Final Results - Year Ended 31 December 1999
Bodycote International PLC
23 March 2000
For further information, please contact:
John Chesworth, Managing Director Tel: 0171 831 3113 on 23.03.2000
Bodycote International plc Tel: 01625 505300 thereafter
Edward Bridges/Scott Fulton
Deborah Ardern-Jones
Financial Dynamics Tel: 0171 831 3113
BODYCOTE INTERNATIONAL PLC
PRELIMINARY RESULTS ANNOUNCEMENT
FOR THE YEAR ENDED 31 DECEMBER 1999
H I G H L I G H T S
* Good progress in a demanding year
* Double digit operating profit growth across all divisions
* Additional capacity in place after two year programme
* Operational efficiency drive continues
* World markets strengthening
* E-commerce improving volume business prospects
1999 1998 Change
SUMMARY OF RESULTS £M £M %
Turnover 355.4 320.0 +11
Operating profit before 84.0 75.1 +12
goodwill
Profit before taxation 80.7 76.8 +5
goodwill and exceptional
items
Earnings per share
Headline 22.5p 21.3p +6
Basic 22.6p 21.0p +8
Dividend per share 5.5p 4.8p +15
Commenting on the results, John Chesworth, Managing Director said:
'The group is in excellent shape, both structurally and geographically, and
continues proactively to develop the many outsourcing opportunities which are
even more apparent during these challenging conditions. With capacity in
place to serve markets which are generally showing distinct signs of
improvement, the year 2000 should be another successful year.'
PRELIMINARY RESULTS ANNOUNCEMENT
FOR THE YEAR ENDED 31st DECEMBER 1999
CHAIRMAN'S STATEMENT
Bodycote made good progress during what proved to be a demanding year. For
the twentieth consecutive year the group's core businesses produced increased
sales and profit before tax. Pre-tax profit, before amortisation of goodwill
and exceptional items, was £80.7 million, an increase of 5% over the previous
year (1998: £76.8 million). Headline earnings per share increased to 22.5
pence from 21.3 pence last year, a rise of 6%. Interest cover for the group
was 26 times.
The directors are recommending a final dividend of 3.55p per share, making a
total dividend for the year of 5.5 pence per share (1998: 4.8p), an increase
of 15%. The dividend is covered more than 4 times by earnings. The figures
for earnings and dividend per share have been adjusted for the reorganisation
of share capital into 10 pence shares completed in June 1999.
The group made significant progress in the restructuring of its short-term
loans at the end of 1999 with a private placement of $80 million with five US
financial institutions for a ten year term at a fixed interest coupon of 7.8%.
During the year a review of the group's audit and tax advisory services was
concluded. As a result the international firm Arthur Andersen was appointed
for all group companies. This has already streamlined the audit process and
reduced costs.
1999 was another busy year for the group with £39 million spent on
acquisitions, £24.5 million received from disposals and £84 million invested
in new plant and equipment. Eighteen acquisitions in six countries in our
core activities were completed during the year. The most significant was the
purchase of the former Ontario Research and Technology Institute (Ortech) in
Canada, which now forms the centre for materials testing for all Bodycote's
North American operations.
A Nordic coatings group was also created by the acquisition of five companies,
comprising nine facilities, in the first half of the year. This new group has
considerable market synergies with the existing Bodycote heat treatment
companies. New plants were established at Rochdale and Wolverhampton (UK),
Venlo (Holland), Eching (Germany), Santa Ana (USA) and Tecate (Mexico). These
state of the art investments will help to increase our profitability and
market penetration.
Three furnace equipment manufacturing businesses, which had been acquired as
part of companies purchased in 1995 and 1997, were sold for £24.5 million in
November.
Outsourcing agreements, under which customers' in house facilities are
replaced by Bodycote's dedicated plant, similar to those agreed with Rolls-
Royce, Derby, and highlighted in my previous annual statement, have been
completed with Corus (formerly British Steel) at Shotton, and AGCO (Massey
Ferguson) in Coventry in the United Kingdom. Similar agreements have also
been entered into in Germany, with Holzer and Krupp Presta, in France, with
Garconnet and Franck et Pignard, and in North America with Schlage Lock. The
group also continues to meet the metallurgical processing needs of major
customers through an increasing number of long term contracts.
Another developing feature has been the transfer of technology between
Bodycote group companies. In Europe the transfer of vacuum brazing know-how
has enabled the group to develop new markets. Densal IIr HIP technology is to
be deployed in Germany and the United States. Bodycote Hauzer's PVD process
technology and equipment, introduced in the Netherlands, is now in operation
within the group in the United Kingdom, Sweden, France and Mexico.
Bodycote's efforts in 2000 will be concentrated on maximising utilisation of
its existing facilities. The influence of the Internet and
telecommunications based technologies is starting to change the way Bodycote
does business. Bodycote is using these e-commerce technologies to improve
competitiveness.
I should like to thank all Bodycote employees whose dedication, hard work and
enthusiasm enabled the group to produce such good results. The group has a
strong pool of talent which augurs well for the future.
With improving world markets, a continuing drive towards greater operational
efficiency and opportunities for organic and acquisition-led growth, the year
2000 should be another successful one.
Dr Bruce Farmer CBE
Chairman
23 March 2000
MANAGING DIRECTOR'S REPORT
Bodycote's geographic and technical strength enabled the group to overcome
difficult market conditions. The performance of the group against this
background was extremely resilient, sales increased from £320 million to £355
million (+11%), operating profit before goodwill increased from £75.1 million
to £84 million (+12 %), whilst profit before tax, amortisation of goodwill and
exceptional items, increased from £76.8 million to £80.7 million (+5%).
Headline earnings per share improved from 21.3p to 22.5p (+6%).
Operating cash flow for the year amounted to £99 million, an increase of £5
million compared to 1998. Capital expenditure in 1999 was £84 million and
acquisitions absorbed £39 million. The sale in November of the furnace
manufacturing businesses, Schmetz, Mahler and Fours BMI for £24.5 million,
released resources for redeployment into our core activities.
All processing divisions continued to make progress, achieving double digit
growth in operating profits and all contributed well to these improved
results. Modest organic growth was achieved in spite of generally difficult
markets, whilst acquisitions produced results in line with expectations.
The substantial capital expenditure programmes of the last two years,
totalling in excess of £160 million, included the replacement of old plants
with new greenfield facilities, as well as the commissioning of additional
capacity. With generally flat market conditions, a swift response in reducing
the cost base ensured that margins were maintained.
The group is now very well positioned to take advantage of improving volumes
of business as markets firm up and increased utilisation of the additional
capacity created in the last two years will be the major focus in the short
term. Investment in the medium term will, therefore, be directed mainly
towards specific outsourcing projects and further geographic expansion of the
network.
Heat treatment processing, by far the largest division, produced record
results. Towards the year end there were clear signs that volume business was
improving in Scandinavia, Germany and the United States, and with the UK and
France continuing strong, prospects for the year 2000 are encouraging.
The hot isostatic pressing division continued to make good progress.
Difficulties in the oil and gas sector affected the performance of Bodycote
Powdermet in Sweden. However, this was outweighed by underlying growth in the
remainder of the division which increased volume business by 16%. Margins
improved because of the change in mix of business. Market development of the
Densal IIr process will gather momentum when new aluminium processing capacity
is installed in Germany and the United States in the summer.
Materials testing had a very good year, and reported a tenth consecutive
record performance in sales and profits. Markets generally were firm although
some weakness was evident in the oil and gas sector. First time contributions
from some notable acquisitions were excellent. Prospects for this division
continue to be bright.
The rapidly growing coatings division completed a year of considerable
reorganisation in the UK and is now able to offer substantial, highly
efficient capacity to component manufacturers. The results for the division
were enhanced by contributions from several UK acquisitions, as well as an
excellent performance from the newly created coatings network in Sweden. The
new facility in Tecate, Mexico, providing PVD coatings to Schlage Lock was
running profitably by the year end.
The remaining manufacturing business, Hauzer Techno Coatings again produced a
strong performance and has a substantial order book for the year 2000.
Bodycote now has capacity headroom to increase volume business substantially
without further capital expenditure. E-commerce will undermine historic
supplier relationships and create much more efficient purchasing. The
Bodycote network is able to accommodate these large volumes of potential
business. The group's registered web properties, including
www.heattreatments.com are in position to meet these rapidly emerging
opportunities.
The group is in excellent shape, both structurally and geographically, and
even though a strong pound is having an adverse effect on translation of
European profits, the group continues proactively to develop the many
outsourcing opportunities which are even more apparent during these
challenging conditions. With capacity in place to serve markets which are
generally showing distinct signs of improvement, the year 2000 should be
another successful year.
Once again, I am obliged to all my colleagues for their continuing support and
commitment.
J. Chesworth
Managing Director
23 March 2000
Bodycote International plc
Consolidated profit & loss account
For the year ended 31 December 1999
1999 1999 1999 1998 1998 1998 Note
Before Goodwill Total Before Goodwill Total
Goodwill Goodwill
£'000 £'000 £'000 £'000 £'000 £'000
Turnover 1
Existing operations 307,606 - 307,606 305,311 - 305,311
Acquisitions 31,284 - 31,284 - - -
Continuing 338,890 - 338,890 305,311 - 305,311
operations
Discontinued 16,490 - 16,490 14,657 - 14,657
operations
355,380 - 355,380 319,968 - 319,968
Operating Profit
Existing operations 75,361 (2,145) 73,216 72,344 (1,166) 71,178
Acquisitions 5,540 (786) 4,754 - - -
Continuing 80,901 (2,931) 77,970 72,344 (1,166) 71,178
operations
Discontinued 3,133 - 3,133 2,731 - 2,731
operations
84,034 (2,931) 81,103 75,075 (1,166) 73,909
Exceptional items
Profit on disposal
of discontinued 11,764 631
operations
Restructuring costs (5,116) -
Profit on disposal 775 -
of fixed assets
Profit on ordinary 88,526 74,540
activities before
interest and
taxation
Net interest (3,322) 1,697
(payable)/receivable
e
Profit on ordinary
activities before 85,204 76,237 1
taxation
Tax on profit on (27,169) (22,768) 3
ordinary activities
Profit on ordinary
activities after 58,035 53,469
taxation
Minority interests 131 6
- equity
Profit for the
financial year 58,166 53,475
Dividends - paid
and proposed (14,184) (12,334)
Retained profit for
the financial year 43,982 41,141
Earnings per share 4
Headline 22.5p 21.3p
Headline - diluted 22.3p 21.1p
Basic 22.6p 21.0p
Basic- diluted 22.4p 20.8p
Bodycote International plc
Consolidated balance sheet
As at 31 December 1999
1999 1998
£'000 £'000
Fixed Assets
Intangible assets 64,074 41,740
Tangible assets 357,438 299,220
Investments 1,465 1,668
422,977 342,628
Current assets
Stocks 13,144 15,560
Debtors 98,570 89,230
Cash at bank and in hand
96,409 102,855
208,123 207,645
Creditors
Amounts falling due within one year (145,485) (160,159)
Net current assets 62,638 47,486
Total assets less current liabilities 485,615 390,114
Creditors
Amounts falling due after more than one (136,899) (80,964)
year
Provisions for liabilities and charges (16,383) (11,623)
Net assets 332,333 297,527
Capital and reserves
Called up share capital 25,750 25,696
Share premium account 239,607 238,727
Revaluation reserve 2,718 2,718
Currency and other reserve (9,265) 2,473
Profit and loss account 73,276 27,439
Shareholders' funds - equity 332,086 297,053
Minority interests - equity 247 474
332,333 297,527
Consolidated statement of total recognised gains and losses
1999 1998
£'000 £'000
Profit for the financial year 58,166 53,475
Currency adjustments (11,738) 6,370
Total recognised gains and losses 46,428 59,845
relating to the year
Bodycote International plc
Consolidated cash flow statement
For the year ended 31 December 1999
1999 1999 1998 1998
£'000 £'000 £'000 £'000
Operating profit 81,103 73,909
Depreciation charges 27,086 22,971
Amortisation of goodwill 2,931 1,166
Profit on sale of tangible (366) (227)
fixed assets
Cash impact of restructuring (4,341) -
Increase in stocks (3,080) (1,252)
Increase in debtors (10,597) (10,944)
Increase in creditors 1,878 8,139
Net cash inflow from operating 94,614 93,762
activities
Returns on investment and
servicing of finance (3,750) 1,624
Taxation (26,148) (19,192)
Capital expenditure and
financial investment (83,634) (80,737)
Acquisitions & disposals (10,867) (63,402)
Equity dividends paid (12,981) (10,946)
Cash outflow before management
of liquid resources and (42,766) (78,891)
financing
Management of liquid resources 2,616 (38,581)
Financing 32,876 109,161
Decrease in cash in year (7,274) (8,311)
Bodycote International plc
For the year ended 31 December 1999
Note 1999 1999 1998 1998
£'000 £'000 £'000 £'000
Reconciliation of net cash
flow to movement in net debt
Decrease in cash in the year (7,274) (8,311)
Cash inflow from increase in (32,142) (7,300)
debt
Cash (inflow)/outflow from
movement in liquid resources (2,616) 38,581
Change in net (debt)/cash
resulting from cash flow (42,032) 22,970
Debt acquired with (7,913) (2,847)
subsidiaries
Currency adjustments 6,493 (4,507)
Movement in net (debt) /cash
position in the year
15,616
(43,452)
Net debt position at 1 (34,961) (50,577)
January
Net debt position at 31 5 (78,413) (34,961)
December
Reconciliation of movements
in shareholders' funds
1999 1998
£'000 £'000
Profit for the financial year 58,166 53,475
Dividends paid and proposed (14,184) (12,334)
Retained profit for the 43,982 41,141
financial year
Currency adjustments (11,738) 6,370
New shares issued 934 109,453
Goodwill written off on prior
year acquisitions (96) (1,442)
Goodwill previously written
off included in retained 1,951 -
profit
Net movement in shareholders' 35,033 155,522
funds
Shareholders' funds at 1 297,053 141,531
January
Shareholders' funds at 31 332,086 297,053
December
NOTES ON THE ACCOUNTS
1. Divisional turnover and
profit before taxation
1999 % 1998 %
£'000 £'000
Turnover
Heat treatment 220,530 62.1 204,178 63.8
Hot isostatic pressing 33,289 9.4 32,271 10.1
Materials testing 39,455 11.1 31,069 9.7
Metallurgical coatings 29,518 8.3 18,271 5.7
Equipment manufacture 32,588 9.1 34,179 10.7
355,380 100 319,968 100
1999 % 1998 %
£'000 £'000
Profit before tax
Heat treatment 51,148 60.3 46,014 60.1
Hot isostatic pressing 11,837 14.0 9,849 12.9
Materials testing 9,786 11.5 8,342 10.9
Metallurgical coatings 5,883 6.9 4,957 6.5
Equipment manufacture 6,140 7.3 7,369 9.6
84,794 100 76,531 100
Head office expenses (760) (1,456)
Operating profit before
amortisation of goodwill 84,034 75,075
Net interest (3,322) 1,697
Profit on ordinary
activities before
amortisation of goodwill and 80,712 76,772
exceptional items
Amortisation of goodwill (2,931) (1,166)
Profit on ordinary
activities before 77,781 75,606
exceptional items
Exceptional items 7,423 631
Profit on ordinary
activities before taxation 85,204 76,237
2. Geographical analysis of
turnover by origin and
profit before taxation
Turnover Profit
1999 1998 1999 1998
£'000 £'000 £'000 £'000
United Kingdom 61,756 59,784 15,479 16,602
North America 77,916 56,371 19,445 13,922
Rest of Europe 213,525 201,677 52,432 43,001
Rest of World 2,183 2,136 1,170 1,105
355,380 319,968 88,204 76,237
Net interest (3,322) 1,697
85,204 76,237
3. Tax on profit on ordinary activities 1999 1998
£'000 £,000
The charge for taxation comprises:
UK Corporation tax 6,741 7,660
Overseas (including tax on
exceptional items of £4,215,000 20,428 15,108
(1998:£265,000))
27,169 22,768
4. Earnings per share 1999 1998
£'000 £'000
Profit for the financial year 58,166 53,475
Goodwill amortisation charge 2,931 1,166
Exceptional items after tax (3,208) (366)
Headline earnings 57,889 54,275
Weighted average number of shares in 257,292,664 254,603,568
issue - basic
Adjustment in respect of share 1,984,843 2,784,060
options
Weighted average number of ordinary
shares in issue - diluted 259,277,507 257,387,628
The figures for 1998 have been adjusted to take into account the five for two
share capital reorganisation in June 1999.
5. Analysis of net debt position
1 Jan Cash Acquisitions Non- Currency 31
99 Flow cash Dec 99
changes
£'000 £'000 £'000 £'000 £'000 £'000
Cash at bank & in 29,437 (2,943) - - (887) 25,607
hand
Short term 73,418 (2,616) - - - 70,802
deposits
Bank overdrafts (2,587) (4,331) - - 268 (6,650)
Bank loans due
within one year (57,918) 13,506 (1,974) 6,325 4,050 (36,011)
Bank loans due
after one year (73,019) (45,347) (5,336) (6,325) 2,551 (127,476)
Finance leases due
within one year (1,205) 209 (124) (103) 112 (1,111)
Finance leases due
after one year (3,087) (510) (479) 103 399 (3,574)
(34,961) (42,032) (7,913) - 6,493 (78,413)
Latest directors dealings
- 7 seconds ago British American Tobacco
- 17 minutes ago CC Japan Income & Growth Trust
- 38 minutes ago 3i Infrastructure
- 44 minutes ago QinetiQ Group
- 1 hour ago JPMorgan Emerging Markets Growth & Income plc