‘Cautious’ approach returns NG Bailey to profit

Mechanical and electrical (M&E) contractor NG Bailey returned to profitability in the year to 1 March 2024 as a careful approach paid off, its latest accounts show.

Group turnover rose by 12.9 per cent year on year to reach £600.1m. Higher turnover in both divisions generated a pre-tax profit of £10.7m compared with a loss of £25m the previous year.

Company executives emphasised a careful approach to tendering.

“While we have a clear path for the division based on sustainable long-term contracts and a strong visible pipeline of work in our chosen markets, we are being cautious and highly selective in our work-winning approach given current market headwinds,” they said in the strategic report accompanying the accounts.

NG Bailey’s engineering division saw revenue increase by 6.4 per cent from £293.1m to £312m.

Sales in its services division also improved, rising by 20.8 per cent from £238.5m to £293.1m.

The firm said it expected the balance to shift in favour of services “as significant growth opportunities for the division mature in the next few years, providing greater stability in uncertain times as services work is typically lower risk and more commercially benign”.

It added that the services division delivered “record levels of profitability in 2023/24 for the second year in a row”.

Leeds-based NG Bailey was established in 1921 and operates from 21 offices in the UK. It ranked 37th in the CN100 2023 table of top contractors, and 2nd in the CN Specialists M&E index last year.

The loss in 2022/23 was attributed mainly to “unprecedented high inflation, project delays and supply chain failures, which hampered a small number of fixed-price contracts”.

But the engineering division returned to profitability in 2023/24, “with a renewed focus on governance, quality margins and risk management, including reinforced and strengthened contract management at all stages of the contract lifecycle”, NG Bailey stated in its latest results.

Directors highlighted NG Bailey’s offsite factory in Bradford (pictured) and the use of modern methods of construction.

“We are seeing a growing take-up of these methods within our current portfolio,” the directors said.

“Significant investment is committed in the next 12 to 18 months to accelerate further digitalisation and systemisation of our systems and workflows to improve productivity, enable better decision making and enhance the working experience for our people.”

The firm is free of bank debt, having repaid a £10.5m bank loan over the course of the latest financial year. It also improved its payment performance, settling 98 per cent of supplier invoices within 60 days (the 2022/23 figure was 97 per cent).

No final dividend was proposed for the 2023/24 financial year, as NG Bailey said it was focusing on growing its cash reserves. Year-end net cash totalled £27.3m compared with £40.5m in the previous year.

NG Bailey said its order book at 1 March stood at £1.4bn compared with £1.3bn the year before, “with an increasing proportion of work directly with the end client rather than through a main contractor”.

It added: “A significant proportion of next year’s sales are already secured, supporting our highly selective ‘bid no bid’ approach as we will not chase turnover.”

Average monthly headcount in the group was 3,411 versus 3,216 the previous year.

In May, shortly after the period covered by the latest accounts, David Hurcomb retired from the firm where he had spent 14 years as chief executive.

He was replaced by Jonathan Stockton, who moved up from chief operating officer.

Looking ahead, NG Bailey said a “growing pipeline of work in recession-resilient markets with high barriers to entry, including defence, nuclear, healthcare, airports, universities and rail, provides a robust platform” to grow profitability in 2024/25.

It added that it was “uniquely placed” to play a role in the UK’s decarbonisation drive that is supported by both major political parties.

Ongoing projects for NG Bailey include a place in the alliance delivering Hinkley Point C nuclear power plant, and the firm said it was “well placed” to win work on the proposed Sizewell C plant.

But the firm said its cautious approach to bidding was likely to remain amid “challenging” trading conditions caused by high interest rates and economic uncertainty.

“While the group’s order book was unaffected by the government’s decision in October 2023 to cancel HS2 phase two, we are aware of the potential for delays or further cancellations of government-backed projects, and our future plans reflect a sensible level of caution with this in mind,” directors said.

“In spite of these short-term headwinds, the medium to long-term outlook in our markets is positive.”

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