Fit-out work a driver of growth for Morgan Sindall’s first half

A Morgan Sindall construction crew poses on-site in Nottinghamshire, England, UK. (Image: Morgan Sindall)

Overall revenue through the first six months of the year was up 14% compared to last year to £2.2 billion (US$2.8 billion). Operating profit also rose 14% compared to 2023’s first half to $83 million.

The firm’s order book stayed relatively flat, dipping 2% to $11 billion.

Morgan Sindall’s Fit Out segment leads the way

Fit-out works – renovations and retrofit activity most common in commercial, central and local government offices, and education segments – grew ‘significantly’, Morgan Sindall said.

Fit Out reported a 26% rise in revenue to $801 million. The division’s profit grew 36% to $53 million compared to 2023. Operating margin also grew a half-percent from 6.1% to 6.6%.

“The market for Fit Out’s services has continued to be very strong, with a number of positive structural changes in the market,” said Morgan Sindall.

The firm added that lease-related events, requirements for greater energy efficiency from office spaces, a societal move towards more flexible and collaborative workspaces, were drivers in the Fit Out segment.

The company also noted “the use of office space as a tool for enhancing staff retention and brand image, and office relocations to the regions with clients requiring increasingly complex projects” has led to more activity. 

The company said about 85% of its fit-out works were traditional projects, while 15% were “design and build” contracts.

Interior shot of the Nottingham Central Library in the UK amid a Morgan Sindall fit-out job. (Image: Morgan Sindall)

“There remains a significant pipeline of visible opportunities being pursued,” added Morgan Sindall. “The division also had over $191 million of work in the pre-contract ‘preferred bidder’ stage at the period end, as well as in excess of $1 billion of work currently being tendered or pending a decision and over $1.2 billion at tender stage.”

The group highlighted several major fit-out projects won in the period, including a 380,000 sq ft (35,303m²) job for consultancy PwC, which was the largest of the builds listed. 

The biggest project completed in the first half was a 750,000 sq ft (69,677m²) for financial services firm Canary Wharf.

Construction and infrastructure work strong for Morgan Sindall

While Fit Out was the clear winner for the firm, Morgan Sindall produced solid figures in its construction and infrastructure arms, as well.

Construction revenue grew 10% to $660 million. Operating profit also rose; it hit $18 million on 18% year-on-year growth. The business remains broadly public sector focused and education continues to be the largest market sector served at around 50%, said the company.

In Infrastructure, Morgan Sindall reported a 24% rise in revenue to $674 million. The division is focused on key sectors of highways, nuclear, energy, water, and rail with visible opportunities in defence, the firm said.

A worker on the CP7 Eastern Framework for Network Rail site. (Image: Network Rail)

The largest project between both Construction and Infrastructure divisions is a position on the $4.5 billion CP7 Eastern Framework for Network Rail project.

“In Construction and Infrastructure, where projects are currently underway, most include appropriate inflationary protection within the overall contract pricing, and this is not seen as a significant risk,” it added. “Where projects are being priced for future delivery, inflation and funding constraints in some areas continues to place some project budgets under pressure, which in turn has led to some delays in decision-making and project commencement.

“However, the impact of this has not been material and in many cases, any client budget constraints are being addressed by adjustments to project scopes, thereby allowing projects to proceed.”

Improving UK housing conditions part of Morgan Sindall’s outlook

Morgan Sindall said it expects more of the same from its high-performing divisions and is also planning for a turnaround in the UK housing market, although it noted government support would be a driver.

“In Partnership Housing, the partnership model focusing on long-term partnerships with the public sector, has provided some level of resilience and cushion against the impact of the slowdown,” the group said. “While the demand for contracting has remained strong, the sales rates of private homes on its mixed-tenure sites has begun to show modest recovery since the end of 2023, with the first half of this year showing a gradual improvement on HY 2023 levels.

“It is positive that the Government has set out its ambitions for affordable home targets, which we believe will bring about some positive momentum in the near to medium term.”