I did not buy into Galliford Try (GFRD) but I am interested in learning any lessons that I can which might assist me when making future selections.
The last results to be published by GFRD were the Interim Results for the Year Ending 30 Jun 2019.
https://otp.tools.investis.com/clients/ ... id=1232782 Group
· Strong group underlying performance producing record pre-exceptional profit, with continuing progress against our strategic objectives across the Group.
· 3,069 total new homes completed by Linden Homes and Partnerships & Regeneration (H1 2018: 2,878).
· Net debt reduced to £40m (H1 2018: £85m), with average net debt decreasing to £126m (H1 2018: £203m).
· Interim dividend of 23.0p declared (H1 2018: 28.0p), in line with 2.0x cover policy.
· Increased total sales currently reserved, contracted and completed of £1,097m7 (H1 2018: £1,008m) and a current Group order book of £5.4bn7 (H1 2018: £5.6bn).
Construction
· Aberdeen Western Peripheral Route (AWPR) construction completed. First half exceptional costs of £26m from completion delays.
· Constructive dialogue with the client continues regarding significant and recognised claims. Financial statements include an estimate for these recoveries.
· Lower revenues reflect more cautious bidding and project deferrals owing to clients' macro uncertainty.
· Pre-exceptional operating margin maintained at 0.9% (H1 2018: 0.9%) with encouraging performance on current projects.
· Solid, high-quality order book of £3.2bn7 (H1 2018: £3.5bn).
Peter Truscott, Chief Executive, commented:
"Galliford Try has delivered a strong financial and operational performance in the first half, with further progress against our 2021 strategy. The Group is well capitalised and average net debt is below previous guidance, driven by focused working capital management over the period.
…………………..
Construction's performance continues to be encouraging, particularly on newer contracts, reflecting the business's careful approach to project selection and risk management. We continue to prioritise the quality of each opportunity over volume. We are seeing projects deferred as a result of macro uncertainty, but with 96% of revenue secured for the current financial year and 66% secured for the following year the business has confidence in its prospects.
The Group enters the second half of the year with a solid foundation, underpinned by a strong balance sheet and our focus on high-quality earnings which will drive further margin improvements over time. Our mix of residential development creates a robust proposition in more uncertain markets. We remain cautious of the impact of the current political uncertainty on consumer and business confidence, and the medium-term outlook for the macro economy, but believe our focused strategic objectives, strong order book and disciplined approach will deliver a full year out-turn toward the upper end of the analysts' current range8."
Note that “Construction” is reported as “encouraging”
Only one warning flag as far as I can see, although it is a big one for HYP, the decreased interim dividend, of which more later. But apart from that, albeit only based on the short summaries, these results on the face of it look fairly strong.
Next we go back to last Full Year Results for the Year Ending 30 Jun 2018.
https://otp.tools.investis.com/clients/ ... id=1180176Group
· Very strong underlying performance reflecting excellent progress made against strategy to 2021
· 6,193 total new homes built by Linden Homes and Partnerships & Regeneration (2017: 5,490)
· Sales order books in Linden Homes and Partnerships & Regeneration robust at £698m (2017: £638m)
· Successful 1 for 3 rights issue in April 2018 resulting in net proceeds of £150m
· Average net debt at £227m (excluding the rights issue proceeds)
· Full year dividend payment of 77.0p (2017 restated: 86.0p), covered 2.0x by pre-exceptional profits in line with policy announced at the rights issue
· Pre-exceptional return on net assets improved to 29.2% from 27.5%
· On track to achieve Group 2021 strategic targets with adjustments to divisional targets
Construction
· Pre-exceptional margin improved to 0.9%, on revenue of £1,687m (2017: 0% and £1,527m respectively)
· £26m net debt (2017: net cash £137m), reduction primarily reflecting cash funding of Aberdeen Western Peripheral Route (AWPR)
· Good progress on the AWPR contract, with the vast majority of the road complete, significant sections already opened to traffic and final completion expected in late Autumn. Construction result impacted by exceptional charge of £45.0m from the contract, in line with earlier guidance
· £3.3bn9 risk managed high-quality order book (2017: £3.6bn)
Peter Truscott, Chief Executive, commented:
"We have delivered a very strong underlying performance during the year, driven by excellent progress towards our strategic objectives across all three businesses.
……………………..………
The underlying Construction business performed well and continues to see a pipeline of suitable opportunities, with new projects delivering improved margins. We have made good progress towards completion of the AWPR contract, with significant sections of the road open to traffic and the final section expected to be open by late Autumn 2018.
The rights issue in April has strengthened the balance sheet and ensures that the Group's businesses are well positioned, with the appropriate capital, to deliver on their respective growth opportunities in line with our Strategy to 2021."
Ah, the rights issue. Is that a clue to the reduced Interim Dividend? Well yes, but only in part. According to Dividend Data the adjusted Interim for Year Ending 30 Jun 2018 is 25.19p as opposed to the 28p that was reported in the latest Interim Results.
https://www.dividenddata.co.uk/dividend ... ?epic=GFRDAlso, as well as a second warning flag - the recent Rights Issue – a third warning flag is the reduced Annual Dividend from an adjusted value of 86.37p for the Year Ending 30 Jun 2017 to 77p for the Year Ending 30 Jun 2018
As I said, I never bought into GFRD and in fact I have never checked into any prior results before now, not least because I did invest within the same Business Sector by way of Persimmon (PSN) – FTSE100 - and Crest Nicholson (CRST) - higher yield at the time (I think).
However, from the time of publication of the final results for the Year Ending 30 Jun 2018, not to mention the Rights Issue in April of 2018, I think if I had reviewed GFRD it would not have been selected for HYP, despite the “Strong” results being reported by the company.
I know, very easy to say with the benefit of hindsight. But can anyone point me to anything that I am missing that made GFRD a suitable candidate for HYP, at any time after the Rights Issue for April 2018 was announced?
In conclusion I should add that, although I did miss this particular banana skin, I had a full holding of Carillion PLC (CLLN)
and I am still holding what was once about a half holding of Kier PLC (KIE) – much less than half now
. You win some you lose some I guess.
Ian