Shares in Muse parent leap on upbeat results

Shares in Salford Quays-based Muse parent Morgan Sindall rose by nearly 10% after it reported strong interim results with pre-tax profits up 13% to £28.6m for the six months to the end of June.

Turnover at the diverse group, which has five divisions covering affordable housing, construction, fit out, infrastructure and urban regeneration, topped £1.2bn, up 48% from the same period last year. The jump in revenues was largely due to acquisitions last year including that of Amec Developments, now renamed Muse Developments and comprising the group's urban regeneration division.

Shares in Morgan Sindall were up 45p, or 8%, to 605p in early trading this morning.

Today's statement said Muse showed "solid performance in challenging market conditions", producing an operating profit of £5.6m on revenues of £45m.

Morgan Sindall also said Muse had a "share of a forward development pipeline of £1.1bn, with a further four projects valued at £1.0bn at preferred bidder stage".

The group added that "mixed-use development remains a major opportunity in the long-term".

Muse is preferred bidder on Network Rail's redevelopment of Victoria Station in Manchester and Talbot Gateway in Blackpool. The developer is also part of the English Cities Fund joint venture currently delivering St Paul's Square, Liverpool.

The interim statement added: "The [urban regeneration] division is responding to the recent slowdown of the commercial property market by revisiting existing plans and rephasing developments to ensure it is best placed to take full advantage when the market improves.

"Although the recent softening of the commercial and residential property sectors means the short-term outlook for the division is subdued, the group remains of the view that mixed use development is central to the regeneration of urban communities in areas of social and economic deprivation and will be a major opportunity in the long-term."

The group also acquired construction and infrastructure business from Amec last year. Construction produced operating profit up 86% to £4.1m on revenues of £418m (2007: £199m). Margins were up slightly to 1.2% (2007: 1.1%). The order book stands at £828m (2007: £891m).

Fit out saw operating profit of £11.5m (2007: £12.4m) on revenues of £205m (2007: £225m), with a record margin of 5.6%. The order book increased both year-on-year and from the start of the year to £220m (2007: £206m).

Infrastructure enjoyed a rise in operating profit of 90% to £7.6m (2007: £4.0m), after one-off IT costs of £1.4m relating to the acquisition, on revenues of £395m (2007: £221m). There is underlying revenue growth of 25%, plus a significant contribution from the acquisition. Margins improved to 2.3% (2007: 1.8%), after adjusting for one-off costs, and the division strengthened its market position with leadership in tunnelling, transport, water and utilities. A record order book stands at £1.8bn (2007: £1.5bn).

Affordable housing saw strong performance in social new build and refurbishment sectors offset by the impact of mortgage availability in the open market housing sector. Operating profit of £8.8m (2007: £11.5m) was produced on revenues of £176m (2007: £192m), on a margin of 5.0% (2007: 6.0%). The order book is maintained at £1.4bn (2007: £1.5bn).

The group said cash in the bank was £98m, up from £62m, and it proposes an interim dividend to shareholders of 12p, up from 10p last year.

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