5th Aug 2014 09:33
(An item published 1048 BST Monday misstated the company name. The correct version follows.)
LONDON (Alliance News) - Construction business Morgan Sindall Group PLC Monday reported an increase in profit for the first half, as its Urban Regeneration division made an increased contribution.
The company, which builds houses and refurbishes offices, posted pretax profit of GBP13.0 million for the six months ended June 30, up from GBP1.0 million a year earlier. Adjusted pretax profit, which is before intangible amortisation, dipped 8% to GBP14.2 million from GBP15.4 million.
FTSE 250-listed Morgan Sindall has faced challenges in recent times, with margins under pressure and increased competition affecting profit. In the previous year, profit was depressed after the company booked exceptional operating items of GBP13 million, as a provision against amounts recoverable in relation to a small number of construction contracts.
Morgan Sindall said the first half saw an important shift in the balance of its profit, with an increase in contribution from the urban regeneration business. This is a trend that is expected to continue into the second half and beyond.
Revenue for the Urban Regeneration business rose 31% to GBP71 million from GBP54 million a year earlier. Morgan Sindall said key contributions within the period include practical completion on both the Council Office and a J Sainsbury PLC store in Blackpool, a residential block in Brentford and a multi-storey car park in Stockport.
Other milestones include site starts in Lewisham, planning consents for John Lewis at Home and Waitrose stores in Basingstoke and the exchange of contracts for a development scheme in Brixton, south London worth GBP140 million. Morgan Sindall plans to construct 125,000 square feet of offices in Brixton town centre and up to 275 new homes.
The company said Affordable Housing revenue rose to GBP193 million from GBP186 million a year earlier. However, the group's Fit Out and Construction divisions did not do as well with revenue slipping 8% and 4%, respectively.
Morgan Sindall said the although revenue fell for the Fit Out arm, the committed order book grew 57% from the year-end position. Additionally, the division is experiencing a higher level of contract procurement through more favourable sales routes, which also provides support for further profit growth.
The company said the overall trading environment for Construction and Infrastructure remained difficult throughout the period.
Morgan Sindall said: "The combination of lower margins from work tendered in 2012-2013 and cost inflation, both at a time of improving general market activity, has provided some significant on-going challenges particularly in the construction activities."
Overall Construction and Infrastructure revenue fell to GBP567 million from GBP593 million a year earlier, primarily driven by lower construction revenue resulting from the on-going selectivity and focus on operational delivery and margin improvement.
Nonetheless, Morgan Sindall said the group order book rose 14% from the year-end reflecting an increase in generate market activity. It said this leaves it well positioned for the medium to long term.
Post the period-end the group signed a new GBP140 million committed revolving loan facility with four banks, which will mature in September 2018.
"Together with GBP30 million of facilities signed in 2013 and which mature in 2016, this leaves the group securely financed with good headroom over and above anticipated funding requirements," Morgan Sindall said.
Looking ahead, the company said the operating environment for general construction is expected to remain challenging with no easing of pressure on margins.
"However, with continued positive momentum anticipated within both Fit Out and Urban Regeneration, the group remains on track to deliver results for the full year in line with the board's expectations," Morgan Sindall said.
The company declared an unchanged interim dividend of 12.0 pence per share.
Morgan Sindall shares were quoted down 0.1% at 791.50 pence Tuesday morning.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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