Trading Statement

RNS Number : 0066U

Morgan Sindall Group PLC

15 December 2011

 



15 December 2011

Morgan Sindall Group plc

Morgan Sindall Group plc ('Morgan Sindall' or the 'Group'), the construction and regeneration group, provides the following period end trading update in advance of the announcement of its preliminary results for the year ended 31 December 2011, on 21 February 2012.

Trading

As previously announced in our Interim Management Statement on 9 November, Morgan Sindall remains on track to achieve its expectations for the current year. With our growing emphasis on regeneration, the pipeline has grown significantly over the course of the year from £1.4bn to £2.2bn with a further £1.0bn at preferred developer stage. Our forward contracted order book is slightly below that reported at half year at £3.3bn but there are a number of major opportunities currently at preferred bidder stage valued at £0.3bn.

The Construction & Infrastructure division continues to trade positively in mixed market conditions. The division's construction activities are operating in a very competitive and challenging market place impacted by ongoing reductions in public sector spending. However, there is a good pipeline of opportunities in growing sectors of the infrastructure market.  The division continues to be successful in securing key opportunities and, since the Interim Management Statement, it has been selected, in joint venture, as preferred bidder for Electricity Transmission Overhead Line work for National Grid potentially worth £500m.  It has also recently secured, in joint venture, the Whitechapel Main Station Works Crossrail contract worth £110m.

Affordable Housing continues to exploit the broader markets available to it as a result of the Connaught acquisition in 2010.  The collection of outstanding work-in-progress and debt relating to the acquisition remains on track, contracts are performing as expected, and the division has built on its broader capability winning a contract for planned refurbishment and electrical work with Barnet Council worth £103m over 10 years.  Although the market has remained reasonably stable through the year, continuing constraints on mortgage availability mean that the pace of open market house sales from mixed tenure sites remains subdued.  There was some encouragement for the sector from the Government's recent Autumn Statement with additional monies being allocated to support affordable housing.

Fit Out's level of activity has remained robust in the second half of this year and the division is performing as expected. The market is still seeing a lower than normal number of larger projects at present, which is currently weighing on margins, although we continue to expect this situation to improve in 2012. The forward order book has improved, as expected, since the half year but we remain cautious over the outlook for the division whilst wider macro-economic issues continue.

Urban Regeneration's market is slowly improving and the division remains on track to make further progress this year. The medium term prospects are increasingly encouraging. This is underpinned by the division being named as Basingstoke and Deane Borough Council's regeneration partner for a £200 million regeneration project.  Earlier this week, Stockport Council announced that Muse was its preferred development partner for the £145 million regeneration of Stockport Grand Central Station.  The division's development pipeline has increased significantly since the start of the year, and this is bolstered by significant opportunities at preferred bidder.  We remain confident that the division is making good progress with positioning schemes to capitalise on demand when market conditions improve.

The Autumn Statement also reinforced our belief that, in the current economic environment, owners of assets will need to look at alternative ways to deliver services and we expect that new privately funded investment models will emerge. Our Investments division is ideally placed to develop such innovative approaches, for example, the Local Asset Backed Vehicle (LABV) model currently being used at Bournemouth to develop a number of sites in joint venture with the Borough Council.

Outlook

The Group is delivering in challenging market conditions and we remain confident of meeting our expectations for 2011. Although we are cautious about 2012 we believe our medium term prospects have improved over the course of 2011 with our greater emphasis on regeneration being reflected in a growing regeneration pipeline. Our financial position remains strong, with £100m of committed banking facilities through to mid-2015 in addition to a £25m facility in place to mid-2012.  The ongoing investment in our regeneration activities is expected to result in our average cash for the year being below that in 2010. We continue to develop the breadth and depth of the Group's capabilities to meet our clients' requirements, which is reflected in our healthy forward order book. We remain confident that we are positioning the business to take advantage of market opportunities and to emerge from the market downturn in a stronger place. 

Enquiries:

Morgan Sindall Group plc                                       Tel: [phone]

Paul Smith, Chief Executive

David Mulligan, Finance Director

Blythe Weigh Communications                               Tel: [phone]

Tim Blythe                                                                   Mobile: [phone]

Ana Ribeiro                                                                  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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