Galliard profit slumps by 93%

London-focused housebuilder Galliard saw pre-tax profit slump by 93% in the year to March 2022 as its turnover dropped and it was hit by a series of exceptional charges.

According to accounts filed in Companies House, the housebuilder reported pre-tax profit of just £4.6m, down from £66.4m. Annual turnover dropped 32% to £204m.

The drop in profit was exacerbated by £15.2m of exceptional charges, including a £8.3m “termination payment” to the long-time chief executive Don O’Sullivan, who left in December last year, and a £6.8m provision for remediation works to historic properties affected by fire safety issue.

The firm saw its turnover drop in 2022 despite claiming that the number of homes completed on Group sites actually increased sharply on 2021 figures, to 1,103, from 771.

A statement in the accounts said the firm had “traded well in the past year despite a difficult market”. It added: “Fluctuations in profit, year-on-year, have always been a feature of the group’s performance simply because of the varied nature of its development portfolio.”

Jonathan Bloom, head of public affairs for the group, said the drop in turnover and profit was caused by the fact that fewer sites reaching the completion stage of construction during the year, and those sites that did reach completion were in areas with lower values. In addition, he said the group had a lower percentage share in the completing sites that operated through joint ventures.

He added: “The impact of the payment to Don O’Sullivan and the provision made for remediation works for building safety also reduced group profitability.”

The large payment to O’Sullivan, described in the accounts as a “termination payment”, appears to raise questions over the nature of his surprise departure last year after 21 years at the business. At the time the firm said he had decided to “seek new challenges elsewhere”.

Six months later another Galliard stalwart, director of investment and development Jonathan Morgan, who had been at the business 17 years, also left the firm.

However, Bloom said the £8.3m payment to O’Sullivan was simply a “performance related bonus”. He said: “Don O’Sullivan left the Group to spend time at home for personal family reasons. Jonny Morgan left the group to start a bridging finance business, Reflex Property Finance.

“Both departures were entirely amicable and consensual, and we continue to have excellent relationships with both of them. In both cases, the transitions were very smooth as we had internal succession plans in place. Darren Maguire took over full responsibility for all construction matters and Eli Dias took over full responsibility for acquisitions.”

The accounts also contain tributes to both from Galliard founder, and returning CEO Stephen Conway, who described their contributions to the business as “invaluable”.

The statements reveal the firm is also amending its development strategy to reflect changing buying behaviour in the wake of the Covid pandemic. Conway’s statement said fewer purchasers were happy to buy off-plan, meaning it was diversifying into traditional housebuilding as well as the high rise apartment schemes it is known for.

Conway said it had begun a partnership with housebuilder Wavensmere Homes to develop this strategy and “have recently started to acquire sites that fall into this category”, with a scheme in Ipswich the first example.

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Bloom told Housing Today: “We have seen a change in the buying habits of our customers such that there has been a move away from buying off-plan towards a preference for seeing the final product before committing to purchase.

“There has been a demand from customers for homes outside of city centres to properties with gardens and outdoor space. We have adapted our business model accordingly. Notwithstanding the above we continue to seek further opportunities in urban areas.”