Sindall shrugs off housing gloom

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Morgan Sindall, the construction group, on Monday gave an upbeat outlook for the rest of 2008, as the office refitting and outsourcing specialist shrugged off deepening concerns over the troubled housing sector.

The shares jumped in early trading after the group revealed a 13 per cent increase in first-half pre-tax profits to £28.6m ($56.1m), though without the effect of last year’s acquisitions the result would have been broadly stagnant. The shares closed 9½p higher at 569½p, though they have lost nearly half their value this year.

Last month, the group warned that its exposure to private sector housebuilding and commercial development would hit its 2009 performance. That warning, made at the same time as an unexpected £58m writedown on the £23m acquisition last year of two divisions from engineering group Amec, triggered a 22 per cent fall in its share price on the day. On Monday, Morgan Sindall maintained that it was on track to deliver record results for 2008. For next year, analysts’ consensus estimates suggest that profits will fall about 10 per cent to £61m.

In the six months to June, revenues at Morgan Sindall’s construction unit more than doubled, compared with the same period last year, to £418m. The group’s other activities include office refurbishment, affordable housing, urban regeneration and infrastructure services, such as sewage and railway works.

John Morgan, executive chairman, said that the infrastructure unit had the best outlook, with orders from government and water companies.

The amount of work in the pipeline was “looking very positive”, he added.

Group revenues rose to £1.24bn, against £836m in the first half of last year. Net cash was £98m (£62.4m).

Morgan Sindall increased the interim dividend 20 per cent to 12p. Basic earnings per share rose 22 per cent to 50.1p.

Analysts were broadly positive but cautioned that nervousness about the building sector could hit the refurbishment and social housing divisions.

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