Increasing competition sees contractor income down despite rising revenue
Pre tax profit at construction giant Morgan Sindall fell 12% in 2011 despite rising revenue, as competition for building jobs grew increasingly intense.
Reporting full year results for the year ending December 31, Morgan Sindall said profit fell to £45.3m on revenue of £2.23bn, up from £2.1bn in 2010.
The firm also said its forward order book has fallen to £3.4bn from £3.6bn at the same point in 2011, though its pipeline of regeneration projects has risen to £1.8bn, up 28%.
The profit margins at it construction and infrastructure business fell from 2.2% to 1.7%, with the pipeline for this division, which produces more than half of the group’s revenue, dropping sharply. It said recovery in the London office market was “slow” and that recovery in the fit-out market would be “slower and later than expected.”
Cash balances were also sharply down in 2011, as the business paid out in order to mobilise contracts won in 2010. However, profit grew at the firm’s smaller affordable housing and regeneration divisions, as the group continues to pursue its strategic focus on regeneration schemes.
John Morgan, executive chairman, described the performance as “solid” in a “challenging” market. “We are benefiting from being a broadly based business, offering creative, integrated solutions for increasingly complex projects, with a track record of delivery.”
The firm also wrote off another £1.1m related to the £28m acquisition of social housing contractor Connaught in September 2010.