Deputy City Editor
The depressed new issues market will receive a welcome boost next month with the planned flotation of Morrison Construction, an Edinburgh-based building and property development group. It will be the largest flotation in the construction sector since a flood of issues in the spring of 1994 killed off institutional demand for new building companies.
Morrison, one of the largest privately owned construction and development groups in the country, made record profits in the year to March of pounds 7.6m, attributing its success to a refusal to take part in the price war that has devastated the industry's margins during and since the recession.
Acquired from Charter Consolidated in 1989 for an undisclosed sum, Morrison is wholly owned by its directors, with the founding Morrison family owning 80 per cent. Existing shareholders plan to retain a significant stake after flotation.
The planned issue is the first time a sizeable company has risked coming to the market since a number of flotations were pulled in the first half of last year. Other issues only scraped under the wire by reducing the proceeds they were able to raise.
Since the buyout from Charter, shareholders' funds have risen from pounds 1m to pounds 18.6m. Previous peak profits of pounds 5.7m in 1991 slipped to pounds 3.3m in 1993 as the construction industry experienced the darkest days of recession before recovering in 1994 to pounds 5.1m.
Morrison prides itself on avoiding the construction industry's traditional tendering, where contracts are determined solely on price and often result in confrontation between clients and contractors, who aim to make a margin on a project by renegotiating its terms after work has begun.
Unusually for a construction company, Morrison often combines the roles of property developer and building contractor on the same job in sometimes elaborate schemes.
Morrison also has a civil engineering division, active in the Scottish roadbuilding market, and a division providing specialist contracting services to gas, water, power and telecoms utilities.