Morgan Sindall stock price rallies 12% on improved visibility

Morgan Sindall stock price rallies 12% on improved visibility
Written by:
Michael Harris
5th August, 12:38
Updated: 5th August, 12:39
  • Morgan Sindall reported its pre-tax profit tumbled 62% to £13.6 million on a 4% dip in revenue
  • The construction giant reinstated its full-year guidance amid improved visibility
  • The positive outlook for the rest of the year prompted shares to rally 12%

Shares of Morgan Sindall Group PLC (LON: MGNS) surged 12% despite the tumbling revenue and profits. The construction firm reinstated its full-year guidance amid improved visibility. 

Fundamental analysis: COVID hits MS hard

Morgan Sindall reported its pre-tax profit tumbled 62% to £13.6 million amid the pandemic and lockdown measures. Earnings per share slumped to 27.4p while revenue went 4% south to £1.4 billion for the first six months ending June. It marks the worst set of figures from the construction giant in the last five years. 

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“These results reflect the inevitable impact on our business of the COVID-19 pandemic,” John Morgan, CEO of the company, said

As a result, the firm reinstated its full-year guidance as it expects a full-year profit between £50 million and £60 million. This is a drop of between 30% and 40% compared to last year’s £88.6 million. Hence, Morgan Sindall won’t be paying an interim dividend. 

“The business is having to continually adapt in this changing environment and I am extremely thankful to all our employees for their professionalism and dedication as we adjust to new ways of working safely and productively,” Morgan added. 

The company witnessed a strong first quarter ending March, with revenue up 17%. However, the lockdown measures prompted the closure of 31% of its building sites and caused the Q2 income to fall 23%.

Still, Morgan Sindall remains committed to its long-term strategy. 

“Our proven strategy remains the same, based on organic growth and operational improvement.”

Out of 1,900 furloughed staff, some 1,700 have returned to work in the meantime. The net cash reserves also improved, jumping to £146 million.  

Technical analysis: Shares rally despite plunging profits

Morgan Sindall stock price rallied 12% on, what it appears, better-than-expected results. Moreover, the company has reinstated the full-year guidance to inject a certain degree of optimism in the future outlook. 

Morgan Sindall stock price weekly chart (TradingView)

Shares are trading above 1150p just two days after dipping below 1000p for the first time since 2017. The bulls are now pushing to test the broken diagonal support above 1200p. The 200-WMA, which now acts as resistance, comes at 1248p. 

Summary

Morgan Sindall stock price is trading as much as 12% higher despite a 62% tumble in the first half-year profits. The construction firm reinstated its full-year guidance amid improved visibility, sending its shares higher. 

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