Construction group Morgan Sindall has warned it will be “fighting hard to stand still” for the next two years as a result of cuts in public sector spending on construction.
The warning comes with the announcement of the latest set of trading figures for the Group for the six months to 30 June 2010 which saw a fall in revenue fell below £1 billion– described as “solid results in line with expectations”.
The Group’s profit before tax, amortisation of intangible assets and non-recurring costs was £23.1 million (2009: £23.9 million) on revenue of £982 million (2009: £1.14 billion). The Group’s forward order book has increased to £3.7 billion (2009: £3.6 billion).
John Morgan, the Group’s executive chairman said:
“These results demonstrate our continued strategic and operational progress,” says “Whilst we are conscious that market conditions remain challenging, our financial strength, breadth of capabilities and leading positions across a range of market sectors leave us well placed to capture further market share. We look to the future with confidence.”
The firm said that significant strategic development had been achieved through combining its Construction and Infrastructure Services into a new division, which had increased efficiency and delivered a more integrated service to clients.
Morgan Sindall saw a record first half operating profit contribution from the division’s construction businesses, up 11% to £6.3m (2009: £5.7m), with margin improved to 1.8% (2009: 1.5%); operating profit of £5.9m (2009: £9.3m) on maintained margin of 2.2% (2009: 2.2%) from infrastructure businesses.While the outlook remains challenging, the company said it had a “reasonable pipeline of construction opportunitie”s and a number of major infrastructure opportunities being tendered. The Division’s order book was up £0.5bn to £2.1bn, a 31% increase, since the start of the year.
The division now encompasses a full service capability from design, through delivery of complex construction and civil engineering projects, to maintenance of infrastructure assets, working across a number of sectors, including water.
The company said that during the first half of the year the division had been successful in converting all of its preferred bidder opportunities (£0.9bn) brought forward at the start of the year - including the Lee Tunnel project for Thames Water (valued at £209m to the Group) and a framework with Yorkshire Water under AMP5 (£60m).
However, the company said that the outlook for the division remains challenging although it currently has a reasonable pipeline of construction opportunities and a number of large infrastructure projects including Crossrail and the Second Forth Road Crossing being tendered. Uncertainty remained over the precise levels of future public sector demand, with Morgan Sindall waiting for the outcome of the Comprehensive Spending Review to gain a clear understanding of specific departmental plans for future public spending.
The forward order book at 30 June 2010 was £2.1bn (2009: £2.1bn), an increase of £0.5bn since the start of the year, with broadly the same balance between the Construction (£0.6bn) and Infrastructure (£1.5bn) elements of the forward order book.