About 2,500 staff were transferred from collapsed social housing firm Connaught to Lovell, Morgan Sindall’s social housing division, when it took on the bulk of Connaught’s social housing contracts in a deal worth £28m last September.
However, as only some of Connaught’s customers transferred work directly to Lovell, there was not enough work to keep them on.
“We took on Connaught staff but have had to make some redundant as not all the contracts came across” said John Morgan, chairman of Morgan Sindall. “We took these staff on, and paid them, and many of them helped us win the contracts we did but where that wasn’t the case, we couldn’t realistically keep them on.”
Morgan Sindall warned last October that some former Connaught employees’ jobs would not be safe but the scale of the impact on staff levels had not been revealed.
Initially the firm expected additional revenues of £200m per year from the Connaught business but when it updated the stock market last year, after the deal, it said it expected to add about £100m in extra revenue.
The Connaught business contributed £20.9m of revenue in the period from 9 September 2010 to 31 December 2010.
Lower than expected revenue from the Connaught business is unlikely to have a major impact on the group. In its full-year results Morgan Sindall said that, while its revenue fell, profits were flat, after allowing for one-off costs. Revenues fell by 5% in the financial year to 31 December 2010, ending the year at £2.1bn, compared with £2.2bn in the 2009 financial year. When adjusting for one-off charges, pre-tax profits were unchanged at £51.3m.
In a separate story Construction News reported that Morgan Sindall Investments has won a £450 million contract to carry out a waterfront regeneration scheme on the South coast.
The contractor was named preferred developer for the Royal Pier Waterfront project by Southampton City Council.
The development, which is a joint initiative between Southampton City Council, the Crown Estate and Associated British Ports, will include offices, residential, retail and leisure facilities.