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Margins at Morgan Sindall鈥檚 construction business edged closer to the 3% mark as the firm turned in another set of improved annual figures.

The firm said revenue in the year to December 2019 was up 3% to 拢3.1bn with the group seeing its overall operating margin climb from 2.9% to 3%. Pre-tax profit was up 10% to 拢88.6m.

Chief executive John Morgan said the firm鈥檚 year end net cash pile of 拢193m allowed it to pick and choose which jobs it went for.

He said: 鈥淥ur balance sheet remains a significant differentiator for us allowing us to make the right long-term decisions for the business.鈥�

Construction and infrastructure is the largest part of the group with turnover up 11% to 拢1.5bn and operating margins up from 2% to 2.2% after operating profit climbed 20% to 拢32.3m

Construction accounts for 42% of that revenue, 拢619m, with operating margins going up from 2.4% to 2.8% after operating profit climbed 22% to 拢17.1m.

But Morgan said he didn鈥檛 expect margins to go through the 3% barrier this year. 鈥淲e鈥檝e always said 2.5% to 3% and we don鈥檛 expect more than 3%. We鈥檝e worked very hard to get margins up and this year we鈥檒l be allowing turnover to grow slightly.鈥�

The firm, which is building a new 拢98m secondary school and leisure centre (pictured) in Hackney, east London, for the council, said just 2% of its 拢514m construction order book had been won through competitive tendering.

Margins at infrastructure edged up from 1.7% to 1.8% and Morgan admitted: 鈥淭hey were less than we would have liked.鈥�

Morgan said he expected to see the two businesses, which is seeing the infrastructure arm carry out an extension of the London Overground to Barking Riverside, make further inroads into their 2.5% margin target this year. Infrastructure鈥檚 operating margin target over the next three to four years is 3% and Morgan said the figure in 2020 would be closer to its target.

Its fit-out business saw workloads increase 1% to 拢839m but operating margin slipped to 4.4% after operating profit fell 16% to 拢36.9m.

Morgan had previously warned he expected profits to come down to its target 拢30m-拢35m range after describing 2018, where operating profit hit a record 拢44m, as 鈥渙ur best year in fit-out by a country mile鈥�.

He said he expected operating profit to be around 拢35m in the next few years and the amount of work it does in London, where it completed work on Microsoft鈥檚 new flagship store at Oxford Circus, to reduce from the current 70% of fit-out鈥檚 volume.

鈥淚鈥檝e been saying that for a couple of years now but I think London will be less. Manchester and Birmingham are very strong,鈥� he added.

Projects the fit-out arm won last year outside the capital included Virgin Media鈥檚 new headquarters at Reading and offices for law firm Eversheds Sutherland in Cambridge.

Morgan Sindall鈥檚 partnership housing business, which includes its Lovell brand, saw revenue stay flat at 拢513m but operating profit was up 50% to 拢18.3m sending operating margins up to 3.6%.

It said a loss-making scheme in London had now been completed and that it was targeting operating margins of 6% over the next three to four years. Morgan admitted the business hadn鈥檛 been performing in recent years, prompting a management rejig. 鈥淲e鈥檝e been playing catch-up,鈥� he said, adding the division could eclipse fit-out as the firm鈥檚 biggest profit maker over the next half decade.