North of England construction company, Esh Group, has reported a healthy level of profitability and liquidity for 2022 despite considerable industry headwinds.
Chief Executive, Andy Radcliffe, credited a “meticulously designed business model” for softening the impact on 2022’s operating profit which stood at £3 million.
Pressures on the Group’s 2022 earnings derived from long duration contracts that were priced pre-pandemic, and the ongoing battle with levels of cost inflation not seen for a generation, supply chain constraints and labour shortages being key factors. However, those longer-term contracts were concluded in the first half of 2023, which, combined with a more stable inflationary environment, will negate many of the challenges experienced during 2022.
Radcliffe said: “Our focus on targeting routes to market and key sectors that present a lower risk profile has provided a finely balanced portfolio of revenue which has served to insulate us from the extremes of the challenges experienced by the broader industry. Whilst of course we have not been immune to these challenges, many of which have led to the sad demise of a number of highly respected businesses in our regions, the strength of our core revenue model has been the key differentiator in our ability to navigate these industry-wide headwinds.”
A key success factor for any construction business is the management of cash, and the Group has been successful in delivering liquidity of £19 million at the end of 2022, with nothing drawn on its £7 million revolving credit line, remaining debt free. Turnover increased to £261 million, up £6 million from the previous year.
“Our business model ensures that we can balance out the peaks and troughs of individual market segments over their respective economic cycles which offers a much more stable and predictable backdrop. Above all, targeting sectors that present near term growth opportunities, such as affordable housing, utilities and general infrastructure, while simultaneously reducing our exposure to more technically and commercially challenging sectors of the market, provides us with a level of resilience that has been the hallmark of both our maintenance of profitability during 2022, and our expectations for both turnover growth and margin expansion over the coming years,” Radcliffe added.
Esh Group’s forward order book across its civil engineering, affordable housing, commercial build, and private housebuilding division is at record level, totalling £600 million, and includes flagship schemes such as the landmark restoration of the Tyne Bridge, and the Stockton Waterfront regeneration scheme.
After adding the largest contract in the company’s history to its affordable housing portfolio earlier in 2023, a £56 million new build scheme in Middlesbrough, Esh is set to deliver more than 540 new affordable homes with Thirteen Group in the coming years. In addition, long term partnerships through a unique portfolio of joint venture arrangements with a carefully selected group of clients and investment partners compliment the Group’s business model to both reduce risk and limit capital exposure.
Over the past year, Esh has placed emphasis on expanding its award-winning social value strategy with the launch of a new education programme aimed at embedding construction into the school curriculum, an increase in T-Level and undergraduate placement opportunities and growing apprentice numbers to 8% of the workforce. A focus on employing and procuring locally is also providing a wealth of opportunities for the local supply chain and significant re-investment in Esh’s operational areas.
Radcliffe concluded: “Our achievements, once again, are down to the unwavering efforts of our highly skilled and dedicated team of colleagues who have battled hard to manage the challenges we faced. We are exceptionally grateful to our clients, our supply chains and wider stakeholders, who value the role collaboration plays in ensuring mutual success. We look forward to the coming years with cautious optimism and a business model that, simply put, sees us stick to what we are good at, with supply chains that we know, and clients with whom we can nurture long term partnerships.”