Stock of the week: Morgan Sindall
Construction business Morgan Sindall is this week’s stock of the week. A medium-sized company with six divisions, the group is involved in a range of activities including construction and infrastructure, office fit out, property services and urban regeneration. It is heavily bolstered by long-term trends including the rising population, need for investment in infrastructure and the demand for affordable housing.
Full-year results in February were above expectations with revenues rising 9% to £2.8bn and pre-tax profits up 46% to £66.1m thanks to a good increase in the profit margin. The office fit out division continued to perform well, along with construction and infrastructure. Urban Regeneration saw a drop in profits but that was expected.
The company said its order book had increased by 6% to £3.85bn and it raised the dividend by 29%. Better still was news that prospects for the new financial year were better than the management previously thought.
The company raised that guidance still further in May when it reported that trading in the first quarter of the new financial year had remained strong, especially at the fit out business.
We reiterate our buy recommendation due to the strength of the fit out and construction business, along with good prospects for affordable housing and the better than average dividend. The shares have come back a little in recent weeks providing a better entry point for investors seeking a balance of income and growth.