Margins fall as competition bites

Published:  10 August, 2011

LONDON: Increased competition for contracts has seen profit margins at Morgan Sindall on construction and infrastructure work drop by 25% during the first half of the year.

Figures released today showed operating margins fell from 2% to 1.5% during the six months to June "reflecting the competitive market".

Construction and infrastructure turnover was steady at £617m from £612m as operating profit at the firm's main division fell to £9.5m from £12.2m.

But Morgan Sindall is bullish about the future and expects private sector construction and infrastructure work to grow and the firm has cut its reliance on declining public sector work to 50% from 60% of the business.

The firm said: "Looking forward, the market is expected to remain highly competitive with public sector work and roads construction continuing to shrink. However, we are focused on sectors that are expanding."

These include affordable housing, fit-out and urban regeneration.

Executive chairman John Morgan said: "Our broad sector spread, increasingly joined up approach and focus on more complex projects has helped to underpin a solid set of results.

"While market conditions remain challenging, we continue to make the most of opportunities as they present themselves and invest in our businesses in order to position them for growth in the medium-term.

"We look to the future with cautious optimism and are confident that we are well positioned to deliver long-term sustainable growth."

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