Sheffield Forgemasters, the heavy engineering specialist, has announced its 2019 financial results against the backdrop of a series of unprecedented challenges.
David Bond, CEO, has led the company through a challenging period with the business buffeted by multiple headwinds. For the year ended 31 December 2019, the company recorded revenue of £79.3m (up from £66.3m in 2018) with pre-tax profit of £0.8m (down from £2.0m in 2018) and entered 2020 with an order book of £162m.
David Bond said: “During 2019 we have focused on our core UK Defence programmes, achieving much improved delivery performance, and have reduced product arrears for the Steel Processing sector, helping to drive an increase in revenue of 20 per cent.
“Margins came under pressure during the year, driven by a lower level of throughput. This reflects slower than expected order intake from subdued global markets, the impact of the business-wide flood event in November and the challenges of running our ageing plant and equipment.”
The company reported a significant reduction in net debt from £20.3m to £8.8m in the year and has extended its lending facilities with Wells Fargo to December 2021.
Steve Hammell, CFO, said: “We have continued to reduce debt levels by a strict focus on cash management whilst maintaining levels of capital expenditure to improve plant reliability. In April we extended our £40m lending facility for a further 20 months to December 2021, providing the financing to deliver on our UK Defence contractual commitments. Having managed a rapid recovery from the flood event, this placed the company in a robust financial position just as the Covid-19 pandemic hit.”
All main areas of Sheffield Forgemasters’ plant have remained fully operational throughout the pandemic, continuing to deliver on customer commitments, supported by the key worker status granted to those parts of the site serving national security interests.
The company’s initial Covid-19 response was to safeguard its employees, establishing strict hygiene and social distancing measures, zoning of the manufacturing site and enabling home-working for all vulnerable staff and office based teams.
David Bond added: “Following the November flood event, our management team have grown accustomed to handling fast moving crises. As the pandemic unfolded, we tried to balance the absolute necessity to protect the health of our employees with the preservation of the business, by maintaining the safe operation of as much of the site as possible.”
“Despite the strong response to the pandemic and entering lockdown in a much improved financial position, the demand environment has deteriorated and, as for many other UK manufacturers, order intake remains a challenge.”
Steve Hammell added: “In the second quarter, orders from steel mills declined as major producers struggled with the collapse in demand for steel. The oil and gas sector has also suffered, with oil prices falling to historic lows.
“We are understandably concerned at the uncertainty the pandemic has caused and the decline in business confidence across the economy. Over the short-term, the outlook is challenging but we remain focused on building resilience and competitiveness in anticipation of the return to stronger trading conditions.”
David Bond concluded: “We are optimistic about the long-term prospects of the business given its unique capabilities in the Defence Nuclear supply chain and we continue to work with external stakeholders to secure our role on future defence programmes. We also see strong prospects in support of the UK Government zero carbon agenda, particularly supplying complex steel products into Civil Nuclear power applications and large off-shore wind structures.”