Press release: 16th April 2012
Revenue and profit growth and a strong balance sheet
The British Standards Institution (‘BSI’ or ‘the Group’) today announces its results for the year ended 31 December 2011. The 2011 financial results continue BSI’s prolonged track record of consistent growth in both revenues and profits.
Key points of 2011 financial results
- Revenue increased 4% to £244.9m (2010: £235.3m)
- Underlying operating profit increased 5% to £28.7m (2010: £27.3m)
- Operating profit increased 33% to £26.9m (2010: £20.3m)
- Net assets increased 8% to £43.0m (2010: £39.7m)
- Net cash was £39.7m (2010: £41.4m) following a £17m contribution to the pension fund
- Opened a new head office for EMEA region and announced new premises for Product Certification business
- Significant investment in core business and recruitment
- Positive outlook with continued growth and investment expected
- Plan to double revenue in next five years
The term ‘underlying’ is defined as ‘before exceptional items and excluding the effect of disposals’.
Howard Kerr, Chief Executive, commented “Given the difficult global macro-economic conditions during 2011, we were pleased to deliver healthy growth in both revenue and operating profit in the year. Sales to new customers fared even better, being 13% above their 2010 level. This augurs well for the longer term development of our business. We concentrated on organic growth during the year and invested heavily in our core business and the recruitment of key individuals to drive future growth. I believe that BSI now has the right business model and strength in our major geographies and business streams. Our strategy is beginning to bear fruit and I look forward to 2012 with the confidence that we are well positioned to see further progress and growth.”
Howard Kerr, Chief Executive, 020 8996 9000
Craig Smith, Finance Director , 020 8996 9000
Ben Atwell, 020 7831 3113
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 2012. 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.
A year ago I wrote that 2010 was like ‘being out at sea in a storm’. Sadly, for the world’s economy as a whole, 2011 did not bring the calmer waters for which we had all hoped. Sovereign debt continued to increase in many major countries, some significant players in Euro-zone approached the brink of bankruptcy and, to cap it all, a serious earthquake and subsequent tsunami brought turmoil to Japan and other markets, which had hitherto been some of the more stable around the globe.
With such an uncertain and challenging backdrop it gives me great pleasure to report yet another year of increased revenue and profit at BSI. The Group continued to be cash generative while maintaining significant investments in systems, products and people. Once again this demonstrates the robust nature of our business and the value that our clients place on our diverse products and services in these difficult times.
BSI, Royal Charter Company
As a Royal Charter Company, BSI is not subject to the oversight by investors as is found in joint-stock companies. Nevertheless BSI applies the principles of the UK Corporate Governance Code where applicable and has established internal governance procedures that reflect best practice. Our focus on governance begins with the Board, which has a majority of non-executive directors and is able to draw on the experience of individuals of recognized stature from many areas of business. The Board is supported by formal Audit, Remuneration and Nominations Committees, on which the Non-executive Directors are the primary participants, as well as by the Standards Policy and Strategy Committee and the recently established Social Responsibility Committee. Underpinning the frameworks of internal control and financial management and their related monitoring and compliance systems is the BSI Code of Business Ethics, which sets the ethical values and high standards of integrity that we insist are upheld in every aspect of the way we do business.
According to the Board’s policy, during 2011 the triennial formal Board evaluation process was undertaken by an external facilitator. Work continued on the adoption of ISO 26000 to embed social responsibility firmly into our activities and operations. We again reinforced our core values and continued to strengthen our management of risk.
As BSI progresses it is important that the governance provided by its Board develops with it. To this end, and to ensure strong succession planning for the future, we have brought two advisors to the Board into the business during 2011. Pat Chapman-Pincher has board level experience in both international public and private technology companies and has extensive knowledge in new company start-ups, mergers and acquisitions. Lucinda Riches worked for over twenty years at UBS Investment Bank and is now Non-executive Director of, amongst others, UK Financial Investments Limited which manages the UK Government’s investments in financial institutions. Craig Smith joined BSI as Group Finance Director in August 2011, succeeding Martin Hannah and bringing with him many years of experience in similar roles with FTSE listed companies. All underwent tailored induction processes. I would like to welcome them to our Company; they have much to offer BSI and will, no doubt, be instrumental in the shaping of our future strategy and its implementation.
Later this year Mike Low, Director, BSI Standards, will be retiring. Mike has made a huge contribution to BSI during his nine years with the Group and I would like to thank him for all his hard work and commitment. His crowning achievement was being instrumental in the appointment of Terry Hill as President-elect of ISO, the first Briton to hold this position in 55 years. Mike will be handing over to Dr Scott Steedman CBE who will bring a great deal of varied experience to BSI and, I am sure, will build on the foundation already laid.
I shall be retiring as Chairman of BSI on 30 March 2012, after almost ten years at the helm. My successor will be Sir David Brown. Sir David joined the Board as a Non-executive Director in May 2010. A Chartered Engineer by training and a Fellow of the Royal Academy of Engineering, Sir David was, from 2003 to 2004, President of the Institution of Electrical Engineers and, from 1999 to 2000, President of the Federation of the Electronics Industry. He was the founding President of the Chartered Quality Institute, during which time it secured Royal Charter status. I could not wish for a better successor.
As a result of my retirement the Board has agreed that Lucinda Riches will be appointed as a Non-executive Director at the forthcoming Annual General Meeting of the Company on 17 May 2012.
In the future, BSI aims to continue to grow organically in line with our defined strategy in the UK and identified international markets in spite of the continuing economic uncertainty. I believe that I am leaving the business in a prominent leadership position in its chosen markets, working closely with the UK Government, the European Commission and businesses around the world to promote and deliver the benefits and value of standardization and its related products of certification, training and compliance. I have thoroughly enjoyed my tenure at BSI and would like to thank my colleagues, past and present, for their support during this time. I wish BSI continued success in the future.
Sir David John KCMG
22 March 2012
Chief Executive’s Review
I am sure that you will have noticed that the 2011 Annual Report of BSI looks different from its predecessors. In fact it is the first time you may have seen a document with the new branding of BSI and with our new credo, ‘Making Excellence a Habit’ taking centre stage. ‘Making Excellence a Habit’ is an 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 will achieve by buying and implementing the standards we write, having these standards certified by our assurance teams, having their staff instructed in their management by our trainers and having their business leaders reassured by our compliance tools.
The new branding and credo will be embedded in the business during 2012 and are just the latest steps in the journey that began three years ago with the creation of ‘One BSI’ and the development of the matrix structure of management that it relied upon for its success. This is now nearing completion and I am pleased to report that we now have global strategies for our business streams implemented by our regional management, an integrated organizational and product offering delivered by committed people, enviable systems and a new brand identity to take to market. Given the difficult macro-economic conditions prevalent across the globe during 2011, our performance was healthy with both revenue and operating profit showing solid increases on 2010. Overall, revenue rose by 4% and underlying operating profit by 5%. New sales fared even better, being 13% above their 2010 level. This augurs well for the longer-term development of our business as they will convert to revenue in 2012 and beyond. We also increased the number of clients we work with by over 3%. Our balance sheet ended the year with no external debt and almost £40m of cash after a contribution to our pension fund of £17m during the year. In view of the world economy we concentrated on organic growth during the year, making no acquisitions, but invested heavily in improved operating systems and new business applications, a new head office for our EMEA region in Milton Keynes and in the ongoing recruitment of key individuals to drive future growth. Late in the year we announced a realignment of our UK Product Certification business into new premises in the UK from its current base in Hemel Hempstead.
One of our particular successes in 2011 was our approach to industry, which has seen us focus on particular sectors such as healthcare, aerospace and the built environment. Our clients derive great benefits from our expertise in specialized areas and we continue to develop new centres of excellence as part of our strategy. A key achievement was the launch of our Information Products Platform (IPP) upon which we have initially released our Eurocodes library. This represents the first stage in our transition from being a publisher and distributor of standards documents to being a provider of sophisticated, professional information tools with standards content at the core. Further products will be available on this platform in 2012 and beyond. We have also completed a statutory restructuring in the UK which will permit us to provide professional services in our major markets without conflicting with other parts of our business.
Every business faces demands from its stakeholders and BSI is no exception to this. We find ourselves increasingly working together in partnership with clients, suppliers, regulators, local communities and society as a whole as each strives to improve sustainability, manage its risk and improve its performance. These become more important still in sluggish economies where there is less to go around. Our continued growth demonstrates our success in gaining the confidence of our partners and building long-term relationships with them for mutual benefit.
It would be wrong to discuss 2011 performance without a word about our Japanese business. On 11 March 2011 an earthquake and tsunami hit the north-eastern coastline of Japan. In the aftermath the economy slowed considerably and our team faced a great deal of uncertainty. They worked alongside the rest of their countrymen as they rebuilt their economy and their business. By the second half of 2011 BSI Japan was back to similar run-rates as those it had enjoyed six months previously. I commend them for their efforts.
Of course, as always we recognize that our talented global workforce provides the expertise that differentiates BSI from our competitors. It is largely due to the knowledge, skills and integrity of over 2,500 people servicing clients in 147 countries that those clients come to us, and keep coming back to us. For this reason our global talent management programme remains a high priority for BSI. We invest heavily in people development, providing a range of training and support tools to help individuals develop meaningful careers within BSI. I would like to take this opportunity to thank every member of the BSI team for their dedication and diligence during 2011.
Sir David John will retire as Chairman of BSI on 30 March 2012. The ten years during which he has held this position have been a prolonged era of successful growth for the business. Indeed, on a like-for-like basis, both revenue and profit have increased during every single year of his chairmanship, despite some challenging economic conditions in more recent times. His dedication to governance, with the emphasis on risk management, transparency and compliance, will leave behind a legacy of a world-class international business with a healthy balance sheet and a clear strategy for the future. BSI owes a great debt of gratitude to Sir David and we all wish him well in his retirement.
The outlook for 2012 and beyond is for continued growth and investment in our core businesses as we implement the strategic plan approved by the Board during 2011. Each business stream has its own plans to expand geographically and in terms of its product and service offering. Investment in our IT systems infrastructure will increase as we underpin this growth. In particular we expect to expand our smallest business stream, Compliance, by investing more in our Training infrastructure and our Governance, Risk and Compliance software packages.
The continued tribulations of the world economy during 2012 will mean that life is not easy for many businesses. However, BSI is well hedged across geographies, industry sectors and business streams that will allow us to take advantage of pockets of strength. Our exposure to the Euro-zone is far smaller than that of many of our major competitors and we have strong, mature businesses particularly in the UK and the US, whose economies appear to be holding.
Of course BSI, as a business, has some counter-cyclical traits. Adherence to standards provides businesses, and their suppliers and customers, with the confidence that products and services will consistently meet requirements. This can be a real competitive advantage, particularly in markets where demand is being squeezed. Indeed the vast majority of our clients see benefits from our services, including increased revenue, cost savings, new customers and improved employee morale. We really can help in ‘Making Excellence a Habit’.
I believe that BSI now has the right business model and strength in our major geographies and business streams. Our strategy is beginning to bear fruit and I look forward to 2012 with the confidence that we are well positioned to see progress and growth.
22 March 2012