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CENTRAL SOUTH MID MARKET GROUND BREAKINGNOVEL
Central South mid market – looking to tomorrow?
Mid-market businesses have always relied on investment in innovation as one way to ensure they remain competitive, but in recent years we have seen innovation move higher up the board agenda as companies compete in ever-more global markets
As part of its Central South Mid Market focus, BDO has identified 20 companies that truly highlight the breadth of innovation taking place in the region. “This was challenging,“ explains James Tetley, tax director at BDO Southampton. “Not so much because innovation is hard to measure, but because the term ’innovation’ can encompass so many different things.
“Although it’s often easy to focus on the ’product’ aspect of innovation, it is important to also recognise the value of process innovation. Process changes that may appear from the outside to be a relatively simple improvement, development or adaptation can result in a genuinely innovative result. This equally applies to the use of new, environmentally-friendly
technologies to enable production processes to be more efficient.
In recent years, the Government has given clear signals that it intends to make the UK an ’Innovation Nation’, a global leader in the development and exploitation of intellectual property.
This has been reinforced through research and development tax credits and more recently the Patent Box tax regime, which rewards companies keeping IP within the UK with a 10% rate of corporation tax. This has made the UK tax landscape extremely attractive to inward investment and continued domestic investment.
BDO’s study of companies within the £10 million - £300m turnover bracket indicates that investment in R&D is not just a ’nice to have’ but an essential. Regardless of size – from small companies in a pre-revenue phase of R&D, through to large businesses with extensive product portfolios – there is recognition that innovation and strong growth is common to those at the forefront of their industry.
“When companies can potentially recover £33 for every £100 spent on research and development through the tax credit regime, and then halve their future tax rate through exploitation of a patent, in many respects investing in innovation is a highly cost-efficient way to achieve strong sustainable growth,“ adds Tetley.
BDO is highlighting the breadth of investment in innovation across the region in identifying its leading companies whose growth has been underpinned by a desire to innovate. John Burbedge of The Business Magazine asked two of these companies to share their views and experiences.
RIMOR ENGINEERING: ... exploring the boundaries of precision
Currently based on three sites near Waterlooville, Hampshire, Rimor Engineering manufactures and tests high- precision components and assemblies for the subsea oil and gas industry. Rimor is moving to purpose-built 70,000 sq ft premises in Portsmouth during 2015, enabling it to consolidate its workforce and double its manufacturing footprint.
Turnover: £18.3 million. Recent annual growth of 20% per annum
Staff: 110 – 40% manufacturing; 60% process and customer service support
History: Privately-owned company founded in 1979. June 2013: agreed MBO by MD Paul Mason and FD Scott Bushby, backed by LDC investment.
Why does Rimor constantly seek precision engineering perfection?
www.businessmag.co.uk
“The components and assemblies we produce have to operate faultlessly year upon year in arduous conditions up to 2.5 kilometres deep under the ocean,“ explains Mason.
Downtime costs serious money in the global subsea oil and gas industry. Also, quality-critical standards have been prioritised following extensive environmental damage caused by recent offshore disasters.
Rimor produces precision subsea components and assemblies using high-tech materials, but it also tests and integrates them to ensure they meet tolerances of heat, pressure and stress that are setting new boundaries within subsea applications. The reason, Mason explains, is that “most of the easy oil and gas has been extracted“ and Rimor is now helping major companies tackling deeper more challenging offshore sites.
“We are supplying innovative solutions that provide tangible benefits for our clients in a very pioneering industry.“
Demand continues to increase and the industry is set to grow 15% per annum over the next eight to 10 years, during which time Rimor turnover will top £40m, Mason predicts.
Rimor’s leading-edge engineering, assembly and test processes, while innovative and evolving to meet fresh industry challenges, also meets a host of ISO quality management standards. Through material resource planning and advanced Siemens NX software, Rimor can track, analyse and control its manufacturing throughput from raw materials to complete, fully-documented components and assemblies.
Assisted by BDO, Rimor ensures that it takes full advantage of tax allowances. Interestingly, Mason’s view is that: “R&D credits are nice to have, but they don’t drive decision-making.“ Government support for innovation, he adds, has recently “... gone off the radar.“
Rimor does not design products for its clients Continued ... THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – OCTOBER 2014
ENHANCING INCENTIVE
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