Interim Management Statement

RNS Number : 8259V

Morgan Sindall Group PLC

09 November 2010

 



Morgan Sindall Group plc

9 November 2010

INTERIM MANAGEMENT STATEMENT

Morgan Sindall Group plc ('Morgan Sindall' or 'The Group'), the construction and regeneration group, announces today its Interim Management Statement covering the period 1 July 2010 to 8 November 2010.

Morgan Sindall remains on track to meet its expectations for the current year. Although market conditions remain challenging, our financial strength, breadth of capabilities and leading positions across a range of market sectors leave us well placed to capture further market share.

Construction & Infrastructure

The Construction & Infrastructure division faces varying market conditions with its construction markets, as expected, continuing to be impacted by public sector spending cuts whilst its infrastructure markets remain reasonably buoyant, with a number of major opportunities still being pursued. The integration of the construction and infrastructure services divisions, announced in April, is progressing smoothly and we expect it to be largely complete by the end of the year. We are continuing to see the benefits of this combination with the division currently bidding and delivering a number of integrated construction and infrastructure projects.

The division has been successful in the second half of the year in securing key construction and infrastructure opportunities. These include accommodation for the Royal Veterinary College (£16m), a manufacturing plant for Aggreko (£20m), academic buildings for Teesside University (£8m) and the University of Sussex (£18m), a joint-venture framework for Yorkshire Water (£75m over five years) and a multi-element regeneration project at Stockbridge for Knowsley Metropolitan Borough Council (£19m). During the period the division has also submitted its joint-venture bids for the major tunnelling and station infrastructure works for Crossrail and continues to progress its joint-venture bid for the Second Forth Road Crossing. The division's forward order book is significantly ahead of that at the start of the year, but slightly down on the position at June 2010.

Fit Out

Fit Out's revenue has, as expected, increased in the second half of the year despite market conditions remaining highly competitive. This reflects the division's market leadership in the delivery of larger projects, and we have continued to focus on profitable work. The market outlook has softened over the past few months, however, with a weakening of the longer term pipeline of major projects in particular. The division's current forward order book is in line with the start of the year.

Affordable Housing

Affordable Housing's planned maintenance and new build social housing markets have continued to be robust in the second half of the year. In contrast conditions in open market housing continue to be constrained by the lack of mortgage availability. In September the division significantly enhanced its response maintenance capability by securing a number of maintenance contracts and assets from Connaught's administrators for £28m. This transaction builds on the acquisition at the end of June of Powerminster Gleeson Services.

This major step forward of the division's response maintenance capability has created a unique full-service social housing business covering new build open market and social housing, and planned and response maintenance for social housing. In particular, it has strengthened Lovell's national coverage in the South West and substantially broadened its customer base. As a result Lovell is well placed to take advantage of further maintenance outsourcing as local authorities look to achieve the efficiencies required by the Comprehensive Spending Review. The Connaught transaction has led to new agreements with 45 local authority and housing association clients and has created a significant number of new opportunities for the division.

Overall, we currently expect the Connaught transaction to add around £100m of revenue in 2011, although we do not expect the full profit benefit until 2012 as we realise efficiencies in the contracts acquired. The Group has provisionally recognised one-off costs in the second half of the year relating to the transaction of £3m to cover transaction and integration costs.

The division's outlook remains reasonable given the new build social housing target recently announced by the Government in the Comprehensive Spending Review. The division's forward order book is up on the start of the period as it now includes Connaught related contracts totalling £142m, which extend forward over 2 years.

Urban Regeneration

Urban Regeneration's market remains subdued although we expect the division to make progress this year. The division's future development pipeline remains in line with the start of the period at £1.4bn and underpins the outlook for the division in the medium term.

Investments

The Investments unit was successful in the period in being appointed preferred bidder for the Bournemouth Town Centre Master Vision Regeneration Scheme. The scheme is expected to run for 20 years and has a development value of £350-£500m, delivered in a 50/50 joint-venture with Bournemouth Borough Council. It is also continuing to pursue a number of opportunities and to work with its clients on alternative funding structures for public infrastructure and services in response to the public sector spending cuts.

The Group is continuing to realise further cost savings as it adapts its business to the current market environment. It remains in a strong position with a £3.7bn order book, average cash year to date at £64m, ahead of the average cash of £60m achieved in the first half of the year, and £100m of committed banking facilities. There has been no significant change in the Group's financial position since the publication of the Interim Report for the six months to 30 June 2010.

The Group remains on track to achieve our expectations for 2010. Our financial strength and healthy order book coupled with the Group's diverse construction activities and broad sector spread provides resilience, leaving us well placed to meet the challenges and opportunities presented by the market in the remainder of this financial year and beyond.

ENQUIRIES:

Morgan Sindall Group plc                                       Tel: [phone]

David Mulligan, Finance Director

Blythe Weigh Communications                               Tel: [phone]

Tim Blythe                                                                   Mobile: [phone]

Paul Weigh                                                                 Mobile: [phone]

 

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