Construction, regeneration and housebuilding firm Galliford Try (GFRD) delivers a nasty shock to the market in the form of a £150m fundraise. The news overshadows a solid set of half year results and triggers an 18.2% decline in the share price to 807.4p.

The new funds are required to shore up its finances as it absorbs higher costs on a troubled project and the impact of the collapse of Carillion in January.

We discussed the links to the now liquidated outsourcer in an article previewing these results and today’s news is a disappointment to us given Galliford’s inclusion in our portfolio of Great Ideas.


The problems are mainly linked to the £550m Aberdeen Western Peripheral Route contract, carried out in joint venture with both Carillion and Balfour Beatty (BBY).

In January Galliford said Carillion’s liquidation would require an additional cash contribution of £30m to £40m and it has largely stuck with this estimate suggesting there have been further cost over-runs on the development.

At least management are able to point to the fact they no longer take on ‘fixed-price, all risk major projects of this nature’.

While the company could have absorbed the extra costs without having to issue new shares it did not want to divert capital away from its higher quality regeneration and housebuilding arms.

In 2017 Galliford-owned Linden Homes saw revenue increased by 7% and its operating margin advanced from 16.3% to 18.5%. The regeneration division delivered revenue up 55% with margins increasing from 3.4% to 4.8% and the order book up 41% to £1.3bn.

In the long-term today's decision to raise more capital may be viewed more positively by investors.

Issue Date: 14 Feb 2018