May Gurney holds profit margin at close to 3%

May Gurney (MG) continues to hold its profit margin at close to 3% as interim financial results show a pre-tax profit of £7m on turnover of £230m.

In the comparable period last year the margin was firmer at 3.8%.

The latest performance covers the six months to 30 September 2008.

Last time round a turnover of £220m produced an interim pre-tax profit of £8.1m.

Philip Fellowes-Prynne, chief executive, said: “We maintain a strong cash flow and order book of more than £1.25 billion.

“Prospects for the business remain positive, despite the impact of the economic climate on private sector related work. Our core markets in local government and regulated industry are growing and provide us with a resilient income stream, with strong demand for our added-value services.

“We have managed the development of the business with the emphasis on shifting our order book profile towards long-term maintenance activities and resilient local government and regulated sector income streams. This provides us with good visibility of earnings and should minimise the impact of the current economic downturn.”

In recent weeks MG has seen a reduction in private-sector-driven spend in landfill remediation and geotechnical engineering linked to the house building sector. “We are managing our related costs appropriately,” said Fellowes-Prynne.

Private sector work contributed only 10% of the group’s turnover last year and that figure is set to drop to less than 3% by the end of next year.

In addition to the £1.25bn forward orderbook, potential contract extensions could add another £750m-worth of work.

MG ended the period with net cash of £8m even after spending £25m on acquisitions during the previous twelve months. The biggest spend was the acquisition of ECT Recycling

The pension scheme is fully funded, said the group.

Segmental results show turnover contributions of:

• £180m – maintenance services
• £52m – engineering and project services

Their contributions by way of operating profits were:

• £7.3m – maintenance services
• £1.6m – engineering and project services