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Morgan Sindall revenue drops 14%

9 Aug 10 Morgan Sindall's revenue for the first six months of 2010 dropped 14% to £0.98bn, compared to the £1.14bn delivered in the first half of last year.

Morgan Sindall's revenue for the first six months of 2010 dropped 14% to £0.98bn, compared to the £1.14bn delivered in the first half of last year.

Profit before tax at the construction group was also down at £23.1m (H1 2009: £23.9m), a fall of 10%.

The fall in turnover is primarily due to lower levels of activity in the group's Construction & Infrastructure business, through revenue increased in its Fit Out and Urban Regeneration divisions.

Morgan Sindall had a strong cash balance of £138m (H1 2009: £89m) at 30 June, an increase of 55% on the previous year's figure.

The group said a continued focus on cost reduction had realised a further £16m of annual savings, in addition to £38m of savings previously announced.

Operations

Morgan Sindall merged its Construction and Infrastructure divisions into a single business during the first half, which it expects to yield further annual savings of £6m.

The new division delivered a reduced operating profit of £12.2m (H1 2009: £15.0m) on revenue of £612m (H1 2009: £797m). The operating margin was up fractionally to 2% (H1 2009: 1.9%)

The Construction & Infrastructure order book was up £0.5bn to £2.1bn, a 31% increase, since the start of the year.

In Fit Out, revenue increased 12% to £179m (2009: £160m), due to greater demand for larger projects from professional and financial services sectors in London, the firm said. However, operating profit was down at £6.9m (H1 2009: £7.4m), with margin reduced to 3.9% (H1 2009: 4.6%)

The order book was up 25% since start of the year at £213m (2009: £150m), and Morgan Sindall said it expected revenue in the second half of the year to exceed that achieved in the first half.

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In Affordable Housing, operating profit of £6.9m (H1 2009: £7.1m) and revenue of £173m (H1 2009: £178m) were broadly comparable to the figures reported a year ago. Operating margin was identical at 4%.

On 30 June, Morgan Sindall acquired Powerminster from Gleeson to extend the division's response maintenance capability and geographic reach.

Its order book increased to £1.4bn (2009: £1.3bn), and the firm said the “outlook remains robust for new build social housing, refurbishment and response maintenance in short to medium-term”.

In its other two divisions, the group's Urban Regeneration business reported an operating profit of £0.8m (H1 2009: loss of £1.1m) on revenue of £15m (H1 2009: £5m), while the directors' valuation of its Investments portfolio has increased to £51m (H1 2009: £36m).

Outlook

John Morgan, chief executive, said: “We expect that the construction market will remain challenging but the Group's broad spread of activities will provide some resilience to the changes in the market.

“In addition, we will continue our focus on resource levels and ensure that our businesses remain efficient in the current market environment.

“Nevertheless, the size and length of the Group's forward order book coupled with our financial strength leaves us well positioned to navigate our way through these challenges, to take advantage of the opportunities presented by the market and to grow profitable market share.”

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