Forgemasters' turnaround starting to pay

Forgemasters recorded a £900,000 pre-tax loss in 2016 compared to a £7.6m pre-tax loss in 2015.

The company attributed the change in fortunes to “site-wide efficiency measures” and an “aggressive drive” towards new markets. Forgemasters has been cutting costs as part of its turnaround plan.

Tony Pedder, chairman at Sheffield Forgemasters International, said the results showed “a substantial amount of improvement across the business”.

He added: “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.”

The engineering specialist appointed a new chief financial officer last year as it executes its five-year turnaround plan.

Mr Pedder said: “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 remained relatively unchanged over the previous year at £73m.

Forgemasters employed 649 people this time last year. The most up-to-date headcount stands at 666.

The business has made a £6.5m investment in machining centres to reduce production bottlenecks, with the Sheffield Local Enterprise Development Fund contributing ten per cent to the capital cost.

Graham Honeyman, chief executive at Sheffield Forgemasters, said the latest results showed that the business was heading in the right direction.

He added: “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.”

He added: “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.”

The collapse in the value of the pound since Britain’s vote to leave the European Union also benefited Forgemasters due to the proportion of sales made outside of the UK, Mr Honeyman said.