Rocketing fit out market the driver behind upgraded targets, Morgan Sindall boss says

A huge rise in the order book of its fit out business is behind Morgan Sindall announcing new targets for its businesses with some analysts suggesting profit at the group could hit £180m within five years.

The division saw a 119% rise in secured workload last year to £897m and chief executive John Morgan admitted: “Fit out’s order book is high. It’s also bigger and longer.”

He said firms had taken advantage of the pandemic to give their premises a makeover while staff were working from home with contractors able to press on free from noise restrictions. “We were able to drill all day long because people weren’t in. It was an opportunity to get fit out done. A lot of people thought it would be a good idea to do.”

Fit out was given a previous target of an annual operating profit of around £35m but last year beat this by 26%, posting a figure of £44.2m on revenue up 14% to £795m.

The division has now been asked to produce operating profit of between £40m and £45m over the next three to five years leading to a series of revenue and margin upgrades across all parts of the business.

Schemes the fit out arm won last year included more than 500,000 sq ft across two sites in Canary Wharf, east London, with one job for oil giant BP, and nearly 400,000 sq ft for telecoms firm BT at sites in Bristol and Birmingham.

Its construction arm, which concentrates on building work, posted an operating margin of 3.2% last year with its medium-term target being set at between 2.5% and 3%.

Morgan added: “Anything over 3% [in building] may happen occasionally but you can’t bank on that.”

The new targets for Morgan Sindall’s businesses, which have been introduced now after previous ones were reached ahead of schedule, have led to house broker Numis suggesting pre-tax profit of £180m is achievable in the medium term – a figure thought to be a record for a listed contractor.

Another house broker, HSBC, said it expected a pre-tax number of around £179.5m in the medium term, which would be a 42% rise on the record £126.2m pre-tax profit recorded last year.

Both are expecting pre-tax profit to be around £127m this year with next year’s figure around the £133m mark. The pair are suggesting income this year will be between £3.2bn and £3.3bn with that increasing next year to be between £3.4bn and £3.5bn.

Revenue last year was up 6% to £3.2bn – a 5% hike on the number it posted in 2019.

The firm’s overall order book for 2021 stood at £8.6bn, a rise of 4% on the year before.

Meanwhile, the firm said that Kate Bowyer will become the new managing director of its urban regeneration business Muse Developments. Currently the finance director, she will take over from Matt Crompton who is retiring in April after 30 years at the firm, 15 of those as managing director.