AGM Trading Update

RNS Number : 4192M

Morgan Sindall Group PLC

07 May 2015

 



7 May 2015

Morgan Sindall Group plc

AGM trading update

Ahead of today's Annual General Meeting ('AGM'), to be held at Jefferies Hoare Govett, Vintners Place, 68 Upper Thames Street, London, EC4V 3BJ at 12 noon, Morgan Sindall Group plc ('the Group') announces a trading update for the period from 1 January 2015 to date.

Group performance

Overall, Group performance remains in line with the Board's expectations set at the time of the full year results on 19 February 2015 and expectations for the year remain unchanged, subject to the exceptional charge detailed below.

Current trading

The Group's committed order book as at 31 March 2015 was £2.7bn, up 2% from the year- end position.

As indicated at the time of the full year results, the performance of Construction & Infrastructure has been held back by the performance of a number of construction contracts in London and the South; this is expected to continue and remain through at least the first half as these contracts are worked through to completion.

The increased volumes in Fit Out which were experienced in the second half of 2014 have continued into 2015 which, coupled with improved operational efficiency, are driving strong growth in performance.

The regeneration mixed-tenure activities in Affordable Housing have been focussed on developing out schemes to support future open market sales. Margins in the construction & services activities remain challenging, however are beginning to improve. The response maintenance business has made good progress in securing new work and improving operational performance and is on track to deliver in line with expectations.

In Urban Regeneration, the portfolio of regeneration schemes has benefited from further planned investment, whilst Investments continues to work closely with the other divisions to secure higher quality construction opportunities.

As expected, average daily net debt for the Group has increased, up to £25.0m from the start of the year to 30 April (and of which £17.3m is non-recourse debt). In line with previous guidance, average net debt levels will increase further through the year as more phases of regeneration schemes across Urban Regeneration and the mixed-tenure activities of Affordable Housing are accelerated and developed.

Exceptional charge

In the Group results for the year ended 31 December 2013, an exceptional charge of £14.7m was taken to impair the receivables in relation to four old construction contracts held on the balance sheet.

The impairment was based upon legal advice and opinion on the recoverable amount at that time, taking account of progress toward recovery and the expected time, cost and associated risk of pursuing legal remedies to achieve recovery.

Of the four contracts, commercial resolution was achieved on one, whilst another was impaired to reduce the carrying value to nil.  The remaining amount held on the balance sheet related to amounts due on two contracts which were transferred as part of the acquisition of the design and project services division of Amec in 2007.  Both contracts have the Secretary of State for Defence as the overall employing party. One contract relates to the design and construction of a floating jetty, the other to the design and construction of living accommodation and infrastructure, both around the Faslane Naval Base in West Scotland.

The Group has now received a specific court judgement on one discrete issue in advance of a future arbitration hearing on one of these contracts, which is at variance with the legal basis underpinning the current carrying value of the corresponding receivable. The Board has considered the implications of this court judgement on that contract, its relevance also to the other contract and reviewed its available options. 

As a consequence, an exceptional charge of approximately £35m will be recorded in the half year results to 30 June 2015, which reflects the Board's best current assessment of the likely outcome on both contracts. The charge is non-cash in nature. The Board is, however, also reviewing its options to mitigate and maximise ultimate recovery levels.

ENDS

NOTES TO EDITORS:

Morgan Sindall Group

Morgan Sindall Group plc is a leading UK Construction and Regeneration group with a turnover of £2.2bn, employing around 5,700 employees and operating in the public and commercial sectors.  It operates through five divisions of Construction & Infrastructure, Fit Out, Affordable Housing, Urban Regeneration and Investments.

ENQUIRIES:

Morgan Sindall Group                      Tel:      [phone]                       

John Morgan, Chief Executive

Steve Crummett, Finance Director

Brunswick                                           Tel:      [phone]

Jonathan Glass

Nina Coad

 

END

 

 

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