Morgan Sindall profit falls as competition squeezes margins
Feb 18 (Reuters) - British construction company Morgan Sindall Group Plc reported a 34 percent fall in full-year adjusted pretax profit as margins were hurt by more competition across its construction and infrastructure and affordable housing divisions.
Adjusted pretax profit fell to 31.3 million pounds ($52.31 million) in the year ended Dec. 31 from 47.1 million pounds a year earlier.
Revenue rose 2 percent to 2.09 billion pounds. Adjusted gross margins reduced 90 basis points to 8.2 percent.
Morgan Sindall said its construction and infrastructure division - which accounts for more than half of total revenue - experienced challenging market conditions through the year, which significantly hurt overall profitability.
Operating profit in the division fell 36 percent to 12.7 million pounds as competitive pressures and cost inflation cut operating margin to 1 percent.
The company competes with Kier Group, Carillion , Interserve in the construction and infrastructure business.
The order book stood at 2.4 billion pounds as of Dec. 31, an increase of 8 percent from a year earlier.
The London-listed company, which also builds houses, refurbishes offices and undertakes redevelopment projects, said it anticipated pressure on supply chain costs and skills availability in 2014.
"There is significant recovery potential from 2015. However, this will absorb working capital ... which will drive average net debt higher and means an equity issue may be on the cards," Liberum analysts wrote in a note to clients.
The brokerage cut its 2014 earnings per share estimate for the company by 3 percent to reflect the rising average net debt.
Morgan Sindall shares were down about 2.8 percent at 754.25 pence at 0845 GMT in thin trading on the London Stock Exchange on Tuesday.
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