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Trading Update - 11 July 2017

Tuesday, 11 July 2017 @ 10:23

Galliford Try plc, the housebuilding, regeneration and construction group, today provides the following update on trading for the year ended 30 June 2017. All figures are as at 30 June 2017, unless otherwise stated, and all comparatives relate to the prior year equivalent period. The Group expects to announce its results for the full year on 13 September 2017.

Overview

  • A strong underlying financial and operating performance across all three businesses for FY 2017, with profits towards the upper end of the analysts’ range 1
  • Linden Homes and Partnerships & Regeneration expected to deliver increased revenue and improved operating margins, while newer contracts in Construction are performing well
  • No movement in the £98m non-recurring costs in Construction, as announced on 3 May 2017
  • Modest net cash at 30 June 2017 (2016: net debt £9m)
  • Expect to pay dividend in line with previous guidance
  • Well positioned to deliver against 2021 strategic targets

Linden Homes

Linden Homes is expected to report a strong performance for the full year. Revenue growth has accelerated in the second half, driven by solid growth in volumes, with total completions (including units in joint ventures) up 7% to 3,296 units (2,876 units net of our partners’ shares) at 30 June 2017 (2016: 3,078 and 2,691 units respectively). Average sales rates in the second half were strong at 0.68 units per site per week, up from 0.56 in H1 2017, from a reduced average number of outlets for the full year of 77 (2016: 80). The average private sales price was up 6% to £354,000 (2016: £335,000). Reflecting the strategy to increase product standardisation and improve operating efficiencies, the operating margin has continued to improve.

The business maintains a strong forward order book to start the next financial year, with sales carried forward of £373m at 30 June 2017 (2016: £380m). All land plots have been secured for FY 2018, with 83% of plots secured for FY 2019. The landbank stands at 10,650 plots, having decreased from 11,500 plots in FY 2016 in line with our strategy to hold a shorter landbank, equivalent to 3.5 years. Also in line with our stated plan, we have successfully increased our strategic land assets.

Partnerships & Regeneration

Performance in Partnerships & Regeneration continues to improve, with both revenue and margin increased over FY 2016 helped by growth in higher-margin mixed-tenure projects. The business is making good progress against its strategy, supported by the recent acquisition of the mixed-tenure developer, Drew Smith, in Hampshire, which is expected to accelerate growth across the southern region. At 30 June 2017, the contracting order book is up 23.5% at £1.05bn (2016: £0.85bn) and the landbank is 2,700 plots (2016: 2,700).

Construction

The underlying portfolio of newer contracts continues to perform well. As announced on 3 May 2017, Construction’s reported performance in FY 2017 will be impacted by £98m non-recurring costs following a reappraisal of costs to complete and recoveries, principally from two large legacy contracts. These also affected the business’s cash position, which decreased to £136m at 30 June 2017, from £160m in 2016. As outlined previously the business no longer undertakes these types of fixed-price contracts on large infrastructure projects. Construction enters the new financial year with a high quality order book of £3.5bn (2016: £3.5bn), predominantly in the public and regulated sectors, which includes 84% of projected revenue for FY 2018 (2016: 82%).

Financial Position

We will report net cash at 30 June 2017 of less than £10m (2016: net debt of £9m) and average net debt over the full year is expected to be lower than previous guidance at below £250m. While the non-recurring costs in Construction have impacted the Group’s cash position, overall Galliford Try maintains a strong balance sheet, with the debt private placement and facility extension in FY 2017 providing diversification and flexibility in the Group’s funding sources.

Outlook

The Group’s outlook for FY 2018 is unchanged. Linden Homes is expected to deliver further volume growth and improvement in the operating margin. Partnerships & Regeneration continues to enhance its position to benefit from the demand for affordable housing, while Construction’s margin is expected to increase as we close out legacy positions.

Peter Truscott, Chief Executive, commented:

“Galliford Try made excellent operating progress in the financial year, with our reorganised management teams focused on improving operating efficiency across the Group, and driving revenue growth in Linden Homes and Partnerships. Reflecting this operational focus and benefiting from robust market conditions over the last twelve months, we expect to deliver a strong underlying result for FY 2017 notwithstanding the impact on the Group’s reported financial performance from the non-recurring costs in our Construction business, as previously announced.

As we enter the new financial year, we are cautious about the impact of the current political uncertainty following the general election and the medium-term outlook for the macro economy. However, all three businesses have clearly defined plans to improve operating efficiency and grow revenue and margins, providing the Group with confidence in its ability to deliver a strong performance even in a period of lower growth in the wider economy. We enter the financial year with a Group order book of £4.9bn, giving us a solid foundation to deliver growth in FY 2018. Overall, we remain well positioned to deliver against our medium-term targets for 60% growth in profit before tax to FY 2021, a five year CAGR on dividend of at least 5% and a return on net assets in FY 2021 of at least 25%, while rebuilding dividend cover to 2.0x.

Reflecting a strong underlying performance, the strength of our balance sheet and our confidence in the prospects for each of our businesses, we expect to pay a final dividend in line with previous guidance.”


Conference Call

A conference call for Analysts and Investors will be held at 08:30am (UK time):
Participant telephone number: +44 (0)20 3139 4830
Participant passcode: 17524923#

For further enquiries:

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

Tulchan Communications James Macey White / Martin Pengelley 020 7353 4200