6th Mar 2024 14:20
(Alliance News) - Galliford Try Holdings PLC's much improved half-year profit showed the potential to "perform through" the economic cycles affecting the UK building industry, according to analysts on Wednesday.
In the six months that ended December 31, the Uxbridge, England-based building and infrastructure construction company said pretax profit rose 81% to GBP13.0 million from GBP7.2 million a year earlier.
Revenue rose 21% to GBP819 million from GBP679 million.
Off the back of this, Galliford Try raised its interim dividend by 33% to 4.0 pence from 3.0p.
"I am very pleased with the group's performance in the first half of the financial year. There is strong momentum in the business and our continued excellent performance is a reflection of our disciplined strategy, committed people and long-established relationships with our supply chain and clients. The group has delivered increased revenue and divisional operating margin, as we make accelerated progress towards our strategic objectives, and we will continue to provide long-term sustainable value for our stakeholders," said Chief Executive Officer Bill Hocking.
AJ Bell noted Galliford Try was "in a confident mood", with its results "suggesting that if you target the right markets and you get your ducks in a row operationally, then you have a decent shout of performing through economic cycles."
"The UK building industry has had a difficult time off the back of rising borrowing costs and a bleak consumer backdrop...Galliford focuses on areas like schools, hospitals, prisons, roads and water treatment works. These are areas which, in theory, should be pretty inured to fluctuations in the economy. Although, the precarious state of UK public finances is a risk to future work," said AL Bell analyst Russ Mould.
"For now, the company is delivering a healthy mix of increased margins, revenue, profit and dividends. The market will be watching closely for news on how the business can sustain its current momentum when it delivers a capital markets day [on May 23]."
Panmure Gordon said Galliford Try "continues to benefit from favourable spending trends within the public and regulated industry segments of the construction industry and market share gains".
Galliford Try said it enters the second half of the year with "strong momentum", with confidence for the financial year ending June 30 "and the longer term".
On December 31, Galliford Try's order book stood at GBP3.7 billion, up 5.7% from GBP3.5 billion, while cash on its balance sheet stood at GBP150 million, down 2.6% from GBP154 million.
Panmure Gordon said its order book position had been maintained, providing material earnings visibility and that the pipeline "remains healthy".
Edison analyst Andy Murphy commented: "The company's notable contract wins, including a GBP3.2 billion affordable housing framework and recent infrastructure projects totalling GBP98 million, highlight Galliford Try's ability to secure and deliver complex endeavours across diverse sectors, affirming its competitiveness in the industry. With a strategic focus on profitable growth and operational excellence, Galliford Try remains well-positioned to capitalise on market opportunities and sustain momentum."
Shares in Galliford Try were up 0.1% to 241.33 pence each in London on Wednesday afternoon.
Panmure Gordon reiterates its 'buy' rating and 370p price, arguing shares trade on a forward price-to-earnings ratio of 8 times for its estimated financial 2026, compared to competitors Mears Group PLC and Renew Holdings PLC trading at 12 and 13 times respectively.
"With Galliford Try's delivering healthy earnings progression, underpinned by the strong order book, we anticipate that the shares will move to this valuation level," said Panmure Gordon analyst Adrian Kearsey.
Liberum rates Galliford Try at 'buy', maintaining a 300p price target.
"We make four key points: targets will likely be increased at the [capital markets day] in May and we expect the margin to progress towards 4%; the order book is flat at the [financial 2023] level of GBP3.7 billion but up on the [first half] GBP3.5 billion and it is high quality and there is a strong pipeline of activity, particularly in Water; at Building, there is strength across the Health, Education and Defence markets and [earnings before interest and tax] increased 14%; at Infrastructure, we see Water as particularly exciting," said Liberum analyst Joe Brent.
By Greg Rosenvinge, Alliance News senior reporter
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