Shares in construction and regeneration group Morgan Sindall (MGNS) leapt 14% to a new all-time high of £24.10 after the firm posted a sharp increase in first half earnings and said its full-year results would be ‘significantly ahead’ of its previous expectations.

In an unscheduled trading update, the firm said trading had been strong in the six months to June and the positive momentum across the group had ‘continued to accelerate’ since its last update in April, when it also pointed to better full year earnings.

NEW ORDERS RISING

Profits before tax for the first half are expected to be in the region of £53 million compared with £15.7 million last year and £36.3 million in the same period of 2019. The company is scheduled to publish its interim results on 4 August.

The total order book at the end of June was £8.3 billion, 5% higher than a year ago, with growth in construction and infrastructure providing excellent visibility for the full year and likely to result in divisional earnings ‘significantly stronger than previously expected’.

The fit-out business also saw strong order flow, posting a record value of work on the books at the half-year, ‘providing confidence in the full year and beyond’.

ANALYSTS’ VIEW

Following the update the building and construction research team at Numis have raised their current-year pre-tax profit estimate by 12% to £122 million against a consensus of £107 million.

As they note, this is the fourth upgrade to 2021 earnings and their forecast is now £24 million higher than their original estimate set prior to the pandemic in February 2020.

Moreover, given the roughly 10 times earnings multiple and the 4.2% dividend yield, they have raised their medium-term target price from £23.50 to £26.50 and reiterated their buy recommendation.

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Issue Date: 22 Jul 2021