Companies: MTG   

Metnor completed its transformation into a ‘property solutions’ play last year, finally selling its remaining galvanising operations in October and investing surplus cash in development sites for its property business.

Record results were unveiled for the calendar year, with ‘normalised’ pre-tax profits surging 31% higher to £6.7m, after adding back goodwill and deducting disposal profits, on £74.5m sales. The headline PBT figure soared from £4.4m to £10.3m, boosted by the one-off £4.2m profit from the galvanising sale, which, alongside the sale of a development site in Poole, boosted year-end cash reserves to £13.8m.

Chief executive Stephen Rankin is now focusing efforts on property activities geared towards ‘turnkey’ solutions for two sectors where demand is supported by Government spend and demographics: healthcare and student residential.

‘We’ve been investing surplus cash into sites for development on the property side,’ explained Rankin, who sees this new revenue stream as a lucrative provider of construction and service contracts to other parts of the group, yet concedes the move into property projects exposes the business to planning delays and lumpy property profits.

Thankfully, other core divisions are trading well. Mechanical and electrical contracting business Norstead turned over £36m from more than 30 major contracts in a busy 2006 and the construction division, focused on niche areas of the market where margins are best, increased sales to £28m from £25m. ‘Both Norstead and Metnor Contracting are very profitable in their own right,’ added Rankin, who also reported a record year from the group’s specialist equipment rental business, which is flourishing in the offshore oil services market.

This year, look for adjusted pre-tax profits of £7.3m from £80m sales, earnings of 34p and a likely 11.1p payout. Based on those metrics, the shares are swapping hands for only 12.9 times forecast earnings, undemanding given the 25% EPS growth envisaged by the City this year. Support is also provided through growing net assets of 201p-a-share.