Scale down of foreign conflicts hit Hesco Bastion
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PROFITS and sales have plummeted at Hesco Bastion after the withdrawal of the US and UK military from Afghanistan and Iraq but investment in innovation is helping the business look towards a strengthened future in other niche areas.
The Leeds-based barrier system manufacturer has seen operating profit fall to £4.4m compared to £21.9m last year and pre-tax profit slide to £4.1m from £22.5m.
It said turnover has reduced by two thirds to £33m, compared to the previous year’s turnover of £105m.
The group, which was founded by the late Jimi Heselden, reported “healthy” cash balances of £17.7m in the year ending January 31 2013, and overall net assets increased to £12.6m in comparison to £9m in 2012, which it described as the “key headline in terms of finances”.
Mr Heselden made his fortune after coming up with a way of using wire cages to build walls that is now used extensively as a way of defending military installations and for flood protection.
Following his death in September 2010, the business has regrouped and restructured under the new leadership of CEO Mike Hughes, who was brought in by the Heselden family to refocus the business and respond to the impact of world events.
The business – established in 1991 – said it is now focused on investment in product innovation, diversification and strengthening its export capabilities in new international markets. The business is emerging from significant restructuring as it looks at international markets other than military contracts dependent on Iraq and Afghanistan.
The group said initial indications are good with the company securing significant new contract wins for flood and asset protection as well as humanitarian and peace keeping projects across the world.
Mr Hughes said: “Hesco Bastion has undergone a period of significant restructure following the impact of external conditions on the group as a direct result of the gradual withdrawal of the US and UK military from Afghanistan and Iraq.
“Although this was foreseen, the speed of the removal has been much quicker than anticipated which is reflected in our recent financial statements. However, the timely action we have taken to identify this change and the new journey we are now embarked on means the company is well placed to build upon our firm foundations and position as the market leader in defence products.
“We have experienced great change and responded to challenging external factors. As a result, Hesco Bastion is embarking on a new focus which sees us investing in product innovation, new product offerings and market diversification.”
Hesco said it has won a number of contracts with oil companies and has done work in new sectors such as working with a fire company in the US. Hesco recently won a big contract in Thailand worth around £1m.
“This was a significant move for the business and it is getting lots of traction,” Hughes said.
“Significant new contract wins in Thailand and with several international oil companies have seen Hesco Bastion become involved in flood protection and providing security to key infrastructure projects whilst also expanding its work with leading international humanitarian and peacekeeping organisations.
“As a result of the restructure we are a more focused and resilient business. Our target for 2014 is to build upon our reputation as the market leader in our niche sector and continue to expand into new export markets to fuel growth. There is important work still to do but we have a sound base from which to work and are proud to maintain our manufacturing capabilities here in Leeds. Our goal continues to be the protection of people and assets against man-made and environmental forces.”
Hughes said the business is looking at new markets for exports, including the Middle East, South East Asia and North Africa.
The restructure saw the company dramatically downsize – from over 200 people to 83.
The company, which earlier this year acquired its Hesco Military Products arm for a consideration of £1.7m, said it is also experiencing increased competition for its traditional products which is impacting volumes.
In the four years before his death, Mr Heselden, who was named the winner of the Yorkshire Pride category in TheBusinessDesk.com’s Yorkshire Business Masters two years ago, donated around £30m to causes in his home city through the Leeds Community Foundation and the family of businessman and philanthropist Jimi Heselden have promised to continue to support his favourite charities after he left an estate worth £343m.Hughes said the family are in the business for the “foreseeable future”.
He said: “The family have been very supportive in everything we have tried to do. I was bought in because it was an unusual situation. There were family members involved in the business but none in senior management level and didn’t have the skills and expertise required to run the business.”
Hesco Bastion has appointed the Leeds team at Mazars who are providing accountancy and advisory services.
