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.”

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