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Morgan Sindall CEO John Morgan on Brexit, management changes, airports and investment

Morgan Sindall’s CEO has confirmed the contractor will bid for work at Gatwick, despite being one of six firms urging the government to back a third runway at Heathrow.

John Morgan spoke to Construction News about issues including the UK’s place in the EU and recent management changes in Morgan Sindall’s regions, after the group posted preliminary results for 2015 last week.

His company this month signed an open letter urging the chancellor to back a third runway at Heathrow, alongside fellow contractors Balfour Beatty, Bam Nuttall, Ferrovial Agroman, Laing O’Rourke and Mace.

Asked whether Morgan Sindall would try to win work on Gatwick’s new frameworks, Mr Morgan said “very much so” and cited the airport’s development director, who told Construction News earlier this month that although the contractors were “misguided” they would not be precluded from winning work.

On Gatwick seeking to procure directly with key trades, Mr Morgan said: “We’re seeing some [clients moving into self-delivery], but we’ve also seen it before. We have to prove we can provide something they can’t, otherwise why shouldn’t they? To put it bluntly, if we don’t deliver on time and on budget, why would they want to come to us?”

Recent months have seen Morgan Sindall’s construction managing directors for the East and London have left the firm.

John Homer this month left his role as construction MD for the East after 12 years with the group. Ian Cheung, former London and South-east head of construction, and his predecessor Tony Dixon both departed in 2015.

But Mr Morgan said he expected to see less movement among regional management in the year ahead.

He said: “People leave companies and move from time to time; I’m not expecting major changes to the business going forward. The senior team hasn’t changed in the last two years.

“Construction has been difficult for us; we’re expecting a steady improvement, but it’s important to have a good mix of new people and established management.”

The CEO said the volume of two-stage tendering had increased and Morgan Sindall has reduced competitive tenders from around two-thirds of its activity to just one in 10 jobs between 2012 and 2015.

Morgan Sindall Urban Regeneration pipeline by region Feb 2016

Morgan Sindall Urban Regeneration pipeline by region Feb 2016

John Morgan on ‘Brexit’

Morgan Sindall’s CEO said he was unaware of the company being asked to sign a letter of support for the UK staying in the EU, inked by almost 200 business leaders this week.

“Were we asked? Not to my knowledge. We probably weren’t because we’re a UK-based company and I think it’s companies that trade with Europe who have more to say on this.

“It’s a difficult one. If our leaders who are supposed to know better can’t agree, how does a lesser mortal like me know what is the right answer.

“There are strong arguments on both sides, but increasingly I’m reading economically it’s not going to make a lot of difference either way.”

However, this meant some jobs would not be economically viable, he warned: “There is much more two-stage tendering than there used to be, which is good, but it can be that you get to the end of a process and the job is too expensive.”

Morgan Sindall invested £207m in its regeneration businesses in 2015 – the company’s focus in recent years while rivals have expanded overseas or into support services.

This included its affordable and partnership housing business Lovell, urban regeneration arm Muse, and its investments business.

The investment marked an increase of £55m on 2014, with up to £45m in additional revenue expected to be invested in the business in 2016, bringing the total sum to around £250m.

Morgan Sindall expects investment in that part of the business to “slacken” post-2016, with infrastructure work expected to ramp up at the same time as projects such as High Speed 2 and Thames Tideway enter the construction phase.

Morgan Sindall Urban Regeneration pipeline by sector Feb 2016

Morgan Sindall Urban Regeneration pipeline by sector Feb 2016

On the group’s results, Mr Morgan said: “I haven’t felt this positive for years. I think when I came in [as CEO in November 2012] and made a lot of changes, we’re [now] seeing quite a lot of benefit coming through.

“We invested £30m in Lovell last year, we’ll invest £15m this year, we’ll invest in urban regeneration and had a great result in fit-out.

“The fit-out team have been there for two years now, and I think we have had such a stunning result [that] if we do the same next year, it would be a good [performance].

“We did £600m this year at a margin of 4 per cent; we’re not expecting growth on that but we’re upbeat as well.

“It’s a bit like winning the Olympics: you’ve got to go and do it again.”

Morgan Sindall order book 2012 vs 2015

Morgan Sindall order book 2012 vs 2015

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