Morgan Sindall Group Regulatory News (MGNS)

10 Nov 2009 07:00



Morgan Sindall plc

10 November 2009

INTERIM MANAGEMENT STATEMENT

Morgan Sindall plc, the construction and regeneration group, announces today its Interim Management Statement covering the period 1 July 2009 to 9 November 2009.

Morgan Sindall remains on track to achieve its expectations for the current year despite the challenging market conditions with its position underpinned by a quality order book at £3.4bn supplemented by a pipeline of £900m of projects at preferred bidder stage. Our strategy remains one of developing market leadership in all the sectors in which we operate. 

Fit Out continues to perform well despite the tough market conditions, securing projects across its broad sector spread. We expect the division's revenue for 2009 will reduce by more than a third compared with 2008 although we estimate the overall market has fallen by a greater extent during the year. So we remain of the view that the division has performed comparatively well in the current trading environment.  The improvement in the level of tendering activity which we reported in August has continued  with  the  forward order book being consistent with the start of the year.

Construction is performing strongly although there is considerable uncertainty surrounding future public spending commitments. Notwithstanding this uncertainty we continue to experience robust demand. The division has been successful in the second half of the year in securing key opportunities including Basildon Sporting Village (£30m construction value), an assembly facility for Airbus (£71m) a contract under the Liverpool BSF project (£37m) and a place on the Construction Framework South West that will deliver £500m of projects for 20 local authorities. In addition, as previously announced, the division has been appointed as preferred bidder for the Tayside Mental Health PFI (£100m) and the Hull BSF project (£200m) in which its sister division, Investments, will take equity stakes. The division's  forward order book is down in comparison to the start of the year albeit this current position is expected to improve once the division achieves financial close on the Hull BSF and the Tayside Mental Health projects around the end of the year.

Infrastructure Services continues to trade positively, with the market for infrastructure services remaining reasonably strong. In the second half of the year the division has been successful in being appointed preferred bidder for a utilities framework with Central Networks (valued at £500m over 10 years). The division is also continuing to progress a number of other key tunnelling and utilities opportunities. The division's order book remains in line with the start of the year and we still expect this to increase as we approach the end of the year.

Affordable Housing's refurbishment and new build social housing contracting business has continued to perform well. In the second half of the year the division has secured key opportunities including a major refurbishment project for Three Oaks Homes (£24m) and a major redevelopment programme for Atlantic Housing (£20m) as well as being selected as a preferred partner for a £35m regeneration scheme in Skipton. The market has been supported by the Government's Kickstart initiative and the division has initially secured £10m of funding for five projects in the first wave and is seeking additional sums in the second wave of funding of £500m to be allocated towards the end of the year. The improvement in open market housing volumes has continued.  The division's forward order book has fallen slightly compared with the start of the year. We expect demand for refurbishment and social housing to remain resilient with the longer term outlook buoyed by the next round of social housing PFIs.

Urban Regeneration's market remains subdued though we still expect the division to make a small contribution in 2009. The division continues to progress the major regeneration schemes in which it has an interest and its longer term development pipeline of £1.6bn remains healthy. Despite the difficult market backdrop we are increasingly confident of the substantial longer term prospects and value that the division can bring to the Group.

Whilst the Group's forward order book has fallen slightly to £3.4bn since 30 June 2009 this forward order book is supplemented by over £900m of projects at preferred bidder stage. Given the Group's increased capability to deliver projects of greater scale and complexity we expect this higher level of work at preferred bidder stage to remain a more notable feature of our order pipeline in the future.  

Given the challenging market conditions, since the beginning of 2008 we have realised annualised cost savings totalling £35m and each of our divisions continues to particularly focus on cash management, cost reduction and supply chain improvements, as well as responding to market growth opportunities where they present themselves.

The Group remains financially robust with cash balances continuing to improve into the second half of the year. With £100m of committed banking facilities in place, 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 2009.

In summary, Morgan Sindall is on track to meet our expectations for 2009 and is well placed to meet the challenges and opportunities we currently face. We remain mindful of the challenges facing the sector in the longer term and continue to shape our business accordingly.