Proactive Investors - Run By Investors For Investors

Galliford Try full year profits to be hit by £98m one-off charge for legacy contracts

Wednesday's calendar includes annual results from Galliford Try and Dunelm along with official UK jobs data
Galliford Try has said it has so far shrugged off Brexit uncertainty

The outlook for Galliford Try PLC (LON:GFRD) will be a key focus when the housebuilder reports its full year earnings on Wednesday as Brexit concerns continue to weigh on the market.

Investors already have an indication of what to expect for the full year results after Galliford said in July that it sees profit before tax meeting the top end of analysts’ forecasts of between £46mln and £59mln, compared to £135mln last year.

Galliford, which abandoned its £1.2bn bid for rival Bovis Homes Group PLC (LON:BVS) in April, also said its guidance for the following year remained unchanged.

The company reported revenue growth in its Linden Homes business, boosted by an increase in the average prices of homes.

The construction division also performed well but its cash position was reduced, reflecting £98mln of non-recurring costs related to two large legacy contracts. The provision had led it to issue a profit warning in May.

Like many of its sector peers, Galliford has said that it has so far managed to shrug off Brexit worries as the housing market remains supported by cheap borrowing costs, low unemployment, a supply shortage of homes and the government’s Help to Buy scheme and planning reform.

However, the outlook remains uncertain as the UK negotiates its withdrawal from the European Union. Housebuilders Barratt Developments PLC (LON:BDEV) and Berkeley Group PLC (LON:BKG) both warned of a slowdown in the London housing sector and Brexit uncertainty in updates last week.

Dunelm to report drop in full year profits

Dunelm Group PLC (LON:DNLM) joins Galliford in posting its annual results.

The UK homewares retailer lost its chief executive, John Browett, last month after saying it expects full year profits to fall on weak sales.

Chairman Andy Harrison has taken over the role on a temporary basis while the company searches for replacement for Browett, who left for personal reasons.

In a July trading update, the company said it predicts pre-exceptional profit before tax in the range of £109.0mln to £111.0mln for the full year to 1 July, compared to £128.9mln the previous year.

Like-for-like sales in the full year fell 0.5% to £834.8mln, as a 2.4% decline in store sales offset a 23.5% increase in home delivery sales. 

However, the group saw a pick up in the fourth quarter with revenue rising 17.7% to £240mln, lifted by a £22.5mln sales contribution from Worldstores.

Dunelmn bought WS Group, which owns the Worldstores, Kiddicare and Achica brands, in November for £8.5mln.

“Although 2017 has been a tough year for the business, we remain positive on Dunelm,” said Numis, which expects annual pre-tax profit of £109.8mln.

“Combining the solid fundamentals and improving trend in Dunelm's high quality core operation, the recovery from one-offs in 2017 (Worldstores losses, supply disruption, weather), and the opportunity from the Worldstores acquisition, we believe that the current multiple - 12x calendar year 2018 price-to-earnings ratio, a small discount to the sector, and a circa 7% free cash flow yield - offers upside opportunity.”

UK jobs data

In economic data, the Office for National Statistics releases its UK jobs report. The attention is likely to centre on real wage growth amid worries about rising inflation putting a squeeze on consumers.

Consumer price inflation rose to annual rate of 2.9% in August from 2.6% the previous month, according to the ONS.

Economist have forecast a 2.3% rise in average weekly earnings in the three months to July. Employers are expected to have added 154,000 jobs to the economy over the period while the unemployment rate is projected to remain at 4.4%.

A decline in real wages since the Brexit-driven pound pushed inflation higher, has prompted consumers to tighten their purse strings, hitting UK retail sales. 

Significant events expected:

Finals: Dunelm Group PLC (LON:DNLM), Galliford Try PLC (LON:GFRD),  Haynes Publishing Group PLC (LONLHYNS),  Town Centre Securities PLC (LON:TOWN), Wilmington PLC (LON:WILT)

Interims: Advanced Medical Solutions Group PLC (LON:AMS), Alliance Pharma PLC (LON:APH), Columbus Energy Resources (LON:CERP), Epwin Group PLC (LON:EPWN), Eve Sleep PLC (LON:EVE), Gaming Realms PLC (LON:GMR), Ingenta PLC (LON:ING), Just Group PLC (LON:JUST), Soco International PLC (LON:SIA), SQS Software Quality Systems AG (LON:SQS), Sigmaroc PLC (LON:SRC), Ten Entertainment Group PLC (LON:TEG)

Economic data: UK unemployment, average earnings US forward PPI

© Proactive Investors 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use