Contractor blames drop on fall in planned maintenance work
Morrison in £12.7m loss
Housing repairs and maintenance contractor Morrison suffered significant losses in the first six months of the 2011/12 financial year, after seeing a sharp downturn in its high-value work.
The company’s results for the six months to 30 September 2011 show it was operating at a loss of £12.7 million - a £17.9 million fall compared with the same period in 2010 when it made a pre-tax profit of £5.2 million.
The figures also show operating cash flow has fallen by £21.5 million from £8.7 million in the black in 2010 to £12.8 million in the red in 2011. Turnover, however, increased from £122.5 million in the six months to September 2010 to £139.1 million in the same period last year.
In a statement, Morrison blamed the losses on a reduction in planning maintenance work.
But Gary Moreton, a partner at auditor Baker Tilly, said the surprising results may be down to low bidding on work by Morrison. Mr Moreton said: ‘There are a number of providers that are operating at low margins, and as a result they don’t have room to manoeuvre.
‘It’s good news that [Morrison’s] turnover has increased but it is operating at a loss so something has happened with its processes, margins or overheads. It looks like it’s priced [contracts] too competitively or had some increase in its overhead structure that doesn’t support the level of activity.’
The results emerged from a document published by parent company Anglian Water in December, rather than by Morrison itself. The company attributed the increase in turnover to a contract won in Leeds, plus large re-bids for existing contracts.
Guy Wakeley, chief executive of Morrison, said: ‘In the first half of 2011, Morrison mobilised the two largest housing repairs contracts in the market along with numerous other new business wins and restructured the cost base to suit current levels of client spending.
‘While the first half results were impacted by these investments, the business is now trading profitably and in line with expectations. The balance sheet remains strong and without borrowings and there is unprecedented visibility of future revenues and the prospects for the year ahead are good.’