Galliford Try still building

Galliford Try (GFRD) traded strongly in the six months to the end of December and first-half profits will now exceed previous expectations. In a recent trading update, the housebuilding and construction group revealed that house completions rose to a record 1,364 units, while average selling prices were up from £239,000 to £248,000.

Total reserved sales increased 4 per cent at £544m and margins are expected to be up, too, thanks to greater use of cheaper land. In fact, around 83 per cent of the total land bank has been secured at current market values, up from 75 per cent a year earlier. Furthermore, 96 per cent of the consented land required for the full year has already been secured.

On the construction side, virtually all the projected revenue for the full year has already been secured and 62 per cent has been secured for the year to June 2014. The group has also managed to maintain its diverse revenue spread: 40 per cent of the order book is now in the regulated sector; 42 per cent in the public sector; and 18 per cent in private contracts. Moreover, the division's order book has been maintained at £1.6bn, of which 56 per cent has been secured within framework agreements. Group finances are in good shape, too, with net debt down from £69.8m in December 2011 to £60m at end of 2012.

Panmure Gordon says...

Hold. Galliford Try has undoubtedly been the key success story of the housebuilding sector in recent years, with management implementing a significant growth plan in the right markets at the right time. There is also a highly cash-generative construction business, providing the group with a strong financial foundation. But while we continue to see continued growth potential, the shares are trading on 1.57 times net asset value estimates for December 2013 - that is up with events although income investors will still be attracted by the 5 per cent dividend yield. Expect pre-tax profits for the year to June 2013 to rise 14 per cent to £72.9m, to produce EPS of 69.2p and a dividend of 36p.

Jefferies says...

Buy. Switching emphasis to building houses in the more prosperous south of England has paid off handsomely and we are keeping with our full-year estimates for pre-tax profits of £72m. And while mortgage availability remains a constraint, there are signs that recent initiatives to improve the supply of affordable mortgages are starting to have an effect. The construction market is a lot tougher and we estimate that turnover fell by around 15 per cent to £420m in the first half. However, cash management remains impressive, and construction cash balances will only have fallen by around 7 per cent to around £135m.