Infrastructure, construction and fit-out group Morgan Sindall (LON:MGNS) reported another record half-year for the six months to June. Excluding Covid, the firm has posted record H1 results for 11 years running, and given the strong fundamentals for Construction and Fit-Out it has now increased its medium-term targets for both businesses.
Record H1 results
The company posted an 8% increase in H1 revenue to £2.56 billion and a 21% increase in adjusted pre-tax profit to £116 million, beating analysts’ forecasts. Thanks to this strong profit growth, the adjusted pre-tax margin rose to 4.5% from 4% a year earlier.
Construction revenue grew 18% to £742 million while Fit Out revenue increased 19% to £996 million. Operating profit at the Construction arm increased 47% to £24.4 million while profit at the higher-margin Fit Out arm rose 19% to £69 million.
The firm revised up its medium-term operating margin target in Construction to 3.5% to 4% against 3% to 3.5% previously. It also raised its Fit Out operating profit target to £100 million to £130 million from £80 million to £100 million.
Despite a subdued housing market, which resulted in a 14% drop in Partnership Housing revenue, the division still turned a £13 million profit. Meanwhile, Infrastructure revenue dipped 3% to £468 million but profit was flat at around £18 million.
What did the CEO say?
Chief executive John Morgan commented: ‘Our performance continues to reinforce our track record of delivering strong revenue and growth in profits leading to robust cash generation.
‘Our Fit Out and Construction Services businesses delivered excellent results and made a significant contribution to group performance during the period.’
Despite the challenging backdrop for the Partnerships businesses, Morgan is condfident the firm’s FY performance will be in line with expectations. As Morgan explained to Sharesify: ‘It’s all about the long term, making the business better and empowering our teams. Although we’re a relatively big company, we feel like a small company and we’re still ambitious.’
We’ve been fans of Morgan Sindall for some years and it continues to deliver excellent results. We suspect the early weakness in the shares today was just because the firm didn’t raise its FY guidance for a third time.
The Construction and Fit Out businesses are humming along nicely, so much so their medium targets have been raised. Although the Partnership Housing business is sluggish, it is still generating cash and profits.
We haven’t even touched on the order book, which now sits at £12.2 billion of secured work. On top of that is another £7.3 billion of preferred bidder work, taking the total pipeline to almost £20 billion.
We would also point to the balance sheet and the firm’s impressive record of cash generation. Any client wanting to put work their way only has to look at the company’s daily cash position to gauge its strength and solidity.
Read the press release here: https://www.morgansindall.com/investors/reports-and-presentations
