Galliford Try to stop bidding for large infrastructure projects
Isabelle Fraser THE developer and construction company Galliford Try has said it will no longer bid for large fixed-price infrastructure contracts after its annual profits were hit by a charge on legacy contracts.
Pre-tax profits fell nearly 60pc to £59m due to the £98m charge it announced in May, relating to problem legacy contracts for the Queensferry Crossing and part of a road in Aberdeen. However, the company posted a 7pc rise in revenues to £2.7bn in the 12 months to June 30, and a 9pc increase in underlying profits excluding exceptional items.
Galliford added that this amount set aside was unchanged, and it was making “good progress” on its target to increase profits by 60pc by 2021.
Its housebuilding arm, Linden Homes, and the regeneration division both reported stronger results, with operating profits up 16pc and 27pc respectively, but the construction side suffered, recording a £0.9m underlying loss for the year.
Compared with other housebuilders and construction giants, these results are on the lower end of the scale, although they were in line with market expectations.
Shares in Galliford slipped 1.7pc to £13.40 yesterday. Peter Truscott, the chief executive, said: “Today, we are focusing on lower-risk public and regulated sectors and two-stage negotiated work, rather than large infrastructure projects on fixed-price, all-risk contracts, which these legacy projects were.”
He added that the company was remaining “cautious” about the impact of political uncertainty and the outlook for the macro economy.
He added: “The way we are mitigating against it is with a strong balance sheet and order book, and working in the right sectors, such as housing.
“We want to be leaders in regeneration and partnerships, building affordable housing.”
Linden Homes built 3,296 properties in 2017 and the company said it was aiming to complete around 5,000 a year by 2021. By the same date, Galliford is also aiming to double its partnerships arm, which builds affordable homes, while it plans to keep the construction side at the same size it is now.
Earlier this year, the company tabled a takeover bid for beleaguered housebuilder Bovis Homes, but was rejected.
Anthony Codling, an analyst at Jefferies, said: “Trading remains robust in the housing-related division and the recovery in construction is on track. There are more risks here than with a pure play housebuilder.”