Galliford Try profit sinks due to troubled road job
Galliford Try’s profit sank as it took a £50.8m hit in exceptional charges, including £26m in additional costs, to complete the Aberdeen Western Peripheral Route (AWPR) contract, its latest financial results have revealed.
The group’s revenue in the year to 30 June 2019 dipped to £2.86bn, down from £3.13bn in 2018. Meanwhile, the group’s pre-tax profit dived from £143.7m in 2018 to £104.7m in 2019.
The AWPR contract, which was delivered by a joint venture between Galliford Try’s Morrison Construction arm and Balfour Beatty, was heavily delayed and came in well above its £745m price tag, due in part to the collapse of a third joint venture partner, Carillion.
The latest financial results revealed that Galliford Try’s construction division suffered a £61.5m operating loss in 2019, after exceptional costs of £46.4m relating to its restructuring as well as contract write-offs.
However, the business said new contracts were performing well. Pre-exceptional revenue at the division was down to £1.38bn, from £1.69bn the year before. Its order book stands at £2.9bn, down from £3.3bn in 2018. Of that £2.9bn, 79% is for work in the public sector, 17% is in the private sector and 4% is in regulated industries.
Revenue at Galliford Try’s Linden Homes arm fell to £820.4m, down from £947.3m the previous year. Profit from operations was down to £160.5m, from £184.4m in 2018.
Its partnerships and regeneration business experienced revenue growth, climbing from £475.2m in 2018 to £623.2m in 2019. Profit from operations was also up to £34.8m, from £23.6m the year before.
Yesterday, Galliford Try announced that it had reached a preliminary agreement to merge Linden Homes and the partnerships and regeneration businesses with Bovis Homes in a £1.1bn deal, as it tries to get its construction business back on track.
Commenting on today’s results, chief executive Graham Prothero said: “Construction's result for the year has been impacted by challenges with both legacy and some current projects and by the restructure, which is now complete. The business continues to see good demand in its building and infrastructure divisions and is focusing on disciplined growth across its core sectors of building, water and highways, which we believe will deliver improved margins.
“The potential combination of our Linden Homes and partnerships businesses with Bovis Homes represents a superb opportunity, enhancing the prospects for all three of our businesses to thrive as strategically focused and well-financed operations with excellent opportunities for growth. The transaction allows construction to continue trading as a standalone well capitalised business.”