Listed contracting’s star performer says fit out arm remains firm’s biggest
Morgan Sindall cemented its status as construction’s star performer among listed firms with another set of strong results which has meant the company has upgraded profit targets at four of its six businesses.
The firm said pre-tax profit last year jumped 19% to a record £172m on turnover up 10% to £4.5bn. The firm’s order book, which does not include preferred bidder work, was up 28% to £11.4bn.
The company’s biggest business remains fit out with an income of £1.3bn, a rise of 18%, and an operating profit of £99m, up one third.
Chief executive John Morgan told Building the firm had won some jobs following the collapse of ISG last year but added: “I think our balance sheet strength meant we won some jobs we otherwise might not have won.”
Net cash at the end of last year was up 7% to £492m while average daily net cash last year was up 33% to £374m.
Morgan said its fit out arm had not taken on too many former ISG staff with many heading to Wates, Structure Tone and Mace instead along with several jobs left stranded by ISG’s implosion.
He added: “We were very busy and we didn’t want to do too much because if you don’t give clients a level of service, you’re dead. We do have strong competition [now] and every business needs competition.”
And he said that while some firms suffered in the wake of ISG’s collapse, the impact “was not as bad as feared”.
Fit out is one of its four businesses which have seen their medium term – which Morgan defined as three to four years – profit targets upgraded.
Its annual operating profit is expected to be between £60m and £85m, up from £50m to £70m, while construction has been given an operating margin target of between 3% and 3.5% – up from 2.5% to 3% – while infrastructure has been given a figure of 3.75% to 4.25%, from its previous 3.5% to 4% figure.
Morgan said he backed the government’s reforms on infrastructure and planning but asked if he had seen a noticeable difference admitted: “Not really. The government is well intended but these things take time. Let’s hope they can do it in the time they want to do it in.”
Meanwhile, its mixed use partnerships business has also had its targets upgraded although the figures for partnership housing remain unchanged. Morgan said “housing is better than it was but not as good as we would like it to be”.
Revenue at partnership housing, which operates under the Lovell brand which has announced that it will build more than 2,000 homes for Cardiff and Vale Housing Partnership, was up 3% to £861m with operating profit up 18% to £36m.
Morgan added the firm had experienced gateway 2 delays but downplayed their impact. “We get delays – that’s part of being a builder,” he said.
The property services business was the only blot in the results racking up an £18m loss which Morgan Sindall said was down to “a small number” of contracts which it has since exited with the firm expecting a return to profit this year.
The firm’s house broker Deutsche Bank said it expected pre-tax profit to be up to £173m this year and £178m next with the figure rising to £184m in 2027.
Broker Investec called the results “stellar” and in a note added: “Very strong and in-line FY24 results. Overall, strong delivery with a robust balance sheet and positive medium-term outlook.” It said it was forecasting pre-tax profit of £173.5m this year and £180.5m next.
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