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Morgan Sindall Group (LON:MGNS) reported what management described as a "record first half," with revenue, profit and cash generation all rising as strength in Fit Out, Construction and Infrastructure offset weakness in housing-related markets.
In opening remarks, John Morgan said the group had delivered its 11th consecutive record first half, excluding the COVID year, and highlighted the benefit of Morgan Sindall's diversified model. "Some [markets] have been good, some not so good, but it's the diverse nature of our business which has enabled us to have a growth of 21%, even with housing market being weak, because other markets have taken over," he said.
Revenue and Profit Rise in First Half
Kelly said group revenue increased 8% to GBP 2.6 billion, while operating profit rose 21% to GBP 112 million. The operating margin improved 50 basis points to 4.4%. Profit before tax also rose 21% to GBP 116 million, with the pre-tax margin increasing to 4.5%.
Earnings per share grew 22%, with the effective tax rate continuing to track in line with the U.K. statutory rate, Kelly said. The group's workload visibility increased 3% to GBP 19.5 billion, including secured order book, preferred bidder work, framework contracts and long-term partnership agreements.
The company also announced a 10% increase in its interim dividend to GBP 0.55 per share.
Cash remained a central feature of management's presentation. Average daily net cash increased by GBP 69 million to GBP 423 million, while period-end cash stood at GBP 418 million, up GBP 28 million from the prior year. Kelly said the group continues to expect average daily net cash to remain above GBP 400 million for the full year, while still investing in partnership businesses where returns align with medium-term targets.
Fit Out Leads Profit Growth
Fit Out again delivered the strongest divisional contribution, with revenue and operating profit both rising 19%. Revenue reached GBP 996 million, while operating profit increased to GBP 69.1 million. The operating margin was 6.9%, in line with the prior-year period.
Kelly attributed the performance to "strong continuing volumes and revenues, excellent contract execution," the weighting of project completions in the first half and operational gearing. The division ended June with a secured order book of GBP 1.3 billion, GBP 400 million at preferred bidder stage and GBP 1 billion of tendering opportunities.
John said Morgan Sindall is increasingly confident in the Fit Out market and raised the division's medium-term profit target to GBP 100 million to GBP 130 million, from GBP 80 million to GBP 100 million. He cited market fundamentals, the company's position and a more normalized competitive environment following the collapse of ISG.
In response to an analyst question from Ainsley Lamb of Investec, management said Fit Out already has the organizational capability to deliver at the higher level. Kelly said the division had been building resources and management teams over time and noted that 75% of the management team had been with the business for more than two decades.
Construction Target Raised as Margins Improve
Construction delivered a 47% increase in operating profit to GBP 24.4 million, with a margin of 3.3%. Kelly said 98% of the division's work is delivered through frameworks, two-stage tendering processes or directly negotiated work, reflecting its disciplined approach to risk.
The division's secured order book stood at GBP 1.9 billion at the end of June, with a further GBP 1.3 billion at preferred bidder stage. Education remains the largest revenue-generating sector, while healthcare is showing "increasing potential." Kelly said the division was named an alliance partner on the government's New Hospital Programme, which totals GBP 37 billion.
John said Morgan Sindall is raising Construction's medium-term operating margin target by 50 basis points to 3.5% to 4%. He said the business had improved year by year over the past decade by better understanding risk and focusing on the work it is best suited to deliver.
Housing Headwinds Weigh on Partnerships
Partnership Housing revenue declined 14% to GBP 347 million, though operating profit was broadly resilient at GBP 13.2 million, in line with the prior year. The margin expanded to 3.8%.
Kelly said contracting revenue fell 21% to GBP 247 million, partly due to timing delays around elections and the mix of homes delivered to partners. Mixed-tenure revenue rose 6% to GBP 100 million, supported by an 11% increase in average sales price despite fewer open-market completions.
The division signed a development agreement for Birmingham City Council's Druids Heath regeneration program, expected to deliver 3,500 homes over several decades. It also signed a partnership development agreement with North Yorkshire Council to build an initial 500 homes over four years.
Mixed Use Partnerships reported a small operating loss of GBP 1.1 million as it continued to invest ahead of project starts. The division started five projects on site in the first half and expects to start a further eight in the second half. By the end of 2026, Morgan Sindall expects 15 projects to be operationally on site.
Management said viability challenges remain a near-term issue across the country, not just in London, but added that the division has experience working through viability gaps with local and central government partners.
Outlook Reaffirmed After Profit Upgrades
Infrastructure reported operating profit of GBP 18.3 million, broadly in line with the prior year, with a margin of 3.9%. The secured order book was nearly GBP 2 billion, with GBP 600 million of preferred bidder work. Kelly said the division's visible workload totals GBP 5.8 billion when frameworks are considered over their full length.
For the full year, John said Fit Out is expected to be slightly ahead of its new medium-term target, while Construction margin is expected to be at the bottom end of its new medium-term target and revenue is expected to rise to about GBP 1.4 billion. Infrastructure margin is expected at the top end of its range, with revenue just under GBP 1 billion. Partnership Housing profits are expected to be slightly down on last year amid housing market and viability pressures.
Following two unscheduled profit upgrades in the first half, John said Morgan Sindall remains confident that full-year performance will be in line with current expectations. He also emphasized the importance of the group's balance sheet and cash position in winning work, particularly with clients seeking financial stability from contractors.
About Morgan Sindall Group (LON:MGNS)
Morgan Sindall Group plc, the Partnerships, Fit Out and Construction Services Group, reported an annual revenue of £5.0bn in the full year 2025. The Group employs over 8,500 employees and operates in the public, regulated and private sectors. It reports through five divisions of Partnership Housing, Mixed Use Partnerships, Fit Out, Construction and Infrastructure.
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