Office demand drives Morgan Sindall profit

Marion Dakers
CONSTRUCTION group Morgan Sindall said growing demand for office space was helping to offset the impact of government spending cuts, although the construction recession was not over yet.

“The commercial side is growing, but let’s not over exaggerate – it’s growing a bit but not as quickly as governments are spending less,” said executive chairman John Morgan.

Morgan told City A.M. public sector contracts have fallen from 60 to 50 per cent of total work this year, with a further drop to 40 per cent expected. When asked whether private contracts will cover the drop, Morgan said: “It will make up some of it, but not all… It’s probably going to make up about half the difference.”

The group posted a three per cent fall in first half pre-tax profit to £23.1m yesterday, on the back of revenue down 14 per cent to £980m.

It maintained the interim dividend at 12p per share and increased its net cash balance 55 per cent to £128m.

“Our figures came in as expected,” said Morgan. “Conditions are difficult out there but we have done better than most because of our size and expertise.”

The company said demand for office space was being driven by financial firms in London, and that its fit out business had seen revenue increase 12 per cent to £179m.

The firm’s affordable housing division Lovell remained largely flat with revenue of £173m, but the firm said demand remains robust despite continued difficulties for customers obtaining mortgages. It expanded in June by purchasing maintenance firm Powerminster.

Morgan said the firm could benefit from the woes of housing maintenance firm Connaught.

“We’ve added half a billion pounds to the order book since the start of the year, cash flow is significantly ahead and we’re seeing a lot of new opportunities. The future is about hard graft for the next couple of years and improving market share,” Morgan added yesterday.