Bodycote Plc · LSE:BOY
Bodycote — FY2018 Earnings Presentation
37 slides from Bodycote's earnings presentation, Mar 8, 2019
Slide 1: 2018 Preliminary Results
Slide 2: Introduction
Introduction Stephen Harris Group Chief Executive 2
Slide 3: Agenda
Agenda Highlights Business review Financial review Summary Outlook 3
Slide 4: Highlights
Highlights Results 6.7% revenue growth at constant currency, 5.6% at actual rates 13% headline operating profit growth at constant currency, 12% at actual rates Basic headline EPS growth of 14% to 55.9p (2017: 49.2p) Free cash flow of £97.4m (2017: £83.0m) ROCE increased to 20.5% (2017:19.
Slide 5: Strategic progress
Strategic progress Growing the business - Continued investment in Specialist Technologies - Continued investment in Emerging Markets - Continued investment in long term structural growth opportunities - Continued investment in Classical Heat Treatment through Bolt-on acquisitions and Sales effecti
Slide 6: Strategic Progress
Strategic Progress Expansionary investments e.g. New HIP in North America Structural growth Specialist Technologies opportunities e.g. Aerospace greenfield facility, Poland e.g. LPC greenfield facility, Mexico Emerging Markets 2018 expansionary capex of £44m A number of our investments incorpora
Slide 7: Strategic Progress: margin improvement
Strategic Progress Margin improvement of 100bp to 19.0% With over 180 plants across 23 countries there is a rich variety of contributors to margin improvement. The main drivers are: AGI margin improvement - Continuation of the drive to improve AGI margins, up to 18.7% (2017: 17.8%) Faster revenu
Slide 8: Margin and revenue progression
Margin and revenue progression Revenue, £m Margin, % 800 20.0% 18.0% 700 Good 10 year record of margin 16.0% 600 and revenue growth 14.0% 500 12.0% Testament to the resilience of 400 10.0% the margin and business model 300 8.0% 6.0% 200 4.0% 100 2.0% 0 0.0% 2009 2010 2011 2012 2013 2014 2015 201
Slide 9: 2018 Revenue and growth analysis
2018 Revenue and growth analysis1 Revenue, £m by Technology by Geography by Market 600 500 400 300 200 100 0 Growth, % 12% 5% 6% 5% 21% 6% 13% 7% 6% Specialist Classical Western North Emerging Aerospace & Energy Automotive General Technologies Heat Europe America Markets Defence Industrial Treatment
Slide 10: Specialist Technologies
Specialist Technologies Revenue: £175m Constant currency growth: 12% Revenue, £m At constant currency 180 160 140 120 100 80 60 40 20 0 2016 2017 2018 High margins and high returns 10
Slide 11: Specialist Technologies
Specialist Technologies 24% of Group Revenues 36% of Group Profits Specialist Technologies growth highlights: - LPC and CiD grew over 20%1 - HIP PF grew over 30%1 - Maturing of new 2017 facilities Continued adoption of Specialist Technologies Ongoing investment in new capacity and capability
Slide 12: Emerging Markets
Emerging Markets Revenue: £63m Constant currency growth: 21% Revenue, £m At constant currency 70 60 50 40 30 20 10 0 2016 2017 2018 Eastern Europe, Mexico, China 12
Slide 13: Emerging Markets
Emerging Markets 9% of Group Revenues 10% of Group Profits China growth mainly from increased penetration of auto supply chain Mexico growth driven by growth of automotive exports to USA Embedded future revenue growth as four new facilities continue ramp up Continued opportunity for new inve
Slide 14: Our Market Sectors
Our Market Sectors Revenue: £728.6m Group constant currency growth: 6.7% Growth1 & Share of Revenue Aerospace & Defence Growth 6% General Industrial 23% Growth 6% 38% £m 30% 9% Automotive Growth 7% Energy Growth 13% Proportion of automotive dependent on internal combustion engine (max 11% of Group r
Slide 15: Our Markets
Our Markets1 Aerospace & Defence - revenue growth of 6% - Civil aviation revenues up 8% - UK operations performed strongly - Major position on the Leap engine Energy - revenue growth of 13% - Strong oil & gas revenue growth largely Permian Basin - Partially offset by IGT weakness Automotive -
Slide 16: Financial review
Financial review Dominique Yates Chief Financial Officer 16
Slide 17: 2018 Results summary
2018 Results summary Growth £m 20181 20171 Growth Constant currency Revenue 728.6 690.2 5.6% 6.7% Headline operating profit 138.3 123.9 12% 13% Headline operating margin 19.0% 18.0% Headline profit before tax 136.4 121.5 12% 13% Headline tax rate 21.7% 22.9% Free cash flow 97.4 83.0 Net cash 36.2 39
Slide 18: Headline operating profit bridge
Headline operating profit bridge £m 3.7 139.7 -1.4 138.3 5.1 6.5 123.9 0.5 2017 Price minus cost Sales volume New facilities Share-based 2018 constant Foreign 2018 increases and mix payments currency exchange 18
Slide 19: ADE and AGI summary
ADE and AGI summary The ADE Business The ADE Business comprises more than 60 facilities primarily focused on Aerospace, Defence, and Energy customers Growth £m 20181 20171 Growth Constant currency Revenue 288.0 273.1 5.5% 6.9% Headline operating profit 68.7 64.2 7% 8% Headline operating margin 23.9%
Slide 20: 2018 H1 and H2 revenue growth
2018 H1 and H2 revenue growth Revenue growth At constant currency 20% Automotive H2 2018 weak in Europe, compared to H1 2018 market growth 15% (stock increase pre introduction of WLTP) 10% General Industrial slowing growth trend 5% Tail wind in civil aviation & probably energy continues into 2
Slide 21: 2018 Sales and operating profit by currency
2018 Sales and operating profit by currency Headline Revenue operating GBP profit 8% 100% Other Other 24% Operating profit translation reduction of 80% 19% £1.4m Average full year exchange rates 60% EUR £1: €1.13 and £1: $1.33 46% EUR 39% Every cent change in the Euro is worth 40% Other c.£0.5
Slide 22: Taxation and balance sheet
Taxation and balance sheet Taxation Headline tax rate of 21.7%, reflecting benefit of existing financing structures Guidance for 2019 is 24.5% Balance sheet Net cash £36.2m, reflecting strong cash flow IFRS16 impact +£2m to headline operating profit, EPS unchanged and adds debt of +c.£80m
Slide 23: Cash flow
Cash flow1 Revenue, £m 2018 2017 220 Headline EBITDA = £205m Headline EBITDA = £191m 200 180 Depreciation Capex 160 Depreciation Capex 140 Working Capital 120 Tax, Interest & Working Tax, Interest & Other Other 100 Tax, Interest & Capital Restructuring Other Restructuring 80 Headline Headline Operat
Slide 24: Capital allocation priorities
Capital allocation priorities 1 2 Investment for growth 3 Enhancing ordinary dividends 4 Acquisitions Supplemental distributions 24 as appropriate
Slide 25: 2014 - 2018 capital allocation
2014 - 2018 capital allocation £m £216m invested to support 800 future business growth 670 -171 700 £299m cash returned to 600 499 -169 shareholders since 2014 500 400 -47 -156 300 200 -143 100 -16 0 -100 Free cash flow Maintenance Free cash flow Expansionary Acquisitions Ordinary Special Decrease i
Slide 26: Revenue progression of recent facilities
Revenue progression of recent facilities Revenue, £m At constant currency 12 facilities opened since the 30 beginning of 2014 2018 start ups 2017 start ups 25 £51m invested across these 2016 start ups 12 facilities 2015 start ups 20 2014 start ups Typically revenues build over 15 a 3 to 5 year
Slide 27: Summary and Outlook
Summary and Outlook Stephen Harris Group Chief Executive 27
Slide 28: Summary and Outlook
Summary and Outlook 2018 has once again demonstrated the strength of Bodycote’s strategy and business. We achieved double-digit growth in Specialist Technologies’ revenues, an excellent performance in our Emerging Markets and robust growth in civil aviation revenues. Combined with pricing discipline
Slide 29: Slide 29
Slide 30: Specialist Technologies
Specialist Technologies A selection of highly differentiated, early stage processes with high margins, large market opportunity and good growth prospects. Bodycote is either the clear market leader or one of the top players among few competitors Hot Isostatic Pressing Surface Technology (HIP Service
Slide 31: Classical Heat Treatment
Classical Heat Treatment Classical Heat Treatment It provides wear resistance, strength or toughness depending on the application. Surface hardness can be is the controlled heating controlled by diffusing elements such as carbon and and cooling process of nitrogen into the metal during the heating s
Slide 32: 2018 Statutory income statement
2018 Statutory income statement £m 2018 2017 Revenue 728.6 690.2 Headline operating profit 138.3 123.9 Amortisation of acquired intangible fixed assets (3.7) (4.5) Acquisition costs (0.5) - Operating profit 134.1 119.4 Net finance costs (1.9) (2.4) Profit before tax 132.2 117.0 Headline earnings per
Slide 33: 2018 Cash flow
2018 Cash flow 2018 IFRS16 2018 2017 £m Post Pre IFRS16 IFRS16 Headline operating profit 140.7 2.4 138.3 123.9 Net capex to Add back: Depreciation and amortisation 76.6 14.6 62.0 59.8 depreciation ratio Impairment of fixed assets 1.8 - 1.8 0.4 1.2 times Share-based payments 3.8 - 3.8 7.8 (includes £
Slide 34: Net finance charge/facilities
Net finance charge/facilities £m 2018 2017 Interest received on bank overdrafts and loans 0.2 0.1 Net interest payable 0.1 0.1 Financing and bank charges 1.8 2.0 Pension finance charge 0.2 0.4 Total finance charge 2.1 2.5 Net finance charge 1.9 2.4 Committed facility headroom of £230m at 31 Decemb
Slide 35: Financial information
Financial information Shares in issue 2018 2017 Weighted average 190.5m 190.3m Exchange rates 2018 2017 EUR Average (P&L) 1.13 1.15 Closing (B/S) 1.11 1.13 USD Average (P&L) 1.33 1.30 Closing (B/S) 1.27 1.35 SEK Average (P&L) 11.61 11.04 Closing (B/S) 11.29 11.07 Analysis by currency, 2018 Operating
Slide 36: ADE and AGI summary – 2018 H1 v H2
ADE and AGI summary – 2018 H1 v H2 Total The ADE Business H1 H2 ADE Revenue 142.7 145.3 288.0 Headline operating profit 33.3 35.4 68.7 Margin 23.3% 24.4% 23.9% Total The AGI Business H1 H2 AGI Revenue 225.3 215.3 440.6 Headline operating profit 43.2 39.2 82.4 Margin 19.2% 18.2% 18.7% 36
Slide 37: Definitions
Definitions Term Definition Headline Operating Profit Operating profit before acquisition costs and amortisation of acquired intangibles Headline Profit Before Tax Profit before tax, acquisition costs and amortisation of acquired intangibles Headline Operating Cash Flow Cash generated by operations,