Focusing on regional work has paid off for Esh Group, according to its chief executive.
In an exclusive interview with Construction News, group chief executive Andy Radcliffe said that targeting contracts in the North East had delivered strong financial results and secured future business.
Radcliffe spoke after announcing the firm’s results for 2023, which included a pre-tax profit of £3.1m, up from £2m the previous year.
Although turnover remained at £261m, the firm has improved its liquidity to £23m, up by £4m from the previous year. It also did not rely on its £6m credit line.
Radcliffe reflected: “We’ve put a very intense focus on the balance sheet as well as profit and loss. It’s been a hell of a journey but I’m supported by an incredibly talented team of people.”
The reduced financial stress has delivered gains beyond the financials.
Radcliffe said: “There are huge benefits; we’re not sleeping with one eye open. We’re paying our supply chain promptly. That creates a virtuous circle of loyalty and best pricing.”
Closer to home
There’s been another advantage to focusing on work closer to the firm’s Durham head office. Radcliffe’s team get earlier warnings of projects that could be going wrong.
That wasn’t always the case during what he refers to as “the Dark Ages of London and the south coast”.
“The lack of proximity to the partnerships was an issue,” he said. “We’re now up and down that A1 corridor. We’ve got close proximity and for our team, they can be home at night. That can be a factor that helps with loyalty and stability.”
And right now, the region is very active in terms of investment, particularly projects that boost connectivity around Newcastle.
A key figure in this is Tees Valley mayor Lord Ben Houchen, who has “been very active”, according to Radcliffe.
“There’s a huge amount of projects that will require infrastructure and connectivity,” Radcliffe told CN.
The chief executive is also proud of the emphasis on employing locally and buying locally. “We play hard on that local angle,” he said. “It’s quite an important factor.”
New friends
So what about the new government talking about building more infrastructure and housing? Could Esh Group become Labour’s new friend in the North?
It’s not about party colours, Radcliffe said. “The political instability of the past few years has been miserable. Whatever your political persuasion, you just want to see some certainty,” he added.
Stability with inflation will also help “price with confidence”.
But he is concerned about the lack of planning skills in local authorities that could hold projects up.
Image change
There’s a lot that Radcliffe wants to see change, starting with the industry’s image – critical to solving the skills crisis.
“It’s still got the image of muck, machines and bricks on site. You can sit and moan or you can do something about it.”
So the firm is working with further education colleges in Yorkshire and the North East with the aim of getting the right skills in the right place – including digital transformation, data and AI. Esh is also working with academies across the region on a skills initiative that includes mock interviews held at Newcastle’s giant sports arena.
The firm is also running an education programme in primary schools aimed at changing industry perceptions in the early years. “We’re also driving very hard to shift the gender balance. At that age, gender doesn’t matter. That’s very powerful,” Radcliffe said.
Downsizing
The basis of the firm’s success was a rationalisation programme, started in 2019, that cut 26 businesses down to five complementary activity groups. Among the sales was its Scottish subsidiary Finlaysons in 2020.
The strategy and timing meant the firm was ready for the post-Covid inflation that impacted the sector, according to Radcliffe.
He said: “I took over a business that was far too diverse. There had been a very aggressive spurt of buys and startups It was on the brink of being broken.
“I had 26 businesses when I started. Those were gradually reduced and we’re now down to five.”
Also to go was a fencing and landscaping firm plus a plant hire business.
The firm is now focused on civil engineering, retrofit, social housing and lastly private housing.
The logic behind the decision was simple, according to Radcliffe. “You need to understand each segment [of the sector] over the long run.
The overexposure in multiple parts of the industry meant only one thing, he said: “Growth when they’re in boom but misery when they’re in bust.”
Esh Group kept the utilities business – “quite frankly they’re recession-proof”. The firm has also stayed with both social housing and private housing – “when one is down, the other is up”.
The work since 2017 has paid off, with one result that Radcliffe is proud of – an order book of £1.6bn “gives rise to real confidence for the future” he said.
