Acquisition
December 20 2001 - 10:16AM
UK Regulatory
RNS Number:0483P
Morgan Sindall PLC
20 December 2001
Morgan Sindall plc
("Morgan Sindall" or "the Group")
#16.45 million acquisition of Pipeline Constructors Group plc
("Pipeline Constructors" or "the Company")
Highlights
- Acquisition of Pipeline Constructors, a leading provider of utilities
services, for a consideration of #16.45 million
- Consideration to be satisfied by a mixture of cash, payable from
existing resources, and loan notes
- Acquisition brings further scale to the Group's growing Infrastructure
Services division, Morgan Est
- Powerful synergies between Pipeline Constructors and Morgan Est in
terms of complementary services and customer base
- Utilities market progressing towards integrated outsourcing contracts
- the combined businesses will be well positioned to benefit
- The Directors of Morgan Sindall believe the acquisition will be
earnings enhancing in the first financial year
- Current trading remains strong across all divisions with record total
order book
Introduction
The Board of Morgan Sindall plc, the construction brands Group, today
announces that contracts have been exchanged on the acquisition of Pipeline
Constructors Group plc, a leading provider of utilities services. The
acquisition is in line with Morgan Sindall's stated strategy to expand its
Infrastructure Services division.
Pipeline Constructors was formed in 1966 and has built its business primarily
in the water services sector, although it also services electricity and gas
clients. With a head office in Corby and 1,000 employees, the business has a
national presence with offices in both Scotland and England.
For the year ended 30 September 2001, the company reported turnover of #75.2
million with pre-tax profits of #332,690. Net assets at 31 December 2001 are
anticipated to be #1.9 million including some estimated #2.0 million cash. The
final consideration is dependent upon the completion balance sheet.
The cash element of the consideration of #9.1 million will be paid from Morgan
Sindall's existing resources. The remainder will be payable in loan notes.
Completion of the acquisition is expected to take place on 2 January 2002. The
Directors of Morgan Sindall believe the acquisition will be earnings enhancing
within the first financial year.
Reasons for the acquisition
The powerful synergies between Morgan Est and Pipeline Constructors will
enable the enlarged business to further penetrate the utilities market as
utility companies increasingly seek improved and integrated outsourced
services from their providers. The utilities market in the UK in which
Pipeline Constructors operate is estimated at approximately #2 billion.
Pipeline Constructors has a strong presence and increasing penetration in the
water sector, especially in potable water and sewerage capabilities.
Complementary services include design, materials management and information
technology.
Pipeline Constructors has a four-year order book valued at approximately #150
million and a long established blue chip client base. Major water customers
include East of Scotland Water, Yorkshire Water, Severn Trent Water, Anglian
Water and Wessex Water. Electricity and gas clients include East Midlands
Electricity, Scottish & Southern Energy and the Ministry of Defence. During
2001 the company was successful in securing major new long-term contracts with
both West of Scotland Water and 24seven electricity. It also has long-term
framework agreements with United Utilities and Thames Water. The majority of
these major UK utility companies are already customers of Morgan Est.
The Directors believe that the acquisition of Pipeline Constructors will
provide the opportunity to bring higher potential margins and increase in
earnings to the Infrastructure Services division. There is also the
opportunity for substantial cost savings through the proposed integration of
the two businesses.
Current Trading
The Board is confident that the results for the year to 31 December 2001 will
meet market expectations. Trading across the Group's four divisions remains
strong and, with the addition of this earnings enhancing acquisition, the
total order book is now at a record #750 million.
The Board announced on 12 November that the Group's regional construction
division will, from 1 January 2002, be merged into one company and branded
Bluestone plc. This strategic decision will drive performance and enable the
division to respond more effectively to client demand. Whilst no exceptional
costs will be incurred, the Board believes that the division will benefit from
some restructuring investment and that therefore the contribution from this
division will be below market expectations for 2002. Despite this investment,
the construction division is expected to achieve margins of approximately 1%.
The Group's outlook remains positive. This year Morgan Sindall announced three
important acquisitions that have significantly broadened its offering and will
provide improved quality of earnings for the future. Despite difficult
economic conditions, the Board is confident that the strength of the Group's
portfolio will enable further growth to be achieved and that 2002 will prove
to be yet another strong year.
John Morgan, Executive Chairman of Morgan Sindall, commented:
"The Infrastructure Services division is an important area of growth for our
Group. The utilities sector brings huge potential for those businesses that
can provide integrated solutions. We believe that Morgan Est, combined with
Pipeline Constructors, will become one of the leaders in this sector."
20 December 2001
Enquiries:
Morgan Sindall Tel: 020 7307 9200
John Bishop, Finance Director
College Hill Tel: 020 7457 2020
Kate Pope/Matthew Smallwood
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