Galliford Try hikes dividend by a third as earnings build

Galliford Try (GFRD) has done the improbable. It is a construction company that has grown during a property downturn, putting it in an excellent position to grow more as the real estate market recovers. Its dividend was raised by a third after earnings per share (EPS) more than doubled in the half-year to 31 December. 

A drop in exceptional costs related to the introduction of cloud computing helped to flatter EPS, but there are no caveats to its sales growth, which has continued uninterrupted since the dark days of Covid. Its adjusted EPS figure, which strips out the cloud computing costs and on which it bases its growing dividend, leapt to 13.2p from 8.8p.

It has achieved this through building a construction business resistant to shock, with diversified exposure to government projects and the commercial property market. That means Galliford Try can stay in the black even when an interest rate spike causes the latter to wobble.

It is no mean feat. Construction companies' margins tend to be razor-thin, and Galliford Try is no different. However, its multi-year contracts give it visibility on future EPS growth that other companies would kill for. That makes it easy to see how it will jump to 20p for the year to 30 June 2024 before rising to 25.1p for the year to 30 June 2026. The current price/earnings ratio might look slightly elevated, but it reflects those well-evidenced EPS forecasts.

True, another Black Swan event like Covid could knock those predictions for six, but that would be true of most businesses. And, even in the unlikely event of another property downturn, Galliford Try has shown it can thrive. Buy.

Last IC view: Buy, 213p, 20 Sep 2023