Contract woes drag Morgan Sindall into the red

Grant Prior 7 years ago
Share

Problem construction and infrastructure contracts dragged Morgan Sindall’s results down to a pre-tax loss of £27.2m during the first half of this year.

The contractor is also scaling down its London and South East operations as it pulls back from bidding in the region.

The company set aside £35m in May to cover losses on two Government contracts at Faslane in Scotland – that has now increased to £39.4m.

The problem jobs relate to the design and construction of a floating submarine jetty which was finished more than three years late and the design and construction of living accommodation and infrastructure at the naval base.

Both contracts were transferred as part of the acquisition of the design and project services division of Amec in 2007.

Morgan Sindall said: “Commercial resolution ‘in principle’ has been achieved on one of those contracts and based upon this and the Board’s best current assessment of the likely outcome on the other contract, an exceptional item of £39.4m has been charged in the period which is non-cash in nature.”

The deal is understood to have been reached on the living accommodation contract.

The company was also dogged by lower returns from construction in London and the South “as lower margin construction contracts procured during the more difficult pricing environment of 2012-2013 continue being worked through to delivery and completion.”

Morgan Sindall said: “Completion of these construction contracts has been more difficult and at a slower rate than previously anticipated, with construction programmes now extending into the second half.”

Bidding activities in London and the South East have been reduced with the order book down 22% and “regional overhead has been reduced accordingly.”

Exceptional items dragged results down for the six months to June 30 2015 to a £27.2m pre-tax loss from a £13m profit last time on turnover up to £1,152m from £998m.

Adjusted pre-tax profits without exceptional items dipped to £13.3m from £14.2m.

Fit out operations continued to perform strongly making a £10.4m profit on a turnover of £299m.

Chief executive John Morgan said: “We’ve seen a strong performance from Fit Out in the first half and Urban Regeneration continues to deliver good growth as a result of our focused and long-term investment in the development portfolio.

“Construction & Infrastructure continues to be impacted by the poor performance of its older and lower margin construction contracts in London and the South and, whilst these are working through to completion, this is happening at a slower rate than previously anticipated which will hold back the divisional performance in the second half of the year.

“However, it is expected that Fit Out will produce a further strong performance in the second half, with Urban Regeneration and Affordable Housing both making good progress.

“Consequently, the Group remains on track to deliver results for the full year in line with the Board’s expectations and the outlook for 2016 and beyond remains unchanged.”

 

Latest news

Plans in for Brentford 110-flat canalside scheme

Makers’ Yard mixed commercial and residential use scheme
59 mins ago

Kier pulls off contracts league double in July

Contractor bags highest value of new work and tops rolling 12 months ranking
41 mins ago

Hinkley Point C giant water intakes craned onto seabed

Video: contractors complete one of the world’s most complex marine engineering projects
8 mins ago

Taziker revenue jumps 30% to record £73m

Multi-disciplinary engineering specialist boosts headcount to 366 staff
41 mins ago

Consultant buys scaffolding contractor

RSK Group makes MG Scaffolding its latest acquisition
19 mins ago

M&E specialist gears up for £16m Aston Martin package

Major package award on McLaren Silverstone site
6 mins ago

WSP to buy consultant RPS Group for £591m

5,000 staff at Oxfordshire based firm to join WSP
1 day ago

Countryside puts offsite factory up for sale

Offers invited for Bardon plant which is less than a year old
24 hours ago

M&E specialist Spie UK arm returns to profit

French parent group launches a strategic review of UK operations after performance stabilises
1 day ago

Site boss fined for locking out safety inspectors

Police called to enter site before fire fighters rescue workers stranded on roof
1 day ago

Rebid starts for £200m M5 junction job

Cost inflation forces retender for £200m junction 10 rebuild near Cheltenham
24 hours ago

New Downing Construction boss named

Andy Thomas takes top job as Ian Orton steps back after 24 years
1 day ago

Plans in for 600 homes at London Aylesbury estate

Notting Hill Genesis aims to start work next year on phase 2 of Southwark estate rebuild
1 day ago

Tide gets green light for UK’s tallest modular tower

Volumetric specialist to build 48-storey student skyscraper at Canary Wharf
3 days ago

TopHat cuts losses and aims for profit in three years

Modular specialist investing for future as latest results show £19.4m loss
2 days ago

Story Contracting names next chief executive

Andy Joy to be promoted to CEO as Jason Butterwork becomes vice chairman
2 days ago

Stalled £100m North London build-to-rent tower to start

Essential Living commits to start Swiss Cottage scheme six years after planning OK'd
2 days ago

Bidding starts for Pagabo £1bn medium works deal

Extra small project lot added in framework renewal
2 days ago

Vital funding deal for £50m A38 Midlands upgrade

Work could start early next year on A38 BREP now out to tender
2 days ago

Graham wins £16m National Railway Museum job

Firm seals pre-construction deal as new museum Central Hall gets planning green light
2 days ago

Demolition starts on half-built £48m Taylor Wimpey flats

Furious local residents blast house builder over "unbearable" noise
5 days ago

Civils contractor fined £600k after boy dies in drainage pipe

Workers find seven-year-old who suffocated on housing site
6 days ago

Plan for trio of towers at old Yorkshire Post site

Galliford Try advises on construction plan for Leeds student and build to rent towers
5 days ago

Insolvency to rival inflation as project cost threat

Inflationary pressures likely to peak this year before easing in 2023, but supply chain stress is growing.
5 days ago

B+K starts £300m Sheffield West Bar scheme

Funding deal triggers start on major mixed-use scheme
5 days ago

Willmott Dixon bags £44m Passivhaus leisure centre

Private builder prepares to start Staines-upon-Thames complex
5 days ago

Go-ahead for £160m Cambridge mixed-use scheme

Devonshire Gardens will consist of 70 private rental flats and 120,000 sq ft of offices
5 days ago

Construction buyers report first drop in output for 18 months

Civil engineering worst performing sector
6 days ago

Construction and infra margins hit 3.2% at Morgan Sindall

Contractor picking deals carefully as inflation continues to bite
6 days ago

Morrisroe Group revenue tops £200m

Pre-tax profit halves to £2.7m as cost inflation bites
6 days ago

Contractor services