Ahead of today's Annual General Meeting (‘AGM’), to be held at Jefferies International, Vintners Place, 68 Upper Thames Street, London EC4V 3BJ at 12.00 noon, Morgan Sindall Group plc (‘the Group’) announces its Interim Management Statement for the period from 1 January 2013 to date.
Against the backdrop of continued difficult trading conditions in most of its markets, Group performance in the first quarter (“Q1”) was slightly below the Board’s expectations. Although Group revenue levels held up, Group margin was adversely impacted by margin contraction in its Construction and Infrastructure and Affordable Housing divisions.
The Group’s forward order book as at the end of Q1 was £3.2bn, up 6% from the year end position, reflecting positive levels of selective bidding activity.
In Construction and Infrastructure, the markets continue to be highly competitive, with the operational focus being on careful contract selection, cost and overhead management, and management of cash in a challenging working capital environment. Margins continue under pressure across all sectors, however the full impact of this has been mitigated in part by the overhead cost savings derived from the restructuring announced in November 2012.
Fit Out is focused on operational delivery and margin improvement through selective tendering and has seen no significant change in market conditions through Q1.
Affordable Housing has seen some recent improvement in market conditions in its open market housing activities, as evidenced by an increase in house reservations in Q1 compared to last year. However, the benefit of this has been more than off-set primarily by continuing significant pressure on construction revenue and margins.
Returns from the division’s mixed-tenure business, which is focusing on larger and more complex schemes, are holding up well and business development activity in this strategic and increasingly important area remains encouraging.
There have been some important milestones achieved within Urban Regeneration, with planning consents granted for new projects in Lewisham, Chester and Doncaster; the commencement of the second phase of construction at its Chatham Place, Reading development; and the recent award of preferred bidder status on a significant redevelopment project by Aberdeen City Council. The regeneration pipeline at the end of Q1 was level with the year end at £2.1bn.
Investments continued with its strategy of recycling its invested capital, with the sale of its interest in the “Access for Wigan” scheme. In addition, it has signed contracts for the Slough LABV framework and the first three phases of the Bournemouth LABV, both important projects which will secure future construction opportunities for the rest of the Group.
Net debt as at 30 April was £23m. Average daily net debt from the start of the year up to 30 April was £35m, reflecting the ongoing disciplined focus on cash management.
During the period, the Group has entered into a £15m three-year bilateral loan issued under the UK Government’s Funding for Lending Scheme arranged by Lloyds Bank Commercial Banking. Total committed banking facilities are therefore increased to £125m, which includes £110m of committed banking facilities expiring in June 2015.
General market conditions are expected to remain difficult throughout 2013 and no significant short-term improvement is envisaged. With positive momentum in the business evidenced by order book levels and the operational focus on deliverable margin, the Board is confident that the business is well-positioned to benefit from profitable opportunities as they arise, with a strong bias towards the second half of the year.