Healthy profits for construction business amidst industry challenges

Construction company, Esh Group, has reported a healthy level of profitability and liquidity for 2022 despite “considerable industry headwinds.”

Chief executive, Andy Radcliffe, said the Leeds and Durham-based company’s business model had softened the impact on 2022’s operating profit which stood at £3m. Turnover increased to £261m, up £6m from the previous year.

The group delivered liquidity of £19m at the end of 2022, with nothing drawn on its £7m revolving credit line.

Pressures on the group’s 2022 earnings derived from long duration contracts which 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, Esh Group points out those longer-term contracts were concluded in the first half of 2023 which, combined with a more stable inflationary environment, should 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.

“While of course we have not been immune to these challenges, the strength of our core revenue model has been the key differentiator in our ability to navigate these industry-wide headwinds.

“Our business model ensures 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.

“Targeting sectors that present near term growth opportunities, such as affordable housing, utilities and general infrastructure, while 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 our maintenance of profitability during 2022, and our expectations for turnover growth and margin expansion over the coming years.”

Esh Group’s forward order book across its civil engineering, affordable housing, commercial build, and private housebuilding division is at a record level, totalling £600m.

Across Yorkshire and the Humber, the contractor has an affordable housing pipeline worth £90m, including four land led developments that will deliver a mix of affordable, extra care and general needs housing.

Its civil engineering division has also experienced a period of growth in the region, with several new projects secured since the start of 2023 representing a 100% uplift in pipeline from the same time in 2022.