Bodycote Plc · LSE:BOY
Bodycote — Investor Presentation (December 2004)
65 slides from Bodycote's investor presentation, Dec 3, 2004
Slide 1: Materials Testing
Materials Testing 3rd December 2004
Slide 2: Format
FORMAT 1. Introduction GH 2. Business Model GH 3. Financial/KPI’s GH 4. Services/Markets/Competition a) Materials TDS b) Health Sciences DC c) Engineering & Technology NT 5. Strategy for Growth a) Organic/Outsourcing/Acquisitions GH b) Business Development TDS c) Technology Transfer NT 6. Summary, Q
Slide 3: 1. Introduction: Core Values
1. INTRODUCTION Core Values Our vision To be recognised as the leading global provider of materials testing services and the partner of choice for outsourcing needs, by delivering value added services to our customers. Our mission We have four key priorities, all interlinked: To meet our financial o
Slide 4: What We Do
What We Do “But the Contractor said his tests passed” BMT is a knowledge based company providing independent, accredited materials testing services to almost every business sector. The results of testing facilitate product development, production release, forensic analysis and certification. slide n
Slide 5: 2. Business Model
2. BUSINESS MODEL Key Competencies • BMT is a leading global provider of testing services focused on Materials, Health Sciences and Engineering/Technology • Bodycote is a market leading brand and is renowned for quality, service,innovative solutions and delivering a client oriented service. • The Gr
Slide 6: 3. Financials/KPI's
3. FINANCIALS/KPI’s 1. Sales/EBIT CAGR hyperlink 8.ppt 2. Margins hyperlink 9.ppt 3. Capex and depreciation hyperlink 10.ppt 4. ROCE hyperlink 11.ppt slide number 6
Slide 7: 4. Services/Markets/Competition
4. SERVICES/MARKETS/ COMPETITION a) Materials b) Health Sciences c) Engineering & Technology slide number 7
Slide 8: Materials Testing
BODYCOTE MATERIALS TESTING Bodycote outsourcing for industry MATERIALS TESTING
Slide 9: Materials Testing core services
Materials Testing core services The “Materials” laboratories within the Bodycote group mainly provide Radiography routine Mechanical testing Concrete testing services to testing a wide range of industries Corrosion testing Metallurgical Scanning electron Oil & gas sector examinations microscopy slid
Slide 10: Group Sales Analysis
Group Sales Analysis Health Sciences 22% Materials 53% Engineering & Technology 25% slide number 10
Slide 11: Where is the service provided from?
Where is the service provided from? UK – 13 laboratories USA – 5 laboratories Europe – 4 laboratories Canada – 4 laboratories Middle East – 4 laboratories slide number 11
Slide 12: What sectors does Materials serve?
What sectors does “Materials” serve? Almost all manufacturing industries:- Aerospace Automotive Construction Defence Electronics General Engineering Oil & Gas Power Generation Rail slide number 12
Slide 13: Market Drivers
Market Drivers Locomotive lubricating oil analysis Service – reliable, quality assured performance Pricing – increasingly competitive Increasing efficiencies - systems integration Location – non-specialist services will not travel far Testing is often the last activity in the manufacturing productio
Slide 14: Competition
Competition Numerous smaller independents >1000 globally A few larger independents – Staveley,USA; Stork; Canspec, Canada Manufacturers with in-house facilities Multinational certification companies – DNV, SGS, Intertek – in a few areas only Universities & Technical institutions (RAPRA, Edison Weldi
Slide 15: What differentiates Bodycote?
What differentiates Bodycote? High priority placed on Quality Assurance - Absolute, non-negotiable refusal to ‘adjust’ results Stature – we’re large enough to partner major clients Investment in sample preparation technology & systems integration (IS) Unrivalled breadth of testing capability Strengt
Slide 16: Market potential / future trends
Market potential / future trends Engineering manufacturing markets are in flux, globalisation is having an effect Project based work - oil & gas, Middle East civil engineering development - continues to provide higher margins Infrastructure related testing is more secure – rail sector / pipelines /
Slide 17: Barriers to Entry
Barriers to Entry Low: low technology, locally based service Medium: client wants a Groupwide deal across several regions – demands a laboratory network High: client demands expensive, industry specific approvals or accreditations e.g. NADCAP for aerospace slide number 17
Slide 18: Health Sciences
BODYCOTE MATERIALS TESTING Bodycote outsourcing for industry HEALTH SCIENCES
Slide 19: Health Sciences core services
Health Sciences core services Testing pipelines for water utilities Testing soil and water for signs of contamination Testing and surveying Testing and evaluating Food testing for asbestos in buildings pharmaceuticals slide number 19
Slide 20: Group Sales Analysis
Group Sales Analysis Health Sciences 22% Materials 53% Engineering & Technology 25% slide number 20
Slide 21: Service centres
Service centres UK – 5 Canada – 4 Middle East – 1 laboratories laboratories laboratory slide number 21
Slide 22: Market Drivers
Market Drivers Businesses are driven by changes in legislation eg. asbestos, environment etc. Competency and reliability. Testing on time, every time. Aversion to risk (supermarkets, brand retention issues). Reverse globalisation – products from outside EC need to be tested in the EC. Canadian Cost
Slide 23: Competition
Competition Pharma market fragmented. Niche market for routine/R&D testing. Large CRO’s dominate clinical testing but do not compete in “analytical testing” markets. Environmental market dominated by large competitors. Niches exist for best in service providers. Utilities market. Large audit competi
Slide 24: Market Differentiators
Market Differentiators Service driven philosophy. The customer gets what the customer wants ie. Trending, web based interactive services, out of spec reporting etc. Flat management structure; responsive to change, deployment of skills as required, flexibility of approach. Using the “factory” approac
Slide 25: Market Potential / Future Trends
Market Potential / Future Trends Organic growth of min 10% per annum achieved on existing UK Pharma / Environmental laboratories last 5 years and targeting future growth. Strengthening core services through acquisition, adding bolt-on environmental / asbestos laboratories in the UK. Increasing scope
Slide 26: Future Priorities
Future Priorities Introduce and develop new acquisitions, bringing them to Bodycote typical EBIT margins. Standardise test methodologies to: Reduce operating risk. Create efficiencies. Improve margins. Continue the development of centres of excellence for niche tests, or contract out around the netw
Slide 27: Barriers to Entry
Barriers to Entry Substantial in most Health Sciences markets: Key staff: have significant invested knowledge in their markets; hard to find. Pharma and Environmental labs are capitally intensive to start up. Quality standard requirements in Environmental testing are increasingly stringent. Business
Slide 28: Engineering & Technology
BODYCOTE MATERIALS TESTING Bodycote outsourcing for industry ENGINEERING & TECHNOLGY
Slide 29: What Does Engineering & Technology Do?
What Does Engineering & Technology Do? The Engineering & Technology function provides specialist / advanced mechanical and materials testing services to a wide range of industries slide number 29
Slide 30: Group Sales Analysis
Group Sales Analysis Health Sciences 22% Materials 53% Engineering & Technology 25% slide number 30
Slide 31: What Industry Sectors Does It Serve?
What Industry Sectors Does It Serve? Almost all manufacturing industries:- Aerospace (airframes & engines) Automotive Construction Defence Electronics General Engineering Medical Devices Oil & Gas Power Generation Rail slide number 31
Slide 32: Where Is The Service Provided From?
Where Is The Service Provided From? 3 specialist facilities within the UK 3 within Europe 1 within the USA 2 within Canada slide number 32
Slide 33: Who Is The Service Provided By?
Who Is The Service Provided By? PhD, 20 MSc, 14 BSc, 48 Other, 158 240 staff Over 1/3 Qualified to degree standard or higher slide number 33
Slide 34: What Is The Customer Looking For?
What Is The Customer Looking For? Demonstrating Fitness for Purpose: Product certification Design (& change) validation Determine susceptibility to defects and degradation Response to service problems slide number 34
Slide 35: Response Of Materials To Complex Variables
Response Of Materials To Complex Variables Example: Measuring the rate of fatigue crack growth against simulated aircraft flights slide number 35
Slide 36: Validation of Computer Models
Validation of Computer Models Example: Checking the stress ‘hot-spots’ seen on computer model with those seen in simulated service slide number 36
Slide 37: Validation of Computer Models
Validation of Computer Models Example: Checking the predicted clamping force transferred to the central steel tube of a sub-sea umbilical during installation slide number 37
Slide 38: Examples: Product Certification
Examples: Product Certification slide number 38
Slide 39: Examples: Design Validation
Examples : Design Validation Example: Medical devices (femur nail) Earthquake dampers for bridges slide number 39
Slide 40: Examples: Establishing Tolerance To Defects
Examples : Establishing Tolerance To Defects Crack Preventing CRACK Example: Using fracture mechanics to predict the resistance to manufacturing defects in welds slide number 40
Slide 41: What Are The Main Market Drivers?
What Are The Main Market Drivers? Product certification / qualification against specification New materials / new designs Protection against litigation Reduced warranty exposure Will the product work properly, safely and for the required length of time when it reaches market? slide number 41
Slide 42: Who Are The Competition?
Who Are The Competition? Manufacturers’ specialist in-house facilities (Alstom, Incotest) Privatised Government Facilities (Qinetiq, TRL, IMA) Universities & Technical institutions (Heriot Watt, Ghent, TWI, Sintef) Smaller industry specific testing organisations (MIRA, Westmorland, Martest, Sintef,
Slide 43: What Differentiates Bodycote From The Rest?
What Differentiates Bodycote From The Rest? •Commercially driven, not institutionalised •Scope of capability •Experience from many industry sectors •The willingness and ability to tackle novel problems •Depth of both materials and engineering knowledge and skills •Willingness to invest to support ch
Slide 44: Market Potential / Future Trends
Market Potential / Future Trends •Higher end engineering currently remains in west •Some ‘reversed globalisation’ due to re-qualification of existing items under new manufacture •Engineering project income not related to production volume •Increased integration between testing and computer modelling
Slide 45: Barriers to Entry
Barriers to Entry •Capital Intensive. Often need extensive range of expensive equipment •Personnel. Very dependant on high calibre personnel, both academic and practical •Branding. Widespread customer base, a difficult service to sell – branding and networking are key •Accreditation. Specific approv
Slide 46: 5. Strategy For Growth
5. STRATEGY FOR GROWTH a) Organic/Outsourcing/Acquisitions b) Business Development c) Technology Transfer slide number 46
Slide 47: Organic/Outsourcing/Acquisitions
Organic/Outsourcing/ Acquisitions hyperlink 12.ppt Bodycote plans to grow the materials testing group both organically and by acquisition. 1. Diversify away from routine and commodity testing by expanding further up the value chain. hyperlink 13.ppt 2. Increase BMT exposure to regulatory driven mark
Slide 48: Business Development
Business Development Core skill-set – Business Development Managers Organisation & structure Marketing strategy Partnerships & Outsourcing Acquisition pipeline slide number 48
Slide 49: Core Skill-set Business Development Managers
Core Skill-set Business Development Managers Specific sector experience Operating at board level Entrepreneurial Numerate, IS literate Good communicator Self starting Testing experience is not essential Business acumen is! slide number 49
Slide 50: Group Structure
Group Structure International Sector Development BD Director Group Co-ordination Automotive Oil & Gas Aerospace Health Sciences Civils Rail Polymers Materials USA International UK Pharma / Env MIddle East UK USA Canada Coordination UK Dynamic Scandinavia Canada Utilities Canada Canada UK Engines USA
Slide 51: Group Coordination
Group Coordination Regular cross reporting by international / sector seniors Use of Bodycote “Extranet” as a communication tool Annual meeting of international seniors to review strategy and report on progress Sector specific meetings to coordinate approach to major clients Sharing of business criti
Slide 52: Dealing Effectively With Major Clients
Dealing Effectively With Major Clients Locally – Operations Managers Close working relationship Deal with day-to-day production issues Inform other interested parties through Extranet /CRM system Group - Business Development Managers Target key influencers Negotiate beneficial Group deals Set Group
Slide 53: Marketing Strategy
Marketing Strategy Differentiation through unrivalled breadth of services, geographical cover and ongoing service enhancement Brand development through improved communication, both internal and external Facilitate easy communication with the Group through the development of regional marketing centre
Slide 54: Regional Marketing Centres
Regional Marketing Centres Well established in Canada Developing in USA and UK Future development in Middle East “One-stop-shop” for inbound enquiries Ensure maximum value extracted from every enquiry Place the work with subject experts Take the enquiry administration load off the laboratory staff M
Slide 55: Being Web-Centric
Being Web-Centric Group web sites are promoted at every opportunity Major web-sites for: North America Europe Middle East North American site being split to provide better differentiation for Canadian R & D services Web search engine optimisation measures in-place Approximately 20,000 visits a month
Slide 56: Partnerships / Outsourcing
Partnerships / Outsourcing Ongoing outsourcing contracts in North America and Europe Automotive and aerospace predominate Clients are increasingly looking to develop partnerships with Bodycote Planned service enhancements – shared benefits Technology benefits Stable trading conditions Assured qualit
Slide 57: Acquisition Pipeline Control
Acquisition Pipeline Control Europe & North America Approach BMT / Vendor Indicative offer made Board Approval Offer Accepted A/C's received Due Diligence NDA signed 1st Meeting Interested? Completed L.O.I. Comments Country 1 Laboratory A B Completed Laboratory B V Completed Laboratory C B V Vendor
Slide 58: Technology Transfer
Technology Transfer Technology transfer is now a key element within Bodycote Materials Testing’s growth strategy The objectives are: To the maximise the leverage from existing key skills and capabilities and To fast track introduction of advanced technologies slide number 58
Slide 59: Technology Transfer
Technology Transfer Bodycote has several areas of specialist capability but the market frequently insists on a local delivery of service For example: Corrosion testing Advanced fracture toughness testing Vibration Fire & Flammability Numerical Modelling Food testing slide number 59
Slide 60: Just considering oil and gas
Opportunities Just considering oil and gas slide number 60
Slide 61: Oil & Gas: spectrum of services and capabilities
Oil & Gas The spectrum of services & capabilities already offered: • Routine mechanicals • Advanced Fracture Toughness • Component & Structural Testing • Corrosion Testing • Numerical Modelling / ECAs There are potential benefits identifiable now from technical development and exchange for all the a
Slide 62: Oil & Gas Wide Plate Test Rig
Oil & Gas 1200 Tonne Wide Plate Test Rig Near–Resonance Full Scale Pipe Fatigue Test Rig slide number 62
Slide 63: From The Client's View
From The Client’s View The client can reasonably expect: •A consistent quality of service from each location •Access to appropriate expertise to satisfy needs •Apply consistent, appropriate methodologies •That we understand our local and global capabilities slide number 63
Slide 64: The Advantages For Us
The Advantages For Us •Reduction in time & costs associated with procedure development / eliminate duplication of effort •Increased leverage from our personnel with ‘top consultant-level’ expertise •Improved client confidence through rigorous training of local staff •Increased resource capability th
Slide 65: 6. Summary
6. SUMMARY • A proven track record of consistent revenue EBIT and ROCE growth • A solid infrastructure foundation for development moving forward • Business Development function provides pipeline of outsourcing/organic/acquisition opportunities • Highly motivated management team committed to achievem