Eric Wright Group’s profit has dipped after a “particularly challenging contract” hit its civil engineering business for £700,000.
The contractor, which reports through parent company Henmead Ltd, blamed the dip on a “small number of contracts which have suffered challenges, necessitating provisions for losses incurred”. But it pointed to the one especially difficult contract as the main reason for its profit fall.
It tabled a pre-tax profit of £3.9m for the year to 31 December 2023, in comparison to £4.9m the previous year.
As well as the undisclosed contract, Eric Wright said its civil engineering business struggled to win enough work during the year, in both the public and private sectors, which caused its turnover to “fall short of the level required to cover business overhead”.
“A key challenge in 2023 has been work-winning in a difficult market with numerous jobs deferred or delayed,” it said in its accounts.
“There is undoubtedly inertia, particularly from the public sector clients, due to resourcing issues within councils, inflation in material prices and political instability.
“This was compounded by the reticence of private sector clients to invest in new sites and infrastructure as a result of depressed confidence in the development market.”
Overall, though, turnover increased to £232.3m, in comparison with £168m the last time out, after its construction business “performed particularly well” and tabled a “convincing profit”.
The key difference between the two businesses was that the construction business “secured and progressed” a number of projects and pre-construction services agreements, which Eric Wright put down to the “value of early engagement and collaboration”.
The construction business made a pre-tax profit of £2.3m, more than double the £800,000 it made last time out.
Looking ahead, Eric Wright said its construction business was “well positioned to generate sustainable profits”.
Thanks to falling interest and inflation rates, Eric Wright projected that market sentiment would improve, which it said could help to improve project viability.
It added: “The work bank for the coming year shows further growth across the contracting businesses, and the now well-established risk-management strategies position the group well to achieve continued trading stability and greater financial returns moving forward.”
But it warned that, for now, there is a “scarcity of talent available to recruit in key areas”.
It also tabled a provision of £3m for one onerous development contract, which it predicted would be used in full by April next year.
On top of that, it revealed a £1m “reserve” to deal with “potential defects as a result of the changes to the liability period imposed by the Building Safety Act 2022”.
In the most recent edition of the CN100 ranking of the UK’s biggest construction firms, published last week, Eric Wright was placed 94th. Based on the latest turnover, however, the firm, which has been run by Jeremy Hartley since 2011, would take 71st place.
