Well, at least there wasn’t any more bad news. Shares in Galliford Try were up by 94p at £12.61 after something of a relief rally, though they are well below their level in March.
The shares have tended to lag the other housebuilders because of the company’s hybrid nature, comprising Linden Homes, a large construction division that has suffered with the rest of the industry because of low margins, and a partnerships and regeneration side building for local authorities and the like.
Then in May came the shock of a £98 million clutch of one-off charges on two projects in Scotland, one the Forth Road Bridge replacement, taken on in earlier years when the company was prepared to enter fixed-price contracts. This is no longer the case, but the writedowns will mean that most of the annual profits will disappear.
Linden and the partnerships business are doing well enough, as indeed they should be given the housing boom. Linden built almost 3,300 homes in the financial year, up 7 per cent. Average selling prices were 6 per cent ahead at £354,000 and average sales per week were strongly up in the second half.
Galliford Try has ambitious plans by 2021 for all three divisions, whose performances in the past year were at the top end of analysts’ expectations. Completions from Linden should hit 5,000, while the number of homes built by partnerships should rise from 1,500 to 4,000. There is no plan to increase the size of the construction business, but the company is aiming for a net operating margin of 2 per cent-plus, against little more than 1 per cent at present, from a more disciplined approach to winning contracts.
The concerns when the write-offs were announced were their impact on borrowings, which were regarded as high, and on the dividend. On the assumption that this will continue to grow in line with earnings, Galliford Try has one of the highest yields in a sector with plenty of good income payers. The expected payment this year obviously will not be covered by net earnings, but a one-off cut makes no sense. It means the shares, which sell on only eight times earnings, yield almost 8 per cent, a good enough reason to buy them.
MY ADVICE Buy
WHY Reassurances over the dividend mean that high yield looks fairly safe, while all the bad news in construction seems to be in the past
Page Group
Page is the first of three recruitment specialists to announce trading updates this week, with Robert Walters set to follow today and Hays on Friday. SThree, which has a May half-year-end, has reported and highlighted a sharp downturn in the UK, partly because of uncertainty over Brexit.
It is a fair bet that Page’s experience will be mirrored in those other updates. The rest of the world, where it obtains four fifths of its business, is doing well, albeit with odd weak pockets such as Brazil, Dubai and Singapore. Fee income from Asia was up 10 per cent in the first half, including a similar rise in China, while in the Americas it rose by 13.8 per cent.
In Britain it fell by 4.5 per cent in the second quarter, but this was affected by the later timing of Easter, as were other areas where the holiday is celebrated, and a fall of 2.3 per cent in the first half is a clearer indicator. Plainly, multinationals in particular are taking more time to decide to hire staff in the uncertainty over future trade and immigration policy.
The company, like its peers, is fortunate to have so much work overseas, and though headcount is at a record level, there is not a huge amount of investment going in. Last year it paid an interim 6.46p special dividend and the improving cash position means another, possibly of 11p, is due, suggesting a yield of about 5 per cent.
The shares have been rebounding strongly since the autumn and, off 11½p to 477¾p, on 18 times earnings look fully valued.
MY ADVICE Avoid
WHY Too much uncertainty ahead despite wide spread
Gocompare.com
When Gocompare.com demerged from Esure last November, one aim was to expand out of its main insurance market, which provides more than 90 per cent of the business. Progress in this has been slow: a deal with Haymarket Media Group will mean that Gocompare features on its auto magazine websites, while the trading update yesterday was accompanied by news that the company had bought a minority stake in Mortgage Gym, a digital “robo-adviser” whose platform launches in September.
There has been talk of a possible move into energy price comparison, too. The encouraging news is that more efficient use of digital techniques has meant that, although interim revenues are up only 4 per cent to £75.8 million, operating profits should be ahead by 22 per cent to £17.5 million, a significant improvement in margins.
Though that 4 per cent revenue rise looks disappointing at a time when there is pressure on customers to switch because of rising premiums, analysts were increasing forecasts for the year. The shares, demerged at about 72p, rose 7¾p to 111½p. They sell on 18 times this year’s earnings, which seems full enough.
MY ADVICE Avoid
WHY Much of the upside already seems in the price
And finally...
AEW UK Long Lease REIT is the latest specialist property company on the stock market aimed at providing investors with an assured income, having arrived last month with the intention of investing in alternative assets. The company has said it has made offers for four properties, including a hotel, a gym and an ice rink, almost all the income from which is linked to inflation, with a total value of £24 million against the £80.5 million raised. The aim is to provide investors with a dividend yield of 5.5 per cent.
