Shareholders cash in on Galliford Try profits up 29%

Published on Tuesday 22 February 2011 21:43

GALLIFORD Try, owner of the Edinburgh-based Morrison Construction, yesterday delivered a 36 per cent hike in its interim dividend and promised to return one-third of pre-tax profits to shareholders.

Shares jumped almost 3 per cent after the construction group unveiled a 29 per cent rise in underlying pre-tax profits to 17 million in the six months to 31 December.

Revenue edged ahead from 570m to 575.9m, boosted by a pick-up in the housebuilding sector in the south of England.

Ken Gillespie, group managing director of the firm's construction division, hailed the success of managing costs within the business, which saw the division's gross margin rise from 2.4 per cent to 2.5 per cent.

He told The Scotsman: "I'm very pleased with the contribution from the construction division, including our Morrison operations in Scotland.

"About 30 per cent of our 3,000 construction staff are based in Scotland, carrying out about 25 per cent of the volume of our work."

Gillespie - who was managing director of Morrison from 2005 until Galliford Try bought it from Anglian Water in 2006 - said the company's strategy of expanding into the housing sector had paid off.

The group raised 125m through a rights issue in 2009 to fund a spending spree on cut-price land during the nadir for the housing market.

Gillespie said the group was confident that it could carry on growing profits, even if house prices stay at their currently- depressed level.

Any recovery in the housing market could then boost the company's bottom line.

Housebuilder Redrow last week said it was more upbeat on its prospects, as buyers flocked back to showhomes this year, while rival outfit Bellway also said sales revived in January after bad weather kept buyers at home over Christmas.

Morrison traces its roots back to 1948 when it was founded as a family-run building contractor in the Highland town of Tain.

The firm continues to build houses in the north of Scotland, with three developments on the go around Inverness.

Gillespie reiterated the company's desire to expand its housebuilding operations into the rest of Scotland.

Morrison also continues to win major construction projects north of the Border.The company is part of the consortia that built the M74 motorway extension in Glasgow and is involved in the first of the Scottish Futures Trust's "hub" projects to deliver several public services from a single site.

The group was also appointed to six National Health Service contracts across Aberdeen, Dundee and Edinburgh and has recently won 50m of work on Orkney for London-listed oil and gas services giant Petrofac and the 58m Orkney school-building project.

Howard Seymour, an analyst at Numis, said: "Galliford remains a special situation in housing as it looks to grow significantly in a dull macro-market backdrop, but, as it demonstrates success in this area, it should increasingly be valued as a housebuilder, which provides significant share price upside from here."

Robin Hardy, an analyst at Peel Hunt, which carries a "buy" recommendation on the group, added: "The expansion of housing is starting to pay dividends. This will drive a significant step-up in dividends. The shares are cheap."

Shares closed up 10p at 360p.