Galliford Try : Download our full year statement

07:00 AM WEDNESDAY 21 SEPTEMBER 2022

GALLIFORD TRY HOLDINGS PLC

ANNUAL RESULTS STATEMENT FOR THE YEAR ENDED 30 JUNE 2022

Strong Financial Performance and Confident Outlook

• Strong performance resulting in increased revenue, pre-exceptional profit and operating margin.
• Profit before tax increased by 68% to £19.1m (2021: £11.4m) before exceptional costs 1.
• Increased divisional operating margin to 2.4% (2021: 2.0%), showing excellent progress against our 3% margin target in 2026.
• Cash generative with well-capitaliseddebt-free balance sheet, average month end cash for the period of £174m (2021: £164m), PPP asset portfolio of £47.5m (2021: £49.1m) and no pension liabilities.
• Final dividend payment up 66% to 5.8p (2021: 3.5p), together with an interim dividend of 2.2p giving a total dividend of 8.0p, up 70%.
• Additional capital return through initial £15m share buy-back programme.
• One-offpayment totalling c£1.0m to over 1,800 employees in recognition of the cost-of-livingchallenge.
• Delivering on our Sustainable Growth Strategy with confident outlook for disciplined growth in 2023.
• Confident outlook with high quality £3.4bn order book (2021: £3.3bn) positioned across our chosen sectors and 90% of FY23 revenue already secured.

	2022	20213
Revenue	£1,237m	£1,125m
Operating profit before amortisation1	£18.5m	£10.1m
Divisional operating margin 2	2.4%	2.0%
Profit before tax1	£19.1m	£11.4m
Statutory profit before tax	£5.4m	£11.4m
Earnings per share1	16.0p	9.5p
Earnings per share after exceptional items	5.8p	9.5p
Full year dividend per share	8.0p	4.7p
Average month-end cash	£174m	£164m
Order book	£3.4bn	£3.3bn

1 Stated before exceptional items. Exceptional items relate to the acquisition of nmcn's water business (£7.7m) and our investment in the

implementation of cloud-based IT systems (£6.0m). There were no exceptional items in 2021.

2. Divisional operating margin is defined as pre-exceptional operating profit before amortisation as a percentage of revenue. It is stated for the combined Building and Infrastructure divisions.

3 All 2021 financial information presented relates to continuing operations, unless otherwise stated.

Bill Hocking, Chief Executive, commented:

"The Group has had another successful year. We have made an excellent start to our Sustainable Growth Strategy, delivering risk managed controlled growth while making good progress on our margin improvement target.

Our commitment to robust risk management, careful contract selection and operational excellence continues to underpin our performance and prospects. The Group is well capitalised and has a strong and selective order book, focused in our chosen and proven sectors. This has enabled us to significantly increase shareholder dividends and capital returns. With strong and disciplined risk management we continue to manage the current market conditions, including the inflationary pressures, and are well placed for further progress in FY23.

With our passionate teams, strong balance sheet, market-leading sector positions, excellent client and supplier relationships and high-quality order book, we look forward to the future with confidence."

Enquiries:
Galliford Try	Bill Hocking, Chief Executive	01895 855001
	Andrew Duxbury, Finance Director
Tulchan Communications	James Macey White	020 7353 4200
	Ed Cropley

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

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Investor presentations

A webcast presentation and conference call for Analysts and Investors will be held at 09:30am BST today, Wednesday 21 September 2022. To register for this event please follow this link:

https://stream.brrmedia.co.uk/broadcast/63089defda906b287e99fd9a

Should you wish to ask a question, please dial-in on [phone] using confirmation code 1948329, 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 23 September at 2:30pm 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

SUSTAINABLE GROWTH STRATEGY

Our strategy is to deliver high-quality buildings and infrastructure, in a socially responsible way, while also providing a sustainable return 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 to create long term value for all our stakeholders. In respect of climate change, we are committed to achieving net zero carbon emissions across the Group's own operations by 2030 and across all activities by 2045.

Our strategy targets growth in revenue and margin, which will be achieved by increasing volumes and improving operating margins in our existing markets within Highways, Environment and Building:

• 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 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.

We will target further growth in complementary and adjacent markets, utilising our balance sheet strength to deliver increased margins. This element of the strategy has three main strands:

• Increasing our involvement in co-development of Private Rented Sector (PRS) schemes in Building;
• Developing our Green retrofit offering within our Facilities Management team, to meet the growing needs of our clients; and
• Increasing our capital maintenance asset optimisation capabilities within the existing Environment sector.

Financial targets

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:

Objective

KPI

Target

Earning a sustainable return on the value we deliver.

Focus on bottom line margin growth	Divisional operating margin growth to
	3.0%
Disciplined contract selection and	Revenue growth towards
sustainable revenue growth	£1.6bn
Maintain strong balance sheet	Operating cash generation
Sustainable dividends	Dividend cover of
	2.0x

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Risk management and order book

The Group's established approach to strong risk management, commercial discipline and contract selection provides a strong platform for our strategy to 2026 and continues to underpin our future ambitions. This approach is reflected in the quality of our order book.

At 30 June 2022, the Group had a high-quality order book of £3.4bn (2021: £3.3bn), of which 91% is in the public and

regulated sectors and 9% is in the private sector (2021: 91% and 9% respectively).

Frameworks provide certainty of pipeline of work with repeat clients and established terms and conditions, and amount to 94% of our order book (2021: 87%), affording good visibility of future revenues.

Building and Infrastructure were appointed to contracts and frameworks worth over £945m and £466m respectively during the year ended 30 June 2022. Examples of the Group's key frameworks include the Department for Education's school building framework (six lots); Crown Commercial Service (CCS) Capital Works Framework, including ProCure 23; Ministry of Justice Strategic Alliance Framework (multiple lots); hub North Scotland, hub South East Scotland, hub South West Scotland and hub West Scotland; National Highways Delivery Integration Partnership; and AMP7 for Northumbrian Water, Yorkshire Water, Southern Water, Thames Water and Severn Trent Water; Southern Construction Framework; Procure Partnerships Framework and Midlands Highways Alliance.

The Group started the new financial year with 90% of planned revenue secured for the 2023 financial year (2021: 90%).

Dividends and capital allocation

The Board is committed to maintaining a strong balance sheet, which provides the Group with a competitive advantage in its market and supports our growth strategy. Our capital allocation priorities are:

• Supporting operational requirements and strategic opportunities
  A strong balance sheet is an important element in delivering the Group's Sustainable Growth Strategy, as it provides a competitive advantage in the market, supports the Group's disciplined approach, and provides confidence to our clients and supply chain. We are also able to allocate capital to assist the development of our adjacent markets, as set out above. Furthermore, and as demonstrated by our acquisition of the water businesses of nmcn plc and MCS Control Systems (in July 2022), a strong cash balance sheet enables the Group to react quickly to strategic opportunities, including bolt-on acquisitions that enhance our capabilities and increase value.
• Mitigating the effect of future market downturns
  The current outlook across our markets remains encouraging and supports our strategy, but the Group also ensures that it is prepared for any adverse change in market conditions that may arise. Our strong balance sheet is particularly important for the Group to continue to operate its disciplined approach to contract selection and focus on operating margin, irrespective of any short term economic concerns. The current inflationary pressures clearly demonstrate the value and importance of the Group's risk management framework and focus.
• Paying sustainable dividends to shareholders
  The Board understands the importance of dividends to shareholders, and in setting its dividend considers the Group's profitability, its strong balance sheet, high quality order book and longer term prospects. Consistent with this approach the Group expects dividend per share to increase in line with earnings, with dividend cover of 2.0 times annual earnings.

We continue to assess the cash requirements of the business to ensure the Group remains well positioned to deliver on its Sustainable Growth Strategy and has sufficient funds to invest in the business. Given the capital allocation priorities and requirements set out above, the Board anticipates retaining average month-end cash and PPP assets of £175m to £250m to support the delivery of our financial targets to 2026. For the year ended 30 June 2022, the aggregate of month-end cash and

1. assets was £221m, towards the top of this range early in the strategy period. As previously announced, where average month-end cash and PPP assets increase above the level required, the Board will consider making additional returns to shareholders.

Having reviewed the Group's results and the outlook, the Directors are recommending a final dividend of 5.8 pence per share which, subject to approval will be paid on 9 December 2022 to shareholders on the register at 11 November 2022. Together with the interim dividend of 2.2 pence per share paid in April, this will result in a total dividend for 2022 of 8.0 pence per share.

Consistent with the framework set out above, the Company has announced it intends to commence an initial share buyback programme to repurchase up to £15 million of ordinary shares of 50 pence per share. The Board has reviewed the strong cash performance of the last two financial years and the capital required to support the Group's strategic targets, and considers that this is a prudent level of additional capital to return to shareholders, whilst continuing to prioritise a strong balance sheet and sustainable growth.

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CURRENT TRADING AND OUTLOOK

The Group has delivered a strong operational and financial performance in the year to 30 June 2022 with increased revenue, profitability and margin growth.

We continue to see good demand across our core markets and anticipate continued progress in the new financial year, in line with our targets. Through our active engagement with our supply chain and disciplined approach to risk management, bidding and careful project management we have successfully managed and mitigated the challenges of supply shortages and inflation without any overall 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 opportunities in complementary and adjacent markets where we have additional opportunities through our recently acquired businesses. Looking ahead the UK's planned investment in economic and social infrastructure supports growth in our core markets. The Group's strong balance sheet and quality order book mean we are well placed to meet our growth objectives for the new financial year.

We will continue to maintain our disciplined approach to risk management and careful contract selection whilst operating sustainably. Notwithstanding the continued pressures around inflation and labour availability the Group is confident in the future as we look to continue to deliver controlled growth, increase operating margins and enhance shareholder value.

Environment, Social and Governance (ESG) 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 helps us to win work, engages our employees, benefits communities and the environment, and makes us more efficient. This is why our sustainability commitments are an integral part of our strategy, residing at the core of how we deliver stakeholder value.

The six fundamental pillars of our sustainability strategy, which are mapped to the UN Sustainable Development Goals, are set out below:

Health, safety and wellbeing

The health and safety of our people, and those who come into contact with our operations is our number one priority, and we aspire to a target of no harm.

We were pleased to reduce our overall Accident Frequency Rate (AFR) to 0.06 (2021: 0.08) and achieve an AFR of zero across eight business units. Our Lost Time Incident Rate remained stable at 0.26.

We take safety extremely seriously and our improved result is demonstrative of our commitment to our safety programme Challenging Beliefs, Affecting Behaviour which reinforces that nothing we do is so important that we cannot take the time to do it safely, and use Lead Indicators to drive improvement in safety culture and behaviour, for example by learning from high-potential incidents and near misses.

The success of our approach was confirmed in our employee survey, where our highest scoring area was health and safety, with 99% of people responding favourably to the statement we give health and safety high priority.

Our people

To deliver our plans successfully, we need to ensure we have the right talent supported by a great culture. Our approach to this is to retain and invest in our existing teams, while also attracting new high calibre people as a destination employer.

A key highlight of the year was achieving an employee advocacy score of 85% (sector average 80%). This was also demonstrated by a stable churn rate in a competitive market for talent.

Attracting more women into our business is key to accessing the skills we need and promoting a more diverse culture, so, for our strategy period, we are targeting a year-on-year increase for women as a percentage of total employees. For the reported year, the proportion of females across Galliford Try was 24.3% compared to 23.0% last year excluding the nmcn businesses, and 21.2% following the acquisition of nmcn water.

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 6.1% of our workforce in early careers positions (2021: 7.2%).

Recognising the national cost of living challenge, the Board has approved a one-off payment of circa £1.0m in the Autumn 2022 to provide additional financial support to over 1,800 employees.

We continue to monitor our culture through our Employee Forum, chaired by the Group's Senior Independent Director, which provides direct engagement with individuals from across the Group and drives initiatives which help us to be an employer of choice.

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Environment and climate change

Tackling climate change is an essential sustainability priority for us as a business as well as for many of our clients, investors, people and regulators. Last year, we joined the UN-backed campaign Race to Zero and pledged to achieve net zero carbon across our own operations by 2030 and all activities by 2045 using the Science Based Targets initiative (SBTi).

KPI	FY201,2	FY211	FY221	Ambition
Scope 1 and 2 carbon emissions (CO2e tonnes)			10,795	Net zero by
18,732	11,525	2030
Scope 3 carbon emissions (CO2e tonnes)	not reported	Not	6,040	Net zero by
reported	2045
Waste intensity (tonnes/£100k revenue)			20.96	YoY
13.04	7.57	reduction

1Carbon dioxide equivalent emissions are reported by calendar year and since 2014 have been externally verified to ISO 14064-1.

2 In 2020 and prior years, the emissions associated with business use of company cars where the employee purchased the fuel and was reimbursed through an expenses claim have been reported under scope 3 - business travel. In 2021, these emissions have been reported under scope 1 in order to be consistent with the reporting of emissions from company cars where the fuel is paid for by a corporate fuel card. To aid comparison

with earlier years, the data for 2019 (FY20) and 2020 (FY21) has been re-stated using the methodology used for 2021.

In the year, we were pleased to drive down our scope 1 and 2 emissions by a further 6.3% which reflects a number of ongoing initiatives including early connections to mains electricity supply, the transition to mandating electric and hybrid vehicles in our fleet, more energy efficient site office and welfare cabins, and a transition to alternative fuels.

In 2021, we have for the first time been able to estimate and report on a range of scope 3 categories, including business travel, fuel and energy-related activities and employee commuting. This will form part of our total scope 3 baseline against which we will set our science-based reduction target and monitor our progress towards our 2045 net zero target. Our waste intensity increased in the year, reflecting the project mix, with a greater proportion of higher waste intensity projects. However, waste continues to be an area of focus, with increased use of modern methods of construction, especially off- site manufacture, reducing the volumes of waste produced. We also manage our waste streams to maximise recycling and minimise waste to landfill and have increased the proportion of waste diverted from landfill to 96.3% (2021: 94.5%).

In September 2021, we committed to providing only electric or plug-in hybrid vehicles in our company car fleet. As at the 30 June 2022, 51% of the 1,122 vehicles in our company car fleet are electric or plug-in hybrid and the average emissions per vehicle had reduced to 60.1g/km (2021: 77.9g/km).

We also invested in our own capabilities to support clients with their objectives. Activities included a focus on how we design, build and maintain low carbon infrastructure and buildings through selection of materials and construction methodologies, operational energy consumption and, where relevant, end-of-life decommissioning. We established a cross-disciplinary Carbon Reduction Working Group to identify and coordinate improvement initiatives in relation to employee carbon literacy, carbon calculation, reporting and training.

Communities

The ability to measure the social and local economic outcomes we deliver on our projects is now a requirement for many of our clients, especially in the public sector.

During the year, we extended the scope of our partnership with the Social Value Portal, a tool which is backed by the National TOMs (Themes, Outcomes and Measures) Framework, which helps organisations measure, report and enhance their social value. We are now able to report the social value we deliver on our projects across the group in a consistent way. We evaluated 28 projects completed during the year and on these projects, we delivered a combined Social and Local Economic Value (SLEV) of £306m. 14 projects (50%) delivered a SLEV as percentage of contract value greater than our target of 25% and we have set our ambition for 60% of projects to exceed this threshold.

The Considerate Constructors Scheme (CCS) is an industry wide organisation that strives to improve the impact of the construction industry and leave a positive legacy through implementation of best practice in the areas of community engagement, the environment and workforce wellbeing. Our average CCS audit score increased in the year from 40.6 to 41.8 and remains above the industry average of 39.0.

Clients

Our focus on delivering quality outcomes and building trusted relationships with our clients is reflected in the fact that 94% of our order book is repeat business (2021: 92%) and we continue to have a strong pipeline of secured work in our chosen markets, with 90% of FY23 revenue already secured (2021: 90%).

These are important indicators demonstrating we are building trusted, long-term relationships with our clients based on a track record of delivering on their key priorities and are underpinned by our accreditation to the ISO 44001 Collaborative Business Relationships Standard.

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