Morgan Sindall limits inflation impact amid supply chain challenges

Morgan Sindall has managed to limit the impact of inflation and material shortages on its operations, according to a trading update issued this morning, but it added that supply-chain difficulties remain “a significant challenge”, exacerbated by the war in Ukraine.

“The impact continues to be minimised on most projects through focused sourcing through the supply chain and ongoing operational efficiency,” the contractor said in its update.

Morgan Sindall said its trading this year has remained “in line” with the expectations set out in its full-year results for 2021, released in February.

In particular, it said construction and infrastructure work should deliver margins in line with the guidance given earlier, of 2.5 to 3 per cent for construction and 3.5 to 4 per cent for infrastructure.

The firm said work in the fit-out sector has been very strong too, with the forward order book giving it confidence for the rest of the year. A slowdown in maintenance work meant that Morgan Sindall’s work in property services began slowly, but the contractor said it is “expected to improve” this year.

The contractor said it remained “confident” that its performance in 2022 would be in line with previous estimates, on the basis of its ability to date and its pipeline of work for the year.

Morgan Sindall also revealed that its partnership housing arm has signed up to housing secretary Michael Gove’s remediation pledge, committing to fix all of the fire-safety defects on the buildings it has built over the past 30 years. The contractor said costs related to the pledge are “are not expected to be material to the group”. More than 35 developers have signed up to the plan, which Gove said would raise £2bn to remediate affected buildings.

In a separate trading update published today, developer Barratt Homes revealed that it had brought forward its employee salary review in light of the increase in the cost of living. The housebuilder said it had awarded a rise to all eligible employees.

Barratt’s update also focused on the government’s plans for remediation. The firm has signed Gove’s pledge, but labelled plans to impose a building safety levy on all developers “unjust and disproportionate”.

In its trading update, the housebuilder said the levy would “further punish UK housebuilders, who were not responsible for most of the historical buildings or building safety issues being addressed, and fails to effectively allocate the cost of remediation to those responsible”.

Gove said the levy would raise a further £3bn to repair residential buildings in need of remediation.

The construction sector has been battling mounting material and labour costs over the past two years, and was more recently hit with rising energy and fuel prices. Earlier this week, the Construction Products Association (CPA) revised down its growth prediction for the year, warning that the combination could have an “increasingly depressing impact” on the sector.

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