Inspiring trust for a more resilient world. The British Standards Institution Annual report and financial statements 2020 Through our unique combination of expertise, we share knowledge, innovation and best practice to help individuals and organizations realize their potential and embed resilience into their everyday business to the benefit of their communities. For over a century, we have been the business improvement company that forges consensus and advocates best practice to enable organizations to turn standards of best practice into habits of excellence. By Royal Charter In this report the ‘Company’ refers to The British Standards Institution, a Royal Charter Company, Companies House number ZC0202, which is the parent company for the financial statements. ‘BSI’, ‘BSI Group’ or ‘Group’ means the Company and its subsidiaries. The BSI logo, ‘Kitemark™’, the ‘Kitemark™’ device, ‘Supply Chain Solutions™’ and ‘Entropy Software™’ are registered trademarks of The British Standards Institution in the UK and are registered, or in the process of registration, in other jurisdictions. Throughout this report, the word ‘underlying’ is defined as ‘before exceptional items and excluding the effects of material disposals’. Strategic Report Corporate Governance Financial Statements Our purpose Strategic report 1 Our purpose 2 At a glance 4 Highlights of 2020 Inspiring trust 5 Chairman’s review 8 Our business model 10 Our strategy 12 Key performance indicators for a more 14 Chief Executive’s review 20 Business review 30 Principal risks and uncertainties 34 Sustainability overview 36 Sustainability review resilient world 40 Standards review 44 Financial review Corporate governance 49 Introduction by the Chairman 50 Board of Directors Our mission 52 Group Executive 54 Corporate governance report To share knowledge, innovation and best practice to help 57 Statement of Directors’ responsibilities in respect of the financial statements people and organizations realize their potential and make 58 Report of the Audit Committee excellence a habit. 61 Report of the Nominations Committee 63 Report of the Sustainability Committee 66 Directors’ remuneration report 80 Directors’ report Financial statements Consolidated financial statements 87 Independent auditors’ report 94 Consolidated income statement Our values 95 Consolidated statement of comprehensive income 96 Consolidated statement of changes in equity 97 Consolidated balance sheet Integrity Respect Expertise 98 Consolidated statement of cash flows 99 Notes to the consolidated financial statements Parent company financial statements 135 Parent company balance sheet 136 Parent company statement of changes in equity 137 Notes to the parent company financial statements Our excellence behaviours Client centric Agile Collaborative Annual report and financial statements 2020 The British Standards Institution 1 At a glance Our business is enabling others to perform better Imparting our global expertise worldwide BSI is an integrated global enterprise, able to serve clients from 84 offices in 32 countries across the world. Our clients range from globally recognized brands to small local companies in 195 countries across a range of industries. 55% 82% 81% 77,500 of the Fortune 500 of the FTSE 100 of the Nikkei 225 clients across a wide range of industries Over Over 35,700 142,000 223,000 100% standards offered to delegates trained days certifying of profit reinvested the market management systems in the business 2 The British Standards Institution Annual report and financial statements 2020 Strategic Report Corporate Governance Financial Statements Our markets and opportunities We provide a unique combination of complementary services and solutions, managed through four global business streams. Knowledge Assurance Services Regulatory Services Consulting Services The core of our business is the Independent assessment of the Independent assessment of To experience real long-term knowledge that we create and conformity of a process or product the conformity of a process or benefits, our clients need to ensure impart to our clients as services or to a particular standard provides product, in the Medical Devices ongoing compliance to standards, information solutions. We continue trust and ensures that our clients industry, to a particular standard regulations and best practice so to build our reputation, shaping perform in an excellent way. We ensures that our clients perform in that it becomes an embedded standards at national, regional train our clients in world-class an excellent way and that patients habit. We provide consultancy and international levels and implementation and auditing worldwide may receive the correct services and differentiated delivering standardization techniques to ensure they maximize level of medical care. management tools to facilitate services and technical assistance the benefits of our standards. this process. projects worldwide. Revenue Revenue Revenue Revenue £65.3m £263.0m £143.0m £68.0m 2019: £66.5m 2019: £283.0m 2019: £119.4m 2019: £79.2m Read more on pages 20 and 21 Read more on pages 22 and 23 Read more on pages 24 and 25 Read more on pages 26 and 27 Our sectors We operate across many sectors but focus on our areas of specialization. Healthcare Food and Retail Built Environment Aerospace and Automotive For some years we have We provide food-specific Our Built Environment expertise is We have a long history of been market leaders in the certification solutions for our based on many years of working leadership in the assurance of certification of medical clients in this expanding sector with the construction industry to the Aerospace and Automotive device systems and products. as well as satisfying their general develop and implement standards. industries and continue to We have complemented this with requirements, led by our Food We are at the forefront of smart consolidate our position as they training courses and standards Centre of Excellence. This expertise city developments and the develop new requirements to face development and are expanding continues through the retail globalization of Building their future challenges. our offering into pharmaceuticals supply chain. Information Modelling (BIM). and hospital services. Read more about our focus sectors on pages 28 and 29 Annual report and financial statements 2020 The British Standards Institution 3 Highlights of 2020 Resilience in unprecedented circumstances • Strong global performance Revenue Underlying operating profit despite impact of Covid-19 £539.3m £67.4m • Revenue just 2% below 2019 -2% +16% record level 2019: £548.1m 2019: £58.3m • Solid delivery of underlying operating profit Operating profit Cash and deposits • The implementation of our £67.4m £132.1m strategy continues as planned +23% +55% 2019: £54.7m 2019: £85.1m Net asset value Average headcount £249.3m 5,237 +20% +3% 2019: £207.4m 2019: 5,089 4 The British Standards Institution Annual report and financial statements 2020 Strategic Report Corporate Governance Financial Statements Chairman’s review Inspiring trust for a more resilient world 2020 definitely did not turn out for BSI the way innovation and best practice to help people and I had expected when I was writing my statement organizations realize their potential and make for last year’s Annual Report. The onset of excellence a habit’. This purpose and mission Covid-19 and the resulting lockdowns in our major provide the platform upon which we manage markets brought new challenges for our business, our business on a day-to-day basis, in line with amongst which was the profound sadness as three the agreed five-year strategy. We run our of our team fell victim to the pandemic. We offered business by means of four global business our support to their families and colleagues, but streams. This structure was seriously tested by this will never remove the sense of loss. the disrupted market conditions during 2020, The pandemic changed almost everything about and each business stream was impacted in a the way we go about our business although it different way but, once again, the changed nothing about the importance of our complementarity and hedging between the work – to our clients, our people and the world streams vindicated the structure and ensured at large. I am very pleased to report that our that, as a whole, BSI weathered the storm management, led by the Chief Executive and the better than many others. Our structure reflects Group Executive team, responded quickly and our increasing requirement to provide a wide effectively to the situation, innovating new range of services and solutions to our clients on solutions in order to ensure the provision of our a global basis. Local delivery from our extensive services to our clients throughout the year. The network of offices will ensure that all clients, John Hirst, Chairman result of these actions was that we are able to regardless of location or size, will continue to report impressively strong financial results for benefit from the high level of service we aim to 2020, the 119th year in the history of this great deliver. Institution. Revenues are only marginally below their record levels of 2019, but profits and There is no doubt that the overriding factor year-end cash are at their highest level ever, influencing the global economy during 2020 thanks to prudent cost and investment was the Covid-19 pandemic. This adversely management, a higher proportion of remote impacted both the supply and demand sides of “ The onset of delivery of services, and a real focus on the economy and devastated some industries. supporting our clients. This response confirmed We can only speculate at the long-term effects Covid-19 and the my early impressions of BSI as a well-run, of the pandemic on employment, how long the resilient business with huge potential. I hope world will take to recover and the structural resulting that 2021 will bring progressively calmer waters changes that will inevitably ensue. But, of for everyone, although I am convinced that BSI course, there were other important world lockdowns in our will face the future with confidence however it events which have changed the world in which plays out.