Financial burdens linked to Carillion’s collapse have pushed construction firm Galliford Try to raise a further £150m to strengthen its balance sheet.
The company had been part of a joint venture with both Balfour Beatty and Carillion to construct the Aberdeen Western Peripheral Route (AWPR), but its partner’s liquidation means Galliford Try will probably have to contribute an extra £30m to £40m to the project.
It has now booked a £25m exceptional charge for the six months to 31 December and announced plans to raise £150m in new equity capital in the coming weeks to “strengthen” the group’s balance sheet and “ensure that the group’s businesses can continue to pursue their respective growth opportunities”.
Galliford Try went on to report an 11 per cent drop in pre-tax profits for the half year to £56.3m, despite seeing revenues jump 14 per cent to £1.5bn.
But the company assured that it was making “good progress” on both AWPR – which is expected to be completed this summer – as well as other legacy contracts and was otherwise in good financial standing.
“The group has sufficient financial resources to meet its obligations, including the estimated impact of Carillion’s liquidation,” Galliford Try said in a statement.
“However, 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 company said it no longer takes on fixed price or “all risk major projects of this nature” and has also improved its tendering and project selection process.
Looking at the business as a whole, Galliford Try’s chief executive Peter Truscott said the company had delivered a “strong financial and operating performance” over its first half to 31 December.
Galliford Try’s Linden Homes division reported a 7 per cent jump in revenue to £436.8m over the first half, while its construction unit saw revenue rise from £742m to £823.6m.
The company said the Government’s commitment to the housing market – including the Help to Buy programme and relaxation of stamp duty for first-time buyers – was welcome while good mortgage availability and lower interest rates were benefiting the business.
The construction unit reported a strong order book and an “encouraging pipeline” of opportunities linked to current and planned investment in national infrastructure.
Mr Truscott said political uncertainty in the UK still poses economic risks but added the company is on track for growth.
He said: “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.”