Galliford Try PLC (LON:GFRD) has been downgraded by its house broker following its huge profit warning earlier on Tuesday.
The builder shocked the market when it said profits would be between £30-40mln below previous forecasts after it was forced to write down the value of some big contracts in its construction division.
READ: Galliford Try shares crumble on huge profit warning
One such writedown was to do with the Queensferry Crossing in Scotland, where costs have spiralled amid delays to tidying up final snags.
House broker Peel Hunt called it a “further construction disappointment” as it slashed its price target to 700p (from 885p), having chopped it by 300p last time around.
Analysts also downgraded the stock to ‘hold’ from ‘buy – a rare move for a house broker, which usually gives its clients the benefit of doubt.
At the moment, of the 117 companies which pay for Peel Hunt’s services, 102 – or 87% – of them are down as ‘buy’ or ‘add’. Only ten house stocks are assigned with ‘hold’ recommendations.
Price target slashed
“Given the continued uncertainty about the performance, size and future of the construction business we now factor in a negative value of 110p per share,” said Peel Hunt in a note to clients.
“This takes into account possible further disappointments from the Aberdeen road, other meaningful contracts costs to downsize and the loss of some upfront cash payments.
“This leads us to cut out target price to 700p and we move our recommendation to ‘hold’. We will review this position when more details come out in May.”
Galliford was topping the FTSE 250 loser-board in late-morning trading on Tuesday, down 17.9% to 596p.