REG - Morgan Sindall Grp - Results for the Full Year Ended 31 December 2024
26/02/2025 07:15
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RNS Number : 4506Y Morgan Sindall Group PLC 26 February 2025
26 February 2025
MORGAN SINDALL GROUP PLC
('Morgan Sindall' or 'Group')
The Partnerships, Fit Out and Construction Services Group
RESULTS FOR THE FULL YEAR (FY) ENDED 31 DECEMBER 2024
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 Kelly Gangotra, Chief Financial Officer.
Record full year performance reflecting the high quality, strength and depth of the Group's operations
FY 2024 FY 2023 Change
Revenue £4,546m £4,118m +10%
Operating profit - adjusted(1) £162.6m £141.3m +15%
Profit before tax - adjusted(1) £172.5m £144.6m +19%
Earnings per share - adjusted(1) 278.8p 247.7p +13%
Period end net cash £492m £461m +£31m
Total dividend per share 131.5p 114.0p +15%
Operating profit - reported £162.0m £140.6m +15%
Profit before tax - reported £171.9m £143.9m +19%
Basic earnings per share - reported 281.4p 254.2p +11%
(1) 'Adjusted' is defined as before intangible amortisation of £0.5m and
exceptional building safety charge of £0.1m. (FY 2023: before intangible
amortisation of £2.9m and exceptional building safety credit of £2.2m)
FY 2024 Summary:
· Strong revenue growth once again delivers record results
o Revenue up 10%to £4.5bn
o Adjusted profit before tax up 19%to £172.5m
o PBTA margin expansion to 3.8% (FY 2023: 3.5%)
· Continued balance sheet strength
o Net cash of £492m (FY 2023: £461m)
o Average daily net cash of £374m (FY 2023: £282m)
· High quality secured order book at £11.4bn, up 28%, driven by Mixed Used Partnerships
o Partnerships £6.3bn, up 62% (FY 2023: £3.9bn)
o Fit Out £1.4bn, up 31% (FY 2023: £1.1bn)
o Construction Services £3.7bn, down 6%(2) (FY 2023: £3.9bn)
· Total dividend up 15% to 131.5p per share (FY 2023: 114.0p)
· Medium-term targets increased for four out of six of the Group's
divisions
(2) Includes an adjustment to remove the revenues of the unexpired term of the
contracts which Property Services had negotiated an early release from,
excluding this adjustment growth of the order book for Construction Services
is 4% on the prior year.
· Continued leadership in sustainability
o MSCI 'AAA' rating retained again for Group's ESG performance
o CDP 'A' rating for Group's leadership on climate change (FY 2023: 'A'
rating)
· Divisional highlights
o A strong performance from Partnership Housingin a slowly recovering
housing market; operating profit(1) increasing by 18% to £36.1m (FY 2023:
£30.5m) and revenue up 3% to £861m (FY 2023:
£838m). Average capital employed over the year increased to £338m, in line
with our investment strategy (FY 2023: £255m).
o Trading remained subdued due to the phasing of project completions in
Mixed Use Partnerships, delivering operating profit(1) of £1.5m (FY 2023:
£14.8m) and average capital employed over the year of £87m (FY 2023: £99m).
Exceptional growth in its secured order book of 124% to £4.1bn, reflecting
the success in converting several sizeable, preferred bidder schemes into new
and secured long-term partnership agreements.
o Fit Outdelivered another significant and market-leading performance in the
year; operating profit up 38% to £99m (FY 2023: £71.8m), revenue up 18% to
£1,300m (FY 2023: £1,105m) with an operating margin of 7.6% (FY 2023: 6.5%).
o Constructiondelivered a strong performance; operating profit(1) up 19% to
£30.9m (FY 2023:
£25.9m), revenue up 8% to £1,044m (FY 2023: £967m) with an operating margin
of 3.0%, achieving its medium-term targets.
o A robust performance from Infrastructure; revenue up 18% to £1,047m (FY
2023: £887m) with an operating margin of 3.7% (FY 2023: 4.3%). Operating
profit of £38.5m, in line with the prior year, due to the timing and phasing
of project starts and completions (FY 2023: £38.5m); also achieving its
medium-term targets.
o Successful completion of the business remediation programme for Property
Servicesin December 2024. Full year operating losses(1) of £17.8m impacted by
exit costs from an early release from a small number of contracts and a review
of contract assets (FY 2023: operating loss £16.8m). The business is now
positioned to return to profit in 2025.
o As a result of current performance, market position held together with
future prospects, the medium-term targets for Mixed Use Partnerships, Fit Out,
Construction and Infrastructure have been upgraded as of February 2025.
(1) Adjusted before intangible amortisation of £0.5m and exceptional building
safety charge of £0.1m
Commenting on today's results, Chief Executive, John Morgan said:
"2024 was another record year for the Group, reflecting the high quality of
our diverse operations underpinned by the talent and commitment of our people,
delivering significant double-digit growth for both adjusted profit before tax
and the full year dividend, supported by our high-quality order book.
Throughout the year we have continued to make significant strategic and
operational progress across the Group and remain well positioned to support
the Government's affordable home and social infrastructure plans over the
medium-term, a result of which is that we have upgraded medium-term targets
for four out of six of the Group's divisions. In addition, our balance sheet,
supported by a substantial average daily cash position, has allowed us to
focus on making the right decisions to drive long-term sustainable growth
while also supporting the returns to shareholders in the year.
Looking ahead, while there is continued uncertainty in the wider macroeconomy,
we remain positive for the year ahead. Together with our high-quality and
growing order book spread across a wide number of sectors, we are
well-positioned for the future and on track to deliver an outcome for 2025
which is in line with our current expectations."
Morgan Sindall Group Tel: 020 7307 9200
John Morgan Kelly Gangotra
Brunswick Jonathan Glass Nina Coad
Tel: 020 7404 5959
Presentation
· There will be an analyst and investor presentation at 09.00am at
Deutsche Numis, 45 Gresham Street, London EC2V 7BF on 26 February 2025. Coffee
and registration will be from 08.30am
· A copy of these results is available at: www.morgansindall.com
(http://www.morgansindall.com/)
· The presentation will be available via live webcast from 09.00am on 26
February 2025 at www.morgansindall.com. (http://www.morgansindall.com/)
Note to Editors Morgan Sindall Group
Morgan Sindall Group plc, the Partnerships, Fit Out and Construction Services
Group, reported annual revenues of £4.5bn in full year 2024, employing over
8,000 employees and operating in the public, regulated and private sectors. It
reports through six divisions of Partnership Housing, Mixed Use Partnerships,
Fit Out, Construction, Infrastructure and Property Services.
Reflecting the continued progression of the Group, and our strategy aligned to
structural growth drivers, with balanced end markets, Morgan Sindall has
evolved from the Construction and Regeneration Group to the Partnerships, Fit
Out and Construction Services Group it is today.
Morgan Sindall's recognised expertise in Partnerships is displayed through its
market positions in affordable housing (through its Partnership Housing
division) and in mixed use regeneration development (through the Mixed Use
Partnerships division). Both businesses within this segment reflect a deep
understanding of creating partnerships, developed over many years and their
ability to provide solutions for complex projects through various
partnerships. As a result, its capabilities are aligned with sectors which
support the UK's current and future regeneration and affordable housing needs.
Fit Outis the market leader in its field and delivers a consistently strong
operational performance and together with Construction Services, it generates
cash resources to support the Group's investment in affordable housing and
Mixed use regeneration.
Through Construction Services the Group is also well positioned to meet the
demand for ongoing investment in the UK's physical infrastructure, while its
geographically diverse construction activities are focused on key areas of
education, healthcare and commercial. The Group also has a business in
Property Services which is focused on response and planned maintenance
activities provided to the social housing and the wider public sector.
Under the three strategic lines of business of Partnerships, Fit Out and
Construction Services, the Group is organised into six reporting divisions as
follows:
Partnershipscomprise the following operations:
· Partnership Housing: Focused on working in partnerships with local
authorities and housing associations. Activities include mixed-tenure
developments, building and developing homes for open market sale and for
social/affordable rent, 'design & build' house contracting and
refurbishment.
· Mixed Use Partnerships: Focused on transforming the urban landscape
through partnership working and the development of multi-phase sites and mixed
use placemaking.
Fit Out
· Focused on the fit out of office space with opportunities in
commercial, central and local government offices and further education.
Construction Servicescomprise the following operations:
· Construction: Focused on the education, healthcare, commercial,
industrial, leisure and retail markets.
· Infrastructure: Focused on the energy, nuclear, rail, highways,
water and defence markets. It also includes the BakerHicks engineering design
activities.
· Property Services: Focused on response and planned maintenance
activities provided to the social housing and the wider public sector.
In addition to presenting the financial performance of the business on a
statutory basis, adjusted performance measures are also disclosed. Refer to
the Other Financial Information section which sets out the basis for the
calculations. These measures are not an alternative or substitute to statutory
UK IAS measures, however, are seen as more useful in assessing the performance
of the business on a comparable basis and are used by management to monitor
the performance of the Group.
In all cases the term 'adjusted' excludes the impact of intangible
amortisation of £0.5m and an exceptional building safety charge of £0.1m.
For FY 2023, 'adjusted' excluded the impact of intangible amortisation of
£2.9m and the exceptional building safety credit of £2.2m.
Summary Group financial results
The Group delivered a strong performance in 2024, with a significant
contribution from the Fit Out division. The results were another record for
the Group and reflected the strength and diversity of the Group's operations
and the talent and commitment of its people.
Group revenue increased by 10% up to £4,546m (FY 2023: £4,118m), while
adjusted operating profit increased by 15% to £162.6m (FY 2023: £141.3m).
Adjusted operating margin was 3.6%, 20bps higher than the prior year (FY 2023:
3.4%).
The Group continued to benefit from higher interest rates on its cash balances
compared to the prior year period, with a net finance income of £9.9m (FY
2023: £3.3m) resulting in adjusted profit before tax of £172.5m, up 19% (FY
2023: £144.6m).
The adjusted tax charge for the period was £42.0m (statutory tax charge of
£40.2m), an effective rate of 24.3% on adjusted profit before tax (UK
statutory rate for the year of 25%).
The adjusted earnings per share increased 13% to 278.8p (FY 2023: 247.7p),
while the statutory basic earnings per share of 281.4p was up 11% (FY 2023:
254.2p).
General market conditions
While market conditions have been relatively stable over the past year, the
Group is cognisant of the uncertainty in the current macroeconomic environment
and the effect it may have on the broader markets that the Group operates in.
Elsewhere, while cost increases have been more manageable throughout the year,
the Group hopes to mitigate the impact of the employer national insurance
increases announced in the recent Budget over the forthcoming year.
UK construction and regeneration programmes continue to benefit from sustained
government investment commitments. This continues to support the Group's
market sectors which remain structurally secure particularly in housing, mixed
use schemes, construction, and infrastructure (primary areas in the UK
targeted for growth). Liquidity issues across the supply chain remains a
common theme requiring additional vigilance during both the pre-construction
and delivery phases of projects, with their ongoing stability under regular
review. The Group's exposure to this risk is largely mitigated by the
diligence taken before project commencement, and the fact that no division is
overly reliant on any one supplier.
The pace of recovery in the UK housing market remained subdued this year,
tempered by affordability constraints impacted by high mortgage rates. In
Partnership Housing, the partnership model focusing on long-term partnerships
with the public sector, has continued to provide some level of resilience and
cushion against the impact of the softness in housing for sale activity. While
the demand for contracting has remained strong throughout the year, the sales
rates of private homes on its mixed- tenure sites have shown gradual recovery
during 2024. The Group remains positive that the
government has set out its ambitions for affordable home targets together with
its broad framework for delivery, which we believe will bring about some
positive momentum over the medium term, together with its intentions around
planning reforms which currently remain challenging.
In Mixed Use Partnerships, the combination of elevated build cost inflation
and high interest rates continued to present short-term challenges on the
timing of some of its development schemes prior to their commencement,
although not significantly material to the overall portfolio of schemes and
their future financial performance over the medium to long-term. Similar to
Partnership Housing, this division is currently exposed to a challenging
planning environment.
The market for Fit Out'sservices has continued to be very strong, with a
number of positive structural changes in the market; however some
normalisation seems likely following the recent period of exceptional
performance. Looking ahead, the main drivers continue to be business or market
changes impacting the tenant, lease-related events, the requirement for
greater energy efficiency from offices, the move towards more flexible and
collaborative workspaces, 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.
In both Construction and Infrastructure, the market environment remains stable
due to the diversification of the segments in which they operate within. Where
projects are currently underway, most include appropriate inflationary
protection within the overall contract pricing, and this is not seen as a
significant risk. Where projects are being priced for future delivery, funding
constraints, and inflation to a lesser degree 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 the majority of cases, any client budget
constraints are being addressed by adjustments to project scopes, thereby
allowing projects to proceed.
In Property Services, local authority and housing association clients are
increasingly focused on housing maintenance and on the general state of repair
of their housing stocks. In the delivery of existing reactive maintenance
services, while cost inflation and particularly labour inflation have severely
impacted the profitability for some contracts during the prior and current
year, contract pricing and exit renegotiations were concluded over the year
for several contracts limiting the exposure for the remaining unexpired term
for those contracts.
Divisional headlines
Against the backdrop of a housing market downturn last year, there has been
gradual but modest recovery during 2024, Partnership Housing revenues climbed
up slightly by 3% to £861m (FY 2023:
£838m), as contracting work continued to provide a shield effect against the
subdued housing market. Operating profit was up 18% to £36.1m (FY 2023:
£30.5m).
Mixed Use Partnerships, which holds a long-term development portfolio, was
substantially impacted by the duration of time that has lapsed between scheme
completions in the prior year and a lower level of completions this year. As a
result, operating profit fell from £14.8m in FY 2023 to just £1.5m in FY
2024. The return on capital in the year was 2% (FY 2023: 15%).
Fit Out delivered another excellent result, with profit and margin both
increasing significantly. Revenues were up 18% to £1,300m (FY 2023: £1,105m)
supporting the significant growth to both operating profit and margin.
Operating profit was up 38% to £99m (FY 2023: £71.8m) with an expansion to
its operating margin to 7.6% (FY 2023: 6.5%).
Both Construction and Infrastructure continued to maintain their disciplined
focus on operational delivery and contract selectivity during the year.
Construction revenues increased by 10% to £1,044m (FY 2023: £967m), while
operating profit increased 19% to £30.9m (FY 2023: £25.9m) resulting in an
operating margin of 3% (FY 2023: 2.7%). Elsewhere, Infrastructure revenues
increased by 18% to
£1,047m (FY 2023: £887m) with an operating profit of £38.5m in line with
last year due to the phasing of project starts and completions, resulting in
an operating margin of 3.7% (FY 2023: 4.3%).
Property Services completed its business remediation plan in December 2024,
which included a negotiated exit from a small number of contracts through
mutual agreement, a review of contract assets together with some operational
restructuring related to key existing contracts. The outcome of which led to
the division making an operating loss in the year of £17.8m (FY 2023:
operating loss
£16.8m). As a result of the above actions taken, the business is now
positioned to return to profit in 2025.
Secured order book
In the year, the Group's high-quality secured order book enjoyed substantial
growth, principally led by Mixed Use Partnerships, closing at £11,419m, up
28% on the prior year end position (FY 2023:
£8,920m). Maintaining contract selectivity and bidding discipline to ensure
there remains the appropriate risk balance in the order book continues to be
of critical importance to the future success of the Group.
Balance sheet & cash
Net cash at the year-end was £492m (FY 2023: £461m) and the average daily
net cash for the year was
£374m (FY 2023: £282m). Of this total, £49m was held in jointly controlled
operations or held for future payment to designated suppliers (JVs/PBAs).
Operating cash flow for the year was an inflow of £134.8m (FY 2023: inflow of
£189.0m), which included an adjusted working capital outflow of £34m. The
operating cash flow represented 83% of adjusted operating profit as the Group
increased its net investment in Partnership Housing by
£100.4m, where it has continued to invest in developing its new sites.
Looking ahead, the Group currently expects that the average daily net cash for
2025 will be in excess of £330m.
The Group's Capital Allocation Framework is set out in the separate section
below.
Dividend
The proposed final dividend has increased by 15% to 90.0p per share (FY 2023:
78.0p), resulting in a total dividend for the year of 131.5p per share (FY
2023: 114.0p), an increase of 15%. This represents dividend cover of 2.1x and
reflects the result for the year, the strong balance sheet and the Board's
confidence in the long-term prospects for the Group.
As part of the Capital Allocation Framework set out below, the Board operates
a formal dividend policy such that dividend cover is expected to be in the
range of 2.0x-2.5x on an annual basis.
Group outlook for 2025
While there is continued uncertainty in the wider macroeconomy, we remain
positive for the year ahead. Together with its high-quality and growing order
book spread across a wide number of sectors, the Group is well-positioned for
the future and on track to deliver an outcome for 2025 which is in line with
its current expectations.
The 2025 outlook for each division is detailed in the Divisional Review.
Medium-term divisional targets
To provide a framework for future performance, each division operates to a
medium-term financial target or set of targets (the 'target' or 'targets') and
are referred to in the Divisional Review.
The medium-term targets were originally set in February 2022, with subsequent
upgraded revisions made to Fit Out in February 2023 and then again in August
2023, while the target for Property Services was downgraded in August 2023 to
reflect its current performance.
As a result of current performance, market position held together with future
prospects, the medium- term targets for Mixed Use Partnerships, Fit Out,
Construction and Infrastructure have been upgraded as of February 2025.
Division Medium-term target
Partnership Housing Operating margin of 8% / return on capital up towards 25%
(Unchanged)
Mixed Use Partnerships Return on capital up towards 25%
(previously 3-year rolling average return on capital towards 20%)
Fit Out Annual operating profit of £60m - £85m
(previously £50m - 70m)
Construction Operating margin of 3.0% - 3.5% pa Revenue > £1bn
(previously 2.5% - 3.0% pa and Revenue of £1bn)
Infrastructure Operating margin of 3.75% - 4.25% pa Revenue > £1bn
(previously 3.5% - 4.0% pa and Revenue of £1bn)
Property Services Annual operating profit of £7.5m
(Unchanged)
Increased medium-term target updated in February 2025
The Board's single, overarching principle governing capital allocation is a
commitment to maintain a strong balance sheet and to hold significant net cash
balances at all times. This will provide a stable and firm foundation for the
Group to make sound decisions for its long-term development, thereby enhancing
its competitive advantage and future work winning.
As stated in the Group Operating Review above, the Group's net cash at 31
December 2024 was £492m (FY 2023: £461m) and the average daily net cash for
the year was £374m (FY 2023: £282m). The year end cash position included
£49m held in jointly controlled operations or held for future payment to
designated suppliers.
Across 2024, the lowest net cash balance on any one day in the year was £293m
(FY 2023: £195m). Of this, £54m was held in jointly controlled operations or
held for future payment to designated suppliers. The Board uses this net cash
balance on the lowest day of the year as the initial reference point from
which it then considers its application of its capital allocation hierarchy.
This allows it to balance the needs of all stakeholders whilst enhancing the
Group's market competitiveness and capabilities and maintaining its financial
strength.
The Group's capital allocation hierarchy comprises:
A. Maintaining a strong balance sheet
(i) to enhance its competitive advantage and win future work
Fundamental to the Group's organic growth strategy is engaging in long-term
partnerships with its public and private sector clients, whether it be through
joint ventures or other arrangements in its Partnership activities, or through
frameworks in its Construction activities.
When assessing the suitability of long-term partners, potential clients are
increasingly looking for security and assurance of long-term solvency and the
availability of cash resources to ensure their partners can fulfil their
long-term contractual obligations. A strong balance sheet and significant
levels of net cash are considered by the Group as a key market differentiator
and a competitive advantage when bidding and winning future work to support
the future growth of the business.
(ii) to ensure downside protection - maintaining a 'buffer' in the event of
a macro downturn
Maintaining significant levels of net cash is considered as key to offsetting
any potential consequence of a future downturn in the economy and reduction in
revenue in the activities of Construction, Infrastructure and Fit Out.
These activities operate with a negative working capital model, which in turn
can lead to cash outflows in the event of declines in revenue. Maintaining a
net cash 'buffer' therefore allows the Group to continue with its strategy of
disciplined contract selectivity and prudent approach to risk management
throughout the whole economic cycle.
B. Maximising investment in Partnership activities to drive sustainable growth
Significant opportunities are expected to arise through the medium and long
term to invest in the existing business to support and accelerate the organic
growth of these activities.
Specifically, investment in Partnership Housing and Mixed Use Partnerships is
a strategic priority:
Ø For Partnership Housing, the growth potential remains substantial despite
the short-term market headwinds. The medium-term target is for an operating
margin of 8% and for return on capital to be up towards 25% on an annual
basis.
The capital employed has increased significantly over the last 5 years, up
from an average of
£152m in 2019 to an average of £338m in 2024. The scalability of the
partnership housing model provides the potential to further increase the
capital employed significantly above current levels over the medium to long
term.
Ø Within Mixed Used Partnerships, its development activities across
multi-phase sites and place making are targeted to generate return on capital
up towards 25% on an annual basis over the medium term.
The capital employed has reduced over the last 5 years, down from an average
of £102m in 2019 to an average of £87m in 2024. Notwithstanding this
reduction, based on the investment profile of schemes already secured, the
sizeable new schemes at preferred bidder stage as well as the identified
pipeline of future opportunities, the capital employed in the division will
increase over the medium term, albeit modestly.
C. Ordinary returns to shareholders
Ordinary dividends are considered by the Board to be an important component of
shareholder returns. The Board has previously formally adopted a dividend
policy such that dividend cover is expected to be in the range of 2.0x-2.5x on
an annual basis.
D. Investment by acquisition to accelerate sustainable growth
Any acquisition activity will likely be targeted towards the Group's
partnership activities, primarily Partnership Housing. The focus would be on
opportunities to complement the existing organic growth strategy by acquiring
pre-existing partnership development schemes, land options, positions in
existing schemes from third parties or businesses which can complement or
reinforce the division's position in the partnerships sector.
Other potential acquisition opportunities across the Group's construction and
fit out activities would only be considered where they would accelerate growth
through the existing divisional structure and capabilities.
E. Special returns to shareholders
The Board will continue to assess the needs of the business and the optimum
balance sheet structure within the context of the overarching principle
governing capital allocation and the hierarchy A-D described above. Any
capital then deemed surplus above these requirements may be returned to
shareholders.
Such returns would be in the form of either share buybacks or special
dividends, with the method of distribution to be determined by the Board at
the time based on prevailing conditions.
The Group continues to prioritise the delivery of improved environmental,
social and governance (ESG) outcomes which are pivotal to winning work and
building trust among our customers. By taking consistent action against five
Total Commitments, our divisions are driving sustainable growth while creating
shared value for the communities we serve.
In early 2025, the Group retained its 'AAA' MSCI rating for the fourth
consecutive year and an 'A' for CDP Climate for the fifth year(1).
Furthermore, we were listed as a '2024 European Climate Leader' by the
Financial Times for our progress in reducing global greenhouse gas (GHG)
emissions. In August, the Group published its first Climate Transition Plan,
which details our strategy for how we will meet our medium-term science-based
targets to achieve a 60% reduction in our Scope 1 and 2 emissions(2) and a 42%
reduction in our Scope 3 emissions(3) by 2030, as well as our longer-term net
zero target to achieve a 90% reduction in our Scope 1, 2 and 3 emissions by
2045(4).
In addition to our decarbonisation focus, the Group continued to support the
UK's housing, regeneration, development and infrastructural needs while
delivering long-term value for business and society. We use a variety of
third-party verified methodologies to track and assess the impact our
activities have on society. To date, the Social Value Portal's TOM's framework
has determined that the Group has delivered £4.6 billion in social value
through the creation of local jobs, support of regional businesses and
contribution to safer and healthier communities(5). Our divisions also
continued to implement initiatives to support educational, environmental and
community projects throughout 2024.
For full details of our ESG progress, please refer to the responsible business
section in our 2024 Annual Report & Accounts and our 2024 Responsible
Business Data Sheet which will be published on 20 March 2025 at:
www.morgansindall.com (http://www.morgansindall.com/) .
(http://www.morgansindall.com/)
(a) Environmental
Morgan Sindall Group was the third construction company globally to submit its
carbon targets for validation by the Science Based Targets initiative (SBTi)
in 2017 and, in 2023, we revalidated our commitments to align to a more
ambitious 1.5(o)C reduction scenario. Subsequently, we retained our target to
reduce Scope 1 and 2 and emissions by 60% for 2030, while adding a new stretch
target to deliver a 90% reduction by 2045 against a 2019 baseline. We also set
a Scope 3 reduction commitment targeting a 42% reduction by 2030 and a 90%
reduction by 2045 against a 2020 baseline.
As of 2024, the Group remains on track to achieve its medium-term climate
ambitions(6). Since 2019, we have achieved a 44% reduction in our Scope 1 and
2 emissions. This year, the Group updated its Scope 3 inventory to improve
data collation, this has enabled us to externally report our Scope 3 emissions
across all relevant categories for the first time to drive progress against
our long-term net zero target(6). We also undertook internal decarbonisation
audits across each of our divisions to identify further opportunities to
achieve emissions reductions.
Beyond our direct operations, we continued to empower customers, teams and
partners to reduce and avoid emissions associated with projects. Since 2020,
our RICS-approved carbon intelligence tool CarboniCA has been used on around
650 projects, including 218 new projects in 2024. Our industry- leading
software undertakes a Whole Life Carbon Assessment (WLCA) of a project to
highlight its most carbon-intensive elements and recommend lower-carbon
alternatives. By deploying this early in the design phase, CarboniCa can
generate significant emissions savings for customers.
We invest in high-quality projects located in the UK that enhance biodiversity
and contribute to a healthier climate. In 2024, we continued to work on our
three legacy natural capital projects which, as well as helping to address
climate change, support the Group in tackling residual emissions through
credible carbon offset certification. Work was completed on the planting of
nine woodlands and 270,000 trees at the Blenheim Estate in Oxfordshire as part
of the Dorn & Glyme Woodlands project. At the end of 2024, the project was
validated by the Woodland Carbon Code and, due to our critical investment,
70,000 Peatland Carbon Units (PCUs) were released, of which the Group owns
20,000(7).
A summary of environmental highlights from across the Group in 2024 includes:
· 44% reduction in Scope 1 and Scope 2 emissions since 2019
· 1% increase in Scope 3 emissions since 2020 baseline
· 72% of the Group's fleet are hybrid and electric vehicles (FY 2023:
64%)
· > 650 projects have implemented CarboniCA, our intelligent carbon
software since 2020
· 97% of total waste diverted from landfill in 2024 (FY 2023: 94%)
(b) Social
With over 80 offices and a nationwide supply chain network, our activities
have a broad reach across the UK. Furthermore, with hundreds of projects up
and down the country, we recognise the opportunity we have to make a positive
impact on the communities where we live and work.
Our longstanding relationships with our supply chain partners are essential to
the successful delivery of projects. In 2024, we grew our Morgan Sindall
Supply Chain Family of preferred suppliers to 414 members (FY 2023: 406), who
continue to benefit from tailored training, on-site advice, access to contract
information and dedicated relationship management teams. We also believe in
supporting local businesses wherever we can, which aligns with our responsible
business strategy and ethos of building strong partner relationships. In 2024,
62% of Group spend was with regional small and medium-sized enterprises
(SMEs).
Our people are the lifeforce of our business and we depend on them to deliver
services that delight our customers every day. In 2024, we reinforced our
commitment to zero harm by setting new leading health and safety indicators.
We hope that these new indicators will drive further reductions in our lost
time incident rate (LTIR) which fell marginally to 0.23 in 2024 (FY 2023:
0.24). We also continued to support and develop our people, delivering over
26,000 training days (3.2 days per employee), in addition to securing new
opportunities for the next generation of leaders by providing apprenticeship
roles, graduate schemes, structured training initiatives and student
placements.
As a business that operates at the heart of communities, it is vital that we
identify ways to accurately measure and increase the social and economic
impact our projects have on society. In July 2024, we launched the Built
Environment Bank (formerly known as the Social Value Bank) in partnership with
the Housing Associations' Charitable Trust (HACT) - an online tool to measure
the value and wellbeing we are creating within our supply chain and through
our work. Our divisions continued to participate in wide range of social value
activities during the year, including educational programmes, community
initiatives and environmental projects. We hope to improve data capture of
this great work through the Built Environment Bank in the months and years to
come.
A summary of social highlights from across the Group in 2024 includes:
· £4.6 billion delivered in social value to date as determined by the
Social Value Portal
· 97.7% of supplier invoices paid within 60 days in the second half of
2024
· 62% of Group spend was with regional SMEs and 77% with Supply Chain
Family members
· Lost time incident rate (LTIR) reduced to 0.23 against a 2025 target
of 0.21 (FY 2023: 0.24)
· > 26,000 training days delivered (representing an average of 3.2
training days per employee)
1. The Group uses MSCI and CDP to gauge its
ongoing responsible business performance. Both MSCI and CDP provide decision
support services for the global investment community and are used by most
major stakeholders.
2. Scope 1 and 2 emissions include those generated from owned or controlled
sources and indirect emissions from purchased electricity.
3. The Group's Scope 3 emissions refer to the 15 emissions categories from
the GHG Protocol Scope 3 Standard. The Group has excluded categories 2, 9, 13
and 14 as these represent > 1% of total emissions. Scope 3 emissions
account for the vast majority of our total footprint.
4. Our net zero targets are approved by the Science Based Targets
initiative (SBTi) and the remaining 10% of residual carbon emissions will be
offset using high quality UK-based offsets.
5. The Social Value Portal is an accounting tool based on the national
Themes, Outcomes and Measures (TOMS(TM)) framework. The TOMS framework is
compatible with all major ESG frameworks, endorsed by the Local Government
Association, and used by many public sector organisations across the UK to
measure social value creation. Our £4.6bn figure was accurate as of December
2024, and represents total contribution of projects logged in the portal since
October 2023. More detail can be found in our 2024 annual report.
6. The Group's medium-term science-based targets refer to a 60% reduction
in Scope 1 and 2 emissions and a 42% reduction in Scope 3 emissions by 2030,
with our long-term targets aiming for a 90% reduction across all our carbon
emissions (Scope 1, 2 and 3) by 2045.
7. The Group's 20,000 owned PCUs will be used to offset its residual
emissions as part of its net zero targets.
The following Divisional Review is given on an adjusted basis, unless
otherwise stated. Refer to Note 15 for appropriate reconciliations to the
comparable UK IAS measures.
Headline results by business segment (vs FY 2023)
Revenue Operating Profit Operating Margin
£m Change £m Change % Change
Partnership Housing 861 +3% 36.1 +18% 4.2% +60bps
Mixed Use Partnerships 91 -51% 1.5 -90% n/a n/a
Fit Out 1,300 +18% 99.0 +38% 7.6% +110bps
Construction 1,044 +8% 30.9 +19% 3.0% +30bps
Infrastructure 1,047 +18% 38.5 - 3.7% -60bps
Property Services 223 +21% (17.8) -6% (8.0)% +110bps
Group/Eliminations (20) n/a (25.6) n/a n/a n/a
Total 4,546 +10% 162.6 +15% 3.6% +20bps
Group secured order book(1) by division
The Group's secured order book(1) at 31 December 2024 was £11,419m, up 28%
when compared to the prior year. The divisional split is shown below.
FY 2024 FY 2023 Change
£m £m
Partnership Housing 2,174 2,034 +7%
Mixed Use Partnerships 4,085 1,825 +124%
Fit Out 1,439 1,098 +31%
Construction 952 796 +20%
Infrastructure 1,883 1,689 +11%
Property Services 887 1,478 -40%
Inter-divisional eliminations (1) -
Group secured workload(1) 11,419 8,920 +28%
1 The 'secured order book' is the sum of the 'committed order book', the
'framework order book' and (for Partnership Housing and Mixed Use
Partnerships) the Group's share of the gross development value of secured
schemes (including the development value of open market housing schemes). Of
these amounts, £6,164.5m relates to performance obligations to be satisfied
for in-progress contracts at the year end.
The 'committed order book' represents the Group's share of future revenue that
will be derived from signed contracts or binding letters of intent. The
'framework order book' represents the Group's expected share of revenue from
the frameworks on which the Group has been appointed. This excludes prospects
where confirmation has been received as preferred bidder only, with no formal
contract or binding letters of intent in place.
Partnership Housing
FY 2024 FY 2023 Change
£m £m
Revenue 861 838 +3%
Operating profit(1) Operating margin 36.1 30.5 +18.0%
4.2% 3.6% +60bps
Average capital employed(1,2) 337.8 254.5 +£83.3m
(last 12 months)
Capital employed(1,2) (at year end) 318.7 234.4 +£84.3m
ROCE1,3 (last 12 months) 11% 12%
In Partnership Housing, the division continued to grow its long-term
partnerships with the public sector. Throughout the year, while we have seen a
modest improvement in the housing market, demand for contracting with the
public sector has remained strong, shielding the impact of a gradual recovery
of open market sales within the mixed-tenure activities. The division
continued to optimise construction of the contracted affordable homes on
mixed-tenure sites to maintain activity.
Reflecting the above, revenue was up 3% to £861m (FY 2023: £838m), driven by
Contracting which was up 19% to £564m (66% of divisional total) compared to
the prior year. Mixed-tenure revenue declined by 19% to £297m (34% of
divisional total) compared to the prior year.
Notwithstanding the composition of the divisions revenue, both contracting and
mixed-tenure activities achieved stronger margins over the year, led by
contract type, mix of schemes delivered and other income (note 7), resulting
in operating profit(1) increasing by 18% to £36.1m (FY 2023: £30.5m) with an
operating margin of 4.2% (FY 2023: 3.6%).
Despite the challenging macroeconomic environment, the longer-term development
of the business and its partnerships with local authorities and housing
associations has continued with planned momentum. Reflective of this ongoing
activity and investment in future growth, the average capital employed(1) for
the last 12-month period increased by £83.3m to £337.8m (FY 2023: £254.5m).
The capital employed(1) at the end of the year was £318.7m, an increase of
£84.3m on the prior year (FY 2023: £234.4m). As a result of the higher
average capital employed, the overall ROCE(2) for the last 12- month period
reduced slightly to 11% (FY 2023: 12%) due to continued investment in the
partnership activities.
The division continues to maintain a high-quality secured order book, through
ongoing successful client engagement leading to work being awarded through
frameworks or through direct negotiation. The secured order book at the year
end was £2,174m, 7% higher than the prior year end (FY 2023:
£2,034m) and with 58% of its total value for 2026 and beyond providing
long-term visibility of workload.
Mixed Tenure
Good progress was made with the strategy of increasing the number and size of
mixed-tenure sites. At the year end, the division had 66 active mixed-tenure
sites at various stages of construction and sales, up from 61 at the prior
year end, with an average of 166 open market units per site (up from 163 at
the prior year end). Average site duration is 47 months, providing long-term
visibility of activity.
During the year, 1,808 units were completed across open market sales and
social housing (including through its joint ventures) compared to 1,923 units
in 2023, noting that the number of open market sales within this increased by
5% to 874. The average sales price was £237k, which was broadly in line with
the prior year average of £239k.
Of the total divisional order book, the amount relating to mixed-tenure
activities increased by 12% to
£1,310m (2023: £1,167m). In addition, the amount of mixed-tenure business in
preferred bidder
status, or already under development agreement but where land has not been
drawn down, was
£1,200m at the year end (FY 2023: £821m).
Work won in the year included: 727 units as the division moved into phases 2
and 3 at South Thamesmead, in joint venture with Peabody; the 500-unit Grahame
Park development in north London in partnership with the London Borough of
Barnet; a 350-unit development in Williton, Somerset with Aster Group; a
309-unit development in Balderton, Newark; a 290-unit scheme at the Elm Grove
Estate in partnership with Sutton Council; 176 units in Winchburgh, West
Lothian; a 115- unit scheme in Haverfordwest, Pembrokeshire with Pobl Group;
112 units on phase 4 of the Castleward development in Derby with Riverside;
and 82 units in Primrose Hill in partnership with Birmingham City Council.
Elsewhere, good progress continued to be made on other mixed-tenure schemes,
in partnerships with Riverside, Clarion Housing, L&Q, Together Housing
Group, Repton Property Developments (owned by Norfolk County Council), the
Borough Council of King's Lynn & West Norfolk, Flagship Group, Pobl Group,
West Sussex County Council, Suffolk County Council and Homes England.
Contracting
Partnership Housing continued to experience robust levels of demand with
clients awarding work either through frameworks or direct negotiation.
The total number of equivalent units built increased by 15% to 3,299, up from
2,865 in the prior year. Of the total divisional order book, the contracting
secured order book remained on a par with the prior year end at £863m (FY
2023: £867m), of which c40% is for 2026 and beyond.
Key contracting schemes awarded in the year included: an £80m, 321-unit
project at Leaside Lock in East London for The Guinness Partnership; a £14m,
70-unit development in Castle Gresley for East Midlands Homes; an £11m,
38-unit scheme at Saffron Lane for Leicester City Council; a £10m, 45-unit
development in Isleham, Cambridgeshire for Havebury Housing Partnership; a
£10m, 56-unit scheme in Baginton, Warwickshire for Platform Housing Group; a
£9m, 55-unit scheme at Crick Road, Portskewett for Candleston Homes; a £40m,
87-unit scheme at Carlton Dene for Westminster City Council; and a number of
retrofit and refurbishment projects for local authorities and housing
associations.
Divisional outlook for Partnership Housing
Partnership Housing's medium-term targets are to generate a return on average
capital employed up towards 25% and to deliver an operating margin of 8%.
Looking ahead to 2025, while we expect another year of modest recovery in the
housing market due to the uncertainty over the timing of future interest rate
changes, solid profit growth is still expected in the year, while the return
on average capital employed(1,2) is expected to be in line with 2024 levels as
we continue to invest. We remain confident over the medium-term fundamentals
of the sector and remain well positioned to support the Government's
affordable home plans across the country over the forthcoming years.
The average capital employed(1,2) is expected to increase up towards c£380m
to £400m, reflecting the increased scale of the business and stage of its
developments.
1 Before exceptional Building Safety Charge of £2.7m (FY 2023: £nil). See
Note 2 of the consolidated financial statements
2 Capital Employed is calculated as total assets (excluding goodwill,
intangibles and cash) less total liabilities (excluding exceptional Building
Safety provisions, corporation tax, deferred tax, inter-company financing and
overdrafts)
3 Return On Average Capital Employed = (Adjusted operating profit plus
interest from JVs) divided by average capital employed
Mixed Use Partnerships
FY 2024 FY 2023 Change
£m £m
Revenue 91 185 -51%
Operating profit(1) 1.5 14.8 -89.9%
Average capital employed(2) 86.9 98.6 £(11.7)m
(last 12 months)
Capital employed(2) at period end 94.4 79.7 +£14.7m
ROCE3 (last 12 months) 2% 15%
ROCE3 (average last 3 years) 12% 16%
Mixed Use Partnership's profits were significantly lower than previous years
due to fewer project completions occurring in the year resulting in an
operating profit(1) of £1.5m (FY 2023: £14.8m). However, excellent progress
was made securing new long-term agreements for future projects. The ROCE(3)
for the last 12 months was 2%, significantly down on the prior year, based on
average capital employed(2) of £86.9m, as a result of project completion
phasing.
Despite the modest profit contribution, key contributors to performance during
the year were profit and development fees generated from activity in Salford
Central, Talbot Gateway in Blackpool, Stroudley Walk, Lewisham Gateway and
Forge Island in Rotherham; and profit from a land sale in Hucknall, East
Midlands.
At the end of the year, the division's order book amounted to £4,085m,
substantially ahead of the prior year end (FY 2023: £1,825m), reflecting the
success the division has had in converting a number of sizeable, preferred
bidder schemes into new and secured long-term partnership agreements. These
include:
· a 30-year partnership with Arden Cross Limited (land-owning
consortium) to deliver development at the HS2 Interchange Station in Solihull.
This nationally strategic and regionally significant site will deliver
commercial space expected to employ c27,000 people alongside an Innovation
District, anchored by a HealthTech campus and up to 3,000 new homes;
· a development agreement with Solihull Council to regenerate Mell
Square, an iconic shopping hub in the heart of Solihull town centre, with a
mix of uses including an improved retail offer, new public spaces, leisure
facilities and homes; and
· a new partnership with Homes England and Pension Insurance
Corporation, to deliver over 3,000 low-carbon, low-energy homes for rent
nationally, with a focus on affordable homes.
In addition, Mixed Use Partnerships was named by Manchester City Council as
delivery and investment partner for the long-term regeneration of Wythenshawe
Civic, with plans to deliver a new public square, shops, workspace, community
and cultural space and more than 1,750 new homes, including significant
affordable housing.
Through ECF, the division's strategic partnership with Homes England and Legal
& General, the following agreements and partnerships were entered into
during the year:
· a development agreement with Wolverhampton City Council, to create
a new city centre neighbourhood with 1,000 new homes (including affordable),
enhanced market square with green spaces, and new shops, cafes and
restaurants;
· a development agreement with Bradford Council to create a new
sustainable, city centre neighbourhood with 1,000 new homes alongside shops,
workspace, community parks and public space. ECF secured £29m of funding to
commence the scheme;
· a partnership with West Northamptonshire Council to explore the
regeneration of Greyfriars in Northampton town centre. The 25-acre site will
provide homes, retail and leisure and the reimagining of the Corn Exchange, a
heritage asset at the heart of the town centre; and
· an agreement with Stevenage Borough Council, to explore the
regeneration of up to 30-acres of land around Stevenage railway station, that
will focus on addressing the long-term needs of the local community,
delivering new, high-quality homes and employment space, amenity and green
space, a new railway station and a new theatre.
The division secured planning permission for: the final phases of Stockport
Exchange, which will create new workspace, shops and a public square in the
town centre; a new heart for Prestwich Village in Bury including new homes, a
community hub and public space; the market-led revival and Town Hall
refurbishment in Earlestown, St Helens; 90 affordable homes designed to
Passivhaus standards at Oldfield Basin, Salford Central; and at Weston M6 in
Basford East, hybrid consent was secured for a new state-of-the-art commercial
and business park totalling 1.2 million sq ft of space and wellbeing- led
green space. In addition, ECF secured planning permission for the Crescent
Innovation zone, which is part of the Crescent Salford programme and includes
933 new homes, 1.7 million sq ft of new commercial innovation, academic and
research floorspace, active ground-floor space and a new movement hub, along
with significant improvements to public spaces.
During the year, good progress was made at Stroudley Walk in Bromley-by-Bow to
create 274 homes, with 50% available for London Affordable Rent or shared
ownership, and a 215,000 sq ft Civil Service Hub at Talbot Gateway, Blackpool,
which will accommodate more than 3,000 civil servants.
Completions in the year included 256 mixed-tenure homes at Hale Wharf,
Tottenham Hale through the Waterside Places partnership with the Canal &
River Trust; the final phase of Lewisham Gateway, delivering 649 homes for
rent, retail space, food and beverage space, workspace and a multiplex cinema;
Forge Island in Rotherham, a leisure destination including a new cinema,
restaurants and public space; 113 affordable homes at Northshore in
Stockton-on-Tees; a 144-bed Holiday Inn at Talbot Gateway, Blackpool; and a
new bridge connecting communities at Brentford Lock West.
The ECF partnership also made good progress on existing schemes. Work
completed at Eden, a 115,000 sq ft workplace, designed to be 'net zero carbon
in operation' with space let to accountancy firm BDO and law firm TLT, and a
collection of 96 affordable, Passivhaus homes at Greenhaus, both in Salford.
At Manor Road Quarter in Canning Town, the first phase of 355 homes was
completed, including 140 affordable homes handed over to Metropolitan Thames
Valley Housing. Construction commenced on Willohaus, a collection of 100
affordable, Passivhaus homes, and major infrastructure project, Salford Rise,
as part of the 240-acre, mixed-use regeneration of Salford Crescent, as well
as 196 build-to-rent homes at New Bailey, Salford Central.
Divisional outlook for Mixed Use Partnerships
The increased medium-term target for Mixed Use Partnerships is to generate a
return on capital up towards 25%.
While the division has experienced a substantial increase to its development
order book for a number of long-term sizeable schemes, profits (and the
resulting ROCE(1,3)) in 2025 will continue to be moderate and similar to 2024
levels. The average capital employed for the year is expected to be between
c£105m and £115m.
1 Before exceptional Building Safety Credit of £5.9m (FY 2023: Credit of
£13.7m). See Note 2 of the consolidated financial statements
2 Capital Employed is calculated as total assets (excluding goodwill,
intangibles and cash) less total liabilities (excluding exceptional Building
Safety provisions, corporation tax, deferred tax, inter-company financing and
overdrafts)
3 Return On Average Capital Employed = (Adjusted operating profit plus
interest from JVs) divided by average capital employed
Fit Out
FY 2024 FY 2023 Change
£m £m
Revenue 1,300 1,105 +18%
Operating profit 99.0 71.8 +37.9%
Operating margin 7.6% 6.5% +110 bps
Fit Out delivered another market-leading performance in the year, enjoying
significant growth for both revenue and operating profit. With revenue
increasing by 18% to £1,300m (FY 2023: £1,105m), operating profit was up 38%
to £99.0m (FY 2023: £71.8m) resulting in strong margin expansion to 7.6% (FY
2023: 6.5%), strongly influenced by the exceptional volumes and operational
leverage. The division's focus on consistent operational delivery and enhanced
customer experience continues to underpin its excellent performance in the
year, complemented by a high-quality workload through disciplined and focused
bidding, which in turn supports the division's strong brand reputation and
market position.
The overall balance of the business has been reasonably consistent over recent
years, with any movements in geography, type of work and sectors served not
indicative of any longer-term trends.
The London region continued to generate a strong proportion of the division's
revenue, accounting for 72% of revenue (FY 2023: 64%), while other key
geographies served out of offices in the Thames Valley, Birmingham,
Manchester, Leeds and Glasgow covered the remaining 28% of revenue (FY 2023:
36%).
There was no significant change to the market sectors served. The commercial
office market remained the largest, contributing 86% of revenue (FY 2023:
80%), with higher education amounting to 6% of revenue (FY 2023: 10%),
government/local authority representing 6% (FY 2023: 8%), and retail banking
and other sectors covering the remaining 2% of revenue (FY 2023: 2%).
In terms of type of work delivered in the year, 86% related to traditional fit
out work (FY 2023: 85%), while 14% related to 'design and build' (FY 2023:
15%). The proportion of revenue generated from the fit out of existing office
space remained relatively constant at 82% (FY 2023: 79%), with the remainder
attributable to the fit out of new office space. Of the fit out of existing
office space, 46% of the work was refurbishment 'in occupation' compared to
54% where work was performed in non-occupied space.
The market for Fit Out remains strong, with a number of different factors
driving demand: lease events and significant project requirements in the
London commercial office market; upcoming public and private sector schemes
outside of London; carbon-driven planning restrictions for new buildings and
energy efficiency of existing office space; and the continuation of
re-purposing of office space to accommodate new ways of working.
At the year end, the secured order book was £1,439m, an increase of 31% from
the previous year end (FY 2023: £1,098m). Of this total, £1,187m (83%)
relates to 2025, 45% higher than it was at the same time last year for the
12-month look ahead, which continues to underpin the visibility and confidence
for the forthcoming year.
Commercial
Commercial fit out projects won in London during the period included 380,000
sq ft for PwC at More London; 355,000 sq ft for A&O Shearman at 2
Broadgate in London; 277,000 sq ft for Latham & Watkins on Leadenhall
Street; 156,000 sq ft for Unilever in Kingston-upon-Thames; 158,000 sq ft for
Travers Smith; 129,000 sq ft for JLL at 1 Broadgate in London; 101,000 sq ft
fit out for Investec on Gresham Street; 83,000 sq ft for Wise in Worship
Square, London; 56,000 sq ft for Standard Chartered Bank; 48,000 sq ft for
Rabobank London on London Wall; 37,000 sq ft for OMERS and Oxford Properties;
26,000 sq ft for Motability Operations at 22 Bishopsgate; 24,000 sq ft for
Johnson Matthey at Gresham Street; and 8,500 sq ft for AstraZeneca at Pancras
Square.
Regional project wins in the period included 185,000 sq ft for a UK consumer,
corporate and wealth and private banking franchise in Northampton; 152,500 sq
ft for Lloyds Banking Group in Birmingham; 43,000 sq ft for Bruntwood Estates
in Manchester; 32,000 sq ft for an electric vehicle design and manufacturing
company in Bicester; 27,000 sq ft for Evelyn Partners in Bristol; 20,000 sq ft
across two floors for Vodafone in Newbury; and 12,700 sq ft across two
projects for VISA in Basingstoke.
Commercial fit out projects on site or completed in London during the year
included 1.2 million sq ft for Citi in Canary Wharf; 110,000 sq ft for a
professional services firm in London; 109,000 sq ft for Aviva at 80 Fenchurch
Street; 114,000 sq ft for law firm Reed Smith near Spitalfields; two projects
totalling 99,500 sq ft for Deloitte at New Street Square; 51,500 sq ft for
Berkeley Estate Asset Management in Mayfair; 40,000 sq ft for British Land on
Bishopsgate; 17,000 sq ft for Boston Consulting Group on Charlotte Street; and
an 11,000 sq ft fit out for Burges Salmon at New Street Square.
Regional projects on site or completed during the year included 160,000 sq ft
for Lloyds Banking Group in Leeds; 144,000 sq ft for Wirral Borough Council;
50,000 sq ft for Dojo in Bristol; 44,000 sq ft for Samsung in Cambridge;
27,000 sq ft for Arup in Bristol; and 20,000 sq ft for Sky in Leeds.
Science & Research and Higher Education
Projects won in the year included 310,000 sq ft for British Land at 1 Triton
Square in London; 64,000 sq ft for Kings College London; 29,000 sq ft at
Newcastle University; a 29,000 sq ft library refurbishment at the University
of Wolverhampton; and two projects totalling 25,000 sq ft at Anglia Ruskin
University.
Projects on site or completed during the year included a 150,000 sq ft HQ for
GSK in London's Life Sciences Hub, known as the Knowledge Quarter; 100,000 sq
ft at Durham University School of Business; five projects totalling 45,000 sq
ft for Queen Mary University; upgrade works at the Francis Crick Institute as
their project partner; 27,500 sq ft for Aston University; and a 12,500 sq ft
fit out of Keele University's Clinical Skills department.
Design & Build
Projects won and continuing on site during the year included 120,000 sq ft for
Wood Group at Green Park in Reading; 50,000 sq ft for Mapletree at Green Park
in Reading; 23,000 sq ft for Ultra Maritime in High Wycombe; and 6,000 sq ft
for Molton Brown in Bishop's Stortford in Essex.
Projects won and completed during the year included 50,000 sq ft for Accrue
Capital in Maidenhead; 30,000 sq ft of fully-fitted labs and office space for
Stanhope at MediaWorks in White City Place; 38,000 sq ft for Aurora Energy
Research in Oxford; 21,000 sq ft for Kajima Properties (Europe); 24,000 sq ft
for Greystar on Finsbury Square; 18,000 sq ft for Sage UK in Winnersh
Triangle, Reading; 15,000 sq ft for Wavestone at Exchange Square in London;
13,500 sq ft for Smiths Group plc; 8,600 sq ft for Centiva; 8,000 sq ft for
Spin Master Toys in Marlow; 8,000 sq ft for AEW UK Investment Management;
7,000 sq ft for Trinity Life Sciences in the Scalpel in London; and 7,000 sq
ft for Just Climate (by Generation) in London.
Frameworks
Projects won under frameworks and corporate partnerships included £30.0m of
works for the Mayor's Office for Policing and Crime (MOPAC), with a future
order book of £30.3m; £21.4m of works through Procure Partnerships, with a
future order book of £9.6m; £11.2m of works through Pagabo, with a future
order book of £3.5m; £7m of works through the Southern Construction
Framework; £3.2m of works through Construction West Midlands Framework; and
two projects through Scape to the value of £3.6m.
Divisional outlook for Fit Out
The increased medium-term target for Fit Out is to deliver an average annual
operating profit of £60m-
£85m.
Based on the timing of projects in the order book and the current visibility
the division has of future workload for the forthcoming year, the division is
expected to have another strong year in 2025, with profit towards the top end
of this revised target range.
Construction
FY 2024 FY 2023 Change
£m £m
Revenue 1,044 967 +8%
Operating profit(1) 30.9 25.9 +19.3%
Operating margin(1) 3.0% 2.7% +30bps
1 Before exceptional Building Safety Credit of £0.1m (FY 2023: Charge of
£11.5m).
Construction's revenue increased by 8% to £1,044m (FY 2023: £967m), while
operating profit increased by 19% to £30.9m (FY 2023: £25.9m), resulting in
an operating margin of 3.0% (FY 2023: 2.7%); this was at the top end of its
targeted range for its operating margin of 2.5%-3.0%. The strong profit
performance was driven by improving the overall quality of earnings through
disciplined contract selectivity and operational delivery together with
prudent risk management within its order book.
The division had a strong year of winning new work, with the secured order
book at £952m, 20% ahead of the prior year (FY 2023: £796m). Of the total,
£771m (81% by value) is secured for 2025, this compares to £652m (82% by
value) of work which was secured for the year ahead at the start of last year.
In addition to the total order book, there continues to be a significant
amount of suitable work available in the market, much of which is being
generated through negotiated or existing frameworks. At the end of the year,
the division had £1,179m of work at preferred bidder stage, providing
confidence of a sizeable ongoing workload (FY 2023: £1,284m) for the
forthcoming period.
Education
Project wins included a £51m new build 930 place secondary school in
Dumfries, Scotland; the Nine Elms £50m two form entry and Special Education
Needs (SEN) primary school in Battersea; the 900 place, £50m Willows High
School and SEN facility in Cardiff; a £34m secondary academy at Callerton in
Newcastle-upon-Tyne for the Department for Education (DfE); the £25m
Ravensdale Special Education Needs and Disabilities (SEND) school in Mansfield
for Derby City Council; the £19m Carleton High School in Pontefract; Maendy
(£14m) and Goetre (£20m) primary schools in South Wales; and the 420 place,
£13m Cable Wharf Primary and SEN school in Kent for Kent County Council and
the DfE to support a growing residential development.
During the year, work progressed on the Orbiston Community Hub, a £42m
facility accommodating two primary schools, family learning centre and
community centre near Glasgow; the £32m, 1,900 place all-through school in
Abergavenny; and the £21m new build and refurbishment of the School of
Veterinary Medicine at the University of Central Lancashire.
Completions in the year included: the 150 place, £35m Alconbery SEN school in
Huntingdon; the £18m Pear Tree SEND school in Stockport; the £13.9m Little
Reddings Primary School in Bushey, delivered via the DfE's School Rebuilding
Programme; a £12m facility for Middlesbrough College to deliver training in
specialist engineering; an £11m, three-storey teaching block for Castle
School in Thornbury, Bristol; Limebrook School in Maldon, Essex, a new
420-place primary school and nursery; the London Institute for Healthcare
Engineering (£24m), a state-of-the-art life sciences facility for King's
College London and Guy's and St Thomas' NHS Foundation Trust; and a £19.5m
'Living Lab' public science centre for Anglia Ruskin University.
Healthcare
Project wins included a £35m theatre and ward expansion and refurbishment at
Harrogate District Hospital; a £32m expansion to create a new 48-bed ward
block and imaging facility at Milton Keynes University Hospital; a £9m
extension to The Grange University Hospital's emergency department in Cwmbran;
and a £9m redevelopment of Bradford Royal Infirmary's maternity department.
During the year, work progressed at the £24m Alder Hey Hospital surgical
neonatal intensive care unit, the first specialist facility of its kind in the
UK; a new £14m community diagnostic centre at St Margaret's Hospital, Epping
for The Princess Alexandra Hospital NHS Trust; and multiple upgrades for Mid
and South Essex Foundation Trust's Broomfield Hospital in Chelmsford.
Elsewhere, work completed on the Norfolk and Norwich University Hospital's
£25m, community diagnostic and assessment centre.
Other Sectors
In other sectors, project wins included the £86m Devonshire Gardens mixed
use, redevelopment scheme for Railpen in Cambridge; a £27m life sciences
development in King's Cross; a £32m redevelopment and upgrade of a household
waste recycling centre and waste transfer station in Aldridge, West Midlands
for Walsall Metropolitan Council; a £32m major public realm development for
Plymouth City Council; a £10.5m upgrade to Ashford Fire Station in Kent; and
the £10m redevelopment of Reading Central Library. The £43m residential
project in New Bailey Salford for English Cities Fund, being carried out in
collaboration with Mixed Use Partnerships, made good progress in the period,
while other completions included five fire station projects across the UK,
including the new £15.4m Cosham Fire Station in Portsmouth.
Divisional outlook for Construction
The increased medium-term target for Construction is to deliver an operating
margin between 3.0% and 3.5% per annum with an annual revenue target in excess
of £1bn.
For 2025, based upon its secured order book together with the timing of
projects at preferred bidder stage expected to convert into contract and
commence in the year, its operating margin is expected to be towards the lower
end of the revised range and revenues expected to slightly exceed £1bn.
Property Services
FY 2024 FY 2023 Change
£m £m
Revenue 223 185 +21%
Operating (loss)(1) (17.8) (16.8) -6.0%
Operating margin(1) -8.0% -9.1% +110bps
1 Before intangible amortisation of £0.5m (FY 2023: £2.9m)
In 2023 the division reported an operating loss due to cost pressures and
operational challenges, and initiated a business remediation programme, which
concluded at the end of 2024. Under the leadership of the new management team,
the division successfully negotiated both the resetting of pricing levels and
KPI levels for a number of contracts, together with early releases from a
small number of underperforming contracts by way of mutual agreement. The
latter resulted in exit costs recorded in the first half of 2024.
Elsewhere the division carried out a review of existing contract assets, with
impairments recognised, while also concluding its operational restructuring
efforts across a number of its key contracts, to achieve efficiencies with
improvement plans now implemented.
The impact of the above events has resulted in an operating loss(1) in the
year of £17.8m (FY 2023: loss of £16.8m). While revenue increased by 21% to
£223m (FY 2023: £185m), the growth is driven by increased volumes of planned
repair works for existing clients seeking to improve the condition of their
residential assets. While the remediation programme was underway during the
year, only a small number of less material contracts were bid for.
At the year end, the secured order book was £887m, down 40% from the prior
year (FY 2023:
£1,478m), as revenues were removed for the unexpired term for those contracts
for which the division had negotiated an early release from. Of the order book
remaining, 78% is for 2026 and beyond.
During the year, the division secured a two-year contract with The Guinness
Partnership to deliver planned works in the London and South regions and was
awarded a place on the Pagabo facilities management framework, which will
support further expansion into this market. The division continues to work
with four existing contracts to deliver retrofit and decarbonisation works
under the Department for Energy Security and Net Zero's (DESNZ) Social Housing
Decarbonisation Fund Wave 2.1, with a combined two-year value of £31m.
Divisional outlook for Property Services
The medium-term target for Property Services is to deliver £7.5m operating
profit per annum.
Following the successful completion of the remediation programme, the division
is now positioned to return to a modest profit in 2025.
Infrastructure(1)
FY 2024 FY 2023 Change
£m £m
Revenue 1,047 887 +18%
Operating profit 38.5 38.5 -
Operating margin 3.7% 4.3% - 60bps
Infrastructure delivered another strong performance in the year, with both
profits and margin influenced by the timing and nature of projects delivered
through its frameworks, while still ensuring a high-quality operational
delivery across the business. Revenue increased by 18% to £1,047m (FY 2023:
£887m) with operating profit of £38.5m, in line with the prior year (FY
2023: £38.5m) supported by an operating margin of 3.7% in the middle of its
targeted range of 3.5% - 4.0% (FY 2023: 4.3%).
Infrastructure's order book of £1,883m was 11% up compared to the prior year
(FY 2023: £1,689m). The order book continues to remain long term in nature,
with around 98% derived through existing frameworks. The division continues to
remain focused on the key sectors of energy, nuclear, rail, highways, water
and defence, with visible opportunities in defence. Its markets have
significant long- term committed investment programmes in place, largely
driven by government and regulatory objectives. The division continues to see
its clients awarding large long-term frameworks with its delivery partners,
awarding projects focused on delivering the strategic outcomes over the term
of the framework.
Energy
The division secured a position on the £9bn Great Grid Partnership, as part
of the Accelerated Strategic Transmission Investment (ASTI) projects. The
Great Grid Partnership will build new electricity network infrastructure
required to reduce the UK's reliance on fossil fuels by connecting 50GW of
offshore wind by 2030. In Scotland, the division secured a position as a
strategic partner on ScottishPower's £5.4bn programme of contracts to
deliver the biggest rewiring of the electricity grid since its inception. The
partnership will run for an initial five years, with the option to extend up
to 10 years. Elsewhere, work continued at Dinorwig in Wales, and commenced at
ZA, in Hertfordshire as part of the RIIO T2 electricity construction EPC
(Engineer, Procure and Construct) framework for National Grid. Work also
continued in Shetland for Scottish and Southern Electricity Networks (SSEN),
which includes an 11km, 132KV twin circuit underground cable project and
construction of Gremista substation; this project will play a key role in the
connection of the Viking wind farm, capable of generating 500MW.
Nuclear
Decommissioning works continued for Sellafield on the Infrastructure Strategic
Alliance and the
£1.6bn Programme and Project Partners contract. In addition, work progressed
on the 10-year Clyde Commercial Framework for the Defence Infrastructure
Organisation, while works completed on the D58 facility for BAE Systems in the
year.
Rail
The division secured a position on the CP7 Eastern Framework for Network Rail,
a £3.5bn framework which lasts through to 2029, adding to its position on the
£2bn CP7 Wales and Western Framework secured in 2023. Announced late in 2024,
the division was appointed by Network Rail as delivery partner for the
overhaul of the Liverpool Street station roof at £22m. Work continued on the
remodelling of Colindale station for Transport for London, including a new
ticket hall and step-free access. Elsewhere, works continued to progress on
the extension to Beckton Depot and a project to upgrade Surrey Quays station,
both for Transport for London as part of its London Rail Infrastructure
Improvement Framework.
Several schemes for Network Rail continued to progress at pace, including the
Bangor to Colwyn Bay line, as part of the CP6 Wales and Western framework, the
lift scheme at Liverpool Central station as part of the Merseyrail framework,
and the Northumberland Line extension project.
Highways
The division continued to deliver the £87m, M27 project as part of the
National Highways' Concrete Roads programme to replace the concrete surface of
motorways on major A roads in England, while work completed on the A11 and A12
schemes, part of the same framework, improving traffic flow and safety for
local commuters.
Water
Work continued on various environmental improvement projects and wastewater
treatment upgrades as part of the long-term AMP7 framework with Welsh Water,
and the division's 30-year plus relationship with Welsh Water continues
following its appointment on the AMP8 framework. Adding to its water
portfolio, the division also secured a position on AMP8 with Wessex Water, as
a capital delivery partner over a five-year period. In addition, civil
engineering works continued to make good progress on the west section of the
Thames Tideway 'super sewer' project to help prevent pollution in the River
Thames, with the project on target to complete in 2025.
Design
In the BakerHicks design business, HMP Highland received the final go-ahead
for construction. Having been involved from the feasibility design stage,
BakerHicks will continue to deliver multi-disciplinary services, including
architectural, building information modelling (BIM), civil and structural,
mechanical and electrical, and principal designer services. The new facility
is set to be the first net zero prison in Scotland, with improved education
and health facilities to help with rehabilitation. Work continued during the
year on an innovative feed additive facility for East Dunbartonshire Council
in Dalry, North Ayrshire to reduce methane emissions from cattle.
Divisional outlook for Infrastructure
The increased medium-term target for Infrastructure is to deliver an operating
margin between 3.75% and 4.25% per annum, with an annual revenue target in
excess of £1bn.
For the full year, based upon the timing of projects and the projected type of
work, its operating margin is expected to be in the middle of the revised
range, while revenues are expected to be closer to £1bn. This is underpinned
by their continued focus on long-term client relationships, disciplined
contract selectivity, risk management and project delivery.
1 Design results are reported within Infrastructure
1. Net finance income.Net finance income was £9.9m, an increase of £6.6m
compared to FY 2023.
FY 2024 FY 2023 Change
£m £m £m
Interest income on bank deposits 17.4 10.8 +6.6
Interest receivable from joint ventures 0.8 - +0.8
Loan arrangement and commitment fees (2.2) (2.0) -0.2
Interest expense on lease liabilities (3.8) (2.5) -1.3
Other (2.3) (3.0) +0.7
Total net finance income 9.9 3.3 +6.6
2. Tax.A reported tax charge of £40.2m is shown for the year (FY 2023:
£26.2m). This equates to an effective tax rate of 23.4% on profit before tax.
The adjusted tax charge is £42.0m (FY 2023: £29.9m).
FY 2024 FY 2023
£m £m
Profit before tax 171.9 143.9
Less: share of underlying(1) net profit of joint ventures (4.5) (14.1)
Profit before tax excluding joint ventures 167.4 129.8
Statutory tax rate 25% 23.5%
Current tax charge at statutory rate (41.9) (30.5)
Tax on underlying(1) joint venture profits2 (1.5) (2.6)
Tax on exceptional items 1.6 1.5
Other non-deductible expenses 0.2 0.7
Prior year adjustments 1.6 4.2
Other adjustments (0.2) 0.5
Tax charge as reported (40.2) (26.2)
Tax on amortisation (0.1) (0.7)
Tax on exceptional items (1.7) (3.0)
Adjusted tax charge (42.0) (29.9)
1 Underlying net profit of joint ventures excludes the exceptional building
safety charge of £1.4m related to joint ventures (FY 2023: credit of £4.1m).
2 Certain of the Group's joint ventures are partnerships for which profits
are taxed within the Group rather than within the joint venture.
3. Net working capital.'Net Working Capital' is defined as 'Inventories plus
Trade & Other Receivables (including Contract Assets), less Trade &
Other Payables (including Contract Liabilities)' adjusted as below.
FY 2024 FY 2023 Change
£m
£m £m
Inventories 476.0 344.7 +131.3
Trade & Other Receivables(1) 664.2 713.5 -49.3
Trade & Other Payables(2) (1,256.8) (1,210.7) -46.1
Net working capital (116.6) (152.5) +35.9
1 Adjusted to exclude capitalised arrangement fees and accrued interest
receivable of £2.3m (FY 2023: £2.2m).
2 Adjusted to exclude accrued interest payable of £0.5m (FY 2023: £0.3m).
4. Cash flow. Operating cash flow was an inflow of £134.8m (FY 2023: inflow
of £189.0m). Free cash flow was an inflow of £107.0m (FY 2023: inflow of
£171.4m).
FY 2024 FY 2023
£m £m
Operating profit - adjusted 162.6 141.3
Depreciation 33.1 26.8
Share option expense 10.5 6.6
Reversal of impairment of joint venture (5.1) -
Share of underlying(1) net profit of joint ventures (4.6) (14.1)
Other operating items (2) 10.0 0.9
Change in working capital(3&4) (33.8) 59.7
Net capital expenditure (including repayment of finance leases) (42.1) (33.8)
Dividends and interest received from joint ventures 4.2 1.6
Operating cash flow 134.8 189.0
Income taxes paid (43.9) (25.2)
Net interest received (non-joint venture) 16.1 7.6
Free cash flow 107.0 171.4
1 'Underlying net profit of joint ventures' excludes the exceptional building
safety charge of £1.4m related to joint ventures (FY 2023: credit of £4.1m).
2 'Other operating items' includes increase on building safety receivable
(£9.3m) and increase in provisions (£8.7m) less building safety provision
movements (£7.3m) and a gain on disposal of PPE (£0.7m).
3 'Change in working capital' excludes movement on building safety receivable
(£9.3m).
4 Includes net investment in Partnership Housing activities of £100.4m.
5. Net cash.Net cash at 31 December 2024 was £492.4m, as a result of a net
cash inflow of £31.7m from 1 January 2024, with movements summarised as:
£m
Net cash at 1 January 2024 460.7
Free cash flow (as above) 107.0
Dividends (56.1)
Other(1) (19.2)
Net cash at 31 December 2024 492.4
1 'Other' includes the purchase of shares in the Company by the employee
benefit trust (£47.2m) and net capital advances to JVs (£1.2m) less proceeds
from the exercise of share options (£19.5m) and proceeds from the issue of
new shares (£9.7m).
6. Capital employed by strategic activity.An analysis of capital employed in
the Partnershipactivities shows an increase of £99.0m since the prior period,
split as follows:
Capital employed(1,2) in Partnerships FY 2024 FY 2023 Change
£m £m £m
Partnership Housing 318.7 234.4 +84.3
Mixed Use Partnerships 94.4 79.7 +14.7
413.1 314.1 +99.0
1 Total assets (excluding goodwill, intangibles, inter-company financing
and cash) less total liabilities (excluding corporation tax, deferred tax,
inter-company financing and overdrafts).
2 Adjusted to exclude building safety receivables and provisions.
An analysis of the capital employed in Construction Servicesand Fit Outshows a
decrease of £56.6m since the prior period, split as follows:
Capital employed(1,2) in Construction Services and Fit Out FY 2024 FY 2023 Change
£m £m £m
Construction (250.1) (216.5) -33.6
Infrastructure (80.6) (87.0) +6.4
Fit Out (96.6) (105.6) +9.0
Property Services 22.4 60.8 -38.4
(404.9) (348.3) -56.6
7. Exceptional Building Safety charge. The total exceptional building safety
charge of £0.1m arose as a result of a better estimate of expected costs and
recoveries. This includes a charge of £1.4m that has been recognised in
respect of the Group's share of constructive and legal obligations to
remediate legacy building safety issues within JVs, and this has been
recognised within the Group's share of net profit of joint ventures. A net
credit of £1.3m has been recognised in cost of sales.
FY 2024 FY 2023
£m £m
Net additions on building safety provisions (8.0) (18.4)
Insurance and recoveries recognised in receivables 9.3 16.5
Exceptional building safety credit/(charge) within cost of sales 1.3 (1.9)
Exceptional building safety (charge)/credit within joint ventures (1.4) 4.1
Total exceptional building safety (charge)/credit (0.1) 2.2
8. Dividends.The Board of Directors has proposed a final dividend of 90.0p per
share, an increase of 15% on the prior year final dividend (FY 2023: 78.0p).
This will be paid on 15 May 2025 to shareholders on the register on 25 April
2025. The ex-dividend date will be 24 April 2025.
9. Principal risks and uncertainties.The Board continues to take a proactive
approach to recognising and mitigating risk with the aim of protecting and
safeguarding the interests of the Group and its shareholders in the changing
environment in which it operates.
Details of the principal risks facing the Group and mitigating actions will be
included in the 2024 Annual Report which will be published on 20 March 2025.
The following are still considered to be relevant risks and uncertainties for
the Group at this time and are summarised below (in no order of magnitude):
Economic change and uncertainty- UK construction continues to benefit from
sustained government investment commitments. This continues to support the
Group's market sectors which remain structurally secure particularly in
housing, mixed use schemes, construction and infrastructure (primary areas in
the UK targeted for growth). In addition, the Group's diversity of offering
and strong balance sheet protects the business from cyclical changes in
individual markets.
Exposure to UK residential market - The Group's long-term public sector
partnerships models, Government commitments and the UKs Affordable Housing
need complement its product position. Prior headwinds have slightly eased
during the reporting period and there are some signs of recovery in the
market, although interest rate trajectory will likely impact scale and timing.
Planning constraints continue to contribute to reduced sales volumes and in
Regeneration, cost inflation on some schemes is impacting viability in turn
slowing down conversion.
Health and safety incident- Failure to protect the health, safety and
wellbeing of its key stakeholders could damage the Group's reputation as a
responsible employer and affect its ability to secure future work.
Talent attraction and retention- Talented people are needed to provide
excellence in project delivery and customer service. Skills shortages in the
construction industry will remain an issue for the foreseeable future.
Partner insolvency or adverse change of behaviour- There is a heightened risk
of supply chain partners trading with strained finances as a result of prior
macro challenges and more recent main contractor demise. Whilst such failures
have been limited to date, our teams are acutely aware and have increased due
diligence activities as well as providing help and assistance where
appropriate. In some
limited circumstances we have supported key partners with more favourable
terms to assist their cash flow while obtaining assurance on production
progress and forms of guarantee.
Inadequate funding - A lack of liquidity could impact our ability to continue
to trade or restrict our ability to achieve market growth or invest in
regeneration schemes.
Mismanagement of working capital and investments - Poor management of working
capital and investments leads to insufficient liquidity and funding problems.
Poor contract selectivity and/or bidding - The quality of the Group's public
and regulated industry sectors should safeguard future performance, allowing
the Group to continue selecting the right projects and in sectors where it has
proven capability. Post inflationary customer budgets are now more realistic
but, in some instances, do result in preconstruction periods taking longer.
Poor project delivery -Improved inflationary backdrop is allowing bids to
include sensible contingency allowances. In addition, the Group's longstanding
supply chain relationships and focus on customer experience continue to
mitigate any significant issues and disputes should they arise.
Cyber activity/ failure to invest in IT - Cybercrime continues its prevalence
and to counter this the Group's investment in IT continues to increase in
order to meet the future needs of the business in terms of expected growth,
security, and innovation, and enables its long-term success. It is also
essential to avoid reputational and operational impacts and loss of data that
could result in significant fines and/or prosecution.
Climate change - Failure to protect the environment in which we work by
reducing carbon emissions and waste and to fully consider potential
environmental risks on projects could cause delays to projects and damage the
Group's reputation.
Cautionary forward-looking statement
These results contain forward-looking statements based on current expectations
and assumptions. Various known and unknown risks, uncertainties and other
factors may cause actual results to differ from any future results or
developments expressed or implied from the forward-looking statements. Each
forward-looking statement speaks only as of the date of this document. The
Group accepts no obligation to publicly revise or update these forward-looking
statements or adjust them to future events or developments, whether as a
result of new information, future events or otherwise, except to the extent
legally required.
Consolidated income statement
For the year ended 31 December 2024
2024 2023
Notes £m £m
Revenue 4,546.2 4,117.7
Cost of sales (4,016.3) (3,670.1)
Gross profit 529.9 447.6
Analysed as:
Adjusted Gross profit 528.6 449.5
Exceptional building safety items 3 1.3 (1.9)
Impairment loss on contract assets (21.0) (2.8)
Administrative expenses (360.0) (324.0)
Share of net profit of joint ventures 3.2 18.2
Other operating income 9.9 1.6
Operating profit 162.0 140.6
Analysed as:
Adjusted Operating profit 162.6 141.3
Exceptional building safety items 3 (0.1) 2.2
Amortisation of intangible assets (0.5) (2.9)
Finance income 18.2 10.8
Finance expense (8.3) (7.5)
Profit before tax 171.9 143.9
Analysed as:
Adjusted Profit before tax 172.5 144.6
Exceptional building safety items 3 (0.1) 2.2
Amortisation of intangible assets (0.5) (2.9)
Tax 4 (40.2) (26.2)
Profit for the year 131.7 117.7
Attributable to:
Owners of the Company 131.7 117.7
Earnings per share
Basic 6 281.4p 254.2p
Diluted 6 271.5p 250.4p
There were no discontinued operations in either the current or comparative
years.
Consolidated statement of comprehensive income
For the year ended 31 December 2024
2024 2023
£m £m
Profit for the year 131.7 117.7
Items that may be reclassified subsequently to profit or loss:
Foreign exchange movement on translation of overseas operations (0.3) 0.2
Net (loss)/gain arising on revaluation of cash flow hedges (0.1) -
(0.4) 0.2
Other comprehensive (expense)/income (0.4) 0.2
Total comprehensive income 131.3 117.9
Attributable to:
Owners of the Company 131.3 117.9
Consolidated statement of financial position
At 31 December 2024
2024 2023
Notes £m £m
Assets
Goodwill and other intangible assets 218.1 218.6
Property, plant and equipment 95.1 86.0
Investment property 0.6 0.8
Investments in joint ventures 7 111.9 106.6
Non-current assets 425.7 412.0
Inventories 476.0 344.7
Contract assets 224.6 270.6
Trade and other receivables 8 453.5 461.6
Current tax assets 6.6 -
Cash and cash equivalents 12 544.2 541.3
Current assets 1,704.9 1,618.2
Total assets 2,130.6 2,030.2
Liabilities
Contract liabilities (110.4) (95.8)
Trade and other payables 9 (1,130.3) (1,087.0)
Current tax liabilities - (1.9)
Lease liabilities (22.6) (19.1)
Borrowings 12 (51.8) (80.6)
Provisions 10 (85.1) (76.7)
Current liabilities (1,400.2) (1,361.1)
Net current assets 304.7 257.1
Trade and other payables 9 (16.6) (28.2)
Lease liabilities (44.1) (44.7)
Deferred tax liabilities (2.1) (8.7)
Provisions 10 (20.4) (19.4)
Non-current liabilities (83.2) (101.0)
Total liabilities (1,483.4) (1,462.1)
Net assets 647.2 568.1
Equity
Share capital 2.4 2.4
Share premium account 65.7 56.0
Other reserves 0.9 1.3
Retained earnings 578.2 508.4
Equity attributable to owners of the Company 647.2 568.1
Total equity 647.2 568.1
Consolidated cash flow statement
For the year ended 31 December 2024
2024 2023
Notes £m £m
Operating activities
Operating profit 162.0 140.6
Adjusted for:
Exceptional building safety items 2.1 13.7
Amortisation of intangible assets 0.5 2.9
Underlying share of net profit of equity accounted joint ventures (4.6) (14.1)
Depreciation 33.1 26.8
Share-based payments 10.5 6.6
Gain on disposal of property, plant and equipment (0.7) (0.1)
Reversal of impairment on investments in joint ventures (5.1) -
Repayment of shared equity loan receivables - 0.4
Increase in provisions excluding exceptional building safety items 10 8.7 1.4
Additional pension contributions - (0.2)
Operating cash inflow before movements in working capital 206.5 178.0
Increase in inventories (131.3) (10.8)
Decrease in contract assets 46.0 24.0
Decrease/(increase) in receivables 7.8 (107.8)
Increase in contract liabilities 14.6 21.6
Increase in payables 29.1 116.2
Movements in working capital (33.8) 43.2
Cash inflow from operations 172.7 221.2
Income taxes paid (43.9) (25.2)
Net cash inflow from operating activities 128.8 196.0
Investing activities
Interest received 18.0 10.0
Dividends from joint ventures 4.2 1.6
Proceeds on disposal of property, plant and equipment 1.9 2.0
Purchases of property, plant and equipment (18.2) (14.3)
Purchases of intangible fixed assets - (0.3)
Capital advances to joint ventures (29.1) (44.2)
Capital repayments from joint ventures 27.9 34.2
Net cash inflow/(outflow) from investing activities 4.7 (11.0)
Financing activities
Interest paid (1.9) (2.4)
Dividends paid 5 (56.1) (48.1)
Repayments of lease liabilities (25.8) (21.2)
Proceeds on issue of share capital 9.7 0.1
Payments by the Trust to acquire shares in the Company (47.2) (11.3)
Proceeds on exercise of share options 19.5 4.0
Net cash outflow from financing activities (101.8) (78.9)
Net increase in cash and cash equivalents 31.7 106.1
Cash and cash equivalents at the beginning of the year 460.7 354.6
Cash and cash equivalents at the end of the year 12 492.4 460.7
Cash and cash equivalents presented in the Consolidated cash flow statement
include bank overdrafts. See note 12 for a reconciliation to Cash and cash
equivalents presented in the Consolidated statement of financial position.
Consolidated statement of changes in equity
For the year ended 31 December 2024
Share premium account
Share capital Other reserves Retained earnings Total equity
£m £m £m £m £m
1 January 2023 2.4 55.9 1.1 436.8 496.2
Profit for the year - - - 117.7 117.7
Other comprehensive income - - 0.2 - 0.2
Total comprehensive income - - 0.2 117.7 117.9
Share-based payments - - - 6.6 6.6
Tax relating to share-based payments(1) - - - 2.7 2.7
Issue of shares at a premium - 0.1 - - 0.1
Purchase of shares in the Company by the Trust - - - (11.3) (11.3)
Exercise of share options - - - 4.0 4.0
Dividends paid - - - (48.1) (48.1)
1 January 2024 2.4 56.0 1.3 508.4 568.1
Profit for the year - - - 131.7 131.7
Other comprehensive expense - - (0.4) - (0.4)
Total comprehensive (expense)/income - - (0.4) 131.7 131.3
Share-based payments - - - 10.5 10.5
Tax relating to share-based payments(1) - - - 11.4 11.4
Issue of shares at a premium - 9.7 - - 9.7
Purchase of shares in the Company by the Trust - - - (47.2) (47.2)
Exercise of share options - - - 19.5 19.5
Dividends paid - - - (56.1) (56.1)
31 December 2024 2.4 65.7 0.9 578.2 647.2
(1) Tax relating to share-based payments includes a current tax credit of
£5.8m (2023: £nil) and a deferred tax credit of £5.6m (2023: credit of
£2.7m).
Notes to the consolidated financial statements
For the year ended 31 December 2024
1 Basis of preparation
General information
The financial information for the year ended 31 December 2024 set out above
does not constitute the Company's statutory accounts as defined by section 434
of the Companies Act 2006. A copy of the statutory accounts for 2023 was
delivered to the Registrar of Companies and those for 2024 will be delivered
following the Company's Annual General Meeting. The auditor reported on those
accounts: their report was unqualified, did not draw attention to any matters
by way of emphasis without qualifying their report and did not contain a
statement under s498(2) or (3) of the Companies Act 2006.
This preliminary announcement has been prepared solely to assist shareholders
in assessing the strategies of the Board and in gauging their potential to
succeed. It should not be relied on by any other party or for other purposes.
Forward looking statements have been made by the directors in good faith based
on the information available to them up to the time of their approval of this
preliminary announcement. Such statements should be treated with caution due
to the inherent uncertainties, including both economic and business factors,
underlying any such forward looking information. Actual future results may
differ materially from those expressed in or implied by these statements.
While the financial information included in this preliminary announcement was
prepared in accordance with the recognition and measurement criteria of UK
adopted International Accounting Standards ('IAS') and International Financial
Reporting Standards ('IFRS'), this announcement does not itself contain
sufficient information to comply with IFRS.
The consolidated financial statements will be available in March 2025. A copy
will be delivered to the Registrar of Companies following the Company's Annual
General Meeting.
Further information on the Group, including the slide presentation document
which will be presented at the Group's results meeting on 26 February 2025,
can be found on the Group's corporate website www.morgansindall.com.
(http://www.morgansindall.com/)
Going concern
In determining the appropriate basis of preparation of the financial
statements, the directors are required to consider whether the Group and
Company can continue in operational existence during the going concern period,
which the directors have determined to be until 28 February 2026.
As at 31 December 2024, the Group held cash of £544.2m, including £23.1m
(2023: £26.1m) which is the Group's share of cash held within jointly
controlled operations, and total overdrafts repayable on demand of £51.8m
(together net cash of £492.4m). Should further funding be required, the Group
has significant committed financial resources available including unutilised
bank facilities of £180m (2023: £180m), of which £165m matures in October
2027 and £15m matures in June 2027. The Group's secured order book at 31
December 2024 is £11.4bn (2023: £8.9bn), of which £4.1bn relates to the 12
months ended 31 December 2025.
The directors have reviewed the Group's forecasts and projections for the
going concern period, including sensitivity analysis to assess the Group's
resilience to the potential financial impact on the Group of any plausible
losses of revenue or operating profit which could arise from one of the
principal risks to the business occurring. The analysis also includes a
reasonable worst-case scenario in which the Group's principal risks manifest
in aggregate to a severe but plausible level involving the aggregation of the
impacts of a number of these risks. The modelling showed that the Group would
remain profitable throughout the going concern period and there is
considerable headroom above lending facilities such that there would be no
expected requirement for the Group to utilise the bank facility, which
underpins the going concern assumption on which these financial statements
have been prepared. As part of the sensitivity analysis the directors also
modelled a scenario that stress tests the Group's forecasts and projections,
to determine the scenario in which the headroom above the committed bank
facility would be exceeded. This model showed that the Group's operating
profit would need to deteriorate substantially for the headroom to exceed the
committed bank facility. The directors consider there is no plausible scenario
where cash inflows would deteriorate this significantly. However, as part of
their analysis the Board also considered further mitigating actions at their
discretion, such as a reduction in investments in working capital, to improve
the position identified by the reasonable worst-case scenario. In all
scenarios, including the reasonable worst case, the Group is able to comply
with its financial covenants, operate within its current facilities, and meet
its liabilities as they fall due.
Accordingly, the directors consider there to be no material uncertainties that
may cast significant doubt on the Group's ability to continue to operate as a
going concern. They have formed a judgement that there is a reasonable
expectation that the Group and Company have adequate resources to continue in
operational existence for the going concern period which they determine to be
until 28 February 2026. For this reason, they continue to adopt the going
concern basis in the preparation of these financial statements. The period
until 28 February 2026 has been assessed as appropriate following
consideration of the budgeting cycles and typical contract lengths undertaken
across the Group.
Changes in accounting policies
There have been no significant changes to accounting policies, presentation or
methods of preparation since the Group's latest annual audited financial
statements for the year ended 31 December 2023.
2 Business segments
For management purposes, the Group is organised into six operating
divisions: Partnership Housing, Mixed Use Partnerships, Fit Out, Construction,
Infrastructure and Property Services, and this is the structure of segment
information reviewed by the Chief Operating Decision Maker (CODM). The CODM is
determined to be the Board of directors and reporting provided to the Board is
in line with these six divisions, which have been considered to be the Group's
operating segments.
The six operating divisions' activities are as follows:
· Partnership Housing: Lovell Partnerships Limited is focused on
working in partnerships with local authorities and housing associations.
Activities include mixed-tenure developments, building and developing homes
for open market sales and for social/affordable rent, design and build house
contracting and planned maintenance and refurbishment.
· Mixed Use Partnerships: Muse Places Limited is focused on transforming
the urban landscape through partnership working and the development of
multi-phase sites and mixed-use regeneration.
· Fit Out: Overbury plc specialises in fit out and refurbishment in
commercial, central and local government offices and further education. Morgan
Lovell plc provides office interior design and build services direct to
occupiers.
· Construction: Morgan Sindall Construction focuses on education,
healthcare, commercial, industrial, leisure and retail markets.
· Infrastructure: Morgan Sindall Infrastructure focuses on energy,
nuclear, rail, highways, water and defence markets. Infrastructure also
includes the BakerHicks design activities based out of the UK and Switzerland.
· Property Services: Morgan Sindall Property Services Limited
provides response and planned maintenance for social housing and the wider
public sector.
Group activities represent costs and income arising from corporate activities
which cannot be meaningfully allocated to the operating segments. These
include the costs of the Group Board, treasury management, corporate tax
coordination, Group finance and internal audit, insurance management, company
secretarial services, Group general counsel services, information technology
services, finance income and finance expense.
Notes to the consolidated financial statements
For the year ended 31 December 2024
The Group reports its segmental information as presented below:
Year ended 31 December 2024
Partnership Mixed Use Partnerships Property Services Group Activities
Housing Fit Out Construction Infrastructure Eliminations Total
£m £m £m £m £m £m £m £m £m
External revenue 855.9 90.5 1,299.2 1,043.3 1,034.1 223.2 - - 4,546.2
Inter-segment revenue
5.3 - 1.1 0.8 12.9 - - (20.1) -
Total revenue 861.2 90.5 1,300.3 1,044.1 1,047.0 223.2 - (20.1) 4,546.2
Impairment loss on contract assets
- - - - - (21.0) - - (21.0)
Adjusted operating profit/(loss) (note
15)
36.1 1.5 99.0 30.9 38.5 (17.8) (25.6) - 162.6
Amortisation of intangible assets
- - - - - (0.5) - - (0.5)
Exceptional operating items
(2.7) 5.9 - 0.1 - (3.4) - - (0.1)
Operating profit/(loss)
33.4 7.4 99.0 31.0 38.5 (21.7) (25.6) - 162.0
Finance income 18.2
Finance expense (8.3)
Profit before tax 171.9
Other information:
Depreciation (2.6) (0.8) (3.0) (2.5) (18.9) (4.2) (1.1) - (33.1)
Average number of employees
1,193 108 1,121 1,533 3,080 1,097 110 - 8,242
Notes to the consolidated financial statements
For the year ended 31 December 2024
Year ended 31 December 2023
Partnership Mixed Use Partnerships Property Services Group Activities
Housing Fit Out Construction Infrastructure Eliminations Total
£m £m £m £m £m £m £m £m £m
External revenue 821.2 185.3 1,104.8 945.2 876.0 185.2 - - 4,117.7
Inter-segment revenue 16.3 - 0.4 21.4 10.7 - - (48.8) -
Total revenue 837.5 185.3 1,105.2 966.6 886.7 185.2 - (48.8) 4,117.7
Impairment loss on contract assets
- - - - - (2.8) - - (2.8)
Adjusted operating profit/(loss) (note 15)
30.5 14.8 71.8 25.9 38.5 (16.8) (23.4) - 141.3
Amortisation of intangible assets
- - - - - (2.9) - - (2.9)
Exceptional operating items
- 13.7 - (11.5) - - - - 2.2
Operating profit/(loss) 30.5 28.5 71.8 14.4 38.5 (19.7) (23.4) - 140.6
Finance income 10.8
Finance expense (7.5)
Profit before tax 143.9
Other information:
Depreciation (2.4) (1.1) (2.9) (2.5) (14.6) (2.6) (0.7) - (26.8)
Average number of 1,131 97 1,031 1,430 2,788 1,105 107 - 7,689
employees
Segment assets and liabilities are not presented as these are not reported to
the CODM.
Notes to the consolidated financial statements
For the year ended 31 December 2024
3 Exceptional building safety items
2024 2023
Notes £m £m
Net additions on building safety provisions 10 (8.0) (18.4)
Insurance and recoveries recognised in receivables 9.3 16.5
Exceptional building safety credit/(charge) within cost of sales 1.3 (1.9)
Exceptional building safety (charge)/credit within joint ventures 7 (1.4) 4.1
Total exceptional building safety (charge)/credit (0.1) 2.2
During 2022 the Partnership Housing division signed the Developers Pledge (the
"Pledge") with the Ministry of Housing, Communities and Local Government
("MHCLG") (then the Department for Levelling Up, Housing and Communities
("DLUHC")) setting out the principles under which life critical fire-safety
issues on buildings that they have developed of 11 metres and above are to be
remediated. A letter was also received from DLUHC requesting information to
assess whether it may be appropriate for Mixed Use Partnerships to also commit
to the principles of the Pledge as part of its commitment to support the
remediation of historic cladding and fire safety defects over and above its
obligations under the new Building Safety Act. The Group subsequently signed
the Developer Remediation Contract in March 2023 on behalf of all of its
divisions.
An exceptional charge of £48.9m was recognised in 2022 due to the materiality
and irregular nature of creating provisions arising because of the Pledge.
In the current year, the legal and constructive obligations related to the
Pledge (including reimbursement of grants provided by the Building Safety
Fund), the Building Safety Act and associated fire safety regulations have
been reassessed based on further information. The overall movement in the
building safety items is a net charge of £0.1m and is shown separately as an
exceptional item consistent with prior year treatment.
Included in the £0.1m exceptional building safety charge (2023: £2.2m
credit) is a £1.4m charge (2023: £4.1m credit) that has been recognised in
respect of the Group's share of constructive and legal obligations to
remediate legacy building safety issues within joint ventures, and this has
been recognised within the Group's share of net profit of joint ventures. The
remaining net credit of £1.3m (2023: £1.9m charge) has been recognised in
cost of sales.
At the reporting date the Group had not yet made any reimbursements to the
Building Safety Fund for amounts previously granted and drawn on any of the
developments for which the Group has taken responsibility for. As notified by
the DLUHC, any repayments will only be requested upon final completion of all
the relevant works. On this basis, any repayments are only likely to commence
towards the middle of 2025 at the earliest.
Notes to the condensed consolidated financial statements
For the year ended 31 December 2024
4 Tax
Tax expense for the year
2024 2023
£m £m
Current tax:
Current year 40.1 16.9
Adjustment in respect of prior years 1.1 4.7
41.2 21.6
Deferred tax:
Current year 1.7 13.5
Adjustment in respect of prior years (2.7) (8.9)
(1.0) 4.6
Tax expense for the year 40.2 26.2
UK corporation tax is calculated at 25.0% (2023: 23.5%) of the estimated
taxable profit for the year. The table below reconciles the tax charge for the
year to tax at the UK statutory rate:
2024 2023
Notes £m £m
Profit before tax 171.9 143.9
Less: post-tax share of profits from joint ventures 7 (4.5) (14.1)
167.4 129.8
UK corporation tax rate 25.00% 23.50%
Income tax expense at UK corporation tax rate 41.9 30.5
Tax effect of:
Adjustments in respect of prior years:
Relating to exceptional Items - (2.0)
Other (1.6) (2.2)
Expenses for which no tax relief is recognised:
Proportion of exceptional items (1.6) (1.5)
Proportion of share-based payments (0.8) (1.3)
Other non-deductible expenses 0.6 0.6
Tax liability upon underlying joint venture profits(1) 1.5 2.6
Other 0.2 (0.5)
Tax expense for the year 40.2 26.2
(1) Certain of the Group's joint ventures are partnerships for which profits
are taxed within the Group rather than within the joint venture.
Notes to the condensed consolidated financial statements
For the year ended 31 December 2024
5 Dividends
Amounts recognised as distributions to equity holders in the year:
2024 2023
£m £m
Final dividend for the year ended 31 December 2023 of 78p per share 36.5 -
Final dividend for the year ended 31 December 2022 of 68p per share - 31.5
Interim dividend for the year ended 31 December 2024 of 41.5p per share 19.6 -
Interim dividend for the year ended 31 December 2023 of 36p per share - 16.6
56.1 48.1
The proposed final dividend for the year ended 31 December 2024 of 90.0p per
share is subject to approval by shareholders at the AGM and has not been
included as a liability in these financial statements.
6 Earnings per share
2024 2023
Notes £m £m
Profit attributable to the owners of the Company 131.7 117.7
Adjustments:
Exceptional building safety items 3 0.1 (2.2)
Amortisation of intangible assets 0.5 2.9
Tax relating to the above adjustments (1.8) (3.7)
Adjusted earnings 130.5 114.7
2024 2023
Number of Number of
shares (millions) shares (millions)
Basic weighted average number of ordinary shares 46.8 46.3
Dilutive effect of share options and conditional shares not vested
1.7 0.7
Diluted weighted average number of ordinary shares 48.5 47.0
Basic earnings per share 281.4p 254.2p
Diluted earnings per share 271.5p 250.4p
Adjusted earnings per share 278.8p 247.7p
Diluted adjusted earnings per share 269.1p 244.0p
The average market value of the Company's shares for the purpose of
calculating the dilutive effect of share options and long-term incentive plan
shares was based on quoted market prices for the year. The average share price
for the year was £28.05 (2023: £18.57).
A total of 1,806 share options that could potentially dilute earnings per
share in the future were excluded from the above calculations because they
were anti-dilutive at 31 December 2024 (2023: 2,535,887).
Notes to the condensed consolidated financial statements
For the year ended 31 December 2024
7 Investments in joint ventures
Investments in equity-accounted joint ventures are as follows:
2024 2023
Notes £m £m
1 January 106.6 84.0
Equity-accounted share of net profits:
Underlying share of net profits 4.6 14.1
Exceptional building safety (charge)/credit 3 (1.4) 4.1
3.2 18.2
Capital advances to joint ventures 29.1 44.2
Capital repayments by joint ventures (27.9) (34.2)
Non-cash impairment reversal - other operating income 5.1 -
Dividends received (4.2) (1.6)
Reclassification from funding obligations payable - (4.0)
End of period 111.9 106.6
During 2024, an exceptional building safety charge of £1.4m (2023: credit of
£4.1m) has been recognised in respect of the Group's share of constructive
and legal obligations to remediate legacy building safety issues within joint
ventures.
8 Trade and other receivables
2024 2023
Notes £m £m
Amounts falling due within one year
Trade receivables 300.2 320.9
Amounts owed by joint ventures 13 15.8 21.1
Prepayments 16.1 17.8
Insurance receivables 23.1 21.7
Other receivables 29.0 31.3
384.2 412.8
Amounts falling due after more than one year
Trade receivables 69.3 48.8
69.3 48.8
Trade and other receivables 453.5 461.6
The directors consider that the carrying amount of trade and other receivables
approximates to their fair value. Trade receivables are stated after
provisions for impairment losses of £1.3m (2023: £1.5m).
Retentions held by customers for contract work included within trade
receivables at 31 December 2024 were
£129.1m (2023: £105.3m). These will be collected in the normal operating
cycle of the company including £69.3m (2023: £48.8m) that fall due in more
than one year. The company manages the collection of retentions through its
post completion project monitoring procedures and ongoing contact with clients
to ensure that potential issues that could lead to the non-payment of
retentions are identified and addressed promptly.
The Group holds third party insurances that may mitigate the contract and
legal liabilities described in note 10 - Provisions and note 11 - Contingent
liabilities. Insurance receivables are recognised when reimbursement from
insurers is virtually certain.
Notes to the condensed consolidated financial statements
For the year ended 31 December 2024
9 Trade and other payables
2024 2023
Notes £m £m
Trade payables 211.1 202.2
Amounts owed to joint ventures 13 0.2 0.2
Other tax and social security 139.3 142.8
Accrued expenses 729.8 703.9
Deferred income 7.1 3.8
Land creditors 30.8 20.7
Other payables 12.0 13.4
Current 1,130.3 1,087.0
Land creditors 15.3 25.5
Other payables 1.3 2.7
Non-current 16.6 28.2
The directors consider that the carrying amount of trade payables approximates
to their fair value. No interest was incurred on outstanding balances.
Non-current other payables have been discounted by £1.3m (2023: £4.3m) to
reflect the time value of money.
Retentions withheld from subcontractors included in trade payables amount to
£95.5m (2023: £88.8m).
10 Provisions
Building Safety Self- insurance Contract &
legal Other Total
£m £m £m £m £m
1 January 2023 38.3 19.8 15.7 3.1 76.9
Reclassifications 0.3 - 3.7 - 4.0
Utilised (0.9) (1.3) (5.2) (0.3) (7.7)
Additions 26.3 3.9 10.6 0.8 41.6
Released (7.9) (3.2) (6.5) (1.1) (18.7)
1 January 2024 56.1 19.2 18.3 2.5 96.1
Utilised (7.3) (1.3) (7.6) - (16.2)
Additions 11.9 4.3 21.5 1.1 38.8
Released (3.9) (3.0) (5.2) (1.1) (13.2)
31 December 2024 56.8 19.2 27.0 2.5 105.5
Current 56.8 1.2 27.0 0.1 85.1
Non-current - 18.0 - 2.4 20.4
31 December 2024 56.8 19.2 27.0 2.5 105.5
Notes to the condensed consolidated financial statements
For the year ended 31 December 2024
Building Safety provisions
Management have reviewed legal and constructive obligations arising from the
Developers Pledge, the Building Safety Act and other associated fire
regulations. Where obligations exist, these have been evaluated for the likely
cost to address, including repayments of the Building Safety Fund. As a result
of this review process provisions are recognised, as reported in the table
above, excluding those recognised in joint ventures. The provision is expected
to be utilised in the next two years, with repayments to the Building Safety
Fund commencing in 2025.
See note 3 for further detail.
The Group also holds third party insurances that may mitigate the liabilities.
Third party insurance reimbursement in respect of these provisions has been
recognised as a separate asset, but only when the reimbursement is virtually
certain. See notes 3 and 8 for details of mitigating insurance receivables
recognised at the period end.
Note 11 includes details of contingent liabilities related to building safety.
Self-insurance provisions
Self-insurance provisions comprise the Group's self-insurance of certain risks
and include £11.5m (2023: £10.0m) held in the Group's captive insurance
company, Newman Insurance Company Limited (the ''Captive'').
The Group makes provisions in respect of specific types of claims incurred but
not reported (IBNR). The valuation of IBNR considers past claims experience
and the risk profile of the Group. These are reviewed periodically and are
intended to provide a best estimate of the most likely or expected outcome.
Contract and legal provisions
Contract and legal provisions include liabilities, loss provisions, defect and
warranty provisions on contracts that have reached completion.
The Group also holds third party insurances that may mitigate the liabilities.
Third party insurance reimbursement is recognised as a separate asset, but
only when the reimbursement is virtually certain. See note 8 for details of
mitigating insurance receivables recognised at the period end.
Note 11 includes details of contingent liabilities related to claims.
Other provisions
Other provisions include property dilapidations and other personnel related
provisions.
11 Contingent liabilities
Group banking facilities and surety bond facilities are supported by cross
guarantees given by the Company and participating companies in the Group.
There are contingent liabilities in respect of surety bond facilities,
guarantees and claims under contracting and other arrangements, including
joint arrangements and joint ventures entered into in the normal course of
business. As at 31 December 2024, contract bonds in issue under uncommitted
facilities covered £194.9m of contract commitments of the Group, of which
£19.4m relates to joint arrangements and £nil relates to joint ventures
(2023: £174.7m, of which £22.3m related to joint arrangements and £nil
related to joint ventures).
Contingent liabilities may also arise in respect of subcontractor and other
third party claims made against the Group, in the normal course of trading.
These claims can include those relating to cladding/legacy fire safety
matters, and defects. A provision for such claims is only recognised to the
extent that the Directors believe that the Group has a legal or constructive
obligation as a result of a past event and it is probable that an outflow of
economic benefit will be required to settle the obligation. However, such
claims are predominantly covered by the Group's insurance arrangements.
Recoveries under insurance arrangements are recognised as insurance
receivables when they are considered virtually certain.
Notes to the condensed consolidated financial statements
For the year ended 31 December 2024
Building Safety
At 31 December 2024, provisions in respect of liabilities arising from the
Developers Pledge, the Building Safety Act and other associated fire
regulations totalled £63.7m (2023: £61.6m), including those related to joint
ventures.
The ongoing legislative and regulatory changes in respect of legacy building
safety issues create uncertainty around the extent of remediation required for
legacy buildings, the liability for such remediation, recoveries from other
parties and the time to be considered. It is possible that as remediation work
proceeds, additional remedial works are required that may not have been
identified from the reviews and physical inspections undertaken to date. The
scope of buildings and remediation works to be considered may also change as
legislation and regulations continue to evolve.
Uncertainties also exist in respect of the timing and extent of expected
recoveries from other third parties involved in developments.
12 Net cash Net cash
Net cash is defined as cash and cash equivalents less borrowings and
non-recourse project financing as shown below:
2024 2023
£m £m
Cash and cash equivalents 544.2 541.3
Bank overdrafts presented as borrowings due within one year (51.8) (80.6)
Cash and cash equivalents reported in the Consolidated cash flow statement
492.4 460.7
Net cash 492.4 460.7
Included within cash and cash equivalents is £23.1m (2023: £26.1m) which is
the Group's share of cash held within jointly controlled operations.
Additionally there is £26.0m included within cash and cash equivalents that
is held for future payment to designated suppliers (2023: £13.9m). There is a
third party charge of £0.3m (2023: £0.5m) on a bank account in Switzerland
for the purpose of rental guarantees for offices occupied by BakerHicks.
The Group has £180m of committed loan facilities maturing more than one year
from the balance sheet date, of which £15m matures in June 2027 and £165m in
October 2027. These facilities are undrawn at 31 December 2024.
Average daily net cash during 2024 was £374.2m (2023: £281.7m). Average
daily net cash is defined as the average of the 366 (2023: 365) end-of-day
balances of the net cash (as defined above) over the course of a reporting
period. Management use this as a key metric in monitoring the performance of
the business.
13 Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. During the year, Group companies entered into transactions to provide
construction and property development services with related parties, all of
which were joint ventures, not members of the Group, amounting to £136.5m
(2023: £186.4m). At 31 December 2024, amounts owed to the Group by joint
ventures was £15.8m (2023: £21.1m) and amounts owed by the Group to joint
ventures was £0.2m (2023:
£0.2m) including joint venture funding obligations.
Notes to the condensed consolidated financial statements
For the year ended 31 December 2024
Remuneration of key management personnel
The Group considers key management personnel to be the members of the group
management team, and sets out below in aggregate, remuneration for each of the
categories specified in IAS 24 'Related Party Disclosures'.
2024 2023
£m £m
Short-term employee benefits 11.2 9.5
Post-employment benefits 0.2 0.1
Termination benefits - 0.3
Share-based payments 3.3 1.9
14.7 11.8
Directors' transactions
There have been no related party transactions with any director in the year or
in the subsequent period to 25 February 2025.
Directors' material interests in contracts with the Company
No director held any material interest in any contract with the Company or any
Group company in the year or in the subsequent period to 25 February 2025.
14 Subsequent events
There were no subsequent events that affected the financial statements of the
Group.
15 Adjusted Performance Measures
In addition to monitoring and reviewing the financial performance of the
operating segments and the Group on a statutory basis, management also use
adjusted performance measures which are also disclosed in the annual report.
These measures are not an alternative or substitute to statutory IFRS measures
but are seen by management as useful in assessing the performance of the
business on a comparable basis. These financial measures are also aligned to
the measures used internally to assess business performance in the Group's
budgeting process and when determining compensation. The Group also uses other
non-statutory measures which cannot be derived directly from the financial
statements. There are four alternative performance measures used by management
and disclosure in the annual report which are:
'Adjusted' In all cases the term
'adjusted' excludes the impact of intangible amortisation and exceptional
items. This is used to improve the comparability of information between
reporting periods to aid the use of the annual report in understanding the
activities across the Group's portfolio.
Below is a reconciliation between the reported Gross profit, Operating profit
and Profit before tax measures on a statutory basis and the adjustment made to
calculate Adjusted Gross profit, Adjusted Operating profit and Adjusted Profit
before tax.
Adjusted basic earnings per share and adjusted diluted earnings per share is
the statutory measure excluding the post-tax impact of intangible amortisation
and exceptional items, and the deferred tax charge arising due to changes in
UK corporation tax rates. See note 6 for a detailed reconciliation of the
adjusted EPS measures.
Notes to the condensed consolidated financial statements
For the year ended 31 December 2024
Gross profit Operating profit Profit before tax
2024 2023 2024 2023 2024 2023
Notes £m £m £m £m £m £m
Reported 529.9 447.6 162.0 140.6 171.9 143.9
Adjust for: exceptional building safety items(1) (1.3) 1.9 0.1 (2.2) 0.1 (2.2)
Adjust for: amortisation of intangible assets - - 0.5 2.9 0.5 2.9
Adjusted 528.6 449.5 162.6 141.3 172.5 144.6
Reported tax charge (40.2) (26.2)
Adjust for: tax relating to amortisation (0.1) (0.7)
Adjust for: tax relating to exceptional items (1.7) (3.0)
Adjusted profit after tax / earnings 6 130.5 114.7
(1) The exceptional building safety items includes amounts recognised in cost
of sales (£1.3m credit (2023: £1.9m charge)) and share of net
profit of joint ventures (£1.4m charge (2023: £4.1m credit)). See note 3.
'Net cash' Net cash is defined as
cash and cash equivalents less borrowings and non- recourse project financing.
Lease liabilities are not deducted from net cash. A reconciliation of this
number at the reporting date can be found in note 12. In addition, management
monitor and review average daily net cash as good discipline in managing
capital. Average daily net cash is defined as the average of the 366 (2023:
365) end of day balances of the net cash over the course of a reporting
period.
'Operating cash flow' Management use an adjusted
measure for operating cash flow as it
encompasses other cashflows that are key to the ongoing operations of the
Group such as repayments of lease liabilities, investment in property, plant
and equipment, investment in intangible assets, and returns from equity
accounted joint ventures. Operating cash flow can be derived from the cash
inflow from operations reported in the consolidated cash flow statement as
shown below.
Operating cash flow conversion is operating cash flow divided by adjusted
operating profit as defined above.
2024 2023
Notes £m £m
Cash inflow from operations - reported 172.7 221.2
Dividends from joint ventures 7 4.2 1.6
Proceeds on disposal of property, plant and equipment 1.9 2.0
Purchases of property, plant and equipment (18.2) (14.3)
Purchases of intangible fixed assets - (0.3)
Repayments of lease liabilities (25.8) (21.2)
Operating cash flow 134.8 189.0
'Return on capital employed' Management use return on capital employed
(ROCE) in assessing the
performance and efficient use of capital within the Regeneration activities.
ROCE is calculated as adjusted operating profit plus interest received from
joint ventures divided by average capital employed. Average capital employed
is the 12-month average of total assets (excluding goodwill, other intangible
assets and cash) less total liabilities (excluding corporation tax, deferred
tax, intercompany financing, overdrafts and exceptional building safety
items).
We confirm to the best of our knowledge:
1. The financial statements, prepared in accordance with the applicable
set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole;
2. The strategic report includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties they face; and
3. The annual report and financial statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
shareholders to assess the Company's performance, business model and strategy.
The contents of this announcement, including the responsibility statement
above, have been extracted from the annual report and accounts for the year
ended 31 December 2024 which will be available on publication at
http://www.morgansindall.com. (http://www.morgansindall.com/) Accordingly,
this responsibility statement makes reference to the financial statements of
the Company and the Group and to the relevant narrative appearing in that
annual report and accounts rather than the contents of this announcement.
This responsibility statement was approved by the Board on 25 February 2025
and is signed on its behalf by:
John Morgan Kelly Gangotra
Chief Executive Chief Financial Officer
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