Support services company May Gurney (MAYG) reported a sharp drop in profitability and margins, but says a strong order book will help them hit revised full-year targets. Underlying pre-tax profit collapsed from £14.5m in the prior period, to £1.1m in the six months to the end of September after closing the facilities services division incurred costs of £10m. Management was confident enough to hold the interim dividend, but challenges remain in problem contracts.
The order book remained flat at £1.5bn, and margins fell from 4.5 per cent to 3.7 per cent on tough trading. Management said plans to resolve operational issues were on track, and a review into 13 of May Gurney's key contracts found no major issues. But there are still challenges, operations were significantly reduced in Scotland after Scotia Gas Network contracts were taken back in-house and the two MaGOS rubbish collection contracts are still underperforming. Analysts at Liberum Capital estimate the two contracts could lose £5m next year. Management believes the contracts will still work and have not made a provision.
In the regulated business, strong utility spend from the water sector supported results but this was offset by a short-term downturn in rail. Broker Liberum forecasts full-year adjusted pre-tax profits of £20.9m, giving EPS of 21.9p (from £28.4m and 29.5p for 2012).
MAY GURNEY (MAYG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 171p | MARKET VALUE: | £120m | |
| TOUCH: | 170-172p | 12-MONTH HIGH: | 301p | LOW: 98p |
| DIVIDEND YIELD: | 4.9% | PE RATIO: | 197 | |
| NET ASSET VALUE: | 120p* | NET DEBT: | 26% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 351 | 13.1 | 14.3 | 2.79 |
| 2012 | 354 | -4.6 | -5.33 | 2.79 |
| % change | +1 | - | - | - |
Ex-div: 10 Dec Payment: 7 Jan *Includes intangible assets of £74m, or 105p a share. | ||||
