Morgan Sindall expects 2020 profit despite ‘significant’ covid impact

Morgan Sindall is still on course to make a pre-tax profit of £50m-£60m in 2020 despite the “significant impact” of covid-19 on the business, provided there is no widespread secondary lockdown.

The company revealed a 57% fall in adjusted pre-tax profit
to £15.7m for the half year to 30 June 2020, despite only a 4% decline in
revenue to £1.4bn.

Despite the challenges, the firm pointed to the strength of
its balance sheet, with its average daily net cash increasing over the period
to £153m. It also has committed bank facilities of £180m.

In the first quarter of the year, revenue was up 17% on the
prior year but trading was then hit with the onset of covid-19 and the
subsequent lockdown restrictions. Group revenue for the second quarter fell 23%
on the prior year, while April alone was down 35%.

Meanwhile, the company furloughed a peak of 1,900 employees
across the group. By the start of August, that figure has fallen to around 200
people, mostly within the company’s property services and infrastructure
divisions.

Despite the challenges, Morgan Sindall has also reduced the
average time it takes to pay invoices to 27 days (from 32 days), with 98% of
invoices paid within 60 days.

The group’s secured order book as of 30 June stood at nearly £8bn, up 5% from the year before. Around £3.7bn of that figure is accounted for by Morgan Sindall’s construction arm (construction and infrastructure, fit-out, and property services), with the rest held by its regeneration arm (partnership housing, urban regeneration and investments).

‘Inevitable’ covid impact

Chief executive, John Morgan said: “These results
reflect the inevitable impact on our business of the covid-19 pandemic.
  

“The business is having to continually adapt in this
changing environment and I am extremely thankful to all our employees for their
professionalism and dedication as we adjust to new ways of working safely and
productively.

“Throughout this challenging period, the group has
demonstrated its resilience, with an improved cash position strengthening our
balance sheet and providing significant available liquidity. This in turn has
enabled us to maintain our focus on making the right decisions based upon the
best long-term interests of the business.

“Our proven strategy remains the same, based on organic
growth and operational improvement. We have a balanced business geared towards
future demand for affordable housing, urban regeneration and infrastructure and
construction investment. Together with our high-quality secured workload, we
are confident of future growth and success.

“We now have greater clarity of the extent of the impact of covid-19
on the current year’s performance and on the assumption of no further
significant business interruptions arising from any widespread secondary
lockdown, we expect profit before tax for 2020 to be in the range of
£50m-£60m.”