Bodycote Plc · LSE:BOY
Bodycote — H1 2018 Earnings Presentation
33 slides from Bodycote's earnings presentation, Jul 26, 2018
Slide 1: 2018 Interim Results
Slide 2: Introduction
Introduction Stephen Harris Group Chief Executive 2
Slide 3: Agenda
Agenda Highlights Financial review Business review Summary and Outlook 3
Slide 4: Highlights
Highlights Results 8.7% revenue growth to £368.0m1 15% growth in headline operating profit to £70.1m1 Return on sales improved to 19.0% (H1 2017:17.8%) EPS growth of 16% to 27.3p Free cash flow of £39.4m Developments £16m capex invested for future growth Specialist Technologies’ revenu
Slide 5: Financial review
Financial review Dominique Yates Chief Financial Officer 5
Slide 6: H1 2018 Results summary
H1 2018 Results summary H1 H1 Growth £m Growth 20181 20171 Constant currency Revenue 368.0 345.7 6.4% 8.7% Headline operating profit 70.1 61.7 14% 15% Headline operating margin 19.0% 17.8% Headline profit before tax 69.1 60.5 14% 16% Headline tax rate 24.5% 25.5% Net cash 5.6 17.7 Headline EPS 27.3p
Slide 7: Headline operating profit bridge
Headline operating profit bridge £m 3.0 0.6 71.2 -1.1 70.1 5.5 61.7 0.4 2 H1 2017 Price minus cost Sales volume New facilities Share-based H1 2018 Foreign H1 2018 1 increases and mix payments 3 constant exchange actual rates currency 1 Includes central costs 2 Facilities opened between 2015 - 2018 7
Slide 8: Divisional summary
Divisional summary The ADE Divisions The ADE divisions comprise 63 facilities primarily focused on Aerospace, Defence, and Energy customers H1 H1 Growth £m Growth 20181 20171 Constant currency Revenue 142.7 136.1 4.8% 8.8% Headline operating profit 33.3 30.7 8% 13% Headline operating margin 23.3% 22
Slide 9: H1 2018 Sales and operating profit by currency
H1 2018 Sales and operating profit by currency Headline Revenue operating Operating profit translation reduction of profit £1.1m 120% GBP1 Average half year exchange rates 100% 8% Other £1: €1.14 and £1: $1.37 Other 22% 80% 19% Every cent change in the Euro is worth 60% EUR EUR c.£0.5m of annu
Slide 10: Investing for future growth
Investing for future growth Investment of £16m (more than 50% of overall capex) to support future growth of the business Long cycle aero programmes - New aerospace facility in UK Specialist Technologies1 - S3P facilities opened in Germany and the USA - Additional HIP capacity due in Belgium in 2
Slide 11: Revenue progression of recent facilities
Revenue progression of recent facilities Revenue, £m At constant currency 30 2018 start ups 12 facilities opened since the 25 2017 start ups beginning of 2014 2016 start ups 20 2015 start ups £45m invested across these 12 2014 start ups facilities 15 Typically revenues build over a 3 10 to 5 y
Slide 12: Cash flow
Cash flow1 Revenue, £m H1 2018 H1 2017 120 Headline EBITDA = £103m Headline EBITDA = £94m 100 Depreciation Capex 80 Depreciation Capex Working Capital Working Capital 60 Tax, Interest & Tax, Interest & Other Other Restructuring 40 Headline Restructuring Operating Headline Profit Operating £39m Profi
Slide 13: Taxation and balance sheet
Taxation and balance sheet Taxation Headline tax rate 24.5% Revised tax rate guidance; annual rate now not expected to exceed 24.5% Balance sheet Net cash £5.6m, after ordinary and special dividend payments of £71m Facilities: - Committed facility headroom of £210m at 30 June 2018 - £230m re
Slide 14: Business Review
Business Review Stephen Harris Group Chief Executive 14
Slide 15: Revenue and growth analysis
Revenue and growth analysis1 by Technology by Sector by Geography 300 Revenue, £m 200 100 0 Revenue 11.0% 8.0% 3.6% 20.0% 9.4% 9.0% 9.1% 5.4% 22.2% growth, % Specialist Classical Aerospace & General Western North Emerging Energy Automotive Technologies Heat defence Industrial Europe America Markets
Slide 16: Aerospace & defence
Aerospace & defence Revenue: £82m Constant currency growth: 3.6% Revenue, £m At constant currency 175 150 125 100 H2 75 H1 50 25 0 2015 2016 2017 2018 Civil aviation revenues up 3%1 New facility opens in September to support future UK growth New long-term agreements with Rolls-Royce and Safran
Slide 17: Energy
Energy Revenue: £31m Constant currency growth: 20.0% Revenue, £m At constant currency 80 60 40 H2 H1 20 0 2015 2016 2017 2018 Continued sequential improvement in North American onshore oil & gas Subsea revenues showing early signs of recovery Large frame industrial gas turbine (IGT) revenues d
Slide 18: Automotive
Automotive Revenue: £110m Constant currency growth: 9.4% Revenue, £m At constant currency 250 200 150 H2 100 H1 50 0 2015 2016 2017 2018 Car & light truck revenue growth of 8%1 well ahead of market - Continuing to win positions on new platforms - Strong growth in Western Europe and Emerging Market
Slide 19: General industrial
General industrial Revenue: £145m Constant currency growth: 9.0% Revenue, £m At constant currency 250 200 150 H2 100 H1 50 0 2015 2016 2017 2018 Good growth across all key markets, led by Western Europe Secondary effect from increased demand from resources sector Specialist Technologies contri
Slide 20: Specialist Technologies
Specialist Technologies1 Revenue £86m revenue with 11% constant currency growth - Strong revenue growth from LPC & S3P in auto & GI market 23% - HIP PF and Surface Technology both returned to growth as subsea revenue showed early signs of recovery - HIP Services growth held back by the decline in
Slide 21: Classical Heat Treatment
Classical Heat Treatment 1 Revenue £282m revenue with 8% constant currency growth - Growth in all markets and regions - Automotive boosted by contract wins on new platforms 77% - Continued improvement in oil and gas markets - General industrial growth well ahead of global industrial production gro
Slide 22: Emerging Markets
Emerging Markets 8% of Group revenue, with growth of 22%1 Revenue growth in both China and Mexico over 30%1 Embedded future revenue growth as four new facilities ramp up Continued investment in LPC Revenue, £m At constant currency 60 50 40 30 H2 H1 20 10 0 2016 2017 2018 22 1 At constant cur
Slide 23: Summary
Summary Revenue growth well ahead of the market; headline operating profit up 15% at constant currency Further improvement in return on sales to 19.0% Cash generation remains strong Results reflect long-term investments in long-cycle aerospace programmes, Specialist Technologies, Emerging Ma
Slide 24: Outlook
Outlook “Bodycote has enjoyed a strong first half of 2018. Robust growth has continued with double-digit revenue progression in Specialist Technologies, contract wins on automotive and aerospace programmes and excellent growth across the Emerging Markets. We continue to invest in the ongoing growth
Slide 25: Appendix
Slide 26: Specialist Technologies
Specialist Technologies A set of differentiated processes giving customers the ability to produce unique high value adding products. HIP Services S3P (Specialty Stainless Steel Processes) HIP Product Fabrication (incl. Powdermet®) LPC (Low Pressure Carburising) Surface Technology CiD (Corr-i-Dur®) B
Slide 27: Classical Heat Treatment
Classical Heat Treatment A group of mature processes which are essential for treating all metal components. These tightly controlled processes condition the material properties including both the core properties and the surface characteristics. Annealing Carburising Hardening & tempering Nitriding M
Slide 28: H1 2018 Statutory income statement
H1 2018 Statutory income statement £m H1 2018 H1 2017 Revenue 368.0 345.7 Headline operating profit 70.1 61.7 Amortisation of acquired intangible fixed assets (1.9) (2.3) Operating profit 68.2 59.4 Net finance costs (1.0) (1.2) Profit before tax 67.2 58.2 Headline earnings per share (pence) 27.3p 23
Slide 29: H1 2018 Cash flow
H1 2018 Cash flow £m H1 2018 H1 2017 Headline operating profit 70.1 61.7 Add back: Depreciation and amortisation 29.9 29.4 Impairment of fixed assets 0.4 0.4 Net capex to depreciation Share-based payments 2.1 2.7 ratio 1.0 times Profit on disposal of fixed assets - (0.1) Headline EBITDA 102.5 94.1 N
Slide 30: Net finance charge/facilities
Net finance charge/facilities £m H1 2018 H1 2017 FY 2017 Net interest payable - - - Financing and bank charges 0.9 1.0 2.0 Pension finance charge 0.1 0.2 0.4 Net finance charge 1.0 1.2 2.4 Committed facility headroom of £210m at 30 June 2018, £20m drawn The remaining life of the facility is 3.8
Slide 31: Financial information
Financial information Shares in issue H1 2018 H1 2017 Weighted average 190.5m 190.3m Exchange rates H1 2018 H1 2017 EUR Average (P&L) 1.14 1.17 Closing (B/S) 1.13 1.14 USD Average (P&L) 1.37 1.27 Closing (B/S) 1.32 1.30 SEK Average (P&L) 11.59 11.20 Closing (B/S) 11.81 10.97 Analysis by currency, H1
Slide 32: Divisional summary – 2017 H1 v H2
Divisional summary – 2017 H1 v H2 Total The ADE Divisions H1 H2 ADE Revenue 136.1 137.0 273.1 Headline operating profit 30.7 33.5 64.2 Margin 22.6% 24.5% 23.5% Total The AGI Divisions H1 H2 AGI Revenue 209.6 207.5 417.1 Headline operating profit 36.9 37.3 74.2 Margin 17.6% 18.0% 17.8% 32
Slide 33: 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,