黑洞社区

Morgan Sindall will continue to review its operations as its reshapes its business in response to a deteriorating market in the UK, as it aims to take out cost and target growth markets.

Speaking to 黑洞社区 magazine this week, Morgan Sindall managing director Graham Shennan said the firm鈥檚 recent office closures was part of a deliberate strategy to move away from a 鈥渞elatively inflexible locally-based structure鈥� in order to 鈥渟tay light on your feet鈥� and react to the changing market.

Last week John Morgan, the executive chairman and founder of the business, took control of the 拢2.2bn turnover Morgan Sindall Group again as chief executive, after the resignation of Paul Smith. The move came as part of which saw the contractor warn that its performance would be 鈥渟lightly below previous expectations鈥� and confirm a clutch of office closures as part of a bid to reshape its business.

Shennan said Morgan鈥檚 return to the role of chief executive was 鈥減ositive鈥� and it was largely 鈥渂usiness as usual鈥� for the 拢1.2bn turnover construction business, as Morgan had always maintained an active role as executive chairman.

He said: 鈥淔or me it signals an important change. There is a recognition that the UK market is quite tough. John鈥檚 built this business and it鈥檚 John sort of saying that the time is now right to steer things through a bit of a choppy time.鈥�

Morgan Sindall鈥檚 annual report showed that Smith鈥檚 total remuneration in 2011 was 拢1,025,000 and Shennan conceded the move was also partly driven by a desire to make the management tier more efficient.

鈥淲hen times are tough you have got to make sure you get added value and be as efficient as you can be and that applies at the executive level too. You have to start at the top,鈥� he said.

d that Morgan Sindall and Amec could be forced to bear a combined total of at least 拢50m in costs due to ongoing delays to a high-profile 拢134m nuclear submarine jetty project in Scotland, which is four years overdue and still unfinished.

Shennan would not comment on the project, which is being delivered by the infrastructure arm of the construction business in a joint venture with Amec, except to say it was 鈥渆xtremely complex鈥�. 鈥淏ut we can鈥檛 say anymore than that right now,鈥� he said.

the contractor is set to close four regional offices in the south of England in Theale, near Reading, Bristol, Ashford and Banbury - with about 60 jobs at risk while last month it said it would be closing its office in Durham.

Those office closures followed an earlier announcement that the firm had restructured its regional management team, with the company reshaped with four rather than six geographic regions.

Shennan said the move would see the main offices in the four regions become bigger, with fewer smaller offices as the contractor shifted to a 鈥渞egional hub model鈥� servicing smaller project-focused special works offices.

He said: 鈥淚t鈥檚 not a fundamental change - it鈥檚 more reacting to the market rather than just saying: 鈥榃ell the market is tighter so we鈥檙e just going to have to cut our margins and do the same amount work.鈥�

鈥淚 think that鈥檚 a bit daft really. We鈥檝e got the ability to flex and perform in different areas which are growing. It鈥檚 a deliberate but quite subtle reshaping. We鈥檝e just got to keep light in our feet.鈥�

He said the market in the North of England and the South-west in particular had been 鈥渞eally tough鈥� and that the office closures, such as in Durham, were a response to that. 鈥淲e had a nice little business in Durham but the local economy had become really tough,鈥� he said.

鈥淣ow just because we鈥檝e closed the office there, doesn鈥檛 mean to say we鈥檙e not going to work in Durham anymore.

鈥淏ut you have to be careful that you don鈥檛 just preserve a permanent place in Durham, and buy work at any cost, just to stay there. That鈥檚 madness. Because if you can鈥檛 make a profit in a place, if you can鈥檛 make money, what鈥檚 the point in having a business there? So we will retrench a little bit, and may be in the future we will reopen.

鈥淥ur shop window - our product - is our sites and anything that鈥檚 a framework that can service them can be as flexible as it needs to be.鈥�

He added that the contractor would continue to review its operations and make further office closures - or open new offices - when needed. 鈥淗ave we got anything else planned? Not specifically. Will there be some other changes in the future? Yes most probably. Exactly what? I don鈥檛 know yet,鈥� he said.

鈥淭his is what Morgan Sindall does - we just want to be as flexible as we can for our customers.鈥�

He said this approach had given the business an advantage in winning work, citing the example of Sellafield鈥檚 拢1.1bn Infrastructure Strategic Alliance (ISA) contract Morgan Sindall won in partnership with Arup.

He said: 鈥淥ne of the reasons Sellafield chose us is that we were seen as an empowered structure that could react quickly to client needs.

鈥淪o when we targeted Sellafield, we decided we鈥檇 open an office up there and went and did it - and that showed a commitment that we were serious.

鈥淏ut we won Sellafield because we were the most convincing that we could bring different thinking to the challenges of the contract. The fact that we鈥檙e showing investment, commitment, flexibility, and capability was part of that but it wasn鈥檛 the main reason.鈥�

He said the ISA contract offered some 鈥渞eal contract challenges鈥� with the winning bidder asked to deliver cost savings of 25% over the first five years of the contract, with 鈥渆quivalent savings鈥� over the full contract period. He said Morgan Sindall would aim to deliver on these through through innovations, such as off-site manufacturing.

He said one example of a future change could be adding a new rail stream within the construction business, if that part of the business continued to grow. Rail currently comes under the infrastructure stream, headed up by Jag Paddam, but Shennan said at some point they may need a dedicated rail division.

Despite the firms鈥� update to the City this month, which fell just short of a profit warning, Shennan said the business was well placed going into 2013. 鈥淚 don鈥檛 think 2013 is going to be bed of roses but we are in a better position for 2013 than we were this time 12 months ago for 2012,鈥� he said.

Shennan said the firm would continue to target its growth areas in infrastructure, including energy, rail, roads, and aviation, as well as building work in London. 鈥淲e鈥檝e actually evolved the business and moved into some strategically important sectors in recent years, like rail and aviation,鈥� he said.

鈥淪ome of the sectors we鈥檙e in, some people would give their eye teeth to be in those because you can鈥檛 just say: 鈥極h we鈥檒l go and work in the aviation sector.鈥� Because you need the background, you need the skills set, you need the securities clearance.鈥�

鈥淒on鈥檛 get me wrong, 2013 is not going to be easy - the pricing levels are still extremely competitive and disappointingly, but understandably, a lot of significant customers, including government, are actually buying lowest price because they鈥檙e under their own pressures - so you鈥檝e got to be there or thereabouts.

鈥淏ut in terms of our stats and our order book we鈥檙e in a better place now than we were a year ago for the year ahead.鈥�