Business lunch

Business lunch

An entire career spent on the frontline of the most challenging of sectors has given Brian Manning a clear vision of what’s important in life, as Andrew Mernin discovers.

Brian Manning must be mellowing with age. Having spent almost 40 years growing battle hardened by the intensely competitive building sector, he sees his future more in community centres and primary schools, than perhaps construction sites.

The chief executive runs Esh Group, which lays claim to being the largest indigenous construction company operating in the North of England. If you’ve never met or even heard of Manning, but feel he looks familiar, it’s little wonder.

Few are as active as him and his organisation when it comes to tackling community, skills, economic and social problems across the North East. Schoolchildren, the unemployed, school leavers and young offenders are all among the many supported every year by the empire that has emerged from a small village near Durham.

And Manning likes to get out from behind his desk to see what’s really going on. “You just lose touch with what’s going on around you if you don’t,” he says.

But in future he sees his role becoming increasingly focused on corporate social responsibility (CSR) and less on the cut and thrust of winning and delivering work. And he’s even prepared to step aside to let younger generations handle to top level stuff at Esh as a result.

“I have less of an operational role now. When you’ve got ambitious younger people working for you, you’ve got to satisfy those ambitions. They want to get more involved with managing the business and if they’re good at it, why not? I do see doing more CSR activity as a progression in my role.”

When Manning first joined Esh (Lumsden & Carroll as it was then) in 1990 its annual turnover stood at around £3m. By the turn of the century it had passed the £20m mark and in the subsequent years seemingly unhindered growth followed. This transition from SME into a business employing “the thick end of 1,000 people” has today left Esh caught in the middle ground between a small regional firm and a national heavyweight.

And tackling the challenges that come with this mid-cap status is something of a specialist subject for Manning. In fact, after lunch he’s off for a meeting at Northumbrian Water HQ to discuss just that. It’s also become a common theme in his role as an influential figure within the NECC.

“Mid-caps are the heart and soul of the economy,” he says. “As you get bigger you’re competing with national contractors and that’s really the issue.”

Esh, like other mid-caps arrested between two worlds, is currently plotting its emergence into the land of true national players. Success outside the region, particularly in Yorkshire and Cumbria, shows those plans are already coming into fruition.

But making the jump out of the mid-cap category is a tricky manoeuvre, made no easier by what Manning sees as often unfair procurement conditions. “National procurement tends to favour national firms.

For example there’s one framework where they insist that people have half a billion pound turnover to be on the framework and yet the jobs can be anything from £2m and £20,000.

“I don’t know whether we’ll ever be able to compete with the [huge] nationals because it’s a treadmill and they are always getting further away.” Talk turns to the disastrous handling of the Olympic security contract by G4S as proof that bigger isn’t always best. More digits on the balance sheet do not guarantee a more successful delivery.

“They put all their eggs in one basket with G4S. If they’d appointed five companies to do that, would that necessarily have been a bad thing? Why didn’t they break it down?

“In construction they tend to aggregate a load of contracts together so they might put the building of ten schools into one contract and that rules us out because you might be talking about a £100m to £200m contract and we’ve only got £170m turnover. Maybe they should be going back to putting things into smaller pieces. They’ll argue that it’s more cost effective the other way, but is it?

“What I would say is that I do think there’s light at the end of the tunnel. There is a lot happening in the North East in terms of procurement and I think the local authorities in the region have become very much alive to it since 2008. I’m not one for normally praising the local authorities but I do think they’re making an effort.”

Esh’s bid to increase its national prowess has been significantly aided by the recent rebranding of its subsidiaries into one over-arching name. “To get work in each sector we have do a PQQ [pre-qualification questionnaire] and jump through all the hoops.

"With the formation of Esh Construction we can now put all that turnover together as Esh Construction. That’s more powerful and we can bring together the experience of all the brands.”

Esh Construction was formed last year, incorporating Esh Build (previously Lumsden & Carroll Construction), Esh Property Services, Stephen Easten Building, Lumsden & Carroll Civil Engineering and Esh Facility Solutions.

Trust within the region of the familiar green livery of Lumsden & Carroll meant it had to stay and it remains the group’s civil engineering brand. Outside the North East, the rebrand has already paid off.

In January Esh won a £5.5m contract to design and build a construction skills training centre at Lakes College, Lillyhall, near Workington. The Cumbrian contract comes on the back of Esh’s Kendal office opening in 2010. Expansion into Yorkshire, where Esh has a Leeds office, has also contributed to growth in none-North East-based earnings from around £15m to £45m since 2008.

Standalone contracts in other parts of the country continue to come on board but Yorkshire and Cumbria have been outlined as key markets to help alleviate pressure from its core North East business in these uncertain times. “We’re really trying to punch above our weight in these areas.

What you tend to have in Cumbria is the nationals, who come in and do the likes of Sellafield and the bigger jobs then you’ve got the local contractors. We sit somewhere in the middle.” CSR has played its part in gaining trust in these emerging markets for the group.

Brian Manning inset“We’re not just there to go into a region and pick up a £5m job and leave, we want to put our roots down,” he says. Initiatives such as its competition in Leeds which encourages local residents to contribute to their community centres alongside its myriad of other community, educational or skills-focused projects are all “win win”, says Manning; for the brand and the people they help. Manning, who himself sits on the board of the Tyneside Cyrenians charity, is the hands-on leader behind Esh’s CSR strategy.

“It’s the bedrock of what we do,” he says. And he believes we are now in the throes of a somewhat surprising resurgence of CSR activity in the North East.

“It’s strange because more and more people are seeing the value of CSR. More and more companies are getting involved even though we’re in recession because they’ve got to think long term and really think of the reputation of their business.”

Although CSR is all well and good, says Manning, there is always a danger that trying to do too much extracurricular work can result in staff needs being neglected. Not that Esh has any sweeping problems with staff morale or its reputation as an employer.

After the recession hit in 2008, the firm made regional headlines as its directors all took a 20% pay cut. At a time when the public was fuming at payouts for failed banking execs – such as Northern Rock’s Adam Applegarth, who was rewarded more than £750,000 for his efforts – Esh was a shining example that not all at the top had lost their heads.

With a community-conscious and grounded Shields lad like Manning in the boardroom, however, perhaps it’s little wonder that Esh acted as it did. The 20% has now been returned to the directors’ pay packets, although a pay freeze has been in place at the top of the organisation since.

“A £50,000 pay cut is nothing when you think about it. When I first joined the business I was earning £25,000. So I thought we really needed to make some sacrifices.

“When we went into recession it was a shock to the system. We went from a business that was turning over £150m and making a £10m profit for two or three years, to suddenly finding ourselves in the midst of a storm.”

In the space of a year, the company’s £10m profit had diminished into a £6m loss as the construction industry – and particularly the market for speculatively built housing – bore the brunt of the global financial meltdown.

In Manning’s 22-year stint at Esh, the 17 years leading up to the recession were each marked with growth. Since 2008 however, after returning to the black, the company has remained on a relative plateau with little sign of any dramatic change in fortunes on the horizon.

“In business we say that you have to climb the wall, then get to the landing and maybe cling on for a bit and then climb again. But at the minute we’ve climbed up and found an entire flat landscape.

“My view is that we’ve got to get ready for when it does pick up again, not waste this period. It’s four years now that we’ve been on this plateau and we’ve not got to waste time. So where does the company see the major growth areas of the future?

“That’s a bloody good question,” he says with a grin. What about renewables? “There’s no clear visibility in that area and it’s all a bit foggy,” he says. Esh is involved in the installation of solar PV panels and has a focus on the renewables market but it has not gone full throttle into the industry.

“There’s a market for renewables but it’s been very slow to emerge where best to invest.” No lunchtime recessionary chatter is complete without the next question – when will the industry return to growth? “I wish I knew. That’s the six billion dollar question. I’ve heard one theory that the conditions we see now are actually the norm so we need to get used to them. I hope it’s wrong.

“I don’t think things will ever be as good as they were pre-2008 but maybe things will pick up slightly.” Pick up they may, or, if the gloomier Euro-conscious analysts are to be believed, things may diminish.

But whichever way the market moves, Esh has dug its foundations deep and on the sturdy ground provided by a strong cash balance. In short, says Manning, the company is going nowhere, unlike some of its peers that have crumbled into the dust in recent years.

“In 17 years here profit was the driver and cash followed. But now, if you’re only making £1m to £2m profit it’s sometimes difficult to detect the cash. “You have to make sure that the cash follows the profit and, because margins are so light in construction at anywhere between zero and 2%, you have to be very careful that you are converting that profit into cash.”

Esh reported its year-end bank cash balance at £28m at the last official count last September and Manning says it changes little from year to year – a factor which gives him great confidence in the firm’s future.

“We are in a position to withstand whatever storms come at us, so we want to make sure we get ourselves right and really ready to grow again.” In the meantime, Manning says the company is undergoing a grand-scale “tidy up”. This isn’t a sugar-coated description of cuts to the workforce, however, but more of an holistic change to the business.

“When you’re growing it’s sometimes a case of onward Christian soldiers,” he says, arm aloft. “But we’re now taking time to look back at our systems, processes, HR and payroll to do things more efficiently. That’ll make us leaner going forward.”

Speaking of lean, what of his new gravitydefying friends down on the basketball court? Most sporting sponsorships marrying the corporate-clothed with those in lycra tend to be pretty cold affairs.

One side of the deal gets cash to develop teams and stadia, and the other receives advertising space in abundance. A sense of mutual warmth emanates from Esh’s relationship with Newcastle Eagles Basketball Club, however, through Manning’s passionate description of his now-found love of the game.

Perhaps stereotypically for a North East executive, the Esh boss’s down time was dominated with football and golf before catching the basketball bug. Then, in the wake of former sponsor Northern Rock’s demise, Esh stepped in to support the club as shirt sponsor after some years of working together.

“Basketball is fantastic. Like anything we do, if we sponsor something we’re going to go and have a look at it and get involved.” And the company sees a lot it likes in the way the club operates especially its ability to compete nationally – just as Esh intends to increasingly do.

“There is a link,” he says. “The Eagles are a local business trying to punch above their weight, they’re winning trophies and there’s really strong chemistry between us.”

With the Eagles now officially the most successful team in British Basketball League history, maybe the winning mentality will rub off on Esh as it too looks to overthrow the national competition blocking its route out of the mid-cap zone.