Shares in construction group Morgan Sindall (MGNS) fell 13 per cent after the group warned that profits for the year will be below earlier expectations. The trouble spot is the group's construction division, where fixed price contracts taken when market activity was in the doldrums are now under pressure because of rising costs.
Coming at a time when margins were already pretty thin, analysts at Numis Securities reckon that profit for the year to December will now be £8m below earlier estimates at £26m. And Morgan Sindall admitted that margins in the construction division will fall from 1 per cent to 0.3-0.5 per cent. The contracts in question are all expected to be completed within the next six months. The division was also affected when the construction site for the GlaxoSmithKline carbon neutral factory was destroyed by fire.
However, the rest of the business continues to perform strongly, with Fit Out boosting the order book by 83 per cent since the start of the year, and profits there are expected to be above earlier expectations. Affordable housing boosted its order book by 26 per cent, although sales for the current year are expected to be little changed from a year earlier. Urban regeneration has performed strongly, although some third-party construction programmes scheduled for completion in the fourth quarter may not now complete until next year.
