Slide 1: Full Year Results 2020
Full Year Results 2020 12 March Bodycote
Slide 2: Introduction
Introduction Stephen Harris Group Chief Executive 2
Slide 3: Agenda
Agenda Key messages Financial review Market sector review Restructuring and strategy Looking ahead 3
Slide 4: Committed to sustainability in all we do
Committed to sustainability in all we do The Bodycote way: prioritising our culture and values Rate of injuries Employees' safety and wellbeing remains our number one fell by 18% priority Total CO2 Living our Core Values and creating value in everything we do Senior emissions Management down aga
Slide 5: Business transformed, resilience proven, structured for growth
Business transformed, resilience proven, structured for growth Results Organic revenues declined 20% Resilient headline EBITDA margin at 26.4% (2019: 29.2%) Excellent free cash flow conversion of 141% (2019: 91%) Closing net debt of £23m after paying £96m of the consideration for Ellison Str
Slide 6: Resilience proven
Resilience proven Margin1 Trough FTE revenue decline 20% 19% 33% 8,000 16% 15% 13% 7,000 Trough 13% revenue 11% decline 10% 31% 6,000 5% 5,000 2% 0% 4,000 2008 2009 2010 2011 2019 2020 2008 2009 2010 2011 2019 2020 Headline operating margin in 2020 comparable to peak margin achieved in the decade pr
Slide 7: Business transformed, resilience proven, structured for growth
Business transformed, resilience proven, structured for growth 2020 demonstrated the strength of our business model Flexible cost Bodycote’s business has transformed over the last decade base 2020 has ‘live-tested’ the flexibility of our cost base All key cost lines (apart from depreciation) f
Slide 8: Financial review
Financial review Dominique Yates Chief Financial Officer 8
Slide 9: 2020 Results summary
2020 Results summary £m 2020 2019 Growth Growth constant currency Revenue 598.0 719.7 -16.9% -16.6% Headline operating profit 75.3 134.9 -44% -44% Headline EBITDA margin 26.4% 29.2% Headline operating margin 12.6% 18.7% Headline profit before tax 68.8 130.2 -47% -47% Headline tax rate 22.5% 23.8% Fr
Slide 10: Headline operating profit bridge
Headline operating profit bridge £m 160 140 134.9 0.5 -75.3 120 100 14.8 75.8 -0.5 75.3 80 0.9 60 40 20 0 2019 Price minus cost Sales volume & Ellison Bonus & Share 2020 constant Foreign exchange 2020 increases mix based payments currency Lower variable pay partially offsets sales volume downturn 10
Slide 11: Excellent cash flow
Excellent cash flow £'m 2019 240 Headline EBITDA = £210m 220 2020 Restructuring & 200 Headline EBITDA = £158m Exceptional Tax & Interest 180 Restructuring Depreciation & other Working Capital Working Capital 160 Tax & Interest Capex 140 Capex 120 Depreciation & other 100 Headline Operating 80 Profit
Slide 12: Resilient EBITDA margin
Resilient EBITDA margin 2 £m 800 35% 1 Revenues down 20% 700 30% 1 Costs (excluding depreciation) down 17% 600 25% 1 EBITDA margin2 down only 2.3% to 26.8% 500 20% EBITDA margin2 still above 2016 and 2017 levels 400 15% 300 10% 200 100 5% 0 0% 2016 2017 2018 2019 2020 Revenue Margin 1 Consta
Slide 13: ADE and AGI summary
ADE and AGI summary The ADE Business £m 2020 2019 Growth Growth The ADE business comprises of more than 60 facilities primarily constant currency focused on Aerospace, Defence and Revenue 249.2 301.4 -17.3% -17.2% Energy customers, but also includes Headline operating profit 36.8 75.8 -51% -52% ap
Slide 14: Aligning costs with revenues
Aligning costs with revenues 1 H2 2020 Revenue and cost² ADE AGI Aligning costs with revenues is key to Bodycote’s Revenue Cost Revenue Cost margin resilience 0% Cost flexibility and swift management action are key -10% ADE has done a good job with cost reduction, Growth but scale of revenue d
Slide 15: Restructuring savings
Restructuring savings £m £52m total restructuring charge taken in the year, including £16m of infrastructure impairment £36m cash cost; programme largely completed in 2020, with most of the cash outflow due during 2021 2020 benefit negligible, as initial restructuring benefits offset by ineffi
Slide 16: Balance sheet and taxation
Balance sheet and taxation Balance sheet Net debt (excluding lease liabilities) is £23m (2019: net cash £21m) after paying £96m of the consideration for Ellison IFRS16 lease liabilities of £76m Facility headroom of £199m at 31 December 2020 £251m credit facility matures in 2025 Tax Headlin
Slide 17: Market Sector Review
Market Sector Review Stephen Harris Group Chief Executive 17
Slide 18: Market sector revenue and organic growth
1 Market sector revenue and organic growth Revenue (£m) 232 159 156 51 Largest parts of the business declined the least… …which are well advanced in recovery Growth Aerospace & Defence have a more complex path 18
Slide 19: General Industrial
General Industrial Revenue: £232m (39% of total revenue) YoY OCC1 : -13% £m 70 60 50 40 30 20 10 0 Q1 Q2 Q3 Q4 Revenues gradually recovered through H2 Market sub-segments highly diversified, growth rates varying from +10% to -30% North America stronger than Western Europe Emerging Markets’ g
Slide 20: Automotive
Automotive Revenue: £159m (27% of total revenue) YoY OCC1 : -21% £m 50 40 30 20 10 0 Q1 Q2 Q3 Q4 Automotive recovered strongly in H2 Q4 automotive revenues the same as Q4 2019 Build up of capacity to serve electric vehicle production in Eastern Europe continues 1 Organic Constant Currency 20
Slide 21: Aerospace & Defence
Aerospace & Defence Revenue: £156m (26% of total revenue) YoY OCC1 : -29% £m 50 40 Ellison 30 acquisition 20 10 0 Q1 Q2 Q3 Q4 Civil aerospace revenues now stabilised at an exit revenue rate 43% down on Q4 2019 Earlier recovery expected for narrow bodies (value add per engine now largely independ
Slide 22: Energy
Energy Revenue: £51m (8% of total revenue) YoY OCC1 : -23% £m 15 10 5 0 Q1 Q2 Q3 Q4 Remains a small part of overall business (8%) Offshore – robust, but watching carefully Onshore oil & gas extraction – no further investment anticipated 1 Organic Constant Currency 22
Slide 23: Agenda
Agenda Key messages Financial review Market sector review Restructuring and strategy Looking ahead 23
Slide 24: Restructuring strategy
Restructuring strategy Restructuring initiated in 2019: Restructuring was more than a reaction to the immediate situation Focused on reducing exposure to automotive ICE in Western Europe and increasing EV exposure in Eastern Europe ─ 15 closures, 3 new facilities in Eastern Europe ─ Redundant ca
Slide 25: Cost reductions & restructuring
Cost reductions & restructuring As revenues strengthen, we will refill our temporary labour pool back to the ideal target of 15% of the workforce The restructuring programme is more than a reaction to the immediate situation Strategic restructuring programme positions Bodycote for growth Capac
Slide 26: Investing for growth - Specialist Technologies
Investing for growth - Specialist Technologies Revenue Headline Operating Profit 2019: 25% 72% 28% 52% 48% Specialist 2019: 75% 2019: 25% Technologies 2019: 65% 2019: 35% Classical Heat 2019: 35% Treatment 2019: 75% 2019: 65% Specialist Technologies represented 48% of Group headline operating prof
Slide 27: Investing for growth - Emerging Markets
Investing for growth - Emerging Markets 2 £m 20 15 10 5 0 Q1 Q2 Q3 Q4 Strong recovery in the second half (revenues1 up 8%), driven by recovery in automotive markets China revenues1 up 16% in H2 Emerging Markets’ revenues grew to 12% of total Group revenues in H2 Investment in capacity expans
Slide 28: Agenda
Agenda Key messages Financial review Market sector review Restructuring and strategy Looking ahead 28
Slide 29: A vision of tomorrow
A vision of tomorrow Accelerating growth Using our network to capitalise on growth opportunities across geographies and market sectors Growth in Specialist Technologies Continued growth in Emerging Markets Aligned with secular megatrends Reaping the benefits from restructuring; both in per
Slide 30: Outlook
Outlook Looking ahead, markets are recovering, though the uncertain timeline for recovery in the civil aerospace market clouds the short-term outlook for this part of the business. Nonetheless, our restructuring programme is now largely complete, resulting in a higher quality business aligned to the
Slide 31: Bodycote
Bodycote
Slide 32: 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 33: 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 34: 2020 Revenue and growth analysis
1 2020 Revenue and growth analysis £m 500 400 300 200 100 0 -20% -18% -20% -11% -22% -13% 0% -5% -20% Aerospace & Energy Automotive General Western North Emerging Specialist Classical Defence Industrial Europe America Markets Technologies Heat Treatment 1 At constant currency 34
Slide 35: 2020 Statutory income statement
2020 Statutory income statement £m 2020 2019 Revenue 598.0 719.7 Headline operating profit 75.3 134.9 Amortisation of acquired intangible assets (9.8) (4.6) Acquisition costs (2.1) (1.7) Exceptional items (58.4) - Operating profit 5.0 128.6 Net finance costs (6.5) (4.7) (Loss)/profit before tax (1.5
Slide 36: 2020 Cash flow
1 2020 Cash flow 2020 2019 Strong Free Cash Flow despite Post Pre Post Pre restructuring related outflows £m IFRS IFRS IFRS IFRS 16 16 16 16 Bodycote has £75.6m of Headline operating profit 75.3 72.5 134.9 132.6 outstanding lease obligations Add back: Depreciation and amortisation 82.0 67.2 79.6
Slide 37: Net finance charge/facilities
Net finance charge/facilities £m 2020 2019 Interest received on bank overdrafts and loans 0.2 0.2 Net interest expense (3.7) (2.7) Financing and bank charges (2.9) (1.9) Pension finance charge (0.1) (0.3) Total finance charge (6.7) (4.9) (6.5) (4.7) Net finance charge Committed facility headroom o
Slide 38: 2020 Sales and operating profit by currency
2020 Sales and operating profit by currency GBP 7% GBP1 3% GBP 14% Operating profit translation decrease of £0.5m Other 20% Other 17% Average full year exchange rates: £1: €1.13 and £1: $1.29 Other 24% Every cent change in the Euro is worth c.£0.4m of annual operating profit EUR 35% EUR 37% EU
Slide 39: Financial information
Financial information Shares in issue 2020 2019 Weighted average 190.4m 189.9m Exchange rates 2020 2019 EUR Average (P&L) 1.13 1.14 Closing (B/S) 1.12 1.18 USD Average (P&L) 1.29 1.28 Closing (B/S) 1.37 1.32 SEK Average (P&L) 11.85 12.1 Closing (B/S) 11.22 12.39 39
Slide 40: ADE and AGI summary – 2020 H1 v H2
ADE and AGI summary – 2020 H1 v H2 The ADE Business H1 H2 Total ADE Revenue 135.8 113.4 249.2 Headline operating profit 27.1 9.7 36.8 Margin 20.0% 8.6% 14.8% The AGI Business H1 H2 Total AGI Revenue 170.9 177.9 348.8 Headline operating profit 14.4 26.6 41.0 Margin 8.4% 15.0% 11.8% 40
Slide 41: 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