£25m pre-tax loss for engineering and services group

Leeds-headquartered independent engineering and services business, NG Bailey, has reported increased annual turnover of £532m (2021/22: £500m) for the year ending 3 March 2023.

But the slower than expected recovery of the group’s Engineering division saw NG Bailey post an overall EBITDA loss of £12m and a group pre-tax loss of £25m.

In the year there was also a £6.8m exceptional cost for the write down of the group’s equity investment in Britishvolt, which was placed into administration in January 2023.

NG Bailey says it was still able to maintain its strong balance sheet with net assets of £121m, including cash and investments of £83m.

Chief executive, David Hurcomb, said: “Despite the current market conditions being some of the toughest the group has faced in its long history, we are well placed with a balanced portfolio across building construction, infrastructure and services.

“Our high-quality order book remains healthy, increasing by £100m to £1.3bn, with ongoing strategic opportunities in recession resilient sectors providing a clear route to pre-pandemic levels of trading.

“The consistently strong performance of our Services division demonstrates first-hand the strength of our diversified business plan.

“Whilst market headwinds are being managed carefully in the short-term, particularly for our Engineering division, the medium to long-term outlook across our markets is positive, with the UK government committed to economic recovery through significant investment in infrastructure and the continued drive to a decarbonised economy.”

NG Bailey says its Services division achieved record levels of profitability, underpinned by organic growth and strategic low risk ‘bolt-on’ acquisitions, exceptional operational performance and high levels of customer retention.

Turnover for the division now accounts for almost half of the overall group.

The group’s Engineering division continues to deliver the majority of contracts profitably alongside its sector focused three-year business plan.

But its 2022/23 performance was hit by a small number of major fixed price contracts which have suffered from “unprecedented” inflationary pressures, delays and some supply chain failures, which have cost the business significantly.

NG Bailey says the cash impact of these challenging jobs is now largely behind it, with cash reserves remaining robust.

Jonathan Stockton, who was promoted to the newly created role of chief operating officer earlier this year, said: “The construction industry continues to be acutely affected by external factors including the highest levels of inflation seen in 40 years, prices rising faster than most other sectors, material and labour shortages, and supply chain insolvencies.

“These issues, following on from COVID-19 disruption and the effects of Brexit, have placed operational delivery and trading margins under pressure, with contractors being adversely impacted by the delivery of fixed price contracts in an inflationary market.

“Add to this the impact of successive interest rate rises on customer confidence and project delivery delays, and the sector has faced a perfect storm.”

Hurcomb added: “Despite current market conditions, the group’s long-term strategic plan, robust cash reserves and strong pipeline of work, means we are on track to return to profitability in 2023/24.

“Our Services division is primed for further growth as we remain committed to playing our part in the decarbonisation of the UK economy.

“Within Engineering, we’ve restructured our business to focus on quality margins and will only take on work with an acceptable risk profile.”