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Morgan Sindall on track for record year

3 Aug 23 Half-year results from Morgan Sindall show growth in revenue and profit, putting the company on course for a record year.

Chief executive John Morgan
Chief executive John Morgan

For the six months to 30th June 2023, Morgan Sindall increased revenue by 14% to £1,935m (2022 H1: £ 1,698m). Pre-tax profit was up 8% to £58.0m (2022 H1: £53.7m).

Star performer across the group was the fit-out business, which has benefited from demand for office space reconfiguration and energy efficiency improvements, particularly in London.

With Morgan Sindall splitting its Construction and Infrastructure division into two separate entities, Fit-Out is now its biggest division as well as its most profitable.

Revenue from Fit-Out  was £498m in the first half of 2023 (up 9%) and operating profit was up 43% to £30.4m – a 6.1% margin.

Construction revenue was up 20% to £470m and operating profit up 6% to £12.0m, at an operating margin of 2.6%.

The Infrastructure division also saw growth, with revenue up 15% to £428m and operating profit up 24% to £15.9m (operating margin of 3.7%).

Partnership Housing (Lovell) grew revenue by 31% to £373m although the operating profit of £10.1m was 27% lower than last year’s first half.

Urban Regeneration (Muse) saw revenue shrink 24% to £96m and operating profit fall 18% to £6.0m

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Only the Property Services division made a loss in the first half, £4.1m operating loss, on turnover up 28% at £97m.

Chief executive John Morgan said: “The challenging general market conditions coming into 2023 have continued to ease throughout the period, with inflation abating and falling in certain areas; particularly in trade and labour costs and certain materials. Although still a headwind for the group, the general trading environment has become more predictable and manageable as the year has progressed. Raw material supplies have become more consistent and any constraints in delivery are now only sporadic and localised. 

“During the period, however, the ongoing stability of the supply chain has become more uncertain with liquidity issues increasingly common, requiring additional vigilance both pre-construction and during the delivery of projects. The risk is mitigated to some extent by the diligence taken before project commencement and the fact that no division is overly reliant on any one supplier.

“Most projects in Construction and Infrastructure currently under way have appropriate inflationary protection contained within the overall contract pricing and this is not now seen as a significant risk. Where projects are being priced for future delivery, the inflationary environment continues to place some project budgets under pressure, which in turn has led to some delays in decision-making and project commencement. However, the impact of this has not been material and both still retain sizeable and high-quality secured order books. In many cases, any client budget constraints are being addressed by adjustments to project scopes, thereby allowing projects to proceed.”

Summarising the results, he said: "We've had a record first half of the year, notably from our Fit Out business which has delivered another outstanding performance in the period, demonstrating the high quality of this business.

“Although the wider economic backdrop remains challenging, conditions have generally eased across many of our markets as the year has progressed.  Our strong balance sheet, with a substantial net cash position, allows us to continue operating efficiently and effectively and to focus on making the right decisions to drive for long-term sustainable growth. 

“The positive momentum across the group is driven by our high-quality and substantial order book across a number of sectors covering the built environment. We upgraded our expectations for the full year in June, primarily based on an anticipation of continued outperformance from Fit Out. Since then, there has been no change to our overall expectations for the group and we remain confident of delivering another record performance."

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