The main take-away from construction group Morgan Sindall’s (MGNS) half-year results is that urban regeneration will become increasingly prominent within its business mix. This is borne out by a 12 per cent increase in the value of contracts in the division's pipeline.
Headline comparisons for the group were flattered by an additional £13m in amortisation charges loaded on last year’s interim figures. Strip that out and adjusted operating profits were down 6 per cent to £15.2m. But a 14 per cent increase in Morgan Sindall’s order book since the year-end suggests the new strategic focus is bearing fruit.
Management admitted that margin pressures were likely to persist for the rest of 2014. The squeeze on margins constricted profits at the group’s affordable housing business, though the top line benefited from the return of first-time buyers to the market. Meanwhile, the Overbury fit-out division delivered the stand-out performance, with adjusted operating profits rising 10 per cent to £5.5m on margins up 50 basis points to 2.8 per cent.
Morgan Sindall’s interim dividend was unchanged, even though the group recorded net free cash out-flow of £39.8m. This reflects increased inventories within the urban regeneration and affordable housing divisions, as the group invests in mixed-tenure projects with housing associations and local authorities.
JPMorgan Cazenove expects adjusted 2014 EPS of 72.4p.
| MORGAN SINDALL (MGNS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 789p | MARKET VALUE: | £342m | |
| TOUCH: | 789-808p | 12-MONTH HIGH: | 875p | LOW: 611p |
| DIVIDEND YIELD: | 3.4% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 608p* | NET CASH: | £34m | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 1.0 | 1 | 5.4 | 12 |
| 2014 | 1.0 | 13 | 26.5 | 12 |
| % change | -2 | +1200 | +391 | - |
Ex-div: 1 Oct Payment: 23 Oct *Includes intangible assets of £219m, or 506p a share | ||||
