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Morgan Sindall to double regen share

Morgan Sindall is planning to double its regeneration share in the next three years, its co-founder told CN this week.

The construction and regeneration company announced a fall in pre tax profits of 9 per cent to £19.5 million in the first six months of the year, despite an 11 per cent boost in revenue to £1.087 billion.  There was particular pressure on construction and infrastructure margins.

The company has an order book of £3.5bn, supplemented by a regeneration pipeline of £1.8bn, with a further £0.8bn of regeneration schemes at preferred bidder stage.

Co-founder and executive chairman John Morgan told CN that the company is planning to increase its regeneration share from 25 per cent to 50 per cent in three years. But he said that while some projects could take two to three years to complete, others could span a decade.

“It is going to be our driver for growth going forward, but it is very long term,” he said.

“The critical thing about regeneration for us is that it involves all our businesses.”

That means its investment division as well as urban regeneration arm Muse. The investments division made a £2.1m loss in the six months to 30 June, which the company put down to bidding costs.

Morgan Sindall said its local asset backed vehicle (LABV) – which allows public sector bodies to use their assets to attract long-term investment - secured a £350m regeneration contract for Bournemouth Council. The firm is also using its investment and construction divisions to work with Southampton City Council, the Crown Estate and Associated British Ports on a potential £450m waterfront regeneration scheme.

In terms of urban regeneration, it said there is less competition from developers in the commercial market after the banking crisis and a shortage of new offices in provincial cities, along with opportunities with a longer-term housing shortage.

Mr Morgan said partnerships with local authorities will be key in affordable housing, which saw operating profit up 20 per cent to £8.3m (2010: £6.9m) with revenue at £228m (2010: £173m)

He added:  “We seem to be winning our fair share; and it’s the frameworks that we all want to get on. If you look at the figures, we are well in line with expectations, but it is a tough market out there. The critical thing for us is that we are in a strong position in the segments that we’re in.”

Andy Brown, analyst at Panmure Gordon, retained a buy stance for the company, with pre tax profit forecasts for end of year remaining at £47m.

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