Subsea innovator SMD signals markets recovery after…

Subsea innovator SMD signals markets recovery after second year of pandemic impacts

Tyneside subsea company Specialist Machine Developments says its markets are bouncing back after the pandemic impacted its financial performance for a second year running.

The Wallsend based business, which is recognised as a world leader in the design and manufacture of subsea vehicle systems, has published accounts showing a 39% drop in revenues in 2021, from £40.3m to £24.4m, as a difficult trading environment triggered by the Covid-19 crisis impacted its markets.

The operating loss widened from £159,219 to £8.4m, while the overall loss for the year grew from £3.4m to £11.6m, although its costs of sales were reduced, resulting in an increase in gross margin profit of 4%. Employee numbers fell from 247 to 200, after a review led to the firm reducing staffing levels throughout the year, and directors said the results “are significantly below the original 2021 budget and objectives”.

The figures also mark a second year of falling revenues, having seen results for 2020 also fall as a result of the global lockdown. However, SMD directors have now signalled a recovery in its markets, while highlighting new order wins.

In the accounts, the group said its Remotely Operated Vehicle (ROV) business saw its order intake increase on the prior year, with £12.5m of new work won in the year, and its trenching business carried out contracts won in 2021, while also securing £12m of new contracts. Revenue fell by £4.8m from £12.3m within the division.

In the accounts, directors said: “Whilst the business has seen a downturn caused by a decline in oil and gas prices, it operates across a wider range of industries such as renewables (offshore wind is the major market SMD benefit from), telecoms and mining where numerous opportunities still exist in those areas. The business is expected to revive in 2022 as Covid 19 restrictions are lifted and customer projects resume.”

Meanwhile, it said its deck equipment business continued to support the equipment businesses through 2021 and that its services business delivered on its traditional revenue streams in 2021, seeing revenues in excess of £11m including new refurbishment and upgrade work or customers equipment.

Directors added in the report: “The group was able to execute the contracts in hand to budget and has secured several new projects during the year. There are signs of the market returning and the sectors having more confidence in purchasing capital equipment. As such order backlog at December 31 2021 was £16.6m (2020 - £10m) and the company has been awarded additional work in excess of £7.1m at the start of 2022 and are currently involved in a number of tenders with further new projects expected to be awarded in the coming months.

“The group will continue to work closely with customers in 2022 providing both technical and financial solutions. SMD will continue to invest in R&D, which underpins the long-term strategy, and will increase integration with its Chinese parent.”

The accounts show the group benefitted from government assistance under the Coronavirus Job Retention Scheme in the UK, with grants amounting to £245,409. It also invested £2.74m in capital expenditure to support business growth.