Sheffield Forgemasters has improved its performance by more than £6m in just 12 months after reporting pre-tax losses exceeding £7m.
Year end figures for 2016 show the engineering specialist recorded a £0.9m pre-tax loss compared to a £7.6m pre-tax loss in 2015.
Aspects of the business plan which are cited for the company’s change in fortunes include site-wide efficiency measures through continued investment and an aggressive drive towards new markets.
Tony Pedder, chairman at Sheffield Forgemasters International Ltd, said: “The publication of our year end figures for 2016 shows a substantial amount of improvement across the business.
“Despite a pre-tax loss, we accrued exceptional restructuring costs of £1.7m and with that non-recurring expense taken into account – we posted a modest post-tax operating profit, which is a major step in our recovery programme from 2015.
“We are addressing all aspects of governance, we have a new chief financial officer, James Tate, and I am pleased to welcome three new non-executive directors to the board. Janice Munday, Jon Bolton and David Duggins who bring a breadth of experience and will be valuable additions to our team as we go forward.
“There are a range of issues which we are addressing in our five-year turnaround plan and the executive team are pursuing these with considerable diligence. In particular we have focused ongoing efforts on cost reduction, efficiency and margin enhancement.”
Turnover remains relatively unchanged over the previous year at £73m, but as well as restructuring the business internally the company continues to make significant capital investments to support it’s strategy of expanding technical, added-value products and services.
A £6.5m investment in machining centres to reduce costly production bottlenecks has been made to support this development, with the Sheffield Local Enterprise Development Fund contributing ten per cent to the capital cost.
Sheffield Forgemasters continues to further its investment into heath and safety, with recent benchmarking placing the company at the high end of best practice and environmental performance also demonstrates performance gains with 98 per cent of processed waste from the plant now being recycled.
Graham Honeyman, chief executive at Sheffield Forgemasters, said: “The financial results for 2016 demonstrate that our efforts to turn the business around have delivered and we are clearly heading in the right direction.
“We are pleased to report that the business continues to have a firm financial footing having successfully secured a new two-year and three-month £45m credit facility from our long-standing financier, Wells Fargo Capital Finance (UK) Limited.
“Due to increased working capital commitments and continued capital expenditure, our net debt increased during the year by £7.9m, but our five year plan, which was finalised during 2016, shows profitability continuing to grow and net debt reducing after 2017.
“The cost cutting measures which have taken place over the last eighteen months together with increased gross margin have helped to secure an operating profit sooner than anticipated.
“Depreciation of the sterling currency, which resulted from the Brexit decision in June 2016, has also had a positive impact on the company’s results due to the proportion of sales made outside of the UK.
“Our business development focus on seeking orders for those products where our robust and comprehensive quality control procedures and strength of our technical and research & development functions, has resulted in a sales portfolio which consists of more technical added-value product and services, with less dependency on commodity-driven products.
“And continuous improvement initiatives involving lean manufacturing techniques together with fundamental changes to the organisational structure are bringing significant operational efficiencies. The program of organisational change is set to continue and we expect further improvements to be made over the coming years.
“The LEP contribution towards our new machining capacity is significant and demonstrates the commitment the local authority has to the future of the company.”
Forgemasters employs 650 staff across its 64-acre Brightside Lane site and serves industries including defence, nuclear power, materials processing, offshore oil and gas and power generation.