Morgan Sindall Share Discussion Threads

[galeforce1] 15/8/2022 08:54

Note from Numis, following MGNS's H1 2022 results. The interesting bit is the last paragraph which explains the costs & complexities of the 'Developer Pledge'. MGNS previously signed this for the Partnership Housing Division, and stated the costs would be 'non-material'. Now it has been obliged to sign for the Urban Regeneration Division and costs are undoubtedly 'material'. £7m charge in H1. Looks like a further £40-£50m has to be paid up-front to the government, but much of this should later be recovered from contractors.


Morgan Sindall (Buy, TP: 3,000p) Upgrade driven by Fit Out momentum

Morgan Sindall has reported record H1 profit, delivering further growth on H1-21 which was itself a step change in performance. For context, EBIT is +52% vs H1-19. This is despite a very challenging operating environment in which cost inflation has impacted some project margins. Due to continuing strong momentum in Fit Out, we upgrade current year PBT +6%. As we argued in our recent longer note, we believe the division is benefiting from medium-term drivers of changing working practices and increased EPC requirements for commercial premises. With an orderbook equivalent to >2.5x revs and continued organic momentum across the divisions, we estimate medium-term targets represent c.40% further profit growth. We reiterate our BUY recommendation and £30 target price.
Download Upgrade driven by Fit Out momentum
(4 pages)

Group. H1 revs +9% y/y to £1.7bn with EBIT +4% to £56.9m at a margin -10bp to 3.4%. Market conditions were a headwind; the impact on total build cost and increased strain on the supply chain is expected to continue in H2. Demand remained resilient with the orderbook +2% y/y to £8.5bn. We upgrade NSe FY22 PBT +6% to £134m; we retain FY23 at this stage. The interim divi is +10% y/y to 33p and we now expect a full year divi of 100p (5.1% yield). H1 average daily net cash of £264m remains very high albeit -£30m y/y, predominantly due to investment in Partnership Housing. We now forecast FY22 av. net cash of £250m.
Divisional. Construction & Infra margin increased further to 3.2%; Infra volumes were lower y/y as expected due to timing, offset by growth in Construction (where preferred bidder work grew). Fit Out EBIT +10% y/y, and we now expect £50m for FY22; it maintained its high orderbook. Property Services delivered growth albeit still impacted by delays to decision-making. Partnership Housing EBIT +15% y/y with the margin +40bp to 4.9% and capital employed is now at £179m; av. site size has grown 39% with the number of sites +2%. Urban Regen adj. LTM ROCE was 20%.

Developer Pledge. As previously announced, Partnership Housing signed the developer Pledge and the provisions are not expected to be material to group. Urban Regen has taken a £7m H1 provision in relation to the extended liability period, and in July received a letter from UK Govt requesting it to commit to the Pledge as a mixed-use developer. It has contractual coverage and expects to recover any costs, but its initial assessment is this would involve a charge of £40-50m, before seeking recoveries. This has been recognised as a contingent liability in the H1 accounts.

[piedro] 09/8/2022 16:13

galeforce¹,

I'm not too bothered by the present decline in margins but if it were to continue
into the H2 results that would be worrying.

[galeforce1] 08/8/2022 09:13

Piedro - that's an interesting graph.
How serious do you think the decline in margins is?
The results looked good to me, although de-cladding is going to cost MGNS quite alot more than originally estimated.

[piedro] 02/8/2022 09:18

Morgan Sindall wins £61m Abergavenny super school job
hxxps://www.constructionenquirer.com/2022/08/02/morgan-sindall-wins-61m-abergavenny-super-school-job/

[galeforce1] 20/7/2022 14:31

Half-year results at MGNS on Thursday August 4th. Hopefully everything is continuing to tick along nicely.

We had a trading statement on May 5th which was cautiously optimistic about meeting the 2022 guidance (operating profit of £177m), so there should be no surprises in the H1 figures.

As usual, it is the comments on forward outlook, inflationary pressures, etc. that will be critical.

[woodyjmw] 20/5/2022 21:17

Seems harsh on MGNS, we’ll oversold, but probably won’t break its trend until we’re closer to peak interest rates and inflation. Better prospects in renewable energy and infrastructure, such as 3IN?

[galeforce1] 22/3/2022 08:14

Quite a gap up this morning.

Numis has published a research note with a target of £30.00. That might be the reason.

[galeforce1] 20/3/2022 22:53

I was looking at MGNS's medium term guidance and targets (page 35 of the Results presentation).

They are guiding to operating profits of:

Construction : £30m
Infrastructure £40m
Fit Out: £45m
Property Ser.: £15m
Part. Housing: £35m
Urban Regen.: £12m
Total: £177m

In 2021 total operating profit before Group costs was about £152m.

So in the medium term they see the operating profit £25m higher, which is pretty good.

How long is 'medium-term?

hxxps://www.morgansindall.com/assets/90cae5c3af/FY-2021-slides-FINAL-LR.pdf

[master rsi] 18/3/2022 23:29

Morgan Sindall Group disclosed a sale made by its finance director, to cover his tax bill after the exercise of a bonus award.

The FTSE 250 company said Steve Crummett acquired 12,612 shares at nil cost on Thursday, under its 2019 deferred bonus plan.

He subsequently sold 5,944 shares for 2,330p each, netting him £138,495.20 to forward to the tax man.

As a result of the exercise and sale, Morgan Sindall said Crummett’s total holding had increased by a net of 6,668 shares.

[galeforce1] 07/3/2022 12:43

Down to £20.50. Maybe a good day to buy some more?

There has be some impact on MGNS from higher energy prices. But this has to be a business that is only marginally impacted by a consumer slowdown.

[woodyjmw] 02/3/2022 17:43

Margin's are always low in construction and hence the low ratings of the businesses, but MGNS is pretty decent by industry standards. Nice graphs.

[piedro] 02/3/2022 05:02

FWIW,
In pictures ...



Looks a bit shaky as it's all about margins ...


And here is an 'unapproved' chart, but why I am still in.


Piedro :-)

[woodyjmw] 26/2/2022 11:24

Chart looks very bullish to me, much higher volumes recently, rising lows, rising RSI during the recent double dip, if it moves above the previous recent high in early Feb, then I would think it will have much further to go, at least to retest the all time highs.

[woodyjmw] 24/2/2022 18:04

Yes great results on a day which will live in infamy. Worrying about share price performance seems a bit trivial at this time. Can we hope for a rerating of this company, EPS of 226p and dividend 3 times what it was in 2019? This is the section from the results on cladding - no material impact currently expected:

The Group has considered the public letter to the Residential Property Developer industry from the Department for Levelling Up, Housing & Communities dated 10 January 2022, as well as the letter dated 22 January 2022 to the Construction Products Association and all other related Government press releases, communications and publications.

The Group fully agrees that the costs of remediation should not be borne by leaseholders and is supportive of working with the Government, industry and other key stakeholders to determine a solution to the issue of historic cladding and fire safety defects in buildings.

The Group has considered the scope of relevant cases across its business in line with the criteria set out in the 10 January 2022 letter and this review is ongoing. It is possible that a relatively small number of cases will be identified where the Group has a liability leading to remediation. In accordance with the Group's past practice, the Group is committed to meeting its liabilities as they are identified. Whilst any such costs incurred are not expected to be material and will likely span a number of years, the industry-wide solution to the issues set out in the 10 January 2022 letter is still being determined and therefore any liability arising therefrom cannot be reliably estimated.

In common with the rest of the industry, the Group will begin paying the Residential Property Developer Tax in 2022.

[master rsi] 24/2/2022 13:32

2,250p +100p (4.65%) / Morgan Sindall doubles profit in 2021 on improved margins
(Alliance News) - Morgan Sindall Group PLC delivered a record set of results on Thursday, as the construction sector recovered from Covid-related disruption.

The London-based infrastructure construction company said profit before tax doubled to GBP129.8 million in 2021 from GBP60.8 million the year before. Earnings per share were similarly doubled to 212.4 pence from 99.8p.

Revenue for the year rose by 5.8% to GBP3.21 billion from GBP3.03 billion in 2020, and by 4.6% from the pre-pandemic comparative of GBP3.07 billion in 2019.

Operating margin also increased to 4.1%, up 180 basis points from the prior year's margin of 2.3%, and up 110 basis points from 2019's margin of 3.0%. Despite a 7% drop in Construction & Infrastructure revenue, operating profit grew by 63% over the past year thanks to the improved margin.

Morgan Sindall said better operational delivery, "disciplined contract selectivity", risk management, and a favourable project mix were behind its increased margin.

The final dividend was increased by 55% to 62.0p per share from 40.0p in 2020. The total dividend for 2021 was up 51% year-on-year to 92p, from 61.0p. This represents a dividend cover of 2.46 times.

Morgan Sindall's share price was up 3.9% to 2,232.88 pence each in London on Thursday morning.

Reflecting its strong performance in 2021, Morgan Sindall has increased targets for some divisions. Revenue over GBP1 billion is now targeted in Construction and Infrastructure divisions, having achieved GBP694 million and GBP826 million in 2021 respectively. The company expects to finish 2022 "slightly above" its previous expectations.

Chief Executive John Morgan commented: "The group is in its best shape ever. Our strategic focus on construction and regeneration is driving positive momentum across the group and is enabling us to upgrade our divisional medium-term targets today which provide the framework for our next stage of growth.

"Underpinning these targets is our commitment to maintaining a strong balance sheet at all times and to hold a substantial net cash position. This continues to allow us to make the right long-term decisions for the business."

Net cash at year-end was GBP358 million, up from GBP333 million in 2020, and GBP193 million in 2019.

[rupe1958] 24/2/2022 07:29

Yes, looks very good. This is such a well-run business. Let's hope John Morgan doesn't retire any time soon.

A particularly good result from the Fit-Out diviison, which is higher-margin work.

The only negative thing that I've seen on a quick read is re. inflation in materials and labour. I haven't read the separate section on cladding.

Not a good day to be releasing results, but we may just be a riser in a falling market.

[cravencottage] 24/2/2022 07:06

Wowser!

cracking set of numbers from MGNS.

Congrats to all holders!

[woodyjmw] 22/2/2022 22:07

Next results to be announced this Thursday 24th Feb, hoping for another positive update, on the back of the recovery in construction output. Management of increasing costs will be key, together with usual factors.

[galeforce1] 22/2/2022 11:49

Results this Thursday. Presumably there will be no big surprises as there was a trading update in November. Stockopedia says the estimated net profit for 2021 will be £104m, but is forecasting a dip to £96m in 2022.

MGNS usually has a nice way of surprising to the upside, so I'm hoping to see £110m net profit, more positive news across the order book and a rise in the dividend. MGNS looks very good value at £21-odd. When everyone calms down about Russia annexing the Donbass (3000 miles from Britain and populated by 1.5m Russians who want to be part of Russia), we will hopefully get back towards £25.

It's definitely good news that the fit-out division Overbury is getting contracts like re-fitting the Citi tower in Canary Wharf for £300m.

Potential negatives? Cladding removal costs? Continuing slow action at the Regeneration division? Labour inflation?

[piedro] 27/1/2022 15:15

Overbury gets green light for £300m Citi Tower refurb

[woodyjmw] 18/1/2022 18:23

Will mgns get a positive read across from good results from Henry Boot?

[woodyjmw] 10/1/2022 20:15

Not mentioned as a risk in the last annual report that I can see, would be good to know, but any sector wide levy might affect all?

[galeforce1] 08/1/2022 15:53

Is MGNS likely to be impacted by Gove's scheme to force builders to pick up the tab for removing/replacing cladding?

I doubt that there is much or any exposure, but if there is, it will be in the Regeneration of Muse Development businesses.