It has been eight years since Morgan Sindall (MGNS) last reported adjusted operating profit margins of more than 2 per cent – rising competition and unfavourable currency movements have plagued the group’s ability to deliver profit growth. These half-year results therefore mark a milestone for the construction specialist. A 0.3 percentage point increase in adjusted operating margins to 2.2 per cent sent profits up at a quicker pace than revenues, all thanks to the group’s strategy of focusing on higher-quality projects.
This is particularly noticeable in the construction and infrastructure division (the group’s largest), where a slight decline in revenues was more than offset by wider margins. Operating profits leapt nearly 50 per cent to £11.3m and management has upped its medium-term targets for the division as a result. Business is also still ticking along nicely in the fit-out business, where revenues and operating profits were up 26 per cent and 29 per cent, respectively. Meanwhile, the urban regeneration division managed a 205 per cent increase in operating profits to £6.1m, despite a 13 per cent decline in revenues.
In fact, the only black mark on an otherwise stellar set of results was the partnership housing business, where rising costs at one contract have hampered profits. Still, management is optimistic that annual numbers could come in ahead of previous expectations, while broker Numis has increased its pre-tax profit and EPS forecasts to £81m and 147p, respectively (from £66m and 120p in 2017).
| MORGAN SINDALL (MGNS) | ||||
| ORD PRICE: | 1,480p | MARKET VALUE: | £670m | |
| TOUCH: | 1,480-1,482p | 12-MONTH HIGH: | 1,554p | LOW: 1,078p |
| DIVIDEND YIELD: | 3.2% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 691p* | NET CASH: | £97m | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 1.31 | 23.1 | 42.5 | 16.0 |
| 2015 | 1.42 | 29.9 | 55.2 | 19.0 |
| % change | +9 | +29 | +30 | +19 |
| Ex-div: | 11 Oct | |||
| Payment: | 29 Oct | |||
| *Includes intangible assets of £216m, or 476p a share | ||||
