Bodycote Plc · LSE:BOY
Bodycote — FY2023 Earnings Presentation
38 slides from Bodycote's earnings presentation, Mar 15, 2024
Slide 1: Annual Results 2023
Annual Results 2023 15 March 2024
Slide 2: Stephen Harris, Group Chief Executive
Stephen Harris Group Chief Executive
Slide 3: Introduction
Introduction ▪ Overview ▪ Financial Review ▪ Business Review ▪ Outlook 3
Slide 4: Another year of strong growth and margin progression
Another year of strong growth and margin progression Results ▪ Revenue up 8% to £802.5m. Revenue growth1 of 6% excluding energy- related surcharges ▪ Headline operating profit 17%1 higher at £127.6m ▪ Headline operating margin of 15.9%, up 80bps. 17.3% margin excluding energy surcharges, up 120 bps
Slide 5: Strategic progress
Strategic progress ▪ Strong revenue growth, led by strategic focus areas • Outperformance in Specialist Technologies (+12%1) versus Classical Heat Treatment (+4%1) • Delivered strong growth in Aerospace & Defence (+11%1) and medical (+24%1) markets • Major projects secured for electric vehicles (EV2
Slide 6: On track to achieve margins above 20%
On track to achieve margins above 20% 20% ▪ Headline operating margin excluding 19% surcharges 17.3%, +120 bps 18% 17% ▪ Higher volumes and continued mix 16% shift towards Specialist Technologies 15% ▪ AGI margins sustained above 14% historical peak levels1 13% 12% ▪ ADE margins +410bps1, including
Slide 7: Energy surcharges falling
Energy surcharges falling Energy surcharges as a % of revenue ▪ Successfully implemented surcharges from 10% early 2022 to protect against unprecedented energy price volatility ▪ Fully recovered energy costs in 2023 ▪ Surcharges have reduced from their peak in Q1 2023 as energy prices have fallen ▪
Slide 8: Strong progress on our ESG agenda
Strong progress on our ESG agenda Priority areas of our sustainability approach: Reduction in 2% Scope 1 & Scope 2 ▪ People: fostering a safe, healthy environment in CO2e emissions1 4% Reduction in energy consumption 1 which colleagues can thrive and support the delivery of our strategic priorities
Slide 9: Financial Review, Ben Fidler
Financial Review Ben Fidler Chief Financial Officer
Slide 10: 2023 results summary
2023 results summary Growth Growth £m 2023 2022 constant currency . Revenue 802.5 743.6 8% 8% Headline operating margin 15.9% 15.1% +80 bps Headline operating profit 127.6 112.2 17% 14% Revenue excluding surcharges 735.7 697.0 6% 6% Headline operating margin excl. surcharges 17.3% 16.1% +120 bps Hea
Slide 11: Revenue bridge
Revenue bridge £m 850 £806m £803m 800 £744m 19 66 (3) 67 ▪ Growth before surcharges 750 of 6%, led by Specialist 47 43 700 Technologies 650 ▪ Surcharges added £19m to 600 year-on-year revenue 740 736 growth; level is reducing as 550 697 energy prices fall 500 ▪ Modest FX translation 450 headwind of
Slide 12: Headline operating profit bridge
Headline operating profit bridge £m 160 140 18.0 - ▪ Non-recurrence of H1 2022 5.0 - 120 (4.3) (3.3) energy surcharge shortfall - 100 ▪ Other input costs successfully covered by price increases 80 60 130.9 127.6 ▪ Good profit contribution from 112.2 higher revenue and improved 40 efficiencies 20 ▪ S
Slide 13: AGI and ADE summary
AGI and ADE summary The AGI Business Focused on Automotive & General Industrial customers Growth constant £m 2023 2022 currency Revenue excl. surcharges 404.8 396.6 3% Revenue 447.0 430.9 4% Headline operating profit1 79.3 80.8 1% Headline operating margin2 20% 20% The ADE Business Focused on Aerosp
Slide 14: Cash flow
Cash flow £m 220 Headline EBITDA = £199m Headline EBITDA = £190m 200 ▪ Cash generation improved 180 Maintenance capex significantly, with free cash flow up 160 Depreciation & other Maintenance capex £39m to £123m Depreciation & other 140 Tax & Interest Working capital ▪ Driven by higher profit and a
Slide 15: Change to cash flow definition in 2024
Change to cash flow definition in 2024 ▪ Definitions of headline operating cash flow and free cash flow to change (from interim results 2024) to include expansionary capex ▪ Aligns with common market practice; free cash flow will better reflect the cash available for inorganic growth and shareholder
Slide 16: Disciplined capital allocation
Disciplined capital allocation Expansionary ▪ Year-end net cash position of capital expenditure £12.6m, improved from prior year net debt of £33.4m ▪ Pro forma net debt of c. £40m after acquisition of Lake City, completed Expansionary capital Supplemental on 19 January 2024 Ordinary Ordinarydividend
Slide 17: Technical Guidance
Technical Guidance Translational FX impact Based on current FX rates 2023 2024 Revenue impact £(3)m ~£(18)m Profit impact £(3.3)m ~£(4)m Finance costs & tax 2023 2024 P&L net finance charge £7.5m £10m - £12m P&L headline tax rate 22.5% ~23.5% Cash tax £9.0m ~£20m 17
Slide 18: Business Review, Stephen Harris
Business Review Stephen Harris Group Chief Executive
Slide 19: Bodycote's role in the transition to a low-carbon economy
Bodycote’s role in the transition to a low-carbon economy Providing essential parts for clean tech solutions of the future ▪ Wind, solar, wave and fuel Major enabler of avoided cell tech, hybrid & electric emissions (Scope 4) vehicles Services that Extending component Bodycote’s processing has a lif
Slide 20: Winning on carbon – a case study in Europe
Winning on carbon – a case study in Europe ▪ Major new multi-year contract won for hybrid vehicle driveline parts ▪ Avoided emissions – Scope 4 – a critical factor for our customer ▪ Using low pressure carburising (one of our Specialist Technologies) to achieve a lower environmental impact: ▪ 50% le
Slide 21: Good progress towards our SBTi target
Good progress towards our SBTi target Absolute energy consumption 1,450 ▪ 24% CO2e reduction achieved 1,404 versus 2019 1,400 ▪ On track to achieve SBTi target 1,350 notwithstanding growing revenues 1,300 ▪ Climate-related capital investment 1,250 projects gaining momentum 1,173 1,200 1,181 ▪ Absolu
Slide 22: Specialist Technologies outperform
Specialist Technologies outperform Revenue growth1 25% 15% ~10pp higher growth on average since 2018 5% -5% -15% -25% FY '18 FY '19 FY '20 FY '21 FY '22 FY '23 Specialist Technologies Classical Heat Treatment ▪ Superior organic growth in Specialist Technologies continues to be driven both by existin
Slide 23: Specialist Technologies
Specialist Technologies YoY Growth1 : 13% Revenue: £257m (32% of total revenue) YoY Growth1 excl. surcharges: 12% £m Revenue1 300 YoY Growth1 excluding surcharges 20% 250 +16% 15% Revenue Growth 200 +13% 150 10% £79m 100 £129m 5% 50 £25m +2% 0 £49m - Automotive Aero & Defence General Industrial (inc
Slide 24: Emerging Markets
Emerging Markets YoY Growth1 : 2% Revenue: £98m (12% of total revenue) YoY Growth1 excl. surcharges: 1% £m Revenue1 Revenue excluding surcharges by geography 100 80 China 60 40 Eastern Europe 20 Mexico - 2019 2020 2021 2022 2023 Surcharges ▪ Growth continues to be driven by Eastern Europe, up 5% exc
Slide 25: Aerospace & Defence
Aerospace & Defence YoY Growth1 : 15% Revenue: £214m (27% of total revenue) YoY Growth1 excl. surcharges: 11% Revenue1 Revenue excluding surcharges by geography £m 250 Rest of World 200 United Kingdom 150 100 North America 50 France - 2019 2020 2021 2022 2023 Surcharges ▪ Revenue growth led by civil
Slide 26: Automotive
Automotive YoY Growth1 : 6% Revenue: £195m (24% of total revenue) YoY Growth1 excl. surcharges: 5% £m Revenue1 Revenue excluding surcharges by geography 250 200 Emerging Markets North America 150 100 50 - 2019 2020 2021 2022 2023 Surcharges Western Europe ▪ Eastern Europe up 24% (excl. surcharges),
Slide 27: General Industrial
General Industrial YoY Growth1 : 6% Revenue: £394m (49% of total revenue) YoY Growth1 excl. surcharges: 4% £m Revenue1 Revenue excluding surcharges by segment 450 400 Oil & Gas Other 350 Industrial Gas Turbines 300 250 Renewables 200 Electronics Medical 150 100 Consumer 50 - Construction Industrial
Slide 28: Investing for future growth
Investing for future growth ▪ Over 80% of 2023 expansionary capex deployed in our 2023 expansionary capex £28m strategic focus areas of Specialist Technologies, Emerging Markets, civil aerospace and electric vehicles Other 16% ▪ US HIP capacity increased on East Coast and in the Midwest ▪ Nitriding,
Slide 29: Outlook
Outlook We will continue to deliver on our strategic focus areas in 2024, including driving growth in Specialist Technologies, capitalising on the growth opportunities from delivering carbon reductions for our customers, and integrating the newly acquired Lake City business. Despite macroeconomic un
Slide 30: Well positioned for the future
Well positioned for the future World’s leading provider of thermal processing services Diversified markets & structural growth opportunities % of FY 2023 Group revenue Expertise Breadth Low Carbon Aerospace & Defence Scale 27% General Industrial - covering >10 sub-sectors Wide range of Diversified e
Slide 31: Bodycote
Bodycote
Slide 32: Specialist Technologies
Specialist Hot Isostatic Pressing (HIP) Services Improves component integrity and strength by Technologies application of extreme pressure and heat HIP PF inc. Powdermet® Additive manufacturing of often complex components A selection of highly in conjunction with HIP differentiated, early- Specialty
Slide 33: Classical Heat Treatment
Classical Heat It provides wear resistance, strength or toughness depending on the application. Surface hardness can Treatment be controlled by diffusing elements such as carbon and nitrogen into the metal during the heating stages of the process. Classical Heat Treatment is an indispensable set of
Slide 34: 2023 Statutory income statement
2023 Statutory income statement £m 2023 2022 % change Revenue 802.5 743.6 8% Headline operating profit 127.6 112.2 14% Amortisation of acquired intangible assets (8.1) (9.3) (13)% Acquisition costs (0.3) (0.9) (67)% Operating profit 119.2 102.0 17% Net finance charge (7.5) (6.7) 12% Profit before ta
Slide 35: 2023 Cash flow
2023 Cash flow £m 2023 2022 Headline operating profit 127.6 112.2 Depreciation and amortisation 74.0 74.9 Other, including impairment and profit on disposal of PPE (2.7) 3.0 Headline EBITDA 198.9 190.1 Net maintenance capital expenditure (57.7) (52.2) Net working capital movement (1.7) (25.3) Headli
Slide 36: Financial information
Financial information B/S Currency 2023 2022 (at closing rates) EUR 1.15 1.13 USD 1.27 1.20 SEK 12.76 12.54 TRY 37.59 22.52 P&L Currency % of 2023 Revenue Profit 2023 2022 (at average rates) revenues sensitivity1 sensitivity1 EUR 1.15 1.17 37% ~£3m ~£0.6m USD 1.24 1.24 34% ~£3m ~£0.3m SEK 13.18 12.4
Slide 37: Net finance charge, balance sheet & tax
Net finance charge, balance sheet & tax Net finance charge £m 2023 2022 Interest on bank loans and overdrafts (2.7) (2.3) Interest on lease liabilities (2.7) (1.8) Other finance charges (2.9) (3.0) Total finance charge (8.3) (7.1) Total finance income 0.8 0.4 Net finance charge (7.5) (6.7) Key balan
Slide 38: Definitions
Definitions Term Definition Headline operating profit Operating profit before acquisition costs, exceptional items and amortisation of acquired intangibles Headline profit before tax Profit before tax, acquisition costs, exceptional items and amortisation of acquired intangibles Earnings before inte