Bodycote Plc · LSE:BOY
Bodycote — H1 2016 Earnings Presentation
30 slides from Bodycote's earnings presentation, Jul 28, 2016
Slide 1: 2016 Interim Results
Results 28 July 2016 Im 2016 Inter
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 Revenue – Like-for-like* decline of 6% • Group – excl. energy -2% • Energy -34% Headline operating margin – 16.9% (H1 2015: 18.0%) Business development – Continued high rate of investment – Specialist Technologies now 41% of Group profits (2015: 39%) – Emerging market revenues up 14%*
Slide 5: Financial review
Financial review David Landless Group Finance Director 5
Slide 6: 2016 Interim Results summary
2016 Interim Results summary H1 H1 Constant £m Currency Total change 2016 2015 exchange rates Revenue 291.0 299.8 (24.2) -8% 15.4 (8.8) -3% Headline: Operating profit 49.3 54.1 (8.2) -15% 3.4 (4.8) -9% M argin 16.9% 18.0% Profit before tax 48.1 52.6 (7.9) -15% 3.4 (4.5) -9% Restructuring charge - (1
Slide 7: Divisional summary: ADE
Divisional summary ADE H1 H1 Constant £m Currency Total change 2016 2015 exchange rates Revenue 121.9 128.8 (13.4) -10% 6.5 (6.9) -5% Headline operating profit 27.4 31.5 (5.7) -18% 1.6 (4.1) -13% M argin 22.5% 24.5% Revenue decline caused by oil & gas, down 48% YoY Otherwise margin maintained 7
Slide 8: Divisional summary: AGI
Divisional summary AGI H1 H1 Constant £m Currency Total change 2016 2015 exchange rates Revenue 169.1 171.0 (10.8) -6% 8.9 (1.9) -1% Headline operating profit 27.9 27.6 (1.5) -5% 1.8 0.3 1% M argin 16.5% 16.1% Margin improved Minimal drop-through on revenue decline Aided by sale of Brazil 8
Slide 9: Headline operating profit bridge
Headline operating profit bridge £m 0.8 -7.4 54.1 3.4 49.3 0.0 -0.8 -0.8 45.9 H1 2015 Price minus Sales Start-ups Share-based Central H1 2016 Foreign H1 2016 cost volume payments costs Constant exchange increases currency translation 9
Slide 10: Cash flow
Cash flow H1 2015 H1 2016 90 Headline EBITDA = £81m 80 Headline EBITDA = £77m 70 Capex Depreciation 1.1x depn Capex 60 Depreciation 1.2x depn 50 Working Capital 40 Working Capital Tax, Interest Tax, Interest 30 Headline & Other Headline & Other Operating Operating Restructuring 20 Profit Restructuri
Slide 11: H1 2016 Sales and operating profit by currency
H1 2016 Sales and operating profit by currency Revenue Headline operating profit 120% GBP 8% 100% Other 12% Other 80% 17% GBP stated net of central costs EUR 60% EUR 48% H1 operating profit benefit £3.4m 38% 40% USD 20% USD 45% 37% 0% GBP -5% -20% 11
Slide 12: Notes
Notes Taxation Headline tax rate 27.5% (H1 2015: 23.7%) – Historical tax losses now largely exhausted – Higher proportion of profits from higher tax jurisdictions Finance charge H1 H1 £m 2016 2015 Net interest payable - 0.1 Financing and bank charges 1.0 1.2 Pension finance charge 0.2 0.2 Net financ
Slide 13: Five year perspective
Five year perspective At H1 2016 exchange rates Sales Headline margin £m H1 % H1 H2 301 310 H2 290 287 19 19 18 19 18 18 17 17 17 298 308 321 317 291 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Headline operating profit Average headcount £m Number H2 59 5,720 5,813 5,836 5,667 54 56 52 H1 5,35
Slide 14: Business review
Business review Stephen Harris Group Chief Executive 14
Slide 15: Aerospace & defence
Aerospace & defence Revenue: £74m Constant currency decline: -0.6% Revenue £m 80 70 60 50 40 30 20 10 0 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 UK aerospace up 1%, now growing strongly North America held back by 16% business jet decline Continued strong growth in France 15
Slide 16: Energy
Energy Revenue: £26m Constant currency decline: -34.3% Revenue £m 25 Other Energy 20 Oil & Gas 15 10 5 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 Oil & gas decline stabilising No growth in other energy sectors Despite oil & gas downturn energy business st
Slide 17: Automotive
Automotive Revenue: £82m Like-for-like* growth: 0.3% Revenue £m 80 70 60 50 40 30 20 10 0 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 Like-for-like car & light truck revenues up 3% Like-for-like heavy truck down 15% Specialist Technologies delivered strong growth *Like-for-like sales growth rates
Slide 18: General industrial
General industrial Revenue: £109m Like-for-like* decline: -5.0% Revenue £m 120 100 80 60 40 20 0 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 Widespread softness in Industrial Production Capital equipment and aftermarket demand remain weak *Like-for-like sales growth rates are at constant exchange ra
Slide 19: H1 2016 Headline operating profit
H1 2016 Headline operating profit Specialist Specialist Technologies profit Technologies 41% now 41% of Group39% (H1 2015: 39%) Classical Heat Investment in greenfield (2014: 38%)sites Treatment 59% and additional capacity on track (H1 2015: 61%) 19
Slide 20: Brexit effect on Bodycote
Brexit effect on Bodycote Cross-border trading Nil: All countries served in territory UK economy impact Trivial: UK non-aerospace only 5% of Group sales FX translation Beneficial: 2015 Sterling averages $1.53 and €1.38 20
Slide 21: Summary
Summary Energy – Down 34% YoY (oil & gas down 48%) Other revenues – Down 2% (like-for-like) – Margin maintained Specialist Technologies – Increased share of Group profits FX impact – H1 operating profit benefit of £3.4m Interim dividend – 5.0p, up 4.2% Balance sheet – Minimal leverage 21
Slide 22: Outlook
Outlook The Group has again demonstrated its ability to deal with challenging market conditions, including delivery of a continued improvement in the AGI margin. This has been achieved against a background of subdued demand for industrial machinery and a further substantial decline in oil & gas reve
Slide 23: Slide 23
Slide 24: 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 25: H1 2016 Statutory income statement
H1 2016 Statutory income statement £m H1 2016 H1 2015 Revenue 291.0 299.8 Headline operating profit 49.3 54.1 Amortisation of acquired intangible fixed assets (2.2) (2.1) Reorganisation costs - (19.9) Operating profit 47.1 32.1 Net finance costs (1.2) (1.5) Profit before tax 45.9 30.6 Headline earni
Slide 26: H1 2016 Cash flow
H1 2016 Cash flow £m H1 2016 H1 2015 Headline operating profit 49.3 54.1 Add back: Depreciation and amortisation 26.0 26.0 Share-based payments 1.6 0.8 Net capex to depreciation Headline EBITDA 76.9 80.9 ratio 1.2 times Net capital expenditure (31.0) (29.2) Net working capital movement (7.9) (11.5)
Slide 27: 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 28: Net finance charge/facilities
Net finance charge/facilities £m H1 2016 H1 2015 Net interest payable - 0.1 Financing and bank charges 1.0 1.2 Pension finance charge 0.2 0.2 Net finance charge 1.2 1.5 Committed facility headroom of £230m at 30 June 2016, £5.4m drawn The remaining life of the £230m committed facility is 3 years
Slide 29: Pension analysis
Pension analysis £m H1 2016 H1 2015 FY 2015 UK Funded (1.0) 0.8 2.7 Other Western Europe Funded 2.3 1.7 2.0 Other Western Europe Unfunded 14.3 12.6 12.6 Western Europe Total 15.6 15.1 17.3 North America Funded 0.5 0.6 0.5 Emerging Markets Unfunded 0.1 0.1 0.1 Total retirement benefit obligations 16.
Slide 30: Financial information
Financial information Shares in issue H1 2016 H1 2015 Weighted average 190.1m 190.0m Exchange rates H1 2016 H1 2015 EUR Average (P&L) 1.29 1.37 Closing (B/S) 1.20 1.41 USD Average (P&L) 1.43 1.53 Closing (B/S) 1.32 1.57 SEK Average (P&L) 11.92 12.77 Closing (B/S) 11.29 13.04 Analysis by currency, H1