Morgan Sindall Group Plc (LON:MGNS) met its optimistic update statements by reporting strong earnings and cash last year; operating profit grew 26% and year-end net cash was over £209m, with average daily cash of £25m. The company delivered EPS of 84.7p, well ahead of consensus estimates, which were around 78p. The company has set medium-term targets which, if achieved, could see EPS approach 150p, on a three-year view. That is based on £100m of operating profit versus £48.4m in 2016. The company states that the 2017 outturn will be higher than existing expectations.
Mid-term targets for each sector to double earnings?
This is the first time we have seen medium-term targets for MGNS, which include different targets for each area based on margin or ROCE and, in fit-out, for an absolute level of earnings. While the approach is different in each area, the key issues are firstly, that the “stretch” is small and implies only reaching industry average levels, and secondly, the targets are appropriate measures for the relevant operations.
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