Contractor intends to concentrate on regeneration after building arm reports 67% fall in operating profit
Gleeson said this week that it would increase its focus on regeneration schemes after a disappointing performance from its construction business.
Pre-tax profit for the group rose 86% to £17.6m for the year ended 30 June 2004, mainly driven by property sales and its homes division. But the construction arm, which is split between building and civil engineering, did badly. Operating profit fell 67% to £1.5m.
Andrew Muncey, Gleeson’s managing director, said: “Building has been disappointing. There is plenty of work about in the market but margins have not risen as a result of that. It is still a very competitive market.”
Muncey said that in the future Gleeson would focus on its procurement strategy and compete for projects only when it stood a better chance of winning them.
He said: “We will focus much less on competitive tendering and more on partnering agreements, which is how it is within our civil engineering business.
“We have to transfer that model to the building industry. Taking that step may mean we have to throttle back on our building work over the next year or so.”
Muncey said that Gleeson would be looking to increase its presence in the growing regeneration sector. He said: “We have been there for three years and have the contacts and the contracts to show that we’re up and running.”
There has been plenty of work but margins have not risen as a result
Gleeson has been appointed on the £400m Liverpool Inner Core South scheme, where 4000 homes are planned in the next 10-12 years.
Gleeson Homes, the housing division, is now focusing on the mid-range market, selling units for an average of £186,000. It has set a target of selling 1000 homes a year by the end of 2007.
Muncey said that Gleeson was still on course to meet that target, despite the fact that the number of units it sold in the year to 30 June 2004 rose just by seven, to 496, compared with the previous year.
The board recommended a final dividend of 6.2p a share, up 9.7%.
Gleeson’s share price dropped 7.5p to 209p following the results.