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Galliford Try well-placed

Record earnings, a booming housing division and continued recovery at the construction business leave Galliford Try well-placed for further growth
September 16, 2014

On virtually any measure Galliford Try (GFRD) delivered an impressive full-year performance, with earnings having reached record highs. The construction business generates the biggest slice of group turnover, but it was the housing division that delivered the earnings growth.

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Profit from the housing side actually rose 37 per cent to £115m, boosted by a 3 per cent rise in completions to 2,887 and a 15 per cent gain in average selling prices to £305,000. The housebuilding operating margin grew from 13.3 per cent to 15.1 per cent, too, and management wants to push this to around 18 per cent by 2018. There are also plans to expand the affordable housing operation, which is regarded as being more resilient to any levelling off in private sector activity. Turnover there more than doubled to £243m and sales of up to £400m are targeted by 2018. In the longer term, chief executive Greg Fitzgerald - who plans to retire by end-2015 - anticipates this moving as high as £1bn.

Meanwhile, the construction business delivered a resilient performance given the continued drag from various legacy contracts. These were secured at fixed prices when trading conditions were tougher and subsequent supply chain inflation - of around 10 per cent - has chewed away at the operating margin, which fell to 1 per cent from 1.6 per cent. This, reckons Mr Fitzgerald, represents the bottom of the cycle and contracts secured over the last six months are proving to be more profitable. So management expects the margin to rise to 2 per cent by 2018. Divisional profit, however, fell 38 per cent year on year.

The construction side has also been transformed by July's acquisition of Miller Construction. At the June year-end, the order book had risen from £1.2bn to £1.4bn, but the inclusion of Miller has since more than doubled that to £3bn.

Broker Numis Securities expects pre-tax profit of £111m for 2015, giving EPS of 106.4p (from £96.6m and 94.3p in 2014) and a 63p dividend.

GALLIFORD TRY (GFRD)
ORD PRICE:1,218pMARKET VALUE:£1bn
TOUCH:1.214-1,218p12-MONTH HIGH:1,369pLOW: 1,013p
DIVIDEND YIELD:4.4%PE RATIO:13
NET ASSET VALUE:649p*NET DEBT:1%

Year to 30 JunTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20101.2219.214.712.5
20111.2841.740.316
20121.5063.160.930
20131.4774.171.737
20141.7795.294.653
% change+20+28+32+43

Ex-div: 16 Oct

Payment: 28 Nov

*Includes intangible assets of £128m,or 156p a share