Galliford Try plc (LON:GFRD) saw its shares drop this morning as the housebuilder disclosed that it will take a one-off charge of around £98mln to cover the cost of two major legacy construction contracts.
In a trading update for the period from January 1 to May 2, the FTSE 250-listed firm said that 80% of the non-recurring costs, which follows a reapprisal of its business, relates to its shares of two joint venture infrastructure projects.
The group – which recently withdraw from a takeover bid for bigger peer Bovis Homes PLC (LON:BVS) -- said one of these projects will finish on site in summer 2017, while the other, which represents the larger proportion of the estimated costs, is due to complete in mid-2018.
READ: Bovis to take around a £2.8mln one-off charge for failed takeover talks
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Peter Truscott, the firm’s chief executive said: "The impact of the legacy projects in Construction, in particular the two large infrastructure projects, is regrettable.”
He added: “There are no other similarly procured major projects in our current portfolio and we are encouraged by the performance of the underlying portfolio of newer work."
In reaction to the charge shock, Galliford shares topped the FTSE 250 fallers list, dropping almost 9%, or 128p to 1,334p.
Underlying business in Construction is performing well
In its statement, Galliford said its underlying business in Construction is performing well, while Linden Homes and Galliford Try Partnerships & Regeneration continue to make strong progress.
It added that the outlook for full-year 2017 and future years remains unchanged and the company said its balance sheet and cash position remain robust.
Truscott said: “Excluding the non-recurring charge, we remain confident in delivering a strong performance over the full year, and we plan to pay the dividend in line with previous guidance.”