Bosses' pay cut as firm goes into red.

Byline: Christopher Knox

THE top executives at one of the region's largest private businesses have taken a 30% pay cut after axing 200 jobs and seeing the firm plummet into the red.

The eight board members of the Durham-based, pounds 150m Esh Group agreed to the salary cut to demonstrate their "solidarity with their company's workforce".

The reduction means chief executive Brian Manning has seen his annual salary cut from pounds 250,000 to pounds 175,00. Former Newcastle United chairman Freddie Fletcher, Esh's executive director, will also sustain a 30% cut.

This comes as the construction and civil engineering group posted a loss of pounds 6.4m in 2008 compared to the previous year's pounds 10m pre-tax profit.

Mr Manning said: "All board members have taken the drastic decision to take a pay cut as we want to show solidarity to our workforce as well as be an example going forward.

"The pay cuts should save the company pounds 150,000, which is necessary as we continue to trade through this tough period."

Mr Fletcher said: "This company is still operating well and remains in good shape, despite the wider picture in the housebuilding community.

"Esh had to make a number of reductions at Dunelm Homes in order to keep it in good shape going forward.

"I think making the pay cuts was exactly the right thing to do and is showing staff at Esh that we are all in this together."

In 2008 Esh posted a 3% sales rise to pounds 156.5m, but the group, which is made up of over 21 companies, was forced to write down the value of some of its land bank in its Dunelm Homes division by pounds 8.31m.

However the company said it had "succeeded in delivering a creditable set of results, notwithstanding the unprecedented events of 2008".

Mr Manning added: "Like a number of lager building firms in the region, our housebuilding operations have taken a serious hit.

"However, there are other sides to the business that are making up for the losses and that are showing potential for growth over the coming year. "Although we are not expecting this to be reflected on our next full year financial report, we do believe that the figure will begin to look a lot healthier in two years time.

"This year has been a test of the groups mixed asset business model, and it is certainly holding its own in that respect."

Despite profits taking a tumble, the group was able to improve turnover with its infrastructure business Lumsden and Carroll, as well as social housing arm Dunelm Property Services. Existing Decent Homes contracts, as well as a new contracts with South Tyneside Homes and Broadacres Housing Association, have bolstered the firm's portfolio.

The firm, which employsmore than 1,140 staff, was forced to axe 200 construction jobs in preparation for its last financial year, and, although it said further writedowns may be needed, it is not expecting to make further cuts to staff.

It has also reorganised its financial position after breaking previous banking covenants, and said that the new agreements were more "realistic" and based on cashflows rather than pre-recession profit targets.