Galliford Try Share Discussion Threads

[marksp2011] 12/9/2018 16:43

DR

I have been reading the numbers. There isn't quite enough detail to be able to decide what they mean with so many exceptionals but, the cash flow doesn't look as good as I was hoping.

Interesting to know if the claims for Aberdeen are included in the "receivables" as that is going to be a long long haul.

[cascudi] 12/9/2018 16:19

Thank you for the advice.

[profitaker] 12/9/2018 16:13

cascudi - Personally I'm holding the stock until a P/E of about 10 and a yield of about 5%. That's an share price of £15. Market conditions can change and I might change my mind, but that's my thinking right now. Good luck.

[bor491] 12/9/2018 16:06

so how much is the dividend now... the momentum is strong - odds are it will resume the upside move once it has caught a breather. Remember this stock came all the way from from 1400+ so lots of catching up to do.

[cascudi] 12/9/2018 16:02

Feel upset I got scared by the triple top at 1000. I should have staying in. I would be 20pc profit. Anyway I bought some in the gap up but not as much as my old holding. Any advice for the future?

[dr_smith] 12/9/2018 15:31

Mark:
"Even if they double the margin for the target date and get 4% - I still don't like the risk/reward on construction "
Not sure if intended or co-incidental, but if you supposed the £45m exceptional item didn't exist, that's would give like figure of around 4% profit on t/o pre-tax.

On your very valid point of "is it worth it", I have looked for ROCE by segment, but can't see it. Also, withso many figures preceded by "pre-exceptional item" I find it hard to dril down on construction segment to see where they can improve. It is just over half of business by revenue.

IIRC whilst the Construction sector isn't presently the most profitable, the segmental businesses were set up to provide mutual strength through a cyclic economy.

With Aberdeen by-pass in rear view mirror (oops unintended pun) hopefully giving that 4%, hopefully the improved contract selection process will take that higher still.

I wonder if their peers are also being so cautious towards future gov contracts.
If they didn't get burnt, they may take a more lax view.

[dr_smith] 12/9/2018 11:47

Mark. Have BWY and several other builders myself.
Unfamiliar with Gleeson and Boot, but on quick look, look average.
I note "Gleeson’s strategic land arm, which buys land in southern England and sells it after gaining planning permission"
As I say not familiar with Gleeson, but there is the proposed(implmented?) gov tax on developers/land owners that sit on land marked for development and don't develop - don't know if that has any bearing here.
IMO :-)

Spudders:"'Trend is your friend'"
I believe Buffett does the opposite.

I tend to favour medium to long term, so ignore trends and go on fundamentals.
I do recognise your suggestion though, of multiple short term trend following deals, it is just a different mind set - and seems to revolve around double guessing rather than business logic, so tend to avoid. :-)

[highlands] 12/9/2018 11:30

I agree, probably not the best time to buy but definitely not a good time to sell either. I'm holding on to mine for £12 minimum.

[spudders] 12/9/2018 11:16

Mark, the 'Trend is your friend' why move on why momentum is building. I've held and added since 2007 and see no need to panic just yet, all depends on timeframe. Good luck and enjoy your profit 😃

[marksp2011] 12/9/2018 11:07

DR
Yep...always the same
The primary issue I see is that the procurement teams are incentivised to reduce price and despite all teh good words, price outs. Whilst bid criteria are focused on price rather than quality and sustainability the world repeats. I am moving out of GFRD towards Boot, gleeson, costain and bellway. I have lost any appetite for the Balfours, GFRD and KIER risk profiles

[dr_smith] 12/9/2018 09:56

marksp2011.
I don't know your work, but seems it is your buinsess.
Sorry to hear of the headaches you face.
Must be extremely frustrating being in a trade where you want to apply that trade, but spend disproportionate amounts of time and energy on issues such as you describe.

[dr_smith] 12/9/2018 09:46

Warranty:
Wholly agree.

"We have continued to enhance our project approval process, ensuring we only take on projects with appropriate levels of risk and anticipated profit. "
So what happened before? Even a beginner to accounts understand the concept of risk/return.

Re gov, there does seem intent/media coverage that they acknowledge the system was wrong and needs to change. Whether any future local gov decison maker will consider this is another matter.
Do gov/council employees receive bonuses/financial rewards for keeping with budgets?? I would guess they do and personal pocket may make them forget policies not put down as hard rule...and even then can be comprmoised
- e.g. possibly a factor in the Grenfell disaster with cost cutting?.

[marksp2011] 12/9/2018 09:34

Warranty
I am sitting in the middle of a major renewal on an HMG contract. The last version ended in tears as everyone was losing money and noone wanted to take more work. The renewal started off with announcements of "new ways of working" and is now back to the previous mode of benchmarking every element of the deal.....trying to accept the prices where you are below the benchmark and award any piece where you are actually making $$$ to someone else.

It will end up in a mass of change controls as HMG will not be able to deliver on the assumptions they have told the bidders to work against

[dr_smith] 12/9/2018 09:19

marksp2011: Back in 2012 I was doing a corporate video for a rebar co in London and filming on a costruction site. It was December.
At the first group meeting, I asked if building might stop for bad weather. They loooked at me as I was aright plonker.. or softie.
Yep.. first 2 filming days cancelled as site was being closed - Health and saefty for big freeze.
I believe we have winters each year. ;-)

..oh and co weren't allowed to mention work they had done done 2012 Olympics for legal reasons (greedy over-reaching sponsors).
We do the olympics to show national pride, yet we can't show it - crazy!

[warranty] 12/9/2018 09:12

DR, I think with the likes of CLLN, IRV and other infrastructure providers proving the past systems were nonsensical, they are, as the company has stated in these results, going to be more selective in future contracts. Indeed, I think the government themselves will also realise that changes must be made in future contract negotiations if they are not to lose the very companies they need to handle them. Agreeing to complete work of failed partners as in the Aberdeen contract was pure madness and I doubt will occur again. I do agree that the potential profit margin on Construction is ridiculous for the risk involved and I trust the management to walk away from anything that doesn't produce far better in future. The Carillion and Interserve situations in particular prove the need to rethink how these contracts are priced because if not, either companies will end up bust or walk away from tendering at all.

[profitaker] 12/9/2018 09:07

There was more than enough cash flow from operations to cover the dividend, almost twice in fact. I was merely trying to explain how their management of credit affected cash flow. And it's not simple.

[yorkshireinvestor] 12/9/2018 09:01

I'm not sure why you are picking and choosing numbers, it's a simple calc for me. Net cash flow is +91.7m and the equity fund raising was +153.2m. Strip that out and net cash flow was (61.5)m cash flow.

[dr_smith] 12/9/2018 08:56

Post 4696 on 6/9/18 I said:

>For fun, I will guess share price of 10.50+ for results day, but don't lynch me if I'm wrong. ;-)

Well..not end of day yet, but we've now up to 1054 as I type.

marksp2011. Haven't read results yet, but <1% profit on t/o in not worth it.

Warranty:
>with Government projects likely to be more agreeable in future,

I share that hope - is that personal expectation or based upon industry/Gov comment?

The trouble with big co's with massive overheads there is a high temptation to take on big contracts with view they will help cover running costs and a zero profit is accepted - especially when trying to outbid competitors - and hope for margin on add-ons/follow on projects from same client.

[marksp2011] 12/9/2018 08:42

Yorkshire is right

There is a major difference between profits and cashflow.
The dividend has been paid out of the cashflow that includes the positive impact of the rights. The question is how much of the paper profit will appear as cash. If the cash conversion rate is too low, the dividend will need to be cut.

For me the issue is the construction business......it delivers practically nothing and generates 99% of the risk. if the plans are all met....... it still delivers practically nothing - the same margins as a supermarket with "n" times the risk.

Why bother?

[profitaker] 12/9/2018 08:39

The cash flow statement is fine. They generated £131.8m from operations. However, they allowed debtors to increase by £65.8m whilst at the same time reducing trade creditors by £12.1m. The combined effect of debtor/creditor changes (65.8 + 12.1)£77.9m, when added to "Net cash generated from operating activities 30.4" is £108.3m.

The dividends paid were £75.9m. It's fine.

[yorkshireinvestor] 12/9/2018 08:13

Look at cash flow statement !

[randomwalker] 12/9/2018 08:07

the divi is covered 2x by profits. It is NOT being paid from the capital raising

[yorkshireinvestor] 12/9/2018 08:04

Nice results and showing some recovery, however cash flow still a bit of an issue. The dividend has been funded by the equity raise, not sure if dividend at this level is sustainable.