Galliford Try (GFRD) has warned that pre-tax profits this year will come in below market expectations of £156m, following a review of underperforming construction contracts. Management expects exceptional costs of between £30m and £40m, with the biggest hit coming from an increase in expenditure from its Queensferry Crossing joint venture.
Shares in the housebuilder lost a fifth of their value on the day of the announcement and fell to a seven-year low. Management is considering reducing the size of the construction division – which accounted for just over half of revenue during the first half – as part of its review.
During the first half of the year the group incurred £26m in exceptional costs relating to delays in finishing the now-completed Aberdeen Western Peripheral Route, although management said the work in progress balance in respect of three contracts for a single client remained at £38m.
Revenue for the construction side had already fallen by 13 per cent during the first half, due to a more cautious bidding stance for new work, as well as project deferrals by clients due to economic uncertainties. Linden Homes has also been forced to reduce its exposure to the weakening higher-end part of the housing market in London and the south-east, which reduced the average selling price of its homes.
