Bosses at Sheffield Forgemasters International have sounded an upbeat message about the future prospects for the business, citing a strong order book of contracts worth £140m.
The firm posted a £16.4m loss for the year ended December 31 2017 owing largely to the decision to depreciate the asset base of the company.
The results compare with a loss of £900,000 in 2016 and are the first to be reported since David Bond was appointed as Forgemasters’ chief executive in August this year.
Mr Bond referred to the loss as a “technicality” owing to the accounting changes and said that a number of new contracts, particularly in the defence sector, pointed towards a future that would deliver greater profitability for the business.
“It was a case of us clearing the decks a little for future investment,” he told The Yorkshire Post.
“Forgemasters is a very capital intensive business. We are feeling in a pretty good place at the moment and are sitting on a good order book. One of the sectors, that of defence, is very strong indeed.”
Were it not for the accounting change, the company would have recorded a modest pre-tax profit of £200,000 on revenues of £76.1m, a increase of four per cent over 2016.
Mr Bond joined the firm following in the footsteps of Dr Graham Honeyman who stepped down from the board in July.
He is joined by new chief financial officer Steve Hammell, new chief operational officer Paul Cahill and former Rolls-Royce senior manager Colin Smith as chairman.
The firm, founded in 1805, invested £10 million into a new plant in 2017, including a £2m upgrade to its electric arc furnace and a £6.5m investment into state-of-the-art BOST machining centres.
In 2018 it also committed to a record intake of 33 apprentices and now employs 670 staff.
Mr Bond added: “The new team is expecting a return to stronger levels of profitability in 2018 with the delivery of high specification UK and US defence products. We are also focussed on expanding our customer base for premium products and design consultancy in complex engineering applications, to drive future margins and profitability.
“Making prudent financial decisions does not detract from the necessity of running a business which needs to succeed in a fiercely competitive global marketplace.
“So our technical capability and reputation for innovation is a key market differentiator and demands we maintain our skill base through our apprenticeship programme, research and development efforts and investment in the latest manufacturing technology, enhancing our competitive edge.
“Looking ahead, we will be increasing the amount of investment into plant and equipment in 2019 as we work to maintain the highest delivery and quality standards and drive continuous improvement in our health & safety performance, key priorities for the new team.”
To support these developments, the company also announces that it has extended its asset based lending facilities with Wells Fargo to 30 April 2020, with the debt ceiling reduced from £45m to £40m.
Mr Hammell added: “SFIL has seen it debt levels increase over the last three years and we are determined to reverse this trend to deliver a long-term sustainable business.
“The £5m reduction in the lending facility is a step in the right direction and we will continue to reduce our borrowings over the coming years.”