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Article Excerpt
STEPHEN HARRIS, CEO, BODYCOTE INTERNATIONAL PLC: Well good morning ladies and gentlemen and welcome to the results presentation for Bodycote. I'm Stephen Harris, the Chief Executive.
Before we start this morning I'd just like to introduce my colleagues that are in the room. To my right here is David Landless, the Group Finance Director. You'll probably recognize John Hubbard, who's my predecessor. And somewhere in the audience is Alan, at the back just over there -- is Alan Thomson the Chairman.
Now before we get into the meat of the presentation I'd just like to spend a little time talking about what I've been doing since I joined the Company last November. On the slide you can see a map which shows you a representation of where our facilities are in the globe, in the world. And I took over as Chief Executive, as you're aware, at the beginning of this year. Now in the period from November until now I've spent quite a bit of time travelling around, visiting our locations, meeting our people and some customers. And just to show you where that's been, the countries marked in blue is where I've gone, I've actually visited over 25% of our facilities, it's actually 51 so far, in five countries. And those countries have been the locations where our operations are pretty much concentrated.
So I certainly haven't covered the whole world of Bodycote, but what I have done so far is see nearly all of the technologies and processes that we offer to our customers. And I have to tell you that I've been quite impressed, the quality and the experience of our people is very good. The condition of our facilities is good, we've got some pretty impressive technologies there and overall I like what I see.
Now having said that it's quite a challenging time at the moment. So in light of that we have been developing a restructuring program, which we're going to take about today, a reshaping of the Company. And in the first two months I was working alongside John to develop that program, and since January John's been assisting me in driving that program in -- down into the Organization. And we'll talk about that some more later on.
Now I'll just take you through the highlights and walk though this and once I've completed this I'll hand you over to David who'll give you the details.
So revenue for the Group, GBP717 million, now we disposed of our Testing business last year, so the continuing operations represents the Thermal Processing Group, which is our business today, we are focused on. We have a revenue of GBP552 million there, and that's up almost 19%.
Headline operating profit for the Group was GBP92 million but for continuing operations GBP71 million and that's up just over 1%. Headline earnings per share basic, 17.5p. And the proceeds from our Testing disposal, that was GBP420 million and that represents an EBIT multiple of about 20 times.
Exceptional charges, which we recorded, GBP123 million, associated with the restructuring program and various other items that David will cover. At year-end our net debt was GBP64.7 million and the full-year dividend that we're recommending is 8.3p, and that's up 4%.
So with that, if David, you could take us through the rest.
DAVID LANDLESS, GROUP FD, BODYCOTE INTERNATIONAL PLC: Sure. Thank you Stephen, good morning ladies and gentlemen. So now to talk first about the statutory results, which of course are heavily impacted by both the disposal of the Testing business and the Thermal Processing restructuring. First you need to bear in mind that on a statutory basis the revenue declared is that only for Thermal Processing because that's continuing under IFRS. Then we have the exceptional charges, GBP123 million, which I'll come back to in a minute or two. And because of the quantum of that exceptional charge we have an operating loss for the Group of just under GBP52 million because that excludes the benefit of the disposal of Testing and of the trading of Testing during the year which is counted as discontinued now.
So the profit from Testing was just short of GBP190 million on an after tax basis, that's the way statutorily you have to declare it. So that's after tax of which GBP11 million after tax was from trading and GBP178 million from the disposal.
And the earnings per share basic and diluted is essentially the same amount because there's very few options around now, 48.2p compared to 16.6p last year.
So moving on now to the headline numbers, so this is what's going on in the trading for the continuing business, namely Thermal Processing, which is therefore where we really want to concentrate because that's what we've got for the business going forward.
So repeat that the revenue was GBP552 million ahead, 19% year-on-year and the EBITDA was up 10% year-on-year to GBP123 million. Operating profit, as Stephen has said, was ahead, just over 1% at GBP71 million. And the profit before tax was GBP67.6 million, again just about the same as last year. Now for the analyst community we have to understand that the net finance charge for the Group is also split between the continuing and discontinued businesses and so the GBP3.6 million finance charge against Thermal Processing is what you see here and I'll come back again to the finance charge in total on a later slide. And headline earnings per share, again basic, same as diluted, 17.5p, up 5% year-on-year.
So now if we look to a reconciliation now between the headline numbers and the statutory numbers so that you can properly understand how -- where all the figures come from. Starting with the headline PBT at GBP67.6 million. The first thing we have is a regular charge for the amortization of acquired intangibles, this going back to pre-IFRS stage would have been part of goodwill amortization.
Then we have impairment of goodwill, now this very largely relates directly to the restructuring program where we've had to recognize that some of the locations that we are exiting had goodwill directly attached to them. And clearly if they're going away, they're going away and so is the goodwill with them. And there are one or two other areas where we've taken a Group-wide view of the valuation of goodwill in the Group balance sheet and have made an adjustment give the current economic situation. These are all non-cash of course.
Then we come to an impairment of loan from associate, we have an investment in SSCP Coatings and that's a highly leveraged business, private equity majority shareholding. And given that leverage and the potential for exit prices in those kind of businesses right now, we think it's appropriate to impair the shareholder loans in that business, they are unsecured and rank only just ahead of the equity.
And then finally, last but certainly not least, is the restructuring charge itself, GBP78 million, of which GBP35 million is cash and the balance is asset write-downs. And that -- this item, Stephen will talk to quite a bit more later in the presentation. Which gives us an operating loss for the year GBP55 million.
So if we now look a profit bridge for Thermal Processing, the continuing business, to take us from last year's headline profit to this year, what do we see? First of all we see the impact of selling prices, that's an average 2% increase year-on-year and is respectable but not quite as much as we would have liked. Then we see the impact on -- of the reducing volumes in the second half of the year and of course it's happened quite quickly and so we're now, as you can see from the restructuring program, going...
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