Legacy contracts in builder Galliford Try' s (GFRD) construction business have weighed on profits, but its housebuilding arm more than offset this in the first half. A 10 per cent rise in completions from Linden Homes helped to deliver another strong overall performance for the group.
Revenue for the division grew 12 per cent to £407.6m, while the operating margin rose to 18.2 per cent from 17 per cent for the same period last year. The margin was partly inflated by increased land sales in the wake of the referendum, as the group looked to counteract perceived market risk. After cutting those profits out, the margin falls to a still impressive 16.3 per cent.
The downward pressure on profits from the construction division is expected to continue in the medium term as unprofitable legacy contracts work their way through, but the picture should improve by the 2018 financial year.
By FY2021, the group aims to grow profit before tax by 60 per cent and lift its return on net assets to 25 per cent. And it is planning to build up to twice the dividend cover, providing some ballast to its substantial income.
Analysts at Canaccord Genuity think the improved picture for Linden Homes will more than offset construction weakness, and edged up FY2017 pre-tax profit forecasts to £156m, giving EPS of 151p, compared with £139m and 137p in FY2016.
| GALLIFORD TRY (GFRD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,523p | MARKET VALUE: | £1.26bn | |
| TOUCH: | 1,522-1,524p | 12-MONTH HIGH: | 1,537p | LOW: 741p |
| DIVIDEND YIELD: | 5.8% | PE RATIO: | 11 | |
| NET ASSET VALUE*: | 721p | NET DEBT: | 19% | |
| Half-year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 1.18 | 52.9 | 52.2 | 26 |
| 2016 | 1.24 | 63.0 | 61.9 | 32 |
| % change | +5 | +19 | +19 | +23 |
Ex-div: 23 Mar Payment: 6 Apr *Includes intangible assets of £151m, or 182p a share | ||||
