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Galliford Try Plc Half Year Report for the Six Months to 31 December 2016

Tuesday, 21 February 2017 @ 07:00

GALLIFORD TRY PLC - HALF YEAR REPORT FOR THE SIX MONTHS ENDED 31 DECEMBER 2016

STRENGTHENING OUR FOUNDATIONS TO SUPPORT STRATEGY FOR GROWTH; NEW TARGETS TO 2021

Financial H1 2017 H1 2016 Change
Revenue ¹ £1,308m £1,265m +3%
Group revenue ¹ £1,235m £1,182m +4%
Profit before tax £63.0m £52.9m +19%
Earnings per share 61.9p 52.2p +19%
Dividend per share 32.0p 26.0p +23%
Net debt £113.8m £95.7m -£18m
Group return on net assets ² 24.9% 23.1% + 1.8%ppts

Group

  • Strong first half performance with profit before tax up 19% to £63.0 million, EPS up 19% to 61.9p and interim dividend up 23% to 32.0p reflecting confidence in the full year outlook.
  • Net debt of £113.8 million (H1 2016: £95.7 million), in line with expectation.
  • Balance sheet further strengthened with £450 million bank facility extended to 2022 on same terms; debt private placement of £100 million 10 year fixed-rate notes, adding flexibility and diversity of lenders.
  • Strategy to 2021 targeting sustainable growth and strong returns across all three businesses. Targets include 60% growth in profit before tax to FY 2021, a five year CAGR3 on dividend of at least 5% and a return on net assets2 in FY 2021 of at least 25%.

Linden Homes

  • Continued significant progress with operating margin rising to 18.2% (H1 2016: 17.0%).
  • Revenue up 12% to £407.6 million (H1 2016: £362.7 million) from 1,491 unit completions, 1,319 units net of joint venture partner share (H1 2016: 1,357 and 1,171 respectively).
  • Total sales currently reserved, contracted and completed increased by 8% to £857 million (H1 2016: £793 million).
  • 2021 financial targets include 4,750 - 5,000 units per annum, revenue of £1.25 billion - £1.35 billion and operating margin of 19% - 20%.

Partnerships and Regeneration

  • Operating margin of 3.4% (H1 2016: 3.0%), driven by planned increase in proportion of higher margin mixed tenure revenue.
  • Total revenue of £144.3 million (H1 2016: £150.2 million) reflecting expected lower contracting revenue in the first half, partially offset by higher revenue from mixed tenure sales. Full year growth expectations unchanged.
  • 16% increase in total sales currently reserved, contracted and completed at £92 million (H1 2016: £79 million) with contracting order book up 6% at £925 million (H1 2016: £875 million).
  • 2021 financial targets include 4,200 units (contracting and mixed tenure) per annum, revenue of £650 million and operating margin of 6% - 7%.

Construction

  • Revenue of £742.0 million (H1 2016: £738.6 million), with cash balance of £110.8 million (H1 2016: £154.7 million) reflecting delayed cash flows on some legacy projects.
  • Operating margin at 0.4% (H1 2016: 1.2%) continues to be constrained by the resolution of legacy contracts; margins on new projects support improving divisional returns in future years.
  • Order book solid at £3.4 billion (H1 2016: £3.7 billion), as the business continues its disciplined approach to contract selection.
  • 2021 financial targets include revenue of £1.8 billion, operating margin of at least 2% and net cash of £200 million.

Peter Truscott, Chief Executive, commented:

"The Group delivered another strong performance in the first half. Our reorganised management teams have settled well and are making positive strides towards their respective operating and financial targets.

We continue to see robust demand and pricing in residential markets, for both Linden Homes and Partnerships and Regeneration, driving good rates of sale, and the land market remains benign in all regions. Linden Homes continues to achieve margin improvement, including much improved overhead efficiency. Partnerships achieved a higher proportion of mixed tenure development revenue, resulting also in first-half margin growth. Construction is making steady progress in resolving legacy contracts, and the contribution from newer work is encouraging, demonstrating that the underlying business is strong.

Whilst we remain alert to potential uncertainties in the wider economy, we continue to see opportunity in all of our markets. We enter the new calendar year with strong order books: both Linden Homes and Partnerships are at record levels, and whilst Construction is lower than the prior year, it remains both at a very comfortable level and, more importantly, of high quality. Our improved debt facilities have further strengthened the balance sheet, providing financial flexibility to underpin our strategy for growth.

I am pleased that we are able to announce an interim dividend of 32 pence per share, in line with our sustainable and progressive policy.

When I joined Galliford Try in October 2015 I inherited three strong businesses with talented employees, excellent market reputations, and great potential. Over the last 16 months we have focused on enhancing the strengths of each business, to build a solid platform for further disciplined and profitable expansion. I am encouraged by the opportunities for improvement and growth in all three businesses, and we will share further detail on our strategy and targets in our presentation later this morning."

For further enquiries:

Galliford Try                      Peter Truscott, Chief Executive     01895 855001
                                         Graham Prothero, Finance Director               

                                         Clara Melia, Investor Relations

Tulchan Communications   James Macey White / Martin Pengelley;  020 7353 4200

Galliford Try will hold its half year results presentation for analysts and institutional investors at 09:30 am on Tuesday 21 February 2017 at Berry Bros. & Rudd, 2 St James’s Street, London, SW1A 1EG. An audio webcast will be available at www.gallifordtry.co.uk/investors with a recording available later.  Recorded interviews with Peter Truscott and Graham Prothero on the results will be available at www.gallifordtry.co.uk.

The results presentation will be followed by a strategy presentation commencing at 11:00 am.

¹  'Revenue' includes share of joint ventures' revenue of £72.3 million (H1 2016: £82.6 million). 'Group revenue', where stated, excludes share of joint ventures.

²  Group return on net assets represents annualised profit before tax, exceptional items, finance costs and amortisation divided by average net assets.

³   Compound annual growth rate ("CAGR")

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