Join our community of smart investors

Fit-out boost for Morgan Sindall

Strong cash flow and a healthy order book bode well for the current year
February 22, 2018

This was another outstanding performance from Morgan Sindall (MGNS), as the specialist construction group ticked all the important boxes in 2017, and shareholders were rewarded with a significant increase in the dividend.

IC TIP: Buy at 1288p

Office fit-out was again a very strong performer, with adjusted operating profit up 42 per cent and margins up from 4.3 per cent to 5.3 per cent. And despite all the Brexit generated gloom, the London region accounted for 71 per cent of revenue, up from 65 per cent a year earlier. In construction and infrastructure, revenue grew by 6 per cent but adjusted operating profits more than doubled. And while the committed order book fell 2 per cent, this reflected a more selective approach to taking on new work, and operating margins more than doubled to 1.5 per cent. Partnership housing pushed profits marginally ahead, with lower-than-expected sales completions more than offset by a 27 per cent jump in contracting revenue, including planned maintenance and refurbishment. Property services boosted revenue by a fifth, but there was an operating loss of £1.3m relating to one-off costs associated with its legacy insurance service and the streamlining of its contract portfolio.

Analysts at Numis Securities have upgraded their forecasts, and now expect adjusted pre-tax profit for the year to December 2018 of £73m, giving an EPS of 132p.

MORGAN SINDALL (MGNS)  
ORD PRICE:1,288pMARKET VALUE:£576m
TOUCH:1,284-1,288p12-MONTH HIGH:1,512pLOW: 890p
DIVIDEND YIELD:3.5%PE RATIO:11
NET ASSET VALUE:708p*NET CASH:£193m
Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20132.1013.935.427
20142.2222.842.327
20152.38-14.8-22.629
20162.5643.983.835
20172.7964.9118.845
% change+9+48+42+29
Ex-div:26 Apr   
Payment:21 May   
*Includes intangible assets of £216m, or 483p a share