Construction contracts hit profits at Morgan Sindall
Morgan Sindall has completed a “disappointing” year with profits being hit by a small number of construction contracts despite a rise in annual sales to more than £2.2 billion.
The company, which is the parent of Muse and Lovell, said sales for the year to 31 December 2014 were up by 6 per cent to £2.22bn as all divisions posted revenue growth, apart from its construction and infrastructure arm.
The weaker performance of this division offset strong trading in its fit out and urban regeneration businesses. This resulted in adjusted operating profit of £28.9 million, down 14 per cent on the prior year. Adjusted pre-tax profit also dropped by 19 per cent to £25.2m.
The group’s committed order book is up 11 per cent at £2.7bn from £2.4bn.
Despite the disappointment, chief executive John Morgan said the progress by its urban regeneration division is “particularly pleasing” as it supports Morgan Sindall’s “long-term regeneration strategy and provides a positive platform for further investment in regeneration”.
He added: “Looking ahead to 2015, lower returns in construction and infrastructure are expected to remain for at least the first half of the year, as lower margin construction contracts tendered in 2012-2013 are worked through to completion.
“However, the continued positive momentum expected within fit out, affordable housing and urban regeneration, together with further investment programmes in regeneration opportunities, and supported by the improvement in the quality of our order book, provides confidence that the group is well positioned to deliver overall growth in 2015 and beyond.”
The total dividend for the year of 27p per share has been held level with the dividend awarded for 2013.
Lovell, works with housing associations and local authorities on new affordable housing developments, major housing refurbishment schemes and regeneration programmes across the UK, has an order book which now stands at £673m.
Lovell managing director Stewart Davenport said: “2014 saw the housing market continue to improve supported by the UK government’s Help to Buy initiative. This has allowed us to continue our investment in new mixed tenure regeneration projects leaving us well placed to grow the business in coming years. Our partnerships with housing associations and local authorities continue to support a healthy forward order book. We are particularly well placed to capitalize on the growing appetite for local authorities to provide affordable housing in their own right as they take advantage of their freedom to build new housing.”