Spending cuts see Morgan turn attention to the private sector

The company reported a 16 per cent drop in its first half pre-tax profits, hurt by a weaker performance at its largest construction and infrastructure division.

It said challenging market condition are expected to hit margins, but it is confident of meeting full-year expectations.

The group, which owns affordable housing firm Lovell, said profit margins fell from two per cent to 1.5 per cent as it battled to win contracts in a “very competitive” market.

But the group is winning business in areas such as private sector construction and large infrastructure projects, to compensate for the squeeze on public sector spending.

Key project wins include a £2.9m contract to build a new Audi showroom and workshop for the Sytner Group in Wakefield.

It has also been awarded a £2.4m contract to refurbish an 850-space, multi-storey car park at Doncaster’s Civic and Cultural Quarter scheme, for its sister company Muse Developments.

The public sector now accounts for 50 per cent of its revenues, compared to 60 per cent this time last year.

The group’s offices in Leeds and Hull are working on a number of public sector contracts around Yorkshire.

The Leeds office is working on a £14.8m contract to create new civic offices for Wakefield Metropolitan District Council, which is scheduled for completion in December.

The office is also working on Primary Care Centre projects worth £19m including Hoyland, Darton, Conisborough and The Town Centre Hub in Doncaster, under the NHS LIFT programme.

In Hull, Morgan Sindall has been appointed to deliver the initial four-year construction programme for the Hull Building Schools for the Future (BSF) scheme, led by the Hull Esteem Consortium.

The company has just been awarded three new contracts from the programme, worth a total of £65m.

They include Kingswood College of Arts, a new school that will specialise in art, a scheme to build Oakfield Special Needs School and a contract to construct Andrew Marvell Business and Enterprise College which is to be rebuilt on its current site.

Morgan Sindall is also nearing completion on the Hull BSF programme’s first two new-build schemes. These include a £38m scheme to build Winifred Holtby and Tweendykes, a new secondary and special educational needs school, and a £33m scheme to build Archbishop Sentamu Academy.

Both projects are set to be delivered on time and to budget, ready for the start of the new school year.

Underlying profits fell 16 per cent to £19.5m in the six months to June 30, despite an 11 per cent rise in revenues to £1.1bn reflecting the pressure on margins amid the changing mix of work.

Other major contracts include work on the £1.2bn Gatwick Airport upgrade, £285m of Crossrail work in London and an upgrade to the M62, which connects Hull and Liverpool.

Its biggest division – construction and infrastructure – reported a one per cent increase in revenues to £617m, although underlying profits declined by 22 per cent to £9.5m.

Lovell saw profits rise 20 per cent to £8.3m, on revenues up 32 per cent to £228m after being boosted by the acquisition of some assets at collapsed firm Connaught.

The group’s order book was £3.5bn, with an additional pipeline of £1.8bn of regeneration work. It has won contracts to regenerate parts of Warrington, Glasgow, Brentford and Plymouth.

Although it expects the public sector construction market to continue to show “significant” declines over the next two years, the group hopes to benefit from growth in private sector construction, particularly a £200bn Government plan to improve transport and energy infrastructure.

Growth in the UK construction industry was broadly steady in July, but will be challenging over the coming months.

Spreading the word

Morgan Sindall works for private and public sector customers on projects from £50,000 to over £500m.

The company has a network of local offices including two in Leeds and Hull. Its activities range from small works and repair and maintenance, to the design and delivery of complex construction and engineering projects.

The company operates across the commercial, defence, education, energy, healthcare, industrial, leisure, retail, transport, waste and water sectors.