Review of performance for 2022

The high levels of interest rate volatility during the reporting period meant that our decision to appoint, for the first time, a fiduciary manager to the pension fund proved beneficial. The fiduciary manager has governance over investment decisions and can therefore act with greater agility. Partly because of their expertise, our pension fund, unlike many others, was more resilient to liquidity issues during the turbulence that followed the UK Government September 2022 ‘mini budget’. Cash flow Strategic investments were made in the growth of the business and future capability along with an updated ERP system and enhanced office space. These combined with pension funding contributions and a £6.4M distribution to employees accrued in the previous year led to an overall cash reduction but still left the business in a healthy position at £31.5M. Employee distribution Our ability to once again make a significant employee distribution of £5.2m is particularly pleasing for two reasons. Firstly, it rewards the people who are both central to our success and increasingly in demand from competitors. Secondly, it signals our ability to create greater consistency in financial performance. This is the result of our strategic focus on activities and markets which can deliver the high value work that delivers consistently high returns. Pension A notable feature of the reporting period was the inexorable, if sometimes unpredictable, rise in interest rates. Broadly speaking, this was good news in terms of our pension liability, which falls as interest rates rise. This must, however, be set against the fact that our pension fund assets, typically fixed-rate bonds, fall in value as interest rates rise. Overall, the net result was overwhelmingly positive, with the net deficit reducing by over half during the reporting period. David McSweeney Chief Financial Officer, BMT Outlook The financial prospects ahead look positive for a number of key reasons: As the reporting year progressed, we have seen activity pick up as private and public sector customers, many of whom have delayed orders due to economic and pandemic-related uncertainty, start to regain confidence. We can expect this trend to continue. More broadly, in response to the war in Ukraine, defence spending is becoming an increasing priority for government customers across the world. The conflict is also renewing the focus on energy security and, with energy prices high, this is leading to increased spending on both traditional and renewable energy activities. Energy transition and environmental concerns also remain powerful drivers for customers – and we are well placed to help them understand, manage and deliver on these priorities. We can also look forward to a number of exciting new projects, led by our biggest ever contract – helping to build the future FSS ships for the Royal Navy. By continuing to progress our strategy (as outlined on pages 10 and 11), I believe that we will be well positioned to take advantage of the opportunities that lie ahead. 29