Legacy MoD jobs plunge Morgan Sindall into £15m loss

Aaron Morby 8 years ago
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Two legacy contracts for the Ministry of Defence at Faslane have continued to drag Morgan Sindall into the red despite better trading at the construction group.

The firm revealed this morning that the anticipated final cost of its floating jetty job and separate living accommodation and infrastructure project at the naval base had risen to nearly £47m.

The expected hit is £7.5m more than first highlighted at the half-year. Chairman John Morgan reported that one of the projects had now been settled, with the extra provision expected from the cost of settling the remaining legacy project.

Across the group a strong performance from the fit-out division helped to lift adjusted pre-tax profits 36% to £34m on turnover up 7% at £2.39bn in 2015.

Fit-out division profits soared 60% to £24m delivering a margin of 4%. But poor performance at the construction arm in London and the South East saw profits only creep up to £3.8m from £3.5m.

New business activity in the region was limited to mainly frameworks or bidding opportunities involving Morgan Sindall’s investments or urban regeneration operations.

Morgan Sindall trading divisions
Op profit % change Turnover change % op margin
Construction & Infr £3.8m +9 £1.23bn +5% 0.3
Fit-out £24m +60 £607m +20% 4
Affordable housing £8.6m +43 £426m +1 2
Urban regen £12.9m +29% £110m -3% 11.7

The group’s committed order book was ahead 6% to £2.8bn, compared to the prior year end with fit-out (order book up 41%), construction & Infrastructure (order book up 4%) and affordable housing (order book up 4%) all contributing to the increase.

Morgan said: “We are pleased with the year-end result which is evidence of the strategic and operational progress made across the group during the year and this, together with a positive outlook going into 2016, has enabled us to raise the final dividend.

“Fit-out has performed very strongly, with record revenue levels coupled with significant margin growth, while Urban Regeneration has again delivered a strong profit performance thereby reinforcing our long-term strategic investment in our regeneration activities.”

He added that while construction and infrastructure division margins remained low, the second half of the year had seen an improvement as a result of the considerable progress made in closing out its older and lower margin construction contracts in London and the South.

Morgan said: “Looking ahead to 2016, the positive momentum across the group is expected to continue.

“A strong level of performance from fit-out is anticipated, together with further strategic progress in Urban Regeneration and profit growth in Affordable Housing, driven by its mixed-tenure regeneration activities.”

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