Bodycote Plc · LSE:BOY
Bodycote — FY2016 Earnings Presentation
35 slides from Bodycote's earnings presentation, Feb 28, 2017
Slide 1: 2016 Full Year Results
2016 Full Year Results 28 February 2017
Slide 2: Introduction
Introduction Stephen Harris Group Chief Executive 2
Slide 3: Agenda
Agenda Overview Financial review Business review Summary & Outlook 3
Slide 4: Overview
Overview Revenue – Like-for-like* decline of 3.5% • Group – excl. energy flat • Energy -27% Headline operating margin – 16.6% (2015: 18.0%) Strong cash flow – £1m year end net cash Business development – Investment for growth, capex at 1.1x depreciation – 5 new AGI sites acquired for £30m –
Slide 5: Financial review
Financial review Dominique Yates Chief Financial Officer 5
Slide 6: 2016 Results summary
2016 Results summary Constant £m 2016 2015 Currency Total change exchange rates Revenue 600.6 567.2 (26.7) -5% ** 60.1 33.4 6% Headline: Operating profit 99.6 102.1 (13.7) -13% 11.2 (2.5) -2% M argin 16.6% 18.0% Profit before tax 97.0 99.2 (13.4) -14% 11.2 (2.2) -2% Restructuring charge - (20.0) Hea
Slide 7: Divisional summary – ADE
Divisional summary ADE Constant £m 2016 2015 Currency Total change exchange rates Revenue 250.9 243.5 (16.4) -7% 23.8 7.4 3% Headline operating profit 55.6 59.2 (9.0) -15% 5.4 (3.6) -6% M argin 22.2% 24.3% Constant currency revenue decline entirely due to >40% oil & gas decline Cost discipline m
Slide 8: Divisional summary – AGI
Divisional summary AGI Constant £m 2016 2015 Currency Total change exchange rates Revenue 349.7 323.7 (10.3) -3% 36.3 26.0 8% Headline operating profit 58.5 53.4 (1.2) -2% 6.3 5.1 10% M argin 16.7% 16.5% Business mix continues to improve; tight cost control Headline margin up 20bps to 16.7% Li
Slide 9: Headline operating profit bridge
Headline operating profit bridge £m 102.1 1.6 -12.0 11.2 99.6 0.9 -1.5 -1.3 -1.4 88.4 2015 Price minus Sales volume Acquisitions Start-ups Share-based Central 2016 Foreign 2016 cost and mix payments costs Constant exchange increases currency translation 9
Slide 10: Cash flow
Cash flow 2016 2015 Working Capital 160 140 Depreciation Capex Depreciation 120 Capex 100 Tax, Interest & Working Capital 80 Other Tax, Interest 60 Headline Restructuring Headline & Other Operating Operating Restructuring 40 Profit £61m Profit free £47m 20 cash free cash 0 Sources of cash Uses of ca
Slide 11: 2016 Sales and operating profit by currency
2016 Sales and operating profit by currency Revenue Headline operating profit Every US dollar cent worth c.£0.3m 120% GBP Every Euro cent worth c.£0.4m 100% 8% Other 2016 operating profit benefited by 80% Other 13% £11.2m translation gain, mainly part 18% EUR year effect of post-referendum ste
Slide 12: A newcomer's perspective
A newcomer’s perspective 5 key attractions: Returns ‒ The Group’s strong margins support compelling returns on capital Cash flow ‒ Intrinsic high cash generation Uniqueness ‒ The only big player in an enduring industry where scale has clear benefits Technology ‒ “Specialist Technologies” – c
Slide 13: Business review
Business review Stephen Harris Group Chief Executive 13
Slide 14: Aerospace & defence
Aerospace & defence Revenue: £151m Like-for-like* growth: 1.0% Revenue, £m Revenue, £m At constant rates At actual rates 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 H1 2015 H2 2015 H1 2016 H2 2016 H1 2015 H2 2015 H1 2016 H2 2016 Strong growth in UK aerospace, particularly in H2 Continued
Slide 15: Energy
Energy Revenue: £52m Like-for-like* decline: -26.8% Revenue, £m Revenue, £m At constant rates At actual rates 60 60 Other Energy Other Energy 50 50 Oil & gas Oil & gas 40 40 30 30 20 20 10 10 0 0 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 2014 2014 2015 2015 2016 2016 2014 2014 2015 2015 2016 2016 Oil &
Slide 16: Automotive
Automotive Revenue: £172m Like-for-like* growth: 1.6% Revenue, £m Revenue, £m At constant rates At actual rates 90 90 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 H1 2015 H2 2015 H1 2016 H2 2016 H1 2015 H2 2015 H1 2016 H2 2016 Drive for fuel efficiency continues to grow revenues above backg
Slide 17: General industrial
General industrial Revenue: £226m Like-for-like* decline: -3.3% Revenue, £m Revenue, £m At constant rates At actual rates 120 120 100 100 80 80 60 60 40 40 20 20 0 0 H1 2015 H2 2015 H1 2016 H2 2016 H1 2015 H2 2015 H1 2016 H2 2016 Cyclical decline in general industrial abating Less downward press
Slide 18: 2016 Revenue & headline operating profit
2016 Revenue & headline operating profit Revenue Headline operating profit Specialist Technologies 24% Specialist (2015: 25%) Technologies 42% Classical Heat (2015: 39%) Classical Heat Treatment Treatment 58% 76% (2015: 61%) (2015: 75%) Specialist Technologies headline operating profit now 42% of
Slide 19: Improving revenue trend through 2016
Improving revenue trend through 2016 YoY like-for-like* revenue growth 3% 2% 1% 0% Q1 Q2 Q3 Q4 -1% -2% -3% -4% -5% ___ Like-for-like excluding Energy -6% ___ Total like-for-like -7% -8% 19 *Like-for-like YoY revenue growth rates are at constant exchange rates and exclude acquisitions, closed sites a
Slide 20: Investing in future growth
Investing in future growth Classical Heat Treatment AGI New ADE facility under construction in Rzeszow, Poland Further expansion Greenfield AGI in Wroclaw, Poland, ramping up New AGI facility to be constructed in Prague, Czech Republic New facility planned for Northern UK New Toulouse facility opera
Slide 21: Investing in future growth – Specialist Technologies
Investing in future growth Specialist Technologies HIP: New aerospace capacity on line New facility now operational LPC: Capacity expanded in Poland and the S3P: New facility Netherlands in Germany operational H2 2016 LPC: Capacity expansion in France HIP PF: New facility to be constructed S3P: New
Slide 22: 2016 Acquisitions
2016 Acquisitions £30m acquisition spend funded by free cash 5 new AGI sites acquired: – Burlington, Ontario - Adds new capability to serve growing nitriding market – Syracuse, New York - Enhances local cluster strength – Schmerbach, Germany - Builds logistics between existing German and Europea
Slide 23: Managing through the cycle
Managing through the cycle Headline operating profit, £m Sales, £m (at 2016 rates) 123 (at 2016 rates) 657 113 115 613 634 630 108 100 569 601 89 498 55 2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016 Average headcount Headline margin, % (at reported rates) 5,808 5,836 18.2 18.
Slide 24: 2016 Cash flow and capital allocation
2016 Cash flow and capital allocation £124m Maintenance capex Free cash flow Expansion before capex capex Dividend M&A Opening Closing cash 2015 Special cash dividend £1m £12m No 2016 special dividend – encouraging acquisition pipeline 24 24
Slide 25: Summary
Summary Growth - Momentum built as the year progressed - Oil & gas headwind now abating - Part year sterling depreciation gain in 2016 - Translating 2016 result at closing rates* would have added £6m to headline profit Development - Investment in expansion capital continues - Specialist Technolo
Slide 26: Outlook
Outlook The Group delivered a robust performance in 2016 despite significant headwinds in some key business sectors. The speed and effectiveness of management’s actions, in addition to the continued focus on improved mix, resulted in resilient margins. While our business, by its nature, has limited
Slide 27: Slide 27
Slide 28: Definitions
Definitions Term Definition Headline Operating Profit Operating profit before exceptional costs and amortisation of acquired intangibles Headline Profit Before Tax Profit before tax, exceptional costs and amortisation of acquired intangibles Headline Operating Cash Flow Cash generated by operations,
Slide 29: 2016 Statutory income statement
2016 Statutory income statement £m 2016 2015 Revenue 600.6 567.2 Headline operating profit 99.6 102.1 Amortisation of acquired intangible fixed assets (4.5) (4.2) Acquisition costs (0.6) - Reorganisation costs - (20.0) Operating profit 94.5 77.9 Net finance costs (2.6) (2.9) Profit before tax 91.9 7
Slide 30: 2016 Cash flow
2016 Cash flow £m 2016 2015 Headline operating profit 99.6 102.1 Add back: Depreciation and amortisation 55.2 49.6 Impairment of fixed assets 5.1 - Share-based payments 0.5 (0.4) Net capex to depreciation Profit on disposal of fixed assets (4.5) (2.1) ratio 1.1 times Headline EBITDA 155.9 149.2 Net
Slide 31: Specialist Technologies
Specialist Technologies What are they? HIP Services Application of high temperature and pressure to densify cast material Removal of porosity defects improves strength, toughness and machinability Can eliminate internal voids created by additive manufacturing methods HIP Method of manufactur
Slide 32: Net finance charge/facilities
Net finance charge/facilities £m 2016 2015 Net interest payable 0.2 0.3 Financing and bank charges 2.1 2.3 Pension finance charge 0.3 0.3 Net finance charge 2.6 2.9 Committed facility headroom of £225m at 31 December 2016, £5m drawn The remaining life of the £230m committed facility is 2.5 years
Slide 33: Pension analysis - balance sheet
Pension analysis - balance sheet £m 2016 2015 UK Funded 3.6 2.7 Other Western Europe Funded 1.9 2.0 Other Western Europe Unfunded 15.5 12.6 Western Europe Total 21.0 17.3 North America Funded 0.4 0.5 Emerging Markets Unfunded 0.1 0.1 Total retirement benefit obligations 21.5 17.9 £m 2016 2015 Wester
Slide 34: Financial information
Financial information Shares in issue 2016 2015 Financial ratios 2016 2015 Weighted average 190.2m 190.0m Net Debt : Headline EBITDA net cash net cash Headline EBITDA Interest Cover 759x 498x Exchange rates 2016 2015 Gearing (Net Debt:Total Equity) net cash net cash EUR Average (P&L) 1.23 1.38 Closi
Slide 35: Divisional summary – 2016 H1 v H2
Divisional summary – 2016 H1 v H2 ADE Divisions H1 H2 Total Revenue 121.9 129.0 250.9 Headline operating profit 27.4 28.2 55.6 Margin 22.5% 21.9% 22.2% AGI Divisions H1 H2 Total Revenue 169.1 180.6 349.7 Headline operating profit 27.9 30.6 58.5 Margin 16.5% 16.9% 16.7% 35