It’s an unlikely story. Born out of two former government departments when it
was privatised in 1985, engineering group BMT enjoyed tax-free status as a
scientific research association (SRA), for more than a decade.
Then, under the guidance of its chairman and CEO David Goodrich, it was
reborn as an employee benefit trust in 1998 to, among other things, keep its
mounting cash pile out of the hands of nefarious individuals. Now the company
boasts turnover exceeding £75m and has operations in 10 countries around the
world. Oh, and it designs warships to boot.
Originally called British Maritime Technology, BMT is involved in some
fascinating projects: it helped design the Royal Navy’s future aircraft carrier;
wind-tested Dubai’s Rose Tower; designed a new type of non-nuclear-powered
submarine; developed software for the Environment Agency to determine European
sea water bathing quality and designed the fastest naval craft in the world for
the US Navy.
But the group’s structure is equally interesting. Finance director David
McSweeney (pictured) has been with the group since 2001 when he joined from
accountancy firm Baker Tilly and now finds himself as custodian of Goodrich’s
vision and legacy.
BMT’s website does a reasonable job of describing the company: “BMT is a
company limited by guarantee and member based. The BMT employee benefit trust is
the sole voting member. The EBT Trustees’ remit is to act in the best interests
of all the staff in the short, medium and long-term and they are not themselves
beneficiaries. The assets of the company are held in beneficial ownership for
“The creation of the employee benefit trust was the brainchild of David
[Goodrich],” says McSweeney, despite having some trouble describing it. While
similar to a professional partnership that you might find in a firm of
accountants or lawyers, none of the employees own an equity share. And while
staff are paid a share of company profits it is worked out on a points-based
structure, which takes into account length of service and salary level.
The decision to adopt the EBT structure was in response to the company’s
growth, which far out-stripped its SRA status. “It became taxable,” says
McSweeney. “If we retained reserves to the extent that we didn’t distribute any
profit every year [it would] get taxed, and that’s why our distribution policy
has been quite generous over the years.
“Our challenge is that we will have to retain reserves in order to fund the
growth we’re experiencing. There’s a bit of commercial tension there and the
reason it’s left to the board to decide is that it’s got to consider the
commercial requirements of the business, first and foremost, and then decide how
much is left to distribute.” In 2006, the board distributed £1.7m as a profit
share payment among the staff of its subsidiary companies and £1m among BMT Ltd
In the late-1990s, substantial growth in some of BMT’s energy support
companies were creating a cash-pile that needed an outlet. “A lot of things were
happening in the North Sea, leading to marine offshore service requirements,”
says McSweeney. “Suddenly we had a growing asset with no mechanism to distribute
or do anything with the wealth creation.” BMT is currently sitting on £5.7m in
cash, not counting its overdraft facility.
And that was one reason that Goodrich originally created the EBT. The other
was, as McSweeney points out, an attempt by Goodrich to ensure the funds held by
BMT could not be misused. “David didn’t want us to become so valuable an asset
that it attracted a lot of attention and therefore would be in some ways
manipulated,” he says.
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In many ways a paranoid approach, but a refreshing one nonetheless – in fact,
the legacy of Goodrich infiltrates the entire organisation. BMT observes the
Combined Code, despite having no requirement to do so. “We followed the Combined
Code even though we’re not listed,” says McSweeney, describing the decision to
adopt it as “only right and proper”.
“It can be an intrusion, but we welcome it with open arms because, without it
and in the absence of a shareholder, how do you demonstrate to the world and,
more importantly, to the staff internally, that we have probity,” he asks. “We
have the checks and balances to make sure we don’t end up with our hands in the
till. This is a way of, if you like, self-imposed discipline.”
Taste for acquisition
But growth remains a major focus. McSweeney has presided over around 10
acquisitions while involved with BMT – either while at Baker Tilly or as FD –
and he describes the acquisition process as being reasonably straightforward.
“Up until now we’ve been a beacon and it’s how these things have snowballed,” he
says. “We’ve been a beacon for people that have known BMT in the industry, have
seen what it’s done and therefore we get a lot of direct approaches.”
Because of this, the company tends not to overpay for its targets.
McSweeney’s belief that small teams work better than large could be one of the
main reasons for this, because scientific, research-focused companies tend to
prefer to work independently. “One statistic, I think, is that with 70% of
acquisitions people wish they hadn’t done them – the reason being, because they
overpaid in the first place, so their expectations are never fulfilled in
relation to what they paid.”
But acquisitions for BMT, at least, will likely remain a core component of
its growth strategy and McSweeney is clear about the challenges that it
presents. “There’s a challenge for us, particularly within the main board that
we have to support the growth. But if you’re supporting the £100m to £150m as an
ambition of turnover, ideally you really do need assets of £50m to £70m on your
balance sheet to support those levels of projects.” Currently, BMT has net
assets of £51.6m, although this is reduced to just over £39m when its pension
deficit is taken into account.
Future growth is, however, particularly difficult to predict in BMT’s line of
work because a single large contract – such as the Royal Navy’s new aircraft
carriers – can have such a fundamental affect on the bottom line.
“The pipeline and flow of new projects coming on is what you’re beholden to,”
says McSweeney. “There’s little you can do to influence that other than try and
say you’ve got a competitive advantage.”
Expected to enter service in 2012 and 2015, the BMTdesigned HMS Queen
Elizabeth and HMS Prince of Wales will be three times larger than the UK’s
Invincible-class aircraft carriers and will have a top speed of 25 knots (almost
The vessels will be 265m in length and large enough to hold 600 ship crew and
600 aircraft crew and the hangars large enough to hold 20 aircraft. The hulls
are being designed for a 50-year service.
BMT is working with a consortium of contractors and defence specialists
including BAE Systems, Thales, EDS, QinetiQ and Rolls Royce.
The carriers will be the largest warships ever built for the Royal Navy.