Bodycote Plc · LSE:BOY
Bodycote — H1 2021 Earnings Presentation
36 slides from Bodycote's earnings presentation, Jul 29, 2021
Slide 1: Group Marketing Update
Group Marketing Update
Slide 2: Introduction
Introduction Stephen Harris Group Chief Executive
Slide 3: Agenda
Agenda Overview Financial Review Business Review Summary and Outlook 3
Slide 4: Strong profit and cash performance
Strong profit and cash performance Revenues up 5.9%1 to £312.9m (2.0% at actual rates) Profit up 35%2 to £48.7m Margin3 increased to 15.6% (2020: 12.3%); with AGI margins above 20% for the first time Free cash flow of £60m (124% free cash conversion) Profits benefit strongly from restructu
Slide 5: Strong operational execution
Strong operational execution Ellison Organic Revenue1 Margin1 FTE £m 400 20% 6,000 300 15% 4,000 200 10% 2,000 100 5% 0 0% 0 H1 2019 H1 2020 H1 2021 H1 2019 H1 2020 H1 2021 H1 2019 H1 2020 H1 2021 Good margin improvements coming through from restructuring savings and efficiency improvements 1 Cons
Slide 6: Financial review
Financial review Dominique Yates Chief Financial Officer
Slide 7: H1 2021 results summary
H1 2021 results summary £m H1 H1 Growth Growth 2021 2020 constant currency Revenue 312.9 306.7 2.0% 5.9% Headline operating profit 48.7 37.8 29% 35% Headline operating margin 15.6% 12.3% Headline profit before tax 45.8 35.0 31% Headline tax rate 22.5% 22.5% Free cash flow 60.2 69.7 -14% Headline EPS
Slide 8: Headline operating profit bridge
Headline operating profit bridge £m H1 2020 Price minus Volume & Bonus & Ellison H1 2021 Foreign H1 2021 cost increase mix share plans constant exchange currency Inflation more than offset by price increases, once again Early indications of wage inflation in some geographies, which will be passe
Slide 9: Restructuring progress on track
Restructuring progress on track Closure of 19 facilities completed by end of H1 (14 AGI plants; 5 ADE plants) Closure of remaining 7 facilities in restructuring programme (4 AGI plants; 3 ADE plants) will be completed in H2 3 new facilities in operation Restructuring costs in line with provi
Slide 10: AGI and ADE summary
AGI and ADE summary The AGI Business £m H1 H1 Growth Growth The AGI business comprises more 2021 2020 constant currency than 100 facilities primarily focused on Automotive and General Industrial Revenue 192.5 170.9 12.6% 15.8% customers Circa 60% of the AGI business is in Headline operating prof
Slide 11: Excellent performance in AGI with ADE expected to follow
Excellent performance in AGI with ADE expected to follow The AGI Business AGI revenue recovery well under £m Revenue1 £m Profit1 way boosted by Specialist 250 50 Technologies and Emerging 200 40 Markets 150 30 AGI profits and margins 100 20 benefiting from well advanced 50 10 restructuring progr
Slide 12: Cash flow
Cash flow H1 2020 £m Headline EBITDA = £79m 100 H1 2021 Headline EBITDA = £84m Working capital Capex Working capital 80 Capex Tax & interest Tax & interest Restructuring Depreciation Depreciation & other Restructuring & other 60 40 £60m £70m Headline Operating Profit free Headline free Excellent f
Slide 13: Balance sheet and taxation
Balance sheet and taxation Balance sheet Net debt is £70m1 (H1 2020: £24m), £58m consideration for Ellison and £37m of dividends paid in H1 Financial leverage at 0.5x net debt : EBITDA Facility headroom of £152m at 30 June 2021 £251m credit facility extended 1 year, now matures in May 2026
Slide 14: Market sector review
Market sector review Stephen Harris Group Chief Executive
Slide 15: Addressing climate change
Addressing climate change On the path to Net Zero emissions in line with Paris Agreement Developing our Science Based Targets Assessing and managing climate related risks in line with Task Force on Climate-Related Financial Disclosures (TCFD) Carbon reduction plan progressing well Moving f
Slide 16: Group revenue progression
Group revenue progression Revenue1 £m 190 170 150 130 110 90 70 50 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Group revenues showing steady sequential recovery, but Q2 run rate is still 10.6% below 2019 levels 1 Constant currency 16
Slide 17: Market sector quarterly revenue progression
Market sector quarterly revenue progression £m £m Automotive1 £m Aerospace & Defence1 General Industrial1 70 70 70 60 60 60 50 50 50 40 40 40 30 30 30 20 20 20 10 10 10 0 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2019 2019 2019 2019 2020 2020 2020
Slide 18: General Industrial
General Industrial Revenue: £126.7m (41% of total revenue) YoY Growth 1 : 9% £m Revenue 70 60 50 40 30 20 10 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 General Industrial revenues showing steady growth – almost back to 2019 levels No major differences in gr
Slide 19: Automotive
Automotive Revenue: £91.7m (29% of total revenue) YoY Growth 1 : 33% £m Revenue 60 50 40 30 20 10 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 Q2 revenue declined due to supply chain problems, including the impact of the global chip shortage No major improvem
Slide 20: Aerospace & Defence
Aerospace & Defence Revenue: £71.0m (23% of total revenue) YoY Change 1 : -25% £m Revenue 60 50 40 30 20 10 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 Revenue recovery so far primarily driven by increased flying hours Revenues derived from business closest
Slide 21: Emerging Markets
Emerging Markets Revenue: £37.3m (12% of total revenue) YoY Growth 1 : 36% £m Revenue 20 15 10 5 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 36% Emerging Markets growth vs. 16% growth in Western Europe and North America Automotive and General Industrial Emer
Slide 22: Specialist Technologies
Specialist Technologies Revenue1 Profit 1,2 70% 30% 57% 43% Specialist Technologies H1 2020: 27% Classical Heat H1 2020: 73% Treatment Strategic focus on expanding Specialist Technologies continues to deliver AGI focused Specialist Technologies revenues up 42% on 2020, compared with 14% increase
Slide 23: H1 2021 revenue profile
H1 2021 revenue profile 1 by by Market Market by byGeography Geography by Technology by Technology £m 200 Revenue 100 0 Aerospace Energy Automotive General Western North Emerging Specialist Classical & Defence Industrial Europe America Markets Technologies Heat Treatment Growth % vs 2020 -16% -7% 34
Slide 24: Strategic progress
Strategic progress Development of Specialist Technologies continues apace. Good growth compared to background markets Expansion in Emerging Markets showing excellent progress with revenues now well above 2019 revenues Increasing focus on supporting production for electric vehicles, particularl
Slide 25: Summary
Summary Profits1,2 up 35% on revenues1,2 up 5.9% Restructuring programme delivering savings as expected Production efficiencies improving with gearing of more than 70%2 Excellent cash generation (124% free cash flow conversion) Growth due to accelerate once short-term supply chain issues f
Slide 26: Outlook
Outlook We expect growth to accelerate once short-term supply chain disruptions are eliminated in the Automotive and General Industrial markets and Civil Aerospace begins its upward climb, but none of these effects are expected to be material until 2022. However, the benefits of our 2020 restructuri
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Slide 28: Specialist Technologies
Specialist Technologies A selection of highly differentiated, early-stage processes with high margins, significant market opportunities, and good growth prospects. Bodycote is either the clear market leader or one of the top players among a small number of competitors. Hot Isostatic Pressing Surface
Slide 29: Classical Heat Treatment
Classical Heat Treatment Classical Heat Treatment is It provides wear resistance, strength or toughness the process of controlled depending on the application. Surface hardness can be heating and cooling of controlled by diffusing elements such as carbon and metals in order to obtain nitrogen into t
Slide 30: H1 2021 revenue profile
H1 2021 revenue profile 1 byby Market Market byby Geography Geography by Technology by Technology £m 200 Revenue 100 0 Aerospace Energy Automotive General Western North Emerging Specialist Classical & Defence Industrial Europe America Markets Technologies Heat Treatment Growth % vs 2020 -16% -7% 34%
Slide 31: 2021 Statutory income statement
2021 Statutory income statement £m H1 2021 H1 2020 Revenue 312.9 306.7 Headline operating profit 48.7 37.8 Amortisation of acquired intangible assets (5.1) (4.7) Acquisition costs (0.2) (2.0) Exceptional items - (32.1) Operating profit/(loss) 43.4 (1.0) Net finance charge (2.9) (2.8) Profit/(loss) b
Slide 32: Cash flow
1 Cash flow H1 2021 H1 2020 Post Pre Post Pre £m IFRS 16 IFRS 16 IFRS 16 IFRS 16 Headline operating profit 48.7 47.5 37.8 36.6 Add back: Depreciation and amortisation 37.7 30.8 41.0 33.7 Impairment of fixed assets - - 0.4 0.4 Income from associates (0.2) (0.2) (0.2) (0.2) (Profit)/loss on disposal o
Slide 33: Net finance charge/facilities
Net finance charge/facilities £m H1 2021 H1 2020 Interest received on bank deposits and loans - 0.1 Net interest expense (1.5) (1.7) Financing and bank charges (1.3) (1.1) Pension finance charge (0.1) (0.1) Total finance charge (2.9) (2.9) (2.9) (2.8) Net finance charge Committed facility headroom
Slide 34: 2021 Sales and operating profit by currency
2021 Sales and operating profit1 by currency GBP1 3% Operating profit translation decrease of £2.3m GBP 7% Other 17% Other 32% Average full year exchange rates: £1: €1.15 Other 22% and £1: $1.39 Every cent change in the Euro is worth c.£0.3m of annual operating profit EUR 39% EUR EUR37% 37% EU
Slide 35: Financial information
Financial information H1 H1 Shares in issue 2021 2020 Weighted average 190.7m 190.2m Exchange rates H1 2021 H1 2020 Analysis by EUR Average (P&L) 1.15 1.15 currency, H1 2021 Closing (B/S) 1.17 1.10 Operating USD Average (P&L) 1.39 1.27 Sales profit Closing (B/S) 1.38 1.24 EUR 37% 42% SEK Average (P&
Slide 36: 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