黑洞社区

Morgan Sindall racked up its first exceptional item in seven years after the firm said it was making a 拢49m provision to carry out cladding repair work required by government legislation.

The last time it was forced to book a charge was in 2016 when it wrote off 拢47m on two contracts that came with its purchase of Amec鈥檚 construction business in 2007.

The cladding provision had already been flagged and this morning Morgan Sindall said the cost of meeting the developer pledge under the 黑洞社区 Safety Act would be 拢48.9m.

Speaking about the charge, chief executive John Morgan said: 鈥淚t鈥檚 not through normal trading, this is very different to bad jobs. It really is an exceptional and it鈥檚 in the range that we had previously said it would be.鈥�

The firm said the amount 鈥渄oes not include the benefit of any potential income subsequently received for recoveries from third parties鈥� and Morgan added it was still mulling whether to try and recoup the money. 鈥淚t鈥檚 early days and very difficult to know how this is going to pan out. This will take a long time. [The provision is] mostly with our urban regeneration business where other contractors did the work. Any other exceptional will be as profit.鈥�

The charge meant pre-tax profit was dragged down a third to 拢85m on turnover up 12% to 拢3.6bn.

But underlying pre-tax profit was up 7% to 拢136m and Morgan said its expectations for the year ahead remained unchanged with broker Numis expecting profit to be around 拢132.5m this year before climbing to 拢139m next.

The firm鈥檚 fit-out business continues to boom with the company upgrading what it expects to make this year because of ongoing demand.

鈥淭here鈥檚 some big lease renewals, clients are changing space to make it more attractive and there鈥檚 a lot of work in energy efficiency,鈥� Morgan said.

Along with ISG, its Overbury fit-out arm is due to return its bid for a 拢150m-plus deal to carry out work at the new Google headquarters building in King鈥檚 Cross any day now with the firm also set to start work later this year on a huge overhaul of Citi鈥檚 Canary Wharf headquarters in a deal which could end up being the firm鈥檚 biggest ever.

The job for the US investment bank has been given an official value of 拢100m but it is understood work on the 42-storey office tower at 25 Canada Square, completed in 2001, could be as much as four times that number.

But Morgan said most of its fit-out work is between 拢3m and 拢4m, adding: 鈥淲e have lots and lots of smaller jobs for key clients. That鈥檚 the backbone of the business.鈥� Revenue at fit-out was up 22% to 拢968m on operating profit up 18% to 拢52m.

The partnership housing business, which Morgan has previously said he expects to become its biggest, saw income climb 22% to 拢696m on operating profit up 13% to 拢37m.

鈥淚t鈥檚 doing very well,鈥� Morgan said. 鈥淭here鈥檚 plenty of schemes to go for but we鈥檙e going to sell less because the market is not as strong as last year.鈥�

Like the major housebuilders, Morgan said sales at its affordable housing business had been hit by last September鈥檚 mini-Budget, although the firm did not break out by how much. 鈥淚t certainly didn鈥檛 help,鈥� said Morgan of former chancellor Kwasi Kwarteng鈥檚 statement, 鈥渁lthough perhaps the market was softening anyway.鈥�

The firm鈥檚 biggest business remains construction and infrastructure where revenue was up 3% to 拢1.6bn although operating profit was down 10% to 拢52m.

Margins at the business slipped to 3.3% but Morgan said it was still in track for a 拢2bn turnover business with operating margins at construction between 2.5% and 3% and between 3.5% and 4% at infrastructure. And he added: 鈥淚nflation is definitely moderating, particularly in labour, and materials are more available now.鈥�

The firm鈥檚 order book was off 2% at 拢8.5bn while average daily net cash for the year was 拢256m, down from 拢291m last time.