With the publication of its half year report for the six months ended 31 December 2011 this morning, construction and housing group Galliford Try  has described the spread of long term work in the Group's construction business as “underpinning its strength in difficult market conditions.”

During the period the Group saw a 13% increase in construction revenues, primarily reflecting mid term workloads in the five year AMP5 water frameworks.

At 2.2%, the company said its construction margin was holding up well in a difficult market (2011: 2.5%). Galliford Try said its continued focus was on contracts with acceptable returns, describing the value of order book as in line with expectations at £1.6 billion (2011: £1.75 billion) and underpinned by strength in long term frameworks for infrastructure projects.  Its construction cash balance of £149 million was in line with forecasts (2011: £174 million). Construction revenues were up at £499.9m compared with £442.6m for the same period last year.

The Group said its construction strategy of focussing on profit margin and cash performance remained unchanged and it was not prepared to acquire work in highly competitive markets where price levels or contract conditions were unacceptable.

Galliford Try said while that as forecast, securing work as a result had become more difficult, it had “rigorously maintained” the strategy and would continue to do so until markets improved and growth could be resumed again. The disciplined strategy of focusing on regions and market segments where the company had experience and expertise would enable the Group to become more cash generative over time.

Construction revenues increased at mid-point of AMP5

Galliford Try said revenues in the construction division had increased as it approached peak workloads in the mid cycle of the five year asset management frameworks for water clients and secured additional workload under the frameworks. The margin on work carried out is at a level that is in line with expectations, although the firm anticipates further reductions going forward as it works through projects secured more recently in more difficult markets.  Our focus on cash management continues, and the balance held at 31 December 2011 was £149.4 million (H1 2011: £174.0 million).

Commenting on its construction business, the Group said:

“We have maintained the size of our order book at a level that provides visibility of future work while rigorously maintaining our focus on securing projects with an acceptable risk and return profile.  Our total order book is currently in line with our expectations at £1.6 billion (H1 2011: £1.75 billion) of which 42% is in the regulated sector, 44% in the public sector and 14% in the private sector.  By the start of the second half, we had secured 100% of our projected revenue for the current financial year and we currently have 67% for our next financial year (H1 2011: 100% and 61%).  We are therefore in a good position to work through the current difficult market and to grow again when markets improve.”

Group revenue for the half year to 31 December 2011 was up 30% at £746.8 million ( 2011: £575.9 million).  Revenue (including share of joint ventures) was up 31% to £784.9 million, the increase being primarily driven by a doubling of housebuilding revenue to £277.0 million, although there was also a 13% increase in construction revenues, primarily reflecting mid term workloads in the five year water frameworks.

Profit from operations (stated before finance costs, share of joint ventures' interest and tax, exceptional items and tax) was£38.6 million, a 116% increase over the previous year, driven by increasing margins and revenues in housebuilding.  Profit before tax was up 89% at £32.2 million (2011: £17.0 million), and the earnings per share for the period was up 110% at 31.1p (2011: 14.8p).

Greg Fitzgerald, Chief Executive said that the spread of long term work in the Group's construction business was underpinning its strength in difficult market conditions.