Morgan Sindall lifts profit 21% as Fit Out and Construction power record first half

Morgan Sindall Group has delivered record first-half results, powered by strong performances from its Fit Out and Construction divisions.

Revenue increased by 8% to £2,562 million, while adjusted profit before tax climbed 21% to £116.1 million. Adjusted earnings per share rose 22% to 186.1p, helping the board raise the interim dividend by 10% to 55.0p per share.

The headline numbers are strong, but the performance was not evenly spread. Fit Out and Construction did most of the heavy lifting, while the two Partnerships businesses faced subdued housing demand and project viability pressures.

Morgan Sindall's key half-year figures

Metric	HY 2026	HY 2025	Change
Revenue	£2,562 million	£2,370 million	+8%
Adjusted operating profit	£111.5 million	£91.8 million	+21%
Adjusted profit before tax	£116.1 million	£95.9 million	+21%
Adjusted earnings per share	186.1p	153.1p	+22%
Period-end net cash	£418 million	£390 million	+£28 million
Interim dividend per share	55.0p	50.0p	+10%

Adjusted figures exclude intangible amortisation and exceptional building safety charges. There were no such adjustments in the first half of 2026, meaning adjusted and reported profit before tax were both £116.1 million.

The adjusted profit before tax margin rose from 4.0% to 4.5%. That matters because profit grew considerably faster than revenue, suggesting that contract quality, operational execution and the mix of work all improved.

Fit Out remains the standout performer

Fit Out generated revenue of £996 million, up 19%, while operating profit also rose 19% to £69.1 million. Its operating margin remained at 6.9%.

The division benefited from high project volumes, operational delivery and the timing of contract completions. Its secured order book stood at £1,331 million, slightly above the £1,312 million reported at the end of 2025.

Management has increased Fit Out's medium-term annual operating profit target to £100 million-£130 million, from £80 million-£100 million previously. More strikingly, profit for 2026 is now expected to be slightly ahead of the top of that revised range.

That increased target is an important signal. It suggests management considers the division's performance to be supported by its market position and future workload, rather than viewing the first-half result as purely temporary.

Construction delivers faster margin growth

Construction also produced an excellent result. Revenue rose 18% to £742 million, while operating profit jumped 47% to £24.4 million.

Its operating margin improved by 70 basis points, with one basis point equal to one-hundredth of a percentage point, from 2.6% to 3.3%. Morgan Sindall attributed the progress to disciplined contract selection, stronger earnings quality and operational execution.

The secured order book increased to £1,904 million, with a further £1,276 million at preferred bidder stage. Preferred bidder work is not yet secured in the same way as the formal order book, but it provides additional visibility over potential future activity.

The medium-term Construction margin target has been raised from 3.0%-3.5% to 3.5%-4.0%. The annual revenue target remains above £1.5 billion. For 2026, the margin is expected to be around the entry point of the revised range, with revenue continuing to progress towards £1.5 billion.

Housing remains the weak spot

Partnership Housing's revenue fell 14% to £347 million, although operating profit held steady at £13.2 million. Its margin improved from 3.3% to 3.8%, helped by the mix of work delivered.

The problem is that more capital is being tied up for a lower return. Period-end capital employed increased by 30% to £566.4 million, while return on average capital employed, or ROCE, fell from 10% to 8%.

ROCE measures the operating return generated from the capital invested in a business. The decline reflects slower sales activity, particularly for housing and apartment products in London, alongside continued investment in future partnership opportunities.

Management now expects Partnership Housing's full-year operating profit to be slightly below the prior year, with ROCE also below 2025 levels.

Mixed Use Partnerships reported an operating loss of £1.1 million, compared with a £1.5 million loss previously. The division is investing in projects before they begin generating profits and expects to report a small full-year loss as it balances project starts against near-term viability challenges.

These divisions may provide long-term opportunities, but they are currently consuming capital while producing modest or negative returns.

A large order book supports visibility

Morgan Sindall ended the period with a secured order book of £12.2 billion, up 2% from £12.0 billion. Preferred bidder work increased to £7.3 billion, taking the combined total to £19.5 billion.

The Partnerships order book grew 18% to £12.1 billion, while Fit Out's total was unchanged at £1.7 billion and Construction Services declined marginally to £5.7 billion. These figures include secured and preferred bidder work.

The order book provides useful visibility, but investors should remember that size alone does not guarantee profitability. Contract selection, pricing and execution remain crucial in construction, particularly across long-duration frameworks.

Cash is strong, although investment absorbed funds

Period-end net cash increased to £418.3 million from £389.5 million a year earlier. Average daily net cash rose to £423.1 million, and management continues to expect the 2026 average to exceed £400 million.

However, operating cash flow was an outflow of £10.0 million and free cash flow was an outflow of £27.5 million. This primarily reflected working capital movements and £121.8 million of net investment in Partnership Housing.

That makes the cash position reassuring, but it also highlights the importance of converting the additional capital invested in housing developments into future sales and returns.

The 10% dividend increase to 55.0p per share reflects both the profit growth and balance sheet strength. It is due to be paid on 22 October 2026 to shareholders on the register on 2 October 2026, with an ex-dividend date of 1 October 2026.

What investors should watch next

The central investment question is whether Fit Out and Construction can continue to offset weaker housing-related returns.

The positives are clear: record profit, expanding group margins, raised divisional targets, a substantial order book, strong net cash and double-digit dividend growth. Infrastructure also remains steady, with its full-year margin expected at the top of its 3.75%-4.25% target range.

The main concerns sit in the Partnerships businesses. Housing confidence remains subdued, capital employed has increased sharply and Mixed Use Partnerships is expected to remain loss-making in 2026.

For now, Morgan Sindall expects full-year performance to remain in line with its current expectations. The quality of delivery in Fit Out and Construction gives that outlook support, but improved returns from the capital committed to housing would make the group's performance considerably more balanced.