Bodycote Plc · LSE:BOY
Bodycote — FY2014 Earnings Presentation
38 slides from Bodycote's earnings presentation, Feb 26, 2015
Slide 1: 2014 Full Year Results
2014 Full Year Results 26 February 2015
Slide 2: Introduction
Introduction Stephen Harris Chief Executive 2
Slide 3: Agenda
Agenda Highlights Financial review Business review Outlook 3
Slide 4: Highlights
Highlights Encouraging revenue growth, before adverse exchange effects Further increases in Group headline margin and operating profit Return on Capital Employed increased 80 basis points to 20.7% Net cash of £36m Final ordinary dividend of 9.8p, 14.4p for the year, up 7% Special dividen
Slide 5: Financial review
Financial review David Landless Finance Director 5
Slide 6: 2014 Results summary
2014 Results summary constant £m 2014 2013 change currency Revenue 609.1 619.6 -2% 4% Headline: Operating profit 111.1 107.4 3% 9% M argin 18.2% 17.3% 90 bp Profit before tax 107.8 103.7 4% 10% Net cash 35.7 15.0 Headline EPS 43.8p 41.2p 6% Return on Capital Employed 20.7% 19.9% 80 bp Dividend Ordin
Slide 7: Headline operating profit bridge
Headline operating profit bridge £m 1.8 -6.2 2.2 3.0 -0.9 2.6 111.1 1.2 107.4 2013 Price minus Sales mix Sales volume Start-Ups Share-based Central costs Foreign 2014 cost payments exchange increases translation 7
Slide 8: Divisional summary
Divisional summary constant £m 2014 2013 change currency ADE Divisions Revenue 263.0 261.8 - 5% Headline Operating Profit 70.6 70.7 - 4% M argin 26.8% 27.0% AGI Divisions Revenue 346.1 357.8 -3% 3% Headline Operating Profit 54.1 52.7 3% 9% M argin 15.6% 14.7% 8
Slide 9: 2014 Cash flow
2014 Cash flow £m 180 Headline EBITDA = £166m 160 Capex covered by depreciation 140 Depreciation Capex Maintenance / expansionary capex split 120 approx 50:50 100 Tax, WC & Interest Low working capital 80 39.5p free cash per share Headline 60 Operating Profit £75m 40 free 20 cash 0 Headline
Slide 10: Cash performance
Cash performance £m, at constant currency 180 2012 2013 2014 160 140 Depreciation Capex Depreciation Capex Depreciation Capex 120 100 Tax, WC Tax, WC Tax, WC & interest & interest & interest 80 60 Headline Headline £79m Headline £74m Operating £75m Operating Operating Profit 40 Profit free Profit fr
Slide 11: Central costs
Central costs Underlying central costs £15.7m £16.0m £13.6m Share based payments One-off costs, principally asset impairments Underlying 2012 2013 2014 11
Slide 12: Notes
Notes Currency $ € 2014 Average exchange rate 1.65 1.24 Today's exchange rate 1.54 1.36 Potential effect on 2015 headline operating profit (£m) 4.4 (4.8) Finance charges £m 2014 2013 Net interest payable 0.2 0.6 Financing & other costs 2.5 2.5 Pension finance charge 0.6 0.6 Net finance charge 3.3 3.
Slide 13: Financial summary
Financial summary 4% constant currency revenue growth Headline operating profit up 9% at constant currency Headline margin 18.2%, up 90 basis points Return on capital employed up 80 basis points to 20.7% Headline operating cash of £100m, 90% conversion Net cash of £36m 13
Slide 14: Five year perspective
Five year perspective At 2014 exchange rates Revenue Headline margin £m 609 % 18.2 569 586 16.8 17.3 532 15.1 466 10.4 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Headline operating profit ROCE At actual rates £m % 19.9 20.7 111 17.9 95 102 16.3 80 10.2 49 2010 2011 2012 2013 2014 2010 2011 20
Slide 15: Business review
Business review Stephen Harris Chief Executive Low Pressure Carburising (LPC) LPC is a case hardening process carried out in a vacuum furnace using hydrocarbon gases at very low pressure and elevated temperatures to obtain a hardened surface layer of tempered martensite and a tough core. The treatme
Slide 16: Aerospace & Defence
Aerospace & Defence Revenue: £133m Constant currency growth: 1.7% 15% YOY organic growth trend 10% 5% 0% -5% Jan Dec Defence down 6%, weak in both North America and Europe Defence (including dual-use) approx 5% of total Group revenue Aerospace up 4% UK Aero revenue down 7%, impacted by OEM s
Slide 17: Energy
Energy Revenue: £84m Constant currency growth: 7.4% 15% YOY organic growth trend 10% 5% 0% -5% Jan Dec Oil & Gas strongly ahead; 2013 impacted by severe destocking On-shore growth weakened as year progressed Strong sub-sea growth, driven by rapid adoption of HIP PF Power generation revenue s
Slide 18: Automotive
Automotive Revenue: £151m Constant currency growth: 4.1% 15% YOY organic growth trend 10% 5% 0% -5% Jan Dec Car & light truck up 5% North America grew stongly driven by continued market share gains Improved sales & marketing efforts, particularly in France and Germany, delivered good growth in
Slide 19: General Industrial
General Industrial Revenue: £241m Constant currency growth: 4.2% 15% YOY organic growth trend 10% 5% 0% -5% Jan Dec Strong outperformance versus the market in Western Europe Tooling, construction equipment and general machinery sales were robust S3P market expansion delivered strong growth, pa
Slide 20: Classical Heat Treatment and Specialist Technologies
Classical Heat Treatment and Specialist Technologies Classical Heat Treatment Specialist Technologies Bodycote’s traditional business including: Six Bodycote technologies with: Nitriding high growth rates Carburising margins in excess of 30% Annealing great future potential Temperi
Slide 21: Specialist Technologies
Specialist Technologies What are they? Hot Isostatic Pressing HIP Services Low Pressure Carburising Product Fabrication Specialty Stainless Steel Surface Technology Corr-I-Dur® Processes 21
Slide 22: 2014 Revenue & headline operating profit split
2014 Revenue & headline operating profit split 2014 Revenue 2014 Headline operating profit 24% 38% Specialist Technologies Classical Heat Treatment 62% 76% Specialist Technologies now 24% of total Group revenue, up from 14% in 2007 22
Slide 23: Performance: Classical Heat Treatment
Performance Classical Heat Treatment Improving the mix Focusing on higher added-value business Improving the footprint, aligning with opportunity 1% revenue growth at constant exchange rates Headline margin expanded 60 basis points to 16.6% 23
Slide 24: Business developments: Classical Heat Treatment
Business developments Classical Heat Treatment Improving the mix Focusing on higher added-value business Improving the footprint, aligning with opportunity Further expansion into rapid growth countries (greenfields opened in China and Turkey; capacity additions in Mexico) Focus on improved effic
Slide 25: Performance: Specialist Technologies
Performance Specialist Technologies High growth Superior margins Strong market positions 17% revenue growth at constant exchange rates Headline margin 33% (stated before central costs) 25
Slide 26: Business developments: Specialist Technologies
Business developments Specialist Technologies High growth Superior margins Strong market positions S3P - Capacity enhanced, good revenue growth ST - Contract win for thermal spray on landing gear HIP Services - High pressure capacity added in North America HIP PF - Very strong revenue growth
Slide 27: Looking ahead: Oil & Gas
Looking ahead Oil & Gas 10% of Group revenue Bodycote NA Oil & Gas Revenue & US Rig Count 35 Global Sub-sea Capex 2.5 2,500 30 2.0 2,000 £m per month 25 Capex $Bn Rigs 1.5 1,500 20 1.0 1,000 15 Bodycote NA Oil & Gas revenue 10 0.5 500 US Rig Count 5 0.0 0 0 Dec-07 May-08 Oct-08 Nov-10 Jul-07 Mar-09
Slide 28: Looking ahead: Aerospace and Automotive
Looking ahead Aerospace Automotive – Car & light truck 17% of Group revenue 20% of Group revenue Aircraft Deliveries Car & light truck production 40,000 2,000 35,000 Europe US Wide body 30,000 1,500 25,000 Units Narrow body 1,000 20,000 15,000 500 10,000 5,000 0 0 Source: Boeing & Airbus, Credit Sui
Slide 29: Outlook
Outlook The Group delivered another good performance in 2014. Revenue, at constant exchange rates, was ahead 4% and we achieved further improvement in margin and return on capital employed, in addition to strong cash generation. As we begin 2015 a number of macro-economic uncertainties persist. Neve
Slide 30: Slide 30
Slide 31: 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 32: 2014 Statutory income statement
2014 Statutory income statement £m 2014 2013 Revenue 609.1 619.6 Headline operating profit 111.1 107.4 Amortisation of acquired intangible fixed assets (3.9) (4.5) Acquisition costs (0.2) - Reorganisation costs - (0.8) Operating profit 107.0 102.1 Net finance costs (3.3) (3.7) Profit before tax 103.
Slide 33: Cash flow detail
Cash flow detail £m 2014 2013 Headline operating profit 111.1 107.4 Add back: Depreciation and amortisation 52.5 57.9 Share-based payments 1.9 3.6 Net capex to depreciation ratio Headline EBITDA 165.5 168.9 1.0 times (Gross ratio = 1.1 x) Net capital expenditure (53.8) (57.3) Net working capital mov
Slide 34: 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 35: Net finance charge/facilities
Net finance charge/facilities £m 2014 2013 Net interest payable 0.2 0.6 Financing costs 1.6 1.5 Other charges 0.9 1.0 Pension finance charge 0.6 0.6 Net finance charge 3.3 3.7 Interest payable: decrease due to lower average net debt Financing costs: higher following extension of RCF in July 2014
Slide 36: Pension analysis
Pension analysis £m 2014 2013 UK Funded 1.0 4.8 Other Western Europe Funded 1.6 1.2 Other Western Europe Unfunded 13.7 12.1 Western Europe Total 16.3 18.1 North America Funded 0.6 0.2 Emerging Markets Unfunded 0.1 0.2 Total retirement benefit obligations 17.0 18.5 £m 2014 2013 Western Europe Unfunde
Slide 37: Financial information
Financial information Shares in issue 2014 2013 Financial ratios 2014 2013 Weighted average 190.2m 189.4m Net Debt : Headline EBITDA net cash net cash Headline EBITDA Interest Cover 827x 282x Exchange rates 2014 2013 Gearing (Net Debt:Total Equity) net cash net cash EUR Average (P&L) 1.24 1.18 Closi
Slide 38: Divisional summary – 2014 H1 v H2
Divisional summary – 2014 H1 v H2 £m ADE Divisions H1 H2 Total Revenue 133.5 129.5 263.0 Headline operating profit 36.0 34.6 70.6 Margin 27.0% 26.7% 26.8% AGI Divisions H1 H2 Total Revenue 178.8 167.3 346.1 Headline operating profit 25.3 28.8 54.1 Margin 14.1% 17.2% 15.6% 38