Bodycote Plc · LSE:BOY

Bodycote — FY2009 Earnings Presentation

51 slides from Bodycote's earnings presentation, Feb 25, 2010

1. Slide 1: 2009 Preliminary Results

   2009 Preliminary Results 25 February 2010!

2. Slide 2: Agenda

   Agenda"  Overview: ! !Stephen Harris!  Financial Review: !David Landless!  Business Review: !Stephen Harris! 2 ! 2009 Preliminary Results!

3. Slide 3: Video: Focusing on the future

   Video"  Focusing on the future! – Please visit the Investor Relations section of www.bodycote.com to view the video.! 3 ! 2009 Preliminary Results!

4. Slide 4: Overview

   Overview" Stephen Harris" Chief Executive! Plasma Nitriding" Minimal distortion with enhanced hardness, wear resistance and strength! 4 ! 2009 Preliminary Results!

5. Slide 5: Overview: Markets and business characteristics

   Overview" Markets"  All major customer sectors impacted by global recession!  Capital goods manufacturers most severely affected!  Severe destocking – worse where supply chain is long! Bodycote business characteristics"  Few costs are volume dependent!  Volume changes have a significant impact

6. Slide 6: Overview (continued): Actions taken and status

   Overview (continued)" Actions taken"  Restructuring – addresses structural costs/demand imbalances!  Cost base reduction – incremental to restructuring!  Improved capex and working capital controls !  Realignment of divisions into Aerospace, Defence & Energy and Automotive & General Industrial!

7. Slide 7: Financial Review

   Financial Review" David Landless" Finance Director! Hot Isostatic Pressing " Casting densification and complex near-net-shapes! 7 ! 2009 Preliminary Results!

8. Slide 8: 2009 Results Summary

   2009 Results Summary Continuing Operations" 8 ! 2009 Preliminary Results!

9. Slide 9: Segmental Revenue

   Segmental Revenue Continuing Operations"  UK represents 12% of 2009 revenues (2008: 12%)! 9 ! 2009 Preliminary Results!

10. Slide 10: Segmental Headline Operating Profit

    Segmental Headline Operating Profit Continuing Operations" 10 ! 2009 Preliminary Results!

11. Slide 11: Restructuring

    Restructuring 11 ! 2009 Preliminary Results!

12. Slide 12: Cost Reduction

    Cost Reduction"  Variable costs reduced by lower utilities and consumable usage!  Semi-fixed costs benefit from lower maintenance & repair and people cost savings (non-restructuring)!  Structural costs reduction achieved by restructuring initiatives!  Exchange rate movements arise on translation

13. Slide 13: Profit Bridge

    Profit Bridge Continuing Operations £m" 13 ! 2009 Preliminary Results! Headline Operating Profit is stated pre exceptional items!

14. Slide 14: Operating Cash Flow

    Operating Cash Flow" 14 ! 2009 Preliminary Results!

15. Slide 15: Net Debt

    Net Debt" Debt facilities update:"  New £110m and $20m bank facilities maturing Mar 2013 (arranged early 2010)!  Covenants remain unchanged!  Existing €125m bank facility matures Jul 2013 (arranged Jul 2006)!  Surplus cash used to repay debt! 15 ! 2009 Preliminary Results!

16. Slide 16: Finance Charge

    Finance Charge"  Existing €125m bank facility meets working and fixed capital needs!  New £110m bank facility has significantly higher interest cost but will be largely undrawn!  Fees for the £110m bank facility will increase finance charge in 2010! 16 ! 2009 Preliminary Results!

17. Slide 17: Taxation

    Taxation" 1. Pre exceptional items! 17 ! 2009 Preliminary Results!

18. Slide 18: Financial Review - Conclusion

    Financial Review - Conclusion"  Trading conditions were very challenging!  Restructuring executed quickly!  Cash flow tightly managed!  Net debt low!  Liquidity secured!  Dividend maintained! 18 ! 2009 Preliminary Results!

19. Slide 19: Business Review

    Business Review" Stephen Harris" Chief Executive! Thermal Spray" High performance coatings for corrosion and wear resistance! 19 ! 2009 Preliminary Results!

20. Slide 20: Business Review: Demand trends

    Business Review"  Demand trends"  Cost trends!  Looking forward! 20 ! 2009 Preliminary Results!

21. Slide 21: Demand - General Industrial Sector

    Demand - General Industrial Sector"  Variable by sector!  Multiple layers of destocking depending upon length of supply chain! 21 ! 2009 Preliminary Results!

22. Slide 22: Demand - Automotive & Truck Sector

    Demand - Automotive & Truck Sector"  Bodycote market in Europe biased towards premium cars & diesel in particular!  Truck more heavily impacted! 22 ! 2009 Preliminary Results!

23. Slide 23: Demand - Aerospace & Defence Sector

    Demand - Aerospace & Defence Sector"  Long cycle. Build rate of most platforms sustained!  Aftermarket weaker than new build! 23 ! 2009 Preliminary Results!

24. Slide 24: Demand – Energy Sector

    Demand – Energy Sector"  Power Generation is long cycle, strong underlying demand, but customers face financing difficulties!  Oil & Gas exploration heavily dependent on oil and gas market price! 24 ! 2009 Preliminary Results!

25. Slide 25: Daily Sales Trend – Group

    Daily Sales Trend – Group Constant Exchange Rates" 25 ! 2009 Preliminary Results!

26. Slide 26: Daily Sales Trend – By Division

    Daily Sales Trend – By Division Constant Exchange Rates " 26 ! 2009 Preliminary Results!

27. Slide 27: Business Review: Cost trends

    Business Review"  Demand trends!  Cost trends"  Looking forward! 27 ! 2009 Preliminary Results!

28. Slide 28: Restructuring Update

    Restructuring Update Site and Process Lines Closure" Process ! Sites! lines! 12% closed! 7% eliminated! 6% mothballed! 88% continuing! 87% operational! 28 ! 2009 Preliminary Results!

29. Slide 29: Cost Savings

    Cost Savings Annualised £m" Semi-fixed cost savings" Restructuring savings" 29 ! 2009 Preliminary Results!

30. Slide 30: Costs by Type

    Costs by Type Annualised £m"  Closed the year with much lower cost base! * 2008 adjusted for impact of exchange rate movements in 2009! 30 ! 2009 Preliminary Results!

31. Slide 31: Conclusions – Volumes and Costs

    Conclusions – Volumes and Costs" Volumes"  Severe recession in capital goods market!  Volumes trended up by December, but still c.25% below pre-crisis levels!  Pace of recovery is uncertain! Costs"  Costs managed down by restructuring and normal management action!  Cost base at close of 2009 is

32. Slide 32: Business Review: Looking forward

    Business Review"  Demand trends!  Cost trends!  Looking forward" 32 ! 2009 Preliminary Results!

33. Slide 33: Market Contrast

    Market Contrast" Automotive & General Industrial Aerospace, Defence & Energy  Short supply chains – “parts don’t  Long supply chains – “parts travel” travel”  Automotive is medium to high volumes,  Low to medium volumes General Industrial can be low volumes  Generally lower value parts  Higher

34. Slide 34: New Management Structure

    New Management Structure" Bodycote" ADE! AGI! (Aerospace, (Automotive & General Defence & Energy)! Industrial)! Global Focus! Geographic Focus! Hot Isostatic Eastern ADE Heat Surface France, Central & North Pressing Europe and Treatment! Technology! Belgium & Northern America and (HIP)! South Italy!

35. Slide 35: Aerospace, Defence & Energy

    Aerospace, Defence & Energy" 2009 Markets" £153m average 24%! capital employed* 63 sites! 2008! 49%! (*excluding goodwill)! 27%! £220m ʻpre crisisʼ 21% margin on sales ! Aerospace & Defence! Energy! General Industrial! revenue! 2006 to 2008! 2009 Turnover by Geography" Global Global Presidents custo

36. Slide 36: Aerospace, Defence & Energy: Performance and Future Development

    Aerospace, Defence & Energy Performance"  Aerospace and IGT impacted by supply chain destocking!  Oil exploration sector suffering from fewer new exploration wells!  Late cycle nature of market implies no major pick up expected until later in 2010! Future Development"  Gaining additional busines

37. Slide 37: Automotive & General Industrial

    Automotive & General Industrial 2009 Markets" 2009" Markets" 9%! £319m average 31%! capital employed* 115 plants! 2008! (*excluding goodwill)! 54%! 6%! £330m ʻpre crisisʼ 11% margin on sales ! Automotive! Truck! General Industrial! Energy! revenue! 2006 to 2008! 2009 Turnover by Geography" Local and

38. Slide 38: Automotive & General Industrial: Performance and Future Development

    Automotive & General Industrial" Performance:"  Lower output and destocking in capital goods and automotive sectors!  Early cycle nature! Future Development:"  Improving the value mix, more selective investment and concentrating on gaining benefit from differentiated technology! 38 ! 2009 Prelimi

39. Slide 39: Life Cycle Phases - Technologies

    Life Cycle Phases - Technologies" Heat Treatment Value! >800 B.C! Plasma Spray HIP Densification HVOF Spray K-Tech & Polymer! Speciality Stainless Steel Processes (S3P) HIP Product Fabrication! Proprietary corrosion prevention processes (CPP)! Time! Introduction! Growth! Maturity! Decline! 39 ! 2009

40. Slide 40: Life Cycle Phases - Technologies by Division

    Life Cycle Phases - Technologies" Heat Treatment (ADE & AGI) Value! Plasma Spray ADE HIP Densification ADE HVOF Spray ADE K-Tech & Polymer! ADE! Speciality Stainless Steel Processes (S3P) AGI HIP Product Fabrication! ADE! Proprietary corrosion prevention processes (CPP)! AGI! Time! Introduction! Gro

41. Slide 41: Engines for Long Term Growth

    Engines for Long Term Growth" Migration to Emerging Markets"  Eastern Europe!  Brazil!  China! Driving proprietary technologies"  HIP Product Fabrication !  Specialty Stainless Steel Processes!  Corrosion Protection Processes! 41 ! 2009 Preliminary Results!

42. Slide 42: Investment

    Investment" • Significant investment in growth! Past • All opportunities treated equally! investment" • High capital base and operating cost! • Capital allocation not optimised! Resulting" • Inadequate return on capital! in..." • Inadequate cash flow! • Substantial spare capacity - opportunities to

43. Slide 43: Specific management initiatives

    Specific management initiatives" Retain benefit of lower cost base • Control expense ʻbuild backʼ! following restructuring" Very selective capex" • Capex less than depreciation! • Plant operation! Enhance business processes" • Optimal pricing! Enhance ʻbench strengthʼ" • Across the organisation! Mig

44. Slide 44: Summary

    Summary" Volumes"  Severe impact of recession in capital goods market!  Trended up in Q4 – ʻearly cycleʼ sectors showing signs of recovery! Costs"  Costs managed down by restructuring initiatives and management action!  Continued focus on cost and capital expenditure control! New divisional stru

45. Slide 45: Outlook

    Outlook" ! Many of our automotive and general industrial markets have already started to recover but we do not expect the aerospace, defence and energy markets to strengthen until later in 2010. The pace of recovery remains uncertain and potentially uneven. We anticipate that full recovery in demand

46. Slide 46: 2009 Preliminary Results

    46 ! 2009 Preliminary Results!

47. Slide 47: 2009 Statutory Income Statement

    2009 Statutory Income Statement Continuing Operations" 47 ! 2009 Preliminary Results!

48. Slide 48: Financial Information

    Financial Information"  Average shares in issue 2009: 185.6m (2008: 310.9m)!  Exchange rates:!  Net debt and interest related financial ratios:! 1. Earnings before exceptionals, interest, tax, depreciation, amortisation, impairment and share based payments! 48 ! 2009 Preliminary Results!

49. Slide 49: Pensions

    Pensions" 49 ! 2009 Preliminary Results!

50. Slide 50: Segmental Results - H1 and H2

    Segmental Results - H1 and H2 Continuing Operations" 50 ! 2009 Preliminary Results!

51. Slide 51: Hot Isostatic Pressing Results Summary

    Hot Isostatic Pressing Included within Aerospace, Defence & Energy" 2009 Markets" 2009" Markets" £59m capital 11 plants! employed* 2008 (*excluding goodwill)! £50m ʻpre crisisʼ 32% margin ! revenue! 2006 to 2008! 2009 Turnover by Geography" Results Summary:! 51 ! 2009 Preliminary Results!

Bodycote — FY2009 Earnings Presentation on 6ix