Galliford Try enjoying good levels of revenue visibility

Is this the acceptable face of capitalism? Galliford Try (GFRD) has decided to provide some of its employees with one-off payments amounting to a c£1.0mn package to cope with the cost-of-living crisis. The move comes on top of an earlier pay award for employees based on ‘real living wage’ criteria, so the construction business is doing everything in its power to engender staff loyalty in a tight labour market.

It's unlikely that any shareholders will be unduly perturbed by the giveaway as management felt able to initiate a £15mn share buyback programme after the group revealed a 6 per cent increase in average month-end cash up to £174mn.

That came in full-year figures that detailed a fall-away in statutory earnings due to exceptional items linked to the acquisition of Nmcn Water, together with investment in digital and data capabilities - there were no exceptional items in 2021. Take out exceptional and amortisation charges and operating profit was 83 per cent to the good at £18.5mn with a 40-basis point hike in the underlying margin.

The order book edged up 3 per cent to £3.4bn, with the lion’s share attributable to the public and regulated sectors. It means that the group has started the new financial year with 90 per cent of targeted revenue covered for the next 12 months and around 66 per cent for 2024.

A 2019 profits warning was quickly followed by two years of pandemic disruption and the share price, at 10 times consensus earnings, may still be weighed down by lingering fears over overruns on large construction projects. Given general economic concerns, we remain circumspect, but with a hefty dividend yield allied to a period-end net cash position in advance of the group’s market-cap, a speculative position is not out of the question. Hold.

Last IC view: Hold, 178p, 16 Sep 2021