Affordable housing and fit-out shine for Morgan Sindall

Two of Morgan Sindall's four operating divisions generated operating margins of more than 5% in the first half of 2006: affordable housing and fit-out. Collectively, the two generated an operating profit of more than £20m.

By contrast, the group's two other divisions were relatively in the doldrums as their combined turnover of more than £300m left an operating profit of just £4m: the operating margin in the construction division was 0.96%, while infrastructures services ran to a figure of 1.9%.

Latest interim financial results (six months to 30 June) show turnover at a record £670m (first half of 2005: £620m), while pre-tax profit was another all-time high at £21m (£18m).

"The group has been growing at 28% a year, and we now have the four legs we want, so future growth will be organic," said executive chairman John Morgan.

In fit-out, the margin was 1% higher than the figure of 4.5% that Morgan believes to be sustainable in the long term. "The market continued to expand, primarily driven by the financial and professional services sectors in London, as well as the telecoms and technology sectors in the M4 corridor," he said.

Expansion in the construction division has been put on the back-burner, the priority being to achieve greater selectivity. "Construction generates a lot of cash, in fact it is the group's biggest cash generator, which is useful, but a margin of 1% is not OK," said Morgan.

The group's forward orderbook stands at a record £3.4bn. Morgan said fit-out and affordable housing is "expected to remain healthy in the medium-term".

[Contract Journal, 9 August 2006, p. 2]