Morgan Sindall Group Regulatory News (MGNS)

15 Dec 2010

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 2010, expected to be in late February 2011.

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. Our financial position remains strong, with average cash in the second half of the financial year set to be in line with that achieved in the first half and with £100m of committed banking facilities in place. Our order book remains consistent with the position at the half year, providing us with good, long-term visibility.

The Construction & Infrastructure division continues to trade positively in varying market conditions. Construction revenue remains reasonably firm in the short term with the division benefitting from frameworks and longer term client relationships, although the medium term outlook remains challenging given the expected impact of the announced cutbacks in public sector capital spending. In contrast the outlook for infrastructure remains encouraging, as highlighted in the recently published National Infrastructure Plan, which underlined the fundamental need for major investment in the UK's infrastructure requirements and the Government's commitment to unlocking funding to deliver it. Infrastructure revenue this year, as expected, has been affected by the delayed start of major infrastructure projects and the transition between regulatory periods in the utilities sector. The integration of the division is now largely complete and it is currently bidding and delivering an increasing number of integrated construction and infrastructure projects.

Fit Out has seen strong revenue growth in the second half of this year, reflecting the division's market leading position and an increase in the number of larger projects. However, as previously announced, the pipeline of larger projects has softened slightly, which will constrain the division as it enters 2011.

Affordable Housing is making good progress integrating the contracts secured from Connaught. The affordable housing market remains robust with a reasonable pipeline of new build social housing, response and planned maintenance opportunities as demonstrated by the recent announcement of three regeneration schemes for Southampton City Council, valued at £30m. Conversely activity levels in the open market housing sector remain at a low level.

The Comprehensive Spending Review announced a significant cut in the funding for social housing and consequently Lovell is working closely with its clients to develop alternative funding mechanisms, such as mixed tenure regeneration and zero grant developments. The recent consolidation of providers in the sector has further enhanced the division's outlook, which was already positive given the continuing trend of outsourcing social housing maintenance provision. Lovell is now strongly positioned given its national coverage and unique full-service offering that has been created following the Connaught and Powerminster acquisitions.

Urban Regeneration's market remains subdued although it continues to make the most of limited development opportunities and the division is on track to deliver a modest profit this year. Its development pipeline remains in line with the start of the period and the division continues to focus on appropriately positioning schemes in order to take advantage of improvements in market conditions when they occur.

The Comprehensive Spending Review was largely in line with our expectations. With the fiscal constraints in place we expect that new privately funded investment models will emerge. The Bournemouth Local Asset Backed Vehicle project, where the Investments unit is currently preferred bidder, is a good example of one such alternative structure. This is a partnership between the Group and Bournemouth Borough Council, which will enable the Borough's regeneration needs to be funded through private finance.

Outlook

The Group has made good strategic progress this year with the merger of its construction and infrastructure activities and the creation of a market-leading social housing response maintenance business. Our £3.6bn forward order book, breadth of capabilities and leading positions across a range of market sectors leave us well placed to capture further market share.

Overall we are well positioned to meet the challenges and opportunities in 2011 and beyond.

Enquiries: