Galliford Try Plc - Trading Update
Galliford Try plc, the housebuilding, regeneration and construction group, today issues its trading update for the period 1 January to 20 May 2019. All data is as at 17 May 2019, unless otherwise stated, and all comparable figures relate to the prior year equivalent period.
· Group trading well and we anticipate achieving a full year result consistent with the current range of analysts' expectations.2
· Strategic review of Construction to restructure and refocus business complete and being implemented, with resized business well placed to deliver improved performance.
· Linden Homes is enjoying stable trading conditions and continues to perform well.
· Partnerships & Regeneration continues to deliver a strong performance.
· Average net debt for the full year expected to be in line with previous guidance of between £170m and £190m.
As previously announced the Group has undertaken a review of its Construction business with plans being implemented to simplify the business and management structure and to refocus on key strengths in markets and sectors with long-term growth and profitability potential. The business will concentrate on its core strengths in Building, Water and Highways (having already ceased bidding on fixed-price major projects in 2016) resulting in a reduction of up to 350 personnel across the UK. The restructured business's target annual revenue will reduce to approximately £1.3bn generating annualised cost savings of up to £15m from 2021, accelerating progress towards our target operating margins of 2% by 2021.
Construction's profitability in the current year will, as previously announced, be impacted by the division's strategic review, with a write down of approximately £40m to be recognised in the year, in respect of restructuring costs and legacy and current projects. With regard to the claim in respect of the completed Aberdeen Western Peripheral Route, and the previously disclosed £38m work in progress balance in respect of three contracts for a single client, our position is unchanged.
The current order book is £3.0bn (2018: £3.3bn). 78% of next year's revenue has been secured (2018: 71%).
Linden Homes has maintained a sales rate, since 1 January 2019, of 0.68 (2018: 0.71) in continuing stable market conditions. Average sales outlets were 79 (2018: 84). Unit sales reserved, contracted or completed of 4,320 (2018: 4,494), at a lower average selling price reflecting planned changes to the product mix, resulting in total sales carried forward of £1,054m, of which £770m is for the current financial year (2018: £1,183m and £904m, respectively).
The business's landbank has increased to 12,000 plots (2018: 11,750 plots), in line with the target of 3.5 years' supply, and the business continues to see good availability at appropriate hurdle rates.
Linden Homes has retained its 4* housebuilder status.
Partnerships & Regeneration
Partnerships & Regeneration continues to deliver a strong performance. Mixed-tenure sales reserved, contracted or completed increased to £284m of which £175m is for the current financial year to 30 June 2019 (2018: £175m and £123m, respectively), while the contracting order book remains strong at £1.0bn (2018: £1.15bn).
The landbank is 5,128 plots (2018: 2,918 plots), with 95% of plots secured for the next financial year (2018: 95%). This landbank includes recent appointments under Homes England's Delivery Partner Panel to deliver over 850 homes across the UK.
Partnerships & Regeneration has also been selected by Enfield Council to deliver the first 725 homes at the £6.0bn Meridian Water development in the Lea Valley.
The market opportunity remains strong across all tenures which provides a strong pipeline for the future.
Graham Prothero, Chief Executive, commented:
"We have made some difficult decisions in response to the challenges faced by the Group's Construction business. The associated operational changes are being implemented across the business. We are confident that the decision to refocus our construction activities will deliver a more stable business for the future and support improved margins.
Our balance sheet remains strong, with guidance for average net debt for the full year unchanged.
Despite the ongoing macro-economic and political uncertainty, housing demand continues to be supported by a strong mortgage market, and by Help to Buy. Linden Homes continues to see a steady sales rate and to deliver operational improvements, and we are delighted with the continued strong progress of our Partnerships & Regeneration business."