Pre-close trading update

RNS Number : 7529J

Morgan Sindall Group PLC

05 July 2011

 



Morgan Sindall Group plc

5 July 2011

PRE-CLOSE TRADING UPDATE

The Board of Morgan Sindall Group today announces its trading update for the six months to 30 June 2011. The Group's interim results will be announced on Monday 8 August 2011.

The Group's positive start to the year has continued and we remain on track to meet our expectations for the current year. The financial position of the Group remains strong with the forward order book in line with the start of the year.

Construction & Infrastructure

Construction & Infrastructure is trading in line with expectations, with revenue consistent with the corresponding period in 2010. However, as anticipated, operating margins are lower as a result of the competitive environment. During the period the division was successful in securing positions on a number of major construction frameworks including places on two lots of the £500m Smarte East Alliance framework and on the £400m, four-year South East Wales Schools Capital Working Group framework. The division also secured major civil engineering projects including the £50m Pudding Mill Lane station works for Crossrail and, in joint venture, the £235m Crossrail Whitechapel and Liverpool Street Station Tunnels contract.

The division remains well positioned to exploit opportunities in expanding sectors of the market which include power distribution, airports and rail where growth is being driven by investment in economic infrastructure, as well as the improving commercial sector, particularly in London.

Affordable Housing

Affordable Housing has traded well in the first half of the year demonstrating its full service capabilities by securing major opportunities across mixed tenure, new build social housing and planned and response maintenance. Contracts secured include two mixed tenure development schemes in Doncaster worth £20m, a mixed tenure scheme in Skipton worth £30m, a £40m programme of improvements for Cartrefi Cymunedol Gwynedd, and a place on two major Scottish frameworks valued at up to £210m in total for Port of Leith and West of Scotland housing associations. In addition, Lovell's joint venture, Compendium, was selected as preferred bidder for Derby's £100m Castleward Urban Village development.

The slight improvement in market conditions for open market housing continues despite sales remaining constrained by the lack of available mortgage finance. Alternative financing options remain important in supporting house sales.  Social housing maintenance, refurbishment and carbon reduction projects remain resilient and the division's combined planned and response maintenance offering means we are well placed to address these opportunities. The division secured its first photo voltaic (PV) installation contracts for Flintshire CC and Clwyd Alyn Housing Association, an important milestone in this emerging sector, and is pursuing a number of major PV opportunities which may also harness the Investments division's financing expertise. The maintenance contracts acquired from Connaught continue to perform as expected and the collection of debts acquired from the administrator is, to date, in line with our expectations.

Fit Out

Fit Out has seen increased levels of activity, with revenue ahead of that in the corresponding period last year albeit operating margins, as expected, are lower due to the highly competitive market. Due to the absence of major new commercial properties being completed, there are few large fit out contracts available at present. We expect a gradual improvement in the fit out market next year as new developments are completed. The division has recently established a technology business to broaden its offering by delivering data centre and technology-led projects. As a consequence of the revenue growth we believe the division continues to take market share, leaving it well placed for the expected recovery in the market from 2012. 

Urban Regeneration

Urban Regeneration remains on track to make further progress this year. During the period the division was selected by Warrington Borough Council as its development partner to deliver the Council's £130m Bridge Street regeneration plan. It has also commenced activity on a number of its projects reflecting an improving outlook for the commercial sector.

Investments

The Investments division has had a successful six months. It secured the £350m Bournemouth regeneration contract using an innovative Local Asset Backed Vehicle ('LABV') model, reached financial close on the next tranche of schools under the Hull BSF programme and was appointed preferred developer on the £450m Southampton Waterfront scheme. Whilst the pipeline of PFI opportunities has reduced in the near term, the division is progressing a number of complex land swap development opportunities in which it has a strong track record.

The Group's order book remains in line with the start of the year at £3.6bn with the Group's development pipeline increasing by £0.4bn to £1.8bn, with a further £0.8bn of developments at preferred bidder. The Group's financial position remains strong, with average cash for the six months to 30 June 2011 at £44m being above our expectations although lower than that for the corresponding period in 2010. 

Overall we have had a positive first half of 2011 and, with our track record in growth sectors, broad sector spread and depth of capabilities, we remain well positioned to face the challenges ahead and to benefit from opportunities as they arise.

- Ends -

Morgan Sindall Group plc                                      Tel: [phone]

Paul Smith, Chief Executive

David Mulligan, Finance Director

Blythe Weigh Communications                              Tel: [phone]

Paul Weigh                                                                 Mobile: [phone]

Tim Blythe                                                                   Mobile: [phone]

Notes to Editors:

Morgan Sindall Group plc is a leading UK construction and regeneration group operating through five divisions of construction & infrastructure, affordable housing, fit out, urban regeneration and investments.

 

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