Morgan Sindall warns on profits after contract delays

24th Oct 2014 09:06

Construction and regeneration specialist Morgan Sindall has warned on profits after delays and higher costs on some contracts.Morgan said it had taken a hit from a small number of construction contracts in London and the South since 1 July that had experienced timetable slippages and increased estimated costs.The fixed-price contracts in its construction and infrastructure division were due to complete within the next six months and were secured over a year ago."As a result, the board now expects the full-year result will be below its previous expectations set at the time of the half-year results announced on 5 August 2014," Morgan said in a trading update.Morgan also said the site for the £15.8m construction of the Glaxosmithkline Carbon Neutral Laboratory of Sustainable Chemistry for the University of Nottingham was destroyed by a fire.Work started on site in autumn 2013 and was due for completion in early 2015 and Morgan said the loss of expected contribution from the time of the fire up to completion had further hit divisional performance."As a result, the division is now expected to deliver a full year performance below previous expectations, with full year operating profit margins reduced from 1% in 2013 to around 0.3%-0.5%," Morgan said.Morgan said, however, that its fit-out business had traded strongly, with significant levels of bidding activity resulting in the order book of £260m as at the end of September, up 17% from the half year and up 83% from the start of the year.It said the division's full-year result was now expected to be above previous expectations. It said its affordable housing, urban regeneration and Infrastructure activities had also done well,Chief executive John Morgan said: "We are obviously disappointed that a small number of construction contracts in London and the south have been impacted by timetable slippage and increased estimated costs to complete. This is a short-term and localised issue which is receiving the highest level of management attention and should be worked through in the next six months. "The rest of the business is performing well, particularly fit-out. We firmly believe the medium and long-term opportunities and prospects for the group remain very attractive."