Bodycote Plc · LSE:BOY
Bodycote — H1 2013 Earnings Presentation
27 slides from Bodycote's earnings presentation, Jul 25, 2013
Slide 1: 2013 Interim Results
2013 Interim Results 25 July 2013
Slide 2: Introduction
Introduction Stephen Harris Chief Executive Titanium heat treatment Titanium is light, strong and corrosion-resistant. Although 60% heavier than aluminium, it is twice as strong and is widely used in aerospace and other critical applications. Bodycote’s largest air furnace is used to treat titanium
Slide 3: Agenda
Agenda Highlights Financial review Business review Outlook Gates and seats Destined for severe service applications such as subsea oil & gas, gates and seats must withstand corrosion and wear. Typically, protection from extreme environmental factors is provided by a thermally sprayed tungsten carbid
Slide 4: Highlights
Highlights 5% sales growth (3% constant currency) Headline margin up 90 basis points to 16.6% – Improving mix – New technology growth – Good cost control Headline operating profit up 11% Headline earnings per share up 9% Interim dividend of 4.4p, up 10% 4
Slide 5: Financial review
Financial review David Landless Finance Director 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 and a tough core. The treatment is used to increas
Slide 6: 2013 Interim results summary
2013 Interim results summary £m H1 2013 1 H1 2012 1 change Revenue 316.5 301.3 5% Headline: Operating profit 52.4 47.3 11% M argin 16.6% 15.7% Profit before tax 50.6 45.8 10% Non-headline items 2 (2.1) (1.9) Headline operating cash flow 46.5 52.3 Headline operating cash conversion 89% 111% Net debt
Slide 7: Divisional summary
Divisional summary YOY Growth: £m H1 2013 1 H1 2012 1 Currency Acquisition Organic Total % ADE Divisions Revenue 133.8 130.3 2.8 3.3 (2.6) 3.5 3% Headline Operating Profit2 34.5 31.3 0.8 1.2 1.2 3.2 10% M argin 25.8% 24.0% AGI Divisions Revenue 182.7 171.0 4.7 17.9 (10.9) 11.7 7% Headline Operating
Slide 8: Headline operating profit bridge
Headline operating profit bridge (£m) 5.4 -4.9 1.7 52.4 0.3 4.6 -1.7 47.3 -0.3 8
Slide 9: Cash flow
Cash flow £m H1 20131 H1 20121 Headline operating profit 52.4 47.3 Add back: Depreciation and amortisation 28.2 25.1 Share-based payments 3.0 3.0 Capex to depreciation ratio Headline EBITDA 83.6 75.4 1.0 times (H1 2012: 1.1 times) Net capital expenditure (28.6) (26.6) Working capital (8.5) 3.5 Worki
Slide 10: Business review
Business review Stephen Harris Chief Executive Thermal spray coating Fine metallic or non-metallic materials, usually in powder form, are deposited in a semi molten state to form a thermal spray coating. Metals, alloys, ceramics and composites can all be thermally sprayed, providing varying coating
Slide 11: Daily sales trend
Daily sales trend At constant exchange rates (£m) 3 3 2 Average daily2 sales 2013 1 2013 (pre-acquisitions) 2012 (pre-acquisitions) 1 - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 11
Slide 12: First half organic sales
First half organic sales Organic sales decline of 4.5% spread across: Automotive General Industrial Revenue: £78m Revenue: £125m Organic growth: -7% Organic growth: -6% Sharp reduction in heavy truck Weakness in all markets Tooling & mining hardest hit Aerospace & Defence Energy Revenue: £72
Slide 13: Positive actions
Positive actions Automotive General Industrial Share gains result in North American Management action on cost and car & light truck organic sales improved mix limited organic modestly ahead and Europe flat downside gearing Aerospace & Defence Energy European civil aerospace up 10% in Expande
Slide 14: Margin bridge
Margin bridge 0.2% 16.6% 0.4% 0.1% 0.7% 15.7% -1.0% 0.3% 0.4% -0.2% Group margin up 90 basis points Rapid response to weakening demand - average headcount excluding acquisitions down 2.9% * ADE and AGI are shown excluding New Technologies and Emerging Markets which are presented separately. 14
Slide 15: Five year perspective
Five year perspective At 2013 exchange rates Revenue Margin £m % 299 H2 282 H1 17 17 255 H1 16 209 H2 15 15 12 309 316 287 9 223 244 5 -1 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 Average headcount Acquisition element of Headline operating profit average headcount £m 6,070 53 5,603 5,530 5,5
Slide 16: Outlook
Outlook Stephen Harris Chief Executive Metal joining Includes specialised processes such as electron beam welding, vacuum and honeycomb brazing; complex operations requiring a fusion of expertise and technology. 16
Slide 17: Margin profile
Margin profile Emerging Secular growth Cyclical markets % Margin New Tech. NA ADE* WE ADE* NA AGI* WE AGI* EM Proportion of Group revenue Higher sales growth in high margin markets Margin improvements in lower growth sectors * Excluding New Technologies and Emerging Markets which are shown separ
Slide 18: Bodycote outlook
Bodycote outlook Near term: • Second half outcome broadly similar to first half Medium and longer term growth: • Continued expansion in the secular growth markets of aerospace and energy • HIP PF and S3P now making meaningful contribution • Emerging markets – expansion in China and healthier bus
Slide 19: Outlook
Outlook The Group delivered a good first half result, with last year’s acquisitions performing well. Improvements in mix and rigorous cost control outweighed softness in demand, resulting in increased margins. Looking forward, we expect a broadly similar outcome in the second half and therefore the
Slide 20: Slide 20
Slide 21: Definitions
Definitions Term Definition Headline Operating Profit Operating profit before exceptional costs Headline Profit Before Tax Profit before tax and exceptional costs Headline Operating Cash Flow Cash generated by operations, less net capital expenditure and before cash flow relating to exceptional item
Slide 22: IAS 19 Revised - Reconciliation
IAS 19 Revised - Reconciliation The adoption of IAS19R at 1 January 2013 has the following impact on the Group’s financial statements: £m FY 2011 FY 2012 H1 2012 Income statement: Headline operating profit - previously reported 85.5 97.9 47.5 Increase in operating costs (0.6) (0.4) (0.2) Headline op
Slide 23: H1 2013 Statutory income statement
H1 2013 Statutory income statement £m H1 20131 H1 20121 Revenue 316.5 301.3 Headline operating profit 52.4 47.3 Cash exceptional items Acquisition expenses - (1.2) - (1.2) Non-cash exceptional items Amortisation of acquired intangible fixed assets (2.1) (0.7) (2.1) (0.7) Total exceptional items (2.1
Slide 24: Net finance charge / facilities
Net finance charge / facilities £m H1 20131 H1 20121 Net interest payable 0.4 0.2 Financing costs 0.7 0.6 Bank and other charges 0.4 0.4 Pension finance charge 0.3 0.3 Net finance charge 1.8 1.5 Interest payable: increase due to higher average net debt Financing costs: higher following refinanci
Slide 25: Pensions
Pensions £m H1 20131 FY 20121 H1 20121 UK Funded 3.9 4.2 2.4 Other Western Europe Funded 0.6 0.5 0.7 Other Western Europe Unfunded 14.2 13.1 11.7 Western Europe Total 18.7 17.8 14.8 North America Funded 0.9 0.9 0.8 Emerging Markets Unfunded 0.2 0.3 0.2 Total retirement benefit obligations 19.8 19.0
Slide 26: Financial information
Financial information Shares in issue H1 2013 H1 2012 Average 189.3m 188.4m Exchange Rates H1 2013 H1 2012 Euro Average (P&L) 1.18 1.21 Closing (B/S) 1.17 1.24 US Dollar Average (P&L) 1.54 1.58 Closing (B/S) 1.52 1.57 SEK Average (P&L) 10.05 10.75 Closing (B/S) 10.24 10.83 Financial Ratios H1 2013 H
Slide 27: Bodycote
Bodycote