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Article Excerpt
OPERATOR: Hello and welcome to today's Bodycote interim management statement call. Today on the call, we have John Hubbard, Chief Executive Officer and David Landless, Financial Director of Bodycote.
During this call, all participants will be in listen-only mode and afterwards, there will be a question and answer session. Mr. Hubbard, over to you.
JOHN HUBBARD, CEO, BODYCOTE INTERNATIONAL PLC: Thank you very much, and good morning to all of you. I would like to give you some information on the interim management statement.
As you will have seen from the announcement this morning, that we're going to be seeking shareholder approval to return 40p approximately per share. That circular will be going out hopefully before the end of this month. And that with shareholder approval, those funds can be dispensed before year-end.
In doing this, that's going to leave our balance sheet very near debt free, giving us flexibility to address future challenges and to capitalize on those opportunities which may present themselves.
Our existing main bank lines do not mature until August 2010 and 2013. We do have a situation now where we are feeling the impact of the financial crisis and that is manifesting itself in the automotive sector.
We have seen, as you will probably all remember, challenges in our Americas business for some time, and restructuring is well under way. We have closed five plants this year in North America, and the European downturn in demand is something that is starting to come through in automotive and truck, and we have announced the closure of one plant in the UK and the closure of one department in another factory in the UK. And we expect to see the benefits from these restructuring programs coming through between now and the end of 2009.
We are continuing to look at restructuring programs for Europe and we will see how the whole programs play out, and we will come back to the investment community with our plans and our expectations for them at the time that we do the preliminary announcement.
As I hope you all can appreciate, we are in a very fluid and dynamic market situation right now, and I'll repeat, the areas that we have been experiencing this in has been in the automotive and truck sector. The other sectors that we service, whether they're oil and gas, power generation, aerospace, they all continue to be good and strong for us.
So with that, I will turn it over to any questions that you may have for David or myself.
OPERATOR: Okay, we will now start the question and answer portion of this call. (Operator Instructions). And we go to Michael Blogg of Arbuthnot Securities. Please go ahead sir.
MICHAEL BLOGG, ANALYST, ARBUTHNOT SECURITIES: Yes, good morning gentlemen. The first question is about drop-through. In the absence of cost reduction, what would the drop-through look like in the heat processing and the HIP businesses?
JOHN HUBBARD: Well Michael, in the absence of any corrective actions, we would expect that it would be close to 100% operational gearing. However, we have been preparing to have flexibility in our costs and we would expect to exhibit better operational gearing than that in the range of 40% to 60%. However, I will tell you this downturn in demand is happening quickly. We're having customers who have, in the last week or two, started notifying us that they were going to be shutting down for extended periods involving November and January, so there we're going to see very poor operational gearing.
However, we would expect to see, as I said, 40% to 60% and the challenge, quite frankly, is going to be we have been preparing ourselves in Europe where the social laws are such, that shedding our number one cost, which is people, is more difficult. But we have structured ourselves to have between 10% and 15% of our workforce on either temporary or short-term work contracts. So it'll be a matter of seeing how we actually perform in Europe.
MICHAEL BLOGG: Thanks very much. The next question is on the dividend policy post the return of cash. Could you give us any clues on that please?
DAVID LANDLESS, FINANCIAL DIRECTOR, BODYCOTE INTERNATIONAL PLC: Yes, I think the plan there Michael is that with the consolidation of the shares as part of the B share, the underlying intention is that the dividend would be...
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