Manufacturer’s performance impacted by pandemic, war and energy costs

Engineering specialist, Sheffield Forgemasters, has published financial results for the period to 31 March 2022 following its acquisition by the Ministry of Defence in August 2021.

The financial statements cover the 15-month period ended 31 March 2022 and report revenue of £130.6m, up from £71.9m for the 12 months ended 31 December 2020, and operating profit (pre-exceptionals) of £0.6m.

The accounts highlight significant headwinds which affected the company’s performance, including the effects of Covid-19, high energy costs and the Russia-Ukraine conflict.

Chief financial officer, Stephen Hammell, said: “This has been a transformational period for Sheffield Forgemasters, during which we finalised the acquisition of the company by the MOD to secure the company’s role as a critical supplier to the next generation of UK Defence programmes and secure the long-term future of the business.

“Alongside completing the transaction, we had to guide the business through a series of external challenges that have impacted financial performance.

“The main headwinds during the period were subdued commercial markets in the aftermath of the Covid-19 pandemic, rising costs, the most significant of which was the unprecedented escalation of wholesale energy prices, a localised flood event in February 2022 and Russia’s invasion of Ukraine, resulting in the Board’s decision to immediately cease all product supply to Russian customers.”

Revenue was driven by strong deliveries to UK defence customers, facilitating a reduction of stock levels in the period.

However, reported margins were much lower, reflecting cost base escalation and lower levels of activity across site.

Chief executive officer, David Bond, said: “This has been an incredibly difficult period for the business and the directors regard the out-turn as a creditable result in the circumstances.

“In addition, we have been successful in growing order intake despite the challenges faced, better positioning the business for the next 2 years.”

The company won £80m (2020: £40m) of new orders, driven by UK Defence programmes, and secured new orders from Rolls-Royce SMR for the first demonstrator forgings to support development of Small Modular Reactors (SMR) for Civil Nuclear applications in the UK.

Following the change of ownership in 2021, the company revealed the MOD intends to invest up to £400m over the next 10 years to re-capitalise defence-critical plant and equipment in order for Sheffield Forgemasters to be a reliable supplier of components to UK Defence programmes over the long-term.

Bond added: “Strong progress has been made on the re-capitalisation programme with a replacement heavy forge acquired from Japan being successfully delivered into Sheffield in March 2022 and scheduled for commissioning in 2025.

“Further investment in site infrastructure is progressing on-track and we’ve completed a competitive tender process for significant new machining capability.”