Pre-close trading update

The Board of Morgan Sindall Group today announces its trading update for the period from 1 January 2012 to 28 June 2012. The Group’s half year results will be announced on Monday 6 August 2012.

The Group’s satisfactory start to the year has continued and we remain on course to meet our expectations for the current year. Conditions continue to be competitive across all of our markets given the ongoing uncertainties in the macro environment. The Group’s financial position remains sound with the forward order book of £3.2bn, broadly in line with the start of the year.

Construction and Infrastructure is trading in line with our expectations although we continue to encounter margin pressure as a result of the highly competitive market, which we expect to persist for some time. The division is well placed to take advantage of opportunities in growth sectors such as power distribution, airports and rail.

Fit Out continues to be impacted by the lack of major project opportunities although the pipeline of smaller refurbishment projects remains reasonable. The timing of contracts this year means that the division’s performance is expected to be weighted to the second half of the year.

After the positive start to the year in Affordable Housing, the withdrawal of the stamp duty holiday, coupled with ongoing constraint of mortgage availability, has weighed down on the first time buyers’ market resulting in volumes being similar to 2011.

With future growth expected to be driven by mixed-tenure regeneration, the division is investing in a growing portfolio of schemes, particularly more complex land-swaps, to overcome the lack of grant funding for social housing. Planned and response maintenance opportunities remain reasonably healthy but competitive.

Urban Regeneration continues to deliver good progress on the schemes in its portfolio. We continue to see long-term value in the urban regeneration market with a regeneration pipeline of £1.8bn.

In the absence of a healthy pipeline of PFI projects, Investments’ current focus remains on schemes attracting a project finance approach. As previously announced the division has sold its interest in the Dorset Fire and Rescue PFI and expects to continue to recycle capital by further sales of investments.

As previously stated, we are increasing investment in our regeneration activities and as a result we expect the Group to move into a position of average net debt this year.

Overall we have had a satisfactory first half of 2012. Whilst we continue to experience challenging market conditions, we are confident that our continued investment in long-term regeneration projects and focus on growth infrastructure sectors will ensure we remain well positioned to succeed in the current competitive market place.