Galliford Try : Download our full year results statement

07:00 AM THURSDAY 16 SEPTEMBER 2021

GALLIFORD TRY HOLDINGS PLC

ANNUAL RESULTS STATEMENT FOR THE YEAR ENDED 30 JUNE 2021

Strong Financial Performance and Sustainable Growth Strategy

• Strong operational performance delivering improved profitability.
• Profit before tax above previous guidance at £11.4m (2020: pre-exceptional loss £59.7m).
• Divisional operating margin ahead of expectations at 2.0%, showing strong progress towards our margin improvement target.
• Final dividend payment of 3.5p, together with an interim dividend of 1.2p giving a total dividend of 4.7p covered by 2.0x earnings from continuing operations. Policy to increase dividend in line with earnings, with dividend cover expected to be in the range of 2.0 - 2.5 times earnings going forward.
• Cash generative with well-capitaliseddebt-free balance sheet, average month end cash for the period of £164m (2020: £141m1), PPP asset portfolio of £49m (2020: £41m) and no pension liabilities.
• Positive outlook with high quality £3.3bn order book (2020: £3.2bn) positioned across our chosen sectors.
• Well placed to deliver our updated Sustainable Growth Strategy, through our market leading sector positions, commitment to achieving net zero carbon2 and refreshed sustainability and financial targets.

New Financial targets to 2026:

We publish our updated strategy today, including refreshed financial targets to 2026. Maintaining our strong focus on risk management we plan to deliver long term value for all our stakeholders.

Divisional operating margin: 3.0% across Building and Infrastructure, with a focus on bottom line growth

Bill Hocking, Chief Executive, commented:

"I am very proud of the progress the Group has made over the last year. We have dealt with challenging circumstances and continue to successfully manage the current market conditions.

Our commitment to robust risk management, careful contract selection and operational excellence underpins our performance and prospects. The Group has an excellent order book and balance sheet. We are strongly positioned to meet the increasing demand for social and economic infrastructure in the UK and deliver growth.

Our secure foundation provides the basis for our Sustainable Growth Strategy, which aligns our financial objectives with our sustainability aspirations to deliver sustainable profitable growth.

The outlook is positive for the sector and the management team and Board look forward to the new financial year with confidence."

1. Average for the six months to 30 June 2020 following the disposal of the housebuilding business.
2. Galliford Try has committed to achieving net zero carbon across its own operations (Scope 1 and 2 and operational Scope 3) by 2030 and has already reduced emissions by 62% since 2012. The Group is additionally targeting net zero carbon emissions across all activities by 2045 at the latest.
3. All financial information presented relates to continuing operations, unless otherwise stated.
4. There were no exceptional items in 2021.

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This announcement contains inside information. The person responsible for making this announcement on behalf of Galliford Try is Kevin Corbett, General Counsel & Company Secretary.

Presentation(s)

A conference call for Analysts and Investors will be held at 09:30am BST today, Thursday 16 September 2021. To register for this event please follow this link:

https://webcasting.brrmedia.co.uk/broadcast/6112a8f78f5b0057e0313e00

Should you wish to ask a question, please dial-in on +44 (0)330 336 9125 using confirmation code 1846204, it will not be possible to submit a question via the webcast link.

An open presentation and Q&A session for retail investors will be held on 20 September at 4:00pm BST via the Investor Meet Company platform. Investors can register for the event via this link:

https://www.investormeetcompany.com/galliford-try-holdings-plc/register-investor

STRATEGY

Fundamental to the business' long-term success is our belief that we create value over the long term by operating in a sustainable and responsible way. We believe strongly that the interests of all stakeholders - our people, suppliers, clients, communities and shareholders - are fully aligned and will all benefit from our focus on operating sustainably.

Our purpose is to improve people's lives by building the facilities and infrastructure that communities need, providing opportunities for our people to learn, grow and progress, working with our supply chain to promote the very best working practices and caring for the environment.

We aim to deliver high-quality buildings and infrastructure in a socially responsible way and provide sustainable returns for our shareholders.

Our strategic priorities are:

• Progressive culture, prioritising health, safety and wellbeing and creating an inclusive workplace;
• Socially Responsible Delivery, adopting sustainable resourcing and consumption practices and making a positive impact in communities;
• Quality and Innovation, delivering superior buildings and infrastructure for our clients and aligning with our supply chain; and
• Sustainable Financial Returns, for our shareholders.

Our Sustainable Growth Strategy balances financial targets with wider commitments and aspirations. Alongside our financial targets we have updated our ambitions across each of our six sustainability pillars. In respect of climate change, we are committed to achieving net zero carbon across the Group's own operations by 2030 and across all activities by 2045, supported by Science Based Targets and our involvement with the Construction Leadership Council's C02nstructZero.

The Group will deliver sustainable and profitable revenue growth through our continued focus on the public and regulated sectors, and work with high-quality private sector clients, delivering for our clients through our regional building businesses and national highways and environment businesses. We will continue to develop our capability and expertise in our core sectors and adjacent markets, supported by our investment in our people, digital capabilities and operations.

• Building operates across the UK and has proven expertise in markets with significant future opportunities, particularly education, defence, health, and the commercial sectors.
• Highways works with both National Highways (formerly Highways England) and Local Authorities in England.
• Environment specialises in water and wastewater services, primarily through frameworks in England and Scotland.
• We continue to develop our Facilities Management, Investments and co-development businesses which provide lower risk, margin enhancing, returns.

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Risk management and order book

The Group's strategy is founded on strong risk management and commercial discipline, and we remain selective about the contracts that we take on. This approach is reflected in the quality of our contracts in our order book.

At 30 June 2021 the Group had a high-quality order book of £3.3bn (2020: £3.2bn) of which 91% is in the public and

regulated sectors and 9% is in the private sector (2020: 81% and 19% respectively).

During the year our Building and Infrastructure divisions were successful in winning new work including:

• the £400m NEPO Civil Works framework;
• Scottish Water's £350m SR21 Non-Infrastructure framework;
• Scottish Water's £350m Delivery Vehicle 2 programme; and
• Leicestershire County Council's £48m Grantham Southern Relief Road.

In total, Building and Infrastructure were appointed to contracts and frameworks worth over £641m and £590m respectively. Frameworks provide certainty of pipeline of work with repeat clients and established terms and conditions, and amount to 87% of our order book (2020: 90%) affording good visibility of future revenues.

The Group started the new financial year with 90% of planned revenue secured for the 2022 financial year (2020: 90%).

Financial targets

The Group's strategy and sector focus means that we are well placed to support the Government's commitment to investment in infrastructure and the built environment, which will provide further opportunities for us to contribute to the UK's economic recovery from the pandemic and its decarbonisation commitments.

The Group's Sustainable Growth Strategy is supported by current market conditions and will continue to benefit from our continuing focus on risk management. Our financial targets to 2026 are:

Divisional operating margin: 3.0% across Building and Infrastructure, with a focus on bottom line growth

Dividends and capital allocation

The Board understands the importance of dividends to shareholders, and in reviewing its dividend takes into account the Group's return to profitability, its strong balance sheet, high quality order book and encouraging longer term prospects.

The Board is committed to maintaining a strong balance sheet, which provides the Group with competitive advantage in its market and supports our growth strategy. Our capital allocation priorities are to support the Group's ongoing operational requirements and invest in strategic opportunities that enhance our capabilities and returns; maintain sufficient cash reserves to mitigate the effects of any future market downturn; and to pay sustainable dividends to shareholders. We continually review the cash requirements of the business and as the Group progresses delivery of its strategy the Board will continue to assess capital allocation and shareholder returns.

Consistent with this approach, and as set out in March 2021, the Group expects dividend per share to increase with earnings, with dividend cover expected to be in the range of 2.0-2.5 times earnings.

Having reviewed the Group's results and the outlook, the Directors are recommending a final dividend of 3.5 pence per share which, subject to approval will be paid on 10 December 2021 to shareholders on the register at 12 November 2021. Together with the interim dividend of 1.2 pence per share paid in April, this will result in a total dividend for 2021 of 4.7 pence per share.

Sustainability commitments

Fundamental to the Group's Sustainable Growth Strategy is our belief that, for long-term value creation, we must balance our financial performance with delivering the priorities of all our stakeholders. Being sustainable makes us more efficient, helps us to win work, engages our employees and benefits communities and the environment.

The six fundamental pillars of our sustainability strategy, which are mapped to the UN Sustainable Development Goals, are set out below. We have reviewed the sustainability priorities of our principal stakeholder groups and renewed our key commitments across these six pillars.

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Health, safety and wellbeing

The health, safety and wellbeing of our staff, subcontractors, suppliers, clients and the public continues to be the Group's number one priority, particularly in our response to the ongoing Covid-19 pandemic.

All our workplaces have specific Covid-19 risk assessments to ensure works are carried out in full compliance with the latest Construction Leadership Council Site Operating Procedures, as well as adhering to our own strict protocols. Recent accreditation to the new ISO 45001 confirmed our focus on continual improvement in Health and Safety.

During the year, we took the opportunity to refresh our award-winning behavioural safety programme 'Challenging Beliefs, Affecting Behaviour' to ensure all our teams and subcontractors remain engaged in our belief that nothing we do is so important we cannot take the time to do it safely, consistent with our ambition for no harm.

We set ourselves high standards so were disappointed that our Accident Frequency Rate (AFR) increased slightly to 0.08 from 0.07. We continue to place emphasis on the proactive management measures that will return us to a lower AFR and lead to further improvements. We received eight awards from RoSPA (The Royal Society for the Prevention of Accidents), including four Order of Distinction awards for receiving 15-24 consecutive Gold awards.

Recognising the challenges of working on site, in the office or at home during Covid-19, we have increased our focus on wellbeing. As part of our award-winning 'Be Well' initiative we have introduced an extensive programme of support that is available to all of our staff and their families. Our site staff survey told us that 83% of those who responded felt supported.

Our people

Success comes from our people and our progressive culture. We seek to attract and retain talented individuals who are aligned to our purpose and uphold our values, creating an inclusive environment where they can truly be themselves and thrive. Promoting inclusivity facilitates the diversity of thought, innovative approaches and experiences that create stronger, better balanced teams which enhance our offering for our stakeholders.

Early careers are the focus of many of our recruitment activities, as they allow us to grow our own talent. Our Graduate Programme and apprenticeships and traineeships remain popular, with 7.2% of our workforce in early careers positions.

We are continuing to address the historic under-representation of women in the construction industry and in the financial year, have seen another slight increase in female representation across our business, to 23.0%. In our Gender Pay Report in April this year, we reported that our mean gender pay gap has reduced to an all-time low of 28.8%.

Our Employee Forum, chaired by the Group's Senior Independent Director, provides direct engagement with individuals from across the Group and enables us to better understand how we can be an employer of choice.

Environment and climate change

Tackling climate change is the number one sustainability priority for our clients, investors, and regulators.

We have pledged to achieve net zero carbon across our own operations by 2030, widening that scope to include all activities by 2045 at the latest. To provide a clear route to reduce greenhouse gas emissions, we have also committed to setting and achieving a science-based target verified by the Science Based Targets initiative (SBTi). In doing so, we have joined the Business Ambition for 1.5°C to limit global warming to 1.5 degrees and the UN-backed campaign Race to Zero.

We are already well advanced on our carbon reduction journey across our own operations. We manage and mitigate our environmental impacts through our ISO 14001 certified management system and have reduced carbon dioxide equivalent emissions (Scope 1, 2 and operational Scope 3) by 59% from 2015 to 2020.

We also help our clients to achieve their own carbon reduction objectives by using modern methods of construction and incorporating sustainable environmental considerations into our design standards and construction practices.

Clients

Delivering excellence for our clients is key to the long-term sustainability of our business. We look to achieve exceptional standards of service and satisfaction through continual monitoring, assessment and refinement of our delivery processes.

Our focus on delivering quality outcomes and building trusted relationships with our clients is reflected in the fact that 92% of work in our order book is repeat business, underpinned by our accreditation to the ISO 44001 Collaborative Business Relationships Standard.

Our clients expect us to design and construct assets to a high quality. We are investing in the development and deployment of new technology to help us drive continuous improvement in the quality of the assets we build.

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Communities

Delivering a legacy of positive social value outcomes in the communities in which we operate is a key part of our strategy. This is the right thing to do as a responsible business and it is also an increasingly important priority for our clients. During the year, we launched an updated Social Value Calculator to monitor the positive outcomes that we are delivering to the wider community, including the impact on the local economy through job creation and spend with the local supply chain, apprenticeships, work experience, training, and volunteering.

The Group achieved an average Considerate Constructors Scheme score of 40.6 (2020: 41.1), which continues to exceed

the industry average of 38.0 (2020: 37.1). We donated over £250,000 in time, materials, and money to charitable causes

(2020: £195,000) and we were pleased to mark 22 years of supporting CRASH, which assists homelessness and hospice charities with construction-related projects.

Supply chain

Our approach to our supply chain establishes and maintains long-term trading relationships with key suppliers and manufacturers. We have again improved our performance in respect of the Government's Prompt Payment Code, meeting our target of paying 95% of invoices within 60 days in the most recent six month period. Our Advantage through Alignment programme provides selected suppliers with greater insight into our operations and pipeline, and provides access to our training programmes. We remain a Gold member and Partner of the Supply Chain Sustainability School. In the year, 59% of our business units' core trade spend was with our Aligned subcontractors.

We continue to retain Gold status from the Supply Chain Sustainability School, an award-winning collaboration designed to upskill its members through free training and resources covering sustainability, off-site manufacturing and BIM.

CURRENT TRADING AND OUTLOOK

The Group has made good operational progress in the year to 30 June 2021 resulting in our return to profitability and resumption of dividends. We continue to trade well and in line with the Board's expectations as we enter the new financial year and anticipate continuing to improve margins in line with our targets. Our disciplined approach to bidding and active engagement with our supply chain have proved particularly important during the recent period of materials shortages and inflation. Through our careful project management we have successfully managed and mitigated these challenges without any material impact on trading or margin.

We are encouraged by the pipeline of new opportunities across our chosen sectors in the public, regulated and private markets together with our significant contract wins during the period. The Government's plans to increase capital expenditure, together with the Group's strong balance sheet and quality order book, mean that the Group is well placed to meet its growth objectives for the new financial year.

Our objectives are to operate sustainably, deliver controlled growth, cash generation and improved margins. The Group is confident in the future as we look to increase operating margins and enhance shareholder value whilst maintaining our disciplined approach on risk management and careful contract selection.

FINANCIAL REVIEW

The Group delivered a return to profitability, in line with our plan, and resumption of dividends. Our improving operating performance, strong financial position and quality order book provide confidence in our future performance.

The Group's revenue for the year was up 3% to £1,124.8m (2020: pre-exceptional £1,089.6m). The increase reflects the resumption of site operations following the impact of the Covid-19 lockdown in Spring 2020, partly offset by an expected reduction in Infrastructure's revenue as we transitioned into the new AMP7 programme.

The Group's operating profit before amortisation was £10.1m (2020: pre-exceptional loss of £62.2m). Building generated

profit of £15.9m (2020: pre-exceptional loss of £51.9m), representing a margin of 2.0% (2020: (7.2)%), and Infrastructure

generated profit of £6.0m (2020: pre-exceptional loss of £1.8m), representing a margin of 1.8% (2020: (0.5)%). The

combined divisional operating margin was 2.0% (2020: pre-exceptional (5.0)%).

There was an £11.8m net loss in PPP Investments and Central Costs (2020: £8.5m). During the financial year, we did not take advantage of any Government Covid-19 support, and furlough monies received since July 2020 have been fully repaid.

The profit before tax for the year was £11.4m (2020: pre-exceptional loss of £59.7m). There were no exceptional items in 2021. Exceptional income in 2020 of £25.1m included £28.0m income in respect of the settlement of legacy contracts and £2.9m costs associated with restructuring. Further details of exceptional items are set out in note 5 to the financial statements.

The table below reconciles profit before income tax to our alternative performance measure of pre-exceptional profit before income tax, which is a key metric for us when monitoring performance of the business.

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