Morgan Sindall Posts Record FY 2025 Results with 35% Profit Jump and 20% Dividend Hike

Construction: improving quality of earnings

• Revenue up 11% to £1,159m; operating profit up 20% to £37.0m.
• Operating margin 3.2% – bang in the 3.0%-3.5% target range.
• Order book £1,112m, up 17%, with 80% by value secured for 2026.

My take: steady, well-managed progress with sensible risk selection. 2026 is expected to land mid-range on margin with revenues moving towards £1.5bn.

Partnership Housing: resilient in a tough private market

• Revenue up 5% to £903m; operating profit up 16% to £42.0m; margin 4.7%.
• Order book up 7% to £2,330m, with 60% for 2027 and beyond.
• Capital employed rose to support long-term public partnerships, nudging ROCE to 10%.

My take: the pivot to public-sector contracting is doing its job while private open-market sales remain subdued. Management still aim for 8% operating margin and ROCE up towards 25% medium term. Expect a gradual demand recovery in 2026 and ongoing investment.

Mixed Use Partnerships: investing ahead of growth

• Revenue £52m; expected operating loss of £5.3m as planned investment was expensed.
• Order book jumped 13% to £4,615m after converting eight preferred-bidder schemes.
• Average capital employed £125.1m; ROCE -4% as a result of the planned investment phase.

My take: this is the long game. The Board has upped the medium-term ROCE target to “up towards 30%”, which tells you confidence is high. 2026 profits are flagged to be modest as more schemes start on site – value creation should follow as these build out.

Infrastructure: margins firm, revenue timing effects

• Revenue down 11% to £935m as several big frameworks are in early design phases.
• Operating profit £37.2m, just 3% lower, and margin improved to 4.0%.
• Order book £1,890m, broadly flat; around 98% secured via frameworks.

My take: the right work with the right clients in nuclear, energy, rail, water and highways. Medium-term revenue target has been raised to “towards £1.5bn” with margin guidance unchanged at 3.75%-4.25%. For 2026, revenue is expected to be closer to £1bn with margin mid-range – sensible and cash-generative.

Property Services: back to profit and now integrated

• Revenue £212m; operating profit £2.0m after 2024 remediation.
• Order book £714m, down 20% as focus shifted to delivery and rebalancing towards planned works.

This operation has been folded into Construction from 1 January 2026, which should simplify reporting and unlock synergies.

Order book and pipeline: record visibility

The secured order book rose to £12.0bn (+5%). Add £7.1bn at preferred-bidder stage and you get £19.1bn of work in the bag or near enough. Notable divisional positions: Partnership Housing £2,330m (+7%); Mixed Use Partnerships £4,615m (+13%); Fit Out £1,312m (-9% following heavy delivery); Construction £1,112m (+17%); Property Services £714m (-20%); Infrastructure £1,890m (broadly flat). That mix gives Morgan Sindall both longevity and balance across cycles.

Cash, dividends and capital allocation

• Year-end net cash £531m; lowest day net cash in 2025 was £270m.
• Operating cash flow £195.9m; free cash flow £161.5m after investment.
• Total dividend 158.0p, up 20%, covered 2.4x.

The capital allocation framework prioritises a strong balance sheet, investment in Partnerships, ordinary dividends and – if surplus remains – potential specials or buybacks. With average daily net cash in 2026 expected to be in excess of £400m, optionality is high, though management will keep plenty of headroom to stay competitive on frameworks and protect against downturns.

Outlook for 2026 and medium-term targets

Management say they are on track to deliver an outcome for 2026 in line with the revised expectations set out on 12 February 2026. Divisional signposts:

• Fit Out – another strong year, profits below 2025 but well above the £80m-£100m target range.
• Construction – margin mid-range of 3.0%-3.5%; revenue progressing towards £1.5bn.
• Infrastructure – margin mid-range; revenue nearer £1bn given project timing.
• Partnership Housing – solid profit growth; ROCE similar to 2025 as investment continues.
• Mixed Use Partnerships – modest profit as starts accelerate; average capital employed c£125m-£140m.

Targets have been lifted where it counts: Infrastructure now eyes revenue towards £1.5bn, and Mixed Use Partnerships’ ROCE target has been raised to up towards 30%.

ESG and governance quick take

MSCI ‘AAA’ and CDP ‘A-’ ratings were retained, and the Group reports a 55% reduction in Scope 1 and 2 emissions since 2019. Governance-wise, the Responsible Business Committee has been dissolved with oversight streamlined between the Board and Audit Committee, and from 1 April 2026 the CFO becomes Chief Financial and Commercial Officer.

Risks to watch and what could move the shares

• Positives: continued office fit-out demand, conversion of large regeneration schemes, infrastructure frameworks moving from design to delivery, and cash-backed optionality on capital returns.
• Negatives: slow recovery in private housing, longer preconstruction periods, project delivery risks, and cyber-security threats. Building safety remains a managed issue – the exceptional charge was only £0.4m this year.

Josh’s bottom line

This is a high-quality print from a well-run, cash-rich contractor. Fit Out was exceptional, Construction and Infrastructure are on strategy, and Partnerships are investing for the next leg. With a record pipeline, upgraded divisional targets and a 20% dividend lift, the set-up for 2026 looks sound – even if Fit Out normalises a touch. For long-term holders, this remains a disciplined compounder anchored by cash, culture and frameworks.