Gleeson Building enjoys nine-fold increase in profit

Gleeson Building’s second year of independent trading was “slightly ahead of plan”, says finance director Mike Lethaby. Pre-tax profit jumped nine-fold to £910,000.

GB’s latest financial figures cover the 12 months to 30 June 2007. The company has subsequently been renamed GB Building Solutions. Turnover of £180m was marginally down on the previous year. One-off charges associated with the mbo kept profit down to £100,000 in year one.

Lethaby said that turnover in the current financial period (year three) is heading towards the £205m-£210m range.

“In year two, there was a dip in turnover, as we’d anticipated, as we were transferring away from the MJ Gleeson approach to our new business philosophy,” said Lethaby, “which is not about tendering, and being one of five or six names on a tender list, but rather working on repeat projects for select clients. That scenario calls for longer lead-in times.”

At the end of the second year, GB had secured and completed 19 new projects won since the date of the mbo. “All these were completed on time, to budget and are profitable,” said Lethaby. “In addition, all other projects secured by Gleeson Building are trading profitably.”

GB’s orderbook has increased to £400m.

On the other side of the coin, however, there has been something of a re-juggling of the figures associated with projects inherited from the MJ Gleeson Group.

A statement by GB said: “The adverse performance of a number of contracts transferred [across from MJ Gleeson] caused the directors to question the fair values attributed to the amounts recoverable on contracts”.

The decision was that they were over-optimistic and the sum likely to be brought home at the end of the day was downgraded from £29m to £21m.

As a consequence of that, the goodwill figure, previously put at £1m, was stepped up to £9m.

In addition, the assumption that goodwill could be written off in 30 months has been re-examined, and the decision reached that it would be better to extend this period to 10 years.

Lethaby said that all legacy contracts from the former parent have now been completed and are out of the system.

Overheads rose during the second year following the mbo to £14m, up £2m, because of:

• the need to establish the company’s own finance and IT teams
• the setting up of a new office in Tamworth to improve market penetration in the Midlands
• the formation of a development business, called GB Development Solutions.

GB’s main areas of construction are in five sectors:

• non-acute health
• education
• hotels and leisure
• accommodation
• commercial

There was no dividend paid during the year.