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Morgan Sindall's margins boosted

The group's selective approach to new work is paying off
February 22, 2019

Morgan Sindall (MGNS) delivered another impressive performance in the year to December 2018, with a focus on construction and regeneration helping to lift adjusted operating profits by a quarter to £84.5m.

IC TIP: Buy at 1138p

Construction, which competes for business in areas such as highways, rail, education and healthcare, saw contract selectivity and a firm hold on risk management boost operating margins from 1.5 per cent to 2 per cent, while operating profits were up by a third at £27m. Margins on Fit Out were even better at 5.3 per cent, with revenue growth of 13 per cent.

Urban regeneration, which concentrates on partnership working on multi-use sites, saw operating profits all but doubled to £19.6m. However, partnership housing was hit by one-off construction project cost overruns, which meant that operating profits slipped from £14.1m to £12.2m.

And while the group’s secured order book was down 7 per cent at £3.6bn, more work is coming through framework agreements, with only a small percentage secured through competitive tender.

Analysts at Peel Hunt are forecasting adjusted pre-tax profits for the year to December 2019 of £82.5m and EPS of 144p (from £81.6m and 144p in 2018).

MORGAN SINDALL (MGNS)  
ORD PRICE:1,138pMARKET VALUE:£518m
TOUCH:1,130-1,138p12-MONTH HIGH:1,554pLOW: 1,000p
DIVIDEND YIELD:4.7%PE RATIO:8
NET ASSET VALUE:762p*NET CASH£207m
Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20142.2222.842.327
20152.38-14.8-22.629
20162.5643.983.835
20172.7964.911945
20182.9780.615053
% change+6+24+26+18
Ex-div:20 May   
Payment:25 Apr   
*Includes intangible assets of £216m, or 476p a share