Builder's warning sparks sell-off in UK
British construction firm Morgan Sindall came under pressure today after it warned sluggish housing and property markets would hit the group next year.
The group’s shares fell as much as 21% after it said the “increasingly challenging” conditions in the past three months would impact 2009 results.
While social housing work remains healthy, home sales on the open market are being hit by the scarcity of mortgage deals following the credit crunch.
These sales accounted for 6% of group revenues in 2007, but volumes will fall to half that level this year, Morgan warned.
“The division will continue to be impacted in 2009 by the deteriorating condition of the housing market currently being experienced,” it said.
The company has meanwhile taken a “cautious” view of prospects for its urban regeneration division after the softening of the commercial property market in the past 12 months.
Numis Securities analyst Howard Seymour said: “It is the group’s housing operations which are seeing the biggest hit at present and this is likely to cause some concern.”
Morgan Sindall has also taken a £58m (73.3m) write-down on contracts inherited when it bought Amec’s former construction business last year.
Although the group has maintained overall orders at £4.3bn (€5.4bn) since January and is on track to meet management expectations for 2008, the group also anticipated “some softening” in the office refurbishment market going forward.
The firm’s construction division saw mixed trading, with weaker demand from commercial property clients offset by strong public sector spending, particularly in education projects.
However, increased spending on transport and utilities helped Morgan’s infrastructure arm land new deals in a buoyant market.
