Construction firm Galliford Try is aiming to hit a two per cent profit margin by 2021 as part of a new strategy to overcome the drag from legacy contracts
Bosses at construction firm Galliford Try have revealed plans to reach a two per cent profit margin by 2021. The firm, which has suffered a financial squeeze due some legacy contracts, set out the strategy as part of a four year plan.
Performance
For the six month period to 31 December 2016, Galliford Try said revenue had increased three per cent to £1,308m and pre-tax profit was up 19 per cent to £63.0m.
This was due to solid performances at some of its divisions. Lindon Homes saw revenue rise 12 per cent to £407.6m, with the operating margin rising to 18.2 per cent from 17.0 per cent. Equally, the partnerships & regeneration division also performed well, generating £144.3m revenue in the half-year, with an operating margin of 3.4 per cent.
Meanwhile, Construction took the brunt of the difficulties. It contributed revenue of £742.0m. This was up from £738.6m for the same period the previous year. However, it had a cash balance of £110.8m, down from £154.7m, due to cash flow delays on some legacy projects. Construction margins also dropped to 0.4 per cent.
The new strategy aims to ensure 60 per cent growth in overall pre-tax profit and to reach an annual turnover of nearly £4bn. New financial targets included a full-year construction revenue of £1.8bn, an operating margin of at least 2 per cent and net cash of £200m, the board said.
Performance
Chief executive Peter Truscott said: “The group delivered another strong performance in the first half. Our reorganised management teams have settled well and are making positive strides towards their respective operating and financial targets.
“We continue to see robust demand and pricing in residential markets, for both Linden Homes and Partnerships & Regeneration, driving good rates of sale, and the land market remains benign in all regions.
“Linden Homes continues to achieve margin improvement, including much improved overhead efficiency.
“Partnerships achieved a higher proportion of mixed tenure development revenue, resulting also in first-half margin growth.
“Construction is making steady progress in resolving legacy contracts, and the contribution from newer work is encouraging, demonstrating that the underlying business is strong.
“Whilst we remain alert to potential uncertainties in the wider economy, we continue to see opportunity in all of our markets. We enter the new calendar year with strong order books: both Linden Homes and Partnerships are at record levels, and whilst Construction is lower than the prior year, it remains both at a very comfortable level and, more importantly, of high quality.
“Our improved debt facilities have further strengthened the balance sheet, providing financial flexibility to underpin our strategy for growth.”
He concluded: “When I joined Galliford Try in October 2015 I inherited three strong businesses with talented employees, excellent market reputations, and great potential.
“Over the last 16 months we have focused on enhancing the strengths of each business, to build a solid platform for further disciplined and profitable expansion. I am encouraged by the opportunities for improvement and growth in all three businesses.”
