Higher margins in the firm’s construction business boosted profits in the six months to 31 December 2010
In a relatively string first six months of its financial year, Galliford Try saw a small increase in revenues to £575.9m, compared to £570m in the same period during 2009. After allowing for one off charges, the firm made a pre-tax profit in the last six months of 2010 of £17m, compared to £13.2m a year earlier.
The group moved from a net cash position of £100.2m in 2009, to a net debt of £30.7m at the end of 2010. This was caused by a reduction in cash held by the construction division, which was better than expected, and investment in land in-line with the firm’s housebuilding strategy.
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This is progressing and the firm now has 100% of planned production for 2012 now secured, while 65% of its 10,000 plot landbank was acquired at current market values.
Revenue in the housebuilding division, including its share of joint ventures, for the half year was £152.9, up 29% from £118.8m last year. Profit from operations was £9.9m, 39% up on a year ago (2009: £7.1 million).
Total forward sales in the division are currently £442m, up 19% on last year.
Revenues in the construction business were £442.6m in the first half of the financial year, compared to £465.8m last year. A focus on winning profitable work resulted in operating margins of 2.5%, compared to 2.4% last year.
Commenting on the results, Greg Fitzgerald, Galliford Try chief executive, said: “We are currently on track to deliver the objectives of our three year housebuilding expansion plan during the next financial year. The spring selling season remains crucial, and although it is too early to judge whether it will be sustained, the improvement in our sales rate during the first few weeks of 2011 is encouraging. Our strategy for managing our construction business in challenging times is working well and the underlying results give us confidence that we will be able to grow the business again when markets improve.
“Although the economic outlook is still uncertain, the board is encouraged by the group’s performance and progress in the first half of the financial year, and is confident in its strategy for delivering the objectives of its expansion plan.”
The strong performance from Galliford reflects a focus on winning work at profitable levels, rather than chasing work for the sake of it, and it is this that has resulted in the higher margins. “We have allowed volumes to adjust as we have only gone for good quality work” says managing director of the construction division, Ken Gillespie. “That we have increased margins when the market is as tough as it is has been very positive.We are happy where we are in terms of work volumes and in the future, declines in public sector work will be offset to some extent by more work in the utility sector.” Gillespie added.