4th Aug 2014 07:42
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.
Keller 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. Keller 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.
In addition, 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.
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 up 0.1% at 790.00 pence Monday morning.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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