Galliford Try

Galliford Try to raise £150m to negate loss on AWPR after Carillion demise

Galliford Try is planning to raise £150 million of new equity capital to help cover its additional financial obligations on the Aberdeen Western Peripheral Route (AWPR) contract following the collapse of Carillion.

The two firms formed two-thirds of the Aberdeen Roads Ltd (ARL) consortium leading the £745 million AWPR work alongside Balfour Beatty.

The demise of Carillion, which entered liquidation on January 15, has increased Galliford Try’s total cash commitments on the project by in excess of £150m.

While it has “sufficient financial resources” to meet its obligations, Galliford Try said this would involve diverting capital away from the Linden Homes and Partnerships & Regeneration businesses, “thereby reducing their ability to capitalise on the material growth opportunities these businesses would otherwise be well positioned to exploit”.

The firm has now booked a £25m exceptional charge for the six months to December 31 and announced plans to raise £150m from investors, fully underwritten by Peel Hunt and HSBC.

It added: “Galliford Try therefore intends to raise £150m of new equity capital in the coming weeks to strengthen further the group’s balance sheet and ensure that the group’s businesses can continue to pursue their respective growth opportunities.”

Galliford Try said it continues to make good progress in resolving both AWPR, the construction of which is expected to complete during summer 2018, and other legacy contracts.

The firm has also committed to no longer undertaking fixed price, all risk major projects of this nature, and has improved its tendering and project selection processes, it added.

Announcing its interim results today, Galliford Try revealed “strong” financial and operational performance across all three businesses with good progress being made against the group’s growth plan to 2021.

While the group pre-tax profit figure was down 11% on last year, net debt was also substantially reduced from £113.8m to £84.9m.

Chief executive Peter Truscott said: “We have delivered a strong financial and operational performance in the first half, with revenue growth across all three businesses and excellent progress against our 2021 strategy.

“Linden Homes had a very strong first half, with both volume growth and improving margins. Our strategy of focusing on standardisation is proving to be effective and we continue to benefit from further operating efficiencies. The market continues to be positive, underpinned by good mortgage availability, the government’s ongoing commitment to Help-to-Buy, and the recent stamp duty cut for first-time buyers.

“Within Partnerships & Regeneration, we have delivered an excellent first half performance and continue to be very encouraged by the opportunities in the market, which give us confidence that this growing business will continue to deliver sustained returns over the strategy period and beyond. Our underlying Construction business is performing well with the margin drag of legacy contracts reducing.

“We have reviewed the impact on our business from the compulsory liquidation of Carillion, which has resulted in a further reassessment of the likely out-turn from our participation in the AWPR joint venture, leading to an exceptional charge of £25m. Reflecting the additional financial obligations arising from this contract, we have today announced our plans for a capital raise of £150m. We have also brought forward our plans to increase dividend cover to 2.0x pre-exceptional earnings, with the result that we are today declaring an interim dividend of 28.0p.

“We continue to maintain strict control over net debt, which is consequently better than our guided level. We enter the second half of the year with a solid foundation to build on and strong fundamentals for the housing market. While we remain cautious of the impact of the current political uncertainty and the medium-term outlook for the macro economy, we believe our focused strategy, strong order book and disciplined approach will deliver further growth and shareholder value.”

Joint venture AWPR partners offer jobs to Carillion workers

Carillion workers employed on the Aberdeen Western Peripheral Route (AWPR) have been offered jobs by its joint venture partners Galliford Try and Balfour Beatty, according to Transport Scotland.

The three companies made up the Aberdeen Roads Limited consortium delivering the £550 million section of the AWPR between Balmedie and Tipperty before Carillion entered compulsory liquidation last week.

A Transport Scotland spokesperson said 76 Carillion staff will be offered employment to the remaining contractors to allow work to continue on the project.

The spokesperson said: “Aberdeen Roads Limited has confirmed there are 76 Carillion staff on the AWPR site and we understand that both Galliford Try and Balfour Beatty will offer jobs to allow progression of work on the project.

“The construction partners have reaffirmed their commitment to completing the works.”

Galliford Try revealed last week that the joint venture partners expect to foot a bill of between £60m-£80m to complete the work following Carillion’s demise.

The contractor said: “The terms of the contract are such that the remaining joint venture members, Balfour Beatty and Galliford Try, are obliged to complete the contract.  Our current estimate of the additional cash contribution outstanding from Carillion to complete the project is £60-80m, of which any shortfall will be funded equally between the joint venture members.

“The companies will discuss the position urgently with the official receiver of Carillion and Transport Scotland, to minimise any impact on the project.”

Balfour Beatty said the collapse of Carillion could lead to additional costs of £35m to £45m for the firm overall but did not disclose how much would of this was attributed to the AWPR project.

Meanwhile, Kier Group, which currently operates joint ventures involving Carillion on HS2 and the Highways England smart motorways programme, has revealed that all Carillion employees on these projects will be transferred to Kier.

Following discussions with the UK government and clients, Kier and Eiffage are now 50/50 partners in delivering two of the seven HS2 civil engineering projects.

All 51 Carillion staff, including apprentices, have been offered the chance to switch to the other two companies.

Another 150 Carillion workers on smart motorways schemes have also been offered jobs with Kier, which said it had also been talking with the project’s supply chain, “ensuring continuity of skills, resources and suppliers.”

Kier chief executive Haydn Mursell said: “We have been working collaboratively with our clients and are pleased to have reached agreement with government concerning these joint ventures. We have been able to take action quickly and reassure the project teams that they continue to play an important role in the delivery of these contracts.”

Economy secretary assures parliament over jobs and future of AWPR

Keith Brown on a visit to the AWPR site last year

Cabinet secretary for the economy, jobs and fair work, Keith Brown, has moved to reassure MSPs that disruption and job losses caused by Carillion’s collapse would be minimised in Scotland, though the minister stopped short of giving an opening date for the Aberdeen Western Peripheral Route (AWPR).

The UK’s second-biggest builder entered liquidation on Monday after racking up debt and pensions burdens of around £1.5 billion.

The firm formed one-third of the Aberdeen Roads Ltd (ARL) consortium leading the £745 million AWPR work alongside Balfour Beatty and Galliford Try.

In a topical question at Holyrood, Aberdeenshire East MSP Gillian Martin raised concern for jobs dependent upon the project and also the knock-on effect on smaller companies in the supply chain in the North East and throughout Scotland.

In response, Mr Brown said that support is available to any workers who may be concerned for their jobs, with help and advice to be made available to subcontractors through a designated Scottish Enterprise helpline.

Furthermore, the cabinet secretary assured parliament over the contract to deliver the AWPR scheme with the other firms involved in the consortium making clear that they will fulfil their contract obligations and had “very quickly” notified the London Stock Exchange of their intention. Mr Brown confirmed that Transport Scotland will support and work with them throughout this process.

The economy secretary said he was unable to give a “cast-iron guarantee” that jobs would not be lost as a result of the liquidation of the company, but said there was a “good chance” employees would continue to work on existing projects.

When asked about the future of Carillion employees working on the bypass, Mr Brown said: “I think it is likely that the two remaining contractors will require work to be done that was previously done by the employees of Carillion.

“I don’t want to be too definitive, but there’s around 70-plus employees, direct employees of Carillion, employed on that contract plus 190 employed on other terms, including some agency staff.

“We can’t give a cast iron guarantee on the workers but I think there is a good chance that many of those will be reemployed and for those that are not we have offered the assistance I have previously mentioned.”

On the day of Carillion’s collapse, the joint venture firms indicated that the announcement leaves a financial hole of £40-80m in the AWPR project.

Galliford Try said: “The terms of the contract are such that the remaining joint venture members, Balfour Beatty and Galliford Try, are obliged to complete the contract.  Our current estimate of the additional cash contribution outstanding from Carillion to complete the project is £60-80m, of which any shortfall will be funded equally between the joint venture members. The companies will discuss the position urgently with the official receiver of Carillion and Transport Scotland, to minimise any impact on the project.”

Mr Brown had said the Scottish Government’s Partnership Action for Continuing Employment (PACE), which helps people facing redundancy, would be available for those under threat.

He said PACE would also be available if anyone should lose defence jobs.

Gillian Martin MSP said: “Our first thoughts when businesses face such serious difficulties should always be for those who may be facing uncertainty over their jobs and their future, and it was encouraging to see parliament united in support of them today.

“I am grateful to the cabinet secretary for the support being made available both to Carillion employees and to subcontractors who may have concerns at this time.

“Early confirmation from the other partners in the Aberdeen Roads consortium that they intend to press ahead and deliver the AWPR contract will be hugely reassuring for my constituents. I know people and businesses across the North East are looking forward to the opening of the much-needed £750 million new route this year, and I will be engaging with the Scottish Government and Transport Scotland going forward to ensure that remains on schedule.”

Meanwhile, the Scottish  Government has set up helplines for anyone who may be affected by the failure of the construction firm.

Scottish companies affected by the Carillion insolvency can call Scottish Enterprise on 0300 013 3385 or register their details here.

The redundancy helpline operated by Skills Development Scotland is 0800 917 8000, with help also available here.

It was also announced today that banks and government were working together to mitigate the effects of Carillion’s collapse on businesses within the supply chain.

Contingency plans take hold in wake of Carillion collapse

Carillion is part of a coalition delivering the Aberdeen Western Peripheral Route (AWPR)

Clients and joint ventures partners of collapsed contractor Carillion have taken steps to begin contingency plans after the firm entered compulsory liquidation today.

An application was made to the High Court for a compulsory liquidation of the UK’s second largest construction company before opening of business this morning after talks with the UK government to save the company were unsuccessful.

The firm had been involved in the £745 million Aberdeen Western Peripheral Route (AWPR) and had contracts with Registers of Scotland, the Scottish Children’s Reporter Administration, West of Scotland Housing Association and NHS Greater Glasgow and Clyde among many others.

Network Rail awarded Carillion a contract last year to deliver platform extension works and the firm is also responsible for two facilities management contracts worth £158m with the Ministry of Defence (MoD) which cover 83 military sites in Scotland.

Contingency plans have now been put into effect with the hope to minimise disruption to the projects.

Galliford Try is in joint venture with Carillion and Balfour Beatty on the construction of the £550m section of the AWPR between Balmedie and Tipperty for Transport Scotland.

“The Scottish Government are in discussions with the liquidators and the UK government to support Carillion employees and secure the completion of contracts.”

Economy secretary Keith Brown

Galliford Try said: “The terms of the contract are such that the remaining joint venture members, Balfour Beatty and Galliford Try, are obliged to complete the contract.  Our current estimate of the additional cash contribution outstanding from Carillion to complete the project is £60-80m, of which any shortfall will be funded equally between the joint venture members. The companies will discuss the position urgently with the official receiver of Carillion and Transport Scotland, to minimise any impact on the project.”

A Transport Scotland spokesman reiterated the bypass project will be completed by the spring.

He said: “We expect that any impact on the AWPR will be mitigated by the fact that Carillion’s construction partners are joint and severally liable and as such, the other two construction partners remain fully responsible for the completion of the works.

“Aberdeen Roads Limited, the construction joint venture for the project, confirmed recently that they remain committed to the delivery of this project.”

Amey has incorporated joint ventures with Carillion to deliver the regional prime and national housing contracts for the MoD, through the Defence Infrastructure Organisation (DIO). These contracts maintain the MOD estate in the UK.

It said: “The terms of the joint ventures’ arrangements mean that Amey will continue the services now that Carillion has announced it is entering into immediate compulsory liquidation. Amey is committed to doing this and ensuring continuity of service to the DIO and MOD and the service men and women in the UK.

“For the past few weeks, Amey has been working on detailed contingency plans with the DIO and the Cabinet Office to ensure it can effectively continue to manage the contracts and these are being implemented today.

“Amey confirms it is fully prepared to continue the service obligation of the contracts without adverse effect on the employees of the joint ventures or the supply chain.”

Network Rail commissioned Carillion for both the Waverley platforms extension project and the electrification of the railway line through Shotts.

In addition, the firm was also contracted for platform works at Broughty Ferry and Aberdeen railway stations.

Carillion Powerlines secured an £11.6m contract to carry out electrification work on the Shotts line in December

A Network Rail spokesman said: “We are activating our contingency plans as a result of this unfortunate news.

“We will be working closely with the administrators and Carillion’s management team to ensure projects that they are working on continue and that the supply chain is maintained for this important work.

“Our aim is to ensure that this news has as little impact as possible on our projects to grow and expand the railway network.”

Kier Group, which currently operates joint ventures involving Carillion on HS2 and the Highways England smart motorways programme, jobs, will now have to take them on alone or seek a new partner.

A Kier spokeswoman said: “We have put in place contingency plans for each of these projects and are working closely with clients so as to achieve continuity of service.

“Following today’s announcement and after a short period of transition for these contracts, we do not expect there to be an adverse financial impact on the group arising from these joint venture contracts.”

The Construction Industry Training Board (CITB) said that it was “taking steps to secure the future of the 1,400 Carillion apprentices” by redeploying them to other firms.

CITB chief executive, Sarah Beale, said: “The news of Carillion entering insolvency is clearly a significant blow to the UK construction sector. While this will present the sector with a number of challenges, CITB’s priority is to do all it can to ensure that Carillion apprentices can continue their training so their skills are not lost.

“We have established a project team to work with the apprentices and will be offering in principle grant and apprenticeship transfer incentives to our employer base in order to retain these learners. We will be working closely with the ESFA, the official receiver and our network of college providers so that every possible support is in place to help these apprentices continue their training. We will be liaising with the official receiver with a view to contacting the apprentices as soon as possible.”

The Scottish Government said it is in talks to support Carillion employees and secure the completion of contracts in Scotland.

Cabinet secretary for the economy, Keith Brown, said: “Our first thoughts are with those Carillion employees who will be concerned for their jobs today and we are in discussions with the liquidators and the UK government regarding the measures they intend to put in place regarding private sector, Network Rail and UK govternment-backed contracts in Scotland to support Carillion employees and to secure the completion of these contracts.

“The Scottish Government has been working to manage or eliminate risks associated with Carillion’s difficulties since July last year and we have contingency plans in place for affected contracts, including the AWPR where the contract contains a mechanism for the remaining two joint venture partners to deliver the project and we expect that work to continue.

“I have spoken to the Secretary of State for Scotland this morning and my officials have also spoken with PwC to establish the situation and should it be necessary we stand ready to support for any affected employees through our Partnership Action for Continuing Employment (PACE) initiative which aims to minimise the time individuals affected by redundancy are out of work.”

New managing directors appointed at Galliford Try

Chris Scoffield

Chris Scoffield

Galliford Try has named new managing directors for two different divisions within the group.

Chris Scoffield has been promoted from commercial director of the rail, aviation & environment business unit within the infrastructure division of Galliford Try as its new managing director.

Meanwhile, Sean Egan joins from Home Group to be the new managing director of Galliford Try Partnerships North.

Succeeding Nick Salt following his promotion to managing director of the infrastructure division last month, Mr Scoffield joined Galliford Try as head of work winning as part of the acquisition of Miller Construction in 2014. He graduated from Loughborough University with a degree in commercial management & quantity surveying in 2004 and is a member of the Royal Institution of Chartered Surveyors and the Chartered Institute of Civil Engineering Surveyors.

As development director of Home Group, Mr Egan was in charge of a £1.2 billion programme to build 10,000 new homes. Over the past seven years he has worked on eight joint ventures with Galliford Try, including the £350m Gateshead Regeneration programme.

Galliford Try to quit large infrastructure as profits hit by Queensferry Crossing and AWPR

Queensferry Crossing 2017Galliford Try has revealed that it will no longer bid for major infrastructure projects after its construction division suffered an £89 million loss due to problems on delivering the Queensferry Crossing and the Aberdeen Western Peripheral Route (AWPR).

Pre-tax profits for the year to 30 June 2017 fell nearly 60% from £135m to £59m, on revenue up 6% to £2,820m (2016: £2,670m).

Profit was hit by one-off charges of £98.3m, which includes £87.9m in respect of the two infrastructure joint ventures in Scotland: the £790m Queensferry Crossing and the Balmedie-Tipperty section on the £550m AWPR.

Both projects were contracted on fixed-price terms – Queensferry Crossing in 2011 and AWPR in 2014.

Galliford Try’s construction division made an operating loss of £88.8m for the year on revenue of £1,526.9m. Even excluding the one-off costs associated with writing off major contract losses, the division still failed to break even, making a pre-exceptional operating loss of £900,000.

On a positive note, Galliford Try’s house-building division Linden Homes made an operating profit of £170.3m (2016: £147.2m) on revenue up 11% to £937.4m (2016: £840.8m).

Chief executive Peter Truscott the firm will now focus on lower risk public, utility and two-stage tender work.

He said: “We have put into place rigorous processes to ensure a more disciplined approach towards project selection. Today, we are focusing on lower-risk public and regulated sectors and two-stage negotiated work, rather than large infrastructure projects on fixed-price, all-risk contracts which these legacy projects were.”

He added: “The construction market remains largely positive, as the UK continues to require substantial investment in its social and economic infrastructure. As a result, the order book in our Construction business remains strong and we have already secured a significant proportion of work for the financial year, and much of the following year 2019. Our focus is on contract quality and risk management, and we will continue to be rigorous in our project selection, with revenue expected to remain broadly stable year-on-year as a result. Our newer work has been operating under these parameters and performance to date has been encouraging and is supportive of our target margins. As our legacy positions close out we expect margins to improve as we work towards our 2021 target of at least 2.0%.”

Scottish subcontractor ‘on brink of insolvency’ over payment dispute

streets2_LEDThe future of a Scottish subcontractor is in the balance after a payment dispute with Galliford Try put the firm under “extreme financial pressure”, according to reports.

Paisley-based M&E subcontractor Power One Group is in a dispute over alleged non-payment of a £9 million bill by Galliford Try Infrastructure Limited over the fitting of energy-saving LED street light columns and bulbs in Northumberland.

The Herald has reported that the amount outstanding has become a material cashflow issue which puts Power One, which employs 65 staff, at risk of insolvency.

Power One, which specialises in electrical and communications works, was employed by Galliford Try Infrastructure to both replace and install 46,000 street lights with LED systems.

When the project was first started it had been hoped it would save Northumberland County Council £300,000 a year on energy costs.

Power One’s sub-contracting agreement with Galliford Try, the main contractor on the £25m scheme, was expected to be completed in January this year. It is understood the final completion date was then moved to late November

Power One asked for a delay to the completion of the project in late 2016, with Galliford Try giving the subcontractor an additional 14 weeks to complete the subcontract.

Now Galliford Try has indicated the project isn’t now expected to complete until “early 2018”.

Power One, however, is believed to be claiming that Galliford Try had not supplied the necessary information to allow it to complete the works and that further time was requested to complete the subcontract. However, both parties failed to reach an agreement.

Meanwhile, no payments are understood to have been made to Power One while Galliford Try are also said to have tried to cut the final amount to be paid.

A Galliford Try spokesperson said: “The total value of our contract with Power One is £9m and, to date, we have paid them £6.8m of this sum in line with the terms of the contract.

“We are currently liaising closely with Power One and their advisors to agree terms of payment for the balance.

“The project is due to complete in early 2018.

“We have consistently assisted Power One with their cashflow throughout the project and continue to do so.

“Galliford Try’s policy is always to deal fairly with subcontractors, suppliers and clients.”

Nine contractors named on £800m Scottish schools and community buildings framework

Scottish Procurement AllianceThe Scottish Procurement Alliance has revealed the nine main contractors to have secured places on its £800 million schools and community buildings framework.

The four-year framework is split into regions as well as four value bands (up to £2m, £2m-£4m, £4m-£10m and £10m+) with four selected for each lot.

Kier and Morgan Sindall have renewed their places on the projects over £10m lot while newcomers Robertson Construction and McLaughlin & Harvey will replace previous framework winners Galliford Try and Farrans.

Galliford Try has been named as one of four preferred firms for projects worth £4m-£10m.

Other firms to have secured places include GHI Contracts, Hadden Construction, Novus Property Solutions and CCG (Scotland).

Offering new build and refurbishment works Scotland, the framework covers turnkey solutions for any type of building excluding residential.

Scottish Schools and Community Buildings framework

Projects over £10m

  • Scotland – Kier Construction, Morgan Sindall, Robertson Construction, McLaughlin & Harvey Construction

Projects £4m-£10m

  • Scotland – McLaughlin & Harvey Construction, Galliford Try Building, Kier Construction, Morgan Sindall

Projects up to £2m

  • Scotland – Refurb: Hadden Construction, GHI Contracts, Novus Property Solutions
  • Scotland – New Build: Hadden Construction

New build and refurb projects £2m-£4m

  • Southern Scotland – Hadden Construction, CCG (Scotland), Galliford Try Building
  • North East Scotland: Galliford Try Building
  • Highlands and Islands: Galliford Try Building

New build up to £2m

  • North East Scotland: Hadden Construction
  • West Scotland: Hadden Construction
  • Highlands and Islands – Hadden Construction
  • East Scotland – Hadden Construction

New non-executive director at Galliford Try

Jeremy Townsend

Jeremy Townsend

Galliford Try has appointed the chief financial officer of pest control company Rentokil to its Board.

Jeremy Townsend will join the construction and housebuilding group as a non-executive director from the beginning of September.

His appointment comes as audit committee chairman Andrew Jenner steps down after nine years.

Mr Townsend’s previous jobs include finance director at Mitchells & Butlers and corporate finance director at J Sainsbury.

Chairman Peter Ventress said: “Jeremy’s appointment will further strengthen our independence and the experience of the Board as well as ensure a smooth transition for Andrew’s departure. The Board looks forward to Jeremy quickly establishing himself in the new role, and to benefiting from his extensive corporate and sector experience. Jeremy will assume the role of chair of the audit committee on Andrew stepping down.”

Galliford Try to set aside £98m to cover costs of legacy contracts

Peter Truscott

Peter Truscott

Galliford Try is to take a £98 million one-off hit for two major legacy construction contracts following a reappraisal of costs to complete the projects.

The group said one of these projects will finish on site in summer 2017, while the other, which represents the larger proportion of the estimated costs, is due to complete in mid-2018.

Both projects were contracted in 2014 or before.

A trading update today said: “A reappraisal of costs to complete and recoveries from two major infrastructure joint venture projects has substantially increased the anticipated liability to conclude the legacy contracts (contracted in 2014 and earlier) in the group’s construction business since Galliford Try reported its half year results on 21 February 2017.”

The group has set aside £98m to cover the costs with 80% of that accounted for by the two problem jobs.

It added: “One of these projects will finish on site in Summer 2017, while the other, which represents the larger proportion of the estimated non-recurring costs, is scheduled to complete in mid-2018.”

The firm is part of a joint venture building the new Queensferry Crossing which is due to open this August.

It is also working on the delayed £550m stretch of route between Balmedie-Tipperty on the vast Aberdeen Western Peripheral Route project in joint venture with Balfour Beatty and Carillion.

Galliford Try added that the underlying construction business continues to perform well as it continues to be selective about future bidding.

Chief executive Peter Truscott said: “The impact of the legacy projects in Construction, in particular the two large infrastructure projects, is regrettable.

“However, as described in our recent Strategy presentation, Galliford Try is no longer undertaking large infrastructure jobs on fixed price contracts.

“There are no other similarly procured major projects in our current portfolio and we are encouraged by the performance of the underlying portfolio of newer work.”