Fixed price jobs keep Morrisroe in red as boss says industry margins need to be ‘sustainable’ for health of supply chain

Morrisroe has admitted turnover this year will drop as the firm says it is being more selective about the projects it takes on after being caught out by a series of fixed price jobs.

And Brian Morrisroe used his chief executive’s statement in the contractor’s latest accounts to call for improved margins, saying they were needed for “the health and sustainable growth of the UK construction supply chain”.

In a note accompanying the Hertfordshire-based concrete and piling specialist’s 2023 numbers, Morrisroe said its £60m balance sheet had helped it “absorb the ongoing inflationary impacts brought about by fixed price contracts”.

He added: “[Commodity] prices have remained relatively high and continued to negatively impact margins in the main structures business due to ongoing commitments under some legacy fixed price contracts entered into in previous periods.”

Morrisroe said the firm was now being “more selective about future projects which will result in a drop in sales in 2024”. But he added: “We do feel that our reduced exposure will enable us to continue on our positive trajectory.”

And he said: “We remain focused on the long term and securing the right opportunities to deliver value to clients for a price that reflects what our market can expect from a contractor like us.

“In practice, this means operating sustainably at a reasonable margin, an approach which we feel supports our own vision for the future as well as the health and sustainable growth of the UK construction supply chain.”

>> See also: Industry should look in the mirror: Laing O’Rourke’s losses do no one any good

>> See also: Firms going bust, millions lost and all for a next-to-nothing margin. Who in their right mind would want to be a contractor?

He said the firm, whose schemes include work for Multiplex at the Elephant & Castle town centre scheme in south London and Sir Robert McAlpine’s 2 Finsbury Avenue tower in the City of London, had carried out a review of legacy projects and found that three, including a concrete frame job, would cost more than expected.

This meant that its pre-tax loss for the year to October 2022 was now £11.4m rather than the previously stated £6.9m.

But the firm said it had narrowed pre-tax losses for the year to October 2023 to £1.3m on turnover up 7% to £219m.

Morrisroe added: “Although it is disappointing to report a further trading loss as a group, it is a substantially improved position.”

He admitted that some jobs had also been stalled by second staircase rules and wider Building Safety Act legislation, saying the firm had invested to support clients in these areas including a dedicated website for its structural design practice.

Morrisroe said its order book was down to £240m from £388m last time which, the firm said, “reflected the focus the group has on de-risking future workloads”.