NG Bailey reaps the reward of change of strategy

Under chief executive David Hurcomb, the Ilkley-based mechanical and engineering firm is finding growth in areas like rail, facilities management and IT services.

NG Bailey achieved a 12 per cent increase in turnover to £464m, according to accounts for the year ending February 2012.

The group recorded a pre-tax profit of £7.2m, reversing the loss of £4.2m the previous year.

Mr Hurcomb said: “This is a strong result in a challenging environment, not just for us, but for UK industry as a whole.”

Mr Hurcomb, who joined two years ago, has cut operating costs across the group and returned all five divisions to profit.

But despite the improved performance, Mr Hurcomb sounded a cautious note on the outlook for the building market, which has historically generated all of NG Bailey’s profits.

He said: “The public sector spending cuts are really biting now and we are not seeing private sector picking up the slack.”

He added: “I think we are in for a couple more painful years before the private sector starts to come back.”

NG Bailey has seen several of its rivals fall into administration over the last year, illustrating the challenges of a market with high risk, low margin contracts.

Mr Hurcomb also raised concerns about a North-South divide and claimed that the North of England and Scotland have been more severely affected by the downturn than London and the South East.

He said: “Until they sort out what they are going to do post-private finance initiative, we are going to be bumping along the bottom in the building market, particularly outside London.”

He added: “PFI has stopped for lots of political reasons, but it was quite a driver for major public sector infrastructure. That filters down to everybody in the market.”

Critics claim that PFI saddles the taxpayer with heavy debts lasting decades, but the method helped to finance a wave of new schools and hospitals during the Labour government.

The Treasury said it will publish the findings of its PFI review in autumn.

With the building sector stuck in the doldrums, NG Bailey has had to diversify and the benefits of a strategic overhaul are starting to be felt. In the last financial year, the long-term loss-making facilities management business moved into profit. The division had sales of £43m and had record contract wins in the period. In March, it won a £50m contract with Land Securities to look after the majority of its London office portfolio along with some retail premises.

Mr Hurcomb aims to grow turnover to £100m.

The IT services business had a turnover of £58m and profit of £1m last year and has customers including British Telecom, the Ministry of Defence and RBS.

“After a number of years of being in the red it is now firmly in the black,” said Mr Hurcomb, who put in a new management team in 2011.

The rail division, which grew for the first time last year, had a turnover of £28m with record contract wins. It is working on major projects at London Bridge and Birmingham New Street stations.

Mr Hurcomb said he expects turnover to grow to £60m in the next two to three years. He added: “We see that rail as a market that’s been showing more resilience to the recession than the traditional building market.”

The £10m modular manufacturing division develops mechanical and electrical infrastructure offsite at a factory in Bradford and installs on site.

This part of the business won a £10m contract with Leeds-based milk giant Arla for its new super-dairy in Buckinghamshire.

Mr Hurcomb plans to grow the division to support the rail and utility sectors. He said modular manufacturing can help water companies carry out work at pumping stations without causing major disruption for customers.

NG Bailey plans to “refocus” its building services division to win new work in infrastructure.

The 3,000-strong group continued to hire apprentices during the year, adding 60 new recruits at a time when rivals are “cutting to the bone”, said Mr Hurcomb.

Big jump in net assets

NG Bailey increased its net assets from £9m to nearly £90m over the last financial year.

Chief executive David Hurcomb said the business is sound with very solid foundations and record orders of £750m.

He said: “The next couple of years will remain very tough, but we are concentrating our efforts on reaching new markets, where there are many opportunities for us to seek growth in the longer term.”

Chairman Nimble Thompson said the results reflected the efforts of Mr Hurcomb and his team over the last two years.

He said: “Our strategy is clear and well thought out.”