Companies: MAYG ��

Investors after strong cash flows and excellent earnings visibility should look no further than May Gurney, the long-established support and construction services concern that debuted on AIM last summer at 186p.

For the year to March, the group, which provides maintenance services to sectors such as rail, roads and utilities, reported record sales and profits for the eighth year running, marking its first year as a public company in some style. Pre-tax profits (before float costs and property transactions) grew 27% to �14.9m on revenues lifted 11% to �406m. Underlying EBITA grew by 13% to a record �15.5m, achieving a margin of 3.8%, which management believes it can improve upon.

Top-line growth was delivered almost entirely organically as the company further fostered long-term ties with clients in public and regulated sectors. Recent March acquisition AC Chesters & Son, boosting presence in the water utilities market, barely affected the figures.

Most significant was news of an order book (including framework agreements) now worth more than �1bn, with more than 70% of the business now comprising long-term maintenance contracts. With the bulk of revenues coming from maintenance to support essential services, with infrastructure investment coming from either the public purse or as a result of regulation, May Gurney’s sales aren’t subject to capital spend fluctuations and earnings visibility is highly superior.

With the group going great guns and the net cash pile having increased from �8m in March 2006 to a year-end �22.4m, management recommends a 2.1p final payout, giving total dividends of 3p for the year.

Flush with cash for acquisitions and looking to improve the quality of its highly visible earnings, we continue to confidently recommend May Gurney, which trades on a historic earnings multiple of 17.6 (based on last year’s underlying earnings of 16.95p) despite a share price surge since float.