Bodycote Plc · LSE:BOY
Bodycote — H1 2020 Earnings Presentation
34 slides from Bodycote's earnings presentation, Jul 23, 2020
Slide 1: Interim Results 2020
Interim Results 2020 23 July Bodycote
Slide 2: Introduction
Introduction Stephen Harris Group Chief Executive 2
Slide 3: Taking care of our stakeholders during COVID-19
Taking care of our stakeholders during COVID-19 Looking after employees, shareholders, customers, and the community Employee health, safety and welfare is paramount Support for employees on short-term lay-off with: Pension contributions continued Health insurance provided in the US Support
Slide 4: Agenda
Agenda Overview Business review Financial review Outlook 4
Slide 5: Overview
Overview Key points Results significantly impacted by pandemic related downturns Restructuring plans stepped up yielding £58m of permanent annualised savings £107m invested for future growth, including £94m for Ellison Results Resilient margin performance at 12.3% Excellent free cash flow
Slide 6: Bodycote well placed to respond to demand shocks
Bodycote well placed to respond to demand shocks Matching resources to demand is a core skill Comprehensive site and capacity review completed late 2019 Annual planning activity includes site level contingency plans for demand shocks Strong margins Low level of debt Flexible business mod
Slide 7: Immediate pandemic related actions
Immediate pandemic related actions £7m per month of cost savings 797 FTEs laid-off (14% of workforce) 619 FTEs on short-term lay-offs (11% of workforce) £2.3m in total government labour subsidies received worldwide UK government furlough support being repaid Discretionary spending signific
Slide 8: Headline EBITDA margin evolution
Headline EBITDA margin evolution 35% Clear impact of active cost management 30% 28.8% 26.4% 25% Revenues down 19% 2 20% Costs (excluding depreciation) down 17% 2 EBITDA margins down only 2.4% 15% 10% 5% 0% H1 2020 margin¹ H1 2019 margin 1 Excluding Ellison 8 2 Like-for-like constant currency b
Slide 9: Restructuring – permanent cost savings
Restructuring – permanent cost savings £58m annualised cost savings 10% of operating expenses1 18 plant closures announced, but production capacity maintained..… 13 in Western Europe (10 Automotive and 3 Aerospace) 4 in North America (3 Automotive and 1 Aerospace) 1 AGI plant in Eastern Europe
Slide 10: H1 2020 revenue evolution
H1 2020 revenue evolution1 by Market by Geography by Technology 300 200 Revenue, £m 100 0 Aerospace Energy Automotive General Western North Emerging Specialist Classical & Defence Industrial Europe America Markets Technologies Heat Treatment (incl. Ellison) Growth % -8% -16% -31% -12% -21% -13% -7%
Slide 11: Growing prominence of Specialist Technologies
Growing prominence of Specialist Technologies Classical Heat Treatment declined 21%2 H1 2020 pro forma1 revenue£ Specialist Technologies declined 8% m Excluding Ellison Surface Technologies, decline was 16% Specialist 30% Technologies Specialist Technologies now 30% of Group revenue on pro f
Slide 12: Automotive
Automotive Revenue: £71m (23% of total revenue) YoY: -31%1 Revenue Growth1 Q1 £46.8m -9% Q2 £24.1m -53% OEM production shutdowns globally, concentrated in Q2 - now reopening Bodycote in North America heavily exposed to SUVs/Light Trucks Demand now rebounding helped by low fuel prices Europea
Slide 13: Aerospace & Defence
Aerospace & Defence Revenue: £91m (29% of total revenue) YoY: -8%1 Revenue Growth1,2 Q1 £47.5m -1% Q2 £42.8m -28% Wide-body production currently down c.50% and narrow-body down 20% to 30% with future growth shifting to higher narrow body mix Total engines produced and Revenue Passenger Kilometre
Slide 14: General Industrial
General Industrial Revenue: £119m (39% of total revenue) YoY: -12%1 Revenue Growth1 Q1 £63.7m -6% Q2 £55.5m -19% General Industrial market segments highly diversified, providing downturn protection Tooling revenues down 20% (linked to automotive) Medical revenues up 2% Capital goods driven s
Slide 15: Energy
Energy Revenue: £26m (9% of total revenue) YoY: -16%1 Revenue Growth1 Q1 £14.1m -4% Q2 £12.0m -26% Onshore oil & gas – no further expansion of Bodycote business anticipated in medium term Subsea oil & gas – encouraging, but watching carefully 1 Year on Year growth at constant currency 15
Slide 16: Summary
Summary Decisive action during an extraordinary period: Excellent H1 free cash flow generation of £69.7m versus £44.6m last year Good operational gearing of 42% Resilient operating margin of 12.3% Solid balance sheet with net debt at 30 June 2020 of £23.6m (lower than H1 2019 net debt), afte
Slide 17: Financial review
Financial review Dominique Yates Chief Financial Officer 17
Slide 18: H1 2020 results summary
H1 2020 results summary £m H1 H1 Growth Growth 2020 2019 constant currency Revenue 306.7 366.5 -16.3% -16.6% Headline operating profit 37.8 66.9 -43% -43% Headline operating margin 12.3% 18.3% Headline profit before tax 35.0 64.7 -46% -45% Headline tax rate 22.5% 24.4% Free cash flow 69.7 44.6 56% H
Slide 19: Headline operating profit bridge
Headline operating profit bridge £m 80.0 70.0 1.3 -38.0 66.9 60.0 50.0 1.7 38.3 -0.5 37.8 40.0 8.0 -1.6 30.0 20.0 H1 2019 Price minus cost Sales volume and New facilities 1 Staff bonuses Share-based 2 H1 2020 constant Foreign exchange H1 2020 increases mix payments currency Lower variable pay part
Slide 20: ADE and AGI summary
ADE and AGI summary The ADE Business £m H1 H1 Growth Growth The ADE business 2020 2019 constant currency comprises more than 60 Revenue 135.8 151.1 -10.2% -11.2% facilities primarily focused on Aerospace, Defence Headline operating profit 27.1 37.9 -28% -28% and Energy customers, but Headline oper
Slide 21: H1 2020 Sales and operating profit by currency
H1 2020 Sales and operating profit by currency GBP 8% GBP1 1% GBP 8% Other 26% Other 19% Average half year exchange rates: £1: €1.15 and £1: $1.27 EUR 36% Every cent change in the Euro is worth c.£0.3m of EUR 37% annualised operating profit Every cent change in the US dollar is worth c.£0.2m o
Slide 22: Cash flow
Cash flow Consistently strong free cash flow conversion Maintenance capex reduced in line with lower equipment usage Majority of total £20.1m cash restructuring spend to be incurred in H2; £2.8m in H1 22
Slide 23: Balance sheet and taxation
Balance sheet and taxation Balance sheet Net debt (pre IFRS 16 impact) is £23.6m (H1 2019: £25.5m), after paying £94m consideration for Ellison IFRS 16 lease liabilities of £83.0m Facility headroom £204m at 30 June Credit facility increased to £250m and extended to 2025 Taxation Headline t
Slide 24: Outlook
Outlook Stephen Harris Group Chief Executive 24
Slide 25: Key attributes
Key attributes Highly cash generative business, even in downturns Resilient margins Low level of debt Flexible business model Right sized to generate good returns during recovery and beyond Operating margins will exceed historical levels as revenue recovers Well positioned to capitalis
Slide 26: Outlook
Outlook Bodycote reacted swiftly to the sharp revenue declines arising from the pandemic related downturn. Most cost elements have been reduced in line with sales which has yielded a resilient operating margin of 12.3%. Moreover, the excellent free cash flow performance is testament to the cash gene
Slide 27: Bodycote
Bodycote
Slide 28: 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) Servic
Slide 29: Classical Heat Treatment
Classical Heat Treatment Classical Heat Treatment is It provides wear resistance, strength or toughness depending the controlled heating and on the application. Surface hardness can be controlled by diffusing elements such as carbon and nitrogen into the cooling process of metals in metal during the
Slide 30: H1 2020 Statutory income statement
H1 2020 Statutory income statement H1 H1 £m 2020 2019 Revenue 306.7 366.5 Headline operating profit 37.8 66.9 Exceptional Items (32.1) - Amortisation of acquired intangible fixed assets (4.7) (2.1) Acquisition costs (2.0) (0.4) Operating profit (1.0) 64.4 Net finance costs (2.8) (2.2) Profit before
Slide 31: Cash flow
Cash flow H1 2020 H1 2019 Post Pre Post Pre £m IFRS 16 IFRS 16 IFRS 16 IFRS 16 Headline operating profit 37.8 36.6 66.9 65.7 Add back: Depreciation and amortisation 41.0 33.7 39.0 31.7 Impairment of fixed assets 0.4 0.4 - - Income from associate (0.2) (0.2) (0.2) (0.2) Profit on disposal of fixed as
Slide 32: Net finance charge/facilities
Net finance charge/facilities H1 H1 £m 2020 2019 Interest received on bank overdrafts and loans 0.1 0.2 Net interest expense 1.6 1.4 Financing and bank charges 1.1 0.9 Pension finance charge 0.1 0.1 Total finance charge 4.9 2.4 Net finance charge (2.8) (2.2) Committed facility headroom of £203.8m
Slide 33: Financial information
Financial information H1 H1 Shares in issue 2020 2019 Weighted average 190.2m 189.8m Exchange rates H1 2020 H1 2019 Analysis by EUR Average (P&L) 1.15 1.15 currency, H1 2020 Closing (B/S) 1.10 1.12 Operating USD Average (P&L) 1.27 1.30 Sales profit Closing (B/S) 1.24 1.27 EUR 36% 37% SEK Average (P&
Slide 34: Definitions
Definitions Term Definition Headline Operating Profit Operating profit before acquisition costs, exceptional items and amortisation of acquired intangibles Headline Profit Before Tax Profit before tax, acquisition costs, exceptional items and amortisation of acquired intangibles Headline EBITDA Earn