The division鈥檚 results were hit by contract reviews, including the ongoing saga of the Aberdeen Western Peripheral Route (AWPR).
Construction revenue fell by 18% to 拢1,386.8m (2018: 拢1,687.4m) as the AWPR project concluded and more selective bidding as introduced to focus on better margins.聽
The 拢61.5m operating loss was even worse than the previous year鈥檚 拢29.1m loss. Excluding 拢46.4m of exceptional one-off costs relating to restructuring and contract write-offs, the operating loss was 拢15.0m this time (2018: 拢15.9m profit).
Chief executive Graham Prothero said: 鈥淐onstruction's result for the year has been impacted by challenges with both legacy and some current projects and by the restructure, which is now complete.聽 The business continues to see good demand in its Building and Infrastructure divisions and is focusing on disciplined growth across its core sectors of building, water and highways, which we believe will deliver improved margins.鈥�
He added: 鈥淭he underlying portfolio of newer contracts is performing well, with margins that reflect their associated risk profile.鈥�
Exceptional items included 拢26.0m in relation to additional costs to complete the AWPR contract, which was finished in early 2019, plus a further 拢6.3m from the impact of accounting policy changes relating to AWPR.
Over the last three financial years, Galliford Try has recorded 拢152m of exceptional losses in relation to AWPR. Consultants have advised an expected recovery of around 拢100m to Galliford Try, although the total assessed value in respect of the claims under the contract is more than twice that.聽 Negotiations remain in progress. There are also claims against other parties including designers and insurers.
Elsewhere, Galliford Try has also submitted claims of 拢54m for three contracts 鈥渨ith entities owned by a major infrastructure fund of a blue-chip listed company鈥�.聽 Costs were impacted by client-driven scope changes, Galliford Try asserts. The three contracts terminated in August 2018.聽
At group level Galliford Try鈥檚 revenue for the year (including join ventures) was down more than 8% to 拢2,863m (2018: 拢3,132m). Pre-tax profit was down 27% at 拢104.7m (拢143.7m, including 拢50.8m of exceptional items.
As reported yesterday, Galliford Try is in talks with Bovis Homes about selling its Linden Homes and Partnership & Regeneration house-building operations.
Graham Prothero said: 鈥淭he potential combination of our Linden Homes and Partnerships businesses with Bovis Homes represents a superb opportunity, enhancing the prospects for all three of our businesses to thrive as strategically focused and well-financed operations with excellent opportunities for growth.聽 The transaction allows Construction to continue trading as a standalone well capitalised business."
Galliford Try divisional results: Year to 31st June 2019
| CONSTRUCTION | Pre-exceptional 2019 | 2019 | Pre-exceptional 2018 | 2018 |
|---|---|---|---|---|
| Revenue (拢m) | 1,386.8 | 1,382.5 | 1,687.4 | 1,687.4 |
| (Loss)/profit from operations (拢m) | (15.0) | (61.5) | 15.9 | (29.1) |
| Operating profit margin (%) | (1.1) | (4.4) | 0.9 | (1.7) |
| Order book (拢bn) | 2.9 | 2.9 | 3.3 | 3.3 |
| LINDEN HOMES | 2019 | 2018 |
|---|---|---|
| Revenue (拢m) | 820.4 | 947.3 |
| Profit from operations (拢m) | 160.5 | 184.4 |
| Operating profit margin (%) | 19.6 | 19.5 |
| Completions | 3,229 | 3,442 |
| PARTNERSHIPS & REGENERATION | 2019 | 2018 |
|---|---|---|
| Revenue (拢m) | 623.2 | 475.2 |
| Profit from operations (拢m) | 34.8 | 23.6 |
| Operating profit margin (%) | 5.6 | 5.0 |
| Equivalent contracting units | 2,100 | 2,000 |
| Mixed-tenure units | 1,178 | 751 |
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