Galliford Try PLC - Half-year Report

STRONG FIRST HALF GROUP PERFORMANCE

 

PRE-EXCEPTIONAL2

 

STATUTORY

Financial

H1 2019

H1 2018

Change

 

H1 2019

H1 2018

Change

Revenue £m 1

1,418

1,495

- 5%

 

-

-

 

Group revenue £m 1, 9

-

-

 

 

1,344

1,403

-4%

Profit before tax £m 2, 3

84.2

81.3

+4%

 

53.8

56.3

-4%

Earnings per share 2, 3, 4

62.4p

72.7p

-14%

 

39.4p

50.7p

-22%

Dividend per share

-

-

 

 

23p

28p

-18%

Net debt £m

-

-

 

 

40.1

84.9

+£44.8m

Group RoNA 6, 5

23.5%

24.7%

-1.2%pts

 

16.5%

19.3%

-2.8%pts

Group

·      Strong group underlying performance producing record pre-exceptional profit, with continuing progress against our strategic objectives across the Group.

·      3,069 total new homes completed by Linden Homes and Partnerships & Regeneration (H1 2018: 2,878).

·      Net debt reduced to £40m (H1 2018: £85m), with average net debt decreasing to £126m (H1 2018: £203m).

·      Interim dividend of 23.0p declared (H1 2018: 28.0p), in line with 2.0x cover policy.

·    Increased total sales currently reserved, contracted and completed of £1,097m7 (H1 2018: £1,008m) and a current Group order book of £5.4bn7 (H1 2018: £5.6bn).

Linden Homes

·      Strong performance in more challenging markets, with operating margin continuing to grow.

·      Revenue of £392.1m (H1 2018: £436.8m) from 1,505 unit completions, 1,306 net of joint venture partners' share (H1 2018: 1,587 and 1,346 respectively).

·      Private average selling price 5% lower at £352k (H1 2018: £370k), reflecting changed mix of sales in line with strategy.

·      Further improvement in operating margin to 19.6% (H1 2018: 18.5%).

·      3,6077 unit sales currently reserved, contracted or completed representing a value of £850m7 (H1 2018: 3,401 units and £879m respectively).

·      First half year sales rate at 0.52 (H1 2018: 0.53) with a sales rate of 1.277, 10 from 1 January 2019 (H1 2018: 0.65 from 1 January 2018).

·      11,7507 plot landbank (H1 2018: 11,540), in line with target of 3.5 years' supply.

Partnerships & Regeneration

·      Revenue up 27% to £284.9m (H1 2018: £223.5m), reflecting strong growth in both contracting and mixed-tenure.

·      Operating margin improving in line with our strategy to 5.1% (H1 2018: 4.8%).

·      Total sales currently reserved, contracted and completed up 91% at £247m7 of which £153m is for the current financial year to 30 June 2019 (H1 2018: £129m and £96m respectively).

·      Contracting order book of £1.2bn7 (H1 2018: £1.2bn).

·      4,1007 plot landbank (H1 2018: 2,850).

Construction

·      Aberdeen Western Peripheral Route (AWPR) construction completed. First half exceptional costs of £26m from completion delays.

·      Constructive dialogue with the client continues regarding significant and recognised claims.  Financial statements include an estimate for these recoveries.

·      Lower revenues reflect more cautious bidding and project deferrals owing to clients' macro uncertainty.

·      Pre-exceptional operating margin maintained at 0.9% (H1 2018: 0.9%) with encouraging performance on current projects.

·      Solid, high-quality order book of £3.2bn7 (H1 2018: £3.5bn).

Peter Truscott, Chief Executive, commented:

"Galliford Try has delivered a strong financial and operational performance in the first half, with further progress against our 2021 strategy. The Group is well capitalised and average net debt is below previous guidance, driven by focused working capital management over the period.

We were delighted to achieve completion of the AWPR with final handover in progress, successfully delivering a vital and major piece of infrastructure to the local community. We continue constructive dialogue with our client regarding important and recognised claims.

Linden Homes delivered a strong performance in the first half, despite the continuing political uncertainty and its impact on confidence. The business continues to pursue its successful strategy of product standardisation and improved process efficiency, resulting in continued margin growth.  We are seeing good demand, in particular for smaller and mid-range family houses, supported by Help-to-Buy and a strong mortgage market.  We have seen a positive start to the Spring selling season, despite the headwinds to consumer confidence arising from political uncertainty, which is key to the strength of the market over the coming months. 

Partnerships & Regeneration is performing very strongly, both at revenue and margin levels. Opportunities for the business continue to grow, underpinned by our strong relationships with providers and funders, our growing geographical footprint and by cross-party political support for affordable housing. The business has been encouraged by the successes it has seen in the first half of the year, with new projects commenced across both contracting and mixed-tenure resulting in strong levels of sales reserved, contracted or completed as well as a solid contracting order book.

Construction's performance continues to be encouraging, particularly on newer contracts, reflecting the business's careful approach to project selection and risk management.  We continue to prioritise the quality of each opportunity over volume.  We are seeing projects deferred as a result of macro uncertainty, but with 96% of revenue secured for the current financial year and 66% secured for the following year the business has confidence in its prospects.

The Group enters the second half of the year with a solid foundation, underpinned by a strong balance sheet and our focus on high-quality earnings which will drive further margin improvements over time.  Our mix of residential development creates a robust proposition in more uncertain markets.  We remain cautious of the impact of the current political uncertainty on consumer and business confidence, and the medium-term outlook for the macro economy, but believe our focused strategic objectives, strong order book and disciplined approach will deliver a full year out-turn toward the upper end of the analysts' current range8."