Over-enthusiastic bidding lies behind losses at Miller Construction last year, the company has revealed.
It is now looking to framework agreements to reduce its exposure to risk.
Write-downs on a limited number of contracts pushed Miller Group’s Construction division into a £4.6m operating loss, despite a 58% increase in turnover to £408.7m (2012: £259.4m).
The board said that the loss was down to “contracts that had been procured competitively on the basis of price”. It added: “We no longer tender for projects on this basis unless they are projects with clients with whom we have ongoing, long-term strategic relationships and are at commercially viable margins.”
Miller Construction is particularly focusing on framework deals, with clients including Network Rail, Scottish & Southern Energy and the Ministry of Defence. “The key focus on framework contracts with public sector and regulated bodies provides greater certainty of work over the medium-term with an improved risk profile,” the company said.
Framework contracts are expected to generate an additional £1bn of additional construction revenue over the next five years, it added.
At group level, Miller Group saw overall revenues rise 32% in 2013 to £817.3m (2012: £619.9m). Pre-tax profit was up 58% to £10.4m (2012: £6.6m) and net debt was reduced from 202m down to below £169m.
Miller Homes reported total completions up 12% to 2,053 units (2012: 1,831 units) and turnover up 24% at £330.0m (2012: £265.7m) through increased volumes and a 6.5% improvement in average selling price to £181,000 (2012: £170,000).
Operating profit from house-building was up 57.2% to £22.8m (2012: £14.5m), driven by an increasing proportion of completions from newly acquired sites.
Group chief executive Keith Miller said: "All our businesses are now well positioned to take full advantage of improving market conditions. Miller Homes continues to benefit from increased demand, improving selling prices and a balanced sales mix, and is delivering increasing margins. In our Construction business we have taken the necessary steps to deal with the loss-making contracts. The business is now focused on frameworks and aligned to clients with long-term programmes of work.
“Developments continues to perform well, underpinned by our longer term property assets. Mining has secured a full order book for 2014. The board is confident that group performance coupled with our strong financial base means we will continue to generate further value. This is a strong set of results which provides an excellent base from which to plan the next stage of Miller Group’s development.”
Miller Group 2013 results by segment
Division |
2013 turnover |
2012 turnover |
2013 profit (loss) before interest |
2012 profit (loss) before interest |
Housing |
£330.0m |
£265.7m |
£22.8m |
£14.5m |
Property |
£52.4m |
£60.6m |
£8.4m |
£5.4m |
Construction |
£408.7m |
£259.4m |
(£4.6m) |
£3.2m |
Mining |
£26.2m |
£34.2m |
£4.5m |
£9.2m |