Interim Management Statement

RNS Number : 9598F

Galliford Try PLC

05 May 2011

 



GALLIFORD TRY PLC

THURSDAY 5 MAY 2011

INTERIM MANAGEMENT STATEMENT

Galliford Try plc, the housebuilding and construction group, today issues its interim management statement for the period 1 January 2011 to 4 May 2011.

Greg Fitzgerald, Chief Executive, commented:

"Against a background of challenging economic conditions in both the housebuilding and construction sectors, the housing market has exceeded our expectations throughout the spring selling season and we have continued to benefit from the strong southern bias of our expansion plan.  Construction has also benefited from encouraging contract awards in the period and strong cash balances that lead us to expect the Group's gearing will be minimal at the financial year end.  We therefore now expect full year results to be significantly ahead of the current range of market estimates and remain confident in delivering the objectives of our expansion plan during the next financial year."

Highlights:

Housebuilding

·     Continuation of improved market conditions through the spring selling season, with sales rates substantially up on the first half and sales prices remaining stable.

·      £532 million of sales reserved, contracted or completed, of which £363 million is for the current financial year to 30 June 2011 (2010: £443 million and £308 million).

·      Cancellation rate reduced to 16%, below historic average.

·      100% of plots secured for 2012 production, all with a detailed planning consent.  68% of plots for 2013 secured.

·      67% of 10,150 plot landbank secured at current market values (2010: 50% of 9,700).

·      £347 million Gateshead award underlines Industry leading position in affordable housing and regeneration.

Construction

·      3% increase in order book during the period to £1.8 billion (31 December 2010: £1.75 billion).

·      £790 million Forth Road Crossing project secured by Galliford Try consortium.

·      Cash balances continue to be better than forecast.

·      72% of next financial year's revenues secured (2010: 68%), market in London and the south east showing some improvement.

For further enquiries:

Galliford Try -                             Greg Fitzgerald, Chief Executive              01895 855001

                                                Frank Nelson, Finance Director

Tulchan Communications -          Mal Patel, Matthieu Roussellier               020 7353 4200

Housebuilding

The improvement in the sales rate since the start of 2011 has continued throughout the spring selling season, with prices remaining stable.  The sales rate over the second half of our financial year to date of 0.52 sales per site per week is substantially up on the 0.33 for the first half.  Currently sales reserved, contracted or completed stand at £532 million (2010: £443 million) of which £363 million (2010: £308 million) is for the current financial year to 30 June 2011.

We remain on schedule to deliver the objectives of our three year expansion plan during the next financial year.  As we increase the number of selling sites, which currently stand at 75, we are benefiting from the effect of the improved sales rate across all our sites.  Cancellation rates have reduced to 16% in the period, below the historic average, and there has been a marked reduction in the level of sales incentives required.  There has been some improvement in mortgage availability, albeit purchasers remain constrained by the criteria being applied by lenders. 

We have continued to manage the growth in our landbank to deliver the increase in production planned for the next financial year ending in June 2012, and beyond.  With all the plots required for 2012 now secured and with a detailed planning consent, as well as 68% of plots required for 2013 secured, the proportion of our sales anticipated to come from new land, secured at current market values, compared to our remaining legacy land that was bought at higher prices, will start to rise more strongly.  67% of our current landbank of 10,150 plots has now been secured at current market values.

Affordable housing providers are now looking for development opportunities as they adapt to the Governments new funding model, based on 80% of open market rents, and assemble four year delivery programmes.  We expect to benefit from our strong presence in the south, and are already securing offers in excess of our forecasts.

We were delighted to announce during April that we have been appointed to the £347 million Gateshead regeneration project under which we will deliver up to 2,400 homes across 19 sites during the period up to 2026.  We expect this model for undertaking regeneration projects on public sector land portfolios to generate more opportunities in the future.  Our ability to secure such projects, with the visibility they give to future revenue streams, demonstrates the value of our leading presence in the affordable housing and regeneration sector.

Construction

In markets that remain challenging, the group's strategy is to maintain workload at a level that meets the group's cash and profit objectives, while maintaining a level of resource for when the market improves.  Our cash position remains strong and we have continued to make operational efficiencies across the business.  Our total order book of £1.8 billion, with 72% of our revenue for the next financial year secured, puts us in a good position. 

Our appeal against the quantum of the fine imposed on us by the Office of Fair Trading for three instances of cover pricing between 2001 and 2004 was successful, with the Competition Appeal Tribunal deciding in March to reduce the fine from £8.33 million to £1.4 million.

During the period we have been successful in securing a number of significant projects, specifically in sectors and for projects where price criteria alone do not determine selection.  The award of the £790 million Forth Road Crossing, to be carried out in a four party consortium over a four year construction period, illustrates the opportunities that our approach can generate.  This project will follow on from the £445 million M74 contract in Glasgow, shortly to be completed by our joint venture, giving us continuity of major infrastructure work in Scotland.  Our position as the leading contractor to the water industry provides opportunities to secure additional work over and above the frameworks we have with our five year AMP 5 clients, with our current order book in water standing at over £450 million.

Significant building projects secured during the period include the £59 million Orkney Schools Framework in Scotland together with a preferred bidder appointment on the £50 million Building Schools for the Future project at Halton in the North West and the £37.5 million redevelopment of Riverside Quarter in Wandsworth, South London.  Although the pipeline of public sector projects is falling, as the signs of a limited market recovery in commercial work take hold in the South East of England, an area where we have a strong presence, we have a number of good opportunities. During the period we have successfully completed the £105 million St Pancras redevelopment contract, restoring the Victorian gothic building to its former splendour, creating a 244 bedroom five star hotel and 67 luxury apartments.  Our work for the All England Lawn Tennis Club at Wimbledon continues, with the new Court 3 completed for the championships this summer.

Outlook

Against a background of challenging economic conditions in both the housebuilding and construction sectors, the housing market has exceeded our expectations throughout the spring selling season and we have continued to benefit from the strong southern bias of our expansion plan.  Construction has also benefited from encouraging contract awards in the period and strong cash balances that lead us to expect the Group's gearing will be minimal at the financial year end.  We therefore now expect full year results to be significantly ahead of the current range of market estimates and remain confident in delivering the objectives of our expansion plan during the next financial year.

 

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