Galliford’s hybrid approach brings 35% increase in profits

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by Lin Freestone

Construction company Galliford Try has warned that the housing downturn is starting to spread to private sector commercial construction. There are signs that demand from the private commercial sector for new building is falling as a result of the economic slowdown.

However, the group’s own construction businesses continue to perform strongly and its quick reaction to declining housing markets has enabled it to deliver a strong set of full-year results to the end of June. Pre-tax profits of £71.8m have been recorded, an increase of 35%.

Galliford Try expects the strongest flow of work will come from the public sector in the coming year, and from regulated industries such as the water sector. The company has a £1.9bn forward order book, of which 87% is public and regulated sector work.

The company is building the infrastructure for the Olympic Park for the London Olympics in 2012. Another London project under way is the rebuilding of Wimbledon’s Centre Court.

The restructuring of its housebuilding business to cope with the downturn in the market has led to the loss of 260 jobs in the group’s housebuilding division.

Profits from operations in the housebuilding division rose by 22% to £44.1m, but margins fell from 14.5% to 11.1%. A total of 2,524 houses were sold during the year, 65% more than 2007.

The company has reported that on average house prices are down 18% to 20%. On some sites they are down by as much as 30%, and by only 5% on others. The south east is the strongest region, while the weakest prices are for high-rise apartments in the north of the country.

Galliford has declared a final dividend of 2.1p, giving a total for the year of 3p, and anticipates it will continue to pay dividends in the coming year because its hybrid model is proving to be more resilient.