Interim Results

BODYCOTE INTERNATIONAL PLC 18 August 1999 For further information, please contact: John Chesworth, Managing Director Tel: 0171 831 3113 on the day David Landless, Finance Director or 0797 706 7639 Bodycote International plc Tel: 01625 505300 thereafter Edward Bridges Financial Dynamics Tel: 0171 831 3113 Interim results announcement for the six months ended 30 June 1999 HIGHLIGHTS BODYCOTE INTERNATIONAL PLC is an international group providing a range of metal processing services to industry. * Turnover up 13% * Trading profit up 15% * Profit before tax and exceptional items increased by 8% * Headline earnings per share increased 7% * Dividend per share up 15% * Acquisitions performing well * Many outsourcing opportunities Summary of results Half year to Half year 30th June to 30th 1999 June 1998 £'000 £'000 Turnover 181.4m 160.3m Trading profit 42.4m 37.0m Profit before taxation and exceptional 40.8m 37.9m items** Headline earnings per share (pence) 11.2p 10.5p Dividend per share (pence) 1.95p 1.70p ** Profit before tax is expressed before amortisation of goodwill Commenting on the results, John Chesworth, Managing Director of Bodycote International plc, said today: 'This has been a resilient performance in the face of variable and often difficult market conditions. The group is in good shape both structurally and geographically, and recent acquisitions made an excellent contribution, with a margin on sales in excess of 20%. Global market conditions remain uncertain but with an efficient team of profit drivers in position, Bodycote continues to face the future with confidence.' CHAIRMAN'S STATEMENT In my previous Chairman's statement I said that 1999 would be a demanding year. To date this has been the case, so I am very pleased to report that Bodycote has been able to increase profits before tax by 8% to £40.8 million (before amortisation of goodwill and exceptional items), and headline earnings per share by 7% to 11.2 pence per share, when compared to the same period last year. Turnover during the period rose to £181.4 million from £160.3 million, an increase of 13%. The directors have declared an interim dividend of 1.95 pence per share, an increase of 15% over the first half of last year. This dividend will be paid on 31 December 1999 to all shareholders on the register at close of business on 3 December 1999. The figures for earnings and dividends per share have been adjusted for the reorganisation of the company's share capital into 10 pence shares completed on 8 June 1999. In the half-year, Bodycote substantially expanded the metallurgical coatings division with acquisitions in the UK, France and Sweden. At the same time, the group's heat treatment division made important acquisitions in the USA and Austria. The materials testing division also expanded the network of testing facilities and range of capabilities in North America. In addition, it launched a service enabling customers to input testing requirements and access results and records via the Internet. New Bodycote facilities were opened in Derby, Rochdale, Wolverhampton, Venlo (The Netherlands), Eching (Southern Germany) and Santa Ana (USA). In my last statement I said that the prospects for Bodycote continue to be encouraging. With a sound strategy, improving business prospects, a strengthened management team and acquisitions which are performing well, I remain optimistic for the future. Dr Bruce Farmer CBE Chairman 18 August 1999 MANAGING DIRECTOR'S STATEMENT This has been a resilient performance in the face of variable and often difficult market conditions. Sales have increased from £160.3 million to £181.4 million (+ 13%), trading profit has increased from £37.0 million to £42.4 million (+ 15%) and profit before tax, amortisation of goodwill and exceptional items, has increased from £37.9 million to £40.8 million (+ 8 %), when compared to the same period in 1998. Note 1 to the accounts provides an analysis of these figures. All divisions contributed well to these improved results and Heat Treatment, which represents almost two-thirds of the group's activities, increased both sales and trading profits by 13%, whilst the other divisions all achieved double digit increases in trading profit. Despite the difficult market conditions, an increase in organic profit was achieved as a result of the prompt response of the profit drivers in focussing upon cost reduction. Operational cash flow in the six months was in excess of £40 million, a substantial increase compared to the same period last year. Capital expenditure in the period was £37.6 million and included the completion of a number of greenfield operations, mainly to replace a few old acquired plants, but also to enlarge capacity. A busy acquisition programme costing £33.6 million resulted in a total of 17 plants joining the group. These developments, which form the building blocks for longer- term success, represent an integral element of Bodycote's strategic planning. Gearing at 30 June 1999 stands at a modest 22% of shareholders' funds. The group now offers vital metallurgical processing services to a wide range of engineering manufacturers from 192 locations in 19 countries and is in an excellent position to develop the numerous outsourcing opportunities currently available. Indeed in the UK, Bodycote has recently been successful in winning several outsourcing contracts with major manufacturers, thereby extending market share. The group is in good shape both structurally and geographically, and recent acquisitions made an excellent contribution, with a margin on sales in excess of 20%. Global market conditions remain uncertain but with an efficient team of profit drivers in position, Bodycote continues to face the future with confidence. John Chesworth Managing Director 18 August, 1999 Bodycote International plc Interim results Unaudited consolidated profit & loss account Half year Half year Year to 31 to 30 June to 30 June December 1999 1998 1998 £'000 £'000 £'000 Turnover Existing operations 170,144 160,289 222,956 Acquisitions 11,280 - 97,012 181,424 160,289 319,968 Operating profit before amortisation of goodwill Existing operations 39,811 36,462 57,801 Acquisitions 2,042 - 17,274 41,853 36,462 75,075 Amortisation of goodwill 1,263 366 1,166 Operating profit 40,590 36,096 73,909 Exceptional items Profit on disposal of discontinued - 620 631 undertakings Profit on ordinary activities 40,590 36,716 74,540 before interest Net interest (payable)/receivable (1,098) 1,404 1,697 Profit on ordinary activities 39,492 38,120 76,237 before taxation Tax on profit on ordinary 11,990 11,661 22,768 activities Profit on ordinary activities after 27,502 26,459 53,469 taxation Minority interests - equity 25 20 (6) Profit for the period 27,477 26,439 53,475 Dividends - equity 5,020 4,363 12,334 Amount transferred to reserves 22,457 22,076 41,141 Earnings per share Headline 11.2p 10.5p 21.3p Ordinary 10.7p 10.5p 21.0p Diluted 10.6p 10.4p 20.8p Bodycote International plc Interim results Unaudited consolidated balance sheet As at 30 As at 30 As at 31 June 1999 June 1998 December 1998 £'000 £'000 £'000 Fixed Assets Intangible assets 58,528 19,681 41,740 Tangible assets 329,962 242,744 299,220 Investments 1,495 1,668 1,668 389,985 264,093 342,628 Current assets Stocks 17,053 13,750 15,560 Debtors 107,218 83,670 89,230 Cash at bank and in hand 90,430 123,417 102,855 214,701 220,837 207,645 Creditors Amounts falling due within one 198,801 143,653 160,159 year Net current assets 15,900 77,184 47,486 Total assets less current 405,885 341,277 390,114 liabilities Creditors Amounts falling due after more 80,618 61,727 80,964 than one year Provisions for liabilities and charges Deferred taxation 11,920 11,200 11,623 Total net assets 313,347 268,350 297,527 Capital and reserves Called up share capital 25,737 25,623 25,696 Share premium account 239,331 236,793 238,727 Profit and loss account 49,896 9,816 27,439 Other reserves (2,075) (4,276) 5,191 Shareholders' funds - equity 312,889 267,956 297,053 Minority interests - equity 458 394 474 313,347 268,350 297,527 Bodycote International plc Interim results Movement in Shareholders' funds Half year Half Year to to 30 year to 31 June 1999 30 June December 1998 1998 Profit for the period 27,477 26,439 53,475 Dividends 5,020 4,363 12,334 22,457 22,076 41,141 Other recognised losses for the period (7,266) (3,097) 6,370 Proceeds of shares issued 645 107,446 109,453 Goodwill written off an acquisition - - (1,442) Net addition to shareholders' funds 15,836 126,425 155,522 Shareholders' funds at beginning of the 297,053 141,531 141,531 period Shareholders' funds at end of period 312,889 267,956 297,053 Unaudited consolidated cash flow statement Half year Half Year to to 30 June year to 31 1999 30 June December 1999 1998 £'000 £'000 £'000 Net cash inflow operating (Note A) 40,315 16,200 94,171 activities Returns on investments and (1,139) 1,486 1,624 servicing of finance Taxation (5,949) (4,847) (19,192) Capital expenditure and (37,594) (80,737) financial investment (31,255) Acquisitions and disposals (Note B) (30,335) (63,402) (26,402) Equity dividends paid - - (10,946) Cash outflow before use of liquid resources and financing (34,702) (44,818) (78,482) Management of liquid resources 10,212 (58,219) (38,581) Financing 18,764 87,617 108,955 Decrease in cash in period (Note C) (5,726) (15,420) (8,108) Bodycote International plc Interim results Unaudited consolidated cash flow statement Half year Half Year to to 30 June year to 31 1999 30 June December 1999 1998 £'000 £'000 £'000 Note A : Reconciliation of operating profit to operating cash flows Operating profit 40,590 36,096 73,909 Depreciation and amortisation 14,420 12,198 24,137 (Profit)/Loss on sale of tangible fixed - 39 (227) assets Increase in stocks (1,617) (188) (1,252) Increase in debtors) (13,188) (7,440) (10,944) Increase/(decrease) in creditors 110 (24,505 8,548 ) Net cash inflow from operating activities 40,315 16,200 94,171 Note B: Acquisitions and disposals Net cash/(overdrafts) acquired with 2,016 (2,807) (1,880) subsidiaries Purchase of subsidiary undertakings (32,351) (20,631 (43,713) ) Sale of business - - 3,464 Purchase of minority shareholders' - (2,964) (810) interest Consideration paid to HIT shareholders - - (20,463) Net cash outflow for acquisitions and (30,335) (26,402 (63,402) disposals ) Note C: Reconciliation of net cash flow to movement in net cash Decrease in cash in the period (5,726) (15,420) (8,108) Cash (inflow)/outflow from movement in (18,319) 13,950 (7,094) debt Cash (inflow)/outflow from movement in (10,212) 58,219 38,581 liquid resources Change in new(debt)/cash resulting from (34,257) 56,749 23,379 cash flow Loans acquired with subsidiaries (6,542) (739) (2,847) Currency adjustments 2,023 1,179 (4,507) Movement in net(debt)/cash position in (38,776) 57,189 16,025 the period Opening net debt position (30,669) (46,694) (46,694) Closing net (debt)/cash position (69,445) 10,495 (30,669) Bodycote International plc Interim results Analysis of net debt position 30 June 31December 1999 1998 £'000 £'000 Cash at bank and in hand 27,224 29,437 Short term and deposits 63,206 73,418 Bank overdrafts (6,291) (2,587) Bank loans due within one year (81,547) (57,918) Bank loans due after one year (72,037) (73,019) (69,445) (30,669) NOTES ON THE ACCOUNTS 1. Segmental Analysis Half year Half Year to to 30 year to 31 June 1999 30 June December 1998 1998 £'000 £'000 £'000 Turnover Heat treatment 111,457 98,698 204,178 Hot isostatic pressing 18,298 17,040 32,271 Materials testing 19,083 15,149 31,069 Metallurgical coatings 13,683 9,150 18,271 Equipment manufacture 18,903 20,252 34,179 181,424 160,289 319,968 Trading profit Heat treatment 26,001 23,004 46,014 Hot isostatic pressing 6,156 5,040 9,849 Materials testing 4,387 3,773 8,342 Metallurgical coatings 2,500 2,161 4,957 Equipment manufacture 3,327 2,978 7,369 42,371 36,956 76,531 Head office expense (518) (494) (1,456) Operating profit 41,853 36,462 75,075 Net interest (1,098) 1,404 1,697 40,775 37,866 76,772 Amortisation of goodwill on (1,263) (366) (1,166) acquisition Profit on ordinary activities before exceptional items 39,492 37,500 75,606 Profit on disposal of discontinued - 620 631 operations Profit on ordinary activities before 39,492 38,120 76,237 taxation NOTES TO THE ACCOUNTS /Cont'd 2. The interim financial information has been prepared on the basis of the accounting policies set out in the group's statutory accounts for the year ended 31 December 1998. 3. The charge for taxation on the profit for the period is based on the estimated effective rate for the full year. The amount includes £9,589,000 (1998: £7,665,000) relating to tax on overseas activities. 4. The calculation of ordinary earnings per share is based on earnings of £27,477,000 (1998: £26,439,000) and on the average number of shares in issue during the half year amounting to 257,121,766 (1998: 251,563,635). Headline earnings per share have been calculated on profits of £28,740,000 (1998: 26,446,000), which are stated before amortisation of goodwill and the post tax impact of exceptional items. Diluted earnings per share calculated in accordance with FRS14 were 10.6p (1998: 10.4p) based on a diluted weighted average share capital of 258,216,392 shares (1998: 255,205,060). The figures for earnings and shares in issue have been adjusted to take into account the reorganisation of the share capital into 10p shares completed in June 1999. 5. Year 2000 Compliance - Since the year-end the board has been continually reviewing the progress made towards Year 2000 compliance. The vast majority of work has already been carried out with further work being progressed and reviewed by the board. The cost of addressing the problem has been charged as incurred, and is not significant. Whilst a commercially acceptable level of readiness is anticipated by all divisions in advance of the Millennium, it is not possible for any company, with a complicated problem such as this, to guarantee that there will be no further Year 2000 issues. The necessary resources will be provided to deal with any significant remaining issues. 6. The results for the year ended 31 December 1998 are extracts from the published accounts as filed with the Registrars of Companies. These were audited and reported upon without qualification by KPMG Audit Plc and did not contain a statement under section 237 (2) or (4) of the Companies Act 1985. 7. Copies of this report and the last Annual Report and Accounts are available from the Secretary, Bodycote International plc, Hulley Road, Hurdsfield, Macclesfield, Cheshire SK10 2SG, and can be downloaded or viewed via the group's Website http://www.bodycote.com

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