Morgan Sindall executive chairman John Morgan insisted this week that opting for urban regeneration above overseas markets and support services would provide “real resilience”, despite a 12 per cent fall in profits.
In line with expectations, Morgan Sindall’s pre tax profits were down from £51.3 million to £45.3m in the year to 31 December 2011, despite revenue growing six per cent to £2.22bn.
Mr Morgan blamed fierce competition and economic conditions for the margin fall in construction and infrastructure (2.2 per cent in 2010 to 1.7 per cent), fit-out (3.6 to 2.8 per cent) and affordable housing (4.2 to 4 per cent).
But he told CN: “This is where we are different to the competition; we have not gone looking overseas or in support services.
“At the moment analysts will say overseas and support services will increase performance now – we have a different strategy which we believe will give us real resilience.”
The co-founder defended the two per cent group margin, which he said was also affected by reinvestment in the regeneration strategy.
Morgan Sindall now has 35 regeneration schemes – securing five last year worth £800m – and a regeneration pipeline that has doubled to £2.4bn. It says the public sector is sitting on £17bn of low value land, with its release central to economic growth.
The number of joint ventures will grow, both in regeneration and infrastructure, to share skills and bidding costs, give extra confidence to clients and respond to packaged contracts, said Mr Morgan.
In construction and infrastructure, operating profit was down 20 per cent to £21.1m , with revenue fractionally up to £1.27bn and an order book of £1.6bn (2010: £2bn).
The firm’s share of public sector work is already down to 50 per cent, from 70 per cent last year, and is expected to fall to 45 per cent, said Mr Morgan.
The contractor will focus on “major complex projects” in infrastructure. The smaller projects will remain in fit out (revenue up six per cent to £438m, profit down to 16 per cent to £12.4m), with 80 per cent of based in London.
Affordable housing revenue grew a fifth to £462m with operating profit up 14.1 per cent to £18.6m, driven by the full year impact of the Connaught acquisition.
The firm was waiting on £228.6m of payments from clients by the end of the year, compared with £178.4m at the same time a year earlier.
The total order book sits at £3.4bn, slightly down on £3.6bn last year, with a quarter of this expected from frameworks – meaning they are not secured.
The firm had £109m in the bank at year end, down from £149m last time.