WH Ireland comment on todays Mountfield Group PLC news: “This morning’s results from MOGP confirm the improving trends highlighted in MOGP’s market updates on 5th and 8th April. Overall, the business has moved from a £50k PBT (pre-impairment) in FY2014 to adj. PBT of £0.2m in 2015. 2015 benefited from cost-reductions and a beneficial mix change within and across the two businesses which form the group.
As flagged in April, Connaught Access Flooring (CAF) saw a good close to 2015, after a year in which the business base was widened and benefited from the City of London HQ project where CAF provided 70,000m2 of flooring. The project is still ongoing and will total c.£5.5m when it has been completed. Overall, the division generated a substantial 40%, increase in sales YoY to £7.5m. At the same time, the operating margin in the fit-out area has been increased by some 150 bp to c.6%.
Stripping out two specific and historical loss-making contracts, the construction business Mountfield Building Group Ltd (MBG) would also have been profitable in 2015 following radical action in the middle of the year, including notably a more selective approach to business and reduction in overhead to suit.
A good start to 2016 featured strong demand experienced by CAF and recovery trends within MBG. In line with refreshed company strategy, the MBG order book features an increasing number of smaller contracts, suggesting a more diversified business base. Excluding loan notes, the balance sheet features some c.£0.9m of net borrowings, after a year in which the company succeeded in generating £0.5m of free cash. We anticipate that current trading, following these results, will provide the platform for resumption of forecasts on our part. Pending this process, forecasts for both 2016E and 2017E are retained Under Review, and hence too our target price and recommendation, while noting the ongoing improvements which MOGP has flagged this morning.”
