Morgan Sindall toughs out 'challenging' year

Regeneration and construction firm Morgan Sindall has reduced its dependence on pubic sector projects and increased revenues as its recovery from big share price falls last summer continues.

The firm grew revenues to £2.227bn in 2011, a 6% gain on 2010. However, in what are described as "challenging" market conditions, the group saw pre-tax profits drop 2% to £40m from £40.7m in 2010.

The group ended the year with £109m cash in the bank, down 27% on the previous year while adjusted earnings per share fell 11% to 82.5p.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

In the Construction and Infrastructure division competition forced prices down, reducing margin by 50 basis points to 1.7%. The order book stands at £1.6bn, down significantly from the £2bn seen at the end of 2010.

The Fit Out division saw an even bigger fall in margin from 3.6% to 2.8% and Morgan Sindall warns the "recovery is expected to be slower and later than expected".

Affordable Housing maintained margin at 4%, only slightly down on the 4.2% achieved in 2010.

John Morgan, the Executive Chairman of Morgan Sindall emphasised his firm had "delivered in line with expectations...despite challenging markets".

A crucial metric for the group is its exposure to public sector work, which fell from 70% in 2009 to 50% in 2011. Given the expected squeeze on public projects this balance of work is likely to help the firm through 2012.

Investors seemed content with today's release, by 10:00, Morgan Sindall shares had gained 1.1%. Over the last six months the stock has gained 16%.

BS