Bodycote Plc · LSE:BOY
Bodycote — H1 2015 Earnings Presentation
33 slides from Bodycote's earnings presentation, Jul 30, 2015
Slide 1: 2015 Interim Results
Slide 2: Introduction
Introduction Stephen Harris Group Chief Executive 2
Slide 3: Agenda
Agenda Summary Financial review Business review Outlook 3
Slide 4: Summary
Summary Revenues down 1% at constant currency – Sharp drop in Oil & Gas activity disguises progress elsewhere Headline operating margin maintained at 18.0% – Reduction in ADE fully offset by further progression in AGI Exceptional restructuring charge of £20m – Further business improvements in
Slide 5: Financial review
Financial review David Landless Group Finance Director 5
Slide 6: 2015 Interim Results summary
2015 Interim Results summary H1 H1 Constant £m Currency Total change 2015 2014 exchange rates Revenue 299.8 312.3 (3.5) -1% (9.0) (12.5) -4% Headline: Operating profit 54.1 56.1 (0.8) -1% (1.2) (2.0) -4% Margin M argin 18.0% 18.0% Profit before tax 52.6 54.5 (0.7) -1% (1.2) (1.9) -4% Exceptional res
Slide 7: Exceptional restructuring charge
Exceptional restructuring charge 15 £20m non-recurring H1 charge, 10 Other £m more than half relates to Brazil 5 Other Brazil Brazil 0 Cash Non-cash Cash cost £12m (£10m in H2 2015, £2m in 2016) Asset impairments £8m H2 benefit £4m Additional 2016 benefit £6m Total ongoing benefit £10m 7
Slide 8: Divisional summary
Divisional summary H1 H1 Constant £m Currency Total change 2015 2014 exchange rates ADE Divisions Revenue 128.8 133.5 (5.9) -4% 1.2 (4.7) -4% Headline Operating Profit 31.5 36.0 (5.2) -14% 0.7 (4.5) -13% Margin M argin 24.5% 27.0% AGI Divisions Revenue 171.0 178.8 2.4 1% (10.2) (7.8) -4% Headline Op
Slide 9: Headline operating profit bridge
Headline operating profit bridge £m 56.1 0.1 -1.2 1.3 -0.2 55.3 -1.2 -0.8 54.1 H1 2014 Price minus Sales volume Start-Ups Share-based Central costs H1 2015 Foreign H1 2015 cost payments Constant exchange increases currency translation 9
Slide 10: Cash flow
Cash flow £m H1 2014 H1 2015 90 Headline EBITDA = £84m Headline EBITDA = £81m 80 70 Depreciation Capex Depreciation Capex 60 50 Working Working Capital Capital 40 Tax, Interest & Other Headline Headline Tax, Interest 30 Operating Operating & Other Profit £32m Profit 20 free £21m 10 cash free cash 0
Slide 11: Notes
Notes Currency Profit translation negative £1.2m in H1 c.£3.5m full year impact if current rates persist Taxation Headline tax rate 23.7% (H1 2014: 22.8%) H1 effective tax rate 34.1%, due to restructuring charge for Brazil 11
Slide 12: Five year perspective
Five year perspective At H1 2015 exchange rates Sales Headline margin H1 H2 £m H2 % 284 292 18 18 18 19 274 H1 18 256 16 17 15 15 282 291 303 300 0 260 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Headline operating profit Average headcount £m H2 H1 55 50 52 5,720 5,813 5,836 5,742 5,532 39 49
Slide 13: Business review
Business review Stephen Harris Group Chief Executive 13
Slide 14: Topics
Topics Market segments Margin progression Specialist technologies Restructuring 14
Slide 15: Energy
Energy Revenue: £38m Constant currency decline: -13.6% 12% YOY organic growth trend 8% 4% 0% -4% -8% -12% -16% H1 2014 H2 2014 H1 2015 15
Slide 16: Energy
Energy Revenue: £38m Constant currency decline: £6m Quarterly Revenue, £m 25 Oil & Gas fell sharply in Q2 20 15 Oil & Gas - Dramatic reduction in Heat Treatment 10 IGT & Power Gen. and Surface Technology 5 0 - Impact lessened due to robust HIP PF Q1 Q2 2,500 2.50 subsea revenues 2,000 2.00 IGT a
Slide 17: General Industrial
General Industrial Revenue: £112m Constant currency decline: -3.0% 12% YOY organic growth trend 8% 4% 0% -4% -8% -12% -16% H1 2014 H2 2014 H1 2015 Some softness, largely an Oil & Gas knock-on effect Commodity price weakness affected industrial machinery, particularly agricultural equipment 17
Slide 18: Aerospace & Defence
Aerospace & Defence Revenue: £70m Constant currency growth: 3.0% 8% YOY organic growth trend 4% 0% -4% H1 2014 H2 2014 H1 2015 North America and France achieved strong growth on new narrow body programmes UK Aero down 4%, driven by lower customer production rates 18
Slide 19: Automotive
Automotive Revenue: £80m Constant currency growth: 5.1% 8% YOY organic growth trend 4% 0% -4% H1 2014 H2 2014 H1 2015 Car & light truck up 7% Solid growth driven by programme wins Margin improvement in all territories Programme specific issues held back European heavy truck 19
Slide 20: Headline operating margin bridge
Headline operating margin bridge % 0.3% 18.1% -0.2% 18.0% -1.2% 0.1% 18.0% 0.9% 1.0% -0.9% 20
Slide 21: Specialist technologies
Specialist technologies Encouraging growth from specialist technologies 30% Constant currency revenue growth 25% 20% 15% Impacted by Oil & Gas 10% 5% 0% -5% -10% -15% LPC HIP CiD S3P S3P HIP Surface Services Product Technology Fabrication 21
Slide 22: Restructuring
Restructuring Brazil Economy continues to deteriorate Annualised benefit £3m Cash cost £6m Automotive production contracting rapidly Non-cash cost £5m Oil & Gas growth potential now distant Total Cost £11m Poor prospects precipitate withdrawal 22
Slide 23: Restructuring
Restructuring Annualised benefit: £4m AGI Europe Cost: £8m Exiting low margin activity Rightsizing operations Annualised benefit: £3m Oil & Gas Cost: £1m Reducing fixed costs 23
Slide 24: Looking ahead
Looking ahead Near-term: H2 similar to H1 2016 and beyond: Oil & Gas destocking will end before cyclical recovery Continued momentum from Automotive programme wins UK Aero recovery unlikely until late 2016, but good growth thereafter Global aerospace secular growth will continue Further
Slide 25: Outlook
Outlook The Group’s performance was resilient in the first half, with business improvements mitigating the sharp cutback in oil & gas activities. No upturn is anticipated in the second half in oil & gas and general industrial demand is expected to remain soft. However, the second half will benefit f
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Slide 27: 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 28: H1 2015 Statutory income statement
H1 2015 Statutory income statement £m H1 2015 H1 2014 Revenue 299.8 312.3 Headline operating profit 54.1 56.1 Amortisation of acquired intangible fixed assets (2.1) (1.9) Reorganisation costs (19.9) - Operating profit 32.1 54.2 Net finance costs (1.5) (1.6) Profit before tax 30.6 52.6 Headline earni
Slide 29: H1 2015 Cash flow
H1 2015 Cash flow £m H1 2015 H1 2014 Headline operating profit 54.1 56.1 Add back: Depreciation and amortisation 26.0 26.4 Share-based payments 0.8 1.9 Net capex to depreciation Headline EBITDA 80.9 84.4 ratio 1.1 times Net capital expenditure (29.2) (31.5) Net working capital movement (11.5) (8.9)
Slide 30: 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 31: Net finance charge/facilities
Net finance charge/facilities £m H1 2015 H1 2014 Net interest payable 0.1 0.1 Financing and other costs 1.2 1.2 Pension finance charge 0.2 0.3 Net finance charge 1.5 1.6 Average remaining life of £230m committed facility is 4 years Committed facility headroom of £218m at 30 June 2015 Closing n
Slide 32: Pension analysis
Pension analysis £m H1 2015 H1 2014 FY 2014 UK Funded 0.8 4.6 1.0 Other Western Europe Funded 1.7 1.2 1.6 Other Western Europe Unfunded 12.6 11.9 13.7 Western Europe Total 15.1 17.7 16.3 North America Funded 0.6 0.2 0.6 Emerging Markets Unfunded 0.1 0.1 0.1 Total retirement benefit obligations 15.8
Slide 33: Financial information
Financial information Shares in issue H1 2015 H1 2014 Weighted average 190.0m 190.2m Exchange rates H1 2015 H1 2014 EUR Average (P&L) 1.37 1.22 Closing (B/S) 1.41 1.25 USD Average (P&L) 1.53 1.67 Closing (B/S) 1.57 1.71 SEK Average (P&L) 12.77 10.92 Closing (B/S) 13.04 11.43 Analysis by currency, H1