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7th September 2011
The City will be looking to see for an update on recent trading at Galliford Try’s construction division when the group reports full-year results on September 14.
The Glenigan Index of project starts fell by 8% in July 2011, backing up Construction Products Association data showing construction orders at their lowest level since 1980. Research from Glenigan also shows that against this overall gloomy background, Galliford Try is still succeeding taking market share from its contracting rivals.
One of only two remaining hybrid contracting-to-housebuilding groups left on the stock exchange – the other is Kier – Galliford Try told the stock market in July that trading remains in line with expectations but the construction order book had slipped to £1.75 billion in the year to June 2011 (2010: £1.8 billion).
Galliford Try’s contracting operation won 84 construction contracts worth a total of £1,216 million in the 12 months to August 2011 (2010: 85 contracts worth £689 million) according to Glenigan. In a Glenigan league table measuring the success of the top 50 contractors in winning contractors worth £500,000 or more, this total ranks Galliford Try in sixth place – up from thirteenth a year ago. With the group over-taking peers such as Wates, Sir Robert McAlpine, Willmott Dixon and the UK operations of French group VINCI.
In a recent trading statement, the management disclosed a move to avoid chasing low-margin regional work and Glenigan’s figures shows that Galliford Try is moving towards larger value contracts. A year ago, the average contract won by Galliford Try was £8.1 million but that figure now stands at £14.5 million.
During the latest year, Galliford Try’s contract successes include the Forth Road Crossing, where the group is one of four contractors working in joint venture on this £790 million project. As a result, in terms of sectors, Glenigan’s research shows that highways-related orders at Galliford Try reached £226 million in the 12 months to June 2011 and this total ranks the group in third spot in this sector.
At the end of December 2010, Galliford Try had net debt of £31 million. However, in July the management described cash management at the construction division as “excellent” and at June 30 2011, the group had net cash of ‘over’ £30 million (June 2010: £75 million net cash).
At Galliford Try’s housing industry operation, completions rose by more than a quarter to 2,170 units in the year to June 2011 with forward sales up to £247 million (2010: £201 million). The group has also been active in terms of land acquisition with the land bank up to 10,250 plots (2010: 9,600 plots) and 70% of the land-bank was bought at current market rates.
All the plots coming into production in the current financial year have detailed planning consent and Galliford Try is also pushing new construction projects through the planning pipeline. Glenigan data shows that the group submitted 27 detailed planning applications in the 12 months to June 2011 proposing to build 1,837 units. Of this total, 57% of the units in the pipeline were houses and the balance apartments.
Regionally, Galliford Try’s main focus has been in the South West, where proposals for 924 units were submitted over the past year, and the group is ranked sixth in terms of units in the pipeline in this region. The only other regions where Galliford Try features among the top 10 housebuilders gauged by units proposed are Yorkshire & Humberside (387 units) and East Anglia (124 units).
A survey of analysts covering Galliford Try by Thomson/FirstCall shows that six analysts rate the overall group a buy and only one analyst advocates selling the shares.
One City analyst forecasts that Galliford Try’s group revenue will rise to £1,303.5 million in the year to June 2011 (June 2010: £1,221.9 million) and underlying group pre-tax profits are forecast to rise to £35.9 million from £26.1 million previously.
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