Construction group and housebuilder Galliford Try has today announced a £150m capital raising to help cover the impact of Carillion's liquidation, causing its share price to crumble by almost 20 per cent in early trading.
Galliford ran a number of legacy contracts with Carillion – most notably a joint venture which also included Balfour Beatty for the Aberdeen Western Peripheral Route (AWPR).
Galliford and Balfour both warned last month that they would take a hit from Carillion going bust, but the former today said over-run costs on AWPR – compounded by the compulsory liquidation of Carillion – meant that its total cash commitments to the project had increased by more than £150m.
It therefore said it would aim to raise £150m from investors, fully underwritten by Peel Hunt and HSBC.
Galliford emphasised that it "continues to operate well within its financial covenants", and did have sufficient resources to fulfil all of its financial obligations. But without raising new capital, it said this would involve diverting capital away from the Linden Homes and Partnerships & Regeneration businesses, which would reduce their ability to capitalise on growth opportunities.
Galliford also decided to bring forward the planned increase in dividend cover to two-times pre-exceptional earnings. But this meant the interim dividend stood at 28p per share – down from last year's first-half dividend of 32p.
Galliford stated that it has improved its tendering and project selection processes, which should mean that it will no longer enter into the types of contract which caused its Carillion-related losses. "The group no longer undertakes fixed price, all risk major projects of this nature," it stated.
Meanwhile, first-half results released today showed "strong financial and operational performance". Its Linden Homes division grew revenue by seven per cent, partnerships and regeneration grew revenues by 55 per cent, and the construction branch increased operating margin to 0.9 per cent with changes made to the tendering process.
The group's overall revenue was up year-on-year to £1.5bn.