Morgan Sindall first-half profit falls 95 per cent

CONSTRUCTION company Morgan Sindall Group said first-half profit fell 95 per cent as increased competition hurt margins.

The company, which has offices in Leeds and Hull, said that an exceptional charge of £13m taken as a provision against amounts recoverable on a small number of older construction contracts also hurt profit.

Morgan Sindall, which builds houses, refurbishes offices and undertakes redevelopment projects, said it did not expect overall market conditions to improve significantly in the second half of 2013.

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Profit before tax fell to £1m in the six months ended June 30 from £18.8m a year earlier. Revenue rose two per cent to £1.02bn. Adjusted gross margin fell 120 basis points to 8.1 per cent.

Morgan Sindall’s urban regeneration division, Muse Developments, is developing a 60,000 sq ft office building on the former site of Queen’s Hall on Sovereign Street in Leeds city centre. The building will be occupied by KPMG upon completion in 2015. Morgan Sindall has also secured a £1.9m contract to extend White Rose Shopping Centre in Leeds.

Meanwhile, the company is on site delivering a £6.7m major extension to Europe’s largest soft drinks factory for Coca-Cola Enterprises (CCE) in Wakefield as part of a £30m investment to the site.

Dan Needham, regional director for Muse Developments in Yorkshire, said: “We have had a great start to the year, with construction beginning across the region. The increase in construction and our ability to negotiate a pre-let and finance deal at Sovereign Street in this more challenging market, demonstrates our tenacity and flexible approach in bringing major regeneration projects forward.”

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Morgan Sindall, which gets roughly half its revenue from government contracts, had reported an eight per cent decline in 2012 revenue, hurt by government spending cuts.

The company, which got 70 per cent of its work in the construction business from the public sector about four years ago, has been reducing its exposure to the public sector as it copes with government budget cuts. Morgan Sindall’s order book was flat at £3.1bn.