LON:MGNS Morgan Sindall Group H1 2025 Earnings Report GBX 4,510 -80.00 (-1.74%) As of 08/1/2025 12:04 PM Eastern ProfileEarnings HistoryForecast Morgan Sindall Group EPS ResultsActual EPSGBX 153.10Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/AMorgan Sindall Group Revenue ResultsActual RevenueN/AExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/AMorgan Sindall Group Announcement DetailsQuarterH1 2025Date7/29/2025TimeBefore Market OpensConference Call DateTuesday, July 29, 2025Conference Call Time3:30AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckInterim ReportEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Morgan Sindall Group H1 2025 Earnings Call TranscriptProvided by QuartrJuly 29, 2025 ShareLink copied to clipboard.Key Takeaways Positive Sentiment: Revenues rose 7% to £2.4 bn and profit before tax and amortization jumped 37% to £95.9 m, driving an 80 bp margin improvement and a 20% interim dividend increase to £0.50 per share. Positive Sentiment: Secured order book climbed 39% to £12 bn and, including preferred bidder positions, the total pipeline reached £17.8 bn (+24%), underpinning strong medium- and long-term revenue visibility. Positive Sentiment: Fit Out and Partnership Housing outperformed with Fit Out profit up 41% to £58.1 m at a 6.9% margin, and Partnership Housing profit up 13% to £13.2 m backed by a £2.2 bn secured order book. Neutral Sentiment: Net cash fell to £390 m (from £492 m) reflecting continued reinvestment into partnership businesses, with average daily net cash still guided above £330 m by year-end. Positive Sentiment: Medium-term targets upgraded as Fit Out profit guidance rises to £80 m–£100 m and Construction revenue target increases to over £1.5 bn, signaling confidence in future growth. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallMorgan Sindall Group H1 202500:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipantsPresentationSkip to Participants John MorganFounder, CEO & Director at Morgan Sindall Group00:00:00Welcome everybody to our half year 2025 results. But before we sort of go in and talk about what is another record first half, I'd very much like to say a big thank you to all the teams in our businesses all over the country who've made who've actually made these results. Kelly and I are just here to report on them. Big thank you everybody. I'm just going to say a few words with highlights. John MorganFounder, CEO & Director at Morgan Sindall Group00:00:24Kelly will go through the financial and operational view. Then come back and talk a little bit about markets and outlooks. And then the main show of the day will be Steve Colwill be talking about Partnership Housing, the MD of Lovell and Phil Mail, the MD of Mewes talking about mixed use developments. I'll do a quick summary and then straight into questions and answers. So if we look at the group highlights, turnover up sort of modest 7%, but more importantly the profit is up 37%, which actually gives us a gross profit margin of 4%, a full 80 basis points up on last year and that's a really important thing for us. John MorganFounder, CEO & Director at Morgan Sindall Group00:01:02Order book and preferred bidder up 24% since this time last year and we've been able to put the dividend up 50p. As you see the cash is broadly neutral as we've been reinvesting retained profits into the partnership business. Now we're always looking forward. We're always looking long term, But I thought it's just worth putting a graph up to actually show what's happened over the last ten years. And because we're a company that's always looking long term, I think very often the way you should judge us on what we're doing for the long term. John MorganFounder, CEO & Director at Morgan Sindall Group00:01:35So obviously over the last ten years we've had to deal with things like COVID and a couple of other things, but we still had a sort of compound growth of 18% a year on the PB on profit before tax and obviously just over 16% on the dividend. I'd now like to hand you over to Kelly. Kelly GangotraCFO & Director at Morgan Sindall Group00:01:55Thank you, John and good morning everybody. So look today's results continue to represent our strong track record in delivering growth over the long term. So no apologies for reemphasizing some of our key financial highlights and I'll go into some of the detail in a short while. So revenues were up 7% to £2,400,000,000 Operating profits rose 40% to £91,800,000 accompanied by a margin of 3.9%, up 90 basis points when comparing to this time last year. Now that's been followed by a continuation in our elevated interest rates on our strong cash balances resulting in net interest income in the period of £4,100,000 Equally that's led to our profit before tax and amortization increasing by 37% to £95,900,000 with an equivalent PBTA margin of 4%, up 80 basis points compared to this time last year. Kelly GangotraCFO & Director at Morgan Sindall Group00:03:06Now based on these strong financial results, we have today announced a 20% increase to our interim dividend rising to £0.50 per share. So look in summary a really good set of results here. In fact very strong financial result underpinned not only by our significant growth, but also margin expansion. So let's take a quick canter through our performance by division and many of you will know I'll go through the split of this in a little bit of detail shortly. Once again, Fit Out has delivered a significant contribution to the group's results. Kelly GangotraCFO & Director at Morgan Sindall Group00:03:49Profit's up 41% to £58,100,000 But that's been followed by strong contributions from construction, infrastructure and partnership housing despite the slow recovery in the housing market. In mixed use partnerships, it's recorded a small operating loss in the period as it had fewer projects on-site this period. And in Property Services, we've returned a modest profit in the first half as it's continued to stabilize its business activities in the first six months of this year. So overall operating profit at CHF91.8 million with an operating margin of 3.9%. We've also enjoyed substantial growth in our secured order book increasing 39% to £12,000,000,000 at the end of the period. Kelly GangotraCFO & Director at Morgan Sindall Group00:04:45And that's been followed by almost a further £6,000,000,000 of work at preferred bidder stage with growth coming across our entire diverse portfolio. What this also leads us to is a collective total of £17,800,000,000 of work 24% up this compared to this time last year providing us with an incredibly strong platform to deliver our future revenues over the short, medium and long term. Now many of you will know that the full length of our frameworks and indeed the future phases of our development agreements are not included in either the order book or our preferred bidder positions. It's only when we've got much more clarity and visibility of our capital projects that fall within the frameworks or when we've got planning at a suitably advanced stage for our development agreements do they then fall into these numbers? So let's just switch lanes a little bit. Kelly GangotraCFO & Director at Morgan Sindall Group00:05:49If we look at our net cash at the start of the year, we opened with CHF492 million. If we wind forward now to the end of the period, you will see that there's CHF102 million net cash outflow resulting in a net cash position at the end of the period of £390,000,000 Completely aligned in terms of the outflow to the capital allocation strategy and hierarchy which you see at the bottom of this slide, but a few really important observations to note. Firstly, our operating cash outflow in the period was £17,000,000 That compares to £36,100,000 this time last year. Some of you may well spot secondly that the working capital movements for our Construction Services and Fit Out businesses may seem a little low, but it's entirely aligned to the seasonal profile that these businesses experience in the first half of the year. Thirdly, we have invested £128,000,000 into our partnership businesses to drive long term growth. Kelly GangotraCFO & Director at Morgan Sindall Group00:07:01And finally, we have returned £42,000,000 to our shareholders by way of the 2024 final dividend. Now if this slide which many of you know really represents what goes on in the business on a day to day basis when it comes to cash, you'll all be familiar the dark grey line really charts that day to day position all throughout 2024 and the green line sets out the first six months of this year. Big takeaway here it's broadly similar. However, our daily our average daily net cash has dipped slightly to £354,000,000 compared to £372,000,000 this time last year. But that really is a function of the continuation of our investments in partnership. Kelly GangotraCFO & Director at Morgan Sindall Group00:07:52But what I find particularly interesting is when you look at the highest point of our cash, it's £499,000,000 at the start of the year. The lowest is £270,000,000 in May. But what that really signifies is in a really short period of time how significant the cash swings can be for a business of our size and scale. And so therefore continues to underline the importance of us holding substantial levels of cash at all times to ensure that we are able to make the right decisions for this group for the future. If we look forward to the end of this year, we expect the guidance for the average daily net cash to remain unchanged. Kelly GangotraCFO & Director at Morgan Sindall Group00:08:38So it will be still in excess of £330,000,000 as we continue to strive forward with our strategy to invest in partnerships. So in summary, strong growth in profit before tax, a strong cash position enabling us to continue with our journey to invest in partnerships, a strong and growing and high quality secured order book followed equally by a strong preferred bidder position. So let's take a little bit more of a look now at our businesses. So starting with Partnership Housing. This division has continued to strengthen its long term partnerships with the public sector in the period. Kelly GangotraCFO & Director at Morgan Sindall Group00:09:27And notably that's been evidenced through the award of two long term partnerships. The first being with Cardiff and Vele Flamorgan Council and the second with Barnett Council. Collectively for these two schemes, we expect to build and deliver around 3,500 homes over the next eight years. Revenues in the period grew steadily by 6% to $4.00 £5,000,000 whilst demand for contracting work with the public sector continued to be robust and strong and increased by 21% in the period to £311,000,000 Now despite the revenue mix profile being once again weighted towards contracting and against the backdrop of a slowly recovering healthy market. This division has continued to deliver strong profitable growth in the period. Kelly GangotraCFO & Director at Morgan Sindall Group00:10:30Profits rose by 13% to £13,200,000 but we also saw margin expansion by 20 basis points with its margin rising to 3.3%. With a secured order book of GBP 2,200,000,000.0 with a further GBP 2,800,000,000.0 at preferred business stage, we remain confident and excited about the medium and long term growth prospects for this division. If we look forward towards the end of the year, the average capital employed is expected now to be in a range between £400,000,000 to £430,000,000 as we are expecting to continue with our investment journey in this division. The mixed use partnership, I mentioned earlier, it's reported a small operating loss in the period of £1,500,000 but notably that includes around £6,000,000 of investment costs relating to secured schemes which have yet to start on-site and therefore not yet generating return as well as supporting those schemes that represent future opportunities for this division. To put a little bit more color and context around this at the end of the period the division had six projects on-site. Kelly GangotraCFO & Director at Morgan Sindall Group00:11:55By the 2026, we expect that to be closer to 2021. But the division has been busy. In parallel, it's continued to build upon its prior year successes through the conversion of five schemes which were previously at preferred business stage and are now signed development agreements. At the June, the division had a secured development order book of £4,600,000,000 That's 150% up on this time last year and with a further 700,000,000 at preferred bidder stage where it's one on one. Again if we look forward to the end of the year, its average capital employed is expected to be between a range of CHF115 million to CHF125 million. Kelly GangotraCFO & Director at Morgan Sindall Group00:12:47Now Pitau has delivered a standout significant market leading performance for the first six months of this year. Its revenues increased by 33% to GBP $838,000,000. Its profits rose by 41% to GBP 58,100,000.0, strongly influenced by exceptional volumes and operational leverage, which resulted in an operating margin of 6.9%. But underpinning the strong financial result is the division's tenacity, its laser focus, its attention to detail when it comes to quality, operational delivery and of course the customer experience. It finished the period strong with a secured order book of £1,400,000,000 19% up on this time last year. Kelly GangotraCFO & Director at Morgan Sindall Group00:13:47In Construction, the division's continued to maintain its strategy around its approach to strong risk management starting right from the project selection stage through to operational delivery through to final project handover. And it's this foundation that has enabled the division to deliver strong profitable growth in the period with a real quality to its earnings. Profits rose by 14% to £16,100,000 with a margin of 3.1%. But it's been busy. In the period, it's continued with its strong momentum of winning new work. Kelly GangotraCFO & Director at Morgan Sindall Group00:14:31At the end of the period, it had a secured order book of 1,100,000,000.0 with a further £1,400,000,000 of work at preferred bidder stage bringing its collective total to £2,500,000,000 of work to deliver in the future. Now many of you will know 90% of its work is for the public sector and education continues to remain one of its strongest subsectors. But in the period we have seen increasing exposure positive exposure to sub sector spaces such as judicial and defense work. In infrastructure, it's continued to manage and deliver complex projects, whilst retaining a strong discipline on risk management. In the period, it commenced a number of projects, which are going through the early planning and design phases very much linked with significant work winning activities of last year. Kelly GangotraCFO & Director at Morgan Sindall Group00:15:39As a result, we have seen a slight dip in our profits for this division, down 7% to £18,400,000 but nonetheless a significant contribution to the group's results. We also saw a slight margin expansion by 10 basis points up to 3.8%. It finished the period strong in maintaining a very solid and robust order book at £1,900,000,000 with a further £600,000,000 of work at preferred bidder stage. And in Property Services, after its successful conclusion of its business remediation program in late twenty twenty four, it has continued to stabilize its business activities in the first six months of this year resulting in a modest profit of £500,000 It also continued to rebalance its portfolio moving away from reactive maintenance work and moving much more towards planned maintenance and decarbonization work characteristics very much shared with our construction activities. As a result from the 01/01/2026, we will be fully integrating Property Services into the Construction division. However, until then until the 12/31/2025, this division will continue to remain a stand alone division, but still be under the leadership of Pat Boyle. So this concludes the financial and the operational review. We will now move on to markets and outlook for John. John MorganFounder, CEO & Director at Morgan Sindall Group00:17:25Thank you, Kelly. If you look at our markets as you can imagine, we have sort of headwinds and we have tailwinds. I think overall it's a net positive set of conditions. If you look at fit out, we've certainly got some tailwinds. More and more people are returning to the office. John MorganFounder, CEO & Director at Morgan Sindall Group00:17:43More and more people are now having to make their office better to attract people back. And in many cases they're finding more people coming back to the office than they've got seats for. So we actually think the market there is going to be favorable for some for a little time. If we look at the spending review, and the £16,000,000,000 for National Housing Bank is very positive for us. That is actually government investment rather than government spending and that is money that they're looking to spend quite quickly or very quickly by government standards in order to get a lot of sites going that would otherwise be unviable. John MorganFounder, CEO & Director at Morgan Sindall Group00:18:18So very positive for us as indeed was a ten year rent settlement which actually gives a lot of stability to housing associations to be able to plan their future incomes or indeed to borrow more money if required. And clearly the headline that everyone's talking about is the £39,000,000,000 But the reality is that over a long period of time, it's not really new money and most of it is in the next parliament anyway. So although it's nice to have, it's not that exciting for us, but I thought I should mention it. Obviously, the extra spend for construction and infrastructure very helpful for both the construction company and the infrastructure company because they're two spaces that we are particularly strong in. Now with partnership, there's a lot of partnerships out there at the moment that we are pricing negotiating and there's quite a lot that we see coming. John MorganFounder, CEO & Director at Morgan Sindall Group00:19:09So that is actually really good news for us. But I think there's going to be times when there's a lot of partnerships coming onto the market and times when there's not going be a lot coming onto the market. But because our partnerships go for so long, you could have two or three bad years, but we're not seeing that at the moment just the opposite. Our planning reform is clearly important for all of our group companies infrastructure construction as well as obviously housing and development. And although we've seen a modest impact to date, sense of direction is really helpful and we think the government really is going to improve it over the next two or three years. John MorganFounder, CEO & Director at Morgan Sindall Group00:19:45So if I talk about headwinds, clearly the housing market is not as strong as we would like or indeed as strong as we expected at the beginning of the year. And that is no different to what you'd be hearing from the normal house builders. Interest rates not coming down as quickly as we hoped. It's definitely another headwind. Not only does that affect the housing market, but it affects the viability of a lot of schemes, which leads to construction infrastructure or indeed development work for Muse. John MorganFounder, CEO & Director at Morgan Sindall Group00:20:18GDP growth is really important for our type of business. And the fact that GDP growth is less than perhaps we hoped for is another headwind. But definitely overall we've got a net positive conditions. So we're feeling okay. So if I look at the medium term targets and you might remember we upgraded four of them in February when we had our full year results. John MorganFounder, CEO & Director at Morgan Sindall Group00:20:43I'm pleased to say that perhaps quicker than we expected we're upgrading another two today. Fit out was previously 60,000,000 to £85,000,000 and we're upgrading it to 80,000,000 to £100,000,000 in the medium term. With construction back in February, we increased the margin aspiration in our targets. We're now increasing the turnover from in excess of £1,000,000,000 to an excess of £1,500,000,000 Now clearly probably half of that is because Property Services is going to be incorporated into construction from the January 1, but the other half is definitely an improvement in our expectations of what construction can do over the next few years. So if I move on to the outlook by division. John MorganFounder, CEO & Director at Morgan Sindall Group00:21:28So Partnership Housing, we do expect solid profit growth this year, but the Rockies can be just slightly less as we're continuing to invest. Mixed use again another business we're investing heavily in and that will be close to breakeven this year. Now we fit out. We're not changing our expectations on the profit, but even so the profit that we're already expecting is going to be higher than the top end of our revised target range. So I think what we're saying is that although we feel good about fit out going forward, it's probably the market now is very choppy and it's still going be a good market, but probably not as good as what we're experiencing at the moment. John MorganFounder, CEO & Director at Morgan Sindall Group00:22:10So with Construction, the margin is going to be the middle of its range with revenue in excess of £1,000,000,000 Infrastructure again margin to be in the middle of the range with revenue below £1,000,000,000 just slightly below £1,000,000,000 and very modest profits in Property Services. Before I hand over to Finan's Steve, I'd like to just talk about the differences between our partnership housing business level and our mixed use partnership business news. What they do is quite different. How they go about it is quite different and how they make their money is quite different. And increasingly they are coming together to work on schemes where quite frankly what we have to offer is very, very strong indeed. John MorganFounder, CEO & Director at Morgan Sindall Group00:22:54So the big difference is Lovell makes its profit from selling houses and contracting. Mewes makes its profit from its share of equity and development management fees. Lubbock is a developer and a contractor, whereas Muse is a developer only, often using Morgan Sindle to do the building work, but not necessarily far from it in fact. It's probably only about 20% is done by Morgan Symbol. Lovell has the minority of its schemes forward funding because it's predominantly selling individual houses. John MorganFounder, CEO & Director at Morgan Sindall Group00:23:32Where with mixed use the majority of what they do is forward funded. I think it's interesting that the order book and preferred bidder is pretty similar between the two. But because the new schemes last longer, it will have less capital employed. I'd now like to hand you over to Steve from Lovell, Managing Director of Lovell. Thank you. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:23:58Good morning. As John mentioned, Steve Colby, Managing Director of Lovell. I've been enrolled for seven years now since joining the business back in 2018. So as John mentioned, Lovell works in partnerships with local authorities and housing associations to deliver affordable homes both as a contractor and as a developer. And over the last four years, we've seen a considerable transformation to our business. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:24:27If you go back to 2021, our combined order book which included preferred bidder status projects was at around about GBP 2,800,000,000.0. At that stage, had an average capital employed of £156,000,000 We built 3,100 homes from eight decentralized regions. Now if you move progressively forward to 2024, the change has been quite significant. Our equivalent order book then was at £4,000,000,000 and we'd increased the number of our operational regions to 11. Now this allowed our geographical coverage to be extended to virtually all parts of Great Britain. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:25:09But importantly, it gave us the capacity for future growth. The size of our active sites grew as did the number of them, which increased by around about 40%. Collectively, this allowed us to build a little over 5,100 homes in the year. So 2024 of course was a year where there was a continuation of the softness in the housing market and we saw this as an opportunity to continue to invest selectively. Both the medium term and the long term fundamentals for growth in partnership housing remain very, very strong. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:25:47So this resulted in our average capital employed increasing to £338,000,000 at that point. And if we look back at this period of sustained growth and in investment, our CAGR was for our CAGR for revenue and for profit was equally strong at 1822% respectively. And then as we head further into 2025, we finished the half year point with a combined order book of now £5,000,000,000 And in addition, we have a healthy pipeline of future phases which come from our existing established partnership arrangements which have not yet been included in that headline number. We'll only do so as Kelly mentioned once we have increased visibility and once we have greater certainty on planning. And I guess that's an important point Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:26:44Are we now at the £5,000,000,000 Well, first to note is we've got relatively limited national competition. I think you'll have seen that our brand has become very strong and we have a respected reputation. Morgan Single's balance sheet has never been more important to the Lovell business. First of all, it funds us. But for our clients, it is a huge, huge comfort to them and they place a big value on that when placing orders. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:27:18So over the next few minutes, I'd like to illustrate three of our partnerships which will start delivering homes in the near term and in the medium term. And it's worth also pointing out that all are expected to deliver returns on or above our medium term targets. Let's start with Barnett Council. So this follows a successful tender in 2024. It's to regenerate Phase one of the existing Green Park estate. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:27:47It involves the demolition of the 60s and 70s buildings you'll see there and replacing it with 500 new build social rent shared ownership and open market sale homes. Importantly, the partnership also allows us the opportunity to become development partner with Barnett Council on future sites. And already at this early stage, we have visible prospects within the ten year arrangement of around about 1,200 homes. That would generate a GDV of £500,000,000 around half of that would flow into books. At this stage, again keeping our prudent reporting only Phase one of the Grim Park estate has been included in our order book. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:28:36Preferred bidder status was granted in 2024 and we expect to make a start on-site some three years later in 2027. Now that three year gestation period is fairly typical of what we would expect to see in a normal partnership scheme within our business. And of course once on-site workload is secured for several years to come. So in 2022, we formally joined forces with Suffolk County Council to form a development alliance. The aim there is to build around 2,800 much needed homes that meet real local needs. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:29:17The developments are built on council owned land over five separate locations those being Lowstaff, Mildenhall, Bachton, Westerow and Newmarket. Two of those sites will make a start this year. The remaining three will make a start towards the back end of next year and they will run through to 02/1939. As typical this arrangement includes an option to bring in more sites during the ten year framework. And then finally earlier this year, Cardiff and Vale of Glamorgan Councils appointed us as their preferred bidder for a large scale house building program. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:29:59The partnership aims to build 2,300 homes. It's across 24 council owned sites and has a GDV of over £500,000,000 all of which flows through into Lovell's books. Half of the properties that we build will be retained by the councils for social rent and for shared ownership purposes and the balance will be sold on the open market. With plan and permission already in place for a few of the initial schemes, we expect our first start on-site to happen this year. As with most of our partnerships, the ten year arrangement can be extended and additional sites may also be added. Thanks. And I'll now hand you over to Phil. Phil MayallMD - Muse Places at Morgan Sindall Group00:30:48Thanks, Steve. Good morning, everyone. I'm Phil Mel. I'm the Managing Director of News. A little bit about me. Phil MayallMD - Muse Places at Morgan Sindall Group00:31:00I've been in the business just approaching twenty years starting at the most junior level working my way through and I've been in this particular role for approaching just approaching two years. And so as John and Kelly have outlined as I'm sure you're aware, we're a national mixed use partnership business. Everything we do is in partnership and we develop property across the range of sectors. And we've been in business forty years. So we have an incredibly strong brand developed over that time, a really strong track record. Phil MayallMD - Muse Places at Morgan Sindall Group00:31:39And coupled with the Morgansindle balance sheet as Steve has already mentioned, which is really powerful for us too. We have a real reputation for delivery. So going back a couple of years 2023, we decided that it was time to really start to leverage that brand and that position. Nationally, we don't really have a direct competitor. So it was time to leverage that. Phil MayallMD - Muse Places at Morgan Sindall Group00:32:07So we decided to refocus on larger opportunities. The reason we did that is one, again the balance sheet gives our partners comfort that we can deliver over a long term. Our forty year existence showed that we always stay in schemes. We do everything that we say we'll do. And again that's a huge comfort to our partners. Phil MayallMD - Muse Places at Morgan Sindall Group00:32:31But what it also allows us to do is a lot of schemes have fixed costs regardless of size. So it allows us to spread that capital more thinly across individual projects that come out of those schemes. It also means that as markets expand and contract, we can bring forward a different range of sectors on one single plot on one overall scheme. So it allows us to react to the market as the market is moving back and forth. And finally, what it does is it those types of schemes are very attractive to institutional investors who see them as long term opportunities. Phil MayallMD - Muse Places at Morgan Sindall Group00:33:09All of that coupled together really allows us to focus on hitting that medium term target we have of 25% return on capital employed. This slide really starts to illustrate for you the beginning of that strategy. So if we have a look at the top line across the top line there you can see the increasing size of order book. And that's been a couple of things. Firstly, as I say, it's been a focus on larger opportunities. Phil MayallMD - Muse Places at Morgan Sindall Group00:33:41But it also reflects an investment we made starting in 2022, but firmed up in 2023 where we opened in The Midlands, which we thought was a really strong market for us. And that's been proven in that we've already secured four developments under development agreement, again very much along the lines as Steve's described, we limited we limit the amount of phases that we include in the order book. We're very conservative around that. And we have a team of 14 people that are already helping us to deliver. On the second line, can see the number of projects we have on-site is dropping. Phil MayallMD - Muse Places at Morgan Sindall Group00:34:19And that's simply a result of us transitioning out of those smaller schemes and investing in new schemes. Now it takes roundabout two years from inception to bring a project forward. And as Kelly outlined at the moment at the year end we'll end up with six projects on-site 2026. We expect to be moving towards 2021. Now that isn't from a start today. Phil MayallMD - Muse Places at Morgan Sindall Group00:34:48Money has already been invested in those schemes as Kelly outlined already £6,000,000 is invested to bring those schemes forward and our longer term pipeline. And you can see that in the capital employed. So the capital employed is staying relatively steady, but the projects are dropping because that's where we're putting money into new schemes. Obviously, there's an impact on our return on capital employed in the very short term as returns are dropping as we finish schemes. Capital is going in, but we expect that then to start to move towards our medium target. Phil MayallMD - Muse Places at Morgan Sindall Group00:35:21Now what I'm going to do like Steve, I'm just going to talk you through three schemes just to illustrate what we do and how these fit into the strategy. These are all schemes that we've secured relatively recently And they show the breadth of work we do across sectors. So the first scheme is a development agreement with Durham County Council Akerley Heads. And This is just up the hill from the mainline train station. We're very keen on developing around transport hubs because you get to benefit from that transport infrastructure that's already been committed. Phil MayallMD - Muse Places at Morgan Sindall Group00:36:00And it's will be an innovation zone, an innovation district of around 400,000 square feet. We like this type of work because there are specific occupiers that will take it and they tend to be the sort of occupier that will fund and own it. So therefore, we invest the capital at the beginning to get the scheme moving and then they come along and fund the buildings as they get built, because they want a greater say in the specification and how they work. But here typically as well as a kind of illustration of our model, we actually start work. We'll be starting in 2027 maybe early late twenty twenty six. Phil MayallMD - Muse Places at Morgan Sindall Group00:36:42And that starts demolished by demolishing an existing council facility for which we get paid development management fees. As John mentioned on the comparison slide, we earn money from fees as well as profit. And the next project that I'm going to outline is Mel Square in Solihull. So this is one of the projects I referred to earlier that we've secured through our Midlands office. And much like many of our towns and cities, this is a place that's really focused on what's happening in its town center going forward. Phil MayallMD - Muse Places at Morgan Sindall Group00:37:18Now Solihull, if you're familiar with it, it's a relatively affluent town in the Midlands. And so in terms of its actual retail offer, it's relatively well populated at the moment, but the currency is taking a long term view. And there are two very large shopping centers, which clearly will not sustain in the future. So they brought Muse on board to help redevelop one of them to a more mixed use location, which will drive footfall into the other center, but critically also will deliver new leisure facilities, retail facilities and residential. And it's a type of residential that we deliver for build to rent owners and occupiers and but with some potential open market for sale in there to mix the community up some later living some key worker housing. Phil MayallMD - Muse Places at Morgan Sindall Group00:38:10And the reason for that is it will help drive local economy. So you've got Jaguar Land Rover nearby and some high growth companies. And Solihull is keen to ensure that it retains and attracts the high quality workforce that's needed to support those. And finally, a very large scheme that we're developing in Flag. And this is one we're developing through one of our two national partnerships. Phil MayallMD - Muse Places at Morgan Sindall Group00:38:38So when I refer to partnerships, I'm either referring to a partnership at a local level, so a direct development agreement or a strategic national partnership. And this is being built through our English Cities Fund partnership, which is a twenty year partnership we've had with Legal and General and Homes England. And this is a development again capitalizing on transport infrastructure. So right at the end of the Elizabeth Line in an identified growth location. So it's a mixed use development of 200,000 square feet of grade A offices around 1,600 homes across multiple phases. Phil MayallMD - Muse Places at Morgan Sindall Group00:39:17And we're going through the master planning phases at the moment. We expect to start on-site in early twenty twenty seven. And the initial phases will finish in sort of five to six years after that. But it is a long term project. Again the same with Steve's team. Phil MayallMD - Muse Places at Morgan Sindall Group00:39:37We're very conservative in what we include in our order book and then we add as we go along. That's it for me. Thank you. John MorganFounder, CEO & Director at Morgan Sindall Group00:39:47Thank you, Phil. So I'd just sort of summarize where we are. So we're an organic growth big story and that's not changing. We might do minor bolt ons if they sort of add to that organic growth, but just think of it as more organic growth and we've got a long way to go. That strong balance sheet and substantial cash is absolutely fundamental to our core and we want to hang on to that. John MorganFounder, CEO & Director at Morgan Sindall Group00:40:11I'm pleased that we've been able to increase the medium term targets for both fit out and construction. Following two profit upgrades this year, we're on track to deliver results for 2025 in line with our current expectations. And any hard questions for the team? Aynsley LamminEquity Analyst - Building & Construction at Investec00:40:37Thanks. Good morning. Aynes Lelandman from Iveso. Just two for me please. Just on partnerships, obviously some in the sector has been some kind of mixed results should we say on the partnership size. Aynsley LamminEquity Analyst - Building & Construction at Investec00:40:47And with the new government kind of announcements around that does that encourage increase your kind of expectations for you to put more capital employed in that business? When do you actually expect to see the kind of demand coming through on the ground to bump that division? Are you talking partnership housing? Partnership housing, yes. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:41:05So first of all, John touched on the spend We see the rent settlement ten years 1% plus CPI has been a real advantage to partnership homes. It's making housing associations have a much firmer footing on the ground. In terms of Lubbels partnership model, and I think we can only talk about ours, it's obvious to see that the contracting aspect of it has helped us out significantly in what's been quite a prolonged difficult period in the housing sector. Aynsley LamminEquity Analyst - Building & Construction at Investec00:41:50And just on fit out, obviously you had the kind of disruption in the competitive landscape. Just wondered if you could provide a bit more color on how that's settling down. Is the order book now kind of where you'd expect it to plateau and maybe edge back a bit because some of that work that you've won from the one that went bust easily? John MorganFounder, CEO & Director at Morgan Sindall Group00:42:06It's probable that the order book is higher than I might have expected six months ago. But we do have sort of some very strong competitors who are giving us a run for our money. Stephen RawlinsonDirector at Applied Value Limited00:42:21Hi. Stephen Rawlinson from Applied Value. Can I talk a little bit if you don't mind about risk? Because you've got this long order book and you've got prices obviously, build costs rising. You've got variations to take into account particularly in mixed use. Stephen RawlinsonDirector at Applied Value Limited00:42:40Could you just sort of talk us a little bit through I mean, know it's a results meeting, but nonetheless it'd be very, very helpful because those order books are getting bigger and longer. And as such therefore the risk levels rise and variations particularly mixed use on existing pre existing sites gives you a high level of risk. Just sort of give us a bit of a clue as how you might be tackling that and to what extent your results are insulated from any concerns that we might have about variations? Phil MayallMD - Muse Places at Morgan Sindall Group00:43:08I'd certainly clarify on the variations. Stephen RawlinsonDirector at Applied Value Limited00:43:11Well, just finding a bomb underneath a slough or something like that which I'm sure John Betshamy would love to have. That sort of thing. These are there are things that go wrong in long term projects and these are increasingly long term projects that you're engaging in. And therefore obviously risk levels of variations that you might find on sites and so forth increases. Phil MayallMD - Muse Places at Morgan Sindall Group00:43:36No. Thank you. Thank you for the clarification. I mean first of all in terms of the reference to the long order book as I mentioned a few times, we actually limit the amount we put in so that we can make sure that as we progress through a scheme that as we move forward that we can expand the order book rather than going the other way finding the proverbial bomb and then coming back in. We've been doing this as a business forty years. Phil MayallMD - Muse Places at Morgan Sindall Group00:44:03So those things that you refer to in the ground and those challenges have been there. So we've got a lot of DNA in terms of delivery. And in terms of taking a long term approach, we can focus on that and resolve those issues as they come along rather than exiting all one basket and it'd be a big issue that undermines us. So we're pretty well versed in responding. John MorganFounder, CEO & Director at Morgan Sindall Group00:44:26And if I may add a bit, critical thing is when we have a development agreement that actually is the mechanism for agreeing the price that we pay for the land in any phase. So and we don't have to progress with any phase unless it's viable. So that is the big protection. Stephen RawlinsonDirector at Applied Value Limited00:44:43And the other thing in Construction, I mean, you've increased the revenue target by 500,000,000.0 Some on a pro form a basis about £200,000,000 or £200,000,000 will come from Property Services being in part of that envelope. There is a little bit in the text about your feeling of confidence to get what is in fact 33% increase in the underlying construction revenue. Can you just talk us a little bit through the level of confidence that you have about that in this meeting please? John MorganFounder, CEO & Director at Morgan Sindall Group00:45:14Yes. So I mean clearly we will see quite a bit of progress towards that this year. So it's not as big a jump from the run rate as it might appear. So and the order book is going up and our market share is continuing to increase and has done consistently over the last few years. Kelly GangotraCFO & Director at Morgan Sindall Group00:45:30I think I'd add to that. I mean I said earlier the order book is at £1,100,000,000 But actually the important point to note is the preferred bidder position of £1,400,000,000 And this division has a very strong track record of converting in the high 90%. So I think you should look at it then that way, but also the work it's been winning and the market share it's been gaining. John MorganFounder, CEO & Director at Morgan Sindall Group00:45:51It's also been strengthening the regions where the market share is less over the last few years. And so there's still market share to go for. Allison SunVP - Equity Research at Bank of America Merrill Lynch00:46:06Allison from Bank of America. Two following up questions on the fit out and partnership housing. So on the fit out, I wonder because previously you mentioned the higher competition and also margin to normalize. But right now it looks like the prospect is better. Do you expect the margin normalization probably will take longer time to realize? Allison SunVP - Equity Research at Bank of America Merrill Lynch00:46:29The first one. And the second on the partnership housing, because you also mentioned the RMB39 billion funding from the government. And my understanding is those housing associations and also builders will start beating the funding maybe starting in the next three months or so. Do you guys have a plan or the target like how much funding you actually want to get? Kelly GangotraCFO & Director at Morgan Sindall Group00:46:50I will take the fit out and perhaps you'll do partnership housing. So look, I think the reality is the normalization is coming. It's really hard to identify precisely when. What I can guide you to is that 6.9% is still driven and influenced strongly by the exceptional volumes and therefore leverage we're gaining from our OVADs. So you should still think about your normal operating margin somewhere in the corridor between 5% to 6% take the mean of 5.5%. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:47:23And just on the £39,000,000,000 point, I think it's fair to say for all of our all housebuilding businesses that gestation period is around about three years from first of all applying for planning permission through to making a start and delivering product at the other end. So whilst it is backloaded for in terms of the government spending review, it does give local authorities. It gives housing associations the confidence now to start building up the workload for the future knowing that it takes three years to pick to make a real start. Jonny CoubroughDirector - Building & Construction Research at Deutsche Numis00:48:01Johnny Kubra from Deutsche Numis. Thanks for the presentations. Firstly on partnerships, so perhaps for Steve, just interested to hear whether you think the contracting market sorry within partnership housing, whether the contracting market is growing or whether it's an impact of Section 106 completions being lower? Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:48:21I think there's two reasons for the growth that we are experiencing. First of all, you will have all seen that there was a number of SMEs who unfortunately fell into administration and we've obviously benefited from that. As we sit now, see greater growth in the contracting element partly because of the spending review and confidence in the housing associations. And partly because a lot of workload has been held up with building safety gateways and the like and those are starting to now move their way through and that's allowing us to just see a little bit more sight on contracting work. Jonny CoubroughDirector - Building & Construction Research at Deutsche Numis00:49:05Thanks. And perhaps a follow-up on the mixed tenure side. Do you have visibility of when those revenues might grow? And was it a surprise to see them lower given the market was recovering albeit at a slow pace? Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:49:19I think you're all aware that our business strategy is to move from contracting majority to a mixed tenure majority. We've got the pipeline visible to allow us to do that. But obviously, we're waiting for market conditions to press the button and make that change. Jonny CoubroughDirector - Building & Construction Research at Deutsche Numis00:49:38Thanks very much. And then perhaps also a question for Phil on Muse. Just interested, I mean John mentioned that at the moment there are a lot of schemes coming to market and that might change. Why do you think so many are coming to market at the moment? Is it coincidence or is there anything like that? Phil MayallMD - Muse Places at Morgan Sindall Group00:49:55In terms of partnerships, in terms of opportunities. I think it's a combination of things. You're seeing things like the Solihull example where you've got property that is out of date and needs repurposing, needs redeveloping. So you're seeing an increase of that as a structural shift you're seeing through residential sorry through the change in the retail sector. We're seeing other things like more recently there's been a growth clearly in logistics post COVID. Phil MayallMD - Muse Places at Morgan Sindall Group00:50:27And so there are some drivers there. And this is where our business complements with Lovell also a shift towards urbanization of residential. So the residential we do is mid to high rise in tiny city centers and particularly in places like Manchester Leeds scheme in Bradford we're seeing that. So it's a combination of factors that's driving it. Jonny CoubroughDirector - Building & Construction Research at Deutsche Numis00:50:57Thanks. Edward PrestAnalyst at Berenberg00:51:04Thank you. Hello. It's Ed Press from Berenberg. Firstly, in relation to Partnership Housing. So you've got a target of 8% margin. Edward PrestAnalyst at Berenberg00:51:14How do you bridge that gap between where you are now in the context of there's growth in contracting which is presumably puts downward pressure on it and then the big growth in affordable housing? And I'm going to guess that affordable housing commands lower margin. Do you therefore need a big recovery in the housing market essentially in order to achieve that 8%? It's twofold. We've it's partly performance. Edward PrestAnalyst at Berenberg00:51:38We believe that the workload that we've got in our pipeline now will generate greater returns than we've got. But also it is moving that mix back to a mix tenure side of it. We're talking about the medium term here. There is improvement in the housing market and we've got confidence therefore that we will hit our medium term targets. Kelly GangotraCFO & Director at Morgan Sindall Group00:52:02I'd just add to that Steve. The strategy which we've publicized is opening larger sites which means from a next tenure perspective we'll have a higher proportion of work or volume of work going through open market sales which does carry a higher margin. So the blend of everything gets us in the medium term closer to 8%. Edward PrestAnalyst at Berenberg00:52:26Thank you. Alastair StewartConstruction & Property Analyst at Progressive Equity Research Limited00:52:30Alastair Stuart from Progressive. A couple of broadish questions. First on the property on partnership housing. In terms of the volumes, it was interesting to see on your wave diagram that over the four years it was eight regions nine, ten, 11. Is it going to continue in that sort of trajectory? Alastair StewartConstruction & Property Analyst at Progressive Equity Research Limited00:52:53How many regions are you going to get up to do you imagine you'll get up to? And will the actual completion volumes sort of follow that path? And you say you've got a target 3,500 over eight years. What's going to be the run rate towards the end of that? And where could it go in? Kelly GangotraCFO & Director at Morgan Sindall Group00:53:18Could I just clarify before Steve answers? The 3,500 just relates to two partnership schemes being Cardiff and and Barnett Council. Just those two got a target for the eight years. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:53:31And on the region point we're done for now. We've been through the learning curves. We feel as if we've got enough capacity to feed that growth. Some of our larger partnership schemes allows us to almost have a bolt on to a region. So you still have your overhead structure, but it can be run as an addition to rather than instead of the workload. So yes, we're done for now. Alastair StewartConstruction & Property Analyst at Progressive Equity Research Limited00:53:53Volume should stay steady ish in the medium term? John MorganFounder, CEO & Director at Morgan Sindall Group00:53:57No. We'd expect much more volume through our existing number of regions. Kelly GangotraCFO & Director at Morgan Sindall Group00:54:01So what about leverage from the regions we have? We purposely created capacity knowing there was this bow wave of work coming through us. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:54:10We've been building strong teams who we believe have got more capacity in them. Alastair StewartConstruction & Property Analyst at Progressive Equity Research Limited00:54:14Sure. And the second question was on Defence. I imagine there are very big opportunities and they'll cross a few of your divisions. Can you just talk us through that a bit? John MorganFounder, CEO & Director at Morgan Sindall Group00:54:28Yes. John MorganFounder, CEO & Director at Morgan Sindall Group00:54:29Think predominantly it's going to be construction infrastructure, the defense. There may be a little bit of housing. Residential as well. Yes. But predominantly those two. Any other questions? Well, thank you very much indeed for your time everyone. Thank you.Read moreParticipantsExecutivesJohn MorganFounder, CEO & DirectorKelly GangotraCFO & DirectorSteve ColebyMD - Lovell PartnershipsPhil MayallMD - Muse PlacesAnalystsAynsley LamminEquity Analyst - Building & Construction at InvestecStephen RawlinsonDirector at Applied Value LimitedAllison SunVP - Equity Research at Bank of America Merrill LynchJonny CoubroughDirector - Building & Construction Research at Deutsche NumisEdward PrestAnalyst at BerenbergAlastair StewartConstruction & Property Analyst at Progressive Equity Research LimitedPowered by Earnings DocumentsSlide DeckInterim report Morgan Sindall Group Earnings HeadlinesMorgan Sindall Group's (MGNS) Add Rating Reaffirmed at Peel HuntJuly 31 at 2:53 AM | americanbankingnews.comMorgan Sindall Group (LON:MGNS) Given New GBX 5,000 Price Target at Deutsche Bank AktiengesellschaftJuly 31 at 2:29 AM | americanbankingnews.comChina just unlocked Nvidia’s AI chips—what that means for youTired of Missing Big AI Moves Like Nvidia? You’re not the problem—your trading system is. Tim’s XGPT system tracks breaking AI news and shows when to trade.📈 AI-backed. Beginner-friendly. Results proven.August 2 at 2:00 AM | Timothy Sykes (Ad)Morgan Sindall’s Yorkshire team raises £7,000 for local Wakefield Downs Syndrome charityJuly 8, 2025 | msn.comShareholders Would Enjoy A Repeat Of Morgan Sindall Group's (LON:MGNS) Recent Growth In ReturnsJuly 3, 2025 | uk.finance.yahoo.comMorgan Sindall shares soar as construction group ups profit forecastJune 17, 2025 | msn.comSee More Morgan Sindall Group Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Morgan Sindall Group? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Morgan Sindall Group and other key companies, straight to your email. Email Address About Morgan Sindall GroupMorgan Sindall Group (LON:MGNS), the Partnerships, Fit Out and Construction Services Group, reported an annual revenue of £4.5bn in the full year 2024. The Group employs over 8,000 employees and operates 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.View Morgan Sindall Group ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Amazon's Earnings: What Comes Next and How to Play ItApple Stock: Big Earnings, Small Move—Time to Buy?Microsoft Blasts Past Earnings—What’s Next for MSFT?Visa Beats Q3 Earnings Expectations, So Why Did the Market Panic?Spotify's Q2 Earnings Plunge: An Opportunity or Ominous Signal?RCL Stock Sinks After Earnings—Is a Buying Opportunity Ahead?Amazon's Pre-Earnings Setup Is Almost Too Clean—Red Flag? 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PresentationSkip to Participants John MorganFounder, CEO & Director at Morgan Sindall Group00:00:00Welcome everybody to our half year 2025 results. But before we sort of go in and talk about what is another record first half, I'd very much like to say a big thank you to all the teams in our businesses all over the country who've made who've actually made these results. Kelly and I are just here to report on them. Big thank you everybody. I'm just going to say a few words with highlights. John MorganFounder, CEO & Director at Morgan Sindall Group00:00:24Kelly will go through the financial and operational view. Then come back and talk a little bit about markets and outlooks. And then the main show of the day will be Steve Colwill be talking about Partnership Housing, the MD of Lovell and Phil Mail, the MD of Mewes talking about mixed use developments. I'll do a quick summary and then straight into questions and answers. So if we look at the group highlights, turnover up sort of modest 7%, but more importantly the profit is up 37%, which actually gives us a gross profit margin of 4%, a full 80 basis points up on last year and that's a really important thing for us. John MorganFounder, CEO & Director at Morgan Sindall Group00:01:02Order book and preferred bidder up 24% since this time last year and we've been able to put the dividend up 50p. As you see the cash is broadly neutral as we've been reinvesting retained profits into the partnership business. Now we're always looking forward. We're always looking long term, But I thought it's just worth putting a graph up to actually show what's happened over the last ten years. And because we're a company that's always looking long term, I think very often the way you should judge us on what we're doing for the long term. John MorganFounder, CEO & Director at Morgan Sindall Group00:01:35So obviously over the last ten years we've had to deal with things like COVID and a couple of other things, but we still had a sort of compound growth of 18% a year on the PB on profit before tax and obviously just over 16% on the dividend. I'd now like to hand you over to Kelly. Kelly GangotraCFO & Director at Morgan Sindall Group00:01:55Thank you, John and good morning everybody. So look today's results continue to represent our strong track record in delivering growth over the long term. So no apologies for reemphasizing some of our key financial highlights and I'll go into some of the detail in a short while. So revenues were up 7% to £2,400,000,000 Operating profits rose 40% to £91,800,000 accompanied by a margin of 3.9%, up 90 basis points when comparing to this time last year. Now that's been followed by a continuation in our elevated interest rates on our strong cash balances resulting in net interest income in the period of £4,100,000 Equally that's led to our profit before tax and amortization increasing by 37% to £95,900,000 with an equivalent PBTA margin of 4%, up 80 basis points compared to this time last year. Kelly GangotraCFO & Director at Morgan Sindall Group00:03:06Now based on these strong financial results, we have today announced a 20% increase to our interim dividend rising to £0.50 per share. So look in summary a really good set of results here. In fact very strong financial result underpinned not only by our significant growth, but also margin expansion. So let's take a quick canter through our performance by division and many of you will know I'll go through the split of this in a little bit of detail shortly. Once again, Fit Out has delivered a significant contribution to the group's results. Kelly GangotraCFO & Director at Morgan Sindall Group00:03:49Profit's up 41% to £58,100,000 But that's been followed by strong contributions from construction, infrastructure and partnership housing despite the slow recovery in the housing market. In mixed use partnerships, it's recorded a small operating loss in the period as it had fewer projects on-site this period. And in Property Services, we've returned a modest profit in the first half as it's continued to stabilize its business activities in the first six months of this year. So overall operating profit at CHF91.8 million with an operating margin of 3.9%. We've also enjoyed substantial growth in our secured order book increasing 39% to £12,000,000,000 at the end of the period. Kelly GangotraCFO & Director at Morgan Sindall Group00:04:45And that's been followed by almost a further £6,000,000,000 of work at preferred bidder stage with growth coming across our entire diverse portfolio. What this also leads us to is a collective total of £17,800,000,000 of work 24% up this compared to this time last year providing us with an incredibly strong platform to deliver our future revenues over the short, medium and long term. Now many of you will know that the full length of our frameworks and indeed the future phases of our development agreements are not included in either the order book or our preferred bidder positions. It's only when we've got much more clarity and visibility of our capital projects that fall within the frameworks or when we've got planning at a suitably advanced stage for our development agreements do they then fall into these numbers? So let's just switch lanes a little bit. Kelly GangotraCFO & Director at Morgan Sindall Group00:05:49If we look at our net cash at the start of the year, we opened with CHF492 million. If we wind forward now to the end of the period, you will see that there's CHF102 million net cash outflow resulting in a net cash position at the end of the period of £390,000,000 Completely aligned in terms of the outflow to the capital allocation strategy and hierarchy which you see at the bottom of this slide, but a few really important observations to note. Firstly, our operating cash outflow in the period was £17,000,000 That compares to £36,100,000 this time last year. Some of you may well spot secondly that the working capital movements for our Construction Services and Fit Out businesses may seem a little low, but it's entirely aligned to the seasonal profile that these businesses experience in the first half of the year. Thirdly, we have invested £128,000,000 into our partnership businesses to drive long term growth. Kelly GangotraCFO & Director at Morgan Sindall Group00:07:01And finally, we have returned £42,000,000 to our shareholders by way of the 2024 final dividend. Now if this slide which many of you know really represents what goes on in the business on a day to day basis when it comes to cash, you'll all be familiar the dark grey line really charts that day to day position all throughout 2024 and the green line sets out the first six months of this year. Big takeaway here it's broadly similar. However, our daily our average daily net cash has dipped slightly to £354,000,000 compared to £372,000,000 this time last year. But that really is a function of the continuation of our investments in partnership. Kelly GangotraCFO & Director at Morgan Sindall Group00:07:52But what I find particularly interesting is when you look at the highest point of our cash, it's £499,000,000 at the start of the year. The lowest is £270,000,000 in May. But what that really signifies is in a really short period of time how significant the cash swings can be for a business of our size and scale. And so therefore continues to underline the importance of us holding substantial levels of cash at all times to ensure that we are able to make the right decisions for this group for the future. If we look forward to the end of this year, we expect the guidance for the average daily net cash to remain unchanged. Kelly GangotraCFO & Director at Morgan Sindall Group00:08:38So it will be still in excess of £330,000,000 as we continue to strive forward with our strategy to invest in partnerships. So in summary, strong growth in profit before tax, a strong cash position enabling us to continue with our journey to invest in partnerships, a strong and growing and high quality secured order book followed equally by a strong preferred bidder position. So let's take a little bit more of a look now at our businesses. So starting with Partnership Housing. This division has continued to strengthen its long term partnerships with the public sector in the period. Kelly GangotraCFO & Director at Morgan Sindall Group00:09:27And notably that's been evidenced through the award of two long term partnerships. The first being with Cardiff and Vele Flamorgan Council and the second with Barnett Council. Collectively for these two schemes, we expect to build and deliver around 3,500 homes over the next eight years. Revenues in the period grew steadily by 6% to $4.00 £5,000,000 whilst demand for contracting work with the public sector continued to be robust and strong and increased by 21% in the period to £311,000,000 Now despite the revenue mix profile being once again weighted towards contracting and against the backdrop of a slowly recovering healthy market. This division has continued to deliver strong profitable growth in the period. Kelly GangotraCFO & Director at Morgan Sindall Group00:10:30Profits rose by 13% to £13,200,000 but we also saw margin expansion by 20 basis points with its margin rising to 3.3%. With a secured order book of GBP 2,200,000,000.0 with a further GBP 2,800,000,000.0 at preferred business stage, we remain confident and excited about the medium and long term growth prospects for this division. If we look forward towards the end of the year, the average capital employed is expected now to be in a range between £400,000,000 to £430,000,000 as we are expecting to continue with our investment journey in this division. The mixed use partnership, I mentioned earlier, it's reported a small operating loss in the period of £1,500,000 but notably that includes around £6,000,000 of investment costs relating to secured schemes which have yet to start on-site and therefore not yet generating return as well as supporting those schemes that represent future opportunities for this division. To put a little bit more color and context around this at the end of the period the division had six projects on-site. Kelly GangotraCFO & Director at Morgan Sindall Group00:11:55By the 2026, we expect that to be closer to 2021. But the division has been busy. In parallel, it's continued to build upon its prior year successes through the conversion of five schemes which were previously at preferred business stage and are now signed development agreements. At the June, the division had a secured development order book of £4,600,000,000 That's 150% up on this time last year and with a further 700,000,000 at preferred bidder stage where it's one on one. Again if we look forward to the end of the year, its average capital employed is expected to be between a range of CHF115 million to CHF125 million. Kelly GangotraCFO & Director at Morgan Sindall Group00:12:47Now Pitau has delivered a standout significant market leading performance for the first six months of this year. Its revenues increased by 33% to GBP $838,000,000. Its profits rose by 41% to GBP 58,100,000.0, strongly influenced by exceptional volumes and operational leverage, which resulted in an operating margin of 6.9%. But underpinning the strong financial result is the division's tenacity, its laser focus, its attention to detail when it comes to quality, operational delivery and of course the customer experience. It finished the period strong with a secured order book of £1,400,000,000 19% up on this time last year. Kelly GangotraCFO & Director at Morgan Sindall Group00:13:47In Construction, the division's continued to maintain its strategy around its approach to strong risk management starting right from the project selection stage through to operational delivery through to final project handover. And it's this foundation that has enabled the division to deliver strong profitable growth in the period with a real quality to its earnings. Profits rose by 14% to £16,100,000 with a margin of 3.1%. But it's been busy. In the period, it's continued with its strong momentum of winning new work. Kelly GangotraCFO & Director at Morgan Sindall Group00:14:31At the end of the period, it had a secured order book of 1,100,000,000.0 with a further £1,400,000,000 of work at preferred bidder stage bringing its collective total to £2,500,000,000 of work to deliver in the future. Now many of you will know 90% of its work is for the public sector and education continues to remain one of its strongest subsectors. But in the period we have seen increasing exposure positive exposure to sub sector spaces such as judicial and defense work. In infrastructure, it's continued to manage and deliver complex projects, whilst retaining a strong discipline on risk management. In the period, it commenced a number of projects, which are going through the early planning and design phases very much linked with significant work winning activities of last year. Kelly GangotraCFO & Director at Morgan Sindall Group00:15:39As a result, we have seen a slight dip in our profits for this division, down 7% to £18,400,000 but nonetheless a significant contribution to the group's results. We also saw a slight margin expansion by 10 basis points up to 3.8%. It finished the period strong in maintaining a very solid and robust order book at £1,900,000,000 with a further £600,000,000 of work at preferred bidder stage. And in Property Services, after its successful conclusion of its business remediation program in late twenty twenty four, it has continued to stabilize its business activities in the first six months of this year resulting in a modest profit of £500,000 It also continued to rebalance its portfolio moving away from reactive maintenance work and moving much more towards planned maintenance and decarbonization work characteristics very much shared with our construction activities. As a result from the 01/01/2026, we will be fully integrating Property Services into the Construction division. However, until then until the 12/31/2025, this division will continue to remain a stand alone division, but still be under the leadership of Pat Boyle. So this concludes the financial and the operational review. We will now move on to markets and outlook for John. John MorganFounder, CEO & Director at Morgan Sindall Group00:17:25Thank you, Kelly. If you look at our markets as you can imagine, we have sort of headwinds and we have tailwinds. I think overall it's a net positive set of conditions. If you look at fit out, we've certainly got some tailwinds. More and more people are returning to the office. John MorganFounder, CEO & Director at Morgan Sindall Group00:17:43More and more people are now having to make their office better to attract people back. And in many cases they're finding more people coming back to the office than they've got seats for. So we actually think the market there is going to be favorable for some for a little time. If we look at the spending review, and the £16,000,000,000 for National Housing Bank is very positive for us. That is actually government investment rather than government spending and that is money that they're looking to spend quite quickly or very quickly by government standards in order to get a lot of sites going that would otherwise be unviable. John MorganFounder, CEO & Director at Morgan Sindall Group00:18:18So very positive for us as indeed was a ten year rent settlement which actually gives a lot of stability to housing associations to be able to plan their future incomes or indeed to borrow more money if required. And clearly the headline that everyone's talking about is the £39,000,000,000 But the reality is that over a long period of time, it's not really new money and most of it is in the next parliament anyway. So although it's nice to have, it's not that exciting for us, but I thought I should mention it. Obviously, the extra spend for construction and infrastructure very helpful for both the construction company and the infrastructure company because they're two spaces that we are particularly strong in. Now with partnership, there's a lot of partnerships out there at the moment that we are pricing negotiating and there's quite a lot that we see coming. John MorganFounder, CEO & Director at Morgan Sindall Group00:19:09So that is actually really good news for us. But I think there's going to be times when there's a lot of partnerships coming onto the market and times when there's not going be a lot coming onto the market. But because our partnerships go for so long, you could have two or three bad years, but we're not seeing that at the moment just the opposite. Our planning reform is clearly important for all of our group companies infrastructure construction as well as obviously housing and development. And although we've seen a modest impact to date, sense of direction is really helpful and we think the government really is going to improve it over the next two or three years. John MorganFounder, CEO & Director at Morgan Sindall Group00:19:45So if I talk about headwinds, clearly the housing market is not as strong as we would like or indeed as strong as we expected at the beginning of the year. And that is no different to what you'd be hearing from the normal house builders. Interest rates not coming down as quickly as we hoped. It's definitely another headwind. Not only does that affect the housing market, but it affects the viability of a lot of schemes, which leads to construction infrastructure or indeed development work for Muse. John MorganFounder, CEO & Director at Morgan Sindall Group00:20:18GDP growth is really important for our type of business. And the fact that GDP growth is less than perhaps we hoped for is another headwind. But definitely overall we've got a net positive conditions. So we're feeling okay. So if I look at the medium term targets and you might remember we upgraded four of them in February when we had our full year results. John MorganFounder, CEO & Director at Morgan Sindall Group00:20:43I'm pleased to say that perhaps quicker than we expected we're upgrading another two today. Fit out was previously 60,000,000 to £85,000,000 and we're upgrading it to 80,000,000 to £100,000,000 in the medium term. With construction back in February, we increased the margin aspiration in our targets. We're now increasing the turnover from in excess of £1,000,000,000 to an excess of £1,500,000,000 Now clearly probably half of that is because Property Services is going to be incorporated into construction from the January 1, but the other half is definitely an improvement in our expectations of what construction can do over the next few years. So if I move on to the outlook by division. John MorganFounder, CEO & Director at Morgan Sindall Group00:21:28So Partnership Housing, we do expect solid profit growth this year, but the Rockies can be just slightly less as we're continuing to invest. Mixed use again another business we're investing heavily in and that will be close to breakeven this year. Now we fit out. We're not changing our expectations on the profit, but even so the profit that we're already expecting is going to be higher than the top end of our revised target range. So I think what we're saying is that although we feel good about fit out going forward, it's probably the market now is very choppy and it's still going be a good market, but probably not as good as what we're experiencing at the moment. John MorganFounder, CEO & Director at Morgan Sindall Group00:22:10So with Construction, the margin is going to be the middle of its range with revenue in excess of £1,000,000,000 Infrastructure again margin to be in the middle of the range with revenue below £1,000,000,000 just slightly below £1,000,000,000 and very modest profits in Property Services. Before I hand over to Finan's Steve, I'd like to just talk about the differences between our partnership housing business level and our mixed use partnership business news. What they do is quite different. How they go about it is quite different and how they make their money is quite different. And increasingly they are coming together to work on schemes where quite frankly what we have to offer is very, very strong indeed. John MorganFounder, CEO & Director at Morgan Sindall Group00:22:54So the big difference is Lovell makes its profit from selling houses and contracting. Mewes makes its profit from its share of equity and development management fees. Lubbock is a developer and a contractor, whereas Muse is a developer only, often using Morgan Sindle to do the building work, but not necessarily far from it in fact. It's probably only about 20% is done by Morgan Symbol. Lovell has the minority of its schemes forward funding because it's predominantly selling individual houses. John MorganFounder, CEO & Director at Morgan Sindall Group00:23:32Where with mixed use the majority of what they do is forward funded. I think it's interesting that the order book and preferred bidder is pretty similar between the two. But because the new schemes last longer, it will have less capital employed. I'd now like to hand you over to Steve from Lovell, Managing Director of Lovell. Thank you. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:23:58Good morning. As John mentioned, Steve Colby, Managing Director of Lovell. I've been enrolled for seven years now since joining the business back in 2018. So as John mentioned, Lovell works in partnerships with local authorities and housing associations to deliver affordable homes both as a contractor and as a developer. And over the last four years, we've seen a considerable transformation to our business. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:24:27If you go back to 2021, our combined order book which included preferred bidder status projects was at around about GBP 2,800,000,000.0. At that stage, had an average capital employed of £156,000,000 We built 3,100 homes from eight decentralized regions. Now if you move progressively forward to 2024, the change has been quite significant. Our equivalent order book then was at £4,000,000,000 and we'd increased the number of our operational regions to 11. Now this allowed our geographical coverage to be extended to virtually all parts of Great Britain. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:25:09But importantly, it gave us the capacity for future growth. The size of our active sites grew as did the number of them, which increased by around about 40%. Collectively, this allowed us to build a little over 5,100 homes in the year. So 2024 of course was a year where there was a continuation of the softness in the housing market and we saw this as an opportunity to continue to invest selectively. Both the medium term and the long term fundamentals for growth in partnership housing remain very, very strong. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:25:47So this resulted in our average capital employed increasing to £338,000,000 at that point. And if we look back at this period of sustained growth and in investment, our CAGR was for our CAGR for revenue and for profit was equally strong at 1822% respectively. And then as we head further into 2025, we finished the half year point with a combined order book of now £5,000,000,000 And in addition, we have a healthy pipeline of future phases which come from our existing established partnership arrangements which have not yet been included in that headline number. We'll only do so as Kelly mentioned once we have increased visibility and once we have greater certainty on planning. And I guess that's an important point Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:26:44Are we now at the £5,000,000,000 Well, first to note is we've got relatively limited national competition. I think you'll have seen that our brand has become very strong and we have a respected reputation. Morgan Single's balance sheet has never been more important to the Lovell business. First of all, it funds us. But for our clients, it is a huge, huge comfort to them and they place a big value on that when placing orders. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:27:18So over the next few minutes, I'd like to illustrate three of our partnerships which will start delivering homes in the near term and in the medium term. And it's worth also pointing out that all are expected to deliver returns on or above our medium term targets. Let's start with Barnett Council. So this follows a successful tender in 2024. It's to regenerate Phase one of the existing Green Park estate. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:27:47It involves the demolition of the 60s and 70s buildings you'll see there and replacing it with 500 new build social rent shared ownership and open market sale homes. Importantly, the partnership also allows us the opportunity to become development partner with Barnett Council on future sites. And already at this early stage, we have visible prospects within the ten year arrangement of around about 1,200 homes. That would generate a GDV of £500,000,000 around half of that would flow into books. At this stage, again keeping our prudent reporting only Phase one of the Grim Park estate has been included in our order book. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:28:36Preferred bidder status was granted in 2024 and we expect to make a start on-site some three years later in 2027. Now that three year gestation period is fairly typical of what we would expect to see in a normal partnership scheme within our business. And of course once on-site workload is secured for several years to come. So in 2022, we formally joined forces with Suffolk County Council to form a development alliance. The aim there is to build around 2,800 much needed homes that meet real local needs. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:29:17The developments are built on council owned land over five separate locations those being Lowstaff, Mildenhall, Bachton, Westerow and Newmarket. Two of those sites will make a start this year. The remaining three will make a start towards the back end of next year and they will run through to 02/1939. As typical this arrangement includes an option to bring in more sites during the ten year framework. And then finally earlier this year, Cardiff and Vale of Glamorgan Councils appointed us as their preferred bidder for a large scale house building program. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:29:59The partnership aims to build 2,300 homes. It's across 24 council owned sites and has a GDV of over £500,000,000 all of which flows through into Lovell's books. Half of the properties that we build will be retained by the councils for social rent and for shared ownership purposes and the balance will be sold on the open market. With plan and permission already in place for a few of the initial schemes, we expect our first start on-site to happen this year. As with most of our partnerships, the ten year arrangement can be extended and additional sites may also be added. Thanks. And I'll now hand you over to Phil. Phil MayallMD - Muse Places at Morgan Sindall Group00:30:48Thanks, Steve. Good morning, everyone. I'm Phil Mel. I'm the Managing Director of News. A little bit about me. Phil MayallMD - Muse Places at Morgan Sindall Group00:31:00I've been in the business just approaching twenty years starting at the most junior level working my way through and I've been in this particular role for approaching just approaching two years. And so as John and Kelly have outlined as I'm sure you're aware, we're a national mixed use partnership business. Everything we do is in partnership and we develop property across the range of sectors. And we've been in business forty years. So we have an incredibly strong brand developed over that time, a really strong track record. Phil MayallMD - Muse Places at Morgan Sindall Group00:31:39And coupled with the Morgansindle balance sheet as Steve has already mentioned, which is really powerful for us too. We have a real reputation for delivery. So going back a couple of years 2023, we decided that it was time to really start to leverage that brand and that position. Nationally, we don't really have a direct competitor. So it was time to leverage that. Phil MayallMD - Muse Places at Morgan Sindall Group00:32:07So we decided to refocus on larger opportunities. The reason we did that is one, again the balance sheet gives our partners comfort that we can deliver over a long term. Our forty year existence showed that we always stay in schemes. We do everything that we say we'll do. And again that's a huge comfort to our partners. Phil MayallMD - Muse Places at Morgan Sindall Group00:32:31But what it also allows us to do is a lot of schemes have fixed costs regardless of size. So it allows us to spread that capital more thinly across individual projects that come out of those schemes. It also means that as markets expand and contract, we can bring forward a different range of sectors on one single plot on one overall scheme. So it allows us to react to the market as the market is moving back and forth. And finally, what it does is it those types of schemes are very attractive to institutional investors who see them as long term opportunities. Phil MayallMD - Muse Places at Morgan Sindall Group00:33:09All of that coupled together really allows us to focus on hitting that medium term target we have of 25% return on capital employed. This slide really starts to illustrate for you the beginning of that strategy. So if we have a look at the top line across the top line there you can see the increasing size of order book. And that's been a couple of things. Firstly, as I say, it's been a focus on larger opportunities. Phil MayallMD - Muse Places at Morgan Sindall Group00:33:41But it also reflects an investment we made starting in 2022, but firmed up in 2023 where we opened in The Midlands, which we thought was a really strong market for us. And that's been proven in that we've already secured four developments under development agreement, again very much along the lines as Steve's described, we limited we limit the amount of phases that we include in the order book. We're very conservative around that. And we have a team of 14 people that are already helping us to deliver. On the second line, can see the number of projects we have on-site is dropping. Phil MayallMD - Muse Places at Morgan Sindall Group00:34:19And that's simply a result of us transitioning out of those smaller schemes and investing in new schemes. Now it takes roundabout two years from inception to bring a project forward. And as Kelly outlined at the moment at the year end we'll end up with six projects on-site 2026. We expect to be moving towards 2021. Now that isn't from a start today. Phil MayallMD - Muse Places at Morgan Sindall Group00:34:48Money has already been invested in those schemes as Kelly outlined already £6,000,000 is invested to bring those schemes forward and our longer term pipeline. And you can see that in the capital employed. So the capital employed is staying relatively steady, but the projects are dropping because that's where we're putting money into new schemes. Obviously, there's an impact on our return on capital employed in the very short term as returns are dropping as we finish schemes. Capital is going in, but we expect that then to start to move towards our medium target. Phil MayallMD - Muse Places at Morgan Sindall Group00:35:21Now what I'm going to do like Steve, I'm just going to talk you through three schemes just to illustrate what we do and how these fit into the strategy. These are all schemes that we've secured relatively recently And they show the breadth of work we do across sectors. So the first scheme is a development agreement with Durham County Council Akerley Heads. And This is just up the hill from the mainline train station. We're very keen on developing around transport hubs because you get to benefit from that transport infrastructure that's already been committed. Phil MayallMD - Muse Places at Morgan Sindall Group00:36:00And it's will be an innovation zone, an innovation district of around 400,000 square feet. We like this type of work because there are specific occupiers that will take it and they tend to be the sort of occupier that will fund and own it. So therefore, we invest the capital at the beginning to get the scheme moving and then they come along and fund the buildings as they get built, because they want a greater say in the specification and how they work. But here typically as well as a kind of illustration of our model, we actually start work. We'll be starting in 2027 maybe early late twenty twenty six. Phil MayallMD - Muse Places at Morgan Sindall Group00:36:42And that starts demolished by demolishing an existing council facility for which we get paid development management fees. As John mentioned on the comparison slide, we earn money from fees as well as profit. And the next project that I'm going to outline is Mel Square in Solihull. So this is one of the projects I referred to earlier that we've secured through our Midlands office. And much like many of our towns and cities, this is a place that's really focused on what's happening in its town center going forward. Phil MayallMD - Muse Places at Morgan Sindall Group00:37:18Now Solihull, if you're familiar with it, it's a relatively affluent town in the Midlands. And so in terms of its actual retail offer, it's relatively well populated at the moment, but the currency is taking a long term view. And there are two very large shopping centers, which clearly will not sustain in the future. So they brought Muse on board to help redevelop one of them to a more mixed use location, which will drive footfall into the other center, but critically also will deliver new leisure facilities, retail facilities and residential. And it's a type of residential that we deliver for build to rent owners and occupiers and but with some potential open market for sale in there to mix the community up some later living some key worker housing. Phil MayallMD - Muse Places at Morgan Sindall Group00:38:10And the reason for that is it will help drive local economy. So you've got Jaguar Land Rover nearby and some high growth companies. And Solihull is keen to ensure that it retains and attracts the high quality workforce that's needed to support those. And finally, a very large scheme that we're developing in Flag. And this is one we're developing through one of our two national partnerships. Phil MayallMD - Muse Places at Morgan Sindall Group00:38:38So when I refer to partnerships, I'm either referring to a partnership at a local level, so a direct development agreement or a strategic national partnership. And this is being built through our English Cities Fund partnership, which is a twenty year partnership we've had with Legal and General and Homes England. And this is a development again capitalizing on transport infrastructure. So right at the end of the Elizabeth Line in an identified growth location. So it's a mixed use development of 200,000 square feet of grade A offices around 1,600 homes across multiple phases. Phil MayallMD - Muse Places at Morgan Sindall Group00:39:17And we're going through the master planning phases at the moment. We expect to start on-site in early twenty twenty seven. And the initial phases will finish in sort of five to six years after that. But it is a long term project. Again the same with Steve's team. Phil MayallMD - Muse Places at Morgan Sindall Group00:39:37We're very conservative in what we include in our order book and then we add as we go along. That's it for me. Thank you. John MorganFounder, CEO & Director at Morgan Sindall Group00:39:47Thank you, Phil. So I'd just sort of summarize where we are. So we're an organic growth big story and that's not changing. We might do minor bolt ons if they sort of add to that organic growth, but just think of it as more organic growth and we've got a long way to go. That strong balance sheet and substantial cash is absolutely fundamental to our core and we want to hang on to that. John MorganFounder, CEO & Director at Morgan Sindall Group00:40:11I'm pleased that we've been able to increase the medium term targets for both fit out and construction. Following two profit upgrades this year, we're on track to deliver results for 2025 in line with our current expectations. And any hard questions for the team? Aynsley LamminEquity Analyst - Building & Construction at Investec00:40:37Thanks. Good morning. Aynes Lelandman from Iveso. Just two for me please. Just on partnerships, obviously some in the sector has been some kind of mixed results should we say on the partnership size. Aynsley LamminEquity Analyst - Building & Construction at Investec00:40:47And with the new government kind of announcements around that does that encourage increase your kind of expectations for you to put more capital employed in that business? When do you actually expect to see the kind of demand coming through on the ground to bump that division? Are you talking partnership housing? Partnership housing, yes. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:41:05So first of all, John touched on the spend We see the rent settlement ten years 1% plus CPI has been a real advantage to partnership homes. It's making housing associations have a much firmer footing on the ground. In terms of Lubbels partnership model, and I think we can only talk about ours, it's obvious to see that the contracting aspect of it has helped us out significantly in what's been quite a prolonged difficult period in the housing sector. Aynsley LamminEquity Analyst - Building & Construction at Investec00:41:50And just on fit out, obviously you had the kind of disruption in the competitive landscape. Just wondered if you could provide a bit more color on how that's settling down. Is the order book now kind of where you'd expect it to plateau and maybe edge back a bit because some of that work that you've won from the one that went bust easily? John MorganFounder, CEO & Director at Morgan Sindall Group00:42:06It's probable that the order book is higher than I might have expected six months ago. But we do have sort of some very strong competitors who are giving us a run for our money. Stephen RawlinsonDirector at Applied Value Limited00:42:21Hi. Stephen Rawlinson from Applied Value. Can I talk a little bit if you don't mind about risk? Because you've got this long order book and you've got prices obviously, build costs rising. You've got variations to take into account particularly in mixed use. Stephen RawlinsonDirector at Applied Value Limited00:42:40Could you just sort of talk us a little bit through I mean, know it's a results meeting, but nonetheless it'd be very, very helpful because those order books are getting bigger and longer. And as such therefore the risk levels rise and variations particularly mixed use on existing pre existing sites gives you a high level of risk. Just sort of give us a bit of a clue as how you might be tackling that and to what extent your results are insulated from any concerns that we might have about variations? Phil MayallMD - Muse Places at Morgan Sindall Group00:43:08I'd certainly clarify on the variations. Stephen RawlinsonDirector at Applied Value Limited00:43:11Well, just finding a bomb underneath a slough or something like that which I'm sure John Betshamy would love to have. That sort of thing. These are there are things that go wrong in long term projects and these are increasingly long term projects that you're engaging in. And therefore obviously risk levels of variations that you might find on sites and so forth increases. Phil MayallMD - Muse Places at Morgan Sindall Group00:43:36No. Thank you. Thank you for the clarification. I mean first of all in terms of the reference to the long order book as I mentioned a few times, we actually limit the amount we put in so that we can make sure that as we progress through a scheme that as we move forward that we can expand the order book rather than going the other way finding the proverbial bomb and then coming back in. We've been doing this as a business forty years. Phil MayallMD - Muse Places at Morgan Sindall Group00:44:03So those things that you refer to in the ground and those challenges have been there. So we've got a lot of DNA in terms of delivery. And in terms of taking a long term approach, we can focus on that and resolve those issues as they come along rather than exiting all one basket and it'd be a big issue that undermines us. So we're pretty well versed in responding. John MorganFounder, CEO & Director at Morgan Sindall Group00:44:26And if I may add a bit, critical thing is when we have a development agreement that actually is the mechanism for agreeing the price that we pay for the land in any phase. So and we don't have to progress with any phase unless it's viable. So that is the big protection. Stephen RawlinsonDirector at Applied Value Limited00:44:43And the other thing in Construction, I mean, you've increased the revenue target by 500,000,000.0 Some on a pro form a basis about £200,000,000 or £200,000,000 will come from Property Services being in part of that envelope. There is a little bit in the text about your feeling of confidence to get what is in fact 33% increase in the underlying construction revenue. Can you just talk us a little bit through the level of confidence that you have about that in this meeting please? John MorganFounder, CEO & Director at Morgan Sindall Group00:45:14Yes. So I mean clearly we will see quite a bit of progress towards that this year. So it's not as big a jump from the run rate as it might appear. So and the order book is going up and our market share is continuing to increase and has done consistently over the last few years. Kelly GangotraCFO & Director at Morgan Sindall Group00:45:30I think I'd add to that. I mean I said earlier the order book is at £1,100,000,000 But actually the important point to note is the preferred bidder position of £1,400,000,000 And this division has a very strong track record of converting in the high 90%. So I think you should look at it then that way, but also the work it's been winning and the market share it's been gaining. John MorganFounder, CEO & Director at Morgan Sindall Group00:45:51It's also been strengthening the regions where the market share is less over the last few years. And so there's still market share to go for. Allison SunVP - Equity Research at Bank of America Merrill Lynch00:46:06Allison from Bank of America. Two following up questions on the fit out and partnership housing. So on the fit out, I wonder because previously you mentioned the higher competition and also margin to normalize. But right now it looks like the prospect is better. Do you expect the margin normalization probably will take longer time to realize? Allison SunVP - Equity Research at Bank of America Merrill Lynch00:46:29The first one. And the second on the partnership housing, because you also mentioned the RMB39 billion funding from the government. And my understanding is those housing associations and also builders will start beating the funding maybe starting in the next three months or so. Do you guys have a plan or the target like how much funding you actually want to get? Kelly GangotraCFO & Director at Morgan Sindall Group00:46:50I will take the fit out and perhaps you'll do partnership housing. So look, I think the reality is the normalization is coming. It's really hard to identify precisely when. What I can guide you to is that 6.9% is still driven and influenced strongly by the exceptional volumes and therefore leverage we're gaining from our OVADs. So you should still think about your normal operating margin somewhere in the corridor between 5% to 6% take the mean of 5.5%. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:47:23And just on the £39,000,000,000 point, I think it's fair to say for all of our all housebuilding businesses that gestation period is around about three years from first of all applying for planning permission through to making a start and delivering product at the other end. So whilst it is backloaded for in terms of the government spending review, it does give local authorities. It gives housing associations the confidence now to start building up the workload for the future knowing that it takes three years to pick to make a real start. Jonny CoubroughDirector - Building & Construction Research at Deutsche Numis00:48:01Johnny Kubra from Deutsche Numis. Thanks for the presentations. Firstly on partnerships, so perhaps for Steve, just interested to hear whether you think the contracting market sorry within partnership housing, whether the contracting market is growing or whether it's an impact of Section 106 completions being lower? Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:48:21I think there's two reasons for the growth that we are experiencing. First of all, you will have all seen that there was a number of SMEs who unfortunately fell into administration and we've obviously benefited from that. As we sit now, see greater growth in the contracting element partly because of the spending review and confidence in the housing associations. And partly because a lot of workload has been held up with building safety gateways and the like and those are starting to now move their way through and that's allowing us to just see a little bit more sight on contracting work. Jonny CoubroughDirector - Building & Construction Research at Deutsche Numis00:49:05Thanks. And perhaps a follow-up on the mixed tenure side. Do you have visibility of when those revenues might grow? And was it a surprise to see them lower given the market was recovering albeit at a slow pace? Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:49:19I think you're all aware that our business strategy is to move from contracting majority to a mixed tenure majority. We've got the pipeline visible to allow us to do that. But obviously, we're waiting for market conditions to press the button and make that change. Jonny CoubroughDirector - Building & Construction Research at Deutsche Numis00:49:38Thanks very much. And then perhaps also a question for Phil on Muse. Just interested, I mean John mentioned that at the moment there are a lot of schemes coming to market and that might change. Why do you think so many are coming to market at the moment? Is it coincidence or is there anything like that? Phil MayallMD - Muse Places at Morgan Sindall Group00:49:55In terms of partnerships, in terms of opportunities. I think it's a combination of things. You're seeing things like the Solihull example where you've got property that is out of date and needs repurposing, needs redeveloping. So you're seeing an increase of that as a structural shift you're seeing through residential sorry through the change in the retail sector. We're seeing other things like more recently there's been a growth clearly in logistics post COVID. Phil MayallMD - Muse Places at Morgan Sindall Group00:50:27And so there are some drivers there. And this is where our business complements with Lovell also a shift towards urbanization of residential. So the residential we do is mid to high rise in tiny city centers and particularly in places like Manchester Leeds scheme in Bradford we're seeing that. So it's a combination of factors that's driving it. Jonny CoubroughDirector - Building & Construction Research at Deutsche Numis00:50:57Thanks. Edward PrestAnalyst at Berenberg00:51:04Thank you. Hello. It's Ed Press from Berenberg. Firstly, in relation to Partnership Housing. So you've got a target of 8% margin. Edward PrestAnalyst at Berenberg00:51:14How do you bridge that gap between where you are now in the context of there's growth in contracting which is presumably puts downward pressure on it and then the big growth in affordable housing? And I'm going to guess that affordable housing commands lower margin. Do you therefore need a big recovery in the housing market essentially in order to achieve that 8%? It's twofold. We've it's partly performance. Edward PrestAnalyst at Berenberg00:51:38We believe that the workload that we've got in our pipeline now will generate greater returns than we've got. But also it is moving that mix back to a mix tenure side of it. We're talking about the medium term here. There is improvement in the housing market and we've got confidence therefore that we will hit our medium term targets. Kelly GangotraCFO & Director at Morgan Sindall Group00:52:02I'd just add to that Steve. The strategy which we've publicized is opening larger sites which means from a next tenure perspective we'll have a higher proportion of work or volume of work going through open market sales which does carry a higher margin. So the blend of everything gets us in the medium term closer to 8%. Edward PrestAnalyst at Berenberg00:52:26Thank you. Alastair StewartConstruction & Property Analyst at Progressive Equity Research Limited00:52:30Alastair Stuart from Progressive. A couple of broadish questions. First on the property on partnership housing. In terms of the volumes, it was interesting to see on your wave diagram that over the four years it was eight regions nine, ten, 11. Is it going to continue in that sort of trajectory? Alastair StewartConstruction & Property Analyst at Progressive Equity Research Limited00:52:53How many regions are you going to get up to do you imagine you'll get up to? And will the actual completion volumes sort of follow that path? And you say you've got a target 3,500 over eight years. What's going to be the run rate towards the end of that? And where could it go in? Kelly GangotraCFO & Director at Morgan Sindall Group00:53:18Could I just clarify before Steve answers? The 3,500 just relates to two partnership schemes being Cardiff and and Barnett Council. Just those two got a target for the eight years. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:53:31And on the region point we're done for now. We've been through the learning curves. We feel as if we've got enough capacity to feed that growth. Some of our larger partnership schemes allows us to almost have a bolt on to a region. So you still have your overhead structure, but it can be run as an addition to rather than instead of the workload. So yes, we're done for now. Alastair StewartConstruction & Property Analyst at Progressive Equity Research Limited00:53:53Volume should stay steady ish in the medium term? John MorganFounder, CEO & Director at Morgan Sindall Group00:53:57No. We'd expect much more volume through our existing number of regions. Kelly GangotraCFO & Director at Morgan Sindall Group00:54:01So what about leverage from the regions we have? We purposely created capacity knowing there was this bow wave of work coming through us. Steve ColebyMD - Lovell Partnerships at Morgan Sindall Group00:54:10We've been building strong teams who we believe have got more capacity in them. Alastair StewartConstruction & Property Analyst at Progressive Equity Research Limited00:54:14Sure. And the second question was on Defence. I imagine there are very big opportunities and they'll cross a few of your divisions. Can you just talk us through that a bit? John MorganFounder, CEO & Director at Morgan Sindall Group00:54:28Yes. John MorganFounder, CEO & Director at Morgan Sindall Group00:54:29Think predominantly it's going to be construction infrastructure, the defense. There may be a little bit of housing. Residential as well. Yes. But predominantly those two. Any other questions? Well, thank you very much indeed for your time everyone. Thank you.Read moreParticipantsExecutivesJohn MorganFounder, CEO & DirectorKelly GangotraCFO & DirectorSteve ColebyMD - Lovell PartnershipsPhil MayallMD - Muse PlacesAnalystsAynsley LamminEquity Analyst - Building & Construction at InvestecStephen RawlinsonDirector at Applied Value LimitedAllison SunVP - Equity Research at Bank of America Merrill LynchJonny CoubroughDirector - Building & Construction Research at Deutsche NumisEdward PrestAnalyst at BerenbergAlastair StewartConstruction & Property Analyst at Progressive Equity Research LimitedPowered by