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Fri September 18 2020

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Morgan Sindall stays in profit in challenging first half

5 Aug Morgan Sindall has posted Covid-infected results for the first half of 2020, showing a huge hit to its profits.

Site closures, lower productivity on sites, and the cost of implementing new safety processes and procedures all impacted on the profitability of most construction companies during the first half of 2020, and Morgan Sindall was no different.

Its pre-tax profit was down 62% to £13.6m (2019 H1: £35.5m) for the first six months, on revenue down 4% to £1,363m (2019 H1: £1,421m).

The year started well, with revenue up 17% in the first quarter compared to 2019. But second quarter revenue was down 23%. In April alone, revenue was 35% down on the year.

Morgan Sindall placed 1,900 employees on furlough at peak and accessed the government's coronavirus job retention scheme (CJRS). By the end of June, it had claimed £9.3m under the CJRS. As at the start of August, there remained approximately 200 employees on furlough, primarily within the Property Services and Infrastructure divisions, although this number is expected to reduce further in the next couple of weeks.

Chief executive John Morgan said that despite the challenges, annual profits were expected to be only down around a third from 2019's £89m pre-tax result figure.

"These results reflect the inevitable impact on our business of the Covid-19 pandemic. The business is having to continually adapt in this changing environment and I am extremely thankful to all our employees for their professionalism and dedication as we adjust to new ways of working safely and productively," he said.

"Throughout this challenging period, the group has demonstrated its resilience, with an improved cash position strengthening our balance sheet and providing significant available liquidity. This in turn has enabled us to maintain our focus on making the right decisions based upon the best long-term interests of the business.

"Our proven strategy remains the same, based on organic growth and operational improvement. We have a balanced business geared towards future demand for affordable housing, urban regeneration and infrastructure and construction investment. Together with our high-quality secured workload, we are confident of future growth and success.

"We now have greater clarity of the extent of the impact of Covid-19 on the current year's performance and on the assumption of no further significant business interruptions arising from any widespread secondary lockdown, we expect profit before tax for 2020 to be in the range of £50m-£60m."  

Morgan Sindall Group headline interim results by business segment, 2020 H1

  Revenue   Operating Profit/(Loss)   Operating Margin  
  £m Change £m Change % Change
Construction & Infrastructure 789 +16% 11.5 -17% 1.5% -50bps
Fit Out 317 -22% 10.9 -34% 3.4% -60bps
Property Services 53 -4% (0.5) -131% -0.9% -380bps
Partnership Housing 165 -31% 3.0 -53% 1.8% -90bps
Urban Regeneration 35 -20% 2.1 -75% n/a n/a
Investments 12 n/a (3.2) n/a n/a n/a
Central/Eliminations (8)   (5.7)      
Total 1,363 -4% 18.1 -52% 1.3% -130bps

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