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Esh restructures after 'growing too quickly'

Esh Group has restructured its business following a fall in profit in its latest full-year results.

Pre-tax profit at Esh declined to £395,000 for the year to 31 December 2017, compared with £3.8m in the previous year.

Non-executive chairman Michael Hogan revealed in the firm’s accounts that the business had a “tough couple of years, when the group probably grew too quickly”.

Esh’s turnover increased from £170.2m in 2011 to a peak of £276.8m in 2014 before falling back to £202.6m in its latest accounts.

Chief executive Andy Radcliffe (pictured) told Construction News the group had become too diverse.

He said: “The business grew rapidly, we took on a number of acquisitions, we grew organically in a number of areas, and I think the diversity of the business had become slightly too much to control to drive all of them with the right level of focus.”

A shortage of skilled people, especially on the technical side of the business, made it harder to achieve the profit the firm was targeting as the business expanded, he added.

“It was all fine at the time, but as it progressed it became apparent that with businesses like ours – particularly in our sector – you’ve got to crawl, walk and then run,” Mr Radclffe said. “We tried to get to a sprint from the go.”

Esh has now consolidated its various operations into four divisions covering civil engineering, commercial building, affordable housing and private housing.

“Like many businesses that expand rapidly, you have to pause, take breath, look at what’s important and bring your activity back to those core operating principles, and that’s what we’ve done over the last year,” Mr Radcliffe said.

He said turnover could fall in the current business year as it focuses more on profit margins.

“Through 2018 you’ll probably see turnover similar or slightly down as we drive the simplification agenda, but it’s all about the bottom line,” the chief executive said.

The company does not intend to add any more disciplines to the business, but was still looking to increase its presence across the regions.

“It’s not about expanding our service offering, but growing those services in new geographies,” Mr Radcliffe said.

“We’re now pushing quite aggressively into our Yorkshire operation, which is a really opportunity-rich area for us.”

Esh only lost “a couple of grand” as a result of Carillion’s collapse, he said, partly due to the failed contractor’s limited presence in the North-east.

Mr Radcliffe argued that Carillion was caught out by a business model run on the backs of its suppliers.

“Construction businesses that are funded by the supply chain are in a great position liquidity-wise when they’re growing, but as soon as it starts to decline it eats cash like nobody’s business,” he said. “That’s where Carillion found itself.”

Ahead of Brexit, Mr Radcliffe said the company’s supply chain was predominantly UK-based and that he did not envisage any immediate operational issues.

Working mainly in the North and Scotland also meant Esh projects relied less on workers from the EU than projects in London and the South-east, he suggested, though adding that workers could head south.

He said: “If that migrant labour doesn’t fulfil the requirements in London, there’s every chance that the buoyant London market, if it continues to remain buoyant, could suck out labour from our patch.”

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