Interim Management Statement

RNS Number : 2570U

Galliford Try PLC

13 May 2008

 



GALLIFORD TRY PLC

INTERIM MANAGEMENT STATEMENT

Galliford Try plc, the construction and housebuilding group, today issues its interim management statement for the period 1 January 2008 to 12 May 2008.  

Overview

Galliford Try's construction businesses are performing strongly with a spread of work across the public, regulated and private sectors. The total work in hand for our Building and Infrastructure divisions stands at £2.0 billion, unchanged from the position at 31 December 2007. 85% is for the public and regulated sectors where demand remains strong, and we have secured 67% of our forecast workload for the next financial year, a similar level to the same period last year.

Markets for the Group's Housebuilding division have been difficult throughout the spring selling season. In recent weeks they have shown a further sharp deterioration as the availability of mortgage finance for homebuyers has reduced, with increased costs together with a requirement for more substantial deposits. Ongoing negative press speculation on the future of the housing market has also served to make potential purchasers reluctant to commit themselves.  

These factors have resulted in an increase in the cost of incentives and a reduction in the ongoing level of net reservations to the extent that legal completions in the key period leading up to the financial year end will fall short of previous expectations. Accordingly, the Board now expects that the Group's profit before tax for the year ending 30 June 2008 will be no less than £60 million.   

Our policy of forward selling, particularly in the early months of this financial year, and our growing strength in the Affordable Housing and Regeneration division has helped our overall performance, and these divisions have currently reserved, contracted or completed sales with a value of £645 million of which £529 million are for the current financial year to 30 June 2008, compared with £463 million and £338 million at the same point last year.  

Strong cash management has always been a key driver in all our businesses. Our construction divisions have maintained excellent cash generation during the period and we have implemented tight controls over land expenditure, construction work in progress and overheads in housebuilding. The board expects that deferred payments, land creditors and net debt at the end of the financial year on 30 June 2008 will therefore be significantly below the levels previously forecast. As reported last year, the Group entered into a five year committed bank facility totalling £450 million in February 2007 with HSBC, Barclays, Royal Bank of Scotland and Bank of Scotland. Maturing in 2012, the Group's financing is therefore well structured and substantially exceeds projected requirements while maintaining significant covenant headroom. 

Operations 

In Building we are now achieving project completions on our multi school PFI projects in Northamptonshire and the Highlands of Scotland. Work on the rebuilding of the Centre Court at Wimbledon has also gone well, with the fixed element of the new roof in place for next months championships. We have a well balanced spread of work, with 73% of the current order book in the public and regulated sectors and have experienced little effect to date of a downturn in the commercial market.

Our Infrastructure business, with 98% of its order book in the public and regulated sectors where demand remains strong, continues to grow. During the period our highways business secured, as part of the Interlink joint venture, the £445 million M74 completion contract in Glasgow. Our renewables business was awarded a 5 year framework by Severn Trent Water, expected to generate £45 million of work, to install renewable power sources at facilities across their network. We are midway through the construction of Europe's largest on shore wind farm at Whitelee in Scotland, which is making good progress, as is our remediation contract for the Olympic Development Authority in east London.

PPP investments continues to move forward with shortlisted projects for Worcester library and museum and two new prisons, although we were not selected as one of the final two to bid for the Birmingham Building Schools for the Future project. In line with our policy on holding equity in PFI projects, we sold half of the equity in the St. Andrews hospital and healthcare PFI following financial close, covering our bid costs.

Our affordable housing and regeneration business has made good progress. Our position in the market was underlined by Galliford Try receiving the largest allocation of direct funding from the Housing Corporation of any developer in the 2008 to 2011 allocations. The integration of Kendall Cross Holdings, acquired in November 2007, is going well and we are already expanding the scope of the business into development work from its core affordable housing contracting operations. We exchanged contracts with English Partnerships to acquire the 800 unit net zero carbon site, in joint venture with Affinity Sutton Housing Association, at Graylingwell near Chichester during the period.

The concentration of our housebuilding division on individually designed developments and our minimal exposure to consortium sites has helped to mitigate the effects of the housebuilding market as it has deteriorated. We are using targeted incentives and price adjustments to reflect local market conditions where appropriate. With our geographical spread across the south and east of England we are focussed on the stronger economic regions which will enable us to benefit from a market upturn when it occurs. We are determined to maintain our industry-leading position in customer care and Linden Homes recently secured the 'Building Magazine' Housebuilder of the Year award, the fourth year running that a Galliford Try company has won the award.

We are continuing to drive through reductions in our cost base, both directly and through our supply chain. The process of optimising our land holdings following the Linden acquisition last year has continued, and we expect our land bank at the year end on 30 June 2008 will be below the levels at 30 June and 31 December 2007.

Management 

Andy Sturgess, 58, a member of the Group's executive board and Managing Director of the Building Division, is due to retire at the end of December 2008 and will step down from the Group's executive board on 1 July 2008.  Stuart Gibbons, 41, who is currently Managing Director of Galliford Try Partnerships, is appointed Managing Director of the Building Division from 1 July. Stuart originally joined the Group in 1987.

With effect from 1 July 2008, Paul Cooper, 39, is appointed Managing Director of the Group's South East Housebuilding Division. Paul joined the Group in 1997, and is currently Managing Director of the south east region of Linden Homes. Also from 1 July, Stephen Teagle, 49, who joined the Group in 2006, is appointed Managing Director of the Group's Affordable Housing and Regeneration Division.  

Outlook 

The board continues to view the economic outlook with caution and is not anticipating an early easing of conditions in the housing market.  Our construction businesses and our Affordable Housing and Regeneration division are performing strongly.  Our clear focus on cash management will continue. The Board remains convinced that the Group's business model with its broad sector exposure and financial strength will stand it in good stead during challenging times in housebuilding, and will enable it to position itself to benefit from the increased opportunities that will arise in the future.

A conference call for analysts will be held today at 8:30am. 

Dial in:                   [phone]

Confirmation Code    9748318

For further enquiries:

Greg Fitzgerald, Chief Executive           Galliford Try                        01895 855219

Frank Nelson, Finance Director            Galliford Try                        01895 855226

Ann-marie Wilkinson / Dan de Belder    Bell Pottinger Financial        020 7861 3232

 

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