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Connaught interim profit slumps 21%

27 Apr 10 Local authority construction and maintenance outfit Connaught has reported a 21% fall in pre-tax profit to £10.7m in its latest interim results.

Local authority construction and maintenance outfit Connaught has reported a 21% fall in pre-tax profit to £10.7m (H1 2009: £13.5m) in its latest interim results, for the 6 months to 28 February 2010.

However, turnover was up 17% at £355m (H1 2009: £304m).

Connaught's profit was hit by exceptional costs of £5.8m, of which £3.2m represented reorganisation costs. A further £1.5m was incurred through integration of recent acquisitions Igrox, UK Fire and Fountains, with acquisition-related fees under IFRS3 adding another £1.1m.

Amortisation of intangible assets related to the acquisitions knocked off another £4.2m from the profit figure.

Cash generated from operating activities, excluding the impact from acquisitions, stood at £8.5m, up from £2.6m a year ago. Net debt for the period was £97.5m (H1 2009: £99.2m).

The order book was up marginally at £2.9bn (H1 2009: £2.7bn). This included £403m added during the six-month period (H1 2009: £385m)

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Connaught's strongest business was Social Housing, where revenue rose 13% to £256m, and operating profit jumped 17% to £14.9m.

However, the firm said its decision to exit under-performing markets following a review will reduce revenues in social housing by around £25m in 2010 and by around £40m in 2011.

Connaught also said it was looking for cost-savings elsewhere in the business, through procurement, boosting productivity and rationalising its property portfolio.

Mark Tincknell, who was reappointed as chief executive in February, said: "Our client base is looking to us to help them cut costs in the face of budget constraints, and with our integrated business model we are well positioned to deliver these savings. This trend is reflected in our orderbook which is growing at a fast rate.

“Our order book stands at £2.9bn with a pipeline of £4.9bn, providing significant opportunities for the Group. We believe the strength of our core business, together with our ability to deliver complex, longer term partnerships will provide the foundation for continued earnings and dividend growth.

“The current economic environment in the UK is creating significant opportunities. Financial pressure in the public and private sectors is driving deep, leading to an increase in multi-service outsourcing. This represents a once in a generation opportunity for us.”

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