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鈥淐ash is king,鈥� goes the phrase and never more so than at Morgan Sindall, the contractor which this year has recorded the unprecedented feat 鈥� for a listed builder, anyway 鈥� of upgrading its predicted annual profit four times. This is an industry, remember, where, the opposite usually happens.

鈥淲e鈥檙e going to have a record year by a country mile,鈥� concedes its chief executive, John Morgan, the man who helped to set up the company, originally as a fit-out firm, in 1977 with Jack Lovell. Morgan, who turns 66 on New Year鈥檚 Eve, does not go in for big statements 鈥� it鈥檚 not his style 鈥� so what he is saying is quite some admission.

The firm鈥檚 previous best performance was the near 拢89m pre-tax profit it posted in 2019, but this year analysts are expecting the figure to be around the 拢127m mark. It last slipped into the red in 2015 鈥� the result of two problem contracts it inherited when it bought Amec鈥檚 construction and regeneration business in 2007 鈥� and has not racked up an exceptional item since, of which Morgan is equally proud.

鈥淲e鈥檙e not the people who want to go out and do the trophy jobs, necessarily,鈥� Morgan says from the firm鈥檚 head office in central London. 鈥淲e鈥檙e a bit cautious, a bit careful. We do small jobs.鈥� The firm鈥檚 typical contract size is 拢6.5m.

As befits the chief executive鈥檚 description of the firm, its headquarters just off Oxford Street in central London are functional rather than showy, although there are stylish touches courtesy of its fit-out business. He works there at a desk in the middle of an open-plan office alongside a handful of others. The whole space takes up half a floor.

It must be one of construction鈥檚 smallest head offices, certainly not the grandiose brass plate address normally found for a FSTE 250 listed company. 鈥淲e are so decentralised,鈥� he says. 鈥淲e are very simple as a business; we don鈥檛 go in for big meetings.

鈥淭he office here is pretty straightforward. If you run a site at Morgan Sindall, you have more powers. My job is to make sure I鈥檝e got some great people in making decisions. It鈥檚 as simple as that.鈥�

This niftiness helped last spring when the covid-19 pandemic briefly threatened to bring Armageddon to construction and saw site after site shut down. Listening to the prime minister鈥檚 announcement about the first lockdown that Monday evening in March 2020, Morgan quickly realised that construction was not being told to shut its doors.

>>See our 2021 rankings of the top 150 contractors and housebuilders

鈥淎 lot of people were waiting for head offices to give a little memo telling them what to do. We didn鈥檛 do that. We were like a load of speedboats as opposed to an oil tanker. We finished off our jobs, on the whole, on time.鈥�

The pandemic reduced Morgan Sindall鈥檚  bottom line last year, but the firm remained healthily in the black with a pre-tax profit of 拢61m. It made this after returning the 拢9.5m in furlough money that it had received from the government鈥檚 coronavirus job retention scheme. 鈥淎s soon as we realised we didn鈥檛 need it, we paid it straight back,鈥� Morgan says.

People don鈥檛 just come to work to make money. They want to work for the right company that does the right things

John Morgan

The firm was the first to announce that it would do so, and Morgan adds: 鈥淚t鈥檚 amazing how many people didn鈥檛, people who didn鈥檛 need it. For us paying dividends out on a handout from the government was just morally wrong. All our shareholders backed us on it.鈥�

It was important to be doing the right thing for the firm鈥檚 6,000-plus staff as well, he adds. 鈥淚 got such good feedback from our staff. They really thought [paying furlough money back] was the right thing to do.

鈥淧eople don鈥檛 just come to work to earn money. They want to work for the right company that does the right things. Younger people are very different to people my age. The way we dealt with people and the way we looked after people [during the pandemic], I knew was going to be important.鈥�

The power of cash

For Morgan, the most important thing a company can have is a good balance sheet. 鈥淚t allows you to take long-term decisions rather than a whole load of short-term ones. It is absolutely fundamental.

鈥淐ash enables you to make the right long-term decisions. It is so important to say, 鈥榃e don鈥檛 need that job.鈥� So important.鈥�

In a trading update last month, the firm said that its average daily net cash position this year would be 拢290m. Morgan sees the cash figure every day, which allows him to act quickly on early warning signs when cash becomes squeezed. 鈥淚f a client is slowing down on payments, it鈥檚 usually because he鈥檚 unhappy or there鈥檚 an issue of some sort. I get involved if it鈥檚 bad.鈥�

There are other advantages to having a good balance sheet. 鈥淲e鈥檙e good payers, and that makes a big, big difference.鈥� It takes an average of 27 days for the firm to pay its suppliers, and just 9% of invoices are not paid within agreed terms.

For Morgan, paying suppliers on time is simple. 鈥淚f you鈥檝e got a shortage of something [like labour], why don鈥檛 you give it to somebody who鈥檚 going to pay you quicker? For me, our supply chain is just as important as a customer.鈥�

Every year the firm has a supplier day when 1,500 firms turn up to meet each other and other parts of the Morgan Sindall business. This year鈥檚 took place at the Silverstone race-track in Northamptonshire at the end of September. 鈥淭hat鈥檚 a big day for me, probably my most important day of the year,鈥� Morgan says.

People said the office was dead. It鈥檚 not. It鈥檚 changing, and covid has accelerated the existing trends rather than changed them

John Morgan

鈥淲e want our suppliers to be strong. We need the best, not just the cheapest. We need them to give us their best resources and priority.鈥�

When the pandemic first struck, he remembers: 鈥淚 got the top team together and said, 鈥楻ight, we鈥檙e in a strong position; people will remember us afterwards for how we dealt with them during these tough times.鈥� People have long memories.鈥�

Morgan says the headwinds seen this year 鈥� notably those on the availability of labour and materials 鈥� will spill into next year too. 鈥淚nflation is the issue,鈥� he says.

鈥淵ou might win a job on a two-stage tender and then, nine months later, it鈥檚 20% more. Luckily, clients are not surprised because they鈥檙e reading about inflation everywhere. But it either means decisions are delayed, a job could be cancelled or funding has to come from a different source.鈥�

These issues have not stopped the firm from upgrading its profit for 2022, but Morgan expects some of the froth of the market to blow away. 鈥淭his has been a boom period. Everybody is busy; it鈥檚 a bit of a post-pandemic catch-up. You don鈥檛 know what next year is going to be like. I think the market could tighten up a little bit.鈥�

One sector that had been expected to slow down significantly in the wake of lockdowns and working-from-home orders was Morgan Sindall鈥檚 fit-out business. In fact, the opposite has happened. At the end of September, fit-out had an order book of 拢944m 鈥� a record 鈥� and a rise of 130% from the end of last year.

鈥淔it-out is not as big a surprise to me as it is to other people. People said the office was dead. It鈥檚 not. It鈥檚 changing, and covid has accelerated the existing trends rather than changed them.鈥�

For the future, Morgan thinks that the bigger firms will get bigger organically 鈥� rather than by taking other companies over. 鈥淎cquisitions are very difficult,鈥� he says. He also says that the firm鈥檚 days of doing joint ventures with others are numbered. 鈥淎 JV hasn鈥檛 got your culture; you haven鈥檛 got complete control.鈥�

For Morgan that is key: the ability to turn down jobs and to say no to unnecessary risk. 鈥淵ou can be very arrogant and think we鈥檝e got the skills to do [a particular job] and the skills available to do it. In some areas now, we鈥檝e got plenty of work and we鈥檙e saying we鈥檙e not going to take any more on, otherwise the quality of what we鈥檒l deliver will suffer.鈥�

The past few weeks have seen announcements that two of the industry鈥檚 best-known figures are calling time. Former boss Steve Pycroft leaves Mace in the next few days, and Ray O鈥橰ourke is giving up the chief executive鈥檚 role at Laing O鈥橰ourke at the end of next summer.

Morgan has a lower profile than both, but his association with Morgan Sindall is just as important as that of Pycroft and O鈥橰ourke with their firms. Between them, all three have been in the industry close to 130 years.

鈥淚鈥檒l have to retire at some stage,鈥� Morgan replies when asked about it. 鈥淒on鈥檛 expect me to go any time soon 鈥� unless the board think it鈥檚 the right thing for the business. But we haven鈥檛 had that sort of discussion.鈥�

With a year like the one Morgan Sindall has just had, it鈥檚 not hard to see why.