Late contracts blamed for Gleeson low margin

Gleeson's construction problems last year were partly because M&E contractors failed to deliver on time, resulting in other subcontractors being delayed, said group managing director Andrew Muncey.
Gleeson's construction business achieved a margin of just 0.3% in the 12 months to 30 June 2004 as a £530m (£520m) turnover generated a wafer-thin operating profit of just £1.5m (£4.6m).
Muncey was quick to distance the £150m-a-year engineering element of Gleeson's construction division from the financial muddles. "I don't want people in engineering to think they have caused the problem," he said.
"Rather it was in the £300m-a-year building contracting division. You get good contracts and bad ones and, with the surge of work in health and education, margins should have risen. But they haven't and so the room for error is very low."
There were construction losses in two areas. One was Gleeson's design and build contracts in the student housing market. "It's a difficult place to be as you must finish on time," Muncey said. Asked if Jarvis' keen pricing had been an issue, he said: "It hasn't helped."
He continued: "We now want partnering and low-risk work. We are shying away from overly complex jobs as the quality of subcontractor is not out there.
"M&E was our second problem - overheating as a result of a skills shortage. In today's market there is a high throughput of electricians and fitters.
"It's been delaying our own work. The M&E people enter fixed-price contracts, but fail to deliver to programme, so other subcontractors are delayed."
The Gleeson group reported a turnover of £650m (£620m) and pre-tax profit climbed to £18m (£10m). Muncey said that, apart from construction, the other three divisions achieved excellent performances.
There were record operating profits in Gleeson Homes and Concrete Repairs, while the property arm added a further healthy contribution.