Margins under pressure at Morgan Sindall

8th Aug 2011 13:10

Construction and regeneration specialist Morgan Sindall remains confident of medium term growth despite announcing disappointing half year results. The company saw its pre-tax profits fall 9% to £16.7m (2010: £18.4m) for the half year period ending 30 June, despite revenue jumping up 11% to £1,087m (£982m). With amortisation and non-recurring items stripped out, profit before tax was £19.5m, down 16% from the £23.1m achieved in the first half of last year.The company blamed the poor profit result on challenging market conditions, but stressed results reflected a "resilient performance" which was in line with expectations. Cash at the end of June stood at £65m, down from £138m a year earlier, while the average cash balance during the reporting period was down 30% on the year before at £43m.Margins remain under pressure in most parts of the group, not least those with a heavy reliance on the public sector markets.In the Construction & Infrastructure division the operating margin declined to 1.5% from 2.0% the year before, while the Affordable Housing arm saw its margin slide to 3.6% from 4.0%, due to the changing mix of work.the Fit Out division continues to take market share, the group claimed, but its operating margin is also heading south, down to 2.7% in the first half of 2011, versus 3.8% in the corresponding period of 2011.The interim dividend remained stable at 12p per share. The company commented that "while market remains challenging the group continues to invest in order to position divisions for growth in the medium-term. It is in robust operational and financial shape and we remain confident of meeting our expectations for the full year." Executive Chairman, John Morgan, said: "Our broad sector spread, increasingly joined up approach and focus on more complex projects has helped to underpin a solid set of results. "We look to the future with cautious optimism and are confident that we are well positioned to deliver long-term sustainable growth," Morgan added.The order book of £3.5bn is supplemented by a regeneration pipeline of £1.8bn, the company revealed, with a further £0.8bn of regeneration schemes at preferred bidder stage. The share price was down 0.89% to 612.00p at 13:14. NR