Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
Bumper orders in building services
T Clarke upped 2017 revenue and profit guidance as it revealed that it was going to exceed the £400m mark in its order book for the first time. Morgan Sindall saw a 5% build in its order book in the first quarter while Carillion unveiled orders and ‘probable orders’ worth £1.3bn providing 85% visibility on 2017 revenue.
These run counter to concerns that the Brexit vote would put pressure on the building services market.
What is interesting about these firms is their discounted valuations. All the firms are on relatively low price to earnings (PE) ratios but have relatively high dividend yields. Morgan Sindall is the only firm that trades at a PE ratio close to its market peers at about 12 times versus the sector average of 13.3 times. It offers a dividend yield of 3.3%.
T Clarke trades on a PE of 7.6 times and yields more than 4%. Carillion’s PE ratio is 6.4 and it has a dividend yield of 8.6%.
Remember a strong order book does not guarantee earnings and revenue will come through as anticipated. Orders can be cancelled or delayed and operational failures can impact the profitability of awarded work. (DS)