Bodycote Plc · LSE:BOY
Bodycote — FY2007 Earnings Presentation
34 slides from Bodycote's earnings presentation, 2008
Slide 1: 2007 Preliminary Results
2007 PRELIMINARY RESULTS Bodycote
Slide 2: Highlights
Highlights z Revenue £641m +15% z Organic Sales Growth 2 £49m +9% z Headline Operating Profit 1 £91m +15% z ROCE 1 11.3% 50bps z Testing Sales Growth £31m +21% z 11 bolt - on Acquisitions (Forecast 2008 Sales) £29m z Outsourcing Revenues increase +£18m 2006 Preliminary results 2 1 Pre exceptional it
Slide 3: Financial Highlights
Financial Highlights CAGR Sales 1 9% Headline Operating Profit 2 CAGR 22% 91.3 640.5 79.7 558.6 67.8 448.4 457.2 472.4 53.1 £m £m 41.7 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 Headline Profit Before Tax 3 CAGR CAGR Headline earnings Per Share 4 22% 26% 25.00 20.3 81.0 17.3 70.0 20.00 58.8 1
Slide 4: Key Performance Indicators financial
Key Performance Indicators financial ROCE 1 Return on sales 2 Target: Mid teens% Target: High teens% 0 11.3% 0 10.8% 14.4% 14.3% 14.3% 9.9% 0 0 11.6% 0 0 7.6% 0 9.3% 0 5.5% 0 0 0 0 0 0 0 0 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 Organic sales growth 3 People costs as a percentage of sales
Slide 5: Preliminary Results
Preliminary Results 2007 2006 Change £m £m % Revenue 640.5 558.6 +15 EBITDA 1 141.4 125.1 +13 Headline Operating Profit 1 91.3 79.7 +15 Operating Profit 78.8 58.8 +34 Headline Profit Before Tax 2 81.0 70.0 +16 Headline EPS 3 20.3p 17.3p +17 Dividend/Share 8.0p 7.0p +14 2006 Preliminary results 1 Pre
Slide 6: Profit Bridge – Heat Treatment
Profit Bridge – Heat Treatment (£m) 75.0 + 11.2 - 8.9 70.0 65.0 - 1.2 + 2.7 - 0.9 - 0.8 + 9.2 60.0 55.0 50.0 45.0 40.0 35.0 61.6 30.0 50.3 25.0 20.0 15.0 10.0 OP 2006 Price increases Volum e grow th C ost increases Greenfield sites Acquisitions Ionbond exchange OP 2007 Foreign 2006 Preliminary resul
Slide 7: Profit Bridge - HIP
Profit Bridge - HIP (£m) + 3.3 - 0.8 - 0.7 15.0 + 0.8 10.0 15.4 12.8 5.0 0.0 OP 2006 Price increases Volume growth Cost increases exchange OP 2007 Foreign 2006 Preliminary results 7 6 2007 Preliminary results Operating Profit is stated pre exceptional items and interest and tax on associates.
Slide 8: Profit Bridge - Testing
Profit Bridge - Testing (£m) + 1.0 - 4.4 + 3.6 25.0 + 2.7 -1.3 - 0.7 - 1.2 20.0 15.0 10.0 21.3 21.0 5.0 0.0 OP 2006 Price increases Volume grow th C ost increases Greenfield sites Acquisitions Infrastructure exchange OP 2007 Foreign 2006 Preliminary results 8 7 2007 Preliminary results Operating Pro
Slide 9: Sales and Operating Profit - By Region
Sales and Operating Profit - By Region 2006 2007 EMEA Americas Asia Pacific £m Sales £m £m £m £m 375.0 Heat Treatment 421.7 295.4 125.1 1.2 38.9 Hot Isostatic Pressing 43.5 21.6 21.9 - 413.9 Thermal Processing 465.2 317.0 147.0 1.2 99.6 Testing MEM * 124.4 80.3 42.2 1.9 45.1 Testing HSE ** 50.9 24.7
Slide 10: YoY Change in Sales / Operating Margins
YoY Change in Sales / Operating Margins Americas Asia YoY Change in Sales 1&3 TOTAL % Organic% EMEA % Organic% % Organic% Pacific % Organic% Heat Treatment 14 8 15 10 12 2 - - Hot Isostatic Pressing 17 17 28 28 9 9 - - Thermal Processing 15 9 16 11 11 3 - - Testing MEM 29 13 26 14 33 9 72 36 Testing
Slide 11: Sales By Market
Sales By Market 2007 2006 YoY Change Sector % % in Sales % z Aerospace/Defence 20 20 +15 z Automotive - Cars & Light Truck 19 20 +10 - Heavy Truck & Bus 5 5 +14 z Construction, Agricultural, Railways & Marine 18 16 +29 z Oil & Gas 7 7 +17 z Tooling 7 8 +6 z Medical/Health Science & Environmental 7 7
Slide 12: Profit Reconciliation
Profit Reconciliation 2007 2006 Change £m £m % Headline Profit Before Tax 1 81.0 70.0 +16 Amortisation/impairment of acquired intangible fixed assets (1.9) (1.0) Impairment of goodwill (7.2) (6.0) Impairment of investment in associate - (8.3) Major facility closure costs (5.4) (5.0) Change to pensio
Slide 13: Summary Cash Flow and Financial Ratios
Summary Cash Flow and Financial Ratios 2007 2006 £m £m EBITDA 1 141.4 125.1 Non-cash movements 2.3 1.5 Working capital movement (20.4) (9.0) Net capital expenditure (66.9) (55.4) Settlement of derivative financial instruments 0.7 - Interest (9.1) (12.8) Tax (16.0) (8.4) Free Cash Flow 32.0 41.0 Net
Slide 14: Balance Sheet
Balance Sheet 2007 2006 £m £m Goodwill 213.0 201.9 Tangible and intangible fixed assets 523.2 458.8 Investments 0.6 1.2 Trading working capital 97.5 79.0 Other net assets / (liabilities) (139.5) (126.1) Net assets before borrowings 694.8 614.8 Shareholders' funds 490.0 449.5 Minority interests 6.6 4
Slide 15: Heat Treatment
Heat Treatment Revenue 1 (£m) • Sales + 14% 1 500 429.2 450 375.0 400 349.2 • Operating margin1 14.5% 350 320.9 328.7 300 250 200 • Utilisation 74% 150 100 50 • Cost increases recovered 0 2003 2004 2005 2006 2007 % • Outsourcing continues growth Operating Profit - Margins 1 £m 70 25 62.4 60 • Techno
Slide 16: Hot Isostatic Pressing
Hot Isostatic Pressing Revenue 1 (£m) • Sales1 + 17% 50 45.5 45 38.9 40 35.2 • Operating margin1 35.4% 35 32.1 30 27.6 25 20 • ROCE > 20% 15 10 5 0 • Utilisation 71% 2003 2004 2005 2006 2007 % Operating Profit - Margins 1 • Additional capacity £m 18 16.1 16 50 14 12.8 • New applications 12 40 9.5 10
Slide 17: Testing MEM
Testing MEM Revenue 1 (£m) 140 128.2 120 • Sales1 + 28.7% 99.6 100 80 64.0 • Operating margin1 13.7% 60 50.4 54.1 40 20 • Strong organic growth 13% 0 2003 2004 2005 2006 2007 • Emerging market presence % Operating Profit - Margins 1 £m 20 25 17.6 • Integrating acquisitions 18 16 14.3 20 14 13.0 10.9
Slide 18: Testing HSE
Testing HSE Revenue 1 (£m) • Sales +15% 1 60 51.9 50 45.1 • Operating margin 7.9% 1 40 30 22.5 • Pricing pressure in 20 10.8 11.5 environmental & food 10 0 2003 2004 2005 2006 2007 • Lab rationalisation in Canada % Operating Profit - Margins 1 £m 8 20 • Emerging markets 7.0 18 16 6 14 4.1 12 • Focus
Slide 19: Delivering the Strategy
Delivering the Strategy • Increase importance of Testing • Expand the Group into developing manufacturing economies • Add high added value processes to Thermal Processing • Intensify outsourcing initiatives 2006 Preliminary results 19 18 2007 Preliminary results
Slide 20: Current Trading and Prospects
Current Trading and Prospects • January results in line with our expectations • Aerospace, power generation, oil & gas continue to grow • Automotive gaining share • Energy costs steady • Outsourcing initiatives continue to deliver growth • Pipeline of bolt-on acquisitions • Confident in prospects fo
Slide 21: Appendix
2007 PRELIMINARY RESULTS Appendix
Slide 22: Key Performance Indicators non financial
Key Performance Indicators non financial Utilisation Heat Treatment 6 Utilisation HIP 6 Target: >80% 1 Target: >80% 75% 1 71% 74% 70% 1 1 66% 72% 58% 1 71% 1 1 1 1 67% 0 1 64% 0 1 0 1 1 0 1 0 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 Iso 14001/17025 compliant facilities 7 Accident frequency
Slide 23: Analysis Of Organic/Acquisition Growth
Analysis Of Organic/Acquisition Growth Testing Head HT HIP MEM HSE Office Total Sales £m £m £m £m £m £m 2006 375.0 38.9 99.6 45.1 - 558.6 Organic 1 29.0 6.6 12.9 0.9 - 49.4 Closed sites (7.1) '- '- '- '- (7.1) Acquisition 32.3 '- 15.7 5.9 - 53.9 Currency (7.5) (2.0) (3.8) (1.0) - (14.3) 2007 421.7 4
Slide 24: Taxation
Taxation 2007 2006 £m £m Headline profit before tax 1 81.0 70.0 Exceptional items (12.5) (23.4) Profit before taxation 68.5 46.6 Current taxation 2 22.6 16.6 Tax effect of exceptionl items (7.9) (2.7) Exceptional tax settlements in respect of prior years - (11.2) Total tax charge (credit) 14.7 2.7 P
Slide 25: Operational Locations
Operational Locations Heat Treatment HIP Testing Total USA 39 4 18 61 UK 18 3 33 54 France 33 1 0 34 Sweden 11 1 11 23 Germany 20 1 1 22 Canada 2 0 17 19 Brazil 6 0 1 7 Finland 5 0 2 7 Netherlands 5 0 2 7 UAE 1 0 6 7 Czech Republic 5 0 1 6 Italy 4 0 2 6 Poland 6 0 0 6 Turkey 6 0 0 6 Belgium 2 1 2 5
Slide 26: End Market Demand
End Market Demand Gas Turbine Orders Boeing & Airbus Deliveries (GW) 120 5 1,200 100 9 5 1,000 8 5 80 4 530 10 800 515 294 485 12 325 60 311 450 600 434 10 12 303 4 12 14 378 40 83 320 4 305 18 4 4 400 11 10 56 13 10 10 620 13 597 4 527 549 9 491 478 20 15 4 9 10 9 9 441 31 4 200 381 398 5 8 281 285
Slide 27: Light Vehicle assembly ('000 Units)
Light Vehicle assembly (‘000 Units) North America Western Europe 25,000 25,000 20,000 20,000 15,000 15,000 10,000 10,000 5,000 5,000 0 2004 2005 2006 2007 2008 2009 2010 0 2004 2005 2006 2007 2008 2009 2010 Eastern Europe Asia Pacific 25,000 25,000 20,000 20,000 15,000 15,000 10,000 10,000 5,000 5,0
Slide 28: Emerging Markets
Emerging Markets Emerging markets as a % of group sales 9.1% 10.0% 4.6% 5.0% 3.4% 2.5% 2.8% 0.0% 2003 2004 2005 2006 2007 2006 Preliminary results 28 26 2007 Preliminary results
Slide 29: Emerging Markets Sales
Emerging Markets Sales 2003 2004 2005 2006 2007 £m £m £m £m £m Eastern Europe 4.5 5.0 8.6 11.8 19.4 South America 2.7 1.9 - 3.2 22.9 Asia Pacific - - - - 1.2 Heat Treatment 7.2 6.9 8.6 15.0 43.5 Eastern Europe 0.4 0.7 0.9 1.1 1.4 Middle East 3.8 5.0 6.5 9.7 13.4 Asia Pacific - - - 0.1 0.3 Testing 4.
Slide 30: Impact Of Exchange Rates
Impact Of Exchange Rates Sales Operating Profit 1 £m £m 2007 As Reported 640.5 91.3 2007 Using 2006 Rates 654.8 93.5 Impact (14.3) (2.2) 2006 Preliminary results 30 28 2007 Preliminary results 1 Pre exceptional items and interest and tax on associates.
Slide 31: Acquisitions, Capital Expenditure & Depreciation
Acquisitions, Capital Expenditure & Depreciation Acquisitions 86 Net Capital Expenditure 67 Depreciation 55 50 46 44 44 45 38 41 34 32 33 £m 10 3 2003 2004 2005 2006 2007 2006 Preliminary 5 results 0.8x Capex/Dep 0.8x 1.1x 1.2x 1.3 x 31 29 2007 Preliminary results 5 see definitions Appendix page 31.
Slide 32: Financial Highlights
Financial Highlights CAGR EBITDA 1 Operating margins 1 13% 14.4 14.3 14.3 141.4 11.6 125.1 109.0 9.3 97.1 87.4 £m % 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 ROCE 1 CAGR Dividend Per Share 2 9% 11.3 8.00 10.8 9.9 7.00 % 6.40 7.6 6.10 5.70 5.5 Pence 2003 2006 Preliminary 2004 results 2005 200
Slide 33: Key performance indicators definitions
Key performance indicators definitions 1. Headline operating profit as a percentage of average capital employed. Capital employed includes tangibles and intangibles assets including all previously amortised/impaired goodwill and all non interests bearing assets and liabilities. Headline operating pr
Slide 34: Slide 34