Morgan Sindall Group PLC Trading Update (1615E)

TIDMMGNS

RNS Number : 1615E

Morgan Sindall Group PLC

04 November 2020

4 November 2020

Morgan Sindall Group plc

This announcement contains information that qualified, or may have qualified, as inside information for the purposes of Article 17 of the Market Abuse Regulations (EU) 596/2014 (MAR). The person responsible for making this announcement is Steve Crummett, Finance Director

Trading Update

Morgan Sindall Group plc ("the Group") today provides an update on current trading and the outlook for the 2020 financial year.

Group performance and outlook

At the time of the half year results on 5 August 2020, the Board stated that it expected profit before tax for the year to 31 December 2020 would be in the range of GBP50m-GBP60m. Since then, momentum within the Group's operations has continued to increase following the COVID-related disruption in the first half.

The Group notes the Prime Minister's announcement of further national lockdown restrictions across England commencing 5 November and particularly welcomes the explicit statement that construction activity should continue throughout. The Group will continue to operate in line with government advice and that of the devolved administrations across the UK and with strict adherence to safe operating procedures across all its sites and activities. On this basis, any further disruption to the Group as a result of these newly-announced restrictions is not expected to be material to the current year's performance.

Based on this and the performance to date, with the Group well into the last quarter of the year, it is now expected that the Group will deliver a full year performance which is slightly above the top end of the previously guided range.

In addition, the Group's cash position has further strengthened and the average daily net cash for the full year is now expected to be in excess of GBP150m, again ahead of previous expectations.

Current trading by division

In Construction & Infrastructure, the Infrastructure activities have continued to trade strongly, with revenue and margin well ahead of prior year. With the Construction activities also recovering well, it is expected that the overall divisional margin for the year will be in excess of 2%, reflecting the high quality of client relationships, operational delivery and risk management in the division.

In Fit Out, there have been no significant changes to market dynamics or customer behaviour. Although the secured order book at the end of September was 15% lower than at the same time last year, this is more than offset by the value of projects at preferred bidder stage. In addition, the value of tenders due in the final quarter of the year is 18% higher than for the same period last year.

All contracts have now been remobilised in Property Services and a more normal run-rate of activity is expected throughout the fourth quarter.

Partnership Housing has continued to see higher levels of construction activity as well as unit sales and completions since the half year and its operating margin for the full year is expected to be well in excess of 3%. The market opportunity remains significant, with its secured order book to 30 September up 3% from the half year to GBP1.3bn (up 16% from the year-end).

Urban Regeneration has performed as expected, with all its development schemes under construction back on site and active again. In relation to progressing its pipeline of new development schemes, the speed of decision-making by potential partners remains cautious, although has improved since the half year.

In Investments, the operational management for the joint venture property partnerships and Later Living business is being transferred across to Urban Regeneration and Partnership Housing during the fourth quarter and a modest level of reorganisation costs will be incurred. These costs will be taken as normal through operating results and consequently the second half is expected to show a broadly similar loss to that which was reported for the first half.

Group secured workload

The total secured workload for the Group as at 30 September 2020 was GBP7.9bn, up 5% from the year end position (level with the half year).

This comprised the construction secured order book of GBP3.8bn, up 5% from the year end (down 1% from the half year) and the regeneration secured order book of GBP4.1bn, which was up 4% from the year end (up 1% from the half year).

Repayment of furlough receipts

At the time of the half year results, the Group announced its intention to voluntarily repay the claims which it had made under the Government's CJRS furlough scheme, and that this would be taken through Central costs.

The total amount of cash received under the scheme of GBP9.5m was repaid by the end of October. The repayment was structured such that GBP7.7m was repaid directly (being 81% of the total received) and will be taken through Central costs, with the remaining GBP1.8m paid as additional corporation tax as the repayment through Central costs is not tax deductible.

Balance sheet and liquidity

The Group remains in a very strong financial position.

The average daily net cash from 1 July to 31 October was GBP188m (of which GBP60m was held in jointly controlled operations or held for future payment to designated suppliers (JVs/PBAs)).

For the period from 1 January through to 31 October, the average daily net cash was GBP167m (including GBP60m in JVs/PBAs) which was GBP58m higher than the prior year and of which GBP21m was as a result of the permissions to defer VAT, PAYE and other tax payments previously disclosed.

Based upon this and current forecasts to the year end, the average daily net cash for the full year is now expected to be in excess of GBP150m (FY 2019: GBP99m), significantly ahead of previous guidance and prior year.

During October, the Group also secured a new GBP150m committed revolving credit facility ('RCF'), replacing the previous GBP150m facility which was due to expire in early 2022. The new facility initially extends until late 2023 and includes two further one-year extension options, with the agreement of the lending banks. This facility is in addition to the existing GBP30m loan facility, which together provide the Group with a total of GBP180m of committed facilities as before.

Interim Dividend

At the time of the half year results, the Board concluded that there remained sufficient market uncertainty so as not to declare an interim dividend at that time, however it also committed to actively consider the resumption of dividend payments when there was further clarity over the economic outlook and business interruption risks.

Based upon its current assessment of the performance of the business, the outlook for the year and the strong cash position, the Board has declared an interim dividend of 21.0p per share, in line with 2019's interim dividend.

This will be paid on 8 December 2020 to shareholders on the register at 13 November 2020. The ex-dividend date will be 12 November 2020.

John Morgan, Chief Executive, said:

"Following the disruption earlier in the year, all of the Group's activities are now fully operational again and delivering high levels of productivity. We welcome the Prime Minister's clear statement that construction activity should continue through the new lockdown restrictions in England for November and we anticipate operating safely throughout with minimal impact.

Our high-quality secured workload gives us good visibility for the rest of the year and as such, we now expect to deliver a full year performance slightly above the top end of our previous expectations.

Our strong cash generation, position and balance sheet remain key differentiators. These, together with the improved outlook for the year, have enabled us to repay furlough monies and resume dividend payments as declared today.

Despite the uncertainty that the pandemic brings, we have a sound platform for future growth with the Group geared towards future demand for affordable housing, urban regeneration and infrastructure and construction investment."

ENDS

ENQUIRIES:

   Morgan Sindall Group plc                                             Tel:  [phone] 

John Morgan, Chief Executive

Steve Crummett, Finance Director

   Instinctif Partners                                                           Tel:  [phone] 

Matthew Smallwood

Rosie Driscoll

Morgan Sindall Group

Morgan Sindall Group plc is a leading UK construction and regeneration group with revenue of cGBP3bn, employing around 6,200 employees and operating in the public, regulated and private sectors. It operates through six divisions of Construction & Infrastructure, Fit Out, Property Services, Partnership Housing, Urban Regeneration and Investments.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.

END

TSTKKNBKKBDBBDK

(END) Dow Jones Newswires

November 04, 2020 02:00 ET (07:00 GMT)