said: “Connaught was a really good strategic acquisition for us in an area where we had been weak and I believe we will see an increase in social housing when we see more funding going forward and that we will be in a good position to take advantage - but it will take some time.
“We are hoping 2011 will be the bottom of the market but you can’t tell. It is going to be a really tough few years and it is going to be harder in 2011/2012 than it was in 2009/2010. It is very difficult to say if we have seen the market hit the bottom but I think it will get worse in 2011.”
Revenue for the year in Morgan Sindall’s construction and infrastructure division fell by 17 per cent, a figure Mr Morgan attributed to some “big projects being delayed”.
He said: “In infrastructure there have been some big projects that have been delayed but it is probably an area in which we see a lot of growth. It comes in chunky lumps but we suspect to see turnover increase in that area.”
In the previous financial year to 31 December 2009, the group suffered losses during challenging market conditions, including a 17 per cent fall in turnover, dipping from £2.55bn in 2008 to £2.2bn, and pre-tax profits of £44.7m, down from £62.3m in 2008.
Mr Morgan said that while it was “tricky to say” whether further savings could be made this year through its supply chain, he suspected prices wouldn’t go much lower.
He added: “I am not convinced people are suicide bidding. I am not sure the size of the companies matter but good companies will win work going forward.
“I hope all areas will make progress but we want to increase our leadership across the board and I am interested in what we will look like in three years time rather than just this year.”
The firm’s fit-out division saw growth in revenue of 43 per cent to £415m (£291m in 2009) but Mr Morgan warned that it probably would not continue to see an increase due to lack of available space.
In its statement, the company warned: “Very challenging conditions persist in the commercial fit out and refurbishment markets where intense competition is creating downward pressure on tender prices.”
“Consequently the operating margin reduced to 3.6 per cent (4.7 per cent in 2009).”