SMD boss admits difficult 2013 but now confident of firmer footing

The parent company of Wallsend based subsea manufacturers, Soil Machine Dynamics, saw operating profits dip in 2013

Deputy Prime Minister Nick Clegg with SMD CEO Andrew Hodgson
Deputy Prime Minister Nick Clegg with SMD CEO Andrew Hodgson

The boss of prominent Tyneside subsea manufacturer Soil Machine Dynamics (SMD) says the company endured a difficult 2013, but remains confident that restructuring plans have created a firmer footing.

Accounts for the Wallsend-based firm’s parent company, Specialist Machine Developments (SMD), showed operating profits had fallen from £4.8m in 2012 to £1.6m in 2013.

A lower order book at the start of 2013, coupled with a slowdown in the supply of capital equipment to the offshore renewables market posed headwinds for the business.

The specialists in remotely operated equipment called 2013 a “year of transition” in which the £572,000 restructuring programme was implemented, including the loss of 22 permanent production staff. By the close of 2013 62 contractors were being used to supplement the firm’s workforce.

However, a stronger second half, a strong enquiry pipeline and an increased backlog of orders towards the end of 2013 buoyed the confidence of SMD directors going into 2014.

In July 2013 SMD announced the restructuring plan in response to a slowdown in demand. In the latest accounts, directors described the programme as “immediately effective.”

Andrew Hodgson, SMD chief executive, told The Journal: “In early 2013 the offshore renewables market stopped moving and this had coincided with a significant amount of investment we were putting into our products.

“The second half of the year was much stronger and the business has seen some of the best profitability it has ever achieved in that period. That profitability extended into 2014, and now looks set to continue into 2015.

“We’re still coping without the renewables work and the impact of Russian sanctions affects us, probably a lot more than people would think.”

Highlights of the 2013 year included an expanded product portfolio at SMD’s work class remote operated vehicle (WROV) division, which also closed the year with a number of new customers.

Some £600,000 was spent on research and development activities throughout the year, and SMD noted its successful management of tax exposure through maximum use of R&D tax credits, among other instruments.

SMD also noted progress on its contract with Canada’s Nautilus Minerals thanks to ironing out of previous supply chain issues.

Delivery of machines to Nautilus is now expected to happen in the first quarter of 2015.

Mr Hodgson also noted that more recent success in the mining market represented the realisation of over three years of investment in the field for SMD.

In early 2013 the firm was awarded a Queen’s Award for International Trade in recognition of its export sales growth. SMD had previously won a Queen’s Award for Innovation in 2012 for the development of its WROV range.

SMD services clients across the mining, renewables and nuclear industries.

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