Bluestone profit tumbles

by John Leitch

Morgan Sindall's move to shoehorn six regional construction businesses into the single entity of Bluestone knocked the group's latest pre-tax profit sideways. Bluestone made a loss of £4m, compared with a profit of £2.4m in the same period last year.

As a result, despite Morgan's three other business streams boosting their profits, the group's overall interim pre-tax profit (six months to 30 June) dived to £6m, well down on the £10m figure in the corresponding period a year ago. Turnover was ahead at £470m (£410m).

Chairman John Morgan said he was optimistic about the future. "The group is changing," he said. "Our £1.5bn orderbook represents 18 months worth of work, whereas three years ago we had a forward orderbook equivalent to four months worth of turnover."

Morgan defended the switch to Bluestone. "There is less call for region-specific work," he said. "Regional contracts are being procured on a different basis - even Kier [which also has a string of regional construction businesses] is using the Kier brand name more than it used to."

After Bluestone's £4m loss in the first half, Morgan hoped to reach break-even in the second half, with the business returning to profit next year.

Clients are showing interest, but orders are yet to be secured.

Bluestone has a new management structure, headed by Chris Saxton. Risk management procedures have been improved, with commercial director Paul Whitmore's head on the block should things go wrong.

Morgan Sindall's Fit Out division turned in another record performance. Its two brands, Overbury and Morgan Lovell, both operate in the offices market. A new brand, Vivid Interiors, has been launched to push the group into the specialised retailing, entertainment and leisure sectors.

"Vivid has done at least two jobs now," said Morgan. "We've worked for a handbag client and a caf' at the Royal Festival Hall."

Performance in Affordable Housing is still affected by the Carillion Housing acquisition. "It was making borderline margins," said Morgan, "whereas we're used to hitting 3%, but we'll get there. What the new business has given us is access to the Scottish market and the capacity to undertake refurbishment of affordable housing, as previously we were new build only."

Infrastructure Services' turnover shot ahead to £125m and should hit £250m in the full year. The former Miller Construction business has been renamed Morgan Est. The division has a record orderbook of £730m.

Morgan now has a group with the shape he wants. "We've got positions in the right four areas, so now I want to improve margins," he said.