New contract wins, sustained growth, strategic collaborations and the market repositioning of subsidiary companies have helped North East-based Reece Group to successfully navigate the global economic downturn and once again, post strong financial results for the second consecutive year.
The Newcastle firm, headquartered at Armstrong Works, Scotswood Road, has announced group turnover of £62.9m for the year ending December 2020, with profit before tax up by 31% to over £13.2m.
The Reece Group, which employs 389 staff, is a major worldwide player in the defence and engineering sectors, and the holding company for Pearson Engineering, Responsive Engineering and Velocity.
Pearson Engineering increased turnover to £46.7m, up nearly 14%, with profits rising to £15.7m from £10.5m. This was driven by repeat orders, strategic growth in new overseas markets and several long-term defence projects reaching final production stage.
The company, which currently employs 75 staff at the Armstrong Works HQ, continued to invest in its R&D programmes to the sum of £2.1m, ensuring that it remains at the forefront of innovation in its field.
Whilst Pearson had operational challenges to overcome during the 2020 lockdown, this did not result in any significant impact on its financial performance, and outlook remains very strong for the remainder of 2021 and beyond.
For Responsive Engineering, a deliberate and strategic shift in activities during 2019 resulted in positive results being posted at the start of 2020. However, a combination of delayed orders and reduced enquiries from the oil and gas sector during lockdown resulted in, like for many similar organisations, a loss of revenue.
Turnover was down by £2.9m to £12.7m with a loss of £3.5m on the previous year despite targeted efforts to work through the economic downturn and support customers with continuous supply. The company also had the opportunity to support the Government’s ventilator programmes in 2020.
Responsive Engineering, employing 241 staff, is now actively embarking on a return to profitability with short and long-term prospects for the defence sector looking strong.
The company continues to collaborate with its sister company, Pearson Engineering, to jointly bid for major defence manufacturing projects and support a number of active and planned UK defence programmes. The work is expected to secure employment and retention of key skills across the companies as well as their supply chains, whilst at the same time leveraging the inherent capability of the Armstrong Works facility.
Furthermore, in preparation for growth, Responsive continued to invest heavily during 2020 in new state-of-the-art equipment to enhance its end-to-end manufacturing capability.
Velocity, the Group’s specialist road repair division, was hit by a sharp reduction in demand, albeit temporarily, due to the direct effects of the pandemic on such businesses. However, jobs were protected and whilst all of Velocity’s services were affected, the decrease in enquiries was short-lived with operations in 2021 once again returning to pre-Covid levels.
Turnover for 2020 reached £9.8m with profits at £0.1m, and despite short-term challenges around national driver shortages, future prospects remain positive. The business is now looking to broaden its offering beyond repair into unique, road preservation services.
In contrast, Reece Group took the difficult decision to close its Reece Innovation division in July 2020 as part of strategic growth measures to allow for a more streamlined and efficient operational structure. This managed and reduced risk in order to encourage more long-term benefits across the organisation.
John Reece MBE, Director of Reece Group, commented,
“The last 18 months have been one of the most unpredictable and challenging periods for any business to overcome, regardless of size or sector, yet we have seen Reece Group successfully weather that storm and come out stronger.
“These are very positive results for the Group given world events and some difficult decisions, and that is down to the sheer drive, commitment and determination of all our staff, individually, at every level and across all companies. We have some of the very best, highly-skilled people employed at our sites, carving out new opportunities, forging relationships and delivering advanced, groundbreaking products that are simply world-class. They have demonstrated just how important they are to the business. They’re our greatest asset and it’s fantastic to be part of it.
“Additionally, despite 2020 being a most difficult year, our suppliers, both locally and globally, and our customers have also played a key role in supporting the business, working closely with one another collaboratively in partnership to navigate a way through.
“Whilst the financial results are varied in part, there are many positives to take from them and we can continue looking forward with heightened optimism and confidence.
“Reece Group, as a whole, remains an important, major employer here in the North East, and the significant investments made in our R&D programmes and manufacturing plant, both in 2020 and before, have put us in a healthy position to drive the business forward with significant opportunities in the work pipeline ahead.”
The company continues to donate to local community-led projects supporting regeneration in the west end of Newcastle. It has allocated £1m to good causes since its move to Armstrong Works, and through support of its Reece Foundation, the company’s charitable trust, the Group has helped younger generations gain qualifications and entry into engineering and manufacturing careers via its STEM education programmes.