Bodycote Plc · LSE:BOY
Bodycote — FY2013 Earnings Presentation
34 slides from Bodycote's earnings presentation, Feb 27, 2014
Slide 1: 2013 Full Year Results
2013 Full Year Results 27 February 2014
Slide 2: Introduction
Introduction Stephen Harris Chief Executive 2
Slide 3: Agenda
Agenda Highlights Financial review Business review Outlook Hot Isostatic Pressing Castings for critical applications are HIPed to eliminate internal microporosity thereby improving mechanical properties by removing defects. Hot isostatic pressing also enables the bonding, or cladding, of two or more
Slide 4: Highlights
Highlights Continuing to deliver on the strategy deployed in 2010 Bodycote moved strongly ahead despite mixed markets Excellent performance from 2012 acquisitions New Technologies growing following capacity enhancement Mix improvements across the business Network adjusted to opportunity
Slide 5: Financial review
Financial review David Landless Finance Director 5
Slide 6: Financial Summary
Financial Summary 5% sales growth (3% constant currency) Headline margin up 70 basis points to 17.3% Operating profit and EPS up 10% on headline basis Return on capital employed increased to 19.9% Final dividend of 9.1p, 13.5p for the year, up 10% Special dividend of 10.0p 6
Slide 7: 2013 Results summary
2013 Results summary £m 2013 20121 change Revenue 619.6 587.8 5% Headline: Operating profit 107.4 97.5 10% M argin 17.3% 16.6% Profit before tax 103.7 94.5 10% Non-headline items 2 (5.3) (4.5) Headline operating cash flow 108.9 110.8 Headline operating cash conversion 101% 114% Net cash/(debt) 15.0
Slide 8: Headline operating profit bridge
Headline operating profit bridge (£m) 3.6 107.4 Like-for-like sales -14.8 Like-for-like profit -0.4 6.7 1.8 -4.2 1.6 97.5 0.4 2012 Price minus Sales mix Sales volume Other Acquisitions Foreign 2013 cost increases exchange translation 8
Slide 9: Divisional summary
Divisional summary YOY Growth: £m 2013 20121 Currency Acquisition Organic Total % ADE Divisions Revenue 261.8 258.0 5.0 3.3 (4.5) 3.8 1% Headline Operating Profit2 70.7 69.1 1.3 1.2 (0.9) 1.6 2% M argin 27.0% 26.8% AGI Divisions Revenue 357.8 329.8 9.2 29.1 (10.3) 28.0 8% Headline Operating Profit2
Slide 10: Cash flow
Cash flow £m 2013 20121 Headline operating profit 107.4 97.5 Add back: Depreciation and amortisation 57.9 51.3 Share-based payments 3.6 3.9 Capex to depreciation ratio Headline EBITDA 168.9 152.7 1.0 times (2012: 0.9 times) Net capital expenditure (57.3) (47.7) Working capital (2.7) 5.8 Headline ope
Slide 11: Headline operating profit and Free cash flow
Headline operating profit and Free cash flow Headline operating profit Free cash flow £m £m 81 79 107 71 97 85 57 51 7 8 09 10 11 12 13 09 10 11 12 13 11
Slide 12: Business review
Business review Stephen Harris Chief Executive Annealing Annealing is a softening process, used to improve hot and cold working characteristics, to increase machinability, to reduce internal stress due to working, welding etc, and also to condition components for subsequent hardening treatments. 12
Slide 13: Aerospace & Defence
Aerospace & Defence Market Sales: £140m • Aerospace build rates increased Organic growth*: 1.5% steadily • Defence weakened (c. 5% of total Group) Bodycote growth and developments YOY organic growth trend • Civil aerospace up 5.4% like-for-like 8% • Q4 weakness relates to short-term inventory adjust
Slide 14: Energy
Energy Market Sales: £83m • US onshore oil & gas experienced Organic growth*: -5.8% sharp reduction in capex • Fracking related cutbacks led to severe destocking Bodycote growth and developments YOY organic growth trend • Oil & gas in North America down 32%* 8% in H1, run-rate improved in H2 • Oil &
Slide 15: General Industrial
General Industrial Market Sales: £243m • Mining & agricultural equipment Organic growth*: -5.2% significantly down, particularly in US • Tooling demand flat across the year Bodycote growth and developments YOY organic growth trend • Q4 flat after weak first 9 months • Europe and Emerging Markets 8%
Slide 16: Automotive
Automotive Market Sales: £154m • Car production strong in US, and in Organic growth*: 0.2% Europe premium sector • European volume brands weak, particularly in H1 • Truck market highly cyclical, at low level in 2013 YOY organic growth trend 8% Bodycote growth and developments • Car & light truck up
Slide 17: Margin bridge
Margin bridge 0.2% 17.3% 0.2% 0.4% 16.6% -0.3% 0.2% -0.1% 0.1% * ADE and AGI are shown excluding New Technologies, Eastern Europe and Brazil which are presented separately. 17
Slide 18: Elements of profit growth: New Technologies
Elements of profit growth New Technologies (S3P & HIP Product Fabrication) Sales £m 2009 2010 2011 2012 2013 • High growth • Capacity-limited in 2012; capacity increased progressively through 2013 • Significant growth potential 18
Slide 19: Elements of profit growth: Improving business mix
Elements of profit growth Improving business mix New Technologies Margin % Emerging markets ADE divisions* NA AGI* WE AGI* % of Group Sales % of Group Sales 2010-2013 Organic Sales CAGR 18% 6% 3% 19 *Excluding New Technologies and Emerging Markets
Slide 20: Acquisition update
Acquisition update 2012 acquisitions: Total spend £85m 18 plants, North America Full year performance: £53m sales, 9% of Group £11m operating profit 21% margin 13% ROI in first year l Bodycote Group – pre March 2012 l Curtiss-Wright HT, March 2012 l Carolina Commercial, October 2012 l
Slide 21: Five year perspective
Five year perspective At 2013 exchange rates Revenue Margin £m % 603 620 16.8 17.3 564 15.2 494 428 10.5 1.6 09 10 11 12 13 09 10 11 12 13 Average headcount ROCE Acquisition element of % 19.9 average headcount 17.9 6,020 16.3 5,603 5,532 5,501 5,257 10.2 1.4 09 10 11 12 13 09 10 11 12 13 21
Slide 22: End market outlook
End market outlook Positive trends Areas of weakness • Aerospace • Defence further softening • Build rates increasing on new • General industrial – mining weakness platforms will continue through 2014, destocking reverses beyond • Narrow body transition through 2016 increases opportunity • Oil & gas
Slide 23: Cash utilisation priorities
Cash utilisation priorities 1 2 Organic growth Enhancing core dividends 3 4 Acquisitions Supplemental distributions as appropriate 23
Slide 24: Outlook
Outlook Stephen Harris Chief Executive HIP valve body Following HIP and heat treatment the valve component can be pickled or machined to remove the capsule material. The result is a PM HIP near- net shaped valve body, free from internal flaws and with isotropic properties. 24
Slide 25: Outlook
Outlook In 2013 improvements in business mix, plus the full year effect of the 2012 acquisitions, enabled Bodycote to achieve good growth and strong returns, despite weak markets in the early part of the year. At this early stage in the year and on a constant currency basis, the Board expects Bodyco
Slide 26: Slide 26
Slide 27: 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 28: IAS 19 Revised - Reconciliation
IAS 19 Revised - Reconciliation The adoption of IAS 19 Revised at 1 January 2013 has the following impact on the Group’s financial statements: £m 2012 Income statement: Headline operating profit - previously reported 97.9 Increase in operating costs (0.4) Headline operating profit - restated 97.5 Ne
Slide 29: 2013 Statutory income statement
2013 Statutory income statement £m 2013 20121 Revenue 619.6 587.8 Headline operating profit 107.4 97.5 Amortisation of acquired intangible fixed assets (4.5) (2.0) Operating profit prior to exceptional items 102.9 95.5 Acquisition expenses - (2.5) SSC establishment costs (0.8) (2.4) Sale of investme
Slide 30: Net finance charge / facilities
Net finance charge / facilities £m 2013 20121 Net interest payable 0.6 0.5 Financing costs 1.5 1.1 Bank and other charges 1.0 0.8 Pension finance charge 0.6 0.6 Net finance charge 3.7 3.0 Interest payable: increase due to higher average net debt following the 2012 acquisitions Financing costs: h
Slide 31: Pensions
Pensions £m 2013 20121 UK Funded 4.8 4.2 Other Western Europe Funded 1.2 0.5 Other Western Europe Unfunded 12.1 13.1 Western Europe Total 18.1 17.8 North America Funded 0.2 0.9 Emerging Markets Unfunded 0.2 0.3 Total retirement benefit obligations 18.5 19.0 £m 2013 20121 Western Europe Unfunded: Ita
Slide 32: Financial information
Financial information Shares in issue 2013 2012 Weighted average 189.4m 187.0m Exchange rates 2013 2012 EUR Average (P&L) 1.18 1.23 Closing (B/S) 1.20 1.23 USD Average (P&L) 1.56 1.59 Closing (B/S) 1.66 1.63 SEK Average (P&L) 10.20 10.69 Closing (B/S) 10.64 10.57 Headline operating Analysis by curre
Slide 33: Divisional summary - H1 vs H2
Divisional summary - H1 vs H2 £m ADE Divisions H1 H2 Total Revenue 133.8 128.0 261.8 Headline operating profit 34.5 36.2 70.7 M argin 25.8% 28.3% 27.0% AGI Divisions H1 H2 Total Revenue 182.7 175.1 357.8 Headline operating profit 25.1 27.6 52.7 M argin 13.7% 15.8% 14.7% 33
Slide 34: Bodycote
Bodycote