Battered Miller group consoled by £54m Edinburgh deal as land bank writedown hits results

Published on Saturday 14 March 2009 13:16

MILLER Group may be counting the cost of the housing downturn, but its construction division is due to announce a £54m contract this week to confirm a strong forward order book.

The Edinburgh-based company will announce that it has won the deal to build the first phase of the 600m Scottish Centre for Regenerative Medicine at the bioquarter being developed in Little France on the outskirts of the city.

On Friday the company reported a loss before tax of 170m for the year, against an 81m profit last time. This took into account a huge writedown on its land bank and property as well as a 14.6m restructuring cost, mainly to meet redundancy payments to more than 600 staff who were laid off.

Pre-exceptional profit before interest and tax fell from 127.7m to 14.9m, but the impact of the downturn was clearly evident in the figures.

The slump in the housing market caused the biggest hit, including an 85.7m writedown in the land bank.

But despite the poor trading environment, chairman Sir Brian Stewart was sufficiently encouraged by a better start to the year to say there were signs of prices stabilising.

"Pricing is beginning to plateau, but there are huge variations between family homes and flats, which have gone down more," said Stewart, who joined the board in November. "In the first 10 weeks, reservations are ahead of last year so we remain optimistic. That's not to say something else will not come along in this crazy world."

The company remains well financed with committed bank facilities of 797m extended to March 2012. Its diversification and the stability of a management team that has been together some time are its key strengths, said Stewart.

While the company's balance sheet is more robust than some of its competitors, the board will not be seeking acquisitions for the time being. The job cuts were regrettable as many of those who left had been with the company for some time, he said.

Keith Miller approached Stewart about joining the board following the retirement of Bob Speirs. It is Stewart's first boardroom appointment since leaving Scottish & Newcastle last year following a bruising takeover battle with Carlsberg and Heineken.

Reflecting on a sometimes ferocious encounter with his two competitors, he said that he disapproved of their methods in launching the joint bid, but the hostilities that followed never affected personal relationships with his counterparts at the Danish and Dutch companies. S&N had a particularly close working relationship with Carlsberg through their joint venture in Russia and he admitted that a friendlier approach, rather than a hostile announcement, would have been preferable.

"It was not the style of business we would buy into, but it did not become personal," he said. "Self-evidently we felt let down (by Carlsberg]." The S&N board immediately broke off relations with the company's former partner, vowing not to work with Carlsberg again.

"When push comes to shove, business is about trust and reputation," said Stewart. "If you damage that, you damage a fundamental element in the relationship. How can you ever do another relationship-driven transaction?"

Stewart insisted that the only winners in the battle were the S&N shareholders and the UK employees after the board managed to extract a price at the top of the market and saved jobs.

He was also delighted to see that Standard Life, which he chaired through its flotation, was standing up well to pressures in the sector, following a well-received set of year-end figures last week, including a hike in the dividend.

"The fundamentals in the business were always very strong. You cannot build that very easily," he said.