21st May 2019 09:52
LONDON (Alliance News) - Galliford Try PLC on Tuesday said its construction business revenue will be reduced in the current year as the firm restructures the unit to target markets with long-term growth and profitability potential.
However, Galliford said it expects to achieve an annual result for the group as a whole in line with analysts forecast, as trading since the beginning of 2019 has progressed well.
Current market expectations see the FTSE 250 housebuilder delivering a pretax profit of between GBP112.7 million and GBP123.3 million for the year ending June 30. A year ago, Galliford's pretax profit was GBP143.7 million.
Galliford Try shares were trading 8.1% higher at 580.00 pence each.
At the beginning of April, the company launched a review of its Construction business with plans to simplify its structure and refocus on key markets.
The business will concentrate on its core strengths in Building, Water and Highways, Galliford explained, resulting in a reduction of up to 350 staff members across the UK. This will generate savings of up to GBP15 million from 2021, moving the unit closer to a goal of operating margins of 2% by that year.
In the current year, financial 2019, Construction's profitability will be hurt by the review, with a write down of GBP40 million in respect of restructuring costs and legacy and current projects. Furthermore, the restructured business's target annual revenue will reduce to GBP1.3 billion, the company said.
The current order book in Construction stands at GBP3.0 billion, down from GBP3.3 billion a year ago.
However, the company stressed that its position is unchanged with regards to its claim for the completed Aberdeen Western Peripheral Route, known as the Aberdeen bypass, and the previously disclosed GBP38 million work in progress for three contracts for a single client. The Aberdeen work was set back by the collapse of Galliford's partner on the project Carillion.
Galliford Chief Executive Officer Graham Prothero said: "We have made some difficult decisions in response to the challenges faced by the group's Construction business. The associated operational changes are being implemented across the business. We are confident that the decision to refocus our construction activities will deliver a more stable business for the future and support improved margins."
Meanwhile, the company's Linden Homes division has maintained a sales rate of 0.68, slightly lowered than 0.71 a year ago. Galliford Try's Partnerships & Regeneration unit continued to "deliver a strong performance", the company added.
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