Galliford Try expecting healthy profits despite £98 million hit
Housebuilder Galliford Try is eyeing a healthy boost to profits despite its construction arm taking a near-£100 million hit following a review of two infrastructure projects.
The group said pre-tax profits for the year ending in June would come in at the top end of expectations - between £46 million to £59 million - with revenues accelerating at developer Linden Homes.
It comes after s hares sunk 10% in May after the re-appraisal of two projects showed it was on the hook for around £78 million more than previously thought.
The projects accounted for about 80% of a £98 million hit, with the remaining 20% related to normal contract provisions.
Despite the blow, the FTSE 250 firm rose more than 8% on Tuesday as the group said it was on track to deliver a 60% boost to pre-tax profits by 2021.
Chief executive Peter Truscott said the company was cautious about the impact of political uncertainty following the General Election, but still expects a strong full-year result.
He said: "All three businesses have clearly defined plans to improve operating efficiency and grow revenue and margins, providing the group with confidence in its ability to deliver a strong performance even in a period of lower growth in the wider economy."
Revenue growth at Linden Homes accelerated in the second half of the year, with total completions rising 7% to 3,296 for the year ending in June.
The average sale price also climbed 6% to £354,000, while order books remained robust at £373 million.
Updating on the construction charges, the firm said the re-appraisals had caused the firm's cash to drop to £136 million for June 30 this year, down from £160 million last year.
It also stressed that the company would no longer take on fixed-price contracts for large infrastructure projects.
The lion's share of the construction charges came from fixed-price contracts linked to the £790 million Queensferry Crossing bridge project in Scotland and the £550 million Aberdeen Western Peripheral Route.
It added that more recent contracts were "performing well" and its order book remained flat at £3.5 billion in contrast to last year.