Southern English housebuilding boosts Galliford Try

The strength of the housebuilding market in southern England helped Galliford Try push up adjusted pre-tax profits by a third in the last financial year and Glenigan’s research shows the group looking to build on this success.

One of only two remaining hybrid contracting-to-housebuilding groups left on the stock exchange – the other is Kier – Galliford Try pushed pre-tax profits up to £35.1 million in the 12 months to June 2011 (June 2010: £26.1 million). Revenue rose to £1,284 (June 2010: £1,222), which was slightly below some analysts’ forecast.

The biggest leap in profits was at the housebuilding division, which is in the second year of a three-year expansion plans and lifted operating profits to £31.6 million (2010: £17.6 million) as 2,170 units were sold (2010: 1,705). The average selling price of those units reached £227,000 (2010: £207,000).

Galliford Try cited ‘an increased proportion of sales in the south east of England’ for this rise and Glenigan – which reports on every planned and current UK construction projects– shows that the main forward focus for housebuilding is the South West. In the 12 months to June 2011, the group submitted detailed planning applications to build 924 units. This total ranked Galliford Try in sixth position in this region in terms of planning activity.

All Galliford Try’s plots coming into production in the current financial year have detailed planning consent and Glenigan’s data shows 27 detailed planning applications submitted 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.

The only other regions where Galliford Try features among the top 10 housebuilders gauged by units proposed over the last year are Yorkshire & Humberside (387 units) and East Anglia (124 units).

Turnover at the construction division was broadly unchanged at £936.9 million (2010: £936.5 million) and operating profits slipped back to £22.2 million (2010: £22.8 million) but Glenigan’s data shows that in a depressed environment, Galliford Try is still taking market share from its contracting rivals.

Galliford Try’s contracting operation won 84 contracts worth a total of £1,216 million in the 12 months to August 2011 (2010: 85 contracts worth £689 million) according to Glenigan. This latest total was boosted by large value projects, such as the Forth Road Crossing, where the group is one of four contractors working in joint venture on a £790 million project.

Glenigan ranks Galliford Try as the third most successful contractor in the highways’ sector in the 12 months to June 2011 and this is borne out by the group’s own figures, which show infrastructure as the largest source of new orders at £921 million (2010: £922 million) ahead of building on £673 million (2010: £638 million). The remaining £156 million of orders (2010: £198 million) comes from social housing work.

In a Glenigan league table measuring the success of the top 50 contractors in winning contractors worth £500,000 or more, this latest orders’ 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.

The group values its financial year-end order book at £1.75 billion with 42% of this work in the regulated sector, 40% in the public and 18% in the private sector. The management are pursuing a strategy to avoid chasing low-margin regional work and focus on sectors where Galliford Try can offer specialist expertise.

Glenigan’s data shows that this is producing a shift towards larger value contracts. A year ago, the average contract won by Galliford Try was £8.1 million but in the 12 months to August 2011 that figure now stands at £14.5 million.

One City analyst predicted Galliford Try’s group revenue would reach £1,303.5 million in 2011 and underlying group pre-tax profits would hit £35.9 million.