Builder is on the highway to profit

UPDATE

MORGAN Sindall is a construction group with a heart. The company was co-founded by John Morgan in 1977 and he is still at the helm today, overseeing a business with more than 6,500 employees and turnover of £3.1 billion.

The group is involved in hundreds of projects across the country, sometimes for commercial clients, often for local authorities and government. Schemes include refurbishing halls of residence at the University of Aberystwyth, fitting out a flagship store for Microsoft, building affordable homes across the country, upgrading roads and motorways and working on regeneration projects in towns such as Salford, Slough and Aberdeen.

Many building firms have come a cropper by chasing sales over profit. Morgan Sindall is different. The firm shies away from high-profile, big-ticket projects, focusing instead on smaller contracts where money can be made.

In that vein, Morgan intends to make sure that there is at least £60 million of cash on the balance sheet every day in 2020. This is not just hoarding money – it reassures customers and allows the company to bid for projects with long-term prospects.

Morgan is also aware of the need for a strong culture, looking after employees so they stay for longer and looking after customers so they come back for more business.

The approach has served Morgan Sindall well.

Midas recommended the shares in 2017, when they were £14.10. Today, they are 24 per cent higher at £17.54 and should continue to increase in value.

Annual results last month showed an 11 per cent increase in profits to £90 million and a similar increase in the dividend to 59p.

The group also revealed a 14 per cent rise in secured orders to £7.6 billion, with a strong pipeline of future projects across the business. Morgan is particularly excited by the housing division, which operates under the Lovells brand.

This subsidiary has been reinvigorated, following a slack few years. Profits surged 50 per cent in 2019 and further strong gains are expected, reflecting increased investment and new management.