Miller Group is expecting at least a “double-digit” percentage increase in revenue for 2013 after returning to profit last year, its chief executive said today.
Keith Miller also slammed the length of PFI procurement as “ridiculous” and said the new 18-month procurement rule for private finance 2 projects is still “far too long”, adding: “It’s not like we are building something to go to the moon.”
The Edinburgh-based group – which works in construction, housebuilding, property and mining – returned to profit after reducing its debt pile and passing a 55 per cent stake to Blackstone subsidiary GSO Capital in March in a debt-for-equity deal, with Mr Miller, managers and banks owning the rest.
The move more than halved the interest payments on Miller’s debt, which now stands at £200 million, from £55m to £22m.
The group’s construction division produced a profit before interest of £3.2m (2011: £6.8m) on turnover of £259.4m (2011: £238.6m), after being “impacted by expensing upfront significant business development costs”. The construction order book grew to a record level of £1.5 billion.
Mr Miller said the firm expects to see “a big increase” to turnover in 2013 as Miller Construction looks to grow to £600m.
He described it as a “double-digit percentage increase” for the year, adding they had secured £500m of work last year, which will deliver a “much larger turnover in the current year and improve profitability”.
GSO’s three non-executive directors, who joined the Miller board at the refinancing, are “playing the roles of any normal non-executive directors” and are aligned with the management team, Mr Miller said.
“They have got a very nice light touch to how they approach things,” he added. “They are very happy with the management and the operational controls we have over the business strategy.”
“We are repositioning the business to focus much more on frameworks and PFI projects”
Mr Miller conceded there has always been speculation over a possible float of the firm. “There will be speculation like that – there always has been in the past,” he said.
“They are in here as a long-term investor; we have got no plans to IPO or sell the business. We are creating value and building this business up.” Mr Miller said there are also no plans to sell any part of the firm.
Construction profits were dented by efforts to refocus on PFI and frameworks, it said today. Mr Miller declined to reveal details of any exceptional costs, which were not included in today’s announcement.
He said: “In general terms, we are repositioning the business to focus much more on frameworks and PFI projects, and those PFI projects take a long time to go from preferred bidder to contract close.
“So we carry all those costs and they are expensive to bid on, these projects, so it’s a bit of a timing issue rather than anything else.”
“It’s ridiculous how long it takes to get these [PFI] projects from preferred bidder to contract close”
The change also means Miller is set to take advantage of private finance 2, its chief executive said.
“It’s pretty hard to forecast these things with government but I think it is the one area that government could actually turn its attention to – getting some of these projects on the ground quicker than they have done hitherto, and trying to shorten the procurement process.”
Mr Miller welcomed the 18-month cut-off deadline for procurement in PF2, but said it should not even take that long. “It’s ridiculous how long it takes to get these projects from preferred bidder to contract close,” he said.
“There are many people involved and there’s not always the momentum to get these projects across the line. [The 18-month deadline] is helpful but still far too long. Why does it need to be so long? It’s not like we are building something to go to the moon.”
Frameworks, which contribute to 50 per cent of Miller’s work, continue to be competitive, but he said clients are looking at how firms work with the supply chain and provide value and quality for projects they build and maintain for the long term, rather than just price.
“[GSO] have got a very nice light touch to how they approach things”
Miller will continue to focus on education, health and offices, with growth in rail and energy. The group posted £6.6m pre-tax profit on £616.9m revenue for the year ended 31 December 2012, compared with a £30m loss a year earlier, driven in part by the performance of the housing division, where completions rose 5 per cent to 1,831 units.
Mr Miller said there are no urgent plans to clear the remaining £200m debt. “We are confident running with that level of debt,” he said. “It will come down over a few years but the business is set to be able to pay that down and pay the interest comfortably.
“We will see operating profits continue to grow as we move into higher margin land [in housebuilding]. The construction business generates cash rather than requiring a lot of cash.”