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Galliford Try sees recovery 'ripple effect' spreading north

Galliford Try could consider expanding its housebuilding operations into the north of England within three years, its group managing director told CN.

Group MD for construction Ken Gillespie said the firm is getting “ready to grow again”, but will adopt a “disciplined growth strategy” to housebuilding that is focused firmly on the South and South-east for the time being.

“As the market and [economic] environment hopefully improve, we will see a ripple as we always have done with a recessionary recovery in the country,” he said. “Historically it’s always been south to north.”

He added: “We want to continue, certainly in the short term, to focus on the south. In two or three years we might envisage talking about other parts of the UK, but certainly at the moment it’s South and South-east.”

Mr Gillespie was speaking after his firm hit its target of doubling its housebuilding arm to 3,000 units, meeting the three-year strategy it launched in September 2009.

Profits in the division more than doubled in the year to 30 June 2012, as Galliford Try saw the fruits of having invested in land when the market was “dead on its feet”, said Mr Gillespie.

Of its 10,500 plots in its land bank, 82 per cent is newer, higher margin land. The firm previously said it is unlikely to expand much beyond 4,000 units per year.

Mr Gillespie said the company is now focused on making the division as efficient as possible as it looks to increase its 11 per cent margin another three per cent by 2015.

But in construction, he said the aim is to avoid becoming “busy fools”.

“In construction it’s really about protecting margin and protecting cash in what remains a very challenging market,” he added.

Mr Gillespie said it was “all about being ready to grow again” when the upturn comes, though he remained pessimistic about short-term revenue after building turnover dropped 17 per cent in 2011/12.

“I certainly don’t see any recovery in the next couple of years,” he said.

“I think if you ask me what’s the general direction, I would say downwards because we will remain very selective about what we are doing, as opposed to being busy fools.”

Mr Gillespie said “it’s still very early days” for growth, but that there is some positive movements in leisure, and potentially retail and offices.

Meanwhile, following its work on the Olympic Village the firm is seeking to resolve disagreements with some of its subcontractors, “which may or may not get resolved without some formal intervention” via the courts, he added (see box).

In the housebuilding sector, the government has mooted potential changes to section 106 requirements on affordable housing, including suggestions of contracts being renegotiated.

Mr Gillespie said if the government followed through, the changes would be very welcome.

“We are recognised market leaders in that area and therefore our affordable housing clients are comfortable that we can say we have all the tools,” he added.

“Our partnerships business is absolutely focused on growing affordable housing developments and contracting through up to 50/50 schemes.”

Legal cases – the Olympic Village

“We have a disagreement with a couple of our contractors on the Athletes Village and we‘re working hard to try to resolve these differences, as we always do,” said Mr Gillespie.

He added that disagreements would “not necessarily be resolved out of court”.

“We have got some differences of opinion which may or may not get resolved without some formal intervention.

“I think there are formal dispute processes in place, including court, if it comes to that. Our preference is not to be in that situation and we will work hard to try to resolve this.”

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