Galliford Try aims to double size of house building arm

Galliford Try is gearing up for a "once in a lifetime" opportunity to double the size of its house building operation, as it revealed that it would tap investors for £119m to buy land.

The news comes as the firm revealed a 20% fall in turnover to £1.46bn for the year ended 30 June 2009. Pre-tax profit was also down heavily to £24.5m for the period (2008: £71.8m).

Write-downs of housing-related assets and the cost of making redundancies meant that the company recorded a £26.9m pre-tax loss after exceptional items (£60.3m profit).

Despite a fall in turnover and profit, the firm - one of a comparitively small number of construction firms that runs a 'hybrid' contracting and house building business - issued an upbeat assessment of the housing market.

Speaking to CJ, Galliford Try group managing director construction Ken Gillespie said: "We see a much softer land market than we have seen for a long time. There are fewer house builders available to pursue these opportunities and so we see a big opportunity - a once-in-a-lifetime opportunity in fact - to double the size of our housebuilding business.

"We are using the chance here, on the back our our rights issue, to enter the land market early. We're not banking on house prices rising. What we think we will see is demand coming back from people wanting to buy houses."

But the outlook for the construction arm of the business looked less positive, despite record results.

"We see the construction market becoming increasingly difficult. Eighteen months ago, we saw the deterioration in the private sector commercial market - principally building. Now we are beginning to see public sector projects stall, stop, or have their scope reviewed in line with reduced expenditure," Gillespie said.

He added that the firm would concentrate on regulated sectors such as water, rail, environment, waste, energy and renewables, as public sector spending falls away.

And the company is also expected to focus on reducing its cost base over the coming months as construction got tougher. The firm's directors have already taken a 3%-5% pay cut to signal harder times ahead.

Galliford Try by division:

Construction

• Revenue: £1.1bn
• Operating profit: £26.9m
• Orderbook: £1.7bn (2008: £1.9bn)

Affordable housing & regeneration

• Revenue: £184m
• Operating profit: £6.3m

House building

• Revenue: £235m (2008:£486m)
• Operating profit: £3.5m (2008: £53.2m)
• Average sale price: £189,000 (2008: £220,000)
• Landbank: 4,700 plots (2008: 5,400)
• Completions: 1,769 units (2008: 2,524)