Galliford Try (GFRD) bore the cost of its attempt to become a pure-play construction business, focused on building, water and highways work and selling its housebuilding operations to Bovis Homes (BVS). Additional costs to complete the Aberdeen western peripheral route (AWPR), writing down legacy contracts and restructuring its construction operations dented statutory pre-tax profits last year. Yet the decision to take a more selective approach to bidding for new work also weighed on revenue and meant the group order book stood 12 per cent lower than the prior year at £2.9bn.
The group is negotiating a claim against the AWPR client and has been advised it can expect to recover £100m – although that is against costs of £152m over the past three years – and is pursuing a further £54m in claims over three contracts with entities owned by a major infrastructure fund. The construction division’s operating margins declined to a negative 4.4 per cent, from a negative 1.7 per cent in the prior year. However, management said newer contracts were performing better, with margins that better reflected their risk profile.
Linden Homes suffered a reduction in the average sales price, which fell to £284,000 from £310,000, but standardising processes and cutting costs meant it managed a slight expansion in the operating margin. Partnerships and regeneration remained Galliford’s saving grace, benefiting from a rise in both contracting and higher-margin mixed-tenure revenues. Completions of the latter type increased more than half, helping boost the operating margin to 5.6 per cent, from 5 per cent, while the return on net assets came in at an impressive 51 per cent.
Analysts at house broker Liberum expect adjusted pre-tax profits of £185m and EPS of 137p for the year to June 2020, up from £153m and 113p in the prior year.
| GALLIFORD TRY (GFRD) | ||||
| ORD PRICE: | 681p | MARKET VALUE: | £756m | |
| TOUCH: | 680-682p | 12-MONTH HIGH: | 1,117p | LOW: 500p |
| DIVIDEND YIELD: | 8.5% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 677p | NET DEBT: | 8% | |
| Year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 2.35 | 114 | 100 | 60.4 |
| 2016 | 2.49 | 135 | 118 | 72.9 |
| 2017 | 2.66 | 71 | 53 | 86.0 |
| 2018 | 2.93 | 144 | 121 | 77.0 |
| 2019 | 2.71 | 105 | 79 | 58.0 |
| % change | -8 | -27 | -35 | -25 |
| Ex-div: | 7 Nov | |||
| Payment: | 4 Dec |
