Construction News

Wed September 22 2021

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Morgan Sindall coffers swelled by VAT reforms

4 Aug Morgan Sindall has posted strong first-half financial results, with its cash balances boosted by the recent introduction of reverse charge VAT.

Morgan Sindall’s results for the first half of 2021 are not just strongly ahead of 2020 – no surprise there, with the first lockdown – but also of 2019.

For the six months to 30th June 2021 Morgan Sindall generated revenue of £1,559m, up 14% on 2020 H1’s £1,363m and up 10% on 2019’s H1 £1,421m.

Profit before tax was £52.4m (2020 H1: £13.6m).

Adjusted operating profit of £54.8m was 203% ahead of 2020 and 46% ahead of 2019.  The operating margin increased to 3.5% from 1.3% last year.

Operating cash for the period was an inflow of £44.1m (HY 2020: outflow of £15.3m). Net cash at the period end increased to £337m, an increase of £191m on 2020. Of this total, £64m was held in jointly controlled operations or held for future payment to designated suppliers, including project bank accounts (PBAs).

The average daily net cash for the period was £294m (including £71m in JVs/PBAs), up from £153m in 2020’s first half.

Morgan Sindall’s cash balances benefited from the introduction of the reverse charge VAT scheme, which began on 1st March 2021. By 30th June, it had an extra £67m in its account held for payment in the third quarter, while the incremental benefit to the average daily net cash position was around £20m, the company’s accounts show.

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On a divisional basis, Construction & Infrastructure saw its margin nearly doubling to 2.9% (2020 H1: 1.5%) , making an operating profit of £22.6m, up 97%.

Fit Out revenue grew 20% to £380m, while profit increased by 77% to £19.3m at a margin of 5.1% (2020 H1: 3.4%).

The total secured workload on 30th June 2021 stood at £8,324m, little changed from the start of the year (£8,290m) and 5% higher than at the same time last year (£7,962m). However, Fit Out's order book was up 42% from the year end position to £581m, an all-time record high for the division.

Chief executive John Morgan said: "We've had a very strong first half in which we've upgraded our profit guidance three times. We continue to make significant operational and strategic progress across the group.  With such positive momentum across all our activities, I am excited by the opportunities ahead.

“As ever, we are extremely focused on our cash generation and cash position. Maintaining a strong balance sheet including a substantial net cash position provides a significant competitive advantage for us. It enables us to continue making the right decisions for the business and to best position us in our markets for continued sustainable long-term growth.

“Today's results, combined with the current visibility for the rest of the year, gives us every confidence of another strong performance by the group in the second half."

Between 1st January 2021 and 30th June 2021, Morgan Sindall Construction & Infrastructure maintained its average time taken to pay invoices at 27 days, with 98% of its invoices paid within 60 days. Fit Out reported its average time taken to pay invoices at 22 days, with 97% of invoices paid within 60 days, while Partnership Housing reported 33 days as its average time to pay, an improvement of two days from the last reporting period. 95% of its invoices were paid within 60 days. Property Services reported an average of 38 days to pay invoices, a deterioration of two days from the prior reporting period, with 93% of invoices paid within 60 days.

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