Increases in underlying revenue and profit for thirteenth consecutive year
BSI (‘The Group’), one of Britain’s most established brands, has announced its results for the year ended 31 December 2012.
Growth was reported across all regions and all business streams as BSI again demonstrated its strength and depth across the organization.
Revenue increased 4% (5% at CER) to £254.6m (2011: £244.9m)
Underlying operating profit increased 11% to £32.0m (2011: £28.7m)
Operating profit increased 22% to £32.9m (2011: £26.9m)
Net assets increased 16% to £49.9m (2011: £43m)
Net cash increased 3% to £41.0m (2011: £39.7m)
Both revenue and operating profit showed solid increases on 2011
We ended the year with no external debt and £41m in cash reserves
We continued to focus on and deliver real value in core industry sectors
The outlook is for continued growth and investment as we continue to enhance our business systems to support our strategic plan.
The term ‘underlying’ is defined as ‘before exceptional items and excluding the effect of disposals’.
Howard Kerr, Chief Executive, commented
“2012 was another record year for BSI, with revenue and profit growing for the 13th consecutive time. Current economic conditions are challenging for many of our clients but we believe that BSI remains a trusted partner for them and increasing engagement proves that they derive many benefits from the application of our products and services at all stages of the economic cycle. As we embark on the next chapter of BSI’s long history we anticipate continued growth as we realise our full potential, based on our reputation, competitiveness and international footprint.
“We will continue to invest in the organic growth of our business, particularly where short-term costs will be outweighed by longer-term benefits, and will complement this with selected acquisitions where appropriate. This strategy has been successful during 2012 and I look forward to continuing down this path during 2013 and beyond.”
For further information please contact Bell Pottinger:
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BSI management is available for analyst briefings upon request.
Forward looking statements
This preliminary announcement contains certain forward-looking statements with respect to the financial condition, results of operations and businesses of BSI. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. The forward-looking statements are based on the directors' current views and information known to them at 22 March 2013. The directors do not make any undertakings to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Nothing in this statement should be construed as a profit forecast.
In this, my first Chairman’s statement since I succeeded Sir David John at the end of March 2012, I am pleased to be able to do as he did for every one of his ten years as Chairman and report another year of increased revenue and profit. That I am able to do so is attributable in large measure to Sir David John’s decade-long unwavering commitment and energetic leadership. During that time, BSI not only prospered year after year but also invested in the longer term by building in Britain and all around the globe a unified team of BSI people which is respected by our clients and partners everywhere.
That philosophy of looking to the future as much as to the present, nurtured through the 111 years since BSI’s beginning, positioned us well to meet the challenge of operating for another year in economically troubled markets. Our offer to our many thousands of clients throughout 2012 – that we will help them to make excellence a habit – resonated with their needs and drove the take-up of our products and services. The result was revenue and profit growth for the thirteenth consecutive year and another record performance. Also, significantly, BSI remained cash generative despite making our highest-ever level of investment in systems, products and people, and another substantial advance payment into the final salary pension scheme.
As a Royal Charter Company with no shareholders and therefore no stock exchange listing, BSI is not required to apply the UK Corporate Governance Code. However, consistent with our unique status as the UK National Standards Body and our commitment to our members, we nevertheless apply the principles of the Code where applicable and, in doing so, have established internal governance processes that reflect best practice in business today. The ultimate accountability for the governance of BSI lies with our widely experienced and seasoned Board of directors, which has a majority of non-executive directors.
The Board is supported by Audit, Remuneration, Nomination and Social Responsibility Committees which are chaired by, and primarily consist of, non-executive directors. These formal committees are complemented by the Standards Policy and Strategy Committee, which does invaluable work in gathering and distilling the views of those interested in British Standards and advising the Board. Underpinning this governance framework, our structure of internal controls and financial management and, indeed, everything that every BSI employees does, wherever they do it, is the BSI Code of Business Ethics. It sets the ethical values and high standards of integrity that apply to every aspect of the way that we do business.
There were three changes to the Board of directors in 2012. The first was the retirement of Sir David John in March. The thunderous applause he received at the Annual General Meeting following his retirement was further evidence of the debt of gratitude BSI owes him. We wish him a long and pleasing retirement. The second was the appointment to the Board at the Annual General Meeting of Lucinda Riches, whose eminent career includes more than 20 years with UBS as an investment banker. Lucinda had been an advisor to the Board for a year prior to her appointment as a non-executive director, and in that role had already contributed strongly to the direction of the Group.
The third Board change was the retirement in September of Mike Low, Director, BSI Standards, after nine years of distinguished service. Mike led our standards team with an extraordinarily successful combination of energy and wisdom, for which we are very grateful. We wish him too a long and pleasing retirement. Mike handed over seamlessly to Dr Scott Steedman CBE, who had joined BSI in January and who I was pleased to welcome to the Board in October. Scott is a Fellow of the Royal Academy of Engineering with an enviable career history in the leadership of major international infrastructure projects. He chaired the European Council for Construction, Research and Innovation for over a decade. His election in November 2012 to the position of Vice-president Policy for the European Committee for Standardization (CEN) is testimony to his international standing. The Board, together with his many BSI colleagues around the world, looks forward to working with him in 2013 and beyond.
BSI’s continued growth is evidence of the effectiveness of the careful strategic balance which the Board seeks to maintain between investing to build operational excellence in the present day and investing to keep BSI at the forefront of the development and deployment of standards now and in the future. It is evidence too of the trust that the users of our products and services place in us as they continue to navigate their way through these uncertain times. The Board is acutely conscious that trust in BSI resolves to trust in BSI people. We are very grateful to each and every one of BSI’s employees, and to the very many BSI Committee Members and Subscribing Members without whose support BSI could not still be one of the most prominent standards bodies in the world today.
The Board looks forward to working with all the stakeholders in BSI to build on the successes of 2012 and to continue to earn the trust they place in us.
Sir David Brown
Chief Executive’s Review
BSI is now a very different business to the one I inherited as Chief Executive four years ago. In 2012 we completed our rebranding to the new look you first saw in last year’s report. Our new website,www.bsigroup.com, was launched during the year and clearly articulates the wide scope of our activities and the benefits we deliver. This was the final piece of the jigsaw as the business has been transformed into ‘One BSI’, an integrated global enterprise, able to serve clients from 61 offices in 27 countries across the world. Our five-year strategic plan is being executed effectively as we look to build scale across our business to serve these clients even better.
Day-to-day, the business is now managed through a strong matrix structure with three global business streams, Knowledge, Assurance and Compliance, being driven through three geographic regions, EMEA (Europe, Middle East and Africa), the Americas and Asia Pacific, supported by highly enabling central functions and innovative business systems. This is now overseen by an Operational Executive Committee that sets and manages to targets and reacts quickly and flexibly to changes in the competitive environment.
Our credo is ‘Making Excellence a Habit’. This remains our ambition for everything we do in our business and the promise we make to our clients when they do business with us. It is what our clients expect to achieve by buying and implementing the standards we shape, by having these standards certified by our assurance teams, by having their staff trained in their management by our tutors and by having their management reassured by our compliance offering. The vast majority do, reporting improvements in their client satisfaction and loyalty and boosting their operational performance.
This has served us well as we have traded through the challenging economic conditions of 2012. Our performance was healthy and all business streams and geographical regions showed growth on their 2011 results. Overall, revenue increased organically by 4% (5% at constant exchange rates) and underlying operating profit by 11%. Indeed we have reported increases in both revenue and profit every year since 2000. Over 68,000 unique clients bought products and services from BSI in 2012, an increase of 5% to 2011. Our balance sheet ended the year with no external debt and £41.0m cash, even following capital expenditure of £8.9m and a contribution to our UK defined benefit pension scheme of £18.0m during the year.
Our increased focus on delivering real value to clients in core sectors has delivered strong results across the construction, healthcare, aerospace, automotive and ICT industries and we look to grow equally market-leading positions in other sectors, such as financial services and food. Success in these areas is underpinned by relevant standards and industry expertise. Increasingly BSI is seen as a thought leader in such sectors and able to create high quality solutions to meet the business regulatory and other stakeholder requirements of our clients. This gives them confidence that they can deliver quality, manage risk and grow sustainably.
BSI invested significantly during 2012, predominantly in enhancing our business systems to support our strategic plan, help our employees to be more effective and provide our clients with an excellent interface when dealing with us. We continued to develop our ‘British Standards Online’ (BSOL) platform and our online shop in line with the industry’s move towards digital solutions. Significant investment was made in BSI Entropy Software™ our operational intelligence tool with a major new release to be launched later in 2013. We continue to invest in the further development of innovative new standards that not only meet the need of the economy and society today but also anticipate the requirements of the future. Our two German businesses were merged and now share new offices in Frankfurt in keeping with our growing presence in this country. I announced last year that our UK Product Certification business was intending to move to new premises. Instead, after further review, we have decided to refurbish our existing premises in Hemel Hempstead and consolidate all activities there onto a single site. This will open in the summer of 2013 and will support the global expansion of this business.
During 2012 there were two changes to our Group executive team. In August David Horlock joined us as Managing Director of our Asia Pacific region. David brings with him a wealth of experience in our industry and I would like to welcome him to BSI. Mark Basham, the previous holder of this position, has returned to Europe as Managing Director of our EMEA region. Mark replaces Rob Wallis, who has left BSI to pursue other career interests. David, Mark and the rest of the Group executive team manage a talented global workforce that provides the expertise that brings us competitive advantage and differentiates us from our competitors. It is largely due to the efforts of almost 2,800 people servicing clients in almost 150 countries that those clients come to us and keep coming back to us. I would like to take this opportunity to thank each and every one of the BSI team for their hard work and demonstration of our core values of ‘Integrity, Inclusivity and Continual Improvement’ that guide us in everything we do. You make BSI what it is today.
We invest consistently in people development, providing a range of training and support tools to help individuals develop meaningful careers within BSI. I am pleased to report that BSI has been officially recognized as an ‘Investors in People’ (IiP) company in the UK. This was awarded following an intensive review in which BSI met, and in many cases exceeded, over 93% of the evidence requirements of the IiP framework used for the core standard. During 2012 we undertook our second global Employee Engagement survey. Questions asked are grouped into 17 employee engagement dimensions and we improved our ratings in 16 of these and equalled the very high rating achieved previously in the 17th. In particular our people, by their responses, demonstrated their pride in the quality of the BSI products, services and ethics and their belief in our brand values. As always there is room for improvement in some areas and these are being addressed across the Group. We instigated our ‘Sales Excellence Academy’ in January 2012 to address the need for formal sales training for our global sales resource, and this year are launching our ‘Assessor Academy’ for our Assessment teams. We look forward to enjoying the benefits of these, and the many other, initiatives in this area.
2012 was another record year for BSI, with revenue and profit growing for the 13th consecutive time. Current economic conditions are challenging for many of our clients but we believe that BSI remains a trusted partner for them and increasing engagement proves that they derive many benefits from the application of our products and services at all stages of the economic cycle. As we embark on the next chapter of BSI’s long history we anticipate continued growth as we realise our full potential, based on our reputation, competitiveness and international footprint.
We will continue to invest in the organic growth of our business, particularly where short-term costs will be outweighed by longer-term benefits, and will complement this with selected acquisitions where appropriate. This strategy has been successful during 2012 and I look forward to continuing down this path during 2013 and beyond.
A detailed operational review and financial review as well as the financial statements and notes to the financial statements may be found by following the hyperlink below to the on-line edition of our annual report and financial statements 2012.