UPDATE 2-Galliford Try prices drop 18-20%, profits up

(Recasts, adds finance director comment, analyst comment, Bank of England comment on house prices and share price)

LONDON, Sept 11 (Reuters) Housebuilder and construction company Galliford Try Plc. (GFRD.L) said its average selling prices have dropped by 18-20 percent from their peak, because of its policy of aggressively marketing its properties in the face of the UK housing market slump.

Finance Director Frank Nelson told Reuters: "From the top of the market, I would say on average house prices are down 18 to 20 percent; we have some sites that are 30 percent down and we have some sites that are 5 percent down."

Nelson said the Southeast was stronger than any other region "by some country mile", while the weakest prices are for high-rise apartments in the north of the country.

Nelson said average selling prices fell 7 to 8 percent from last October to the end of March this year and then slumped a further 7 to 8 percent in April alone. He added they have drifted a further 2 to 3 percent since April.

Latest monthly data from HBOS, the UK's No.1 mortgage lender, showed house prices fell for the seventh month running in August to stand 12.7 percent lower than a year earlier.

In comments published on Thursday from the Bank of England's most recent monthly policy meeting, Governor Mervyn King said he had no idea what house prices should adjust to. [ID:nKING]

INFRASTRUCTURE STRENGTH

Galliford Try reported underlying pretax profit up 35 percent to 71.8 million pounds ($126.7 million) for the year to end-June, before land writedowns of 9.1 million and other exceptionals of 2.4 million. Its shares, which have doubled from a low of 30.5 pence in June this year, lost more than 4 percent to 62.75 pence at 1155 GMT in a weak market for housebuilders.

In a note to investors, Kaupthing analyst Kevin Cammack called Galliford Try, which is the largest water utilities contractor in the United Kingdom, a "housing hybrid of the better kind", but said the outlook statement ignores current trading and stresses long-term features.

Nelson said, however, the group has sold over 250 units in the first nine weeks of the new financial year for a total of 62 million pounds.

He added that there was an "excellent supply" of work in the infrastructure industry pipeline and a "number of very attractive looking contracts" in the building segment.

While he declined to comment on specific contracts, Nelson said "one or two" were reasonably imminent.

Nelson said there was some weakening in the building market as clients rein in spending in building projects and this, in turn, will impact on group results in 12-18 months time.

Contrary to its peers in the housebuilding sector, including Redrow (RDW.L) and Barratt Developments (BDEV.L) who have withheld dividends until the market improves, Galliford Try declared a final dividend of 2.1 pence, maintaining its total dividend for the year at 3.0 pence.

Nelson said the group expects to continue to be able pay dividends due to its hybrid model and added that while the payment is unlikely to go up in the coming year. Analysts expect the dividend to remain about the same level. (Reporting by Simon Meads; Editing by Jon Loades-Carter)