Cut-throat competition in the construction sector put pressure on margins and profitability at Morgan Sindall (MGNS) as rival companies vied for every inch of business they could get.
Affordable housing was the worst hit. Here, revenue fell 8 per cent to £185m and the operating margin dropped 220 basis points to 1.5 per cent, resulting in a 64 per cent decline in adjusted operating profit to £2.7m. The bulk of the margin squeeze was driven by competition in the new-build social housing market, which offset good performance from mixed tenure schemes. Cost-cutting in the construction and infrastructure division, which accounts for almost 60 per cent of group revenues, wasn't enough to offset market pressure, either, so despite a 2 per cent rise in revenue to £593m, operating profit tumbled 25 per cent to £6.4m, excluding an exceptional charge of £13m related to small construction contracts.
Elsewhere, the fit-out division saw revenue rise 6 per cent, but profit fell 9 per cent to £5m - once again down to competition at the tender stage. Overall, this left group adjusted operating profit down 22 per cent to £16m.
Broker Numis Securities expects full-year pre-tax profit to £32m, EPS of 60.5p (from £47.1m and 79.3p in 2012) and an unchanged dividend of 27p.
| MORGAN SINDALL (MGNS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 653p | MARKET VALUE: | £282m | |
| TOUCH: | 647-659p | 12-MONTH HIGH: | 695p | LOW: 500p |
| DIVIDEND YIELD: | 4.1% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 574p* | NET CASH: | £39.7m | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 1.00 | 18.8 | 35.8 | 12.0 |
| 2013 | 1.02 | 1.0 | 5.4 | 12.0 |
| % change | +2 | -95 | -85 | - |
Ex-div: 25 Sep Payment: 24 Oct *Includes intangible assets of £222m, or 513p a share | ||||
