Financial Review

BMT delivered a solid financial performance in challenging conditions.

Revenues increased by 5% to £163.3m despite the rising value of the pound having a negative impact on group earnings. In fact BMT now earns more than two-thirds of its income from non-UK customers, illustrating the truly global nature of our operations. Profits fell by 17% to £11.3m as some of our markets cooled and the highly complex, technically demanding nature of certain projects required additional investment.


Markets

Progress in major defence projects was offset by tough market conditions as governments across the world sought to control and reduce costs. Specialist vessel design, particularly yachts and offshore windfarm support vessels, saw good growth. In terms of regions, some cooling off in Australia was offset by a continuing rise in south east Asian infrastructure projects. In general, a ‘buyers’ market’ persisted, meaning that we had to work even harder to maintain profit levels.


Margin

While margin fell during the year to 7% this was largely caused by the additional investment necessary in certain,


relatively small areas of the business. Taking that out of the picture, it was pleasing to see that the underlying margin held up well and we have some confidence that it can be matched, or improved upon, in the future.


Cashflow

At the end of the reporting period our strong cashflow position (not including ‘third party’ money held on account for clients) before deduction of employee profit sharing bonuses and tax was maintained at £15m. Even after deductions we are happy to report that the net cash position was again positive.


Employee distribution

Our solid performance enabled us to reward our staff with an employee distribution of £5.9m. This was below last year’s level, reflecting the fact that turnover per head was down 3% at £118k. Profits per head also fell.


Pension

‘Our pensions’ liabilities, as calculated under FRS17 accounting standard, increased during the year, driven by an upwards adjustment to the inflation rate on which liability assumptions are made. This had the effect of increasing our pension deficit from £17m to £23m. To address this, we extended the period


of our pension recovery plan and agreed rising payments supported by the growth in our business. Although we will continue to set money aside to reduce the deficit, it is important to understand that these are longterm liabilities, subject to regular adjustment, and do not need to be met in the short-term.


Currency

Having benefited for some time from the pound remaining at a relatively weak level, the situation reversed during the year. As a result the rate at which overseas earnings converted into sterling was negatively impacted. Although we hedge much of our currency flows, the impact on our revenues of this movement was nonetheless significant. This meant that our ability to increase revenue during the year was a considerable achievement and evidence that BMT’s strong underlying growth is continuing.


Outlook

Our order book is higher than even last year’s notably strong level. This suggests that recovery is continuing in most of our markets and gives us confidence that BMT can continue to prosper in the niche, high-value markets in which we operate.


Revenues increased by 5% to £163.3m despite the rising value of the pound having a negative impact on group earnings.

David McSweeney
Finance Director

18  |  BMT Group Annual Review 2014