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Morgan Sindall chairman steps down as profit jumps 21% in H1 2016 results

Morgan Sindall’s chairman is stepping down from the company after the group posted a 21 per cent jump in its pre-tax profit for the first half of the year.

Profit before tax stood at £16.1m for the six months to 30 June, compared with £13.3m for the same period the year before.

At the same time the contractor announced that its chairman Adrian Martin will be leaving the company, having seen “progress made in reshaping the business over the last two years”.

A search for a new chairman is now under way.

There was a slight dip in group revenue to £1.148bn, compared with £1.152bn in H1 2015.

However, operating profit increased by 17 per cent to £18.2m, compared with £15.5m.

The group’s committed order book for H1 2016 was up 11 per cent to £3.15bn, of which 34 per cent relates to the second half of 2016, 31 per cent to 2017 and the remainder to 2018 and beyond.

Morgan Sindall chief executive John Morgan said all of the company’s divisions had demonstrated strategy and operational progress over the last few years.

Mr Morgan added that the EU referendum had caused some uncertainty within the markets in which it operates, but he said it was still too early to determine what impact this would have on the business.

“For the current year, however, based upon current trading patterns, our high-quality secured order book and the visible pipeline of opportunities, the group is on track to deliver a full-year result slightly above its previous expectations,” he said.

The company recently split the business into two sectors: construction, which includes construction and infrastructure, fit out and property services; and regeneration, which includes partnership housing and urban regeneration.

It also has an investments business, which works across both construction and regeneration through various strategic partnerships to develop under-utilised property assets.

Construction and infrastructure revenue was down 2 per cent to £612m, compared with £623m in H1 2015.

Within that area of the business construction accounted for 57 per cent of divisional revenue at £351m, which was up 1 per cent compared with the prior year, whilst Infrastructure was 43 per cent of divisional revenue at £261m, down 5 per cent on the prior year.

Morgan Sindall is working on major infrastructure projects including a contract at Sellafield with a potential value of £1.1bn over a maximum of 15 years.

It is also working Heathrow Airport as part of a three-year £1.5bn programme of upgrades and improvements.

The contractor said it continued to be selective with contracts in the construction sector, with ongoing projects including £107m mixed-use scheme at Marischal Square in Aberdeen with its urban regeneration business.

Fit-out saw revenue dip by 1 per cent to £294m from £299m in H1 2015, while operating profit increased by 11 per cent to £11.5m, from £10.4m.

London accounted for 63 per cent of fit-out revenue, compared with 73 per cent last year. Work in the capital was split between 80 per cent of traditional fit-out, compared with 20 per cent design and build.

Property services saw a 16 per cent decline in revenue, with the division posting an operating profit of £100,000, compared with a loss of £800,000 last year.

The firm said its improved performance here was due to efficiencies within contract and overhead management.

Its investment division made a net loss of £800,000, compared with an operating profit of £400,000 the year before.

On this it said that, due to the phasing of schemes, the second half of the year was expected to show improvement, with the overall result for the year expected to range from break-even to a loss of £500,000.

What do the analysts say?

Liberum: “Too cheap to ignore.”

Construction division: Most of the legacy contracts will be resolved by the end of the year and the large loss-makers have all been resolved.

Infrastructure division: It expected delays given the political uncertainty as a result of Brexit and the UK government’s decision to delay Hinkley Point C.

Jefferies: “Robust”

Outlook: It said the current year outlook was robust, taking into account the group’s order book, although it flagged that it was still too early to determine the potential impact for the group in the medium and longer term.

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