Introduction Stephen Harris

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Thomas York
5 years ago
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2 Introduction Stephen Harris Group Chief Executive 2

3 Agenda Highlights Financial review Business review Summary and Outlook 3

4 Highlights Results 8.7% revenue growth to 368.0m 5% growth in headline operating profit to 70.m Return on sales improved to 9.0% (H 207:7.8%) EPS growth of 6% to 27.3p Free cash flow of 39.4m Developments 6m capex invested for future growth Specialist Technologies revenue growth of % Emerging Markets revenue growth of 22% Dividend Dividend 5.7p, increase of 8% 4 At constant currency

5 Financial review Dominique Yates Chief Financial Officer 5

6 H 208 Results summary m H H Growth Growth Constant currency Revenue % 8.7% Headline operating profit % 5% Headline operating margin 9.0% 7.8% Headline profit before tax % 6% Headline tax rate 24.5% 25.5% Net cash Headline EPS 27.3p 23.6p 6% Ordinary dividend 5.7p 5.3p 8% 6 At actual rates

7 Headline operating profit bridge m H 207 Price minus cost increases Sales volume and mix New facilities Share-based payments 3 2 H 208 constant currency Foreign exchange H 208 actual rates 7 Includes central costs 2 Facilities opened between Adjustments for share-based awards

8 Divisional summary The ADE Divisions The ADE divisions comprise 63 facilities primarily focused on Aerospace, Defence, and Energy customers m H H Growth Growth Constant currency Revenue % 8.8% Headline operating profit % 3% Headline operating margin 23.3% 22.6% The AGI Divisions The AGI divisions comprise 24 facilities primarily focused on Automotive and General Industrial customers m H H Growth Growth Constant currency Revenue % 8.6% Headline operating profit % 7% Headline operating margin 9.2% 7.6% 8 At actual rates

9 H 208 Sales and operating profit by currency 20% 00% 80% 60% 40% 20% 0% Revenue GBP 8% Other 9% EUR 39% USD 34% Headline operating profit Other 22% EUR 46% USD 32% Operating profit translation reduction of.m Average half year exchange rates :.4 and : $.37 Every cent change in the Euro is worth c. 0.5m of annual operating profit Every cent change in the US dollar is worth c. 0.3m of annual operating profit -20% 9 GBP profits nil due to central costs

10 Investing for future growth Investment of 6m (more than 50% of overall capex) to support future growth of the business Long cycle aero programmes - New aerospace facility in UK Specialist Technologies - S 3 P facilities opened in Germany and the USA - Additional HIP capacity due in Belgium in 208 and in the USA in Investment in HIP PF facility in the USA Emerging Markets - Additional LPC capacity for Mexico - New facilities in China, Eastern Europe and Mexico 0 For further information on our Specialist Technologies see slide 26

11 Revenue progression of recent facilities Revenue, m At constant currency start ups 207 start ups 206 start ups 205 start ups 204 start ups Beyond facilities opened since the beginning of m invested across these 2 facilities Typically revenues build over a 3 to 5 year period 205 start up represented one site that ramped up very quickly H 208 revenue has been annualized for the purposes of comparison

Cash flow Revenue, m 20 00 H 208 Headline EBITDA = 03m H 207 Headline EBITDA = 94m 80 Depreciation Capex Depreciation Capex 60 40 20 Headline Operating Profit Working Capital Tax, Interest & Other

12 Cash flow Revenue, m H 208 Headline EBITDA = 03m H 207 Headline EBITDA = 94m 80 Depreciation Capex Depreciation Capex Headline Operating Profit Working Capital Tax, Interest & Other Restructuring 39m free cash Headline Operating Profit Working Capital Tax, Interest & Other Restructuring 42m free cash 0 Sources of cash Uses of cash Sources of cash Uses of cash working capital outflow reflects m seasonal H movement on debtors and 7m outflow from annual bonus payments paid in H See slide 29 for detailed cash flow statement

13 Taxation and balance sheet Taxation Headline tax rate 24.5% Revised tax rate guidance; annual rate now not expected to exceed 24.5% Balance sheet Net cash 5.6m, after ordinary and special dividend payments of 7m Facilities: - Committed facility headroom of 20m at 30 June m revolving credit facility matures in

14 Business Review Stephen Harris Group Chief Executive 4

15 Revenue and growth analysis 300 by Technology by Sector by Geography Revenue, m Revenue growth, % 0.0% 8.0% 3.6% 20.0% 9.4% 9.0% 9.% 5.4% 22.2% Specialist Technologies Classical Heat Treatment Aerospace & defence Energy Automotive General Industrial Western Europe North America Emerging Markets 5 At constant currency

16 Aerospace & defence Revenue: 82m Constant currency growth: 3.6% Revenue, m At constant currency H2 H Civil aviation revenues up 3% New facility opens in September to support future UK growth New long-term agreements with Rolls-Royce and Safran Defence revenues returned to growth 6 At constant currency

Continued sequential improvement in North American onshore oil & gas Subsea

17 Energy Revenue: 3m Constant currency growth: 20.0% Revenue, m At constant currency H2 H Continued sequential improvement in North American onshore oil & gas Subsea revenues showing early signs of recovery Large frame industrial gas turbine (IGT) revenues down as previously indicated 7

18 Automotive Revenue: 0m Constant currency growth: 9.4% Revenue, m At constant currency H2 H Car & light truck revenue growth of 8% well ahead of market - Continuing to win positions on new platforms - Strong growth in Western Europe and Emerging Markets - LPC and S 3 P technologies strong contribution to growth Heavy truck, whilst a small contributor to automotive revenues, saw strong growth 8 At constant currency

19 General industrial Revenue: 45m Constant currency growth: 9.0% Revenue, m At constant currency H2 H Good growth across all key markets, led by Western Europe Secondary effect from increased demand from resources sector Specialist Technologies contributed 2.5% to overall sector growth 9 At constant currency

20 Specialist Technologies Revenue 86m revenue with % constant currency growth - Strong revenue growth from LPC & S 3 P in auto & GI market - HIP PF and Surface Technology both returned to growth as subsea revenue showed early signs of recovery - HIP Services growth held back by the decline in large frame IGT as previously indicated Continuing to invest ahead of customer demand to deliver revenue growth - LPC capacity expansion in Mexico - S 3 P new capacity in the USA - HIP capacity added in the UK and Belgium this year and in the USA for % Headline Operating Profit 39% Pace of adoption of Specialist Technologies increasing Specialist Technologies Classical Heat Treatment 20 For further information on our Specialist Technologies see slide 26

21 Classical Heat Treatment Revenue 282m revenue with 8% constant currency growth - Growth in all markets and regions - Automotive boosted by contract wins on new platforms - Continued improvement in oil and gas markets - General industrial growth well ahead of global industrial production growth Continuing to invest in capacity to support aerospace and Emerging Markets 77% Headline Operating Profit 6% Specialist Technologies Classical Heat Treatment 2 For further information on our Classical Heat Treatments see slide 27

22 Emerging Markets 8% of Group revenue, with growth of 22% Revenue growth in both China and Mexico over 30% Embedded future revenue growth as four new facilities ramp up Continued investment in LPC Revenue, m At constant currency H2 H At constant currency

23 Summary Revenue growth well ahead of the market; headline operating profit up 5% at constant currency Further improvement in return on sales to 9.0% Cash generation remains strong Results reflect long-term investments in long-cycle aerospace programmes, Specialist Technologies, Emerging Market capacity expansion and increasing rate of significant contract wins Looking ahead: More to come from recent initiatives (particularly auto and civil aviation) Investment opportunities in new and existing facilities, as well as inorganic growth opportunities Exciting future, in particular for Specialist Technologies and Emerging Markets 23

24 Outlook Bodycote has enjoyed a strong first half of 208. Robust growth has continued with double-digit revenue progression in Specialist Technologies, contract wins on automotive and aerospace programmes and excellent growth across the Emerging Markets. We continue to invest in the ongoing growth of the business through capital expenditure and increased resources. While our business, by its nature, has limited forward visibility, at current exchange rates, the Board expects that the full year result will be marginally ahead of current consensus. 24 Company compiled consensus forecast for headline operating profit is 35.3m

26 Specialist Technologies A set of differentiated processes giving customers the ability to produce unique high value adding products. HIP Services S 3 P (Specialty Stainless Steel Processes) HIP Product Fabrication (incl. Powdermet ) LPC (Low Pressure Carburising) Surface Technology CiD (Corr-i-Dur ) 26 Bodycote s position Significant barriers to entry Meaningful multi-year revenue growth potential Resourced for growth Overall strong margins and returns for Bodycote

Bodycote has well over 000 process lines

27 Classical Heat Treatment A group of mature processes which are essential for treating all metal components. These tightly controlled processes condition the material properties including both the core properties and the surface characteristics. Annealing Carburising Hardening & tempering Nitriding Metal joining Nitrocarburising 27 Bodycote s position Bodycote has well over 000 process lines in 23 countries throughout Europe, North America and Emerging Markets By far the largest global supplier

28 H 208 Statutory income statement m H 208 H 207 Revenue Headline operating profit Amortisation of acquired intangible fixed assets (.9) (2.3) Operating profit Net finance costs (.0) (.2) Profit before tax Headline earnings per share (pence) 27.3p 23.6p 28

29 H 208 Cash flow m H 208 H 207 Headline operating profit Add back: Depreciation and amortisation Impairment of fixed assets Share-based payments Profit on disposal of fixed assets - (0.) Headline EBITDA Net capital expenditure (3.0) (29.7) Net working capital movement (7.8) (4.5) Headline operating cash flow Restructuring (2.) (2.3) Operating cash flow Financing costs (0.9) (.2) Tax (.3) (4.3) Free cash flow Acquisition spend (.3) (5.2) Ordinary dividend (23.0) (20.5) Special dividend (47.5) - Other (.6) 0.2 (Reduction)/increase in net cash (34.0) 6.6 Net capex to depreciation ratio.0 times Closing net cash

30 Net finance charge/facilities m H 208 H 207 FY 207 Net interest payable Financing and bank charges Pension finance charge Net finance charge Committed facility headroom of 20m at 30 June 208, 20m drawn The remaining life of the facility is 3.8 years Closing net cash of 5.6m 30

31 Financial information Shares in issue H 208 H 207 Weighted average 90.5m 90.3m Exchange rates H 208 H 207 EUR Average (P&L).4.7 Closing (B/S).3.4 USD Average (P&L) Closing (B/S) SEK Average (P&L) Closing (B/S) Analysis by currency, H 208 Sales Operating profit EUR 39% 46% USD 34% 32% SEK 6% 6% 3

32 Divisional summary 207 H v H2 The ADE Divisions H H2 Total ADE Revenue Headline operating profit Margin 22.6% 24.5% 23.5% The AGI Divisions H H2 Total AGI Revenue Headline operating profit Margin 7.6% 8.0% 7.8% 32

33 Definitions Term Headline Operating Profit Headline Profit Before Tax Headline Operating Cash Flow Headline EBITDA Headline EPS Headline Operating Cash Conversion ROCE Capital Employed Definition Operating profit before exceptional costs and amortisation of acquired intangibles Profit before tax, exceptional costs and amortisation of acquired intangibles Cash generated by operations, less net capital expenditure and before cash flow relating to exceptional items Earnings before interest, tax, depreciation, amortisation, impairment of fixed assets, profit or loss on disposal of property, plant and equipment, cash flow relating to restructuring, acquisition costs and share-based payments Earnings per share excluding exceptional costs and tax on exceptional costs Headline operating cash flow divided by headline operating profit Headline operating profit divided by the average of opening and closing capital employed Net assets adjusted for net cash/(debt) 33

Introduction Stephen Harris

Introduction Stephen Harris Group Chief Executive 2 Agenda Highlights Financial review Business review Summary and Outlook 3 Highlights Results Highlights 14.9% growth in revenue (9.6% constant currency)