Galliford Try Share Discussion Threads

[edmondj] 14/2/2018 21:13

Yeah fairly natural reaction when the placing price is omitted from the equation!

Looks like the financial PR exec earned their fee, via The Standard article.

[jonwig] 14/2/2018 20:12

The only notifiable short position (afaik) is Henderson Global Investors at 0.91%.

It's worth saying that this needn't mean they are betting on the price falling - often as not it's half of a pairs trade: long A, short B because you expect A to perform better than B.

[jonwig] 14/2/2018 20:08

FT:

The chief executive of UK construction group Galliford Try sought to reassure investors on Wednesday after it announced plans to raise £150m in new equity and cut its dividend to offset costs related to the collapse of Carillion.

As it announced its half-year results to December, the company said it was looking to raise more than £150m to cover cost overruns on the Aberdeen Bypass project, in which Carillion had been a key partner. Peter Truscott, chief executive, pointed to strong performances elsewhere, however, such as Galliford’s core homebuilding businesses and said the fundraising would strengthen the balance sheet.

Shares in the group tumbled more than 19 per cent after the announcement, which Mr Truscott described as a “fairly natural reaction”, adding, “but the important thing is to look at the fundamentals”.

“We’ve seen progress in all our businesses,” he said. The planned capital raising was important in order to be able to demonstrate “a really solid balance sheet to shareholders and retain enough cash to grow the housing business”, he added.

Galliford was originally contracted to build the 58km Aberdeen Bypass alongside joint venture partners Carillion and Balfour Beatty. As a result of Carillion’s collapse last month, the group said the project could cost both remaining partners up to an additional £40m to complete.

Despite this project’s difficulties, Galliford’s underlying profits for the six months were up 29 per cent year on year to £81m, driven by good performances in its core homebuilding businesses, Linden Homes and Partnerships. Linden Homes’s operating profit was up 9 per cent, with sales climbing 7 per cent, while Partnerships saw revenue jump 55 per cent and margins rise to 4.5 per cent from 3.4 per cent.

Mr Truscott said orders across the business were up 40 per cent, with the company “on track” to increase volumes at Linden Homes by 5-10 per cent a year while doubling the scale of Partnerships’ national coverage in the next five years.

Analysts at Liberum wrote in a note: “We see more upside in Galliford Try than in any other of the housebuilders. The historic and not to be repeated errors in construction have had a disproportionate effect on valuation, which also does not reflect the prospects and high quality of Linden and Partnerships.”

The Aberdeen Bypass, which Galliford said was due to be completed later this year, had been an expensive thorn in its side even before Carillion’s collapse: last year Galliford announced it had set aside £98m for one-off charges relating to a number of legacy contracts, 80 per cent of which were for the Aberdeen and Forth Road Bridge projects.

Speaking on Wednesday, chief financial officer Graham Prothero said the fundraising, which has been fully underwritten by HSBC and Peel Hunt, would go towards covering costs already incurred and still to come on completing the project.

The high unforeseen costs could not all be laid at Carillion’s door, said Mr Truscott, since Galliford had agreed a fixed price, and committed to assuming all risks for the Aberdeen project.

Although Galliford could have funded the £150m itself, he said, raising capital would enable it to continue expanding its housebuilding business.

“It’s important to keep the momentum,” said Mr Truscott. “The equity raise is a strong, credible plan.”

[eeza] 14/2/2018 20:06

But poxy inept management do.

[nigelpm] 14/2/2018 19:54

I don't think so, unless the shorters can scupper it (?).

This is fantasy world.

Shorters have no ability to damage a business!

[marksp2011] 14/2/2018 19:47

Needing £150m to protect the balance sheet from a £25m provision suggests that someone has been overreporting profits in previous years as they haven't taken the provisions they should have doneBringing forward the 2x cover rule would be commendable if they had also bought forward the earnings rather than cutting the dividend and trying to spin it as a positive.Announcing a probable rights without the terms also encourages the shutters to attack. What is there to lose?Poor and mealy mouthed comms to try and fit bad management. Honesty is the key with these things.... spin doesn't work.

[rick138] 14/2/2018 19:18

Bottom line for me: is this company going to go under? I don't think so, unless the shorters can scupper it (?).

They say they can meet their obligations even without the rights issue: they want more spare money for the other two arms of the business while they deal with the Carillion fallout.

Pre-tax profits were up by 29% without the exceptional item, so I tend to think this company has a bright future once the legacy issues are out of the way.

Overoptimistic whistling in the wind inspired by the fact that I hold the shares?

[speedsgh] 14/2/2018 19:11

Jim Armitage: Prudence shows Galliford Try is building a future -

Galliford shareholders may not feel like it right now, but the collapse of Carillion could be the best thing that ever happened to them.

The death of the grandaddy of contractors has woken the whole industry with a jolt to the sins of the past. So it is that Galliford today takes the kind of sensible, responsible approach to running a business which Carillion’s chumps so woefully failed to do. Yes, it is hitting shareholders with short-term pain, but the moves will create a business with strong long-term prospects.

Galliford’s troubles stem from its part in a disastrously loss-making Carillion joint venture building a bypass in Aberdeen.

The project was taken on by previous management at a fixed price, on kamikaze terms which meant the contractors took all the risk. It’s worth noting what the project was building: 58km of road, two bridges across the Rivers Dee and Don, a railway bridge and 100 other structures. Four hundred gas, oil, water and other utilities had to be moved out of the way. And all in the dismal weather of the north-east of Scotland. As they say, what could possibly go wrong?Answer: pretty much everything. The spiralling cost overruns were a large cause of Carillion’s collapse. Galliford is now saddled with its share of the additional costs, plus a chunk of Carillion’s.

However, rather than using Carillion’s approach to managing such problems — piling up debt by trawling the back-streets of the global lending markets — Galliford has been prudent, taken stock and tapped shareholders for cash to cover the shortfall instead. Rather than continuing paying out dividends as if nothing was wrong, it’s trimming the divi, too.

In fairness to Carillion, Galliford had more options. Most of its work is in smaller projects with decent margins and less potential to go spectacularly wrong.

Unlike Carillion, then, it is a business well worth saving, even at the cost of a rights issue and dividend pain.

But then, if Carillion had bitten the bullet and done the same a few years back, perhaps it, too, could have been saved.

A very painful lesson learned.

[speedsgh] 14/2/2018 19:06

jonwig - re authority to allot shares, see 2017 Notice of Annual General Meeting at

[careful] 14/2/2018 19:01

GFRD one of my core holdings.
...along with BT CNA and the utilities.

I am becoming accident prone.

[bisiboy] 14/2/2018 18:58

well said jonwig think you are spot on
have bought if they are telling the whole truth looks very cheap.
if not who knows.

[jonwig] 14/2/2018 18:02

@ speedsgh - thanks, I'll look. I don't hold, but suspect this might be worth buying.

If they want £150m they wouldn't say it was "fully underwritten" unless it was going to be a rights issue. (Surely - any dissent?)

Assuming that's the case, they want around 180p per existing share. Really, it's irrelevant what the price is - you know what they want from you.

If it's non-pre-emptive, they want 23% of the existing share capital, which is surely above the normal ceiling (of 15%). I haven't checked, but I imagine they aren't permitted to raise so much with a mere placing.

[speedsgh] 14/2/2018 16:18

Haven't had a chance to watch it myself yet but suspect that it will be well worth the time watching the company's webcast for the Half Year Results. Link to the webcast available from the IR webpage...

[registration required]

[c2b] 14/2/2018 14:34

This just screams "insider trading". I doubt we'll get a proper rights issue, more likely a placing at a cheap price to the favoured few and a small open offer for the existing suckers. Those sure of getting cheap stock in the placing dumping stock. Absolutely disgusting.

[hooley] 14/2/2018 14:22

I decided to pack up trading because the shorters now control the market. Look what they did in Anglo-America when the share price was smashed by 90% then a six-fold increase in just 2 years. These sharks give capitalism a bad name.

[eeza] 14/2/2018 14:14

Anyone buying at the moment needs their heads testing, imo, without knowing the strike price. If it's 750 or less then the share price will tank. Any higher & it won't get away.

[c2b] 14/2/2018 14:00

This has been criminal, not having the exact details of the fund raising announced with the results has just lost £2 per share of value for no gain!Pathetic!

[eeza] 14/2/2018 13:50

Management beginning to lose credibility.
Need to get a grip.
Truscott not up to the job.

[careful] 14/2/2018 13:13

about 2m shares traded out of 84m.
most of those on loan for a small fee I would guess.

the mysteries of markets.
20% down for such a small layout.

[bookbroker] 14/2/2018 12:39

It’s ridiculous that this company involves itself in construction when it has a high quality homes building section. Operating margins on construction are like 1%, why bloody bother even if housebuilding has always been cyclical, but the capital intensity of construction and the risks with legacy issues make it less worthwhile being involved.

[careful] 14/2/2018 12:23

you would have thought they should have made it clear, the exact details.
Here we are all guessing.

[neg] 14/2/2018 12:15

Well as it currently stands they only have authority to raise some £13m from investors outside of shareholders. I think there will be a placing with the majority coming from a rights issue.