Construction and fit-out firm Morgan Sindall (MGNS) posted forecast-beating earnings and raised targets for two of its divisions. Less than a fortnight ago the company increased its FY26 financial guidance thanks to its record forward order book.
| Share price: £51.70 (-3%) | PE: 14x |
| Market cap: £2.5bn | Yield: 3% |
Record order book
For FY25, Morgan Sindall reported adjusted pre-tax profit of £233 million, up 35% on the previous year. Adjusted EPS increased by 33% to 370p, comfortably ahead of the 355p/share consensus.
Group revenue increased 10% to £5 billion thanks to a particularly strong result in Fit-Out, where revenue rose 37%. Construction also put in a good performance with revenue up 11%, while infrastructure income dipped 11%.
Entering FY26, the group has a record secured order book of £12 billion and preferred bidder work of £7.1 billion. Of this, partnership housing represents £11.5 billion, up 29% on FY25, while construction services represent £5.8 billion.
The firm ended the year with £531 million of net cash against £492 million in FY24. Total dividends for the year were up 20% to 158p/share, with dividend cover of 2.4 times.
Raised outlook
As well as confirming its raised FY26 targets, the company raised the medium-term outlook for two of its divisions.
Mixed-use partnerships are seen generating a return on capital of around 30% compared with 25% previously. Infrastructure is seen generating revenue of around £1.5 billion against £1 billion previously with a higher operating margin.
CEO John Morgan is particularly enthused about the growth potential of the partnership businesses going forward. Morgan told Sharesify: ‘We made £5 billion in revenue but that’s not the limit, we’re here for long-term growth.’
We have long championed Morgan Sindall as a quality business deserving of a re-rating, and pleasingly it has paid off. Since January 2023 the shares are up over 200%, while revenue has grown around 40% and earnings are up by around 55%.
We’re encouraged by the firm raising its targets and its confidence in the market opportunities ahead of it. It also has a rock-solid balance sheet with over £500 million of net cash, so it can grab those opportunities.
After their re-rating, however, the shares look fair value to us on a cyclically-adjusted PE basis. Long-term, they could go to a premium to fair value, but the company will need to keep delivering upgrades.
Read the press release here: https://www.morgansindall.com/investors/regulatory-news
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