Galliford Try hikes interim dividend 23% on confident outlook

Galliford Try upped its interim dividend by 23% as it entered the second half with growing profits and record order books in two of its three businesses but saw construction profits fall as new management continues to deal with legacy issues.

Encouraged by the government's recent housing white paper, residential arm Linden Homes and affordable housing-focused Partnerships & Regeneration business both are well positioned, with a supportive residential market and strong political support.

Construction continues to look to resolve legacy contracts, with "steady progress" reported by chief executive Peter Truscott, while the contribution from newer work is "encouraging, demonstrating that the underlying business is strong".

Truscott outlined his strategic targets up to the 2021 financial year, including sustainable growth and strong returns across all three businesses, with pre-tax profits to grow 60%, a five-year compound annual growth rate for the dividend of "at least 5%" and a return on net assets in the 2021 year of "at least 25%".

For the six months to 31 December, group revenue of £131bn was up 3% on the same period in the previous year, with Linden Homes up 12%, Partnerships down 4% and construction just above flat.

Group profit before tax were up 19% to £63m and earnings per share by 19% to 61.9p, as profits grew 21% in residential, 9% in Partnerships and fell 68% in construction.

An interim dividend of 32p per share was declared, which was said to reflect confidence in the full year outlook.

"Whilst we remain alert to potential uncertainties in the wider economy, we continue to see opportunity in all of our markets," said Truscott.

"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."

Shares in GFRD fell initially but were in positive territory by 0900 GMT on Tuesday.

Analysts at Canaccord Genuity said the dividend was bigger than it expected and profits were slightly better, while the strategy update to 2021 looked "sensible and broadly as expected".

"There does not appear to be any fundamental change in strategic direction but rather more clarity around financial targets to FY2021."

Looking at the individual divisional targets, they appears to "factor in a sensible cushion" for group PBT to achieve the target growth of at least 60%.

"Overall the reported interim numbers look as expected and supportive of consensus and the focus is likely to be on the updated FY2021 targets, which also all look sensible and contain no big surprises."