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Fri September 20 2019

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Galliford Try construction losses widen

11 Sep Galliford Try has reported a £61.5m operating loss on its construction activities for the year to 30th June 2019.

Chief executive Graham Prothero
Chief executive Graham Prothero

The division’s results were hit by contract reviews, including the ongoing saga of the Aberdeen Western Peripheral Route (AWPR).

Construction revenue fell by 18% to £1,386.8m (2018: £1,687.4m) as the AWPR project concluded and more selective bidding as introduced to focus on better margins. 

The £61.5m operating loss was even worse than the previous year’s £29.1m loss. Excluding £46.4m of exceptional one-off costs relating to restructuring and contract write-offs, the operating loss was £15.0m this time (2018: £15.9m profit).

Chief executive Graham Prothero said: “Construction's result for the year has been impacted by challenges with both legacy and some current projects and by the restructure, which is now complete.  The business continues to see good demand in its Building and Infrastructure divisions and is focusing on disciplined growth across its core sectors of building, water and highways, which we believe will deliver improved margins.”

He added: “The underlying portfolio of newer contracts is performing well, with margins that reflect their associated risk profile.”

Exceptional items included £26.0m in relation to additional costs to complete the AWPR contract, which was finished in early 2019, plus a further £6.3m from the impact of accounting policy changes relating to AWPR.

Over the last three financial years, Galliford Try has recorded £152m of exceptional losses in relation to AWPR. Consultants have advised an expected recovery of around £100m to Galliford Try, although the total assessed value in respect of the claims under the contract is more than twice that.  Negotiations remain in progress. There are also claims against other parties including designers and insurers.

Elsewhere, Galliford Try has also submitted claims of £54m for three contracts “with entities owned by a major infrastructure fund of a blue-chip listed company”.  Costs were impacted by client-driven scope changes, Galliford Try asserts. The three contracts terminated in August 2018. 

At group level Galliford Try’s revenue for the year (including join ventures) was down more than 8% to £2,863m (2018: £3,132m). Pre-tax profit was down 27% at £104.7m (£143.7m, including £50.8m of exceptional items.

As reported yesterday, Galliford Try is in talks with Bovis Homes about selling its Linden Homes and Partnership & Regeneration house-building operations.

Graham Prothero said: “The potential combination of our Linden Homes and Partnerships businesses with Bovis Homes represents a superb opportunity, enhancing the prospects for all three of our businesses to thrive as strategically focused and well-financed operations with excellent opportunities for growth.  The transaction allows Construction to continue trading as a standalone well capitalised business."

 

Galliford Try divisional results: Year to 31st June 2019

CONSTRUCTION Pre-exceptional 2019 2019 Pre-exceptional 2018 2018
Revenue (£m) 1,386.8 1,382.5 1,687.4 1,687.4
(Loss)/profit from operations (£m) (15.0) (61.5) 15.9 (29.1)
Operating profit margin (%) (1.1) (4.4) 0.9 (1.7)
Order book (£bn) 2.9 2.9 3.3 3.3
 
LINDEN HOMES 2019 2018
Revenue (£m) 820.4 947.3
Profit from operations (£m) 160.5 184.4
Operating profit margin (%) 19.6 19.5
Completions 3,229 3,442
PARTNERSHIPS & REGENERATION 2019 2018
Revenue (£m) 623.2 475.2
Profit from operations (£m) 34.8 23.6
Operating profit margin (%) 5.6 5.0
Equivalent contracting units 2,100 2,000
Mixed-tenure units 1,178 751

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