Bodycote Plc · LSE:BOY
Bodycote — Investor Day (December 2024)
87 slides from Bodycote's investor day presentation, Dec 12, 2024
Slide 1: Capital Markets Event 2024
BODYCOTE OPTIMISE, PERFORM, GROW Capital Markets Event 12th December 2024
Slide 2: Disclaimer
Disclaimer Bodycote plc (the ‘Group’) is providing the following cautionary statement: this presentation has been prepared solely to provide additional information to shareholders to assess the Group’s strategies and the potential for those strategies to succeed. The presentation should not be relie
Slide 3: Today's Agenda
Today’s Agenda 15.15 - break 14.00 14.10 15.00 15.30 15.45 16.00 16.20 INTRO & STRATEGIC OPPORTUNITY DEEP DIVE DEEP DIVE DEEP DIVE STRONG SUMMARY STRATEGY FINANCIAL & Q&A Optimise Specialist Precision Heat Sustainability RETURNS Perform Technologies Treatment as an accelerator Grow JIM JIM THOMAS RI
Slide 4: Intro & Strategy
Bodycote plc Capital Markets Event 2024 INTRO & STRATEGY JIM FAIRBAIRN Bodycote plc Capital Markets Event 2024 4
Slide 5: Key messages
01 INTRO & STRATEGY Key messages 01 1. We are creating two leading, well-positioned divisional platforms 02 2. We have a clear strategy to drive faster growth and improve margins 03 3. We have an attractive set of targets to deliver value for shareholders 4. The right team is in place to deliver our
Slide 6: Our strategy
01 INTRO & STRATEGY Our strategy Two strong platforms with Specialist Technologies Precision Heat Treatment defined focus areas ▪ Highly differentiated processes ▪ Clear market leader ▪ Leading technology positions ▪ Global scale & network ▪ Growing addressable market ▪ Deep customer partnerships Ma
Slide 7: Our targets
01 INTRO & STRATEGY Our targets …our strategy supports delivery of a compelling set of targets Strong growth Improved mix Higher margins Attractive returns Converting to cash Mid-single-digit 35-40% >20% 15-20% 80-90% total annual revenue of revenue from operating margins return on capital operating
Slide 8: The right team to deliver
01 INTRO & STRATEGY The right team to deliver JIM FAIRBAIRN THOMAS OURY RICK LLOPE LILY HEINEMANN MICHELA FUSCO Chief Executive Officer Specialist Technologies PHT Automotive & Industrials Chief Sustainability Officer Chief Marketing Officer Joined March 2024 P Joined April 2019 P Joined January 202
Slide 9: Strategic Opportunity
Bodycote plc Capital Markets Event 2024 STRATEGIC OPPORTUNITY JIM FAIRBAIRN Bodycote plc Capital Markets Event 2024 9
Slide 10: We provide cutting-edge material science solutions
02 STRATEGIC OPPORTUNITY We provide cutting-edge material science solutions Without our services, ▪ One blade generates as much horsepower as a Formula One race car a jet engine high-pressure turbine blade would not ▪ Blades operate in a very extreme environment, with temperatures above the melting
Slide 11: World leader in performance metallurgy
02 STRATEGIC OPPORTUNITY World leader in performance metallurgy Specialist Technologies Precision Heat Treatment £803m 15.9% Advanced, differentiated Precisely controlled heating processes to improve and cooling to achieve product strength, desired metallurgical performance & durability properties R
Slide 12: Attractive exposure
02 STRATEGIC OPPORTUNITY Attractive exposure TECHNOLOGIES END MARKETS ▪ Specialist Technologies ▪ Diversified exposure to a broad range of end markets – Differentiated set of high growth processes with different cycles, providing resilience – High barriers to entry and technical know-how ▪ Structura
Slide 13: Set apart by clear differentiators
02 STRATEGIC OPPORTUNITY Set apart by clear differentiators Global & Local Fully Accredited Technology Leader Expert Knowledge ▪ Global partner to ▪ Certifications for critical ▪ Broadest process offering ▪ Unrivalled metallurgy international customers industries & approved expertise supplier with k
Slide 14: Our path to growth
02 STRATEGIC OPPORTUNITY Our path to growth We have access to multiple avenues for growth in a large and growing market Market growth 1 ~£30bn ▪ Underlying end market growth, including structural growth markets (e.g. Aerospace) Total Market (Including in-house processing) Increasing product requirem
Slide 15: Significant margin potential
02 STRATEGIC OPPORTUNITY Significant margin potential MARGINS IMPROVING POST-COVID SIGNIFICANT VARIABILITY ACROSS SITES Operating Margin (%) Specialist Technologies 24 Precision Heat Treatment 22 >20% margins by 2028 20 18 Operating Margin (FY24E) 16 14 12 10 8 6 2013 2014 2015 2016 2017 2018 2019 2
Slide 16: Clear opportunity to create value
02 STRATEGIC OPPORTUNITY Clear opportunity to create value Today: Mid Term: Solid foundations Significant value creation Performance ▪ Operating margins of ~16% (FY 2023) ▪ Mid-single-digit revenue growth through the cycle ▪ ~30% of revenue from Specialist ▪ Operating margins >20% by 2028 and attrac
Slide 17: Optimise
Bodycote plc Capital Markets Event 2024 OPTIMISE JIM FAIRBAIRN Bodycote plc Capital Markets Event 2024 17
Slide 18: New Core divisional structure
02 STRATEGIC OPPORTUNITY - Optimise New Core divisional structure Greater accountability and strategic alignment as we drive execution through two new platforms Specialist Technologies Precision Heat Treatment ▪ Concentrated Specialist Technologies division ▪ High-quality heat treatment platform ▪ A
Slide 19: Portfolio review
02 STRATEGIC OPPORTUNITY - Optimise Portfolio review Two key criteria underpin our plant portfolio review STRUCTURAL QUALITY FINANCIAL PERFORMANCE ▪ Complexity of process & application criticality ▪ Growth ▪ Operating margins ▪ Return on capital ▪ Local demand outlook & competitive intensity Quality
Slide 20: Providing clear outcomes
02 STRATEGIC OPPORTUNITY - Optimise Providing clear outcomes Plant-by-plant review results in a clear set of implications for the portfolio Bodycote revenue mix* NURTURE INVEST ▪ Vast majority of sites deliver attractive returns ▪ Focus on cash generation from nurture sites ▪ Investment for growth i
Slide 21: Optimising our footprint
02 STRATEGIC OPPORTUNITY - Optimise Optimising our footprint Optimisation programme to exit non-core sites and accelerate improvement of ‘fix’ sites NURTURE INVEST ▪ Will deliver a £12-14m operating profit benefit and a >200bps margin improvement, reflecting: – Removal of non-core capacity – Portion
Slide 22: Perform
Bodycote plc Capital Markets Event 2024 PERFORM JIM FAIRBAIRN Bodycote plc Capital Markets Event 2024 22
Slide 23: Delivering performance excellence
03 STRATEGIC OPPORTUNITY - Perform NURTURE INVEST Delivering performance excellence NON-CORE FIX ▪ Operational performance enables growth, improves margins, and reduces our carbon intensity ▪ Pockets of excellence exist today but performance is varied ▪ Room for substantial improvement in fix sites
Slide 24: Performance framework
03 STRATEGIC OPPORTUNITY - Perform Performance framework ▪ Pockets of excellence across our ~155 operating plants, but a lack of consistency and sharing ▪ HEAT framework is designed to take the best of Bodycote and embed it across the Group H High performance culture Customer experience E Enhanced s
Slide 25: HEAT – driving performance: High performance culture
03 STRATEGIC OPPORTUNITY - Perform HEAT – driving performance H High performance culture Bodycote Today Levers Key internal KPIs ▪ Highly engaged local site teams Simple steps to create a winning team ▪ Employee engagement ▪ Lack of interdivisional ▪ Employee retention collaboration 01 Right people
Slide 26: HEAT – driving performance: Enhanced service quality
03 STRATEGIC OPPORTUNITY - Perform HEAT – driving performance E Enhanced service quality Bodycote Today Levers Key internal KPIs Clear customer feedback: Commercial: ▪ Turnaround time ▪ Highly regarded on quality, ▪ Customer segmentation & mapping ▪ Utilisation reliability and technical support ▪ Eq
Slide 27: HEAT – driving performance: Agile cost base
03 STRATEGIC OPPORTUNITY - Perform HEAT – driving performance A Agile cost base Bodycote Today Levers Key internal KPIs Average site cost base Further enhancing Bodycote’s ▪ Operational gearing performance FY 2023 low cost and agile DNA ▪ Cost benchmarking (including labour efficiency) ~20% Other ▪
Slide 28: HEAT – driving performance: Transitioning to a sustainable future
03 STRATEGIC OPPORTUNITY - Perform HEAT – driving performance T Transitioning to a sustainable future Bodycote Today Levers Key internal KPIs Falling energy consumption Multiple avenues to continue driving energy efficiency ▪ Energy intensity (sales/kWh) Total kWh ▪ Absolute CO2 reduction Furnace ma
Slide 29: Delivering performance excellence
03 STRATEGIC OPPORTUNITY - Perform Delivering performance excellence H ▪ Employee engagement High ▪ Employee retention Company Impact performance culture ▪ Support enhanced growth & ▪ Training & development improved margins E ▪ Execution rigour ▪ Turnaround time Enhanced ▪ Utilisation service qualit
Slide 30: Grow
Bodycote plc Capital Markets Event 2024 GROW JIM FAIRBAIRN Bodycote plc Capital Markets Event 2024 30
Slide 31: Driving accelerated, profitable growth
04 STRATEGIC OPPORTUNITY - Grow Driving accelerated, profitable growth 01 Target high growth areas ~65% of our business is in areas with faster growth potential, with above-average margins Enabled by: End Markets Processes Geographies Growth investment rigorous capital allocation Focus on end market
Slide 32: Clear end market approach
04 STRATEGIC OPPORTUNITY - Grow Target high-growth, high-margin areas Clear end market approach End markets Processes Geographies Focus on further developing our significant exposure to structural growth end markets (Aerospace & Defence, Power Generation, attractive niches) Consumer, Medical & Other
Slide 33: Aerospace & Defence
04 STRATEGIC OPPORTUNITY - Grow Target high-growth, high-margin areas Aerospace & Defence End markets Processes Geographies Diverse Aerospace & Defence exposure with strong position in aero engines Embedded across the supply chain We treat parts throughout the supply chain of an aircraft, and beyond
Slide 34: Power Generation
04 STRATEGIC OPPORTUNITY - Grow Target high-growth, high-margin areas Power Generation End markets Processes Geographies We service parts across a range of PowerGen applications Industrial Gas Turbines Renewables Nuclear End customers HIP of cast vanes and blades, Thermal processing of wind turbine
Slide 35: High-tech niches
04 STRATEGIC OPPORTUNITY - Grow Target high-growth, high-margin areas High-tech niches End markets Processes Geographies Medical equipment Semiconductors Body Artificial Joints Chip production Surgical Tools End customers Lamp Housings End customers & Dental Implants equipment Hot Isostatic Pressing
Slide 36: Automotive
04 STRATEGIC OPPORTUNITY - Grow Target high-growth, high-margin areas Automotive End markets Processes Geographies …and are well positioned to handle We have a diversified Automotive exposure… the powertrain transition ▪ Broad exposure: drivetrain and ICE & Hybrid vehicle agnostic parts ▪ ~2% growth
Slide 37: Industrial Markets
04 STRATEGIC OPPORTUNITY - Grow Target high-growth, high-margin areas Industrial Markets End markets Processes Geographies Wide range of end market applications End customers & applications ▪ Focus on components for machining, machinery and tooling used across a wide range of industries ▪ Significan
Slide 38: Driving process adoption
04 STRATEGIC OPPORTUNITY - Grow Target high-growth, high-margin areas Driving process adoption End markets Processes Geographies Increasing demands on product performance are driving adoption of Specialist Technologies and advanced heat treatment processes Specialist Technologies Precision Heat Trea
Slide 39: Geographic expansion
04 STRATEGIC OPPORTUNITY - Grow Target high-growth, high-margin areas Geographic expansion End markets Processes Geographies Today: Emerging Markets Strong positions in a selected number of emerging markets HY 2024 North America Group Western Europe Revenue Developed markets Current Emerging Markets
Slide 40: Accelerating our trajectory
04 STRATEGIC OPPORTUNITY - Grow Accelerating our trajectory 01 Target high growth areas ~65% of our business is in areas with faster growth potential, with above-average margins End Markets Processes Geographies Focus on end markets with Drive adoption of Specialist Capture faster GDP growth long te
Slide 41: Deep Dive: Specialist Technologies
Bodycote plc Capital Markets Event 2024 DEEP DIVE SPECIALIST TECHNOLOGIES THOMAS OURY Bodycote plc Capital Markets Event 2024 41
Slide 42: The world leader in Specialist Technologies
05 DEEP DIVE: Specialist Technologies The world leader in Specialist Technologies 3 BUSINESSES REVENUE BY PROCESSES & END MARKETS FY 2023 HIP Surface Technology S3P Hot Isostatic Pressing Specialist Stainless Steel Surface Technology (ST) (HIP) Processes (S3P) Aerospace & Defence 36% Automotive 9% £
Slide 43: An attractive, resilient and growing business
05 DEEP DIVE: Specialist Technologies An attractive, resilient and growing business Specialist Technologies continue to build as a share of Group revenue…. 2008 2018 2024 (HY) ~10% ~20% ~30% …delivering a substantial, proven growth premium… …with margins around 30% Annual constant currency revenue g
Slide 44: Hot Isostatic Pressing (HIP)
05 DEEP DIVE: Specialist Technologies Hot Isostatic Pressing (HIP) What is HIP? Very high-pressure gas at elevated temperature is used to consolidate material and remove internal defects such as porosity and microcracks HOT ISOSTATIC PRESSING Up to 2,000°C Pressure transmitted 15,000 psi / 1,000 bar
Slide 45: Bodycote Powdermet Hot Isostatic Pressing
05 DEEP DIVE: Specialist Technologies Bodycote Powdermet® Hot Isostatic Pressing CASE STUDY 1. Subsea Valve Block 2. Subsea Manifold Conventional Solution ▪ Multiple parts ▪ Expanded supply chain ▪ Critical welds required ▪ High Risk Forged Valve Block Design Optimised HIP Design Optimised PMHIP sol
Slide 46: HIP growth strategy
05 DEEP DIVE: Specialist Technologies HIP growth strategy MARKET LEADER POSITION ▪ >50 vessels in operation – unique coverage and redundancy options to customers across Europe & North America ▪ 4x installed capacity vs. #2 player in Europe & North America ▪ Deep expertise in HIP technology and metal
Slide 47: Speciality Stainless Steel Processes
05 DEEP DIVE: Specialist Technologies Speciality Stainless Steel Processes What is S3P? S3P processes, featuring Kolsterising® technology, offer unique surface hardening solutions for stainless steel S3P Improves wear Stainless steel alloys However, these alloys resistance by diffusing offer corrosi
Slide 48: S3P growth strategy
05 DEEP DIVE: Specialist Technologies S3P growth strategy MARKET LEADER POSITION ▪ Proprietary technology ▪ Wide industrial reach with technical and commercial expertise ▪ 7 manufacturing sites across Europe and North America ▪ Over 5x the sales of the largest competitor Organic growth Application d
Slide 49: Surface Technology (ST)
05 DEEP DIVE: Specialist Technologies Surface Technology (ST) What is ST? A wide range of specialised coating technologies, applied through a variety of complex processes, which enhance component life ▪ HVOF Ceramic and metal Advanced applications ▪ Plasma coatings used to extend requirements exceed
Slide 50: ST growth strategy
05 DEEP DIVE: Specialist Technologies ST growth strategy MARKET POSITION ▪ #1 or #2 position in Europe and North America ▪ 13 plants covering over 100 applications ▪ Multiple long-term agreements and technology alignment with key customers Organic growth Application development Geographical expansio
Slide 51: Growth model and perspectives
05 DEEP DIVE: Specialist Technologies Growth model and perspectives Established leadership position Large growth potential Clear growth model ▪ Global leader in safety-critical ▪ Total Addressable Market ca. £1.6bn ▪ ‘Capture’ growth for existing markets applications and applications ▪ Further growt
Slide 52: Deep Dive: Precision Heat Treatment
Bodycote plc Capital Markets Event 2024 DEEP DIVE PRECISION HEAT TREATMENT RICK LLOPE Bodycote plc Capital Markets Event 2024 52
Slide 53: World leader in thermal processing
06 DEEP DIVE: Precision Heat Treatment World leader in thermal processing REVENUE BY GEOGRAPHY & END MARKET £535m ~70% £94.0m 18% FY 2023 Revenue of Group Headline Return on sales Western Europe North America FY 2023 revenues operating profit FY 2023 Emerging markets ▪ World’s leading provider of ou
Slide 54: Strong worldwide footprint
06 DEEP DIVE: Precision Heat Treatment Strong worldwide footprint 41 61 21 sites sites sites North America Western Europe Emerging markets ▪ #1 outsourced heat ▪ #1 outsourced heat ▪ Market leader in Eastern treatment provider treatment provider Europe & Turkey (3 times bigger than largest ▪ Leading
Slide 55: Broad range of heat treatment processes
06 DEEP DIVE: Precision Heat Treatment Broad range of heat treatment processes Continuous Atmospheric Batch Atmospheric Vacuum / Lower-Pressure ▪ Mesh belt hardening, carburizing ▪ Batch atmospheric processes ▪ Vacuum heat treatment ▪ Roller hearth hardening, annealing ▪ Gaseous nitriding, nitrocarb
Slide 56: Creating precision heat treatment
06 DEEP DIVE: Precision Heat Treatment Creating precision heat treatment Precision Heat Treatment is focused on Bodycote’s differentiators – higher value-add processes and greater customer requirements, and is a world leader in advanced and low carbon heat treatment ▪ Footprint review completed, ide
Slide 57: HEAT initiative drives efficiency gains
06 DEEP DIVE: Precision Heat Treatment HEAT initiative drives efficiency gains Challenges & Opportunities Strategy & Tools Outcomes ▪ Variability in customer products and batch Deploy proven Operational Excellence Fast resolution of diverse challenges sizes tools ▪ Labor efficiency increase ▪ New ap
Slide 58: Driving selective growth in Precision Heat Treatment
06 DEEP DIVE: Precision Heat Treatment Driving selective growth in Precision Heat Treatment Targeted growth initiatives are aligned to the Group strategy, underpinned by a highly disciplined investment approach Target high-growth, high-margin areas End Markets Processes Geographies Expand in A&D and
Slide 59: Well positioned & flexible in automotive
06 DEEP DIVE: Precision Heat Treatment Well positioned & flexible in automotive CASE STUDY 1 Heat treatment value 3-5x greater for ICE 8-speed Transmission EV transmission gears LPC, Nitride, 17 Gears/ 4 Gears/ ▪ Fewer parts but increased heat treatment requirement and value Transmission Transmissio
Slide 60: Adoption of Low Pressure Carburising
06 DEEP DIVE: Precision Heat Treatment Adoption of Low Pressure Carburising CASE STUDY 2 Partnering with a global leader in marine engines and power systems Switching from Atmospheric to Low Pressure processes (LPC) Supporting customer testing ▪ Lower carbon footprint: and approvals − Decreased from
Slide 61: Emerging markets expansion in Turkey
06 DEEP DIVE: Precision Heat Treatment Emerging markets expansion in Turkey CASE STUDY 3 Building on our leading presence in Turkey Strong success story over past 5 years with Izmir greenfield Bodycote Turkey revenue ▪ Fourth site in Turkey, began serving (£m) customers in late 2024 ▪ Expands capaci
Slide 62: Driving value creation in Precision Heat Treatment
06 DEEP DIVE: Precision Heat Treatment Driving value creation in Precision Heat Treatment Optimise footprint Improve performance Selective growth investment ▪ Prioritising premium quality and low- ▪ Driving Operational Excellence ▪ Strategic investments in key carbon processes through efficiency and
Slide 63: Deep Dive: Sustainability as an Accelerator
Bodycote plc Capital Markets Event 2024 DEEP DIVE SUSTAINABILITY AS AN ACCELERATOR LILY HEINEMANN Bodycote plc Capital Markets Event 2024 63
Slide 64: Becoming a sustainability leader
07 DEEP DIVE: Sustainability as an Accelerator Becoming a sustainability leader Initialising Booster to growth World class Solid foundations: 2023-24 Accelerating ahead: 2025-27 Maximising value: 2028-30 ▪ First SBTi target ▪ New sustainability strategy ▪ Known as a sustainability leader ▪ Customer
Slide 65: Bodycote's influence on customer emissions
07 DEEP DIVE: Sustainability as an Accelerator Bodycote’s influence on customer emissions Customer use Value chain OPERATIONAL EMISSIONS (SCOPE 1 & 2) Owned Outsourcing enables immediate reduction operations in customers’ operational emissions VALUE CHAIN EMISSIONS BODYCOTE (Upstream & downstream SC
Slide 66: Our new integrated strategy
07 DEEP DIVE: Sustainability as an Accelerator Our new integrated strategy OUR AMBITION GROW OPTIMISE & PERFORM OUR AMBITION Bodycote plc Capital Markets Event 2024 66
Slide 67: Environmental leadership (1)
07 DEEP DIVE: Sustainability as an Accelerator Environmental leadership (1) RESPONSIBLE BUSINESS Driving faster progress New 2030 SBTi target for Scopes 1 & 2 ▪ On track to achieve SBTi target this year ▪ Original target: 28% reduction vs 2019 (well below 2oC) ▪ Setting ambitious new target ▪ New ta
Slide 68: Environmental leadership (2)
07 DEEP DIVE: Sustainability as an Accelerator Environmental leadership (2) RESPONSIBLE BUSINESS SCOPES 1 &2 SCOPE 3 2030 SBTi-aligned 1 61.3% in context SCOPE 3 GOALS TOTAL CARBON FOOTPRINT Uniquely, Scope 3 is smallest segment 1. ≥ 45% reduction in fuel and energy related emissions (vs 2019) Major
Slide 69: Accelerating green growth
07 DEEP DIVE: Sustainability as an Accelerator Accelerating green growth SUSTAINABLE IMPACT New customer sustainability targets for 2030 01 LOW TO NO Avoid Our target is to help our batch atmospheric processing EMISSIONS 125,000 customers reduce their greenhouse gas emissions by tonnes CO2e at least
Slide 70: Capturing new opportunities
07 DEEP DIVE: Sustainability as an Accelerator Capturing new opportunities SUSTAINABLE IMPACT POTENTIAL OF OUTSOURCING CUSTOMER NEEDS Customer Bodycote BODYCOTE’S RESPONSE up to 60% CO2e avoidance … We worry we might not ▪ Proprietary avoided emissions meet our scope 1 and 2 POTENTIAL OF calculator
Slide 71: Tools to win on sustainability
07 DEEP DIVE: Sustainability as an Accelerator Tools to win on sustainability SUSTAINABLE IMPACT Driver: Outsourcing Driver: Low carbon technology transition ▪ Digital avoided emissions app rolled out with global ▪ Product carbon footprint (PCF) tool calculates average salesforce training CO2 by ser
Slide 72: Sustainability as an accelerator
07 DEEP DIVE: Sustainability as an Accelerator Sustainability as an accelerator Foundations laid Into the next era Recognised leader ▪ New strategy in place ▪ Delivering on targets ▪ Carbon avoidance a principal outsourcing driver ▪ Four new targets set ▪ Maturing low carbon sales technique ▪ Custom
Slide 73: Strong Financial Returns
Bodycote plc Capital Markets Event 2024 STRONG FINANCIAL RETURNS BEN FIDLER Bodycote plc Capital Markets Event 2024 73
Slide 74: Our targets
08 STRONG FINANCIAL RETURNS Our targets …our strategy supports delivery of a compelling set of targets Strong growth Improved mix Higher margins Attractive returns Converting to cash Mid-single-digit 35-40% >20% 15-20% 80-90% total annual revenue of revenue from operating margins return on capital o
Slide 75: Accelerating our growth trajectory
08 STRONG FINANCIAL RETURNS Accelerating our growth trajectory ▪ 3% revenue CAGR delivered since 2013 excluding closed & disposed sites, with improved portfolio quality ▪ Optimisation changes alongside clear growth framework will enable acceleration Historical total revenue growth of c.3%... …clear
Slide 76: Driving margin improvement
08 STRONG FINANCIAL RETURNS Driving margin improvement ▪ Clear and de-risked path to >20% margins by 2028 (including surcharges) ▪ Modest progress expected in FY 2025, accelerating in 2026+ as Optimise & Perform initiatives ramp-up 15.9% Optimise Perform Grow >20% £12-14m profit benefit >200bps oper
Slide 77: Optimising our footprint
08 STRONG FINANCIAL RETURNS Optimising our footprint ▪ Programme to deliver an optimised business with lower costs, lower carbon intensity and a higher quality footprint – Net exceptional cash costs of £25-30m – Net exceptional P&L charge of approximately £60m and an additional a goodwill write-down
Slide 78: Divisional overview
03 CORE STRATEGY - OPTIMISE Divisional overview ▪ New reporting structure replaces our previous AGI and ADE divisions from FY2024, with clearer alignment to our strategy ▪ Non-core to be exited by end of 2026; heavy exposure to Automotive and Industrial Markets in developed economies Specialist Tech
Slide 79: Continued focus on cash generation
08 STRONG FINANCIAL RETURNS Continued focus on cash generation Headline operating cash flow (HOCF) conversion 140.0 160% ▪ Strong historical cash generation track-record 120.0 140% 120% ▪ Service business with limited working capital requirement 100.0 100% ▪ Cash conversion improves during downturns
Slide 80: Delivering improved returns
08 STRONG FINANCIAL RETURNS Delivering improved returns Mid-single-digit % revenue Disciplined investment to growth through cycle support growth Higher margins driven by Continued focus on working improved performance & mix capital efficiency Higher profitability ROCE 15-20% Efficient and strong on
Slide 81: Disciplined capital allocation approach
08 STRONG FINANCIAL RETURNS Disciplined capital allocation approach Disciplined investment to drive improvement & growth Maintenance capex - Supporting operational excellence Expansionary capex - Driving growth and strategic execution Strong operating cash conversion 80-90% through the cycle ADDITIO
Slide 82: Capital allocation in practice
08 STRONG FINANCIAL RETURNS Capital allocation in practice ▪ Steady capex spend to improve performance and support growth, augmented with disciplined, aligned M&A ▪ 36-year uninterrupted track record of growing or maintaining the dividend ▪ Additional capital returns: £60m share buyback c.90% comple
Slide 83: Capital expenditure
08 STRONG FINANCIAL RETURNS Capital expenditure Greenville HIP Investment Approach Two HIP vessels relocated to Greenville, SC, to create an additive manufacturing Centre of Excellence Returns ▪ Cash cost: £5.5m ▪ IRR: >20% ▪ Payback period: ~5 years Example projects – Germany S3P Expansion Strategi
Slide 84: Aligned, accretive M&A
08 STRONG FINANCIAL RETURNS Aligned, accretive M&A High-growth, high-margin strategic focus areas ~£240m M&A spend End Markets Processes Geographies (2019-24) Acquiring customer access Building our scale in Accelerating entry to new, Acquisition Deal Size* in target end markets Specialist Technologi
Slide 85: Our targets
08 STRONG FINANCIAL RETURNS Our targets …our strategy supports delivery of a compelling set of targets Strong growth Improved mix Higher margins Attractive returns Converting to cash Mid-single-digit 35-40% >20% 15-20% 80-90% total annual revenue of revenue from operating margins return on capital o
Slide 86: Summary & Q&A
Bodycote plc Capital Markets Event 2024 SUMMARY & Q&A JIM FAIRBAIRN Bodycote plc Capital Markets Event 2024 86
Slide 87: Key messages
09 SUMMARY & Q&A Key messages 01 1. We are creating two leading, well-positioned divisional platforms 02 2. We have a clear strategy to drive faster growth and improve margins 03 3. We have an attractive set of targets to deliver value for shareholders 4. The right team is in place to deliver our st