TIDMBOY
RNS Number : 0762S
Bodycote PLC
12 March 2021
12 March 2021
Bodycote plc
Full year results for the year ended 31 December 2020
% change
at constant
Financial summary 2020 2019 % change currency
----------------------------- ----------- ---------- --------- -------------
Revenue GBP598.0m GBP719.7m -16.9% -16.6%
----------------------------- ----------- ---------- --------- -------------
Headline operating profit
1 GBP75.3m GBP134.9m -44% -44%
----------------------------- ----------- ---------- --------- -------------
Headline EBITDA margin 1 26.4% 29.2%
----------------------------- ----------- ---------- --------- -------------
Headline operating margin
1 12.6% 18.7%
----------------------------- ----------- ---------- --------- -------------
Exceptional items 3 GBP(58.4)m -
----------------------------- ----------- ---------- --------- -------------
Free cash flow1 GBP106.1m GBP123.1m -14%
----------------------------- ----------- ---------- --------- -------------
Basic headline earnings per
share 1,2 27.8p 52.1p -47%
----------------------------- ----------- ---------- --------- -------------
Ordinary dividend per share 19.4p 19.3p
----------------------------- ----------- ---------- --------- -------------
Return on capital employed
1 9.8% 17.7%
----------------------------- ----------- ---------- --------- -------------
Additional statutory measures
Operating profit GBP5.0m GBP128.6m
----------------------------------- ---------- ----------
Profit after tax GBP0.8m GBP94.0m
----------------------------------- ---------- ----------
Net cash generated from operating
activities GBP139.1m GBP177.3m
----------------------------------- ---------- ----------
Basic earnings per share 0.2p 49.4p
----------------------------------- ---------- ----------
Business transformed, resilience proven, structured for
growth
-- The health and wellbeing of our people remains our top priority
-- Financial performance
o Organic revenues declined 20%
o Resilient headline EBITDA margin at 26.4% (2019: 29.2%)
o Excellent free cash flow conversion(1) of 141% (2019: 91%)
o Closing net debt of GBP23m after paying GBP96m of the
consideration for Ellison
o GBP36m of cash restructuring costs, generating GBP30m of
annual savings by 2022
-- Continued programme of strategic investment
-- Structured to align with long-term megatrends in road
transport electrification, point-to-point air travel, and the
reducing use of fossil fuels
-- Uninterrupted 30+ year track record of growing or maintaining dividend
1 The headline performance measures represent the statutory
results excluding certain non-operational items. These are deemed
alternative performance measures under the European Securities and
Markets Authority guidelines. Please refer to note 1 of the 2020
full-year results press release for a reconciliation to the IFRS
equivalent.
2 A detailed EPS reconciliation is provided in note 8.
3 Detail of exceptional items is provided in note 5.
Commenting, Stephen Harris, Group Chief Executive, said:
"Bodycote weathered the adversity of 2020 generating a headline
EBITDA margin of 26.4%, a headline operating margin of 12.6%, and
producing a strong free cash flow conversion of 141% (GBP106m).
This year has been hugely challenging for our people. Not only
have they been confronted with the impact on their personal lives
from the COVID-19 pandemic and all its consequences, but they have
also had to deal with significant changes in the working
environment and organisation. I am immensely proud of the fortitude
and resilience shown by our employees as they continued to deliver
first-class service to our customers under the most trying of
conditions.
As the COVID-19 pandemic hit, the need to safeguard the
wellbeing of our employees drove an immediate, large scale
mobilisation of resources across the Group. I am very pleased to
see how effective the measures we have taken have been and I want
to acknowledge the remarkable performance of the global and many
local management teams involved in this unprecedented effort.
As part of our strategy, we have focused in recent years on
repositioning the Group to take advantage of a number of megatrends
in our end markets. Our expansion in Eastern Europe is targeted at
supporting the Electric Vehicle supply chains that are establishing
themselves in this Region. The change in focus of our civil
aerospace business addresses the structural shift within the
industry towards point-to-point air travel and narrow body
aircraft. Additionally, the repurposing of some of our North
American facilities aligns our business with the diminishing
importance of fossil fuels. The restructuring programme we have
been executing in 2020 represents an acceleration of our strategy
and is exactly aligned with these secular trends.
The Board is proposing a final dividend of 13.4p, which brings
the total ordinary dividend for 2020 to 19.4p. This continues
Bodycote's uninterrupted 30+ year track record of growing or
maintaining the dividend and reflects the Board's confidence in the
Group's future earnings and cash flow potential.
Looking ahead, markets are recovering, though the uncertain
timeline for recovery in the civil aerospace market clouds the
short-term outlook for this part of the business. Nonetheless, our
restructuring programme is now largely complete, resulting in a
higher quality business aligned to the growth opportunities we are
seeing. The Board is confident that Bodycote is well placed to
drive growth and take advantage of the upturn in activity across
all of its markets as they strengthen. "
Full Year Results Presentation
Due to current travel restrictions, we will be presenting our
results via webcast only. Please find the following instructions to
connect to the video and audio:
8.30am UK on 12 March 2021
Webcast URL:
https://www.bodycote.com/webcast2020
Participant dial-in number from the United Kingdom 020 3936
2999
(a ll other locations + 44 20 3936 2999).
Participant Access Code: 980859
Bodycote plc
Stephen Harris, Group Chief Executive
Dominique Yates, Chief Financial Officer
Tel No +44 (0)1625 505 300
FTI Consulting
Richard Mountain
Susanne Yule
Tel No +44 (0)203 727 1340
Full Year commentary
Results overview
It is hard to imagine a set of circumstances that could be more
testing than those encountered in 2020. The fall in demand that
occurred in the second quarter led to an unprecedented drop in
revenues that was significantly greater than even the worst points
of the global financial crisis in 2008 and 2009. The acquisition of
Ellison during the year did help to ease the fall in revenues,
though they still declined by 16.9% (compared with 2019) to
GBP598.0m (16.6% at constant currency). The organic constant
currency revenue decline was 20%.
The headline EBITDA margin of 26.8% (excluding Ellison) was only
2.3% lower than 2019 and still above 2016 and 2017 levels.
Moreover, the 12.6% headline operating margin in 2020 (2019: 18.7%)
is similar to the peak achieved in the decade prior to 2009. This
noteworthy result is not just a reflection of management's cost
control activities during the year but is also testament to the
transformation that has taken place since 2009 in both the quality
of Bodycote's business and the flexibility of the cost base.
Headline operating profit decreased to GBP75.3m (2019:
GBP134.9m), while, after taking account of the exceptional charge
of GBP58.4m, the statutory result was an operating profit of
GBP5.0m. The Group delivered strong free cash flow of GBP106.1m
(2019: GBP123.1m) and ended the year with net debt (excluding lease
liabilities) of GBP23m after paying GBP96m in connection with the
Ellison acquisition.
With significant trade receivables on our balance sheet and a
much lower level of trade payables, there is a natural cash flow
hedge as revenues decline and the level of outstanding trade
receivables also declines. As a result, the cash flow performance
of the business has been strong during 2020 and we achieved free
cash flow conversion of 141% (2019: 91%). Net cash from operating
activities was GBP139m (2019: GBP177m).
Basic headline earnings per share for the Group were 27.8p
(2019: 52.1p). Basic earnings per share were 0.2p (2019: 49.4p),
reflecting the exceptional restructuring charges taken in the
year.
Revenues and margins
In reviewing the 2020 performance, it should be noted that
business trends varied sharply through the year. These trends were
normal until the third week of March, when significant government
restrictions started to be implemented around the world in response
to COVID-19. These restrictions had an immediate and severe impact
on demand throughout the second quarter, followed by a gradual
improvement in most end markets during the second half of the year.
Thus, the year-on-year quarterly organic revenue declines were -6%,
-33%, -24%, and -18% for Q1 through Q4 respectively.
The following commentary reflects constant currency year-on-year
growth rates unless stated otherwise.
Our AGI and ADE businesses experienced contrasting fortunes and
emerged with starkly different short-term outlooks.
In AGI, automotive revenues dropped by more than 50% in Q2 as
OEMs closed their facilities; they recovered significantly in the
second half as facilities came back on stream. Coupled with
sequential quarterly improvement in the general industrial business
in H2, it meant that, by the end of the year, our AGI business in
the developed markets was experiencing only single digit revenue
declines versus the final quarter in 2019. Given the scale of
action taken to address our cost base, we succeeded in offsetting
the impact from the short-term operating leverage and, by the end
of the year, were able to post higher margins in most parts of this
business compared with the previous year. AGI revenues in the
Emerging Markets fared even better with Q4 revenues achieving
growth of over 16%. In total, our second half headline operating
margin for the AGI business as a whole was flat on 2019, at 15.0%,
almost double that of the first half margin of 8.4% and despite the
H2 decline in revenues of 11.5%.
The situation in ADE was quite different. Organic civil
aerospace revenues reduced through the year which, when coupled
with weak energy demand, meant that we experienced revenue declines
of more than 30% throughout the second half. While we have taken
swift action on costs in the ADE business, the scale of the revenue
decline was significantly greater than the short-term cost
mitigation actions that we were able to take. As a result, ADE
headline operating margins declined significantly to 8.5% in the
second half. During the second half, we implemented further cost
saving measures which will be finally completed in 2021. These will
help the business' profitability, but we have taken the strategic
decision not to materially change the aerospace footprint as we
expect the civil aerospace market to recover significantly in due
course. As a result, a return to the ADE margins in the mid-20%s,
that was achieved prior to 2020, is likely in late 2022 and beyond,
even though civil aerospace volumes are not anticipated to recover
above 2019 levels until 2023/2024.
Also noteworthy in terms of profit development is the fact that
our Specialist Technologies businesses represented 48% of Group
operating profit during the year, up from 38% in 2019. This is a
natural consequence of the fact that the revenue performance was
relatively better across these businesses when compared with our
Classical Heat Treatment businesses, and margins in Specialist
Technologies, which are higher, declined by similar absolute
percentages to Classical Heat Treatment.
Market sectors
Automotive revenues declined 20% in the year, to GBP159m. The
drop in revenues in the Western European and North American markets
were both similar in percentage terms, although the shape by
quarter was different. Compared with Western Europe, North America
experienced a more severe decline in Q2 but recovered more strongly
in the second half. Emerging Markets recovered strongly through Q3
and Q4, posting 5% year-on-year growth in the second half.
General Industrial revenues declined 11% to GBP232m. This
decline was broad based across our developed markets, with circa
20% declines in the tooling, industrial machinery, construction,
and agriculture market segments offset by electronics, medical and
general manufacturing which grew significantly in the second half.
Emerging Markets' revenues increased 15% during the second half of
the year.
Aerospace & Defence organic revenues declined 29%. Aerospace
and defence did not experience the same immediate contraction as
the automotive and general industrial segments but ended up weaker.
Civil aerospace revenues stabilised at a decline of 43% in both Q3
and Q4, including the benefit of the contribution to revenues from
Ellison. Ellison was acquired at the beginning of Q2 2020.
Energy , which now represents only 8% of Bodycote's entire
business, had revenues of GBP51m, down 18%. The North American
onshore oil & gas business, which is primarily driven by the
Permian Basin, declined significantly in response to the lower
activity there. Subsea oil & gas fared relatively better given
the longer life of subsea projects. Industrial Gas Turbines (IGT)
and Power Generation revenues also declined significantly.
Specialist Technologies
Bodycote has, for many years, been expanding its "Specialist
Technologies" activities. These are differentiated, early stage
processes with high margins, large market opportunities and good
growth prospects. Bodycote is either the clear market leader or one
of the top players among few competitors. These technologies are
embedded into both the ADE and AGI businesses and address multiple
market sectors. Boosted by the contribution from the Ellison
acquisition, Specialist Technologies constituted 30% of Bodycote's
revenues in the second half of the year. Revenue declined 5% to
GBP168.7m for the full year. Bodycote's AGI focused Specialist
Technologies' revenues grew 8% during the second half, which
compares very favourably with the 12% second half decline in the
combined automotive and general industrial Classical Heat Treatment
revenues. Bodycote's ADE focused Specialist Technologies' revenues
naturally fared worse, given the more negative end market
performance in the civil aerospace and energy market sectors, with
organic revenues declining 33% during the second half. However,
this still represented outperformance compared with the 40% decline
in the comparable organic aerospace, defence, and energy Classical
Heat Treatment revenues.
Emerging Markets
Investment in Emerging Markets continues to be a strategic
priority. Our growing presence in Emerging Markets is concentrated
in the automotive sector with the balance in general industrial.
Our Emerging Market footprint is in Eastern Europe, China and
Mexico. After a sharp fall in the second quarter, revenues
benefited from the recovering automotive market sector. Indeed,
Emerging Markets revenues grew in the second half to leave total
revenues (excluding the contribution from Ellison) for the full
year flat on 2019, despite a decline in our Mexican revenues (which
are largely dependent on developments in the US car & light
truck market). China recorded strong second half revenues to
deliver double digit growth for the full year. In total, Emerging
Markets' revenues constituted almost 11% of total Group revenues
for the first time, and, for the second half of the year,
represented more than 12% of total Group revenues.
Cost reductions and restructuring
During the year, semi variable costs such as energy and
industrial gases were successfully reduced in line with revenue
reductions. The most significant cost input for Bodycote's business
is labour, which represents circa 40% of sales. Full Time Employees
(FTEs) were reduced by 18% (1,020 FTEs). A large proportion of
these positions will be replaced as revenues return, albeit in the
form of temporary labour. However, the strategic restructuring
programme that was initiated in late 2019 and expanded during 2020
will result in permanent structural savings in infrastructure once
completed. The programme was largely completed in 2020.
The restructuring is more than a reaction to the immediate
situation. The expansion of the programme in 2020 represents an
acceleration of what we would have done in any event over a longer
period of time, with the financial rationale being boosted as a
result of the decline in revenues. The goal is not simply to reduce
cost and increase flexibility. It is also to align our business to
the megatrends of electrification of road vehicles, point-to-point
travel in civil aerospace, and the transition away from fossil
fuels.
The first phase of the restructuring programme was focused on
reducing the capacity serving internal combustion engines (ICE)
vehicles in Western Europe and increasing electric vehicle (EV)
exposure in Eastern Europe. It improves Bodycote's geographic and
customer footprint in line with the shift in production underway by
the OEMs and their Tier 1 suppliers. This part of the programme
includes 15 site closures and three new facilities in Eastern
Europe. Redundant capacity in Western Europe has been transferred
to Eastern Europe or repurposed for serving customers in the
general industrial markets.
The second phase extension to the programme in turn consists of
two parts:
-- The consolidation of aerospace capacity to improve
efficiency, as well as rebalancing the market exposure away from
wide bodies in favour of narrow bodies.
- This part of the programme includes one plant closure in North
America, one in Belgium and two in the UK, and equipment has been
transferred to other plants. Total aerospace capacity has been
retained in order to serve this market as it recovers, and in the
meantime, capacity that is underutilised is being targeted at the
medical, electronics and other general industrial markets that use
the same processes as the aerospace market.
-- The consolidation of North American legacy facilities serving
the automotive, general industrial, oil and gas markets.
- This part of the programme includes seven plant closures and
the construction of two new facilities. Both
of the new plants opened in the first quarter of 2021.
In total, we have either closed or announced the closure of 26
of our facilities during the year. Of the new facilities, two were
already operational in 2020 and all five will be operational by the
end of 2021.
The Group entered 2021 in a stronger position, with capacity
concentrated where demand will be greatest and with larger more
flexible facilities that can be operated more efficiently whatever
the level of demand.
The exceptional restructuring charge associated with the
redundancies and closures totals GBP52m, including GBP36m of cash
costs (of which, only cGBP10m was spent in 2020). Once the
restructuring programme has been fully implemented, we expect to
see net permanent annual costs savings of approximately GBP30m per
annum, GBP20m of which will materialise in 2021 and the balance in
2022. The benefit in 2020 was negligible as the structural savings
generated were offset by the inefficiencies associated with the
plant closures.
Strategic progress
Bodycote's strategy is based on improving the overall quality of
the business and focusing investment to drive long-term profitable
growth.
An important part of the Group's strategy has been to ensure
flexibility in the cost base, so that the business can react
quickly in response to a downturn. Observers of our business will
know that the closure and opening of facilities is a part of normal
business-as-usual activity at Bodycote and, over time, this has
formed an important part of the actions that have improved the
quality of the business. The restructuring announced during the
year clearly represented a significantly different pace of
footprint change from the norm. The main strategic themes we have
accelerated are:
-- A much better alignment of capacity to serve the electrification of road transport.
-- A shift of capacity toward the more fuel efficient and longer
range narrow body aircraft and away from high passenger capacity
wide body aircraft. Narrow body aircraft are anticipated to grow at
a rate that is significantly above the growth trend in revenue
passenger kilometres as point-to-point travel becomes more
efficient and flexible. High passenger capacity has historically
been used for hub-to-hub transport with passengers transiting to
short haul single aisle aircraft at the hub. This logistics model
has been under threat for some time, putting downward pressure on
demand for wide body aircraft.
-- Downsizing our capacity serving the fossil fuel sectors.
We have continued to invest in our Specialist Technologies,
which are another key pillar of the Group's strategy, reflecting
their superior returns and growth potential.
We are also driving growth in our Emerging Markets' business,
which has grown its share of our overall business considerably over
the years. Indeed, opportunities continue to abound and the
investment pipeline in support of these opportunities remains
strong.
In implementing the restructuring, the business has retained
virtually all of its physical capacity and capabilities but is now
better aligned with the opportunities for growth. As a result, we
believe that we have made a step change in improving the
sustainability and underlying financial performance of the
business, which will be reflected in the Group's results for the
years to come.
Growth through acquisition is another important part of our
strategy. Given the circumstances in 2020, I am pleased with the
integration and performance of the Ellison acquisition, which has
strengthened our Specialist Technologies. I am confident that this
is a sound acquisition for us and will go from strength to strength
as civil aerospace revenues return to growth.
In 2020, Bodycote has taken action to document and communicate
current initiatives associated with the broader impacts we have on
the environment, the communities where we operate, our employees,
shareholders, and society as a whole. Bodycote summarises our
approach to Environment, Social and Governance (ESG) as 'Our
approach to sustainability'.
Summary and outlook
Bodycote weathered the adversity of 2020, generating a headline
EBITDA margin of 26.4%, a headline operating margin of 12.6% and
producing a strong free cash flow conversion of 141% (GBP106
million) .
Looking ahead, markets are recovering, though the uncertain
timeline for recovery in the civil aerospace market clouds the
short-term outlook for this part of the business. Nonetheless, our
restructuring programme is now largely complete, resulting in a
higher quality business aligned to the growth opportunities we are
seeing. The Board is confident that Bodycote is well placed to
drive growth and take advantage of the upturn in activity across
all of its markets as they strengthen.
Business review
Bodycote has more than 165 facilities around the world which are
organised into two customer-focused businesses: the ADE business
and the AGI business.
Our ADE business focuses on aerospace, defence, and energy
customers, who tend to think and operate globally. Our AGI business
focuses on automotive and general industrial customers. These
include many multinational companies that tend to 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 ADE Business
A large number of Bodycote's global customers fall within our
ADE business and Bodycote intends to continue to leverage its
unique market position to grow our business in the aerospace,
defence, and energy sectors.
Within ADE, we have more than 60 facilities around the world,
including Hot Isostatic Pressing (HIP) and Surface Technology
facilities, alongside our Classical Heat Treatment plants.
The following review reflects constant currency growth rates
unless stated otherwise.
Revenue in 2020 was GBP249.2m, a decrease of 17% (17% at actual
rates), including the benefit of the contribution to revenues from
the Ellison acquisition. On an organic basis, the full year decline
was 25% (25% at actual rates), including a 34% decline (35% at
actual rates) in the second half. Organic civil aerospace revenues
declined 35% in the full year, registering a 50% decline in the
second half. Energy revenues also declined significantly.
As a consequence of the decline in revenues, headline operating
profit dropped to GBP36.8m (2019: GBP75.8m), and headline operating
margin decreased to 14.8% (2019: 25.1%). Reflecting the exceptional
restructuring charge, statutory operating profit declined to
GBP12.1m (2019: GBP73.4m).
In light of the revenue declines, we only spent GBP2.2m on
expansionary capital expenditure as we have plenty of capacity
available to service these lower volumes.
Return on capital employed decreased to 10.3% (2019: 24.2%) as a
result of the lower profitability.
The AGI Business
Our extensive network of more than 100 AGI facilities enables
the business to offer the broadest range of capability and security
of supply. Bodycote has a long and successful history of servicing
its wide-ranging customer base.
Each of our AGI facilities works with their customers to respond
with the expertise and appropriate service level required, no
matter the size of the customer's demand.
The following review reflects constant currency growth rates
unless stated otherwise.
Revenue was GBP348.8m, a decline of 16% on the prior year (17%
at actual rates).
Headline operating profit was GBP41.0m (2019: GBP65.9m), and
headline operating margin correspondingly declined to 11.8% (2019:
15.8%). However, given that the revenue decline in the second half
was lower than that in the first half and much of the action on
costs was beginning to take effect as the year progressed, AGI's
headline operating margin in the second half was actually flat on
the 2019 level at 15.0%, representing a creditable achievement and
placing the business in good shape to benefit from further revenue
recovery. Reflecting the exceptional restructuring charge,
statutory operating profit declined to GBP1.6m (2019:
GBP62.0m).
We spent GBP16.4m on expansionary capital expenditure. Return on
capital employed decreased to 8.8% (2019: 13.8%), reflecting the
lower profitability.
Financial Overview
2020 2019
GBPm GBPm
-------------------------------------------- ------- -------
Revenue 598.0 719.7
-------------------------------------------- ------- -------
Headline operating profit 75.3 134.9
Amortisation of acquired intangible assets (9.8) (4.6)
Acquisition costs (2.1) (1.7)
Exceptional items (58.4) -
-------------------------------------------- ------- -------
Operating profit 5.0 128.6
Net finance charge (6.5) (4.7)
-------------------------------------------- ------- -------
(Loss)/profit before taxation (1.5) 123.9
Taxation credit/(charge) 2.3 (29.9)
-------------------------------------------- ------- -------
Profit for the year 0.8 94.0
-------------------------------------------- ------- -------
Group revenue was GBP598.0m, representing a decline of 16.9% at
actual exchange rates, and 16.6% at constant currency.
Headline operating profit for the year declined by 44% to
GBP75.3m (2019: GBP134.9m), and headline operating margin was a
resilient 12.6% (2019: 18.7%). Statutory operating profit declined
to GBP5.0m (2019: profit of GBP128.6m).
Finance charge
The net finance charge was GBP6.5m (2019: GBP4.7m) analysed in
the table below. The reader will note the inclusion of interest on
deferred consideration resulting from the acquisition of Ellison
Surface Technologies in April 2020, with final consideration due in
April 2021.
2020 2019
GBPm GBPm
----------------------------------------- ----- -----
Interest received on bank overdrafts and
loans 0.2 0.2
----------------------------------------- ----- -----
Interest on deferred consideration (0.8) -
Loan interest payable (0.7) (0.3)
Interest on lease liabilities (2.2) (2.4)
Financing and bank charges (2.9) (1.9)
----------------------------------------- ----- -----
Pension finance charge (0.1) (0.3)
----------------------------------------- ----- -----
Total finance charge (6.7) (4.9)
----------------------------------------- ----- -----
Net finance charge (6.5) (4.7)
----------------------------------------- ----- -----
As at 31 December 2020, headroom on the Group's GBP251m
Revolving Credit Facility was GBP199.2m and has a remaining life of
4.4 years.
Profit before Taxation
2020 2019
GBPm GBPm
------------------------------------- ------ -----
Headline profit before taxation 68.8 130.2
Amortisation of acquired intangibles (9.8) (4.6)
Acquisition costs (2.1) (1.7)
Exceptional items (58.4) -
------------------------------------- ------ -----
(Loss)/profit before taxation (1.5) 123.9
------------------------------------- ------ -----
The statutory loss before tax in the year was GBP1.5m (2019:
profit of GBP123.9m), while headline profit before tax decreased
47% to GBP68.8m (2019: GBP130.2m). Within the exceptional items
charge, the Group incurred a restructuring charge on a targeted
strategic programme to position the business for the future.
Acquisition costs and amortisation of acquired intangibles rose as
a result of the successful completion of the Ellison Surface
Technologies acquisition in the first half.
Tax
As a result of the statutory loss, there was a tax credit of
GBP2.3m in the year (2019: tax charge of GBP29.9m). In line with
previous guidance, the headline tax rate, being stated before
accounting for amortisation of acquired intangibles, acquisition
costs and exceptional costs, was 22.5% (2019: 23.8%).
Provisions of GBP22.1m are carried in respect of potential
future additional tax assessments related to 'open' historical tax
years. Reference is made in note 6 to the financial statements for
more information.
Following the acquisition of the Ellison business in the US,
Bodycote is entitled to claim US tax relief over the next 15 years
for purchased goodwill generating an annual cash flow benefit of
GBP1.8m at current US tax rates. This will not impact the Group's
tax rate, as, under IFRS, a growing deferred tax liability will be
established in respect of any tax relief claimed.
As reported last year in April 2019, the European Commission
published their decision that certain tax exemptions offered by the
UK authorities constituted State Aid and, as such, will need to be
recovered. The UK government subsequently appealed against this
decision. In the meantime, the UK tax authorities have indicated
that they will be raising assessments on affected UK companies in
line with the current judgement. To date, Bodycote has not been
assessed and there is no provision against this contingent
liability.
Earnings per Share
Basic headline earnings per share fell 47% to 27.8p (2019:
52.1p) as a result of the lower headline operating profit. Basic
earnings per share for the year fell to 0.2p (2019: 49.4p).
2020 2019
GBPm GBPm
---------------------------------- ----- ------
(Loss)/profit before taxation (1.5) 123.9
Taxation credit/(charge) 2.3 (29.9)
---------------------------------- ----- ------
Profit for the year 0.8 94.0
Basic headline earnings per share 27.8 52.1
Basic earnings per share 0.2 49.4
---------------------------------- ----- ------
Return on Capital Employed
Return on capital employed (including right-of-use assets) fell
in the year to 9.8% from 17.7% in 2019. The decline reflects the
reduction in the Group's headline operating profit as well as
increase in average capital employed resulting from the investment
in the Ellison acquisition in the first half. The Group continues
to exert strong financial discipline over capital expenditure
projects in order to target strong returns.
Cash Flow
2020 2019
------------------------------------ ------------------ ------------------
Post Pre Post Pre
IFRS 16 IFRS 16 IFRS 16 IFRS 16
GBPm GBPm GBPm GBPm
------------------------------------ -------- -------- -------- --------
Headline operating profit 75.3 72.5 134.9 132.6
Depreciation and amortisation 82.0 67.2 79.6 65.1
Impairment of PPE 0.4 0.4 - -
Income from associates (0.2) (0.2) (0.2) (0.2)
Loss/(profit) on disposal of PPE 0.6 0.7 (4.4) (4.4)
------------------------------------ -------- -------- -------- --------
Headline EBITDA (1) 158.1 140.6 209.9 193.1
Net maintenance capital expenditure (45.1) (38.7) (50.2) (39.1)
Net working capital movement 17.2 17.2 (4.2) (4.2)
------------------------------------ -------- -------- -------- --------
Headline operating cash flow 130.2 119.1 155.5 149.8
------------------------------------ -------- -------- -------- --------
Restructuring (11.6) (11.6) (3.2) (3.2)
Financing costs (4.7) (2.5) (4.5) (2.1)
Tax (7.8) (7.8) (24.7) (24.7)
------------------------------------ -------- -------- -------- --------
Free cash flow 106.1 97.2 123.1 119.8
Expansionary capital expenditure (20.0) (19.5) (32.2) (32.2)
Ordinary dividend (25.1) (25.1) (36.8) (36.8)
Acquisition spend (99.3) (96.0) (29.0) (22.9)
Special dividend - - (38.1) (38.1)
Own shares purchased less SBP and
others (0.1) (0.1) (4.9) (4.9)
------------------------------------ -------- -------- -------- --------
Reduction in net cash (38.4) (43.5) (17.9) (15.1)
Opening net (debt)/cash (58.5) 20.9 (44.1) 36.2
Foreign exchange movements (1.2) 0.1 3.5 (0.2)
------------------------------------ -------- -------- -------- --------
Closing net (debt)/cash (98.1) (22.5) (58.5) 20.9
------------------------------------ -------- -------- -------- --------
(1) Earnings before interest, tax, depreciation, amortisation,
share-based payments, impairment of property, plant and equipment,
profit or loss on disposal of property, plant and equipment, income
from associate.
Despite the GBP59.6m decline in headline operating profit,
headline operating cash flow declined only GBP25.3m to GBP130.2m
(2019: GBP155.5m). This was a result of careful cash management,
coupled with the benefit of significant working capital inflow,
mainly resulting from lower trade receivables associated with the
lower revenues. Headline operating cash conversion was 173% as the
Group continues its great track record of converting profit into
cash. Free cash flow remained strong, falling only GBP17.0m to
GBP106.1m (2019: GBP123.1m), with a free cash flow conversion ratio
of 141% (2019: 91%), despite some restructuring related
outflows.
Expansionary capital expenditure and acquisitions
The Group invested GBP20.0m in expansionary projects, mainly
related to investment in a new plant in Hungary and two new plants
in North America, all in the AGI business. The two new North
American plants have facilitated some of the restructuring
activities undertaken during the year, which, in turn, has improved
the overall quality of our operations.
The Group remains committed to invest in maintaining its assets
to the highest standards of quality and safety, with repairs and
maintenance expenditure maintained, despite the reduction of
revenue.
In April, the Group completed the acquisition of Ellison Surface
Technologies for $200m (GBP154m). Within this, deferred
consideration of $79.0m (GBP57.8m, based on the exchange rate at 31
December) will be paid in the first half of 2021. More details on
this are provided in note 10 of this 2020 Full Year Result press
release.
Exceptional items
The exceptional charge for the year was GBP58.4m, including
GBP35.7m of restructuring cash costs, most of which will be paid
during 2021. The Group also completed an assessment of its software
during the year which has resulted in an impairment of GBP6.2m,
occasioned by the decision to invest in new ERP software.
Dividend and Dividend Policy
The Group aims to pay ordinary dividends so that dividend cover
will be at or above 2.0 times earnings on a 'normalised' multi-year
basis. The Board may also recommend payment of a supplemental
distribution to shareholders. The amount of any supplemental
distribution will be assessed in light of the cash position of the
Group, along with funding requirements for both organic growth and
acquisitions.
In line with this policy, the Board has recommended a final
ordinary dividend of 13.4p (2019: 13.3p), bringing the total
ordinary dividend to 19.4p (2019: 19.3p). The interim dividend of
6.0p, approved by the Board on 24 November 2020, was paid on 12
February 2021 to shareholders on the register at the close of
business on 8 January 2021. The final ordinary dividend will be
paid on 4 June 2021 to shareholders on the register at the close of
business on 23 April 2021. In light of the net debt position at the
year end on the balance sheet, the Board is not recommending a
special dividend.
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
therefore currently deems this to be the most effective means of
long-term funding.
In May, the Group negotiated a new Revolving Credit Facility
extending the borrowing base to GBP251m for five years expiring in
May 2025. As at 31 December 2020 GBP51.7m (2019: GBPnil) was drawn
on this facility.
Facility Facility
Expiry Facility utilisation headroom
Facility date GBPm GBPm GBPm
27 May
GBP251m Revolving Credit 2025 250.9 51.7 199.2
------------------------- ------- -------- ------------ ---------
Alternative performance measures
Bodycote uses alternative performance measures such as headline
operating profit, headline earnings per share, headline profit
before taxation, headline operating cash flow, headline operating
cash conversion, free cash flow and return on capital employed
together with current measures restated at constant currency. These
assist users of the financial statements to gain a clearer
understanding of the underlying performance of the business,
allowing the impact of restructuring and reorganisation activities,
and acquisition costs to be identified separately. These
alternative performance measures can be found in note 1 of this
2020 Full Year Results press release.
Going concern
In determining the basis of preparation for the Group's
financial statements, the Directors have considered the Group's
business activities, together with the factors likely to affect its
future development, performance and position. The Financial
Overview included above includes a summary of the Group's financial
position, cash flows, liquidity position and borrowings.
The current and plausible future impact of COVID-19 on the
Group's activities and performance has been considered by the Board
of Directors in preparing its going concern assessment. Whilst the
situation is uncertain and evolving, the Group has modelled
potential severe but plausible impacts on revenues, profits and
cash flows in its assessment. In preparing its assessment, the
Directors have considered the actual impact that COVID-19 has had
on the business since the beginning of the outbreak and the related
decline in revenues. Revenues on an organic basis for the last 9
months of the year ended 31 December 2020 were 25% below those in
the prior year, reflecting the impact of shutdowns at the Group's
customers' locations and reduced demand, particularly in the area
of civil air traffic.
Management has modelled a base case scenario, built upon the
budgeting process for 2021 and extended up to July 2022. This model
shows an improvement on performance in 2020 in both revenue and
profits, but still a decline on 2019 actuals. Management then
established a severe but plausible downside scenario under which
the crisis would have a prolonged impact, with a significant
revenue shortfall compared with 2019 actuals modelled through to
the end of July 2022, the period that has been modelled for the
purpose of assessing going concern. The Group's record of cash
conversion during recent months was used to estimate the cash
generation and level of net debt over that period, with the cost
reductions achieved during 2020 through restructuring programmes
resulting in future improvements in operating margins.
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 an acquisition spike at 3.5x) and the minimum interest
cover ratio permitted is 4x. In the severe but plausible downside
scenario modelled, the Group continues to maintain sufficient
liquidity and meets its gearing and interest cover covenants under
the Revolving Credit Facility with substantial headroom.
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 the Group's Revolving Credit Facility. The
Group's uncommitted facilities totalled GBP61m as at 31 December
2020.
On 27 May 2020, the Group negotiated a new GBP251m Revolving
Credit Facility for five years to May 2025. At 31 December 2020,
the Group's Revolving Credit Facility had drawings of GBP51.7m
(2019: GBPnil) and the Group's net debt was GBP22.5m (2019: net
cash of GBP20.9m). The liquidity headroom was GBP221.7m at 31
December 2020 excluding uncommitted facilities.
In addition to the above scenarios, management has performed
reverse stress testing over the model to determine the extent of
downturn which would result in a breach of covenants. Assuming
similar levels of cash conversion as seen in recent months, a
monthly revenue decline compared with 2019 actuals, well in excess
of that experienced in any month in 2020, would need to persist
throughout the going concern period for a covenant breach to occur,
which is considered very unlikely. This stress test also does not
incorporate certain mitigating actions or cash preservation
responses, which the Group would implement in the event of a severe
and extended revenue decline.
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. 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 and
determining the Group's risk appetite. The Group's risk framework,
which has continued to operate as normal throughout the COVID-19
pandemic, employing a variety of top-down and bottom-up approaches
is used to identify, monitor and report risks. A comprehensive
review of the Group's business critical and emerging risks is
presented to the Board in June and in December. The Board concluded
that an ongoing process of identifying, evaluating and managing the
Group's significant risks has been in place throughout 2020 and a
robust assessment of the principal risks had been undertaken.
Changes during the year
The risks to the business have been reviewed throughout the
year, and the Board has determined that there are three new
principal risks to the Group, these are all in the operations risk
area: contract review, machine downtime and loss of key
accreditations.
Customer parts need to be treated in accordance with customer
contracts. Parts that are not treated according to the confirmed
specifications can lead to customer claims and reputational damage.
Ensuring that all specifications' changes are properly recorded and
formally agreed with the customer is, therefore, extremely
important.
In order to provide heat treatment and thermal processing
services on parts for certain customers Bodycote is required to
maintain specific accreditations. Should a number of facilities
fail to maintain their accreditations, customers could potentially
move work to a competitor resulting in a loss of revenue to
Bodycote.
Bodycote relies upon its operational equipment, across the
network of plants, being available to meet the requirements of its
customers. Significant periods of equipment downtime, for example,
as a result of breakdowns would impact customer service.
The Board has also determined that two risks previously reported
as principal should no longer be reported as such: capital projects
and loss of key customers. The capital project risk has been
reduced by improvements in the control environment, for example,
improvements in project management and the monitoring of costs. The
loss of key customers risk has been reduced as no single customer
loss would be material to the Group, it would require the loss of
multiple customers to become a significant risk. The loss of
multiple customers would more likely be the consequence of market
downturn, poor quality, or customer service failures; all of which
are principal risks in their own right.
Emerging risks
The Board has highlighted the wider effects of climate change on
Bodycote's business as a key emerging risk. The acceleration in the
transition to electric vehicles (EV) that tend to have fewer
components that require heat treatment could reduce the number of
components Bodycote has to process. However, to capture more of
this growing market Bodycote has already started to position itself
as the supplier of choice to EV manufacturers and OEM's.
Environmental activism around climate change has started to
influence some consumers to reduce their carbon footprints. There
is the potential that this could start to impact some of the
sectors Bodycote operate in, such as aerospace. The COVID-19
pandemic, as well as the potential for more pandemics in the
future, has been added as a new emerging risk in 2020, including
its long-term effects for which the full impacts are still to be
known.
Market and customer risks
Bodycote has presence in 23 countries servicing more than 40,000
customers across a wide variety of end-markets. This presence 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 continuing impact of COVID-19.
-- The entry of 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 has responded proactively and
positively to COVID-19 during 2020. There are extensive Group-wide
health and safety policies that are subject to regular review and
auditing. The principal risk in this area is the safety and health
of our employees.
Environment, social and governance risk
Investors and stakeholders are increasingly seeking 'best in
class' companies across a growing set of ESG criteria. Bodycote is
committed to continuous improvement in the management of corporate
responsibility issues and is implementing policies and initiatives
to further this goal. Our principal risk in this area is the actual
or perceived impact on the environment by Bodycote operations.
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 to the confirmed contract specifications
-- The loss of key accreditations such as Nadcap for aerospace
and defence work and IATF 6949 for automotive
-- 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 during
the year by the Audit Committee. In the course of its business, the
Group is exposed to these financial risks:
-- Foreign currency
-- Interest rate
-- Liquidity
-- Credit risk
Environment, Social and Governance
Our approach to sustainability
Bodycote's Core Values provide a framework for how we operate as
a Group and the behaviours we embody when acting as a good
corporate citizen. Respect and Responsibility are part of
Bodycote's Core Values demonstrating our commitment to reducing the
environmental impact of our activities while providing our
employees a safe working environment.
Our sustainability approach focuses on the broader impacts we
have on the environment, the communities where we operate, our
employees, shareholders, and society as a whole. Bodycote's
stakeholder model shows how its interactions on various levels
contribute towards socio-economic growth and development. We seek
to understand and build mutually beneficial relationships, allowing
for Bodycote's growth and sustainability, which in return provides
benefits to employees, investors, customers, and society.
Bodycote is dedicated to improving the management of
sustainability issues and has policies and initiatives to achieve
this goal. The future success and growth of Bodycote are
intrinsically linked to our ability to ensure our operations are
sustainable and that we can nurture and develop our talent.
The services Bodycote supplies to its customers improve the
lifespan of products and enable a reduction in the environmental
footprint of their components. The services we offer are more
efficient and productive than our customers' in-house operations,
enabling the benefit of reduced carbon footprint, which our
customers highly value, allowing us to create superior shareholder
returns. We continually seek to minimise environmental impact and
as such we have embarked on our path to net-zero carbon.
Governance
We manage and measure our impacts, risks and opportunities in
regard to environmental and social impacts through the Task Force
on Climate-Related Financial Disclosures (TCFD)(1) model.
Our Sustainability and Risk Committee, reporting to the
Executive Committee, oversees the management of our climate-related
risks and opportunities. Stephen Harris, our Group Chief Executive,
has overall accountability for the environment and sustainability.
As part of his role, he oversees the review and performance of our
environmental and climate-related work.
Strategy
Bodycote takes a proactive approach to improve sustainability
and energy efficiency. At every stage where Bodycote is involved in
the manufacturing cycle, our operational aim is to reduce the
overall impact on the environment, not just in our operations but
also those of our customers. Bodycote operates efficiently, working
around the clock to optimise treatment processing cycles. Without
Bodycote, many companies would be using older in-house technology
and running their equipment at reduced capacity, draining energy
resources. Working with Bodycote enables our customers to commit
more easily to carbon reduction initiatives. Our proactive carbon
reduction initiatives are throughout operations and extend to our
service offering by encouraging customers to switch to more
efficient processes such as Gas Nitriding or our Specialist
Technologies including Low Pressure Carburising, Corr-I-Dur,
Surface Technology, and Speciality Stainless Steel Processing (S(3)
P); all of which have an inherently low carbon footprint. As a
company, we are building a path to net-zero carbon.
Bodycote is committed to reducing its carbon emissions in
accordance with the Paris Agreement on Climate Change, reducing
energy consumption and carbon emissions for the benefit of the
business and society as a whole. Our business strategy involves
continuous improvement of business processes and systems. When
managing our plants, we have a significant focus on energy and
carbon reduction, ensuring our plants operate as efficiently as
possible. As a result, our strategy centres around the concept of
continual improvement which ensures a high degree of both climate
and financial resilience.
Risk management
Each year, senior managers from various business areas collate
their key risks, including sustainability and climate
change-related risks. The Executive Committee and the Board assess
the risks to understand their severity, likelihood and the optimal
controls and/or mitigation required.
The supply chain for Bodycote's businesses is principally energy
in the form of natural gas and electricity. Bodycote does not use
fuel oil. In addition, Bodycote consumes the industrial gases
Nitrogen, Argon, Ammonia (NH(3) ) and some Hydrogen. Bodycote has
no raw materials supply chain other than marginal amounts of base
metals. As such there is no raw material supply chain risk. Clearly
any risk to the supply of energy puts Bodycote at risk of being
unable to provide its thermal processing services.
Metrics and targets
We measure the material impacts and outputs from our business
based on standards and regulations relevant to our operations and
these are reported throughout this section of the report.
(1) Task Force on Climate-Related Financial Disclosures (TCFD)
The TCFD has developed a framework to help public companies and
other organisations more effectively disclose climate-related risks
and opportunities through their existing reporting processes.
Environment
As the world's leading provider of thermal processing services,
Bodycote plays an important role in minimising climate change. By
effectively consolidating, our many thousands of customers' heat
treatment requirements, Bodycote significantly reduces the overall
required energy consumed compared with the energy that would be
consumed if each customer treated their own products. In this
regard, Bodycote should be viewed as an enabler to the goal of a
reduction in emissions.
Bodycote's services reduce our customers' carbon footprint by
increasing the lifespan of their products by improving
metallurgical properties, and enhancing corrosion resistance. For
example, Surface Technology is widely used in the reclamation of
damaged and worn components, offering a cost-effective and
energy-efficient alternative to the need to manufacture new
replacement parts. The treated parts often last up to twenty times
longer than the original.
Carbon footprint
Bodycote offers some of the most energy-efficient processes
available on the market place, strives to ensure full capacity
utilisation, thereby providing maximum benefit to the client, the
company and the environment. Bodycote has been able to reduce our
carbon footprint with a 14% reduction in total carbon emissions
since 2018. Our total carbon footprint is positively impacted by
every customer who works with us to move from atmospheric
treatments to our Specialist Technologies, particularly LPC,
Corr-I-Dur, S(3) P, as well as gas nitriding and vacuum heat
treatment. These processes are more efficient than the classical
atmospheric carburising heat treatments that companies typically
use if they process the work in-house.
Year-on-year, Bodycote continuously improves our energy
consumption through investments in energy improvement projects.
Projects to reduce energy consumption vary in size and scope and
collectively help us on our path to net-zero. The projects are as
simple as upgrading to ultra-efficient lighting systems or
installing solar panels or a broader directive to purchase
renewable energy where possible.
The total global energy consumption reduced by 6% in 2020
compared with the previous year.
As individual facilities and as a Group, one of our core
competencies is to manage energy efficiently, reducing our carbon
footprint and creating value for our shareholders.
We actively minimise energy use in a number of ways, optimising
production capacity and providing energy-efficient processes. This
is supplemented by an effective equipment maintenance programme to
ensure that equipment consistently operates at highly effective and
efficient levels. It is essential to the business that we monitor
energy usage to identify opportunities for improvement so that we
can react quickly to address any deficiency in our energy use. To
facilitate this, we align ourselves in many countries to ISO 50001
(Energy Management Systems Standard), allowing a consistent
approach to energy measurement. Doing so will enable us to meet the
Energy Efficiency Directive 2012/27/EU requirements. The UK remains
compliant with the directive through the Energy Savings Opportunity
Scheme (ESOS).
Bodycote's total CO(2) e emission data is based on Scope 1 and
Scope 2, and data relating to this has been calculated to include
country-specific electricity conversion factors from the
International Energy Agency (IEA). Scope 1 emissions are direct
emissions resulting from fuel usage and the operation of
facilities. Scope 2 emissions are indirect energy emissions
resulting from purchased electricity, heat, steam, or cooling for
own use.
The Group collects electricity, natural gas and LPG consumption
information from each facility every month. The Group then applies
the DEFRA and International Energy Agency (IEA) published national
carbon conversion factors to calculate the total tonnage of CO(2) e
produced, which along with the geographical sales for the year
provides the normalised tCO(2) e per GBPm of sales.
In 2020 Bodycote's total carbon emissions (ktCO(2) e) reduced by
8% compared with the previous year.
The total CO(2) e emissions per GBPm sales in 2020 were 486.0 Te
(2019: normalised 427.2 Te). The impact of COVID-19 has meant
throughput of customer product has fluctuated; notwithstanding this
the energy used in the processes remains the same.
All entities and facilities under financial control are included
within the disclosure. Emissions less than 1% of the Group's total
CO(2) e relating to fugitive emissions and owned vehicles are not
significant and are excluded. As such there are no significant
omissions from this disclosure.
Water
Bodycote reduces water consumption wherever possible; Bodycote's
processes by design are not intensive in water consumption, and
often, water is reused. However, during some services, minimal
water is used for either cooling operational equipment or washing
customer parts and is recycled. Any water discharge resulting from
these operations is controlled using for example, measures such as
interception tanks to capture water discharged. This allows the
water to be checked for any contaminant levels and ensuring it is
of an acceptable level prior to final discharge. Both internal and
external auditing verifies all such control measures are in line
with ISO 14001:2015 to ensure compliance with legal
obligations.
The total water consumption, as a ratio of thousand m(3) per GBP
million sales (10(3) m(3) / GBP m), increased by 13%. In 2020,
total water consumption reduced however this was primarily driven
by lower production hours in 2020.
When reviewing the actual total water consumption, there is a 6%
decrease in 2020 from 2019, and a 9% reduction since 2018.
ISO 14001 accredited facilities
Reducing the environmental impact of Bodycote's activities is
taken very seriously. The actions we undertake to reduce our
environmental impact will align all our facilities to the
compliance requirements of ISO 14001. At the end of 2020, 92% (155
of our operating facilities) had achieved or maintained ISO 14001:
2015 accreditation (2019: 90%). The accreditation rates for 2020
have increased. The remaining thirteen facilities will achieve ISO
14001 in 2021.
Waste
Bodycote provides services to our customers, and as such, most
of the customers' parts that arrive in packaging or containers are
returned to the customers in the same packaging or containers. Not
only does this practice reduce environmental impact and the waste
produced, but it provides efficiency to our customers. Therefore,
direct waste is not a significant environmental impact and is
principally limited to office materials, packaging and containers
from maintenance supplies plus chemical and oil waste from
maintenance activities. All waste is segregated into waste streams
and disposed of in accordance with local legislation. Waste
transfer arrangements are validated via internal and external audit
mechanisms.
Streamlined Energy and Carbon Reporting (SECR) for UK listed
companies and their UK subsidiaries
Electricity, natural gas, LPG and transportation fuel
consumption information is collected from each facility on a
monthly basis. The DEFRA conversion factors are then applied to
calculate the total tonnage of CO(2) e produced.
Bodycote PLC and UK subsidiaries total CO(2) e emissions
(ktCO(2) e) for 2020 were 13.4. 100% of Bodycote PLC and its UK
subsidiaries energy consumption was consumed in the UK.
Social
During 2020, individually and collectively, we faced new and
unique challenges. Within Bodycote, our priority will always be the
safety and wellbeing of our people.
Our sustainability approach focuses on the broader impacts we
have on the environment, the communities where we operate, our
employees, shareholders, and society as a whole. Bodycote's
stakeholder model shows how its interactions on various levels
contribute towards socio-economic growth and development. Our
people are at the heart of our sustainability activities.
Bodycote is dedicated to improving the management of
sustainability issues and is implementing policies and initiatives
to achieve this goal. The future success and growth of the Group is
intrinsically linked to our ability to ensure the Group's
operations are sustainable and that we can nurture and develop our
talent.
Our people
The Group's strength is based on its people and we strive to
support our employees' health and wellbeing while driving a
performance culture of business understanding and shared Core
Values. We employ proactive individuals who embody our Core Values
and ensure they are qualified to support continued growth. Bodycote
is fortunate to have a competent and committed international team
that is well respected in technical and business circles.
Bodycote invests in the training and development of its people
both at the local and Group level. The Group is committed to
providing the appropriate skills and training to allow its
employees to operate effectively and safely in their roles and
deliver results. Regular internal satisfaction surveys are
undertaken that provide feedback on the level of satisfaction of
centrally provided services. Overall satisfaction reaches
appropriate levels.
We use performance management tools globally to track skills,
competency progression, and annual achievements throughout our
management population. By communicating clear directions coupled
with skills development, the organisation aims to raise its
management capability in driving performance.
Response to COVID-19
The COVID-19 pandemic compelled Bodycote to be agile in its
response to safeguard the wellbeing of our employees, our customers
as well as the business. This resulted in a balanced, socially
responsible approach resulting in changing work environments, work
from home for some employees at short notice and temporary
mandatory shutdowns of some locations.
The rapid implementation of new safety measures highlights the
resilience and commitment of our people. During these unprecedented
times, Bodycote communicated often, providing the latest
information and worked with individuals to offer the highest level
of flexibility.
Equality, diversity and inclusion
Bodycote recognises the value of a diverse and skilled workforce
and is committed to creating and maintaining an inclusive and
collaborative workplace culture that will provide sustainability
into the future. As such, we regularly review our recruitment and
working practices to identify how we can continue to attract and
retain a diverse workforce. We recognise that diversity and an
inclusive workplace enriches our solutions and adds value for our
stakeholders. Per our Equality, Diversity and Inclusion Policy and
Recruitment Policy we maintain equal opportunities; we give full
and fair consideration to all employment applicants. Recruitment,
training, reward, and career progression are based purely on merit.
We embrace a culture of acceptance and inclusion accommodating
part-time, agile, and flexible working requests.
Bodycote supports employees with a set of policies that fortify
our culture and Core Values. The policies help the organisation 'do
the right thing' every time. Our employment policies are
non-discriminatory and comply with all current legislation to
engender equal opportunity irrespective of age, race, gender,
ethnic origin, nationality, religion, health, disability, marital
status, sexual orientation, political or philosophical opinions or
trade union membership. Due to the nature of our business, we
operate with a multi-cultural team and encourage inclusivity
throughout the Group. Harassment of any kind is not tolerated.
Female representation on our Board during 2020 was 38% (2019:
43%) and at senior manager level it is 30% (2019: 25%). Females
represent 18% (2019: 19%) of our total workforce.
The overall UK gender pay gap figures are published on our
website www.bodycote.com. The UK mean gender pay gap is 4% in
favour of women.
Health and wellbeing
Bodycote has a long history of supporting the health and
wellbeing of our employees. However, in 2020, due to the changes
brought on by COVID-19, maintaining a healthy workplace took new
additional measures. Our local management and the Safety, Health,
and Environment team reacted ahead of local guidelines to implement
measures to protect employees and their families. Through increased
communications, adapting workspaces, flexibility and continuous
improvements, Bodycote put employees' health and safety as the
number one priority.
We recognise that individuals work best and can achieve
sustainable high-performance over time when they are healthy and
feeling valued. Bodycote promotes an environment that encourages
line management to support the health and wellbeing of all
employees. Bodycote encourages facilities to initiate wellness
programmes and the Company sponsors worldwide fitness and wellbeing
activities.
Culture and Core Values
It is not just important what we do but how we do it, and how we
behave in our Company. How we operate as a Group and the behaviours
that we expect from all our employees are expressed in our Core
Values. Our values represent Bodycote and its people and our
commitment to the Company and the business.
Our Core Values are straightforward and are as follows:
Honesty and Transparency
We are honest and act with integrity. Trust stems from honesty
and trust is at the heart of everything we engage in: our customers
trust us to deliver what we say we will, our colleagues trust us to
act in their best interests and our suppliers trust us to conduct
business according to agreed terms. This is not something we take
for granted. Bodycote lives by a culture of honest and transparent
behaviour, which is at the core of all our business
relationships.
Respect and Responsibility
We manage our business with respect, applying an ethical
approach to our dealings with those we interact with. We respect
our colleagues, who are all of the employees of Bodycote. Part of
our respect for our colleagues is our commitment to safe and
responsible behaviour and our fundamental belief that no one should
come to any harm at work. We show respect for our customers, our
suppliers and our competitors. We respect the communities around us
and behave as responsible corporate citizens by being compliant
with the laws and regulations of the countries in which we do
business and by ensuring that our effect on the environment is
minimal. We believe in taking ownership for, and being mindful of
the impact of our actions.
Creating Value
Creating value is the very essence of our business and needs to
be the focus of our endeavours. We create value for our customers,
our employees and our shareholders. The realities are harsh. If we
do not create value for our customers then we have no reason for
existence. If we do not create value for our employees there will
be no one to create value for our customers.
Our shareholders rightfully require that we ultimately create
value for them as they are the owners of the business.
Human rights
As an international business, Bodycote's Human Rights policy is
consistent with the Universal Declaration of Human Rights and the
UN Global Compact's ten principles, and the Group's Human Rights
Policy applies to all our businesses worldwide.
We prohibit forced, compulsory, and underage labour and any form
of discrimination based on age, race, gender, ethnic origin,
nationality, religion, health, disability, marital status, sexual
orientation, gender reassignment, pregnancy, and maternity or
paternity, political or philosophical opinions or trade union
membership. Appropriate mechanisms are in place to minimise the
potential for any contravention of these rules.
By publicly posting our Human Rights Policy and Equality,
Diversity and Inclusion Policy on www.bodycote.com, stakeholders
worldwide can alert us to potential breaches of the policy. Our
internal systems also support compliance with our policy and we
have a robust Open Door Line, which is our third-party confidential
whistleblower's programme, for employees to report alleged
violations of law and/or our policies on a confidential basis and
in their own language. In the jurisdictions in which we employ a
majority of our employees, there are laws applicable to many of the
areas dealt with in our Human Rights Policy and our Equality,
Diversity and Inclusion Policy.
We have a Code of Conduct that sets out our policy on compliance
with legislation, child labour, anti-slavery and human trafficking,
and conditions of employment, health, safety and the
environment.
The Modern Slavery Act
Bodycote plc has conducted a risk assessment on our supply chain
using the UK Government's published guidance entitled 'Transparency
in Supply Chains'. Suppliers in those countries identified in Walk
Free Foundation's 2016 Global Slavery Index as being the most
vulnerable to human rights issues in the supply chain have been
identified for further review and audit. All relevant employees
undergo Anti-Slavery training.
The Anti-Slavery and Human Trafficking Statement is published on
our website and reviewed by the Board of Directors annually.
Suppliers
Bodycote's operations are such that the Group does not have
significant suppliers who are wholly dependent upon the Group's
business and has no significant suppliers on which the Group is
dependent upon for a substantial part of its business. We manage
our suppliers with respect, honesty, and integrity, no matter the
size of the transaction. Suppliers are paid in line with
contractual and legal obligations.
We expect suppliers to adhere to our Code of Conduct for all
relevant items.
Customers
Bodycote works with our customers to service their demand in the
most efficacious manner possible. By surveying customer
satisfaction levels, we modify our methodologies to become a better
thermal processing solutions provider. We endeavour to respond
quickly to changing customer demands, identify emerging needs and
improve service availability and quality. We stay close to our
current and potential customers by building long-term
relationships.
Community
Bodycote seeks to play a positive role in the local communities
in which it operates by providing employment opportunities, and
building goodwill and a reputation as a good neighbour and
employer. Our operations are international but our strength lies in
the local nature of our facilities that are close to our customers.
Our facilities are relatively small plants that typically employ
approximately 30 people. We encourage community involvement
activities championed by our plants and their employees
locally.
Responsible business ethics
The Group has a robust governance structure to support business
ethics and a series of policies that detail its commitments and
standards in this area. We recognise that rules alone are not
sufficient to ensure wrongdoing is avoided - a combination of rules
and values is needed to help embed a healthy business culture. The
Group's approach is to set the tone of an ethical business culture
from the top, demonstrating a commitment to the right values and
behaviours of all employees.
All Bodycote personnel are expected to apply a high ethical
standard, that is in keeping with being an international UK-listed
company.
Directors and employees are expected to ensure that their
personal interests do not at any time conflict with those of
Bodycote. Shareholder employees are advised of and comply with the
share dealing code.
Bodycote has systems in place that are designed to ensure
compliance with all applicable laws and regulations and conformity
with all relevant codes of business practice. Furthermore, Bodycote
does not make political donations.
With regard to competition, Bodycote aims to win business in a
differentiated, high-value manner. The Group does not employ unfair
trading methods and it competes vigorously, but fairly, within the
requirements of applicable laws. Employees are prohibited from
either giving or receiving any inducements.
Our Open Door Policy is communicated in all languages used
throughout the Group. The policy allows employees to report their
concerns confidentially, verbally or in writing, to an independent
third-party provider, ensuring anonymity.
When incidents are reported, whether through internal or
external mechanisms, they are passed to the Group Head of Risk for
investigation and determination of the appropriate steps to be
taken for the matter to be addressed.
Supporting employees who speak up
When our employees do the right thing by speaking up against
instances of wrongdoing, we believe it is crucial that the Company
also does the right thing and ensures that there are no
repercussions for their actions.
Online training courses regarding Anti-Bribery and Competition
Law have been designed and translated into the major languages used
throughout the Group. All relevant employees have completed the
interactive courses.
Safety and health
Bodycote continues to manage hazards and thereby minimise risks
to employees through the deployment of robust safety management
systems and procedures. Bodycote uses a global incident reporting
and Safety, Health and Environment management tool at every site.
This enables a consistent and thorough reporting of workplace
injuries, near misses, and unsafe conditions.
A key element in the Bodycote Safety, Health, and Environment
strategy is the development of a vigorous safety and health culture
that values the identification and reporting of near misses, unsafe
acts or conditions, and suggestions for improvement- collectively
known as 'opportunities for improvement' (OFIs). In 2020, there
were over 9,000 OFIs raised across the business which is a decrease
of 22% against 2019. The significant decrease was attributed to the
impact of COVID-19. The relatively high number of OFI's
demonstrates the engagement of employees in proactively raising and
rectifying safety issues. Though regrettable and unacceptable,
accidents represent learning opportunities and are why accurate
reporting is an essential part of building a robust safety
management system.
The most frequent cause of reportable cases is related to manual
handling of parts and lifting operations and has a number of
underlying causes. Therefore, it continues to focus on risk
reduction activities over the next few years. In 2020, there was
continued Group Safety, Health and Environment capital investment
for manual and material handling improvements.
All reportable cases and lost time injuries are reviewed during
Executive Committee meetings and by the Board. The Executive
Committee reviews incidents that do not result in injury but are
considered to have been serious or to have had a high potential
impact. All serious incidents and high potential incidents are
reviewed by the Group Safety, Health, and Environment Committee and
cascaded as appropriate within the business to ensure that
preventive actions are taken.
In 2020, the Total Reportable Case (TRC) rate decreased to 2.3
(2019: 2.8), and the Lost Time Injury (LTI) rate decreased to 1.3
(2019: 1.4)
Total Reportable Case rate(1) (TRC)
Total Reportable Cases (TRC) include:
- Any lost time incident (>1 day or shift, not including the day of the accident)
- Any restricted work case (where the injured person cannot do their usual work)
- Any medical treatment case (specialist medical treatment, not first aid)
The significant drop in the TRC rate for 2020 (30% drop in
TRC's) is an impressive result during 2020 and is a consequence of
short working hours, and closures resulting in fewer working hours
being reported. This situation would normally cause the frequency
rate to increase, and not decrease, as there would be less hours to
suppress the frequency rate.
(1) Total reportable case rate is the number of lost time
injuries, medical treatment cases and restricted work cases X
200,000 hours, divided by the total number of employee hours
worked.
Operational Safety, Health and Environment performance
Bodycote is committed to continuous improvement in our safety,
health, and environmental performance (SHE). We are committed to
complying with all local legislative requirements as a minimum and
establishing consistent and robust best practices at all of our
sites, enabling the delivery of consistently high performance
across all aspects of Safety, Health and Environment
management.
Directors' responsibility statement
This responsibility 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 have been prepared in accordance with the recognition
and measurement principles of International Financial Reporting
Standards (IFRS) and are derived from the audited consolidated
financial statements of the Group, prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 and in accordance with IFRS
adopted pursuant to Regulation (EC) No 1606/2002 as it applies to
the European Union (they do not contain sufficient information to
comply with IFRS);
-- The Group's condensed consolidated financial statements,
prepared in accordance with IFRS, give a true and fair view of the
assets, liabilities, financial position and profit of the
Group;
-- There have been no significant individual related party transactions during the year; and
-- 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 2020.
The Group's condensed consolidated financial statements, and
related notes, including this responsibility statement, were
approved by the Board and authorised for issue on 12 March 2021 and
were signed on their behalf by:
Director Director
S C Harris D Yates
Audited financial information
The condensed consolidated financial statements and notes 1 to
13 for the year ended 31 December 2020 are derived from the Group
annual 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 2020
2020 2019
Note GBPm GBPm
-------------------------------------------------- ---- ------- -------
Revenue 2 598.0 719.7
-------------------------------------------------- ---- ------- -------
Cost of sales and overheads (535.0) (590.5)
-------------------------------------------------- ---- ------- -------
Net impairment gains/(losses) on financial assets 0.4 (0.6)
-------------------------------------------------- ---- ------- -------
Operating profit prior to exceptional items 2,3 63.4 128.6
-------------------------------------------------- ---- ------- -------
Exceptional items 5 (58.4) -
-------------------------------------------------- ---- ------- -------
Operating profit 3 5.0 128.6
-------------------------------------------------- ---- ------- -------
Finance income 0.2 0.2
-------------------------------------------------- ---- ------- -------
Finance costs (6.7) (4.9)
-------------------------------------------------- ---- ------- -------
(Loss)/profit before taxation (1.5) 123.9
-------------------------------------------------- ---- ------- -------
Taxation credit/(charge) 6 2.3 (29.9)
-------------------------------------------------- ---- ------- -------
Profit for the year 0.8 94.0
-------------------------------------------------- ---- ------- -------
Attributable to:
-------------------------------------------------- ---- ------- -------
Equity holders of the parent 0.4 93.8
-------------------------------------------------- ---- ------- -------
Non-controlling interests 0.4 0.2
-------------------------------------------------- ---- ------- -------
0.8 94.0
-------------------------------------------------- ---- ------- -------
Earnings per share 8
-------------------------------------------------- ---- ------- -------
Pence Pence
-------------------------------------------------- ---- ------- -------
Basic 0.2 49.4
-------------------------------------------------- ---- ------- -------
Diluted 0.2 49.2
-------------------------------------------------- ---- ------- -------
All activities have arisen from continuing operations.
Consolidated statement of comprehensive income
For the year ended 31 December 2020
2020 2019
GBPm GBPm
-------------------------------------------------------------------- ----- ------
Profit for the year 0.8 94.0
--------------------------------------------------------------------- ----- ------
Items that will not be reclassified to profit or loss:
-------------------------------------------------------------------- ----- ------
Actuarial gain/(loss) on defined benefit pension schemes 0.5 (2.0)
--------------------------------------------------------------------- ----- ------
Tax on items that will not be reclassified (0.1) 0.9
--------------------------------------------------------------------- ----- ------
Total items that will not be reclassified to profit or loss 0.4 (1.1)
--------------------------------------------------------------------- ----- ------
Items that may be reclassified subsequently to profit or loss:
-------------------------------------------------------------------- ----- ------
Exchange losses on translation of overseas operations (1.4) (26.4)
--------------------------------------------------------------------- ----- ------
Movements on hedges of net investments 1.1 -
--------------------------------------------------------------------- ----- ------
Total items that may be reclassified subsequently to profit or loss (0.3) (26.4)
--------------------------------------------------------------------- ----- ------
Other comprehensive income/(expense) for the year 0.1 (27.5)
--------------------------------------------------------------------- ----- ------
Total comprehensive income for the year 0.9 66.5
--------------------------------------------------------------------- ----- ------
Attributable to:
-------------------------------------------------------------------- ----- ------
Equity holders of the parent 0.8 66.4
--------------------------------------------------------------------- ----- ------
Non-controlling interests 0.1 0.1
--------------------------------------------------------------------- ----- ------
0.9 66.5
-------------------------------------------------------------------- ----- ------
Consolidated balance sheet
At 31 December 2020
2020 2019
Note GBPm GBPm
---------------------------------------------------- ---- ------- -------
Non-current assets
---------------------------------------------------- ---- ------- -------
Goodwill 215.5 169.8
----------------------------------------------------- ---- ------- -------
Other intangible assets 108.0 42.6
----------------------------------------------------- ---- ------- -------
Property, plant and equipment 522.6 534.5
----------------------------------------------------- ---- ------- -------
Right-of-use assets 69.0 73.3
----------------------------------------------------- ---- ------- -------
Investment in associate 4.1 4.2
----------------------------------------------------- ---- ------- -------
Deferred tax assets 2.4 6.1
----------------------------------------------------- ---- ------- -------
Trade and other receivables 2.1 1.2
----------------------------------------------------- ---- ------- -------
923.7 831.7
---------------------------------------------------- ---- ------- -------
Current assets
---------------------------------------------------- ---- ------- -------
Inventories 15.8 14.8
----------------------------------------------------- ---- ------- -------
Current tax assets 20.7 15.7
----------------------------------------------------- ---- ------- -------
Trade and other receivables 116.2 142.9
----------------------------------------------------- ---- ------- -------
Cash and bank balances 30.7 22.0
----------------------------------------------------- ---- ------- -------
Assets held for sale 2.9 -
----------------------------------------------------- ---- ------- -------
186.3 195.4
---------------------------------------------------- ---- ------- -------
Total assets 1,110.0 1,027.1
----------------------------------------------------- ---- ------- -------
Current liabilities
---------------------------------------------------- ---- ------- -------
Trade and other payables 170.9 127.4
----------------------------------------------------- ---- ------- -------
Current tax liabilities 30.7 31.2
----------------------------------------------------- ---- ------- -------
Borrowings 53.2 1.1
----------------------------------------------------- ---- ------- -------
Lease liabilities 13.6 13.4
----------------------------------------------------- ---- ------- -------
Provisions 9 26.0 4.0
----------------------------------------------------- ---- ------- -------
294.4 177.1
---------------------------------------------------- ---- ------- -------
Net current (liabilities)/assets (108.1) 18.3
----------------------------------------------------- ---- ------- -------
Non-current liabilities
---------------------------------------------------- ---- ------- -------
Lease liabilities 62.0 66.0
----------------------------------------------------- ---- ------- -------
Retirement benefit obligations 16.2 17.9
----------------------------------------------------- ---- ------- -------
Deferred tax liabilities 42.7 48.6
----------------------------------------------------- ---- ------- -------
Provisions 9 11.0 9.5
----------------------------------------------------- ---- ------- -------
Other payables 2.3 2.2
----------------------------------------------------- ---- ------- -------
134.2 144.2
---------------------------------------------------- ---- ------- -------
Total liabilities 428.6 321.3
----------------------------------------------------- ---- ------- -------
Net assets 681.4 705.8
----------------------------------------------------- ---- ------- -------
Equity
---------------------------------------------------- ---- ------- -------
Share capital 33.1 33.1
----------------------------------------------------- ---- ------- -------
Share premium account 177.1 177.1
----------------------------------------------------- ---- ------- -------
Own shares (6.9) (11.6)
----------------------------------------------------- ---- ------- -------
Other reserves 132.6 136.7
----------------------------------------------------- ---- ------- -------
Translation reserves 37.9 37.9
----------------------------------------------------- ---- ------- -------
Retained earnings 306.7 331.8
----------------------------------------------------- ---- ------- -------
Equity attributable to equity holders of the parent 680.5 705.0
----------------------------------------------------- ---- ------- -------
Non-controlling interests 0.9 0.8
----------------------------------------------------- ---- ------- -------
Total equity 681.4 705.8
----------------------------------------------------- ---- ------- -------
The financial statements of Bodycote plc, registered number
519057, were approved by the Board of Directors and authorised for
issue on 12 March 2021.
They were signed on its behalf by:
S.C. Harris D. Yates
Consolidated cash flow statement
For the year ended 31 December 2020
2020 2019
Note GBPm GBPm
---------------------------------------------------------------------------- ---- ------- -------
Net cash from operating activities 139.1 177.3
---------------------------------------------------------------------------- ---- ------- -------
Investing activities
---------------------------------------------------------------------------- ---- ------- -------
Purchases of property, plant and equipment (57.8) (77.7)
---------------------------------------------------------------------------- ---- ------- -------
Proceeds on disposal of property, plant and equipment and intangible assets 1.9 7.4
---------------------------------------------------------------------------- ---- ------- -------
Purchases of other intangible assets (2.1) (1.0)
---------------------------------------------------------------------------- ---- ------- -------
Acquisition of businesses, net of cash acquired 10 (66.7) (19.1)
---------------------------------------------------------------------------- ---- ------- -------
Interest received(1) 0.3 0.2
---------------------------------------------------------------------------- ---- ------- -------
Net cash used in investing activities (124.4) (90.2)
---------------------------------------------------------------------------- ---- ------- -------
Financing activities
---------------------------------------------------------------------------- ---- ------- -------
Interest paid (5.0) (4.7)
---------------------------------------------------------------------------- ---- ------- -------
Dividends paid 7 (25.1) (74.9)
---------------------------------------------------------------------------- ---- ------- -------
Principal elements of lease payments (15.5) (14.4)
---------------------------------------------------------------------------- ---- ------- -------
Drawdown of bank loans 101.9 35.0
---------------------------------------------------------------------------- ---- ------- -------
Repayments of bank loans (62.1) (37.3)
---------------------------------------------------------------------------- ---- ------- -------
Own shares purchased (0.5) (6.0)
---------------------------------------------------------------------------- ---- ------- -------
Net cash used in financing activities (6.3) (102.3)
---------------------------------------------------------------------------- ---- ------- -------
Net increase/(decrease) in cash and cash equivalents 8.4 (15.2)
---------------------------------------------------------------------------- ---- ------- -------
Cash and cash equivalents at beginning of year 20.9 36.2
---------------------------------------------------------------------------- ---- ------- -------
Effect of foreign exchange rate changes (0.1) (0.1)
---------------------------------------------------------------------------- ---- ------- -------
Cash and cash equivalents at end of year 11 29.2 20.9
---------------------------------------------------------------------------- ---- ------- -------
(1) Interest received has been restated to present this as an
investing activity cash flow item rather than a financing activity
cash flow item.
Consolidated statement of changes in equity
For the year ended 31 December 2020
Equity
attributable
Share to equity Non-
Share premium Own Other Translation Retained holders of controlling Total
capital account shares reserves reserves earnings the parent interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- --------- --------- ------- --------- ----------- --------- ------------ ----------- -------
1 January 2019 33.1 177.1 (14.8) 141.4 64.2 317.6 718.6 0.7 719.3
---------------- --------- --------- ------- --------- ----------- --------- ------------ ----------- -------
Profit for the
year - - - - - 93.8 93.8 0.2 94.0
---------------- --------- --------- ------- --------- ----------- --------- ------------ ----------- -------
Exchange
differences on
translation of
overseas
operations - - - - (26.3) - (26.3) (0.1) (26.4)
---------------- --------- --------- ------- --------- ----------- --------- ------------ ----------- -------
Actuarial losses
on defined
benefit pension
schemes net of
deferred tax - - - - - (1.1) (1.1) - (1.1)
---------------- --------- --------- ------- --------- ----------- --------- ------------ ----------- -------
Total
comprehensive
income for the
year - - - - (26.3) 92.7 66.4 0.1 66.5
---------------- --------- --------- ------- --------- ----------- --------- ------------ ----------- -------
Acquired in the
year/settlement
of share
options - - 3.2 (5.8) - (3.4) (6.0) - (6.0)
---------------- --------- --------- ------- --------- ----------- --------- ------------ ----------- -------
Share-based
payments - - - 1.1 - - 1.1 - 1.1
---------------- --------- --------- ------- --------- ----------- --------- ------------ ----------- -------
Deferred tax on
share-based
payment
transactions - - - - - (0.4) (0.4) - (0.4)
---------------- --------- --------- ------- --------- ----------- --------- ------------ ----------- -------
Dividends - - - - - (74.7) (74.7) - (74.7)
---------------- --------- --------- ------- --------- ----------- --------- ------------ ----------- -------
31 December 2019 33.1 177.1 (11.6) 136.7 37.9 331.8 705.0 0.8 705.8
---------------- --------- --------- ------- --------- ----------- --------- ------------ ----------- -------
Profit for the
year - - - - - 0.4 0.4 0.4 0.8
---------------- --------- --------- ------- --------- ----------- --------- ------------ ----------- -------
Exchange
differences on
translation of
overseas
operations - - - - (1.1) - (1.1) (0.3) (1.4)
---------------- --------- --------- ------- --------- ----------- --------- ------------ ----------- -------
Movements on
hedges of net
investments - - - - 1.1 - 1.1 - 1.1
---------------- --------- --------- ------- --------- ----------- --------- ------------ ----------- -------
Actuarial gains
on defined
benefit pension
schemes net of
deferred tax - - - - - 0.4 0.4 - 0.4
---------------- --------- --------- ------- --------- ----------- --------- ------------ ----------- -------
Total
comprehensive
income for the
year - - - - - 0.8 0.8 0.1 0.9
---------------- --------- --------- ------- --------- ----------- --------- ------------ ----------- -------
Acquired in the
year/settlement
of share
options - - 4.7 (4.5) (0.8) (0.6) - (0.6)
---------------- --------- --------- ------- --------- ----------- --------- ------------ ----------- -------
Share-based
payments - - - 0.4 - - 0.4 - 0.4
---------------- --------- --------- ------- --------- ----------- --------- ------------ ----------- -------
Dividends - - - - - (25.1) (25.1) - (25.1)
---------------- --------- --------- ------- --------- ----------- --------- ------------ ----------- -------
31 December 2020 33.1 177.1 (6.9) 132.6 37.9 306.7 680.5 0.9 681.4
---------------- --------- --------- ------- --------- ----------- --------- ------------ ----------- -------
Included in other reserves is a capital redemption reserve of
GBP129.8m (2019: GBP129.8m) and a share-based payments reserve of
GBP2.0m (2019: GBP6.1m). The capital redemption reserve arose from
B shares which were converted into deferred shares in 2008 and
2009, and as a result, GBP129.8m 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 2020 865,565 (2019:
1,405,555) ordinary shares of 17 3/11p each were held by the
Bodycote International Employee Benefit Trust to satisfy
share-based payments under the Group's incentive schemes.
Notes to the consolidated financial statements
Year ended 31 December 2020
1. Alternative performance measures (APMs)
Bodycote uses various APMs, in addition to those reported under
IFRS, as management consider these measures enable users of the
financial statements to assess the underlying trading performance
of the business. These APMs of financial performance, position or
cash flows are not defined or specified according to International
Financial Reporting Standards (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 headline operating profit, headline
operating margin, headline profit before taxation, EBITDA, headline
EBITDA, headline tax charge, headline tax rate, headline earnings
per share (EPS), headline operating cash flow, free cash flow,
headline operating cash conversion, net (debt)/cash, net
(debt)/cash plus lease liabilities and Return On Capital Employed
(ROCE). These measures reflect the underlying 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 underlying performance
of the business. 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.
Headline operating profit
2020 2019
GBPm GBPm
------------------------------------- ----- -----
Operating profit 5.0 128.6
--------------------------------------- ----- -----
Add back:
------------------------------------- ----- -----
Amortisation of acquired intangibles 9.8 4.6
--------------------------------------- ----- -----
Acquisition costs 2.1 1.7
--------------------------------------- ----- -----
Exceptional items 58.4 -
--------------------------------------- ----- -----
Headline operating profit 75.3 134.9
--------------------------------------- ----- -----
Headline operating margin
2020 2019
GBPm GBPm
-------------------------- ----- -----
Headline operating profit 75.3 134.9
-------------------------- ----- -----
Revenue 598.0 719.7
-------------------------- ----- -----
Headline operating margin 12.6% 18.7%
-------------------------- ----- -----
Headline profit before taxation
2020 2019
GBPm GBPm
------------------------------------- ----- -----
(Loss)/profit before taxation (1.5) 123.9
--------------------------------------- ----- -----
Add back:
------------------------------------- ----- -----
Amortisation of acquired intangibles 9.8 4.6
--------------------------------------- ----- -----
Acquisition costs 2.1 1.7
--------------------------------------- ----- -----
Exceptional items 58.4 -
--------------------------------------- ----- -----
Headline profit before taxation 68.8 130.2
--------------------------------------- ----- -----
EBITDA and Headline EBITDA (Earnings Before Interest, Taxation,
Depreciation, and Amortisation)
2020 2019
GBPm GBPm
----------------------------------------------------------------------------------------------- ----- -----
Operating profit 5.0 128.6
----------------------------------------------------------------------------------------------- ----- -----
Depreciation and amortisation 91.9 84.2
----------------------------------------------------------------------------------------------- ----- -----
Impairment of property, plant and equipment and other assets - recognised in exceptional items 16.5 -
----------------------------------------------------------------------------------------------- ----- -----
Impairment of property, plant and equipment and other assets - recognised in operating profit 0.3 -
----------------------------------------------------------------------------------------------- ----- -----
Impairment of other intangible assets - recognised in exceptional items 6.2 -
----------------------------------------------------------------------------------------------- ----- -----
Loss/(profit) on disposal of property, plant and equipment 0.6 (4.4)
----------------------------------------------------------------------------------------------- ----- -----
Share-based payments 0.4 1.1
----------------------------------------------------------------------------------------------- ----- -----
Income from associate (0.2) (0.2)
----------------------------------------------------------------------------------------------- ----- -----
EBITDA 120.7 209.3
----------------------------------------------------------------------------------------------- ----- -----
Acquisition costs 2.1 1.7
----------------------------------------------------------------------------------------------- ----- -----
Exceptional items, excluding impairments 35.7 -
----------------------------------------------------------------------------------------------- ----- -----
Share-based payments (0.4) (1.1)
----------------------------------------------------------------------------------------------- ----- -----
Headline EBITDA 158.1 209.9
----------------------------------------------------------------------------------------------- ----- -----
Headline EBITDA margin 26.4% 29.2%
----------------------------------------------------------------------------------------------- ----- -----
Headline operating cash flow
2020 2019
GBPm GBPm
------------------------------------ ------ ------
Headline EBITDA 158.1 209.9
------------------------------------ ------ ------
Less:
------------------------------------ ------ ------
Net maintenance capital expenditure (45.1) (50.2)
------------------------------------ ------ ------
Net working capital movement 17.2 (4.2)
------------------------------------ ------ ------
Headline operating cash flow 130.2 155.5
------------------------------------ ------ ------
Free cash flow
2020 2019
GBPm GBPm
----------------------------- ------ ------
Headline operating cash flow 130.2 155.5
----------------------------- ------ ------
Less:
----------------------------- ------ ------
Restructuring cash flows (11.6) (3.2)
----------------------------- ------ ------
Income taxes paid (7.8) (24.7)
----------------------------- ------ ------
Interest paid (4.7) (4.5)
----------------------------- ------ ------
Free cash flow 106.1 123.1
----------------------------- ------ ------
Headline operating cash conversion
2020 2019
GBPm GBPm
----------------------------------- ------ ------
Headline operating cash flow 130.2 155.5
----------------------------------- ------ ------
Headline operating profit 75.3 134.9
----------------------------------- ------ ------
Headline operating cash conversion 172.9% 115.3%
----------------------------------- ------ ------
Headline tax charge
2020 2019
GBPm GBPm
-------------------------------------------- ----- -----
Tax (credit)/charge (2.3) 29.9
-------------------------------------------- ----- -----
Tax on amortisation of acquired intangibles 2.4 1.1
-------------------------------------------- ----- -----
Tax on exceptional items 15.4 -
-------------------------------------------- ----- -----
Headline tax charge 15.5 31.0
-------------------------------------------- ----- -----
Headline tax rate
2020 2019
GBPm GBPm
-------------------------------- ----- -----
Headline tax charge 15.5 31.0
-------------------------------- ----- -----
Headline profit before taxation 68.8 130.2
-------------------------------- ----- -----
Headline tax rate 22.5% 23.8%
-------------------------------- ----- -----
Headline earnings per share
A detailed reconciliation is provided in note 8.
Net (debt)/cash and net debt plus lease liabilities
2020 2019
GBPm GBPm
----------------------------------------- ------ ------
Cash and bank balances 30.7 22.0
----------------------------------------- ------ ------
Bank overdrafts (included in borrowings) (1.5) (1.1)
----------------------------------------- ------ ------
Bank loans (included in borrowings) (51.7) -
----------------------------------------- ------ ------
Net (debt)/cash (22.5) 20.9
----------------------------------------- ------ ------
Lease liabilities (75.6) (79.4)
----------------------------------------- ------ ------
Net debt plus lease liabilities (98.1) (58.5)
----------------------------------------- ------ ------
Return on capital employed
2020 2019
GBPm GBPm
----------------------------- ----- -----
Headline operating profit 75.3 134.9
----------------------------- ----- -----
Average capital employed (1) 770.5 762.4
----------------------------- ----- -----
Return on capital employed 9.8% 17.7%
----------------------------- ----- -----
Revenue and headline operating profit at constant exchange
rates
Reconciled to revenue and headline operating profit in the table
below:
Year to 31 December 2020
----------------------------------------------------- -----------------------------------------
Central
cost and
ADE AGI eliminations Consolidated
GBPm GBPm GBPm GBPm
----------------------------------------------------- ----- ----- ------------- ------------
Revenue 249.2 348.8 - 598.0
----------------------------------------------------- ----- ----- ------------- ------------
Constant exchange rates adjustment 0.3 2.0 - 2.3
----------------------------------------------------- ----- ----- ------------- ------------
Revenue at constant exchange rates 249.5 350.8 - 600.3
----------------------------------------------------- ----- ----- ------------- ------------
Headline operating profit 36.8 41.0 (2.5) 75.3
----------------------------------------------------- ----- ----- ------------- ------------
Constant exchange rates adjustment (0.3) 0.7 0.1 0.5
----------------------------------------------------- ----- ----- ------------- ------------
Headline operating profit at constant exchange rates 36.5 41.7 (2.4) 75.8
----------------------------------------------------- ----- ----- ------------- ------------
1 Average capital employed is defined as the average opening and
closing net assets adjusted for net (debt)/cash plus lease
liabilities.
2. 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
is therefore derived by reference to the preponderance of markets
served.
ADE AGI Central costs and eliminations Consolidated
2020 2020 2020 2020
Group GBPm GBPm GBPm GBPm
-------------------------------------------------------- ------ ------ ------------------------------ ------------
Revenue
-------------------------------------------------------- ------ ------ ------------------------------ ------------
Total revenue 249.2 348.8 - 598.0
-------------------------------------------------------- ------ ------ ------------------------------ ------------
Result
-------------------------------------------------------- ------ ------ ------------------------------ ------------
Headline operating profit prior to share-based payments
and unallocated central costs 36.8 41.0 - 77.8
-------------------------------------------------------- ------ ------ ------------------------------ ------------
Share-based payments (including social charges) - - 0.9 0.9
-------------------------------------------------------- ------ ------ ------------------------------ ------------
Unallocated central costs - - (3.4) (3.4)
-------------------------------------------------------- ------ ------ ------------------------------ ------------
Headline operating profit/(loss) 36.8 41.0 (2.5) 75.3
-------------------------------------------------------- ------ ------ ------------------------------ ------------
Amortisation of acquired intangible assets (5.7) (4.1) - (9.8)
-------------------------------------------------------- ------ ------ ------------------------------ ------------
Acquisition costs (2.1) - - (2.1)
-------------------------------------------------------- ------ ------ ------------------------------ ------------
Operating profit/(loss) prior to exceptional items 29.0 36.9 (2.5) 63.4
-------------------------------------------------------- ------ ------ ------------------------------ ------------
Exceptional items (16.9) (35.3) (6.2) (58.4)
-------------------------------------------------------- ------ ------ ------------------------------ ------------
Segment result 12.1 1.6 (8.7) 5.0
-------------------------------------------------------- ------ ------ ------------------------------ ------------
Finance income 0.2
-------------------------------------------------------- ------ ------ ------------------------------ ------------
Finance costs (6.7)
-------------------------------------------------------- ------ ------ ------------------------------ ------------
Loss before taxation (1.5)
-------------------------------------------------------- ------ ------ ------------------------------ ------------
Taxation 2.3
-------------------------------------------------------- ------ ------ ------------------------------ ------------
Profit for the year 0.8
-------------------------------------------------------- ------ ------ ------------------------------ ------------
Inter-segment sales are not material in either year.
The Group does not have any one customer that contributes more
than 10% of revenue.
Western North
Europe America Emerging markets Total ADE
2020 2020 2020 2020
Aerospace, Defence & Energy GBPm GBPm GBPm GBPm
--------------------------------------------------- ------- -------- ---------------- ---------
Revenue
--------------------------------------------------- ------- -------- ---------------- ---------
Total revenue 103.1 143.3 2.8 249.2
--------------------------------------------------- ------- -------- ---------------- ---------
Result
--------------------------------------------------- ------- -------- ---------------- ---------
Headline operating profit/(loss) 17.0 20.0 (0.2) 36.8
--------------------------------------------------- ------- -------- ---------------- ---------
Amortisation of acquired intangible assets - (5.7) - (5.7)
--------------------------------------------------- ------- -------- ---------------- ---------
Acquisition costs - (2.1) - (2.1)
--------------------------------------------------- ------- -------- ---------------- ---------
Operating profit/(loss) prior to exceptional items 17.0 12.2 (0.2) 29.0
--------------------------------------------------- ------- -------- ---------------- ---------
Exceptional items (10.3) (6.5) (0.1) (16.9)
--------------------------------------------------- ------- -------- ---------------- ---------
Segment result 6.7 5.7 (0.3) 12.1
--------------------------------------------------- ------- -------- ---------------- ---------
Western North
Europe America Emerging markets Total AGI
2020 2020 2020 2020
Automotive & General Industrial GBPm GBPm GBPm GBPm
--------------------------------------------------- ------- -------- ---------------- ---------
Revenue
--------------------------------------------------- ------- -------- ---------------- ---------
Total revenue 203.7 83.5 61.6 348.8
--------------------------------------------------- ------- -------- ---------------- ---------
Result
--------------------------------------------------- ------- -------- ---------------- ---------
Headline operating profit/(loss) 26.7 (0.4) 14.7 41.0
--------------------------------------------------- ------- -------- ---------------- ---------
Amortisation of acquired intangible assets (0.5) (3.2) (0.4) (4.1)
--------------------------------------------------- ------- -------- ---------------- ---------
Acquisition costs - - - -
--------------------------------------------------- ------- -------- ---------------- ---------
Operating profit/(loss) prior to exceptional items 26.2 (3.6) 14.3 36.9
--------------------------------------------------- ------- -------- ---------------- ---------
Exceptional items (24.8) (9.4) (1.1) (35.3)
--------------------------------------------------- ------- -------- ---------------- ---------
Segment result 1.4 (13.0) 13.2 1.6
--------------------------------------------------- ------- -------- ---------------- ---------
Central costs
ADE AGI and eliminations Consolidated
2019 2019 2019 2019
Group GBPm GBPm GBPm GBPm
----------------------------------------------------------------------- ----- ----- ----------------- ------------
Revenue
----------------------------------------------------------------------- ----- ----- ----------------- ------------
Total revenue 301.4 418.3 - 719.7
----------------------------------------------------------------------- ----- ----- ----------------- ------------
Result
----------------------------------------------------------------------- ----- ----- ----------------- ------------
Headline operating profit prior to share-based payments and unallocated
central costs 76.8 65.6 - 142.4
----------------------------------------------------------------------- ----- ----- ----------------- ------------
Share-based payments (including social charges) (1.0) 0.3 (0.6) (1.3)
----------------------------------------------------------------------- ----- ----- ----------------- ------------
Unallocated central costs - - (6.2) (6.2)
----------------------------------------------------------------------- ----- ----- ----------------- ------------
Headline operating profit/(loss) 75.8 65.9 (6.8) 134.9
----------------------------------------------------------------------- ----- ----- ----------------- ------------
Amortisation of acquired intangible assets (1.1) (3.5) - (4.6)
----------------------------------------------------------------------- ----- ----- ----------------- ------------
Acquisition costs (1.3) (0.4) - (1.7)
----------------------------------------------------------------------- ----- ----- ----------------- ------------
Segment result 73.4 62.0 (6.8) 128.6
----------------------------------------------------------------------- ----- ----- ----------------- ------------
Finance income 0.2
----------------------------------------------------------------------- ----- ----- ----------------- ------------
Finance costs (4.9)
----------------------------------------------------------------------- ----- ----- ----------------- ------------
Profit before taxation 123.9
----------------------------------------------------------------------- ----- ----- ----------------- ------------
Taxation (29.9)
----------------------------------------------------------------------- ----- ----- ----------------- ------------
Profit for the year 94.0
----------------------------------------------------------------------- ----- ----- ----------------- ------------
Western North Emerging
Europe America markets Total ADE
2019 2019 2019 2019
Aerospace, Defence & Energy GBPm GBPm GBPm GBPm
-------------------------------------------------------- ------- -------- -------- ---------
Revenue
-------------------------------------------------------- ------- -------- -------- ---------
Total revenue 141.3 158.7 1.4 301.4
-------------------------------------------------------- ------- -------- -------- ---------
Result
-------------------------------------------------------- ------- -------- -------- ---------
Headline operating profit prior to share-based payments 35.9 40.6 0.3 76.8
-------------------------------------------------------- ------- -------- -------- ---------
Share-based payments (including social charges) (0.4) (0.6) - (1.0)
-------------------------------------------------------- ------- -------- -------- ---------
Headline operating profit 35.5 40.0 0.3 75.8
-------------------------------------------------------- ------- -------- -------- ---------
Amortisation of acquired intangible assets - (1.1) - (1.1)
-------------------------------------------------------- ------- -------- -------- ---------
Acquisition costs - (1.3) - (1.3)
-------------------------------------------------------- ------- -------- -------- ---------
Segment result 35.5 37.6 0.3 73.4
-------------------------------------------------------- ------- -------- -------- ---------
Western North Emerging
Europe America markets Total AGI
2019 2019 2019 2019
Automotive & General Industrial GBPm GBPm GBPm GBPm
-------------------------------------------------------- ------- -------- -------- ---------
Revenue
-------------------------------------------------------- ------- -------- -------- ---------
Total revenue 246.0 107.4 64.9 418.3
-------------------------------------------------------- ------- -------- -------- ---------
Result
-------------------------------------------------------- ------- -------- -------- ---------
Headline operating profit prior to share-based payments 40.5 9.7 15.4 65.6
-------------------------------------------------------- ------- -------- -------- ---------
Share-based payments (including social charges) 0.6 (0.3) - 0.3
-------------------------------------------------------- ------- -------- -------- ---------
Headline operating profit 41.1 9.4 15.4 65.9
-------------------------------------------------------- ------- -------- -------- ---------
Amortisation of acquired intangible assets (0.4) (2.9) (0.2) (3.5)
-------------------------------------------------------- ------- -------- -------- ---------
Acquisition costs (0.4) - - (0.4)
-------------------------------------------------------- ------- -------- -------- ---------
Segment result 40.3 6.5 15.2 62.0
-------------------------------------------------------- ------- -------- -------- ---------
Other information
Central
ADE AGI costs and eliminations Consolidated
2020 2020 2020 2020
Group GBPm GBPm GBPm GBPm
------------------------------ ------- ------- ----------------------- ------------
Gross capital additions 18.1 40.8 5.0 63.9
------------------------------ ------- ------- ----------------------- ------------
Depreciation and amortisation 35.8 53.2 2.9 91.9
------------------------------ ------- ------- ----------------------- ------------
Balance sheet
------------------------------ ------- ------- ----------------------- ------------
Segment assets 484.9 571.4 53.7 1,110.0
------------------------------ ------- ------- ----------------------- ------------
Segment liabilities (150.2) (164.1) (114.3) (428.6)
------------------------------ ------- ------- ----------------------- ------------
Segment net assets 334.7 407.3 (60.6) 681.4
------------------------------ ------- ------- ----------------------- ------------
Western North
Europe America Emerging markets Total ADE
2020 2020 2020 2020
Aerospace, Defence & Energy GBPm GBPm GBPm GBPm
------------------------------ ------- -------- ---------------- ---------
Gross capital additions 6.8 9.0 2.3 18.1
------------------------------ ------- -------- ---------------- ---------
Depreciation and amortisation 12.9 22.4 0.5 35.8
------------------------------ ------- -------- ---------------- ---------
Balance sheet
------------------------------ ------- -------- ---------------- ---------
Segment assets 168.6 310.9 5.4 484.9
------------------------------ ------- -------- ---------------- ---------
Segment liabilities (47.8) (100.5) (1.9) (150.2)
------------------------------ ------- -------- ---------------- ---------
Segment net assets 120.8 210.4 3.5 334.7
------------------------------ ------- -------- ---------------- ---------
Western North
Europe America Emerging markets Total AGI
2020 2020 2020 2020
Automotive & General Industrial GBPm GBPm GBPm GBPm
-------------------------------- ------- -------- ---------------- ---------
Gross capital additions 17.1 16.0 7.7 40.8
-------------------------------- ------- -------- ---------------- ---------
Depreciation and amortisation 27.2 15.5 10.5 53.2
-------------------------------- ------- -------- ---------------- ---------
Balance sheet
-------------------------------- ------- -------- ---------------- ---------
Segment assets 267.9 171.6 131.9 571.4
-------------------------------- ------- -------- ---------------- ---------
Segment liabilities (97.1) (30.2) (36.8) (164.1)
-------------------------------- ------- -------- ---------------- ---------
Segment net assets 170.8 141.4 95.1 407.3
-------------------------------- ------- -------- ---------------- ---------
Central costs
ADE AGI and eliminations Consolidated
2019 2019 2019 2019
Group GBPm GBPm GBPm GBPm
------------------------------ ------ ------- ----------------- ------------
Gross capital additions 27.5 49.6 4.8 81.9
------------------------------ ------ ------- ----------------- ------------
Depreciation and amortisation 29.1 52.8 2.3 84.2
------------------------------ ------ ------- ----------------- ------------
Balance sheet
------------------------------ ------ ------- ----------------- ------------
Segment assets 375.5 607.1 44.5 1,027.1
------------------------------ ------ ------- ----------------- ------------
Segment liabilities (82.4) (171.8) (67.1) (321.3)
------------------------------ ------ ------- ----------------- ------------
Segment net assets 293.1 435.3 (22.6) 705.8
------------------------------ ------ ------- ----------------- ------------
Western North Emerging
Europe America markets Total ADE
2019 2019 2019 2019
Aerospace, Defence & Energy GBPm GBPm GBPm GBPm
------------------------------ ------- -------- -------- ---------
Gross capital additions 10.4 17.0 0.1 27.5
------------------------------ ------- -------- -------- ---------
Depreciation and amortisation 13.1 15.9 0.1 29.1
------------------------------ ------- -------- -------- ---------
Balance sheet
------------------------------ ------- -------- -------- ---------
Segment assets 181.5 189.2 4.8 375.5
------------------------------ ------- -------- -------- ---------
Segment liabilities (43.7) (38.5) (0.2) (82.4)
------------------------------ ------- -------- -------- ---------
Segment net assets 137.8 150.7 4.6 293.1
------------------------------ ------- -------- -------- ---------
Western North Emerging
Europe America markets Total AGI
2019 2019 2019 2019
Automotive & General Industrial GBPm GBPm GBPm GBPm
-------------------------------- ------- -------- -------- ---------
Gross capital additions 18.1 19.4 12.1 49.6
-------------------------------- ------- -------- -------- ---------
Depreciation and amortisation 27.4 15.3 10.1 52.8
-------------------------------- ------- -------- -------- ---------
Balance sheet
-------------------------------- ------- -------- -------- ---------
Segment assets 289.2 182.2 135.7 607.1
-------------------------------- ------- -------- -------- ---------
Segment liabilities (101.5) (30.3) (40.0) (171.8)
-------------------------------- ------- -------- -------- ---------
Segment net assets 187.7 151.9 95.7 435.3
-------------------------------- ------- -------- -------- ---------
Geographical information
The Group's revenue from external customers and information
about its segment 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
------------ --------------------------------- --------------------
2020 2019 2020 2019
GBPm GBPm GBPm GBPm
------------ ---------------- --------------- --------- ---------
USA 219.1 255.3 429.7 315.2
------------ ---------------- --------------- --------- ---------
France 76.4 102.6 70.6 71.9
------------ ---------------- --------------- --------- ---------
Germany 69.7 87.6 78.0 82.9
------------ ---------------- --------------- --------- ---------
UK 44.3 62.3 83.2 96.5
------------ ---------------- --------------- --------- ---------
Sweden 37.9 44.2 42.6 40.4
------------ ---------------- --------------- --------- ---------
Netherlands 24.9 26.9 23.1 23.3
------------ ---------------- --------------- --------- ---------
Others 125.7 140.8 192.0 194.2
------------ ---------------- --------------- --------- ---------
598.0 719.7 919.2 824.4
------------ ---------------- --------------- --------- ---------
3. Operating profit
2020 2019
GBPm GBPm
-------------------------------------------- ------- -------
Revenue 598.0 719.7
-------------------------------------------- ------- -------
Cost of sales (401.3) (452.3)
-------------------------------------------- ------- -------
Gross profit 196.7 267.4
-------------------------------------------- ------- -------
Other operating income 4.4 14.4
-------------------------------------------- ------- -------
Distribution costs (15.6) (21.6)
-------------------------------------------- ------- -------
Administration expenses (109.0) (124.7)
-------------------------------------------- ------- -------
Other operating expenses (1.2) (0.6)
-------------------------------------------- ------- -------
Headline operating profit 75.3 134.9
-------------------------------------------- ------- -------
Amortisation of acquired intangible assets (9.8) (4.6)
-------------------------------------------- ------- -------
Acquisition costs (see note 10) (2.1) (1.7)
-------------------------------------------- ------- -------
Operating profit prior to exceptional items 63.4 128.6
-------------------------------------------- ------- -------
Exceptional items (see note 5) (58.4) -
-------------------------------------------- ------- -------
Operating Profit 5.0 128.6
-------------------------------------------- ------- -------
Further details of acquisition costs and exceptional items are
included in note 5 and note 10 of this 2020 Full Year Result press
release.
Profit for the year has been arrived at after
(crediting)/charging:
2020 2019
GBPm GBPm
---------------------------------------------------------------------------------------------- ----- -----
Net foreign exchange gain (0.3) (0.1)
---------------------------------------------------------------------------------------------- ----- -----
Inventory expensed 48.8 52.9
---------------------------------------------------------------------------------------------- ----- -----
Depreciation of property, plant and equipment 65.2 63.3
---------------------------------------------------------------------------------------------- ----- -----
Depreciation of right-of-use assets 14.8 14.5
---------------------------------------------------------------------------------------------- ----- -----
Amortisation of other intangible assets 11.9 6.4
---------------------------------------------------------------------------------------------- ----- -----
Loss/(gain) on disposal of property, plant and equipment 0.6 (4.4)
---------------------------------------------------------------------------------------------- ----- -----
Gain on disposal of leases (0.1) -
---------------------------------------------------------------------------------------------- ----- -----
Staff costs 235.1 280.6
---------------------------------------------------------------------------------------------- ----- -----
Government assistance support received (see note 4) (4.3) -
---------------------------------------------------------------------------------------------- ----- -----
Acquisition costs 2.1 1.7
---------------------------------------------------------------------------------------------- ----- -----
Impairment (gain)/loss on trade receivables (0.4) 0.6
---------------------------------------------------------------------------------------------- ----- -----
Impairments - recognised in exceptional items (see note 5) 22.7 -
---------------------------------------------------------------------------------------------- ----- -----
Impairment of property, plant and equipment and other assets - recognised in operating profit 0.3
---------------------------------------------------------------------------------------------- ----- -----
Share of profit of associate undertaking 0.4 0.2
---------------------------------------------------------------------------------------------- ----- -----
The analysis of auditors' remuneration on a worldwide basis is
as follows:
2020 2019
GBPm GBPm
------------------------------------------------------------------- ----- -----
Fees payable to the auditor for the audit of the annual accounts 0.7 0.4
------------------------------------------------------------------- ----- -----
Fees payable to the auditor and its associates for other services:
------------------------------------------------------------------- ----- -----
The audit of the Group's subsidiaries 1.1 0.7
------------------------------------------------------------------- ----- -----
Total audit fees 1.8 1.1
------------------------------------------------------------------- ----- -----
Audit related assurance services (1) 0.2 0.1
------------------------------------------------------------------- ----- -----
Other non-audit fees (2) - 0.1
------------------------------------------------------------------- ----- -----
Total fees payable to the auditor 2.0 1.3
------------------------------------------------------------------- ----- -----
1 This includes GBP0.2m (2019: GBP0.1m) for the review of the
half year report and nominal fees charged in connection with a
merger statement between two legal entities in Sweden required by
local regulation.
2 2019: Agreed upon procedures over adoption of IFRS 16.
The audit fees disclosed for 2020 include GBP0.1m of fees in
connection with the 2019 audit. A description of the work of the
Audit Committee, including an explanation of how auditor
objectivity and independence is safeguarded when non-audit services
are provided by the auditor, is set out in the Report of the Audit
Committee in the 2020 Annual Report on page 59.
4. Government assistance
As a result of the COVID-19 pandemic, the Group has benefited
from GBP4.3m of government assistance programmes relating to
economic support as part of state initiatives to support local
economies (GBP0.7m) and job retention assistance for costs of
employees on 'short-time working' in Europe (GBP3.6m).
The Group has not taken advantage of all schemes available and
returned all payments received in support of furloughed employees
from the UK government in 2020. Government assistance income
related to employee support is presented net against the applicable
staff costs within cost of sales and overheads in the income
statement.
5. Exceptional items
2020 2019
GBPm GBPm
------------------------------------------------------------------------ ----- -----
Severance and redundancy costs 20.8 -
------------------------------------------------------------------------ ----- -----
Property, plant and equipment impairments for assets no longer required 15.9 -
------------------------------------------------------------------------ ----- -----
Impairment of other assets 0.6 -
------------------------------------------------------------------------ ----- -----
Site closure costs 12.0 -
------------------------------------------------------------------------ ----- -----
Environmental provisions - see note 9 2.9 -
------------------------------------------------------------------------ ----- -----
Total exceptional restructuring items 52.2 -
------------------------------------------------------------------------ ----- -----
Impairment of other intangible assets 6.2 -
------------------------------------------------------------------------ ----- -----
Total exceptional items 58.4 -
------------------------------------------------------------------------ ----- -----
Exceptional restructuring costs of GBP52.2m relate to
initiatives across the Group (AGI (GBP35.3m) and ADE (GBP16.9m)),
announced in 2020.The organisational restructuring was driven by a
combination of both macroeconomic uncertainties and longer term
automobile and aerospace market structural shifts. A total of 26
plants will close as a result of these restructuring activities, 20
plants in 2020 and 6 in 2021. These costs have been recorded as
exceptional in line with the Group's accounting policy for
exceptional items. Further detail of this restructuring programme
is outlined in the Full Year Commentary section included within the
2020 Full Year Result press release.
Restructuring cash spend to date amounts to GBP11.6m, with
GBP24.1m held as provisions at 31 December 2020. Refer to note
9.
6. Taxation
2020 2019
GBPm GBPm
------------------------------------------------------------ ----- -----
Current taxation - charge for the year 9.4 24.8
------------------------------------------------------------ ----- -----
Current taxation - adjustments in respect of previous years (9.7) (3.9)
------------------------------------------------------------ ----- -----
Deferred tax (2.0) 9.0
------------------------------------------------------------ ----- -----
(2.3) 29.9
------------------------------------------------------------ ----- -----
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 which in 2020 is based
on a loss before taxation is 24.1% (2019: 25.9%).
The charge for the year can be reconciled to the profit before
taxation per the consolidated income statement as follows:
2020 2019
GBPm GBPm
-------------------------------------------------------------------------------- ----- -----
(Loss)/profit before taxation (1.5) 123.9
-------------------------------------------------------------------------------- ----- -----
Tax at the weighted average country tax rate of 24.1% (2019: 25.9%) (0.4) 32.1
-------------------------------------------------------------------------------- ----- -----
Tax effect of expenses not deductible in determining taxable profit (1) 0.3 0.7
-------------------------------------------------------------------------------- ----- -----
Impact of recognition or derecognition of deferred tax balances 2.0 (0.5)
-------------------------------------------------------------------------------- ----- -----
Tax effect of other adjustments in respect of previous years:
-------------------------------------------------------------------------------- ----- -----
Current tax (2) (9.7) (3.9)
-------------------------------------------------------------------------------- ----- -----
Deferred tax (2) 8.7 2.9
-------------------------------------------------------------------------------- ----- -----
Effect of financing activities between jurisdictions (3) (2.8) (3.6)
-------------------------------------------------------------------------------- ----- -----
Impact of trade and minimum corporate taxes 0.8 1.1
-------------------------------------------------------------------------------- ----- -----
Effect of changes in statutory tax rates on deferred tax assets and liabilities (1.1) (0.1)
-------------------------------------------------------------------------------- ----- -----
Other tax risk provision movements (4) (0.1) 1.2
-------------------------------------------------------------------------------- ----- -----
Tax (credit)/expense for the year (2.3) 29.9
-------------------------------------------------------------------------------- ----- -----
Tax on items taken directly to equity is a charge of GBP0.1m
(2019: credit of GBP0.5m).
1 Those costs in various jurisdictions are not deductible in
calculating taxable profits.
2 2020 and 2019 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. GBP9.9m of
interest deductions were restricted in the US in 2020 (2019:
GBP1.7m).
4 Includes provisions for local tax risks and non-financing
cross border transactions.
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.
Tax provisions totalling GBP22.1m were recognised at 31 December
2020 (2019: GBP15.3m). GBP5.4m (2019: GBP3.0m) of the tax
provisions are expected to crystalise within 12 months. The
provisions included 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. Management 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 enquires, and determining whether any
possible liability is probable.
7. Dividends
2020 2019
GBPm GBPm
------------------------------------------------------------------------------- ----- -----
Amounts recognised as distributions to equity holders in the year:
------------------------------------------------------------------------------- ----- -----
Final dividend for the year ended 31 December 2018 of 13.3p per share - 25.2
------------------------------------------------------------------------------- ----- -----
Special dividend for the year ended 31 December 2018 of 20.0p per share - 38.1
------------------------------------------------------------------------------- ----- -----
Interim dividend for the year ended 31 December 2019 of 6.0p per share 11.4
------------------------------------------------------------------------------- ----- -----
Deferred dividend for the year ended 31 December 2019 of 13.3p per share 25.1 -
------------------------------------------------------------------------------- ----- -----
25.1 74.7
------------------------------------------------------------------------------- ----- -----
Proposed final dividend for the year ended 31 December 2020 of 13.4p per share 25.5 -
------------------------------------------------------------------------------- ----- -----
Interim dividend for the year ended 31 December 2020 of 6.0p per share 11.4 -
------------------------------------------------------------------------------- ----- -----
As a consequence of the impact of COVID-19, the declared 2019
final dividend of 14.0p per share was deferred and was not
presented for approval at the AGM. The Board approved a deferred
2019 dividend of 13.3p which was paid on 25 September 2020.
The Board approved the payment of an interim dividend for 2020
of 6.0p (GBP11.4m) on 24 November paid on 12 February 2021 to
shareholders on the register at the close of business on 8 January
2021. The Board has proposed a 2020 final ordinary dividend of
13.4p per share to be paid on 4 June 2021 to shareholders on the
register at close of business at 23 April 2021 subject to approval
by shareholders at the Annual General Meeting.
As the proposed dividend is subject to shareholder approval in
2021, 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.
8. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
2020 2019
GBPm GBPm
--------------------------------------------------------------------------------------------- ----- -----
Earnings
--------------------------------------------------------------------------------------------- ----- -----
Earnings for the purpose of basic earnings per share being net profit attributable to equity
holders of the parent 0.4 93.8
--------------------------------------------------------------------------------------------- ----- -----
Number Number
----------------------------------------------------------------------------------------- ----------- -----------
Number of shares
----------------------------------------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares for the purpose of basic earnings per share 190,374,428 189,921,112
----------------------------------------------------------------------------------------- ----------- -----------
Effect of dilutive potential ordinary shares
Shares subject of performance conditions(1) - 794,287
----------------------------------------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares for the purpose of diluted earnings per share 190,374,428 190,715,399
----------------------------------------------------------------------------------------- ----------- -----------
Pence Pence
-------------------- ----- -----
Earnings per share:
-------------------- ----- -----
Basic 0.2 49.4
-------------------- ----- -----
Diluted (1) 0.2 49.2
-------------------- ----- -----
GBPm GBPm
---------------------------------------------------------- ---- ----
Headline earnings
---------------------------------------------------------- ---- ----
Net profit attributable to equity holders of the parent 0.4 93.8
---------------------------------------------------------- ---- ----
Add back:
---------------------------------------------------------- ---- ----
Amortisation of acquired intangible assets (net of tax) 7.4 3.5
---------------------------------------------------------- ---- ----
Acquisition costs (net of tax) 1.5 1.7
---------------------------------------------------------- ---- ----
Exceptional items (net of tax) 43.6 -
---------------------------------------------------------- ---- ----
Headline earnings 52.9 99.0
---------------------------------------------------------- ---- ----
Pence Pence
----------------------------- ----- -----
Headline earnings per share:
----------------------------- ----- -----
Basic 27.8 52.1
----------------------------- ----- -----
Diluted (1) 27.8 51.9
----------------------------- ----- -----
1 As at 31 December 2020, in accordance with IAS 33 the related
performance conditions for all open plans have not been met
resulting in nil dilution of earnings per share (2019: 794,287)
9. Provisions
Restructuring Restructuring environmental Environmental Total
GBPm GBPm GBPm GBPm
------------------------------------ ------------- --------------------------- ------------- ------
At 1 January 2020 3.0 2.4 8.1 13.5
------------------------------------ ------------- --------------------------- ------------- ------
Increase in provision 32.8 2.9 - 35.7
------------------------------------ ------------- --------------------------- ------------- ------
On acquisition of subsidiary - - 0.2 0.2
------------------------------------ ------------- --------------------------- ------------- ------
Utilisation of provision (11.2) (0.4) (0.5) (12.1)
------------------------------------ ------------- --------------------------- ------------- ------
Exchange difference (0.1) (0.1) (0.1) (0.3)
------------------------------------ ------------- --------------------------- ------------- ------
At 31 December 2020 24.5 4.8 7.7 37.0
------------------------------------ ------------- --------------------------- ------------- ------
Included in current liabilities 26.0
------------------------------------ ------------- --------------------------- ------------- ------
Included in non-current liabilities 11.0
------------------------------------ ------------- --------------------------- ------------- ------
37.0
------------------------------------ ------------- --------------------------- ------------- ------
GBP35.7m of restructuring provisions have been recorded
following the announcement of several restructuring initiatives
across the Group. The restructuring provisions consist of
provisions for employee severance and redundancy (GBP20.8m) and
costs associated with closing plants (GBP12.0m) and (GBP2.9m) for
environmental provisions. These restructuring provisions have been
included in exceptional items and further details of this programme
can be found in the Full Year Commentary section included within
this 2020 Full Year Result press release and in note 5.
Cash outflows in relation to restructuring initiatives were
GBP11.6m with the remaining outflows to occur in 2021 and 2022.
The Group provides for the costs of environmental remediation
that have been identified at the time of plant closure if there is
a probable outflow of economic resources identified, as part of
acquisition due diligence, or in other circumstances where
remediation by the Group is required and a probable outflow of
economic resources is identified. This provision is reviewed
annually and is separated into restructuring environmental and
environmental to identify separately environmental provisions
relating to the restructuring programme 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.
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.
10. Acquisition of businesses
During the year the Group completed the acquisition of 100% of
the ordinary share capital of Ellison Surface Technologies
('Ellison') for total provisional consideration of GBP130.0m.
Ellison is a Surface Technology business located in North America
with a number of sites primarily serving the aerospace sector.
The acquisition significantly strengthens the Group's network,
enhances processes and creates synergies allowing the Group to
deliver industry-leading solutions that address aerospace
customers' heat treatment and specialist thermal treatment
requirements.
The accounting is provisional as the Group has twelve months to
finalise the valuation of the acquired assets and liabilities and
the resultant goodwill under IFRS 3.
The transaction has been accounted for as a business
combinations under IFRS 3 and is summarised below:
2020
Fair value of net assets acquired: GBPm
------------------------------------------------------------ ------
Other intangible assets 87.9
------------------------------------------------------------ ------
Property, plant and equipment 14.8
------------------------------------------------------------ ------
Right-of-use assets 5.1
------------------------------------------------------------ ------
Inventories 2.6
------------------------------------------------------------ ------
Trade and other receivables 7.3
------------------------------------------------------------ ------
Trade and other payables (19.4)
------------------------------------------------------------ ------
Lease liabilities (5.1)
------------------------------------------------------------ ------
Deferred tax liabilities (1.1)
------------------------------------------------------------ ------
Provisions (0.2)
------------------------------------------------------------ ------
Bank loans (11.9)
------------------------------------------------------------ ------
80.0
------------------------------------------------------------ ------
Goodwill 50.0
------------------------------------------------------------ ------
Total consideration 130.0
------------------------------------------------------------ ------
Satisfied by:
------------------------------------------------------------ ------
Cash consideration 66.1
------------------------------------------------------------ ------
Deferred consideration 63.9
------------------------------------------------------------ ------
Total consideration transferred 130.0
------------------------------------------------------------ ------
Net cash outflow arising on acquisition:
------------------------------------------------------------ ------
Cash consideration 66.1
------------------------------------------------------------ ------
Deferred consideration paid 0.6
------------------------------------------------------------ ------
Payment of debt and other payables acquired post completion 28.8
------------------------------------------------------------ ------
95.5
------------------------------------------------------------ ------
Acquisition related costs amounted to GBP2.1m (2019: GBP1.7m of
which GBP1.3m related to the Ellison acquisition) and have been
included in the Income Statement.
The gross contractual value of the trade and other receivables
was GBP7.8m. The best estimate at the acquisition date of the
contractual cash flows not expected to be collected was GBPnil.
Deferred consideration is settled in US dollars which translated
to GBP63.9m at the acquisition date, on a discounted basis. GBP0.6m
of the original deferred consideration was paid in October as per
agreement with the seller. The remaining deferred consideration is
payable on 3 April 2021, being 12 months after the completion date
of the acquisition.
As the deferred consideration is settled in US dollars, it is
subject to exchange rate movements of GBP5.4m when translated at 31
December 2020 rates. This foreign exchange difference is recorded
within foreign exchange reserves in the financial statements. The
deferred consideration payable held on the balance sheet at 31
December 2020 is GBP58.7m, including the impact of GBP0.3m due to
discounting.
The goodwill arising on the acquisition is expected to be
deductible for tax purposes and is attributable to:
- the anticipated profitability of the distribution of the
Group's services in new markets; and
- the synergies that can be achieved in the business combination
including management processes and maximising site capacities.
The business was acquired on 3 April 2020 and contributed
GBP22.6m revenue, GBP0.9m headline operating profit and GBP4.0m
operating loss, for the period between the date of acquisition and
the balance sheet date.
If the acquisition had been completed on the first day of the
financial year, the acquisition would have contributed GBP34.3m to
Group revenue, GBP1.7m to Group headline operating profit and
GBP3.2m operating loss.
In the prior year the group acquired two facilities that were
accounted for as business combinations for total consideration of
GBP20.0m resulting in GBP10.4m of goodwill being recognised in the
consolidated financial statements, and payments totalling GBP0.1m
were made in respect of deferred consideration due on acquisitions
made in 2016. Refer to note 23 in the 2019 Annual Report for
further information.
11 . Notes to the cash flow statement
2020 2019
GBPm GBPm
------------------------------------------------------------------------------------------------- ------ ------
Profit for the year 0.8 94.0
------------------------------------------------------------------------------------------------- ------ ------
Adjustments for:
------------------------------------------------------------------------------------------------- ------ ------
Finance income (0.2) (0.2)
------------------------------------------------------------------------------------------------- ------ ------
Finance costs 6.7 4.9
------------------------------------------------------------------------------------------------- ------ ------
Taxation (credit)/charge (2.3) 29.9
------------------------------------------------------------------------------------------------- ------ ------
Operating profit 5.0 128.6
------------------------------------------------------------------------------------------------- ------ ------
Adjustments for:
------------------------------------------------------------------------------------------------- ------ ------
Depreciation of property, plant and equipment 65.2 63.3
------------------------------------------------------------------------------------------------- ------ ------
Depreciation of right-of-use assets 14.8 14.5
------------------------------------------------------------------------------------------------- ------ ------
Amortisation of other intangible assets 11.9 6.4
------------------------------------------------------------------------------------------------- ------ ------
Loss/(profit) on disposal of property, plant and equipment 0.6 (4.4)
------------------------------------------------------------------------------------------------- ------ ------
Share-based payments 0.4 1.1
------------------------------------------------------------------------------------------------- ------ ------
Income from associate (0.2) (0.2)
------------------------------------------------------------------------------------------------- ------ ------
Impairment of property, plant and equipment and other assets - recognised in exceptional items 16.5 -
------------------------------------------------------------------------------------------------- ------ ------
Impairment of property, plant and equipment and other assets - recognised in operating profit 0.3 -
------------------------------------------------------------------------------------------------- ------ ------
Impairment of other intangible assets - recognised in exceptional items 6.2 -
------------------------------------------------------------------------------------------------- ------ ------
EBITDA (See note 1) 120.7 209.3
------------------------------------------------------------------------------------------------- ------ ------
Decrease/(increase) in inventories 2.1 (1.5)
------------------------------------------------------------------------------------------------- ------ ------
Decrease/(increase) in receivables 35.6 (1.1)
------------------------------------------------------------------------------------------------- ------ ------
Decrease in payables (35.1) (2.1)
------------------------------------------------------------------------------------------------- ------ ------
Increase/(decrease) in provisions 23.6 (2.6)
------------------------------------------------------------------------------------------------- ------ ------
Cash generated by operations 146.9 202.0
------------------------------------------------------------------------------------------------- ------ ------
Income taxes paid (7.8) (24.7)
------------------------------------------------------------------------------------------------- ------ ------
Net cash from operating activities 139.1 177.3
------------------------------------------------------------------------------------------------- ------ ------
2020 2019
GBPm GBPm
------------------------------------------- ----- -----
Cash and cash equivalents comprise:
------------------------------------------- ----- -----
Cash and bank balances 30.7 22.0
------------------------------------------- ----- -----
Bank overdrafts (included in borrowings) (1.5) (1.1)
------------------------------------------- ----- -----
29.2 20.9
------------------------------------------- ----- -----
12. Basis of preparation
The financial statements of the Group have been prepared in
accordance with International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board (IASB).
The financial statements have also been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 and IFRS adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union.
There are no differences for the Group in applying each of these
accounting frameworks.
The Group has adopted Standards and Interpretations issued by
the IASB and the International Financial Reporting Interpretations
Committee of the IASB (IFRS IC). Individual standards and
interpretations have to be adopted by the European Commission (EC)
and the UK Endorsement Board (UKEB) respectively, and the process
leads to a delay between the issue and adoption of new standards
and in some cases amendments. International Financial Reporting
Standards are subject to ongoing amendment by the IASB and
subsequent endorsement by the EC and UKEB and are therefore subject
to change.
The financial statements have been prepared on the historical
cost basis, except for items that are required by IFRS to be
measured at fair value, principally certain financial instruments
measured at fair value, and retirement benefit assets. Historical
cost is generally based on the fair value of the consideration
given up in exchange for the assets.
13. Non-statutory financial statements
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2020
or 2019 but is derived from those accounts. Statutory accounts for
2019 have been delivered to the Registrar of Companies and those
for 2020 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.
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