Morgan Sindall on course for record year
An “excellent” performance from Morgan Sindall’s fit-out operation has helped the group shrug off challenging market conditions to deliver a record performance in the first six months of 2023.
The company increased revenue by 14% to £1.93 billion from £1.69bn during the same period last year. Pre-tax profit was up 8% to £58m from £53.7m.
The best-performing division was fit-out which recorded a 43% increase in operating profits to £30.4m from £21.2m. Chief executive John Morgan said the firm had now upgraded expected performance for the year based on fit-out work alone.
The construction arm delivered 20% revenue growth to £470m from £392m at an operating margin of 2.6%. Operating profit increased 6% to £12m from £11.3m. 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%).
Only the property services operation recorded a loss, shipping £4m due to “cost pressures and operational challenges”.
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.”