Morgan Sindall bullish on profit outlook

The construction firm said its full-year profit will exceed expectations set in August after a strong performance to date in the second half of 2020, and intends to restart dividend payments to shareholders.

Profit for the full-year 2020 is likely to be “at the top end” of the previous guidance range of £50m-£60m, the company said in a trading update to the London Stock Exchange today.

In August, Morgan Sindall Group, which owns North West-based developers Lovell and Muse Developments, reported a pre-tax profit of £13.6m for the six months ended 30 June, down 62% year-on-year due to the impact of Covid-19.

At the time the half-year results were published, the group’s board had adopted a cautious outlook for the rest of 2020, stating that it expected profit before tax for the year to 31 December to be in the range of £50m-£60m.

However, since then, “momentum within the group’s operations has continued to increase”, the group said in today’s filing. In particular, the value of tenders due in the final quarter of the year is 18% higher than for the same period in 2019.

The Prime Minister’s announcement last week that construction activity should continue throughout the UK’s second national lockdown is a further positive indication of growth.

“Based on this and the performance to date, with the group well into the last quarter of the year, it is now expected that the group will deliver a full-year performance that is slightly above the top end of the previously guided range,” the statement said.

It added: “The group will continue to operate in line with Government advice and that of the devolved administrations across the UK and with strict adherence to safe operating procedures across all its sites and activities.

“On this basis, any further disruption to the group as a result of these newly-announced restrictions is not expected to be material to the current year’s performance.” The group cancelled dividend payments earlier this year due to Covid-related uncertainty, but it intends to resume payments by the end of this year.

Morgan Sindall’s construction and infrastructure business is delivering profit margins above 2% and has a secured order book of £3.8bn, according to the trading update.

The fit-out division, meanwhile, has an order book 15% below last year’s levels but “this is more than offset by the value of projects at preferred bidder stage”.

The group said it has now paid back the £9.5m in furlough support funding it claimed from the Government earlier this year. Daily net cash in the business currently stand at around £150m, it added.

John Morgan, chief executive of Morgan Sindall Group, said: “Our high-quality secured workload gives us good visibility for the rest of the year and as such, we now expect to deliver a full year performance slightly above the top end of our previous expectations.

“Our strong cash generation, position and balance sheet remain key differentiators. These, together with the improved outlook for the year, have enabled us to repay furlough monies and resume dividend payments as declared today.

“Despite the uncertainty that the pandemic brings, we have a sound platform for future growth with the Group geared towards future demand for affordable housing, urban regeneration and infrastructure and construction investment.”