CONSTRUCTION and maintenance group Morgan Sindall reported a fall in annual revenues and pre-tax profits, but revealed a strong financial base and forward orders.

Liverpool stockbroker Panmure Gordon maintained its ‘buy’ recommendation for the group’s shares, praising the “good results” and better margins.

The group saw sales slip 5% to £2.1bn in the year to December 31 and pre-tax profits fall by 9% to £40.7m.

But it said it continues to secure profitable market opportunities and highlighted progress in most divisions.

The affordable housing arm Lovell has extended its response and maintenance capability through the addition of contracts from the administrator of building services firm Connaught.

Almost £60m of cost savings have been made over the past three years, including £21m in 2010, while the balance sheet shows a net cash balance of £149m compared with £118m in 2009.

There is also £100m of undrawn facilities and the defined benefit pension scheme reduced its deficit from £3m to £2m.

Orders have increased to £3.6bn from £3.2bn and the group completed the successful merger of its construction and infrastructure services divisions during 2010 to create a new, bigger division.

Chairman John Morgan said: “2010 was a year of important strategic and operational progress for the group.

“The restructuring we conducted to create construction and infrastructure leaves us better placed than ever to meet our clients’ needs, while Lovell’s expansion in response and planned maintenance opens up exciting new market opportunities.”

He added: “Trading remains challenging, but we continue to secure profitable projects.

“We are well placed to exploit opportunities presented in the short-term, while carefully monitoring market trends to maximise long-term growth potential.

“The group remains financially strong with an exciting future.”

Construction and infrastructure achieved an operating profit of £26.9m compared with £30.1m on revenues of £1.3bn, down from £1.5bn.

Affordable housing improved operating profits by 8% to £16.1m on £387m of revenues, compared with £374m in 2009.

Fit-out saw a 7% jump in operating profits of £14.8m and a 43% surge in revenues of £415m, while urban regeneration improved operating profits from £700,000 to £2m on revenues of £46m against £32m previously.

The group has a construction base at Wavertree Technology Park, affordable homes division in Birkenhead and an urban regeneration and design function in Birchwood, Warrington.

Key projects in the region include an £18.57m regeneration project in Stockbridge Village for Knowsley council, and a £6.1m contract to build the new Park Brow primary school in Southdene, Kirkby.

In Widnes the company is working on the new Venture Fields development, a £10m mixed-use design and build scheme for St Modwen and Halton council.

Lovell is involved in a number of contracts throughout Merseyside valued at around £125m, while urban regeneration arm Muse is working on completing the final phase of the St Paul’s Square business district in central Liverpool.

Stockbroker Panmure Gordon said today: “These are good results from Morgan Sindall.

“Margins have increased, its financials are sound and recent strategic moves position the group well going forward.

“The immediate trading outlook is unchanged at ‘challenging’. A broader social housing offering, post-Connaught, and infrastructure opportunities along with an attractive valuation means we stay positive.”