Lovell profit hit by drop in open market sales

Lovell Partnerships has reported a 27% drop in operating profit in its interim results as open market sales plummeted amid economic uncertainty.

The firm, which is owned by giant construction firm Morgan Sindall,  today reported a 20% year-on-year drop in open market sales to 340 units for the six months to 30 June. The average sales price was £241,000 compared to the prior year average of £261,000, a reduction of 8%.

It said that together this resulted in operating profit of £10.1m, down 27% on the prior year, with its operating marging reducing from 4.9% to 2.7%.

Social housing helped weather the slowdown, helping Lovell to increase its overall sales from 755 to 805 units.

Lovell however boosted its turnover 31% from £284m to £373m and increased its order book 27% from 1,633 to 2,074.

Meanwhile, Lovell’s parent company Morgan Sindall has said it expects to turn in a  record performance this year, the firm said in interim results this morning.

A record first half saw revenue rise 9% to £1.9bn in the six months to June and pre-tax profit jump 8% to £58m with the firm’s fit-out business seeing turnover up 9% to £498m and operating profit hike 34% to £30.4m.

London and the commercial office market were fit-out’s biggest sectors with Morgan Sindall saying that such is the demand that fit-out’s expectations have been upgraded to post annual operating profits in the range of between £50m and £70m in the medium term, a rise of up to 40% from the previous spread of £45m to £50m.

Elsewhere, construction posted improved income of £470m, a rise of 20%, with operating profit up 6% to £12m while its infrastructure business saw revenue climb 15% to £428m with operating profit up 15% to £24.9m.

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The firm said it was increasing its interim dividend 9% to 36p on the back of surging confidence and chief executive John Morgan said: “Although the wider economic backdrop remains challenging, conditions have generally eased across many of our markets as the year has progressed. Our strong balance sheet, with a substantial net cash position, allows us to continue operating efficiently and effectively and to focus on making the right decisions to drive for long-term sustainable growth.”

A blot on its results was the performance of its property services business which slumped to a £4.1m operating loss with the firm blaming “a number of operational delivery issues and inefficiencies, with significant additional costs also being required to support the start-up phases of more recently mobilised contracts” for the fall into the red. It said it had rejigged its senior management team and would be focussing on improving client services and operation delivery in the second half.

Net cash was down £11m to £263m while the firm, which signed the Developer Remediation Contract in March, said the cost of carrying out work under the initiative would be revised down £400,000 to £48.5m.

The group’s order book was up 7% on its year-end number of £9.1bn.