Construction margins slip as Galliford soars to record profit

Aaron Morby 8 years ago
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Galliford Try has delivered record annual profits of £135m, 18% ahead of last year primarily from strong housing growth at Linden Homes.

The performance of the construction and partnerships divisions remained stable, although legacy building contracts continue to dog performance.

Peter Truscott, chief executive said the overall outlook for housing, partnerships and construction looked strong despite the Brexit vote.

He said: “The balance of our businesses and the strength of our order books mean that we are well-placed to manage the impact of this uncertainty.

“While there has undoubtedly been a cooling in demand for new private commercial buildings in the period leading up to and since the EU referendum, our focus on the public and regulated sectors, which represent 90% of our order book, give us a strong and reliable outlook.”

Galliford Try has seen just two projects purportedly cancelled because of Brexit and two PRS schemes put back by four to six months.

The company said: “We will remain disciplined in our approach to securing work: while it is desirable to maintain a certain scale of operations, we will always prioritise quality of the order book over quantity.”

Overall group turnover including joint ventures rose 10% to £2.67bn, with construction, which managed to expand 16% over the year contributing £1.5bn.

But legacy contracts and slower than expected orders from the public sector saw margins slip back from 1.2% to 1.1%.

Galliford Try: trading divisions
Division Op. profit 2016 Op. profit 2015 Turnover 2016 Turnover 2015 2016 margin
Linden Homes £147m £124m £841m £779m 17.5%
Partnerships £11.7m £9.4m £301m £329m 3.9%
Construction £15.8m £15.7m £1503m £1293m 1.1%

Construction’s stable profit included the sale of Galliford Try’s site accommodation portfolio to a third party equipment hirer, achieving a profit of £5.2m on the disposal.

Truscott warned that margins continued to be constrained, in particular in the building business, by contracts won in the more difficult economic climate.  

He said: “Due to the finalisation of these contracts and the settlement of their final accounts, these contracts are unlikely to achieve the levels of margin at which we are now winning work and will consequently hold back the reported figure in 2017.”

Completions at Linden Homes rose 11% to just over 3,000 with average selling price up by 2% to £335,000. This helped drive profit from housing operations up by 18% to £147m.

Partnership Homes also continued to expand with a new Central Southern office planned for the current year after opening a Bristol office in July.

Contracting revenue at the Partnership division slipped back to £234m, slightly constrained by procurement delays following the Government’s rent reforms.

Truscott said: “We are setting ambitious growth plans for this business.

“Building on our experience and relationships with public sector commissioners, we will use our skills in housebuilding and place-making to deliver an increase in the number of new homes we provide. Geographical expansion is a key part of our growth strategy.”

 

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