Morgan Sindall delivers ‘strong’ performance against ‘difficult market backdrop’

Morgan Sindall delivers 'strong' performance against 'difficult market backdrop'

Chief executive John Morgan

Morgan Sindall has delivered a record set of results across the breadth of the group’s operations.

Figures published to the London Stock Exchange this morning revealed that group revenue increased by 14% to over £4.1 billion, while adjusted operating profit before tax was up 6% to £144.6 million.

The group’s balance sheet remains strong with net cash of £461m, and its high-quality secured order book of £8.9bn, up 5% on the prior year leaves the group well-positioned for the future and on track to deliver a result for 2024 in line with its current expectations.

Morgan Sindall’s fit-out division, Overbury, grew revenue by 14% to £1,105m (2022: £967m), with operating profit up 38% to £71.8m (2022: £52.2m) at an operating margin of 6.5% (2022: 5.4%)

The Construction division grew revenue by 18% to £967m (2022: £820m) at an operating margin of 2.7%. (2022: 2.8%). Operating profit was up 15% to £25.9m.

The Infrastructure business saw revenue up 15% to £887m (2022: £768m), with operating profit up 31% to £38.5m at an operating margin of 4.3% (2022: 3.8%).

The Property Services business suffered an operating loss of £16.8m (2022: £4.3m profit).

Partnership Housing grew revenue by 20% to £838m (2022: £696m) but operating profit was down 18% at £30.5m (2022: £37.4m).

Chief executive John Morgan said: “Despite facing market headwinds in the year and the disappointing losses in Property Services, the diversified nature of our operations and capabilities has allowed us to continue to make significant strategic and operational progress. In addition, our focus on positive cash flow together with our strong balance sheet has positioned us well to benefit over the long term from the opportunities available in our markets.

“The challenging general market conditions coming into the year continued to ease throughout, with inflation falling in most areas. Although still a headwind for the group, the general trading environment became more manageable and predictable as the year progressed.

“During the year, 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.

“In Construction and Infrastructure, where projects are currently underway, most include appropriate inflationary protection within the overall contract pricing and this is not seen as a significant risk. Where projects are being priced for future delivery, inflation 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 in many cases, any client budget constraints are being addressed by adjustments to project scopes, thereby allowing projects to proceed.

“The market for Fit Out’s services has continued to be very strong, with a number of positive structural changes in the market. The main drivers of this include lease-related events, the requirement for greater energy efficiency from offices, the move towards more flexible and collaborative workspaces, the use of office space as a tool for enhancing staff retention and brand image, and office relocations to the regions with clients requiring increasingly complex projects.

“In Property Services, housing maintenance and the general state of repair of housing stocks are increasingly the focus for local authorities and housing associations. During the year, the business has been severely impacted by general cost and labour inflation which has impacted the profitability of its contracts.”

Lovell said its partnership housing model has seen the firm show resilience against a softer housing market in Scotland, new results have shown.

Over the last year, 219 mixed-tenure homes were delivered in the country, 66% of which were affordable homes. Lovell also plans to deliver in excess of 700 mixed-tenure homes over the next few years in Scotland.

While there was a slowdown in the sale of private homes on mixed-tenure sites, due to the cost-of-living crisis and rising mortgage rates, revenue across Lovell Partnerships is up by 20% in the year to £838m, with an operating profit of £30.5m alongside a return on capital employed of 12%.

The secured order book at the year-end was £2.034bn, representing a 3% improvement on last year’s position and a clear reflection of the successful strategic growth and partnership model.

Tony Rankin, regional managing director at Lovell, said: “Our team has continued to make progress and deliver homes across Scotland, despite the tough market conditions. These achievements had a much-needed positive impact in a time of a housing crisis and go to the heart of creating thriving, sustainable communities.

“Among our key projects is The Crossings at Bridgewater Village, which is located in the historic town of South Queensferry. This new development offers a mix of social, private rented and private housing, plus a collection of commercial units, helping to shape a neighbourhood that appeals to a real mix of people, from first-time buyers and young professionals, to families and those looking forward to retirement.

“In addition, we are taking the opportunity to invest further into the areas we work, not just with the homes and places we create, but also through our sustainability and social value initiatives too, such as providing multiple work experience placements with local schools and refurbishing youth and community centres.”

Lovell is working on a number of key projects in Scotland, including mixed-tenure developments in Hamilton and Mayfield, Dalkeith. A nine-project scheme via the Scape Framework is also underway with Fife Council, while a mixed-tenure development in Winchburgh will start summer 2024.

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