May Gurney profits plunge in first half results

Underlying profits at support services provider May Gurney fell to 1.1m pounds in the first half of 2012, compared to 14.5m pounds in the corresponding period last year, according to the group's interim results published on Tuesday.

The results, which cover the half year ending September 30th, showed a reduction in underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) and overall operating margin, although the company posted £314m of new business.

Underlying EBITDA was £12.6m, compared to £14.7m in the first half of 2011 and the group's overall operating margin was 3.7%, compared to 4.5% a year earlier.

The decline in operating margin was connected to a number of factors, including poor weather over the summer and underwhelming performance from two environmental services contracts.

The group's surface dressing operations were negatively affected by poor weather and a short-term downturn in rail services. In addition, provisions for SGN's reduction in outsourcing and poor performance of two MaGOS environmental services contracts contributed to the operating margin decline.

At the half-year, no provision for future losses had been made in respect of the two MaGOS contracts and the group said this would be reviewed again at the year end.

May Gurney secured £314m of new work and contract extensions in the first half of 2012, up from £290m in the corresponding period last year. Group revenue rose 4.0% to £338.9m, compared to £324.7m in the corresponding period last year.

Margaret Ford, Chairman of May Gurney, said: "May Gurney's first-half performance was in line with our revised expectations. We have taken steps to reinforce commercial disciplines and the plans we put in place to address the operational issues we announced in September are on track. As expected, the process to resolve the two MaGOS environmental services contracts is complex, and will continue well into next year."

The share price was unchanged at 14.04 GMT at 172p.

MF