Galliford Try has set a target of a 2% construction profit margin by 2020 as part of its new strategy.
The plan was revealed in the company’s latest half-year results to 31 December 2016 which saw overall pretax profits rise to £63m from £52.9m on turnover up to £1.3bn from £1.2bn, which includes the contracting arm and its house building arm Linden Homes.
According to the group, margins have been squeezed in recent months due to legacy contracts but it now plans to become more selective in its overall workload.
The construction operating margin for the half-year was 0.4%, down from 1.2% and operating profit was down 68% at £2.7m. This was attributed to “the resolution of legacy contracts”. Margins on new projects support improving returns in future years for the division, however.
This new strategy of being more selective about what work is taken on has resulted in a slightly slimmer order book of £3.4bn but new financial targets the board has set for 2021 include full-year construction revenue of £1.8bn, operating margin of at least 2% and net cash of £200m
Revenue at Linden Homes was up 12% to £407.6m, with the operating margin rising to 18.2% from 17.0%.
Peter Truscott, chief executive of Galliford Try, said: “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.”
