06.03.2025
Yesterday’s Interim Results from Galliford Try (LON:GFRD) worked wonders for the construction group’s shares, lifting them 10% higher to close at 384p, valuing the whole business at £391m.
Brokers have reiterated their views on this group’s progression, while I take the view that the group has a solid balance sheet, is debt free, well capitalised, with exciting growth prospects.
The Business
This Uxbridge-based group, operating as Galliford Try and Morrison Construction, employs over 4,000 people as it carries out building and infrastructure projects with clients in the public, private and regulated sectors across the UK.
Its main segments include Building, Infrastructure, and Investments.
The construction business operates nationwide, working on projects that include the construction of assets, and the maintenance, renewal, upgrading and managing of services across utility and infrastructure assets.
Its building business serves education, defence and custodial, health, and commercial sectors.
Its infrastructure businesses, primarily Highways and Environment, carries out critical engineering projects.
Through public private partnerships, the company arranges finance, makes debt and equity investments and manages construction through to operations.
It has investments in a number of PPP Special Purpose Vehicles, delivering building and infrastructure projects.
The Interim Results
The six months to end-December 2024 showed revenues up 12.7% at £923.2m (£819.1m), with adjusted pre-tax profits 22% better at £20.5m (£16.8m), lifting earnings 11.3% to 15.7p (14.1p) and an 37.5% increased Interim dividend at 5.5p (4.0p) per share.
The group stated that it continued to have a strong balance sheet, with 12-month average month end cash at £176.4m (year to 30th June 2024: £154.8m) together with PPP assets of £40.2m (30th June 2024 £41.8m).
Its net cash at 31st December 2024 was £210.0m (June 2024: £227.0m).
Management Comment
CEO Bill Hocking stated that:
"The Group's excellent performance in the first half of the financial year provides increased confidence and improved revenue, margin and profit expectations for the full year.
In addition to our continued successes in Building and Environment we see a pipeline of opportunities across all our chosen sectors.
Our track record of operational delivery, focused risk management, committed people and established relationships with our supply chain and clients provides consistency to our results.
Our recent major long-term framework wins and order book provide clear visibility and security of future workloads well beyond the current financial year and we welcome the Government's commitment to grow the economy by major investment in infrastructure and development.
Our performance and future outlook give us confidence to improve our expectations for the full year to 30 June 2025 and we are committed to delivering long-term sustainable value for our stakeholders."
The Equity
There are some 101.93m shares in issue, some 77% of which are held in professional ownership.
The larger holders include Aberforth Partners (11.39%), Premier Fund Managers (11.09%), JO Hambro Capital Management (9.78%), Threadneedle Asset Management (5.35%), Dimensional Fund Advisors (5.15%), Brewin Dolphin (5.01%), Aberdeen Investment Management (4.41%), Norges Bank Investment Management (2.65%), Hargreaves Lansdown Asset Management (2.20%), JP Morgan Asset Management 1.78%) and Canaccord Genuity Wealth (1.56%).
Analyst’s Views
Analysts Joe Brent and Joe Walker at Panmure Liberum rate the group’s shares as a Buy, with an increased Target Price of 480p, up from 430p previously.
Their estimates for the current year to end June 2025 are for sales of £1.87bn (£1.77bn) with pre-tax profits of £40.1m (£32.7m), generating earnings of 29.4p (26.7p) and paying out a dividend of 16.3p (15.5p) per share.
For the coming year they see £1.92bn sales, £42.0m profits, 31.2p earnings and a 17.3p dividend per share.
Their 2027-year estimates are £1.97bn sales, £45.5m profits, 33.7p earnings and a dividend of 18.7p per share.
The analysts noted the group’s continued progress with its strategy and its increased order book worth £3.9bn.
Max Hayes and Guy Hewett, analysts at Cavendish Capital Markets, have an even higher Target Price for the group’s shares, at 527p.
They note that the group’s performance shows encouraging early progress against its 2030 growth targets, which underpin their unchanged 527p Target Price.
The analysts consider that the group is supported by a healthy balance sheet, with 12-month average month-end cash at £176.4m (FY24: £154.8m) and a net cash balance of £210m, where net cash exceeds net working capital for the first time in recent history.
Their estimates for this year are for £1.88bn revenues, £41.7m profits, 30.3p earnings and a 16.2p dividend.
For the year to end-June 2026 they see £1.92bn revenues with £42.7m profits, 31.5p earnings and a 16.8p dividend per share.
Their 2027 figures suggest £1.98bn turnover, £47.9m profit, 35.3p earnings and a dividend of 18.9p per share.
Colin Smith, analyst at Capital Access, noted that the group’s order book ended the period at £3.9bn, with 98% of projected FY25 revenue already covered and 81% coverage for FY26.
For this year he looks for £1.83bn revenues, £35.7m adjusted profits, 26.9p earnings and a 15.6p dividend.
For 2026 he sees £1.88bn revenue, £38.9m profit, 29.3p earnings and 17.1p dividend.
The 2027 estimate is £1.93bn sales, £43.0m profits, 32.4p per share in earnings and 18.7p dividend.
He notes that Galliford Try continues to deliver above expectations and current consensus estimates are likely to be increased again.
In My View
Confidence is gained from this group’s continued strong performance, while analyst estimates underline the overall attractions of the group and the prospects for its rising share price.
Hold tightly to the group’s shares as they progress higher in sales, profits and price.
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