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Galliford Try shares soar as it expects full year profits to reach top end of market forecasts

Published: 09:08 11 Jul 2017 BST

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Galliford Try has enjoyed higher average selling prices of homes

Galliford Try plc (LON:GFRD) shares jumped after the housebuilder said full year profits would reach the top end of analysts’ forecasts.

The company, which pulled out of a £1.2bn attempt to buy rival Bovis Homes in April, said it delivered a strong performance across all of its businesses during the year, including Linden Homes, the partnerships and regeneration unit and the construction division. 

Analysts predict profit before tax of between £46mln and £59mln for the year ending June 30.

Galliford added that it expects to pay a dividend in line with its previous guidance.

Shares in the company rose 6.08% to 1,238p in morning trading.

Linden Homes revenue growth accelerates

In the Linden Homes business, revenue growth accelerated in the second half, as total completions rose 7% to 3,296 units and average prices grew 6% to £354,000. Average sales rates in the second half picked up to 0.68 units per site per week from 0.56 units in the first half. 

Revenue and margins increased in partnerships and regeneration - the unit that builds affordable homes for local authorites, including council flats and share-ownership properties - as the company took on higher-margin mixed-tenure projects and acquired Hampshire-based developer, Drew Smith.

The construction division, however, will be hit by £98mln non-recurring costs related to two large legacy contracts, which reduced the cash position to £136mln at 30 June 2017 from £160mln in 2016. Still the underlying portfolio "continues to perform well", Galliford said. 

The business started the new financial year with an order book of £3.5bln, unchanged from 2016, mainly in public and regulated sectors. This includes 84% of projected revenue for fiscal year 2018, compared to 82% last year.

READ:Galliford Try to take around £98mln one-off cost for major legacy construction contracts

Galliford cautious on outlook amid Brexit uncertainty 

Galliford left unchanged its estimates for the following fiscal year but said it was cautious on the outlook as the outcome of Brexit negotiations remains up in the air, particularly after the general election.

"As we enter the new financial year, we are cautious about the impact of the current political uncertainty following the general election and the medium-term outlook for the macro economy," the group said.

Despite the uncertainties, the company believes it has a “solid foundation” for growth in 2018 as it has started the year with an order book of £4.9bn.

The firm expects to achieve its medium-term targets for 60% growth in profit before tax to fiscal year 2021 and a five-year compound annual growth rate on dividend of at least 5%. It also expects a return on assets in 2021 of at least 25% while rebuilding dividend cover to 2.0x.

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