Support services company
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)|
Ex-div: 10 Dec
Payment: 7 Jan
*Includes intangible assets of £74m, or 105p a share.
Shares in May Gurney have fallen almost 40 per cent this year and trade on eight times forecast earnings. But the MaGOS contract issues remain unresolved and, even with the discount, we will wait for more information on these. Sell.
Last IC view: Sell, 114p, 6 Sep 2012