Bodycote
plc
Full year results for year
ended 31 December 2023
"Another year of strong growth and margin
progression"
Financial summary
|
|
2023
|
|
2022
|
Growth
Constant
Currency
|
Growth
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
£802.5
|
m
|
|
£743.6
|
m
|
8%
|
8%
|
|
Headline operating
profit1
|
£127.6
|
m
|
|
£112.2
|
m
|
17%
|
14%
|
|
Headline operating
margin1
|
15.9
|
%
|
|
15.1
|
%
|
|
+80 bps
|
|
Headline operating margin excluding
surcharges1
|
17.3
|
%
|
|
16.1
|
%
|
|
+120bps
|
|
Free cash flow1
|
£122.5
|
m
|
|
£84.0
|
m
|
|
46%
|
|
Basic headline earnings per
share1,2
|
48.4
|
p
|
|
42.7
|
p
|
|
13%
|
|
Full year ordinary dividend per
share
|
22.7
|
p
|
|
21.3
|
p
|
|
7%
|
|
Return on capital
employed1
|
14.8
|
%
|
|
13.3
|
%
|
|
+150 bps
|
Additional statutory
measures
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
Operating profit
|
£119.2
|
m
|
|
£102.0
|
m
|
|
Operating margin
|
14.9
|
%
|
|
13.7
|
%
|
|
Profit after tax
|
£86.8
|
m
|
|
£74.3
|
m
|
|
Net cash from operating activities
|
£191.6
|
m
|
|
£142.9
|
m
|
|
Basic earnings per share
|
45.1
|
p
|
|
38.6
|
p
|
|
|
|
|
|
|
| |
Highlights
Financial Performance
§ Revenue
up 8% to £802.5m. Growth of 6% excluding energy-related
surcharges
§ Headline
operating profit of £127.6m, 17% higher at constant
currency
§ Headline
operating margin of 15.9%, up 80bps; 17.3% excluding surcharge
revenue, up 120bps
§ Headline
basic EPS2 growth of 13% to 48.4p
§ Return on
capital employed1 up 150bps to 14.8%
§ Free cash
flow improved by £38.5m to £122.5m1
§ Full year
dividend per share of 22.7p, up 7%; 36-year record of growing or
maintaining the dividend
Key Achievements
§ Revenue
growth led by Specialist Technologies, up 12% excluding
surcharges3
§ Strong
performance in aerospace, oil & gas and medical
markets
§ 4%
reduction in absolute energy consumption, notwithstanding 8%
revenue growth
§ Significant margin improvement; on track to achieve margins in
excess of 20% over the medium term
§ Returned
to historical levels of free cash flow conversion1 of
over 90%
§ Disciplined capital allocation resulting in the £52m
acquisition of Lake City in January 2024 and a £60m buyback
commencing 15 March 2024
§ Delivering successfully on all strategic focus
areas
Commenting, Stephen Harris, Group Chief Executive
said:
"In 2023 we once again delivered
strong revenue growth and improved financial performance, as well
as making progress against our strategic focus areas.
We delivered significant headline
operating profit margin improvement, notably in the ADE business,
helping to drive Group margins to 17.3%, excluding surcharge
revenue. Headline EPS increased by 13% to 48.4p. Bodycote returned
to the strong levels of cash conversion which are more typical for
the business, with free cash flow of £123m, up 46%, reflecting
improved working capital management.
We will continue to deliver on our
strategic focus areas in 2024, including driving growth in
Specialist Technologies, capitalising on the growth opportunities
from delivering carbon reductions for our customers, and
integrating the newly acquired Lake City business.
Despite macroeconomic uncertainty
we expect to deliver further progress in 2024. We anticipate a
reduction in the level of energy surcharges, reflecting further
normalisation of energy prices.
2024 should see us take another
step towards our medium term margin target of more than
20%.
The Board remains confident in the
Group's prospects for continued profitable growth."
1 The headline
performance measures represent the statutory results excluding
certain items. These are deemed alternative performance measures
(APMs) under the European Securities and Markets Authority
guidelines. Please refer to the APMs section of this full-year
results release below for a reconciliation to the nearest IFRS
equivalent.
2
A detailed earnings per share reconciliation is provided in
note 6 to the condensed consolidated financial
statements below.
3 At
constant currency.
END
Full
Year Results Presentation
Bodycote will be presenting our
results via webcast at 08.30am UK GMT on 15 March 2024. Please
find the following instructions to connect to the video and
audio:
Webcast URL:
https://www.bodycote.com/results2023
For dial-in only:
Participant dial-in numbers
are:
United Kingdom: +44 800 358
1035
UK local: +44 20 3936
2999
Participant Access
Code: 135721
This presentation will be
available at www.bodycote.com
For further information, please
contact:
|
Bodycote plc
|
FTI Consulting
|
|
Stephen Harris, Group Chief
Executive
|
Richard Mountain
|
|
Ben Fidler, Chief Financial
Officer
|
Susanne Yule
|
|
Peter Lapthorn, Investor
Relations
|
Tel: +44 203 727 1340
|
|
Tel: +44 1625 505 300
|
|
Full
Year Commentary
Overview
Group revenue increased 8% to £802.5m in 2023.
Excluding surcharges, which have continued to be applied in order
to recover high energy prices, revenue was up 6% at constant
currency. This growth reflected significant progress in the Group's
strategic focus areas, and was despite a mixed end market picture,
particularly in the second half of the year. Bodycote delivered
continued outperformance in Specialist Technologies, up 12% at
constant currency and excluding surcharges, compared with Classical
Heat Treatment which grew by 4%. Good revenue progress was
delivered, with strong performance, in particular, in civil
aerospace (+12%), medical (+24%) and energy (+27%).
Headline operating profit increased 14% to
£127.6m, from £112.2m in 2022 (+17% at constant currency). Headline
operating margin improved to 15.9% (2022: 15.1%). Adjusting for the
revenue impact of energy surcharges, headline operating margin
increased by 120bps to 17.3%. Cost inflation was successfully
covered through price increases. Margin improvement was led by the
ADE business, where headline operating margins rose by 410bps to
21.0%, driven by strong revenue growth in Aerospace and Defence, in
addition to the successful actions to improve pricing and
operational performance in Surface Technology.
Statutory operating profit increased from
£102.0m to £119.2m.
Basic headline earnings per share increased by
13% to 48.4p (2022: 42.7p). Basic earnings per share rose 17% to
45.1p (2022: 38.6p), reflecting the increase in statutory operating
profit.
The Group delivered a significant improvement
in free cash flow, which increased £39m to £123m (2022: £84m). This
reflected higher operating profit, as well as a significant
improvement in working capital control, through better receivables
collection. Investment in maintenance capital expenditure increased
by £6m reflecting ongoing steps to drive improvements in equipment
uptime performance.
As a result of the cash flow performance, the
balance sheet further strengthened, with a closing net cash
position excluding lease liabilities of £12.6m (2022: £33.4m net
debt excluding lease liabilities).
Disciplined and balanced capital allocation to drive
shareholder value
The Group's strong financial position provides
flexibility for disciplined and balanced capital allocation, with a
number of actions taken during 2023 and in early 2024.
In 2023, the Group invested £85.5m (2022:
£74.3m) in capital expenditure, including expansionary capital
expenditure of £27.8m (2022: £22.1m). Over 80% of the expansionary
spend was deployed in our strategic focus areas of Specialist
Technologies, Emerging Markets, civil aerospace and electric
vehicles.
Full year DPS was increased by 7% to 22.7p,
continuing a 36-year track record of growing or maintaining the
dividend. The total cash returned to shareholders through dividends
in 2023 was £40.6m (2022: £38.5m).
In January 2024, the Group announced completion
of the acquisition of Lake City Heat Treating for a total gross
consideration of £52m (£46m net of expected tax benefits). Lake
City is a leading hot isostatic pressing (HIP) and vacuum heat
treatment business in Warsaw Indiana, serving the orthopaedic
implant market as well as civil aerospace. It fits well with the
strategic focus on growing further the Group's Specialist
Technologies revenue in addition to significantly expanding the
Group's presence in the structurally attractive medical
market.
In addition, a £60m share buyback programme was
announced in January, which will commence on 15 March 2024. Further
details are provided in a separate announcement.
Business focus
The following commentary reflects constant
currency growth rates versus the comparable period last year,
unless stated otherwise.
Specialist Technologies
Specialist Technologies are differentiated,
early-stage processes with high margins, large market opportunities
and good growth prospects, where Bodycote is either the clear
leader or one of the top players among few competitors. A key part
of the Group's strategy is to grow these businesses and, over time,
to increase their relative weight within our portfolio. Over the
past 6 years, Specialist Technologies has now outgrown Classical
Heat Treatment by on average c.10% per year (at constant currency
and excluding surcharges).
In 2023, revenue from Specialist Technologies
grew by 12%, supported by existing customer growth and ongoing
sales and marketing efforts to drive higher rates of new adoption
of these processes. To service this growth there was also
investment in additional capacity, with 58% of expansionary capital
expenditure in 2023 (£16m) invested in Specialist Technologies. In
2023 this included HIP capacity expansion in the US on the East
Coast and in the Midwest, growth in our S3P businesses
in Mooresville, North Carolina and in Vellinge, Sweden, as well as
additional LPC capacity in Hungary to support electric vehicle
production. In 2024 we expect to drive further expansion, including
new Corr-I-Dur® capability in China and additional HIP
capacity at several sites in the US.
Market sectors
Aerospace
& Defence revenue of £214m was 15% higher
than the prior year, 11% higher excluding the impact of energy
surcharges. Civil aerospace revenue was 12% higher excluding
surcharges, as production rates for commercial aircraft and engines
continued to recover, and there was a considerable step-up in air
traffic and related aftermarket and servicing activity. Further
growth in OE production volumes and aftermarket activity is
expected in 2024, which the group is well positioned to capture
through strong exposure on newer engine programmes like the CFM
LEAP engine. Supply chain issues continue to temper growth in civil
aerospace, although there was some improvement in the second half
of 2023. Outside civil aerospace we also saw good growth in defence
(up 10%), notably in France and the US, and in the space
sector.
Automotive revenue
was £195m, 6% higher in the year, 5% growth excluding the impact of
energy surcharges. Growth was led by Emerging Markets, which saw
strong performance in Eastern Europe (up 24%), partly offset by
weakness in China and Mexico. There was modest growth in Western
Europe, where heavy truck and bus sales grew strongly but light
vehicle sales were flat. Automotive revenue in North America grew
by a low single digit percentage. There was considerable order
activity in electric vehicles (EVs) including battery electric
vehicles and hybrids. We secured further major new OEM contracts
for EV components in Emerging Markets, North America and Europe,
which will progressively ramp-up in the coming years.
General
Industrial (including energy) revenue increased
6% to £394m, which represented 4% growth excluding surcharges.
There was significant variation across end markets, with energy
sales increasing 27%, and with continued strong growth delivered in
medical, up 24%. There were more challenging conditions in the
manufacturing, industrial machinery, tooling, and electronics
markets, which saw declines in the second half of the
year.
Sustainability
We are proud of the work we do to improve
sustainability through our innovative range of metallurgy services
across a multitude of markets and applications. Our services
deliver a wide range of sustainability benefits to customers:
extending the lifespan of components, reducing carbon emissions,
supporting the development of low-carbon industries, and enabling
lighter and thinner components to be adopted for more sustainable
manufacturing. With increasing pressure on companies to decarbonise
their activities to meet emissions targets and align with emerging
legislation, Bodycote's role in helping customers reduce emissions
has never been more important.
As part of our sales and marketing agenda, in
2023 we accelerated our work to develop digital tools that automate
the quantification of carbon savings for customers. Emissions are
up to 60% lower when parts are processed in our facilities,
compared with customers' own in-house processing. Our tools will
enable us to demonstrate the positive impact of outsourcing to
Bodycote, enabling our customers to reduce their operational
emissions, and avoid some emissions entirely.
Our work to transition customers to lower
carbon technologies also gained momentum in 2023. Encouraging
accelerated conversion to these technologies plays a role in
reducing emissions, while driving growth at the same time. We
secured several new contracts in the year where avoided carbon
emissions (Scope 4) were a critical factor for our
customers.
The pace of investment in our own carbon
reduction programme continues to accelerate. This also yields a
financial payback through lowering the cost of energy, driving
higher margins. The Group's energy consumption reduced by 4% in
2023 as a result of our initiatives, notwithstanding the 8% growth
in Group revenue. We are well on track to achieve our Science Based
Target1 for emissions
reduction, having now reduced them by 24% since 2019.
1 Bodycote has signed
up to emissions reductions in line with the Science Based Targets
initiative (SBTi)
Summary and outlook
In 2023 we once again delivered strong revenue
growth and improved financial performance, as well as making
progress against our strategic focus areas.
We delivered significant headline operating
profit margin improvement, notably in the ADE business, helping to
drive Group margins to 17.3%, excluding surcharge revenue. Headline
EPS increased by 13% to 48.4p. Bodycote returned to the strong
levels of cash conversion which are more typical for the business,
with free cash flow of £123m, up 46%, reflecting improved working
capital management.
We will continue to deliver on our strategic
focus areas in 2024, including driving growth in Specialist
Technologies, capitalising on the growth opportunities from
delivering carbon reductions for our customers, and integrating the
newly acquired Lake City business.
Despite macroeconomic uncertainty we expect to
deliver further progress in 2024. We anticipate a reduction in the
level of energy surcharges, reflecting further normalisation of
energy prices.
2024 should see us take another step towards
our medium term margin target of more than 20%.
The Board remains confident in the Group's
prospects for continued profitable growth.
Business review
Our ADE business focuses on aerospace, defence
and energy customers, who typically operate globally. Our AGI
business focuses on automotive and general industrial customers.
These include many multinational companies that tend to typically
operate on a regionally focused basis and numerous medium-sized and
smaller businesses, all of which are important to Bodycote. Much of
the AGI business is locally oriented.
Strategically we have focused on building
customer relationships to enable our participation in long-term
programmes. Not only do we have a competitive advantage as a result
of our scale and capabilities, but our global reach allows
customers to work with us on multiple projects simultaneously,
making us a valued business partner.
The following reviews reflect constant currency
growth rates unless stated otherwise.
Our ADE business
Bodycote services all of the major
manufacturers in the aerospace industry as well as a large portion
of their supply chains.
Revenue in 2023 was
£355.5m, an increase of
14% (14% at actual
exchange rates) with strong growth in
civil aerospace, oil &
gas and medical revenue.
Headline operating profit increased to
£69.5m (2022:
£50.8m), and headline operating
margin increased to
19.5% (2022:
16.2%) and 21.0% excluding the revenue
effect of energy-related surcharges (2022: 16.9%), reflecting
higher aerospace volumes as well as improved pricing and
operational performance in our Surface Technology business.
Statutory operating profit increased to
£63.1m
(2022:
£44.0m).
We spent £13.4m on
expansionary capital expenditure, with significant investment
in capacity growth for the North American
Specialist Technologies business.
Return on capital employed increased to
15.5% (2022:
11.9%) as a
result of the improved profitability.
Our AGI business
Bodycote has a long and successful history of
servicing its wide-ranging customer base.
Our extensive network of facilities enables the
business to offer customers the broadest range of capability and
security of supply. Each of our AGI facilities works with customers
to respond with the expertise and appropriate service level
required, no matter the size of the customer's demand.
Revenue was £447.0m,
an increase of 4% on the prior year
(4% at actual exchange rates). There was
good growth in the first half of the year, led by automotive sales
in Eastern Europe, with a softening in the second half due to
weaker industrial end markets.
Headline operating profit was
£79.3m (2022:
£80.8m), and headline operating margin
declined slightly to 17.7%
(2022: 18.7%)
and 19.6% excluding the revenue effect of energy related surcharges
(2022; 20.4%), impacted by the low volume levels in the second half
of the year. Statutory operating profit declined to
£77.6m (2022:
£78.2m).
We spent £14.4m on
expansionary capital expenditure, with ongoing
expansion in Emerging Markets, particularly in Eastern
Europe and China.
Return on capital employed was broadly stable
at 17.8% (2022:
18.2%).
Financial overview
|
|
2023
£m
|
2022
£m
|
|
Revenue
|
802.5
|
743.6
|
|
Headline operating profit
|
127.6
|
112.2
|
|
Amortisation of acquired intangible
assets
|
(8.1)
|
(9.3)
|
|
Acquisition costs
|
(0.3)
|
(0.9)
|
|
Operating profit
|
119.2
|
102.0
|
|
Net finance charge
|
(7.5)
|
(6.7)
|
|
Profit before taxation
|
111.7
|
95.3
|
|
Taxation charge
|
(24.9)
|
(21.0)
|
|
Profit for the year
|
86.8
|
74.3
|
Group revenue increased to £802.5m, growth of
7.9% at actual exchange rates and 8.3% at constant
currency.
Headline operating profit for the year
increased 13.7% to £127.6m (2022: £112.2m), representing growth of
16.7% at constant currency. This saw the Group deliver further
improvement in headline operating margin to 15.9% (2022: 15.1%)
reflecting the benefit of increased volumes, pricing and improved
operational efficiencies. Statutory operating profit increased to
£119.2m (2022: £102.0m).
The Group continued to recover cost inflation
during the year through a combination of pass through energy
surcharges and sustainable price increases. Excluding the revenue
impact of energy surcharges, headline operating margins rose by 120
bps to 17.3% (2022: 16.1%).
Net finance charge
The net finance charge increased modestly to
£7.5m (2022: £6.7m), analysed in the table below.
|
|
2023
£m
|
2022
£m
|
|
Interest on loans and bank
overdrafts
|
(2.7)
|
(2.3)
|
|
Interest on lease and pension
liabilities
|
(2.7)
|
(1.8)
|
|
Financing and bank
charges
|
(2.9)
|
(3.0)
|
|
Total finance charge
|
(8.3)
|
(7.1)
|
|
Interest received
|
0.8
|
0.4
|
|
Net finance charge
|
(7.5)
|
(6.7)
|
The increase in interest charges during the
year was driven primarily by higher underlying interest rates on
the Revolving Credit Facility drawings and on leases. These were
partly offset by an increase in interest received on cash deposits
during the year.
Profit before taxation
|
|
2023
£m
|
2022
£m
|
|
Headline profit before taxation
|
120.1
|
105.5
|
|
Amortisation of acquired
intangibles
|
(8.1)
|
(9.3)
|
|
Acquisition costs
|
(0.3)
|
(0.9)
|
|
Profit before taxation
|
111.7
|
95.3
|
Headline profit before tax increased by 13.8%
to £120.1m (2022: £105.5m), growth of 17.2% at constant currency.
Statutory profit before taxation increased to £111.7m (2022:
£95.3m).
Taxation
The tax charge for the year was £24.9m (2022:
£21.0m). The headline tax rate for the Group was 22.5% (2022:
22.3%), before accounting for amortisation of acquired intangibles,
acquisition costs and exceptional items. This was in line with our
expectations. The Group's overall tax rate reflects the blended
average of the tax rates in the jurisdictions around the world in
which the Group trades and generates profit. Looking ahead, the
headline tax rate is expected to moderately increase over the next
few years mainly due to growth in the US business and
an increase in the UK corporate tax rate.
The effective statutory tax rate was 22.3%
(2022: 22.1%). Provisions of £26.4m
(2022: £28.1m) are carried in respect of potential future
additional tax assessments related to 'open' historical tax years.
Note 4 of the condensed consolidated financial statements below for
more information.
The OECD Pillar II proposals for a global
minimum tax rate are applicable to the Group from 1 January 2024.
The changes are not expected to have a material impact on the
Group's tax charge in 2024.
Earnings per share
Basic headline earnings per share rose 13.3% to
48.4p (2022: 42.7p) as a result of the higher headline operating
profit. Basic earnings per share for the year increased to 45.1p
(2022: 38.6p). Note 6 of the condensed consolidated financial
statements below provides further details of the basis of these
calculations.
|
|
2023
£m
|
2022
£m
|
|
Profit before taxation
|
111.7
|
95.3
|
|
Taxation charge
|
(24.9)
|
(21.0)
|
|
Profit for the year
|
86.8
|
74.3
|
|
Basic headline EPS
|
48.4p
|
42.7p
|
|
Basic EPS
|
45.1p
|
38.6p
|
Return on capital employed
Return on capital employed rose by 150 bps in
the year to 14.8% from 13.3% in 2022. The increase reflected
improvement in headline operating profit together with the Group's
ongoing discipline over capital expenditure projects, focused on
delivering the Group's strategy and driving attractive
returns.
Cash flow
|
|
2023
£m
|
2022
£m
|
|
Headline operating profit
|
127.6
|
112.2
|
|
Depreciation and
amortisation
|
74.0
|
74.9
|
|
Other, including impairment and
profit on disposal of PPE
|
(2.7)
|
3.0
|
|
Headline EBITDA1
|
198.9
|
190.1
|
|
Net maintenance capital
expenditure
|
(57.7)
|
(52.2)
|
|
Net working capital
movement
|
(1.7)
|
(25.3)
|
|
Headline operating cash flow
|
139.5
|
112.6
|
|
Restructuring
|
(1.6)
|
(7.4)
|
|
Financing costs, net
|
(6.4)
|
(5.8)
|
|
Tax, net
|
(9.0)
|
(15.4)
|
|
Free cash flow
|
122.5
|
84.0
|
|
Expansionary capital
expenditure
|
(27.8)
|
(22.1)
|
|
Ordinary dividend
|
(40.6)
|
(38.5)
|
|
Acquisition spend
|
(0.1)
|
(0.9)
|
|
Own shares purchased less SBP and
others
|
(8.1)
|
1.7
|
|
Reduction in net debt
|
45.9
|
24.2
|
|
Opening net debt
|
(99.4)
|
(116.4)
|
|
Foreign exchange
movements
|
1.8
|
(7.2)
|
|
Closing net debt
|
(51.7)
|
(99.4)
|
|
Lease liabilities
|
64.3
|
66.0
|
|
Net cash/(debt) excluding lease liabilities
|
12.6
|
(33.4)
|
1 Refer to the alternative performance
measures section below for a reconciliation of operating profit to
Headline EBITDA.
Improving cash flow conversion has been a
significant focus during 2023 and reflecting this, cash generation
improved materially in the year. Headline operating cash flow rose
to £139.5m (2022: £112.6m), as a result of higher headline
operating profit and improved working capital control through
better receivables collection. Headline operating cash flow
conversion improved to 109% (2022: 100%). The statutory measure,
net cash from operating activities, rose to £191.6m (2022:
£142.9m).
The Group generated a strong increase in free
cash flow to £122.5m (2022: £84.0m) for the year with free cash
flow conversion of 96% compared to 75% for 2022. Net tax payments
in 2023 were £9.0m (2022: £15.4m) with the reduction reflecting
receipt of tax refunds relating to prior years.
Closing net debt was £51.7m (2022: £99.4m).
Excluding lease liabilities, the Group moved from a net debt
position in the prior year of £33.4m to a net cash position of
£12.6m, an improvement of £46.0m. This improved balance sheet
position was achieved after paying £40.6m of dividends to
shareholders and deploying £13.2m for the purchase of 2 million
shares for the Employee Benefit Trust to satisfy future share-based
payments under the Group's share incentive schemes (at an average
price of £6.61).
Going forwards from 2024, the Group will amend
its definition for both headline operating cash flow and free cash
flow to include expansionary capital expenditure as well as
maintenance capital expenditure. This will better align the Group
with normal market practice.
Expansionary capital expenditure
The Group invested £27.8m (2022: £22.1m) in
expansionary capital projects. Over 80% of the
expansionary spend was deployed in our strategic focus areas of
Specialist Technologies, Emerging Markets, civil aerospace and
electric vehicles.
Total capital expenditure in the year
(including both maintenance and expansionary) was £85.5m (2022:
£74.3m). The Group remains committed to maintaining its assets to
the highest standards of quality and safety.
Dividend and dividend policy
The Group has a long and stable track record of
dividend growth and aims to pay ordinary dividends so that dividend
cover will be at or above 2.0 times earnings on a 'normalised'
multi-year basis.
In line with this policy, the Board has
recommended a final dividend of 16.0p
(2022: 14.9p), bringing the full year ordinary dividend to
22.7p (2022: 21.3p). The interim dividend of
6.7p, approved by the Board on 27 July 2023, was paid on 10
November 2023 to shareholders on the register at the close of
business on 6 October 2023. Subject to shareholder approval at the
2024 AGM, the final dividend will be paid on 6 June 2024 to
shareholders on the register at the close of business on
26 April 2024.
Borrowing facilities
The Group is financed by a mix of cash flows
from operations, short-term borrowings and leases. The Group's
funding policy aims to ensure continuity of financing at a
reasonable cost, based on committed and uncommitted facilities and
loans to be procured from several sources over a spread of
maturities. The Group continues to have access to committed
facilities at competitive rates and currently deems this to be the
most effective means of long-term funding. At 31 December 2023, the
facility was drawn as follows:
|
Facility
|
Expiry
date
|
Facility
£m
|
Facility
utilisation
£m
|
Facility
headroom
£m
|
|
Revolving Credit
Facility
|
27 May
2027
|
250.9
|
32.1
|
218.8
|
In addition to the Revolving Credit Facility,
the Group also has access to additional committed facilities of
£9.7m (£0.2m drawn) bringing total committed facility headroom to
£228.3m at 31 December 2023 (2022: £185.8m).
Post balance sheet events - acquisition and share
buyback
Bodycote announced completion of the
acquisition of Lake City in January 2024 for total gross
consideration of £52.2m on a cash and debt free basis which was
settled through the Group's existing cash balances and borrowing
facilities.
Reflecting the Group's strong financial
position and demonstrating a disciplined and balanced approach to
capital allocation, Bodycote also announced in January 2024 its
intention to launch a share buyback programme of up to £60m. This
will commence on 15 March 2024.
Alternative performance measures
Bodycote uses alternative performance measures
such as revenue excluding surcharges, organic revenue, headline
operating profit, headline operating margin, headline operating
margin excluding surcharge revenue, basic headline earnings per
share, headline profit before taxation, headline operating cash
flow, headline operating cash conversion, free cash flow, free cash
flow conversion, net debt and return on capital employed together
with current measures restated at constant currency. The Directors
believe that these assist users of the financial statements to gain
a clearer understanding of the trading performance of the business,
allowing the impact of restructuring and reorganisation activities
and amortisation of acquired intangible assets to be identified
separately. These alternative performance measures can be found in
the APMs section below.
Going concern
In determining the basis of preparation for
the consolidated financial statements from which the condensed
consolidated financial statements included in this press release
have been extracted, the Directors have considered the Group's
business activities, together with the factors likely to affect its
future development, performance and position.
The current and plausible impact of
macroeconomic factors, including the war in Ukraine, energy and
price inflation, and global supply chain impacts on the Group's
activities, performance and revenue, in addition to other factors
and risks, have been considered by the Directors in preparing its
going concern assessment. The Group has modelled a base case, which
reflects the Directors' current expectations of future trading in
addition to potential severe but plausible impacts on revenue,
profits and cash flows in a downside scenario.
Management's base case scenario is built upon
the budgeting and forecasting processes for 2024 and extended up to
June 2025. It includes the recent acquisition of Lake City and the
£60m share buyback that were announced in January 2024. This model
shows an improvement in performance in both revenue and profits
compared to 2023. The Group's recent record of cash conversion was
used to estimate the cash generation and level of net debt over
that period. The severe but plausible downside scenario assumes a
significant decline in revenue of around 20% below the base case
modelled through to the end of June 2025, giving a 12% year on year
decline in 2024. This downside takes account of additional
short-term negative shock events which are intentionally more
severe than those used in the impairment analysis. In mitigation to
this severe sales decline, a 5% decline to maintenance capex and a
50% decline to expansionary capex compared to the base case has
been assumed, together with an assumption that there is no growth
in dividends from 2023 across this period.
In performing the scenarios, the assessment
has considered both liquidity and compliance with the Group's
covenants. The key covenants attached to the Group's Revolving
Credit Facility relate to financial gearing (net debt to EBITDA)
and interest cover, which are measured on a pre-IFRS 16 basis. The
maximum financial gearing ratio permitted under the covenants is
3.0x (with a one-time acquisition spike at 3.5x) and the minimum
interest cover ratio permitted is 4.0x. In both the base case and
the severe but plausible downside scenario modelled, the Group
continues to maintain sufficient liquidity and meet its gearing and
interest cover covenants under the Revolving Credit Facility with
substantial headroom.
Management also performed a reverse stress
test. This indicated that 2024 revenue would need to decline by
over 35% compared to 2023 levels and with no growth in 2025 before
the Group's loan covenants were breached at the June 2025 test
date. In this scenario, minimum liquidity was over £47m throughout
the entire period. This scenario included the same mitigations as
the downside scenario, with the expansionary capex reduction
increased to 80% in H1 2025.
The Group meets its working capital
requirements through a combination of committed and uncommitted
facilities and overdrafts. For the purposes of the going concern
assessment, the Directors have only taken into account the capacity
under existing committed facilities, being predominantly the
Group's Revolving Credit Facility.
The Group has access to a £250.9m Revolving
Credit Facility maturing in May 2027. The Group's committed
facilities at 31 December 2023 totalled £260.6m while uncommitted
facilities totalled £63.5m. At 31 December 2023, the Group's
committed facilities had drawings of £32.3m (2022: £69.6m) and the
Group's net cash (excluding lease liabilities) was £12.6m (2022:
net debt (excluding lease liabilities) of £33.4m). The liquidity
headroom was £273.5m at 31 December 2023 (2022: £223.0m), excluding
uncommitted facilities.
Following this assessment, the Directors have
formed a judgement, at the time of approving the financial
statements, that there are no material uncertainties that cast
doubt on the Group's going concern status and that it is a
reasonable expectation that the Group has adequate resources to
continue in operational existence for at least the next 12 months
from the approval date of the consolidated financial statements.
For this reason, the Directors continue to adopt the going concern
basis in preparing the consolidated financial
statements.
Principal risks and
uncertainties
The Board is responsible for the Group's risk
management, determining the Group's risk appetite and ensuring that
the Group risk process and systems of internal control are robust,
continuously monitored and evolve to address changing business
conditions and threats. An update is provided to the Executive and
Audit Committees on the Group's risk activities at every meeting
and a comprehensive review of the Group's business-critical and
emerging risks is presented to the Board in June and in December.
The Board is satisfied that an ongoing process of identifying,
evaluating and managing the Group's significant risks has been in
place throughout 2023 and a robust assessment of both the Group's
principal and emerging risks has been undertaken.
Key events in the year
Inflation has remained at a high level leading
to further increases in certain of the Group's input costs, which
have been successfully recovered through pricing. The Ukraine war
continued and geopolitical tensions intensified in the Middle East
during the second half of the year. Bodycote has no direct exposure
to any of the countries involved and has no facilities, customers,
or suppliers in these territories.
There has been a continued increase in interest
rates following the aggressive rate rises implemented during 2022
by numerous central banks to curb inflation. In the last quarter of
2023, monetary policy interventions appear to have eased inflation
rates with many central banks indicating that further rate hikes
may not be required. Bodycote has continued to manage
inflationary cost pressures well through annual price increases to
recover rising labour and other costs and the energy surcharge
programme, implemented in 2022, which has enabled recovery energy
cost inflation in the year.
Emerging risks
The Board has highlighted geopolitical risk,
specifically, the unpredictable geopolitical landscape and the
uncertainty over future global events as an emerging risk. If
tensions in the geopolitical landscape result in the implementation
of aggressive trade barriers that reduce the movement of goods,
this could result in customers shortening their supply chains and
moving them closer to their main production locations. The emerging
risk is mitigated by the fact that Bodycote has a global network of
sites which allow us to service customers from multiple locations,
such that the residual risk exposure is not considered
significant.
No additional emerging risks were identified in
2023. The risk of global pandemics and their impact on both supply
chain issues and operations are no longer considered as either an
emerging nor principal risk for the Group. Bodycote demonstrated
the ability to respond to and manage its cost base well through the
COVID-19 pandemic. Additionally. the following two risks are no
longer considered as emerging and are now included in our principal
risks:
·
the acceleration in the transition to
electric vehicles (markets and customers); and
·
continued environmental activism and increased focus from
both regulators and the investment community around climate change
(environment)
Market and customer
risks
Bodycote's presence in 22 countries servicing
more than 40,000 customers across a wide variety of end-markets
acts as a natural hedge to neutralise localised economic volatility
and component life cycles.
The principal risks in this area
are:
·
General macroeconomic trends, the economic
environment and the rate of transition from ICE to electric
vehicles (which also presents an opportunity for the Group).
Bodycote needs to maintain progress in building a strong market
position in the electric vehicle supply chain
·
Rising inflation if not successfully
passed on to customers
·
The threat of new and existing competitors
into one or more of the Group's Specialist
Technologies
Corporate and community
risk
Bodycote is committed to providing a safe work
environment for its employees and each facility. There are well
established Group-wide health and safety policies that are subject
to regular review and auditing. There are also programmes in place
to focus on the reduction of incidents which could have a high
impact. The principal risk in this area is the safety and health of
our employees.
Environment
Bodycote recognises the importance of
considering climate risks and opportunities in our business
decisions. The Group's carbon reduction strategy is of particular
importance to stakeholders, both as potential risk and as
commercial opportunity. Our climate change risk is managed closely
by Group management reporting to the Chief Executive who provides
regular reports to the Board. We also acknowledge the role of the
Task Force on Climate-related Financial Disclosures (TCFD) in
supporting the transition to a low-carbon economy. Our disclosures
within the Sustainability report in the 2023 Annual Report
demonstrate how we are managing our climate impact and how the
Group is evolving in response to the risks and opportunities
arising.
Our principal risks in this area are the
potential risks from emerging regulation, technology, legal,
market, and physical climate risk drivers which could lead to
business disruption, health risks, loss of reputation and financial
costs.
Operational risks
Bodycote has a global network of more than 165
facilities. Each facility has stringent operational quality systems
in place managed by qualified staff. These facilities are however
subject to a number of operational risks:
· Deterioration in
quality or service levels
· Not treating
parts in accordance with the confirmed contract
specifications
· The loss of key
accreditations such as Nadcap for aerospace and defence work and
IATF 6949 for automotive
· Major facility
disruption due to man-made or natural hazards
· Machinery
downtime
· Information
technology and cybersecurity
Regulatory risk
Bodycote has a strong set of core values
supported by the Group Code of Conduct, Group policies, alongside
training and awareness programmes. The principal risk in this area
is the failure to comply with key local and international
legislation.
Finance risks
The Group's multinational operations expose it
to a variety of financial risks. Financial risk management policies
are set by the Board and the Group's financial risk management was
reviewed and challenged during the year by the Audit Committee. In
the course of its business, the Group is exposed to the following
financial risks:
·
Liquidity risk
· Credit
risk
· Interest
rate risk
· Foreign
currency risk
The principal risks and uncertainties faced by
the Group are set out in detail in the 2023 Annual
Report.
Directors' responsibilities
statement
This responsibilities statement has been
prepared in connection with the Group consolidated financial
statements, extracts of which are included within this
announcement.
The Directors confirm that to the best of
their knowledge:
·
The condensed consolidated financial
statements included in this document are derived from the audited
consolidated financial statements of the Group, prepared in
accordance with UK-adopted international accounting standards (they
do not contain sufficient information to comply with UK-adopted
international accounting standards);
· The
Group's consolidated financial statements, prepared in accordance
with UK-adopted internal accounting standards, give a true and fair
view of the assets, liabilities, financial position, cash flows and
profit of the Group;
· There
have been no significant individual related party transactions
during the year; and
·
Other than changes in Directors, there
have been no significant changes in the Group's related party
relationships from that reported in the half-yearly results for the
six months ended 30 June 2023.
The Group's consolidated financial statements,
and related notes, including this responsibilities statement, were
approved by the Board and authorised for issue on 15 March 2024 and
were signed on their behalf by:
By order of the Board,
Director
|
Director
|
S.C. Harris
|
B. Fidler
|
Audited financial
information
The condensed consolidated financial statements
and notes 1 to 10 for the year ended 31 December 2023 included
below are derived from the Group's consolidated financial
statements which have been audited by PricewaterhouseCoopers LLP.
The unmodified audit report is available for inspection at the
Group's registered office.
Consolidated income
statement
For the year ended 31
December
|
|
|
2023
|
2022
|
|
|
Note
|
£m
|
£m
|
|
Revenue
|
1
|
802.5
|
743.6
|
|
Cost of sales and overheads1
|
2
|
(694.4)
|
(646.2)
|
|
Other operating income1
|
2
|
12.6
|
9.2
|
|
Other operating expenses1
|
2
|
(1.3)
|
(4.5)
|
|
Net impairment losses on financial
assets
|
|
(0.2)
|
(0.1)
|
|
Operating profit
prior to exceptional items
|
1,2
|
119.2
|
102.0
|
|
Exceptional items
|
3
|
-
|
-
|
|
Operating
profit
|
2
|
119.2
|
102.0
|
|
Finance income
|
|
0.8
|
0.4
|
|
Finance charge
|
|
(8.3)
|
(7.1)
|
|
Profit before
taxation
|
|
111.7
|
95.3
|
|
Taxation charge
|
4
|
(24.9)
|
(21.0)
|
|
Profit for the
year
|
|
86.8
|
74.3
|
|
Attributable to:
|
|
|
|
|
Equity holders of the Parent
|
|
85.6
|
73.7
|
|
Non-controlling interests
|
|
1.2
|
0.6
|
|
|
|
86.8
|
74.3
|
|
Earnings per
share
|
6
|
|
|
|
|
|
Pence
|
Pence
|
|
Basic
|
|
45.1
|
38.6
|
|
Diluted
|
|
44.8
|
38.5
|
1 Excludes
exceptional items.
All activities have arisen from
continuing operations.
Consolidated statement of
comprehensive income
For the year ended 31 December
2023
|
|
|
2023
|
2022
|
|
|
|
£m
|
£m
|
|
Profit for the
year
|
|
86.8
|
74.3
|
|
Items that will not
be reclassified to profit or loss:
|
|
|
|
|
Actuarial (losses)/gains on defined
benefit pension schemes
|
|
(0.1)
|
5.8
|
|
Tax on retirement benefit obligations that will not
be reclassified
|
|
-
|
(0.2)
|
|
Total items that
will not be reclassified to profit or loss
|
|
(0.1)
|
5.6
|
|
Items that may be
reclassified subsequently to profit or loss:
|
|
|
|
|
Exchange (losses)/gains on
translation of overseas operations
|
|
(29.7)
|
57.2
|
|
Movements on hedges of net investments
|
|
1.5
|
(3.1)
|
|
Movements on cash flow hedges
|
|
0.4
|
(0.3)
|
|
Total items that
may be reclassified subsequently to profit or loss
|
|
(27.8)
|
53.8
|
|
Other comprehensive (expense)/income for the
year
|
|
(27.9)
|
59.4
|
|
Total comprehensive
income for the year
|
|
58.9
|
133.7
|
|
Attributable to:
|
|
|
|
|
Equity holders of the parent
|
|
58.5
|
133.3
|
|
Non-controlling interests
|
|
0.4
|
0.4
|
|
|
|
58.9
|
133.7
|
Consolidated balance
sheet
At 31 December 2023
|
|
|
2023
|
2022
|
|
|
Note
|
£m
|
£m
|
|
Non-current
assets
|
|
|
|
|
Goodwill
|
|
221.5
|
227.8
|
|
Other intangible assets
|
|
111.2
|
116.9
|
|
Property, plant and equipment
|
|
504.9
|
516.3
|
|
Right-of-use assets
|
|
58.5
|
59.6
|
|
Deferred tax assets
|
|
2.6
|
1.5
|
|
Trade and other receivables
|
|
1.3
|
1.5
|
|
|
|
900.0
|
923.6
|
|
Current
assets
|
|
|
|
|
Inventories
|
|
29.5
|
27.8
|
|
Current tax assets
|
|
13.1
|
24.4
|
|
Trade and other receivables
|
|
148.4
|
154.4
|
|
Cash and bank balances
|
|
45.2
|
37.2
|
|
Assets held for sale
|
|
0.5
|
0.3
|
|
|
|
236.7
|
244.1
|
|
Total
assets
|
|
1,136.7
|
1,167.7
|
|
Current
liabilities
|
|
|
|
|
Trade and other payables
|
|
122.7
|
124.9
|
|
Current tax liabilities
|
|
46.0
|
42.8
|
|
Borrowings
|
|
32.6
|
70.6
|
|
Lease liabilities
|
|
11.8
|
12.3
|
|
Derivative financial instruments
|
|
-
|
0.3
|
|
Provisions
|
7
|
12.0
|
10.2
|
|
|
|
225.1
|
261.1
|
|
Net current assets/(liabilities)
|
|
11.6
|
(17.0)
|
|
Non-current
liabilities
|
|
|
|
|
Lease liabilities
|
|
52.5
|
53.7
|
|
Retirement benefit obligations
|
|
11.1
|
10.9
|
|
Deferred tax liabilities
|
|
51.8
|
51.0
|
|
Provisions
|
7
|
3.0
|
7.9
|
|
Other payables
|
|
0.9
|
1.1
|
|
|
|
119.3
|
124.6
|
|
Total
liabilities
|
|
344.4
|
385.7
|
|
Net
assets
|
|
792.3
|
782.0
|
|
Equity
|
|
|
|
|
Share capital
|
|
33.1
|
33.1
|
|
Share premium account
|
|
177.1
|
177.1
|
|
Own shares
|
|
(15.6)
|
(5.2)
|
|
Other reserves
|
|
139.9
|
134.9
|
|
Translation reserves
|
|
52.3
|
81.2
|
|
Retained earnings
|
|
404.0
|
359.8
|
|
Equity attributable
to equity holders of the parent
|
|
790.8
|
780.9
|
|
Non-controlling interests
|
|
1.5
|
1.1
|
|
Total
equity
|
|
792.3
|
782.0
|
The financial statements of Bodycote
plc, registered number 519057, were approved by the Board of
Directors and authorised for issue on 15 March 2024. They were
signed on its behalf by:
Director
|
Director
|
S.C. Harris
|
B. Fidler
|
Consolidated cash flow
statement
For the year ended 31 December
2023
|
|
|
2023
|
2022
|
|
|
Note
|
£m
|
£m
|
|
Net cash from
operating activities
|
8
|
191.6
|
142.9
|
|
Investing
activities
|
|
|
|
|
Purchases of property, plant and equipment
|
|
(74.1)
|
(57.2)
|
|
Proceeds on disposal of property, plant and
equipment, right-of-use and intangible assets
|
|
10.4
|
4.7
|
|
Purchases of other intangible assets
|
|
(8.3)
|
(9.8)
|
|
Interest received
|
|
0.8
|
0.4
|
|
Net cash used in
investing activities
|
|
(71.2)
|
(61.9)
|
|
Financing
activities
|
|
|
|
|
Interest paid
|
|
(7.2)
|
(6.2)
|
|
Dividends paid
|
5
|
(40.6)
|
(38.5)
|
|
Principal elements of lease payments
|
|
(13.1)
|
(13.8)
|
|
Drawdown of bank loans
|
|
25.7
|
50.7
|
|
Repayments of bank loans
|
|
(61.8)
|
(75.0)
|
|
Own shares purchased
|
|
(13.2)
|
-
|
|
Net cash used in financing activities
|
|
(110.2)
|
(82.8)
|
|
Net increase/(decrease) in cash and cash
equivalents
|
|
10.2
|
(1.8)
|
|
Cash and cash
equivalents at beginning of year
|
|
36.2
|
37.9
|
|
Effect of foreign exchange rate changes
|
|
(1.7)
|
0.1
|
|
Cash and cash
equivalents at end of year
|
8
|
44.7
|
36.2
|
Consolidated statement of changes
in equity
For the year ended 31 December
2023
|
|
Share capital
|
Share premium account
|
Own shares
|
Other reserves
|
Translation reserves
|
Retained earnings
|
Equity attributable to equity holders of the
parent
|
Non-controlling interests
|
Total equity
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
1 January 2022
|
33.1
|
177.1
|
(6.2)
|
137.5
|
23.8
|
319.4
|
684.7
|
0.7
|
685.4
|
|
Profit for the year
|
-
|
-
|
-
|
-
|
-
|
73.7
|
73.7
|
0.6
|
74.3
|
|
Exchange differences on translation of overseas
operations
|
-
|
-
|
-
|
-
|
57.4
|
-
|
57.4
|
(0.2)
|
57.2
|
|
Movements on hedges of net investments
|
-
|
-
|
-
|
(3.1)
|
-
|
-
|
(3.1)
|
-
|
(3.1)
|
|
Movements on cash flow hedges
|
-
|
-
|
-
|
(0.3)
|
-
|
-
|
(0.3)
|
-
|
(0.3)
|
|
Actuarial gains on defined benefit
pension schemes net of deferred tax
|
-
|
-
|
-
|
-
|
-
|
5.6
|
5.6
|
-
|
5.6
|
|
Total comprehensive income for the year
|
-
|
-
|
-
|
(3.4)
|
57.4
|
79.3
|
133.3
|
0.4
|
133.7
|
|
Acquired in the year/settlement of share awards
|
-
|
-
|
1.0
|
(0.9)
|
-
|
(0.1)
|
-
|
-
|
-
|
|
Share-based payments
|
-
|
-
|
-
|
1.7
|
-
|
-
|
1.7
|
-
|
1.7
|
|
Deferred tax on share-based payment transactions
|
-
|
-
|
-
|
-
|
-
|
(0.3)
|
(0.3)
|
-
|
(0.3)
|
|
Dividends
|
-
|
-
|
-
|
-
|
-
|
(38.5)
|
(38.5)
|
-
|
(38.5)
|
|
31 December
2022
|
33.1
|
177.1
|
(5.2)
|
134.9
|
81.2
|
359.8
|
780.9
|
1.1
|
782.0
|
|
Profit for the year
|
-
|
-
|
-
|
-
|
-
|
85.6
|
85.6
|
1.2
|
86.8
|
|
Exchange differences on translation of overseas
operations
|
-
|
-
|
-
|
-
|
(28.9)
|
-
|
(28.9)
|
(0.8)
|
(29.7)
|
|
Movements on hedges of net investments
|
-
|
-
|
-
|
1.5
|
-
|
-
|
1.5
|
-
|
1.5
|
|
Movements on cash flow hedges
|
-
|
-
|
-
|
0.4
|
-
|
-
|
0.4
|
-
|
0.4
|
|
Actuarial losses on defined benefit
pension schemes net of deferred tax
|
-
|
-
|
-
|
-
|
-
|
(0.1)
|
(0.1)
|
-
|
(0.1)
|
|
Total comprehensive income for the year
|
-
|
-
|
-
|
1.9
|
(28.9)
|
85.5
|
58.5
|
0.4
|
58.9
|
|
Shares acquired in the year
|
-
|
-
|
(13.2)
|
-
|
-
|
-
|
(13.2)
|
-
|
(13.2)
|
|
Settlement of share awards
|
-
|
-
|
2.8
|
(2.0)
|
-
|
(0.8)
|
-
|
-
|
-
|
|
Share-based payments
|
-
|
-
|
-
|
5.1
|
-
|
-
|
5.1
|
-
|
5.1
|
|
Deferred tax on share-based payment transactions
|
-
|
-
|
-
|
-
|
-
|
0.1
|
0.1
|
-
|
0.1
|
|
Dividends
|
-
|
-
|
-
|
-
|
-
|
(40.6)
|
(40.6)
|
-
|
(40.6)
|
|
31 December
2023
|
33.1
|
177.1
|
(15.6)
|
139.9
|
52.3
|
404.0
|
790.8
|
1.5
|
792.3
|
Included in other reserves is a
capital redemption reserve of £129.8m (2022: £129.8m) and a
share-based payments reserve of £9.7m
(2022: £6.7m). The capital redemption reserve arose from B shares
which were converted into deferred shares in 2008 and 2009, and as
a result, £129.8m was transferred from retained earnings to a
capital redemption reserve.
The own shares reserve represents
the cost of shares in Bodycote plc purchased in the market. At 31
December 2023, 2,292,243 (2022: 639,125)
ordinary shares of 173/11p each were held by
the Bodycote International Employee Benefit Trust to satisfy
share-based payments under the Group's incentive schemes. In the
period ending 31 December 2023, 2,000,000
shares were purchased for the Bodycote International Employee
Benefit Trust to satisfy future share-based payments under the
Group's share incentive schemes, for an average price of £6.57
(excluding costs) at a cost of £13.1m plus purchase costs of
£0.1m.
Notes to the consolidated financial
statements
Year ended 31 December
2023
1.
Business and geographical segments
The Group has more than
165 facilities across the world serving a
range of market sectors with various thermal processing services.
The range and type of services offered is common to all market
sectors.
In accordance with IFRS 8 Operating
Segments, the segmentation of Group activity reflects the way the
Group is managed by the chief operating decision maker, being the
Group Chief Executive, who regularly reviews the operating
performance of six operating segments, split between the Aerospace,
Defence & Energy (ADE) and Automotive & General Industrial
(AGI) business areas, as follows:
·
ADE - Western Europe;
·
ADE - North America;
·
ADE - Emerging Markets;
·
AGI - Western Europe;
·
AGI - North America; and
·
AGI - Emerging Markets.
The split of operating segments by
geography reflects the business reporting structure of the
Group.
We have also presented combined
results of our two key business areas, ADE and AGI, the split being
driven by customer behaviour and requirements, geography and
services provided. Customers in the ADE segment tend to operate and
purchase more globally and have long supply chains, whilst
customers in the AGI segment tend to purchase more locally and have
shorter supply chains.
Bodycote plants do not exclusively
supply services to customers of a given market sector. Allocations
of plants between ADE and AGI are therefore derived by reference to
the preponderance of markets served.
|
|
ADE
|
AGI
|
Central costs and eliminations
|
Consolidated
|
|
|
2023
|
2023
|
2023
|
2023
|
|
Group
|
£m
|
£m
|
£m
|
£m
|
|
Revenue
|
|
|
|
|
|
Total revenue
|
355.5
|
447.0
|
-
|
802.5
|
|
Result
|
|
|
|
|
|
Headline operating profit prior to share-based
payments and unallocated central costs
|
71.2
|
80.8
|
-
|
152.0
|
|
Share-based payments (including social
charges)1
|
(1.7)
|
(1.5)
|
(2.7)
|
(5.9)
|
|
Unallocated central costs
|
-
|
-
|
(18.5)
|
(18.5)
|
|
Headline operating profit/(loss)
|
69.5
|
79.3
|
(21.2)
|
127.6
|
|
Amortisation of acquired intangible assets
|
(6.4)
|
(1.7)
|
-
|
(8.1)
|
|
Acquisition costs
|
-
|
-
|
(0.3)
|
(0.3)
|
|
Operating profit/(loss) prior to exceptional
items
|
63.1
|
77.6
|
(21.5)
|
119.2
|
|
Exceptional items
|
-
|
-
|
-
|
-
|
|
Segment result
|
63.1
|
77.6
|
(21.5)
|
119.2
|
|
Finance income
|
|
|
|
0.8
|
|
Finance costs
|
|
|
|
(8.3)
|
|
Profit before taxation
|
|
|
|
111.7
|
|
Taxation
|
|
|
|
(24.9)
|
|
Profit for the
year
|
|
|
|
86.8
|
1
Includes £0.8m social security charges
(2022: £0.1m credit).
Inter-segment revenues are not
material in either year.
The Group does not have any one
customer that contributes more than 10% of revenue.
|
|
Western Europe
|
North America
|
Emerging markets
|
Total ADE
|
|
|
2023
|
2023
|
2023
|
2023
|
|
Aerospace, Defence
& Energy
|
£m
|
£m
|
£m
|
£m
|
|
Revenue
|
|
|
|
|
|
Total revenue
|
162.8
|
185.1
|
7.6
|
355.5
|
|
Result
|
|
|
|
|
|
Headline operating profit prior to share-based
payments
|
36.2
|
35.2
|
(0.2)
|
71.2
|
|
Share-based payments (including social charges)
|
(0.8)
|
(0.9)
|
-
|
(1.7)
|
|
Headline operating profit/(loss)
|
35.4
|
34.3
|
(0.2)
|
69.5
|
|
Amortisation of acquired intangible assets
|
(0.4)
|
(6.0)
|
-
|
(6.4)
|
|
Segment result
|
35.0
|
28.3
|
(0.2)
|
63.1
|
|
|
Western Europe
|
North America
|
Emerging markets
|
Total AGI
|
|
|
2023
|
2023
|
2023
|
2023
|
|
Automotive &
General Industrial
|
£m
|
£m
|
£m
|
£m
|
|
Revenue
|
|
|
|
|
|
Total revenue
|
254.6
|
102.4
|
90.0
|
447.0
|
|
Result
|
|
|
|
|
|
Headline operating profit prior to share-based
payments
|
54.7
|
10.1
|
16.0
|
80.8
|
|
Share-based payments (including social charges)
|
(1.0)
|
(0.1)
|
(0.4)
|
(1.5)
|
|
Headline operating profit
|
53.7
|
10.0
|
15.6
|
79.3
|
|
Amortisation of acquired intangible assets
|
(0.4)
|
(0.9)
|
(0.4)
|
(1.7)
|
|
Segment result
|
53.3
|
9.1
|
15.2
|
77.6
|
|
|
ADE
|
AGI
|
Central costs and
eliminations
|
Consolidated
|
|
|
2022
|
2022
|
2022
|
2022
|
|
Group
|
£m
|
£m
|
£m
|
£m
|
|
Revenue
|
|
|
|
|
|
Total revenue
|
312.7
|
430.9
|
-
|
743.6
|
|
Result
|
|
|
|
|
|
Headline operating profit prior to share-based
payments and unallocated central costs
|
52.1
|
81.1
|
-
|
133.2
|
|
Share-based payments (including social charges)
|
(1.3)
|
(0.3)
|
-
|
(1.6)
|
|
Unallocated central costs
|
-
|
-
|
(19.4)
|
(19.4)
|
|
Headline operating profit/(loss)
|
50.8
|
80.8
|
(19.4)
|
112.2
|
|
Amortisation of acquired intangible assets
|
(6.9)
|
(2.4)
|
-
|
(9.3)
|
|
Acquisition costs
|
-
|
-
|
(0.9)
|
(0.9)
|
|
Operating profit/(loss) prior to exceptional
items
|
43.9
|
78.4
|
(20.3)
|
102.0
|
|
Exceptional items
|
0.1
|
(0.2)
|
0.1
|
-
|
|
Segment result
|
44.0
|
78.2
|
(20.2)
|
102.0
|
|
Finance income
|
|
|
|
0.4
|
|
Finance costs
|
|
|
|
(7.1)
|
|
Profit before taxation
|
|
|
|
95.3
|
|
Taxation
|
|
|
|
(21.0)
|
|
Profit for the year
|
|
|
|
74.3
|
|
|
Western Europe
|
North America
|
Emerging markets
|
Total ADE
|
|
|
2022
|
2022
|
2022
|
2022
|
|
Aerospace, Defence
& Energy
|
£m
|
£m
|
£m
|
£m
|
|
Revenue
|
|
|
|
|
|
Total revenue
|
137.1
|
168.6
|
7.0
|
312.7
|
|
Result
|
|
|
|
|
|
Headline operating profit prior to share-based
payments
|
24.5
|
27.4
|
0.2
|
52.1
|
|
Share-based payments (including social charges)
|
(0.4)
|
(0.9)
|
-
|
(1.3)
|
|
Headline operating profit
|
24.1
|
26.5
|
0.2
|
50.8
|
|
Amortisation of acquired intangible assets
|
(0.4)
|
(6.5)
|
-
|
(6.9)
|
|
Operating profit prior to exceptional items
|
23.7
|
20.0
|
0.2
|
43.9
|
|
Exceptional items
|
0.7
|
(0.6)
|
-
|
0.1
|
|
Segment result
|
24.4
|
19.4
|
0.2
|
44.0
|
|
|
Western Europe
|
North America
|
Emerging markets
|
Total AGI
|
|
|
2022
|
2022
|
2022
|
2022
|
|
Automotive &
General Industrial
|
£m
|
£m
|
£m
|
£m
|
|
Revenue
|
|
|
|
|
|
Total revenue
|
241.6
|
103.0
|
86.3
|
430.9
|
|
Result
|
|
|
|
|
|
Headline operating profit prior to share-based
payments
|
51.6
|
12.1
|
17.4
|
81.1
|
|
Share-based payments (including social charges)
|
(0.6)
|
0.2
|
0.1
|
(0.3)
|
|
Headline operating profit
|
51.0
|
12.3
|
17.5
|
80.8
|
|
Amortisation of acquired intangible assets
|
(0.5)
|
(1.5)
|
(0.4)
|
(2.4)
|
|
Operating profit prior to exceptional items
|
50.5
|
10.8
|
17.1
|
78.4
|
|
Exceptional items
|
0.2
|
(0.3)
|
(0.1)
|
(0.2)
|
|
Segment result
|
50.7
|
10.5
|
17.0
|
78.2
|
|
|
ADE
|
AGI
|
Central costs and eliminations
|
Consolidated
|
|
|
2023
|
2023
|
2023
|
2023
|
|
Group
|
£m
|
£m
|
£m
|
£m
|
|
Gross capital additions
|
35.9
|
48.5
|
10.1
|
94.5
|
|
Depreciation and amortisation
|
32.4
|
46.6
|
3.1
|
82.1
|
|
Balance
sheet
|
|
|
|
|
|
Segment assets
|
530.0
|
551.9
|
54.8
|
1,136.7
|
|
Segment liabilities
|
(95.9)
|
(145.7)
|
(102.8)
|
(344.4)
|
|
Segment net assets/(liabilities)
|
434.1
|
406.2
|
(48.0)
|
792.3
|
|
|
Western Europe
|
North America
|
Emerging markets
|
Total ADE
|
|
|
2023
|
2023
|
2023
|
2023
|
|
Aerospace, Defence
& Energy
|
£m
|
£m
|
£m
|
£m
|
|
Gross capital additions
|
12.0
|
23.7
|
0.2
|
35.9
|
|
Depreciation and amortisation
|
12.7
|
19.1
|
0.6
|
32.4
|
|
Balance
sheet
|
|
|
|
|
|
Segment assets
|
178.6
|
346.8
|
4.6
|
530.0
|
|
Segment liabilities
|
(39.8)
|
(55.3)
|
(0.8)
|
(95.9)
|
|
Segment net assets
|
138.8
|
291.5
|
3.8
|
434.1
|
|
|
Western Europe
|
North America
|
Emerging markets
|
Total AGI
|
|
|
2023
|
2023
|
2023
|
2023
|
|
Automotive &
General Industrial
|
£m
|
£m
|
£m
|
£m
|
|
Gross capital additions
|
21.0
|
10.2
|
17.3
|
48.5
|
|
Depreciation and amortisation
|
22.2
|
12.0
|
12.4
|
46.6
|
|
Balance
sheet
|
|
|
|
|
|
Segment assets
|
241.9
|
161.2
|
148.8
|
551.9
|
|
Segment liabilities
|
(93.9)
|
(20.6)
|
(31.2)
|
(145.7)
|
|
Segment net assets
|
148.0
|
140.6
|
117.6
|
406.2
|
|
|
ADE
|
AGI
|
Central costs and
eliminations
|
Consolidated
|
|
|
2022
|
2022
|
2022
|
2022
|
|
Group
|
£m
|
£m
|
£m
|
£m
|
|
Gross capital additions
|
30.8
|
38.2
|
10.6
|
79.6
|
|
Depreciation and amortisation
|
34.1
|
47.0
|
3.2
|
84.3
|
|
Balance
sheet
|
|
|
|
|
|
Segment assets
|
526.9
|
569.8
|
71.0
|
1,167.7
|
|
Segment liabilities
|
(96.0)
|
(134.9)
|
(154.8)
|
(385.7)
|
|
Segment net assets/(liabilities)
|
430.9
|
434.9
|
(83.8)
|
782.0
|
|
|
Western Europe
|
North America
|
Emerging markets
|
Total ADE
|
|
|
2022
|
2022
|
2022
|
2022
|
|
Aerospace, Defence
& Energy
|
£m
|
£m
|
£m
|
£m
|
|
Gross capital additions
|
10.2
|
20.4
|
0.2
|
30.8
|
|
Depreciation and amortisation
|
12.5
|
20.9
|
0.7
|
34.1
|
|
Balance
sheet
|
|
|
|
|
|
Segment assets
|
183.1
|
337.7
|
6.1
|
526.9
|
|
Segment liabilities
|
(51.6)
|
(43.5)
|
(0.9)
|
(96.0)
|
|
Segment net assets
|
131.5
|
294.2
|
5.2
|
430.9
|
|
|
Western Europe
|
North America
|
Emerging
markets
|
Total AGI
|
|
|
2022
|
2022
|
2022
|
2022
|
|
Automotive &
General Industrial
|
£m
|
£m
|
£m
|
£m
|
|
Gross capital additions
|
20.1
|
10.0
|
8.1
|
38.2
|
|
Depreciation and amortisation
|
22.5
|
13.2
|
11.3
|
47.0
|
|
Balance
sheet
|
|
|
|
|
|
Segment assets
|
248.4
|
177.4
|
144.0
|
569.8
|
|
Segment liabilities
|
(79.4)
|
(21.2)
|
(34.3)
|
(134.9)
|
|
Segment net assets
|
169.0
|
156.2
|
109.7
|
434.9
|
Geographical
information
The Group's revenue from external
customers and information about its assets (non-current assets
excluding financial instruments, deferred tax assets and other
financial assets) by country are detailed below:
|
|
Revenue from external customers
|
Non-current assets
|
|
|
2023
|
2022
|
2023
|
2022
|
|
|
£m
|
£m
|
£m
|
£m
|
|
USA
|
271.7
|
258.2
|
426.1
|
450.6
|
|
France
|
116.9
|
90.8
|
63.3
|
64.4
|
|
Germany
|
82.3
|
79.0
|
69.2
|
71.3
|
|
UK
|
66.3
|
55.6
|
96.7
|
88.1
|
|
Sweden
|
50.9
|
48.1
|
34.7
|
35.2
|
|
Netherlands
|
34.9
|
32.8
|
22.7
|
23.1
|
|
Others
|
179.5
|
179.1
|
183.4
|
187.9
|
|
|
802.5
|
743.6
|
896.1
|
920.6
|
2. Operating
profit
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Revenue
|
802.5
|
743.6
|
|
Cost of sales
|
(500.6)
|
(473.9)
|
|
Gross profit
|
301.9
|
269.7
|
|
Distribution costs
|
(21.8)
|
(21.1)
|
|
Administration expenses
|
(172.0)
|
(151.2)
|
|
Other operating income
|
12.6
|
9.2
|
|
Other operating expenses
|
(1.3)
|
(4.5)
|
|
Net impairment losses on financial
assets
|
(0.2)
|
(0.1)
|
|
Operating profit prior to exceptional items
|
119.2
|
102.0
|
|
Exceptional items (see note
3)
|
-
|
-
|
|
Operating profit
|
119.2
|
102.0
|
Operating profit for the year has been arrived at after
charging/(crediting):
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Net foreign exchange
loss
|
0.2
|
0.1
|
|
Inventory expensed
|
76.8
|
69.2
|
|
Depreciation of property, plant and equipment
|
59.4
|
60.2
|
|
Depreciation of right-of-use assets
|
12.9
|
13.0
|
|
Amortisation of other intangible assets
|
9.8
|
11.1
|
|
Gain on disposal of property, plant
and equipment recognised in operating profit
|
(3.4)
|
(1.7)
|
|
Gain on disposal of right-of-use
assets
|
(0.2)
|
(0.1)
|
|
Repairs and maintenance
|
27.2
|
23.5
|
|
Employee costs
|
307.5
|
276.5
|
|
Pension scheme administration
expenses
|
0.5
|
0.6
|
|
Utility costs
|
98.3
|
95.6
|
|
Government assistance support
received1
|
(6.4)
|
(2.6)
|
|
Acquisition costs
|
0.3
|
0.9
|
|
Impairment loss on trade
receivables
|
0.2
|
0.1
|
|
Impairment of property, plant and
equipment and other assets - recognised in operating
profit
|
0.9
|
4.8
|
1
Government assistance consists of support towards energy costs of £6.1m (2022: £1.7m), R&D support of £0.2m
(2022: £0.7m) and £0.1m (2022: £0.2m) in respect of other
support programmes.
3. Exceptional items
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Severance and redundancy provision
release
|
-
|
(0.8)
|
|
Net impairment reversal
|
-
|
(0.1)
|
|
Site closure costs
|
-
|
1.0
|
|
Losses on sales of
property, plant and equipment recognised in
exceptional items
|
-
|
0.1
|
|
Environmental provisions
credit
|
-
|
(0.2)
|
|
Total exceptional items1
|
-
|
-
|
1
Non-exceptional costs relating to severance and redundancy,
impairment charges and reversals, site closure costs and
environmental provisions are booked to other operating expenses.
Gains and losses on sales of property, plant and equipment are
booked to other operating income.
In 2020, the Group announced an
organisation restructuring initiative which was driven by a
combination of both macroeconomic uncertainties and longer-term
automobile and aerospace market structural shifts. A number of
plants were closed as a result of these restructuring activities.
The related costs in the prior year were recorded as exceptional
items in line with the Group's accounting policy for exceptional
items.
At 31 December 2023 £1.4m (2022: £3.0m) was held as exceptional
provisions.
4.
Taxation charge
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Current taxation - charge for the
year
|
26.0
|
21.3
|
|
Current taxation - adjustments in respect of
previous years
|
(2.7)
|
(0.6)
|
|
Deferred tax
|
1.6
|
0.3
|
|
Total taxation charge
|
24.9
|
21.0
|
The Group uses a weighted average
country tax rate rather than the UK tax rate for the reconciliation
of the charge for the year to the profit before taxation per the
consolidated income statement. The Group operates in several
jurisdictions, many of which have a tax rate in excess of the UK
tax rate. As such, a weighted average country tax rate is believed
to provide the most meaningful information to the users of the
financial statements.
The appropriate tax rate for this
comparison in 2023 is 25.4% (2022: 24.8%).
The UK tax rate was increased from 19.0% to 25.0% from 1 April 2023
as per the Finance Act 2021 and consequently, the deferred tax
balances on the consolidated balance sheet relating to the UK have
been measured using these revised rates.
During 2021, the OECD published a
framework for the introduction of a global minimum effective tax
rate of 15%, the Pillar II GloBE Rules, applicable to large
multinational Groups. On 20 June 2023, the United Kingdom
substantially enacted the Pillar II GloBE rules. The Group has
performed an overall assessment of the impact and determined that
the adoption of the Pillar II GloBE Rules by jurisdictions where
Bodycote operates is not expected to have a material impact on the
Group's future tax charge. The Group has applied the exception
provided for by the Pillar II GloBE Rules (Amendments to IAS 12)
and has not recognised, or therefore disclosed, information about
deferred tax assets and liabilities related to these Pillar II
GloBE rules.
The charge for the year can be
reconciled to the profit before taxation per the consolidated
income statement as follows:
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Profit before taxation
|
111.7
|
95.3
|
|
Tax at the weighted average country
tax rate of 25.4 % (2022: 24.8%)
|
28.4
|
23.6
|
|
Tax effect of expenses not deductible in determining
taxable profit1
|
1.1
|
1.7
|
|
Impact of recognition or derecognition of deferred
tax balances
|
0.5
|
(2.0)
|
|
Tax effect of other adjustments in respect of
previous years:
|
|
|
|
Current tax2
|
(2.7)
|
(0.6)
|
|
Deferred tax2
|
0.1
|
(3.4)
|
|
Effect of financing activities between
jurisdictions3
|
0.3
|
(0.6)
|
|
Impact of trade and minimum corporate taxes
|
0.3
|
0.5
|
|
Effect of changes in statutory tax rates on deferred
tax assets and liabilities
|
0.3
|
0.9
|
|
Other tax risk provision movements4
|
(3.4)
|
0.9
|
|
Tax expense for the year
|
24.9
|
21.0
|
Tax on retirement benefit
obligations taken directly to equity was a credit
of £0.1m (2022: charge of £0.5m).
1
Those costs in various jurisdictions that are not deductible in
calculating taxable profits.
2
2023 and 2022 adjustments in current and deferred tax in respect of
previous years relate mainly to changes in assumptions and outcomes
in UK and overseas tax positions.
3 The
Group is externally financed by a mix of cash flows from operations
and short-term borrowings. Internally, operating subsidiaries are
predominantly financed via intercompany loans. The effect is net of
provisions based on management's estimation of tax risk relating to
the potential disallowance of interest.
4.
Includes provisions for local tax risks and
cross-border transactions. 2023 includes a credit of £4.3m
(2022: £nil) for the release of a provision for a tax risk which is
no longer within an audit period.
As part of the calculation of the
tax charge, the Group recognises a number of tax risk provisions in
respect of ongoing tax enquiries and in recognition of the
multinational tax environment that Bodycote operates in where the
nature of the tax positions that are taken is often complex and
subject to change. Included within current tax liabilities on the
consolidated balance sheet as at 31 December 2023 of £46.0m (2022:
£42.8m) are tax provisions totalling £26.4m (2022: £28.1m), of
which £4.2m (2022: £5.3m) are expected to crystallise within 12
months, although if facts and circumstances change this amount
could materially differ. The provisions are based on an assessment
of a range of possible outcomes to determine reasonable estimates
of the consequences of tax authority audits in the various tax
jurisdictions in which the Group operates. The material provisions
relate to the financing of the Group's operations where
management's judgement is exercised to determine the quantum of the
tax risk provisions based on an understanding of the appropriate
local tax legislation, taking into consideration the differences of
interpretation that can arise on a wide variety of issues including
the nature of ongoing tax audits and the experience from earlier
enquiries, and determining whether any possible liability is
probable. The Group's individual tax provisions vary in quantum
from £3.4m to £8.8m.
5.
Dividends
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Amounts recognised as distributions to equity
holders in the year:
|
|
|
|
Final dividend for the year ended 31 December 2021
of 13.8p per share
|
-
|
26.3
|
|
Interim dividend for the year ended 31 December 2022
of 6.4p per share
|
-
|
12.2
|
|
Final dividend for the year ended 31 December 2022
of 14.9p per share
|
28.5
|
-
|
|
Interim dividend for the year ended 31 December 2023
of 6.7p per share
|
12.7
|
-
|
|
|
41.2
|
38.5
|
|
Proposed final dividend for the year ended 31
December 2023 of 16.0p per share
|
30.3
|
-
|
A final dividend
for 2022 of 14.9p was approved at the Annual General Meeting (AGM)
on 25 May 2023 to shareholders on
the register of Bodycote plc on 21 April 2023 and
was paid on 2 June 2023.
The Board approved the payment of
an interim dividend for 2023 of 6.7p on 29 July 2023 to those
shareholders on the register of Bodycote plc on 6 October 2023 and
has proposed a final dividend of 16.0p per
share to be paid on 6 June 2024 to shareholders on
the register at close of business at 26 April 2024 subject
to approval by shareholders at the AGM. The 2023 interim dividend
was paid on 10 November 2023.
As the proposed final dividend is
subject to shareholder approval in 2024, it is not included as a
liability in these financial statements. The dividends are waived
on shares held by the Bodycote International Employee Benefit
Trust.
Any dividend unclaimed after a
period of 6 years from the date for payment of such dividend is
forfeited and reverted back to the Group. In the year 2023 £0.6m
(2022: £nil) was received from dividends forfeited.
6. Earnings per share
The calculation of the basic and
diluted earnings per share is based on the following
data:
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Earnings
|
|
|
|
Earnings for the purpose of basic earnings per share
being net profit attributable to equity holders of the parent
|
85.6
|
73.7
|
|
|
Number
|
Number
|
|
Number of
shares
|
|
|
|
Weighted average number of ordinary shares for the
purpose of basic earnings per share
|
189,877,099
|
190,779,615
|
|
Effect of dilutive potential ordinary shares:
|
|
|
|
Shares subject to performance
conditions1
|
661,721
|
384,848
|
|
Shares subject to vesting conditions
|
344,050
|
191,502
|
|
Weighted average number of ordinary shares for the
purpose of diluted earnings per share
|
190,882,870
|
191,355,965
|
|
|
Pence
|
Pence
|
|
Earnings per
share:
|
|
|
|
Basic
|
45.1
|
38.6
|
|
Diluted1
|
44.8
|
38.5
|
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Headline
earnings
|
|
|
|
Net profit attributable to equity
holders of the parent
|
85.6
|
73.7
|
|
Add back:
|
|
|
|
Amortisation of acquired intangible assets (net of
tax)
|
6.1
|
7.0
|
|
Acquisition costs (net of tax)
|
0.2
|
0.7
|
|
Headline
earnings
|
91.9
|
81.4
|
|
|
Pence
|
Pence
|
|
Headline earnings
per share:
|
|
|
|
Basic
|
48.4
|
42.7
|
|
Diluted1
|
48.1
|
42.5
|
1 As at 31
December 2023, in accordance with IAS 33, the related performance
conditions for open plans have been met resulting in 0.3p dilution of earnings per share (2022: 0.1p dilution) and 0.3p
dilution of headline earnings per share (2022: 0.2p).
7. Provisions
|
|
Restructuring
|
Restructuring environmental
|
Environmental
|
Legal
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
At 1 January 2023
|
1.6
|
2.4
|
8.9
|
5.2
|
18.1
|
|
Increase in provision
|
0.8
|
0.2
|
1.1
|
3.4
|
5.5
|
|
Release of provision
|
(0.4)
|
(0.1)
|
-
|
(0.5)
|
(1.0)
|
|
Utilisation of provision
|
(1.5)
|
(0.1)
|
(2.5)
|
(2.8)
|
(6.9)
|
|
Exchange difference
|
-
|
(0.2)
|
(0.5)
|
-
|
(0.7)
|
|
At 31 December
2023
|
0.5
|
2.2
|
7.0
|
5.3
|
15.0
|
|
Included in current liabilities
|
|
|
|
|
12.0
|
|
Included in non-current liabilities
|
|
|
|
|
3.0
|
|
|
|
|
|
|
15.0
|
As at 31 December 2023 the Group
held £1.4m (2022: £3.0m) of exceptional restructuring provisions
relating to the 2020 exceptional
restructuring programme. Refer to the 2020 Annual report for more
information.
The Group provides for the costs of
environmental remediation if there is a probable outflow of
economic resources that has been identified at the time of plant
closure, as part of acquisition due diligence or in other
circumstances where remediation by the Group is required. This
provision is reviewed annually to determine the best estimate of
expenditure required to settle the identified obligations and where
applicable external confirmations are
obtained to determine the best estimate of future liabilities.
Environmental provisions are separated into
restructuring environmental and environmental provisions to
identify separately those provisions relating to restructuring from
those arising in the ordinary course of business. The majority of
cash outflows in respect of these liabilities are expected to occur
within five years.
Legal provisions include, but are
not limited to, alleged breach of contract and alleged breach of
environmental legislation. While the Group cannot predict the
outcome of individual legal actions, where the exposure can be
reliably measured and an outflow of
economic benefits is considered probable, provisions are recognised following legal advice.
There were no individually material
provisions as at 31 December 2023.
The Group remains exposed to
contingent liabilities in respect of environmental remediation
liabilities. In particular, the Group could be subjected to
regulatory or legislative requirements to remediate sites in the
future. However, it is not possible at this time to determine
whether and to what extent any liabilities exist, other than for
those recognised above. Therefore no provision is recognised in
relation to these items.
8. Notes to the cash flow
statement
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Profit for the year
|
86.8
|
74.3
|
|
Adjustments for:
|
|
|
|
Finance income
|
(0.8)
|
(0.4)
|
|
Finance costs
|
8.3
|
7.1
|
|
Taxation charge
|
24.9
|
21.0
|
|
Operating profit
|
119.2
|
102.0
|
|
Adjustments for:
|
|
|
|
Depreciation of property, plant and equipment
|
59.4
|
60.2
|
|
Depreciation of right-of-use assets
|
12.9
|
13.0
|
|
Amortisation of other intangible assets
|
9.8
|
11.1
|
|
Profit on disposal of property,
plant and equipment recognised in operating profit
|
(3.4)
|
(1.7)
|
|
Loss on disposal of property, plant
and equipment recognised in exceptional items
|
-
|
0.1
|
|
Profit on disposal of right-of-use
assets
|
(0.2)
|
(0.1)
|
|
Share-based payments
|
5.1
|
1.7
|
|
Impairment reversal of property,
plant and equipment and other assets
recognised in exceptional items
|
-
|
(0.1)
|
|
Impairment of property, plant and
equipment and other assets recognised in operating
profit
|
0.9
|
4.8
|
|
EBITDA (See APM
definition)
|
203.7
|
191.0
|
|
Increase in inventories
|
(1.7)
|
(8.5)
|
|
Decrease/(increase) in
receivables
|
6.2
|
(37.4)
|
|
(Decrease)/increase in
payables
|
(1.0)
|
12.6
|
|
Decrease in provisions
|
(3.1)
|
(3.7)
|
|
Cash generated by
operations
|
204.1
|
154.0
|
|
Net income taxes paid
|
(9.0)
|
(15.4)
|
|
Settlement of
derivatives
|
(0.3)
|
0.8
|
|
Refund of post settlement pension
surplus
|
-
|
1.8
|
|
Net exchange differences
|
(3.2)
|
1.7
|
|
Net cash from
operating activities
|
191.6
|
142.9
|
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Cash and cash equivalents comprise:
|
|
|
|
Cash and bank balances
|
45.2
|
37.2
|
|
Bank overdrafts (included in borrowings)
|
(0.5)
|
(1.0)
|
|
|
44.7
|
36.2
|
The cash and cash equivalents
disclosed above in the statement of cash flows includes £0.8m
(2022: £0.8m) held in escrow relating to environmental provisions
in the USA and £1.3m (2022: £1.8m) held in the USA related to the
refund of a pension surplus. The Group intends to use this refund
of pension surplus cash to fund future pension contributions for
its USA employees, otherwise the full amount will become subject to
regulatory restrictions in the USA.
9. Basis of
preparation
The financial statements of the
Group, from which these condensed consolidated financial statements
are derived, have been prepared in accordance with UK-adopted
international accounting standards and with the requirements of the
Companies Act 2006 as applicable to companies reporting under these
standards.
In preparing the condensed
consolidated financial statements, the Directors have considered
the impact of climate change particularly in the context of the
disclosures included in the Sustainability section of our Annual
Report. These considerations did not have a material impact on the
financial reporting judgements and estimates, consistent with the
conclusion that climate change is not expected to have a
significant impact on the Group's cashflows, including those
considered in the going concern and viability
assessments.
10. Non-statutory financial statements
The financial information set out
above does not constitute the Company's statutory accounts for the
years ended 31 December 2023 or 2022 but is derived from those
accounts. Statutory accounts for 2022 have been delivered to the
Registrar of Companies and those for 2023 will be delivered
following the Company's Annual General Meeting. The auditor has
reported on those accounts; their reports were unqualified, did not
draw attention to any matters by way of emphasis and did not
contain statements under s.498 (2) or (3) of the Companies Act
2006.
Alternative performance measures
(APMs) - unaudited
Bodycote uses various APMs, in
addition to those reported under International Financial Reporting
Standards (IFRS), as management consider these measures enable
users of the financial statements to assess the headline trading
performance of the business. These APMs of financial performance,
position or cash flows are not defined or specified according to
IFRS and are defined below and, where relevant, are reconciled to
IFRS measures. APMs are prepared on a consistent basis for all
periods presented in this report.
The APMs used include organic
revenue, revenue excluding surcharges, headline operating profit,
headline operating margin, revenue and headline operating profit at
constant exchange rates, headline operating margin excluding
surcharge revenue, headline profit before taxation, EBITDA,
headline EBITDA, headline operating cash flow, free cash flow,
headline operating cash conversion, free cash flow conversion,
headline tax charge, headline tax rate, headline earnings per share
(EPS), net (debt)/cash, net (debt)/cash plus lease liabilities and
return on capital employed (ROCE). These measures reflect the
headline trading performance of the business as they exclude
certain non-operational items, exceptional items, acquisition costs
and the amortisation of acquired intangible assets. The Group also
uses revenue growth percentages adjusted for the impact of foreign
exchange movements, where appropriate, to better represent the
trading performance of the Group. The measures described above are
also used in the targeting process for executive and management
annual bonuses (headline operating profit and headline operating
cash flow) with headline EPS and ROCE also used in executive share
schemes.
The constant exchange rate
comparison uses the current year reported segmental information,
stated in the relevant functional currency, and translates the
results into its presentational currency using the prior year's
monthly exchange rates. Expansionary capital expenditure is defined
as capital expenditure invested to grow the Group's
business.
Organic revenue
Excludes revenue from acquisitions
in the current and comparative period to provide a like-for-like
comparison, reconciled in the table below:
|
|
|
|
2023
|
2022
|
|
|
|
|
£m
|
£m
|
|
Total revenue
|
|
|
802.5
|
743.6
|
|
Less adjustments for revenue from acquisitions
completed in the current or prior year
|
|
|
-
|
(8.6)
|
|
Total organic
revenue
|
|
|
802.5
|
735.0
|
Revenue excluding
surcharges
|
|
|
|
2023
|
2022
|
|
|
|
|
£m
|
£m
|
|
Total revenue
|
|
|
802.5
|
743.6
|
|
Less energy surcharges
|
|
|
(66.8)
|
(46.6)
|
|
Total revenue
excluding surcharges
|
|
|
735.7
|
697.0
|
Headline operating
profit
|
|
|
|
2023
|
2022
|
|
|
|
|
£m
|
£m
|
|
Operating profit
|
|
|
119.2
|
102.0
|
|
Add back:
|
|
|
|
|
|
Amortisation of acquired intangibles
|
|
|
8.1
|
9.3
|
|
Acquisition costs
|
|
|
0.3
|
0.9
|
|
Exceptional items
|
|
|
-
|
-
|
|
Headline operating
profit
|
|
|
127.6
|
112.2
|
Revenue and headline operating
profit at constant exchange rates
Reconciled to revenue and headline
operating profit in the table below:
|
|
Year to 31 December 2023
|
|
|
ADE
|
AGI
|
Central cost
and eliminations
|
Consolidated
|
|
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
Revenue
|
355.5
|
447.0
|
-
|
802.5
|
|
Constant exchange rates adjustment
|
1.7
|
1.3
|
-
|
3.0
|
|
Revenue at constant currency
|
357.2
|
448.3
|
-
|
805.5
|
|
|
|
|
|
|
|
Headline operating profit
|
69.5
|
79.3
|
(21.2)
|
127.6
|
|
Constant exchange rates adjustment
|
0.8
|
2.0
|
0.5
|
3.3
|
|
Headline operating profit at constant currency
|
70.3
|
81.3
|
(20.7)
|
130.9
|
Headline operating
margin
|
|
|
|
2023
|
2022
|
|
|
|
|
£m
|
£m
|
|
Headline operating profit
|
|
|
127.6
|
112.2
|
|
Revenue
|
|
|
802.5
|
743.6
|
|
Headline operating
margin
|
|
|
15.9%
|
15.1%
|
Headline operating margin excluding
surcharge revenue
|
|
|
|
2023
|
2022
|
|
|
|
|
£m
|
£m
|
|
Headline operating profit
|
|
|
127.6
|
112.2
|
|
Revenue excluding surcharges
|
|
|
735.7
|
697.0
|
|
Headline operating
margin excluding surcharge revenue
|
|
|
17.3%
|
16.1%
|
Headline profit before
taxation
|
|
|
|
2023
|
2022
|
|
|
|
|
£m
|
£m
|
|
Profit before taxation
|
|
|
111.7
|
95.3
|
|
Add back:
|
|
|
|
|
|
Amortisation of acquired intangibles
|
|
|
8.1
|
9.3
|
|
Acquisition costs
|
|
|
0.3
|
0.9
|
|
Exceptional items
|
|
|
-
|
-
|
|
Headline profit
before taxation
|
|
|
120.1
|
105.5
|
EBITDA and headline EBITDA
(earnings before interest, taxation, depreciation and
amortisation)
|
|
|
|
2023
|
2022
|
|
|
|
|
£m
|
£m
|
|
Operating profit
|
|
|
119.2
|
102.0
|
|
Depreciation and amortisation
|
|
|
82.1
|
84.3
|
|
Impairment reversal of property,
plant and equipment and other assets - recognised in exceptional
items
|
|
|
-
|
(0.1)
|
|
Impairment of property, plant and equipment and
other assets - recognised in operating
profit
|
|
|
0.9
|
4.8
|
|
Profit on disposal of property, plant and equipment
- recognised in operating profit
|
|
|
(3.4)
|
(1.7)
|
|
Profit on disposal of right-of-use assets -
recognised in operating profit
|
|
|
(0.2)
|
(0.1)
|
|
Loss on disposal of property, plant
and equipment - recognised in exceptional items
|
|
|
-
|
0.1
|
|
Share-based payments
|
|
|
5.1
|
1.7
|
|
EBITDA
|
|
|
203.7
|
191.0
|
|
Acquisition costs
|
|
|
0.3
|
0.9
|
|
Exceptional items, excluding impairments
|
|
|
-
|
(0.1)
|
|
Share-based payments
|
|
|
(5.1)
|
(1.7)
|
|
Headline
EBITDA
|
|
|
198.9
|
190.1
|
|
Headline EBITDA
Margin
|
|
|
24.8%
|
25.6%
|
Headline operating cash
flow
|
|
|
|
2023
|
2022
|
|
|
|
|
£m
|
£m
|
|
Headline EBITDA
|
|
|
198.9
|
190.1
|
|
Less:
|
|
|
|
|
|
Net maintenance capital expenditure
|
|
|
(57.7)
|
(52.2)
|
|
Net working capital movement
|
|
|
(1.7)
|
(25.3)
|
|
Headline operating
cash flow
|
|
|
139.5
|
112.6
|
Free cash flow
|
|
|
|
2023
|
2022
|
|
|
|
|
£m
|
£m
|
|
Headline operating cash flow
|
|
|
139.5
|
112.6
|
|
Less:
|
|
|
|
|
|
Restructuring cash flows
|
|
|
(1.6)
|
(7.4)
|
|
Net income taxes paid
|
|
|
(9.0)
|
(15.4)
|
|
Net Interest paid
|
|
|
(6.4)
|
(5.8)
|
|
Free cash
flow
|
|
|
122.5
|
84.0
|
Headline operating cash
conversion
|
|
|
|
2023
|
2022
|
|
|
|
|
£m
|
£m
|
|
Headline operating cash flow
|
|
|
139.5
|
112.6
|
|
Headline operating profit
|
|
|
127.6
|
112.2
|
|
Headline operating
cash conversion
|
|
|
109.3%
|
100.4%
|
Free cash flow
conversion
|
|
|
|
2023
|
2022
|
|
|
|
|
£m
|
£m
|
|
Free cash flow
|
|
|
122.5
|
84.0
|
|
Headline operating profit
|
|
|
127.6
|
112.2
|
|
Free cash flow
conversion
|
|
|
96.0%
|
74.9%
|
Headline tax charge
|
|
|
|
2023
|
2022
|
|
|
|
|
£m
|
£m
|
|
Tax charge
|
|
|
24.9
|
21.0
|
|
Tax on amortisation of acquired intangibles
|
|
|
2.0
|
2.3
|
|
Tax charge on exceptional items and
acquisition costs
|
|
|
0.1
|
0.2
|
|
Headline tax
charge
|
|
|
27.0
|
23.5
|
Headline tax rate
|
|
|
|
2023
|
2022
|
|
|
|
|
£m
|
£m
|
|
Headline tax charge
|
|
|
27.0
|
23.5
|
|
Headline profit before taxation
|
|
|
120.1
|
105.5
|
|
Headline tax
rate
|
|
|
22.5%
|
22.3%
|
Headline earnings per
share
A detailed reconciliation is
provided in note 6 of these condensed consolidated financial
statements.
Net debt and net cash/(debt) plus
lease liabilities
|
|
|
|
2023
|
2022
|
|
|
|
|
£m
|
£m
|
|
Cash and bank balances
|
|
|
45.2
|
37.2
|
|
Bank overdrafts (included in borrowings)
|
|
|
(0.5)
|
(1.0)
|
|
Bank loans (included in borrowings)
|
|
|
(32.1)
|
(69.6)
|
|
Net cash/(debt) excluding lease liabilities
|
|
|
12.6
|
(33.4)
|
|
Lease liabilities
|
|
|
(64.3)
|
(66.0)
|
|
Net debt
|
|
|
(51.7)
|
(99.4)
|
Return on capital employed
(%)
|
|
Year to 31 December 2023
|
|
|
ADE
|
AGI
|
Central cost
and eliminations
|
Consolidated
|
|
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
Headline operating profit
|
69.5
|
79.3
|
(21.2)
|
127.6
|
|
Average capital employed1
|
448.1
|
446.3
|
(31.6)
|
862.8
|
|
Return on capital
employed (%)
|
15.5%
|
17.8%
|
n/a
|
14.8%
|
|
|
Year to 31 December
2022
|
|
|
ADE
|
AGI
|
Central cost
and
eliminations
|
Consolidated
|
|
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
Headline operating profit
|
50.8
|
80.8
|
(19.4)
|
112.2
|
|
Average capital employed1
|
426.4
|
442.8
|
(27.6)
|
841.6
|
|
Return on capital
employed (%)
|
11.9%
|
18.2%
|
n/a
|
13.3%
|
1
Average capital employed is defined as the average opening and
closing net assets adjusted for net (debt)/cash plus lease
liabilities.