Chairman’s update – May 2023
To all our stakeholders
The COVID-19 pandemic was an unexpected and unwelcome event that had a major impact on our business. Sales dropped to around £5M in 2020 and hard decisions had to be made, resulting in a reduction in employee numbers of about 30%. Following the initial decline in equipment sales in 2020, the expectation was that the aerospace industry would take a good number of years to recover, potentially as far out as 2025. In fact, the airlines, followed by the aircraft manufacturers, have seen a faster return to pre-COVID business levels than expected. There have been exceptions, such as in China and the wider Asian markets, due to the severe lockdowns imposed by the Chinese government. However, airlines in the European and North American markets recovered much better, as the waves of COVID receded in severity, capitalising on the pent up demand for travel.
The war in Ukraine that started last year was also unexpected and had the potential to destabilise the post COVID recovery in the aerospace sector. However, one year on from the start of the war we have seen no negative impact on our business.
Overall, as a result of the improved outlook in aerospace, Spectrum’s business has recovered better than expected through 2021 and 2022 and looks positive at present. The Company maintained a strong focus on cash and financial stability throughout the pandemic and emerged in good shape and with sufficient reserves to enable it to undertake a buy back of the residual 20% tranche of shares held by BAE Systems following the management buy out in 1994.
The last two years have presented a number of challenges as we focused on rebuilding the business. In particular, the Company has encountered supply chain issues, as have many others. However, we have managed to minimise the impact of these, albeit there is more to do. On the personnel front we have been working hard at rebuilding numbers and are now back to around our pre-pandemic headcount. Recruitment and training have been a key focus and will continue to remain so.
During this period we have built a new senior management team, headed by our new Managing Director, Wayne Thomas, supported by our new Finance Director, Gareth Mason, both of whom have recently joined the business. This has now allowed me to stand back from the day to day running of the business and to focus on long-term strategic business development. The business has a clear long term development plan, focused on sales into the core aerospace and electronics sectors while we continue with the process of new product development to enable the growth of sales in new markets. These developments have been slowed by COVID and other issues but should now pick up pace going forward. The Company remains committed to significant levels of investment in research and development as we look to intensify our diversification into new areas.
Spectrum has remained on an even keel throughout this challenging period. Our business is ongoing and stable. As a result of the lessons learnt from 9/11 we have remained cash positive and debt free and the forecast is that will remain the case going into the future. While there are significant operational challenges remaining in the ramp back up from COVID, as for most businesses, the Board believes that Spectrum remains well positioned for the future.
Dr Peter Dickinson
Bridgend, 4 May 2023