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Sat March 23 2019

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Solid profit growth for Morgan Sindall

21 Feb Morgan Sindall says that keeping its focus on purely construction-related activities is behind its continued financial health, resulting in a leap in profits for 2018.

Chief executive John Morgan
Chief executive John Morgan

Although revenue was up only 6%, from £2,793m in 2017 to £2,972m in 2018, Morgan Sindall’s pre-tax profit rose 24% to £80.6m (2017: £64.9m).

The balance sheet remains strong, with year-end net cash of £207m and average daily net cash of £99m during the past year.

The Construction & Infrastructure division delivered an industry-leading operating margin of 2.0%, with operating profit up 32% to £27.0m.

Across the group, the adjusted operating margin was up from 2.5% in 2017 to 2.9% for the year ending 31st December 2018.

The Fit Out division saw operating profit rise 12% to £43.8m at a margin of 5.3%. Urban Regeneration contributed operating profit up 96% to £19.6m.

The Partnership Housing division (Lovell) made a reduced operating profit of £12.2m (2017: £14.1m).

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Many large construction companies have come unstuck in recent years after diversifying into facilities management and janitorial services. In contrast, Morgan Sindall has stuck to its knitting – building things – with a focus on disciplined contract selection and a broad spread of risk across multiple lesser-value contracts.

Chief executive John Morgan said: “2018 has been another year of strong growth for the group and these excellent results reflect the high quality of our operations and our people. There is significant positive momentum across all divisions and this provides the platform for future strategic and operational progress.

“Our strong balance sheet, with net cash throughout the year and a business which continues to generate positive operating cash flow is a significant differentiator for us. This provides us with the flexibility to continue being highly selective with bidding in our construction activities while also allowing us to invest in our regeneration activities.

“Looking ahead to 2019, we are confident of another good year of progress and the group is in a strong position to deliver on its expectations.”

With regard to Brexit, and any risks it poses to the business, Morgan Sindall believes that it reasonably well insulated.

It said: “Clearly given the number of permutations associated with Brexit, a 'risk free' situation is difficult to completely mitigate, but can be limited. The majority of the group's construction activities and regeneration schemes are with public sector and regulatory customers and underpinned via long term frameworks and JV style arrangements.  The group considers that the strength of this customer base together with the quality and volume of the group's order book and pipeline provide some insulation against any specific adverse consequences arising from the UK's departure from the EU.”

MPU

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