What's new
■ Strong house sales and reservations
■ 80 per cent of next year's revenue secured
■ Construction order book maintained
Galliford Try is reaping the benefit of concentrating its housebuilding activities in the south of England. Indeed, its trading update this month revealed that since the start of the year sales per site, per week have risen from 0.45 to 0.6, while the number of active sites has risen from 75 a year ago to 94. Moreover, the land bank has been developed to ensure that all of the land required for 2013, and 80 per cent of what's needed for for 2014, has already been secured with planning consent. Meanwhile, of the current 10,600 plots in the land bank, 78 per cent have been bought at current lower market values, against 67 per cent a year ago.
Trading on the construction side has been a lot tougher, however, and the group has done well to maintain the order book at £1.6bn. A number of key contracts have been won, notably a £347m Gateshead regeneration programme, as well as a string of projects with several water companies. Moreover, 80 per cent of next year's revenue has been secured, up from 72 per cent this time last year. The group is also generating a decent return from rents from its affordable housing programme.
Panmure Gordon says...
Hold. Galliford Try is performing strongly, but its shares have risen 45 per cent since the start of the year and this is why we are sticking with our hold recommendation. We are also staying with our forecasts for the year ending June - £63.4m of pre-tax profit and EPS of 60p. Margins on the housebuilding side look set to improve further as more land bought at current lower prices is utilised. The construction side is also holding up well, although stiff competition suggests that recent contract wins will have been secured at lower margins relative to a couple of years ago.
Peel Hunt says...
Buy. A weakening mortgage market is putting downward pressure on housebuilders. But Galliford Try is better-placed than the national volume players and its policy of operational restraint, and generous returns to shareholders, deserves a superior share price rating. Galliford has also improved its financial position - helped by greater use of deferred payments for land - so that, instead of finishing the year with debt of around £50m, we now expect to see a small cash balance. Adjusted pre-tax profits for the year to end-June are forecast at £63.1m, giving EPS at 60p, rising next year to £72m and 68.5p.
