REG-Bodycote Plc: Full year results for year ended 31 December 2024
14/03/2025 07:15
Bodycote plc - Full Year Results for the year ended 31 December 2024
Resilient performance; new strategy in place
Group summary Adjusted Statutory
Full year Full Year Full year Full Year
2024 2023 Growth 2024 2023 Growth
Revenue £757.1m £802.5m -5.7% £757.1m £802.5m -5.7%
Operating profit 1 £129.0m £127.6m +1.1% £37.9m £119.2m -68.2%
Operating margin 1 17.0% 15.9% +110 bps 5.0% 14.9% -990 bps
Operating cash flow 1,4 £115.5m £112.2m +2.9% £152.6m £191.6m -20.4%
Basic earnings per share 1,2 48.6p 48.4p +0.4% 10.8p 45.1p -76.1%
Full year ordinary dividend per share 23.0p 22.7p +1.3%
Core summary 1 Full year Full Year Organic
Excludes sites to be exited under Optimise programme 2024 2023 Growth 3
Revenue £712.5m £747.3m -2.9%
Revenue excluding surcharges £679.6m £685.5m +1.0%
Adjusted operating profit £127.6m £124.8m +2.9%
Adjusted operating margin 17.9% 16.7%
Highlights
* Stable organic revenue performance, excluding surcharges, in a challenging
market environment
* Significant improvement in adjusted operating margin, progressing towards
>20% target by 2028
* Performance led by Specialist Technologies, with further growth and margins
+300bps to 29.0%
* Statutory operating profit of £37.9m, reflects previously indicated
charges: £31.9m related to the Optimisation programme, £28.4m ERP-related
impairment, and a goodwill impairment of £18.0m
* Adjusted operating cash flow modestly higher year-on-year at £115.5m (90%
conversion)
* Early progress delivered on strategic plan to create an efficient, high
performing Bodycote * Optimise: first plant closures commenced, £12m-14m
profit benefit at full run-rate (end 2026)
* Perform: HEAT programme to improve operational performance rolled-out to
pilot sites
* Grow: framework in place and attractive investment options identified in
high margin areas
* Close to £100m returned to shareholders in 2024 (~£40m dividend and ~£60m
buyback). Further £30m buyback underway; leverage remains low at ~0.3x net
debt / adj. EBITDA (pre-leases)
2025 Outlook
All guidance comments are provided on an organic basis3
End markets remain mixed, with challenging conditions in Automotive and
Industrial. Structural demand in Aerospace & Defence remains strong, although
there continues to be a temporary impact from industry-wide supply chain
disruption. Reflecting this backdrop, current run-rate profit performance is
at a broadly similar level to H2 2024. We are successfully executing our
Optimisation programme, which will deliver additional profit benefits as we
move into H2 2025.
Our continued focus on cost control and progressing our strategic actions is
ensuring we are well positioned to capitalise when markets recover. We remain
confident in the delivery of our medium-term financial targets.
Commenting, Jim Fairbairn, Group Chief Executive, said:
“We delivered a resilient performance in 2024, with our core business
growing organically pre-surcharges and good margin improvement despite
challenging conditions in many of our end markets. This was driven by
Specialist Technologies where we saw good growth and strong margin
improvement, as well as decisive cost control actions taken in our Automotive
and Industrial Precision Heat Treatment businesses.
At our Capital Markets Event in December we laid out a simplified reporting
structure, a new strategic approach, and a set of comprehensive financial
targets. Going forwards our reporting will be based on two leading,
technology-focused divisions: Specialist Technologies and Precision Heat
Treatment. Our strategy consists of three key levers: Optimise, Perform and
Grow. Through these levers we will enhance the quality of the business,
improve our operational performance and accelerate growth, all supported by
sustainability. Underpinned by these actions, we also announced a set of
compelling medium-term financial targets. We have already begun to deliver on
these strategic initiatives, including commencing with our plant footprint
optimisation, rolling out the HEAT programme to initial pilot sites, and
proceeding with initial growth investments aligned to our target areas. We are
already seeing tangible early benefits from these actions.
I believe there is a significant opportunity in front of us to reach
Bodycote's full potential and to deliver greater shareholder value. With a new
strategy, simplified reporting structure, and ambitious but achievable targets
in place our focus is now on execution."
1 Adjusted performance measures, Core measures, and measures
excluding surcharges represent the statutory results excluding certain items
and are considered alternative performance measures (APMs). A reconciliation
to the nearest IFRS equivalent is provided at the end of this Full Year 2024
Results (hereafter ‘Report’).
2 An earnings per share reconciliation is provided in note 5 to
the condensed consolidated financial statements.
3 Organic measures are stated at constant currency and exclude
contributions from acquisitions. Further details are provided at the end of
this Report.
4 The definition of the cash flow APMs have been modified and
prior year figures have been restated. Refer to the Financial Review for more
information.
END
Full Year Results Presentation
Bodycote will host a presentation for investors and analysts at 09.30 am GMT
on 14 March 2025. The presentation will also be webcast live. Please find
connection instructions below:
Webcast: https://www.bodycote.com/webcast2024
Conference call details:
United Kingdom local: +44 20 3936 2999
United Kingdom (Toll-free): +44 800 358 1035
International: +44 20 3936 2999
Participant Code: 747320
A replay of the audiocast and presentation will also be available at
www.bodycote.com in the investor section after the event.
For further information, please contact:
Bodycote plc Jim Fairbairn, Group Chief Executive Ben Fidler, Chief Financial Officer Peter Lapthorn, Investor Relations & FP&A Tel: +44 1625 505 300 FTI Consulting Richard Mountain Susanne Yule Tel: +44 203 727 1340
About Bodycote plc
Bodycote is the world's largest provider of thermal processing services with
more than 150 locations in 22 countries. Through Specialist Technologies and
Precision Heat Treatment, Bodycote improves the properties of metals and
alloys, extending the life of vital components for a wide range of industries,
including Aerospace, Defence, Automotive, Power Generation, Oil & Gas,
Construction, Medical and Transportation. Customers have entrusted their
products to Bodycote's care for more than 50 years. For more information,
visit www.bodycote.com.
Full Year Commentary
Core Overview
Core revenue grew by 1.0% organically in 2024, excluding surcharges. This was
despite a challenging market environment, with both North America and Western
Europe seeing low levels of demand in Automotive and Industrial Markets. The
resilient performance reflected further growth in Specialist Technologies
(+5.0% organic, excluding surcharges), partly offset by a modest decline in
Precision Heat Treatment (-0.8%). Growth in Specialist Technologies was
supported by market share gains, continued efforts to expand the addressable
market with new applications, as well as strong demand globally in Aerospace &
Defence and Energy markets. Precision Heat Treatment delivered good growth
globally in Aerospace & Defence and outperformed a challenging Automotive
market, supported by growth in Emerging Markets and new customer wins in
Western Europe. The modest revenue decline was driven by soft demand in North
America and Europe across Industrial, Consumer and Medical markets.
Profitability in our Core business improved significantly year-on-year, with
adjusted operating profit up 2.9% organically to £127.6m and margins 120bps
higher at 17.9%. The improvement was led by Specialist Technologies, where
adjusted operating margins increased by 300bps to 29% thanks to improved
utilisation, better operational performance in our HIP business, and a
positive contribution from the Lake City business acquired in January 2024.
Precision Heat Treatment margins were resilient at 17.0% (down 60bps
year-on-year), which reflected the soft volume environment and the
non-recurrence of government energy grants received in 2023, offset by
decisive cost actions taken in the year. Central costs also reduced
year-on-year reflecting tight cost control and a lower level of
incentive-based pay, which is expected to normalise in 2025.
Group Overview
Including Non-Core businesses, total Group revenue was £757.1m (2023:
£802.5m), 5.7% lower year-on-year and 3.9% lower organically excluding the
impact of Lake City. This reflected 1.0% organic growth in the Core business
excluding surcharges, offset by the decline in Non-Core revenue, FX headwinds,
and a significant fall in surcharges year-on-year, which reduced by around 50%
due to the normalisation of energy prices. Group adjusted operating profit of
£129.0m was modestly higher year-on-year (2023: £127.6m), representing a
significant improvement in margins to 17.0% (+110bps).
Our Non-Core businesses, which are almost entirely focused on European and
North American Automotive and Industrial markets, declined during the year.
Revenue was down by 17.1% organically to £44.6m and adjusted operating
margins reduced by 200bps to 3.1%. This business represents a small number of
sites with lower differentiation and a less attractive financial profile than
the rest of the Group. The difference in performance between our Core
Precision Heat Treatment division and the Non-Core division in 2024
demonstrates the higher quality and greater resilience of our Core business.
As outlined at our December 2024 Capital Markets Event, we plan to exit all
Non-Core activity as part of our Optimise programme to enhance the quality and
profitability of the Group.
Group statutory operating profit reduced year-on-year to £37.9m (2023:
£119.2m). This was due to the impact of previously indicated one-off charges,
which totalled £78.3m in 2024. In H1 we announced a £28.4m impairment charge
arising from the decision to cease the rollout of the operations module of our
ongoing ERP upgrade programme. In addition, as part of the Optimise programme
announced at our December 2024 Capital Markets Event, we recognised a £31.9m
restructuring charge. This programme will deliver a significant improvement in
the quality of our plant portfolio and in our financial performance. Finally,
goodwill of £18.0m was impaired in H2 2024, relating to our North American
Automotive and Industrial focused activities, which have seen challenging
market conditions and carry a high level of associated goodwill from
historical acquisitions.
Basic adjusted earnings per share grew to 48.6p (2023: 48.4p), reflecting
higher operating profit offset by a 125bp increase in the tax rate and higher
finance costs. The lower statutory operating profit resulted in basic earnings
per share of 10.8p (2023: 45.1p).
Adjusted operating cash flow of £115.5m was 2.9% ahead of the prior year
(2023: £112.2m), driven by the growth in adjusted operating profit alongside
lower capital expenditure, partly due to the timing of investment in key
projects around year-end. Free cash flow was lower year-on-year at £70.6m
(2023: £95.2m), which reflected a higher level of cash tax compared with the
prior year, which had benefited from a substantial tax refund.
The closing net debt position, excluding lease liabilities, was £68.3m,
reflecting the acquisition of Lake City (£54.9m including acquisition costs)
and the share buyback programme (£57.7m executed in 2024) compared with a net
cash position of £12.6m at year end 2023. The Group continues to have a
strong balance sheet and leverage remains low with net debt / adjusted EBITDA
of approximately 0.3x (excluding lease liabilities).
Divisional Performance
Specialist Technologies 2024 2023 Organic Growth Growth
Revenue 224.2 212.4 +3.3% +5.6%
Adjusted operating profit 65.0 55.2 +12.8% +17.5%
Adjusted operating margin 29.0% 26.0% +300bps
Precision Heat Treatment 2024 2023 Organic Growth Growth
Revenue 488.3 534.9 -5.3% -8.7%
Adjusted operating profit 83.0 94.4 -8.4% -12.1%
Adjusted operating margin 17.0% 17.6% -60bps
Non-Core 2024 2023 Organic Growth Growth
Revenue 44.6 55.2 -17.1% -19.2%
Adjusted operating profit 1.4 2.8 -52.7% -50.0%
Adjusted operating margin 3.1% 5.1% -200bps
Specialist Technologies delivered a good performance in 2024 despite the mixed
market environment, demonstrating the strong underlying characteristics of
this set of differentiated technologies. Organic revenue growth was 3.3%, and
5.0% excluding surcharges, which reflected good growth in both North America
and Europe in Aerospace and Defence, as well as growth in Energy supported by
market share gains. We also continue to drive above market growth by expanding
the addressable market in Specialist Technologies with new applications. To
keep pace with the demand growth in Specialist Technologies, capacity
expansions were made during the year in both HIP and S3P, focused primarily in
North America. Operating margin improved by 300bps during the year to 29.0%,
driven by a significant improvement in operational performance in our HIP
business, as well as volume benefits and pricing improvements on long-term
contracts secured in Surface Technology. The acquisition of Lake City was
completed in January 2024 and has proved an excellent fit for the Group,
delivering strong profit performance in 2024.
Precision Heat Treatment performance reflected the challenging market
conditions in 2024, offset by decisive cost control actions. Industrial demand
softened through the year in both Europe and the US, and demand was also
sluggish in Automotive across developed markets. Despite this backdrop,
performance in Precision Heat Treatment was resilient. Revenue was down 5.3%
organically, however the majority of this was driven by lower energy
surcharges with organic revenue down just 0.8% excluding surcharges. The
business outperformed its underlying end markets in Automotive, driven by good
growth in Emerging Markets and market share gains in Europe. There was also
strong growth in both Europe and North America in Aerospace & Defence. These
tailwinds helped to offset the majority of the broader weakness in developed
markets industrial demand. Cost agility was a key focus during the year, with
a number of decisive actions taken to reduce capacity and flex labour cost to
meet the level of market demand. Operating margins reduced by 60bps in the
year, to 17.0%, driven by soft volumes coupled with the non-repeat of energy
grants received in 2023, partly offset by stringent cost control measures.
Strategic progress: Optimise, Perform, Grow
As outlined at our Capital Markets Event in December, our strategy consists of
three key levers: Optimise, Perform, and Grow, which are focused on creating a
higher quality, more efficient and faster growing Bodycote. We have already
begun to make good early progress executing on these levers in 2024.
Optimise: approximately 6% of Group revenue has been classified as Non-Core
(FY 2024: £45m).This comprises heat treatment activity with lower
differentiation and financial characteristics that do not fit with our revised
strategy and focus. A significant portion of this revenue will be transferred
to other more profitable sites in our network at a higher margin, while the
remainder will be exited. We are also making a number of reductions to our
overhead cost base, enabled by the smaller footprint. Work has already
commenced on transferring or exiting activity in over a third of the impacted
locations, and approximately one third of the targeted overhead cost
reductions have been completed. We anticipate a benefit of low-to-mid
single-digit millions of pounds to adjusted operating profit in 2025,
reflecting the gradual transfer of customer sales, with the full run-rate
benefit of £12m-14m expected to be reached by the end of 2026.
Perform: the HEAT framework will enable us to deliver more consistent and
sustained levels of performance . It will embed systematically across the
Group a high performance culture, enhanced service quality, and a more agile
cost base, while also enabling us to transition to a sustainable future. Once
in place, this approach will drive a significant improvement in our
operational performance and margins. Our new Chief Excellence Officer will
join the business in June 2025, with a focus on driving these Group-wide
operational improvements. We have already rolled-out the key elements of HEAT
to a select group of pilot sites which represent around 10% of our total
footprint. We are seeing early benefits materialise in these pilot sites, and
in 2025 we expect to begin the group-wide rollout of HEAT, with more material
benefits to begin from 2026.
Grow: we see potential for a significant acceleration in growth and aim to
deliver mid-single-digit revenue growth through the cycle. To achieve this, we
are focused on a number of higher-growth and higher-margin areas, including
structural growth end markets, driving adoption of Specialist Technologies and
more advanced heat treatment processes, and expanding in attractive
geographies. In 2024 we compiled a funnel of initiatives in these target
areas, and we have begun to allocate management resource and capital to
specific projects. In 2025 this includes Specialist Technologies expansion
projects across HIP, S3P, and Surface Technology in North America, Europe and
Asia. In Precision Heat Treatment, investment is focused on modernising and
expanding our Aerospace footprint in North America, as well as capacity
expansions in Turkey and China.
Our growth strategy will also be supported by improved commercial capability
and inter-divisional collaboration. Our new Chief Marketing Officer joined in
late 2024 and is building capability in strategic marketing and key account
management. In addition, we are aiming to leverage our ability to reduce our
customers’ carbon emissions to drive revenue growth. We have developed
proprietary tools to demonstrate the carbon reductions we can offer, and have
now trained our sales teams and deployed these tools. Live discussions are
ongoing with a number of large customers on our sustainability offering.
Sustainability
The increasing pressure to decarbonise provides a growing opportunity to
support customers in achieving their sustainability goals. Our suite of energy
efficient processes in both Specialist Technologies and Precision Heat
Treatment can help customers to reduce their emissions and environmental
impact. Outsourcing is already recognised by customers as one of the key
levers for achieving their carbon reduction targets, some of whom would pay a
premium for a more sustainable service. We are focused on developing and
executing our strategy to capture sustainability-related growth opportunities,
and we have recently launched three new environmental targets:
* By 2030, to reduce our absolute Scope 1 and 2 greenhouse gas emissions by
46% versus 2019 levels. This now aligns to a 1.5°C pathway, enhancing our
existing SBTi approved target of a 28% reduction which we achieved in 2024,
six years early.
* To enable our customers of atmospheric processing to avoid at least 125,000
tonnes of CO2e by 2030. This target has been externally validated and is
aligned with best practice guidance.
* An increase in the share of revenue which supports sustainable end-use
markets to at least 20% by 2035 (from 7% in 2023).
This year, we have also broadened our emissions measurement to include a full
Scope 3 emissions inventory and set ourselves new supply chain goals. These
include targets to reduce emissions from our fuel and energy-related
activities by 45% by 2030, and for 30% of our suppliers to have an SBTi or
equivalent carbon reduction target by 2030. Over the next 12-18 months we will
build on this work to develop our longer-term decarbonisation strategy and
evaluate our roadmap towards net zero.
Summary and outlook
All guidance comments are provided on an organic basis
We delivered a resilient performance in 2024 despite a challenging market
backdrop. Core revenue grew by 1% organically, pre-surcharges, and Core
adjusted operating margins reached 17.9%. This was led by strong performance
in Specialist Technologies and supported by decisive cost actions taken in the
adversely impacted areas of Precision Heat Treatment.
End markets remain mixed, with challenging conditions in Automotive and
Industrial. Structural demand in Aerospace & Defence remains strong, although
there continues to be a temporary impact from industry-wide supply chain
disruption. Reflecting this backdrop, current run-rate profit performance is
at a broadly similar level to H2 2024. We are successfully executing our
Optimisation programme, which will deliver additional profit benefits as we
move into H2 2025.
Our continued focus on cost control and progressing our strategic actions is
ensuring we are well positioned to capitalise when markets recover. We remain
confident in the delivery of our medium-term financial targets.
Chief Financial Officer’s report
“A resilient performance with good margin progression despite challenging
end markets.”
B. Fidler
Chief Financial Officer
Financial overview
2024 2023
£m £m
Revenue 757.1 802.5
Adjusted operating profit 129.0 127.6
Exceptional charges (78.3) -
Amortisation of acquired intangible assets (10.4) (8.1)
Acquisition costs (2.4) (0.3)
Operating profit 37.9 119.2
Net finance charge (9.5) (7.5)
Profit before taxation 28.4 111.7
Taxation charge (7.7) (24.9)
Profit for the year 20.7 86.8
Group revenue decreased by 5.7% to £757.1m (2023: £802.5m) at actual
exchange rates and 2.6% at constant currency. The fall in revenue reflected a
47% reduction in energy surcharges to £35.6m (2023: £66.8m) as energy prices
normalised. At constant FX rates and normalised for surcharges, revenue
performance was stable, increasing by 1.3% (-0.1% organic).
Despite the challenging end markets, adjusted operating profit for the year
increased by 1.1% to £129.0m (2023: £127.6m), representing growth of 4.9% at
constant currency (+1.7% organic). Adjusted operating margin further improved
to 17.0% (2023: 15.9%) reflecting good growth in Specialist Technologies and
pro-active cost management in Precision Heat Treatment in response to the
challenging conditions in Automotive and Industrial markets. Statutory
operating profit was £37.9m (2023: £119.2m) after a charge of £78.3m for
exceptional items (see below).
Excluding the non-core businesses which we plan to exit as part of the
Optimise programme, Core revenue reduced by 4.7%. On an organic basis and
excluding the impact of lower surcharges, Core revenue increased by 1.0%,
demonstrating the stronger underlying growth potential of the Core business
despite challenging market conditions. Core adjusted operating margins
increased by 120bps to 17.9%.
Exceptional items
Exceptional charges for the year of £78.3m (2023: £nil) comprised £28.4m in
respect of the write-down of the Group’s ERP system; £31.9m in respect of
the Group’s strategic Optimisation programme; and a £18.0m goodwill
impairment in respect of our North American Automotive and Industrial focused
operations.
The Group has been developing a new enterprise-wide ERP solution, and after a
detailed evaluation the decision was taken in June 2024 to cease further
investment in the Operations module. This decision significantly reduced risk
and future implementation costs but has resulted in an impairment charge of
£28.4m which was recorded as an exceptional item in the first half of the
year.
As part of the Group’s strategic review, we announced a number of
Optimisation actions to enhance the quality of our plant footprint and improve
operational and financial performance. The associated plant closures and
overhead cost reduction actions led to an exceptional cost of £31.9m in the
year comprising £4.1m of severance costs and £27.8m of asset write-downs and
site closure costs, including a loss of £2.7m on the sale of a site in
France.
An £18.0m goodwill impairment was taken related to our North American
Automotive and Industrial focused operations in Precision Heat Treatment. This
area of our business has seen challenging market conditions for a number of
years and has a high level of associated goodwill based on historical
acquisitions.
Further detail can be found in note 6 to the condensed consolidated financial
statements.
Net finance charge
The net finance charge increased to £9.5m (2023: £7.5m), as summarised in
the table below:
2024 2023
£m £m
Interest on loans and bank overdrafts (3.9) (2.7)
Interest on lease and pension liabilities (3.0) (2.7)
Financing and bank charges (3.4) (2.9)
Total finance charge (10.3) (8.3)
Interest received 0.8 0.8
Net finance charge (9.5) (7.5)
The increase in interest charges during the year were driven primarily by
higher borrowing as a result of the acquisition of Lake City Heat Treating in
January 2024 and outflows in respect of share buybacks of £57.7m in the year.
Profit before taxation
2024 2023
£m £m
Adjusted profit before taxation 119.5 120.1
Exceptional charges (78.3) -
Amortisation of acquired intangibles (10.4) (8.1)
Acquisition costs (2.4) (0.3)
Profit before taxation 28.4 111.7
Adjusted profit before tax remained broadly in line with the prior year at
£119.5m (2023: £120.1m) at actual exchange rates, reflecting our active
management of the cost base in light of the challenging end market conditions.
Statutory profit before taxation fell to £28.4m (2023: £111.7m). This
reflected the impact of exceptional charges of £78.3m, as well as higher
amortisation of acquired intangibles and acquisition costs, both as a result
of the Lake City Heat Treating acquisition.
Taxation
The tax charge for the year was £7.7m (2023: £24.9m). The adjusted tax rate
for the Group was 23.8% (2023: 22.5%), before accounting for amortisation of
acquired intangibles, acquisition costs and exceptional items. This was in
line with our expectations. The Group’s overall tax rate reflects the
blended average of the tax rates in the jurisdictions around the world in
which the Group trades and generates profit. Looking ahead, the adjusted tax
rate is expected to moderately increase over the next few years.
The effective statutory tax rate was 27.1% (2023: 22.3%) with the increase
reflecting that not all of the exceptional costs were deductible. Provisions
of £24.9m (2023: £26.4m) are carried in respect of potential future tax
assessments related to ‘open’ historical tax years. Note 4 of the
condensed consolidated financial statements provides more information.
The OECD Pillar II Rules for a global minimum tax rate have been applicable to
the Group from 1 January 2024. The changes have not had a material impact on
the Group’s tax charge in 2024.
Earnings per share
Basic adjusted earnings per share increased 0.4% to 48.6p (2023: 48.4p)
reflecting the improved operating profit and the impact of share buybacks
during the year, offset by higher interest costs and the higher adjusted tax
rate. Basic statutory earnings per share for the year decreased to 10.8p
(2023: 45.1p) reflecting the exceptional charges recorded in the year. Note 5
of the condensed consolidated financial statements provides further details of
the basis of these calculations.
2024 2023
£m £m
Profit for the year 20.7 86.8
Attributed to non-controlling interests (0.7) (1.2)
Earnings attributable to equity holders of the parent 20.0 85.6
Weighted average number of ordinary shares in issue 186,012,493 189,877,099
Basic adjusted EPS 48.6p 48.4p
Basic EPS 10.8p 45.1p
Return on capital employed
Return on capital employed rose by 90bps in the year to 15.7% from 14.8% in
2023. The increase reflects improvement in adjusted operating profit together
with the Group’s disciplined approach to the capital expenditure projects,
focused on delivering the Group’s strategy and driving attractive returns.
Cash flow
Adjusted operating profit 129.0 127.6
Depreciation and amortisation 75.3 74.0
Other, including impairment and profit on disposal of PPE (5.6) (2.7)
Adjusted EBITDA 1 198.7 198.9
Net capital expenditure (60.5) (72.0)
Principal element of lease payments (13.5) (13.0)
Provisions movement (7.3) (0.9)
Net working capital movement (1.9) (0.8)
Adjusted operating cash flow 115.5 112.2
Restructuring (3.9) (1.6)
Financing costs, net (8.9) (6.4)
Tax, net (32.1) (9.0)
Free cash flow 70.6 95.2
Net lease liability additions and disposals (0.7) (0.5)
Ordinary dividend (42.9) (40.6)
net Acquisition spend (55.6) (0.1)
Ordinary shares purchased for share buyback (57.7) -
Own shares purchased less share-based payments 0.6 (8.1)
Reduction in net debt (85.7) 45.9
Opening net debt (51.7) (99.4)
Foreign exchange movements 5.6 1.8
Closing net debt (131.8) (51.7)
Lease liabilities 63.5 64.3
Net (debt)/cash excluding lease liabilities (68.3) 12.6
1 Refer to the APM section of the 2024 Annual report for a reconciliation of
EBITDA to Adjusted EBITDA
2 In 2024 the definition of adjusted operating cash flow has been updated to
include expansionary capital expenditure, which was previously reflected
outside free cash flow. In addition, adjusted operating cash flow has been
restated to include principal element of lease payments and exclude non-cash
movements in net debt arising from lease liability asset additions and
disposals. These changes aim to bring the definition of adjusted operating
cash flow closer to market norms. A reconciliation to adjusted operating cash
flow and free cash flow as previously stated is included in the APM section of
the 2024 Annual report.
Adjusted operating cash flow increased to £115.5m (2023: £112.2m), a
conversion ratio of 90% (2023: 88%), as a result of the improved operating
profit and lower capital expenditure, due partly to timing and partly to
additional discipline around our capital spend given the challenging market
conditions. These tailwinds were partially offset by higher provision outflows
(£6.4m higher year-on-year) driven almost entirely by a first half payment to
resolve a historical environmental issue that was fully provided for.
Free cash flow fell to £70.6m (2023: £95.2m) for the year. This was driven
almost entirely by higher tax, with net tax payments in 2024 of £32.1m
compared with just £9.0m in 2023. The low level of payments in 2023 reflected
the receipt of tax refunds relating to prior years and other timing
differences. The statutory measure, net cash from operating activities, fell
to £152.6m (2023: £191.6m) largely reflecting the increased cash tax
outflows in the year and the payments to resolve the historical environmental
issue.
Closing net debt was £131.8m (2023: £51.7m). Excluding lease liabilities,
the Group moved from a net cash position of £12.6m in 2023 to a net debt of
£68.3m in 2024 after returning £100.6m (2023: £40.6) to shareholders
through dividends and share buybacks and after acquisition spend relating to
Lake City Heat Treating of £54.9m (including acquisition costs).
Capital expenditure
Total capital expenditure in the year - including both maintenance and
expansionary - was £60.5m (2023: £72.0m). The reduction year-on-year was
partly driven by the timing of payments on certain projects around year-end,
and partly by decisions taken during the second half of the year to delay
certain investments in response to the challenging market environment. The
Group remains committed to maintaining its assets to the highest standards of
quality and safety.
Dividend and dividend policy
The Group has a long and stable track record of dividend growth and aims to
pay ordinary dividends so that dividend cover will be at or above 2.0 times
earnings on a ‘normalised’ multi-year basis.
In line with this policy, the Board has recommended a final dividend of 16.1p
(2023: 16.0p), bringing the full year dividend to 23.0p (2023: 22.7p). The
interim dividend of 6.9p, approved by the Board on 30 July 2024, was paid on 7
November 2024 to shareholders on the register at the close of business on 4
October 2024. Subject to shareholder approval at the 2025 AGM, the final
dividend will be paid on 5 June 2025 to shareholders on the register at the
close of business on 25 April 2025.
Borrowing facilities
During the year the Group renewed and extended its existing Revolving Credit
Facility by over two years. 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
banking partners. The Group continues to have access to committed facilities
at competitive rates and currently deems this to be the most effective means
of long-term funding. At 31 December 2024, the facility was drawn as follows:
Facility Expiry Facility Facility Facility
date £m utilisation headroom
£m £m
Revolving Credit Facility 19 September 2029 251 84.3 166.7
In addition to the Revolving Credit Facility, the Group also has access to an
additional committed facility of £8.7m (undrawn) bringing total committed
facility headroom to £175.4m at 31 December 2024 (2023: £228.3m).
Group principal risks and uncertainties
The Board is committed to protecting and enhancing the Group’s interests
through the effective management of risk. As a global business operating in 22
countries we understand that effectively managing risk underpins the
successful performance of the Group.
The Board has ultimate responsibility for the Group’s systems of risk
management and internal control and ensures the Group’s risk processes and
systems of internal control are robust, monitored and evolve to address
changing business conditions and threats. The Board determines the Group’s
risk appetite and ensures that the Group’s exposures to risk are appropriate
and align to the Group’s strategic levers and priorities.
The Board also provides direction and sets the tone on the importance of risk
management. The review of financial risk has been delegated to the Group’s
Audit Committee.
Emerging risk
Bodycote’s emerging risk identification process is based on horizon
scanning. Each emerging risk is assessed based on its potential impact on the
Group on a high, medium or low rating across three time horizons: 0-2 years;
2-5 years; and more than five years. This process takes place alongside the
annual risk review, with emerging risks being considered in facilitated risk
workshops conducted with the Executive Committee.
This review helps to ensure that any new and emerging risks are appropriately
identified and ensures close monitoring of any emerging risks to ensure
appropriate mitigating actions are undertaken. As an international Group
operating in multiple countries, the Group inevitably has exposure to a range
of risks and uncertainties where internal and external factors are considered
and inform the Group’s response to managing such risks, many of which are
similar in nature to those experienced by comparable companies and may not
always be within the Group’s control.
The Board has highlighted geopolitical risk, specifically, the unpredictable
geopolitical landscape and the uncertainty over future global events as an
emerging risk. If tensions in the geopolitical landscape result in the
implementation of aggressive trade barriers that reduce the movement of goods,
this could result in customers shortening their supply chains and moving them
closer to their main production locations. The emerging risk is mitigated by
the fact that Bodycote has a global network of sites which allow us to service
customers from multiple locations, such that the residual risk exposure is not
considered significant.
An additional area of emerging risk identified during the year relates to the
Group’s ability to attract, retain and develop key skills, knowledge and
capabilities. As the global employment environment continues to evolve,
attracting new talent to the industry, particularly in engineering and
operations will become an increasing priority. The Group appointed a new Chief
Human Resources Officer in January 2025 who will drive the Group’s people
and transformation process going forward.
Group principal risks
The principal risks and uncertainties outlined in the strategic report of the
2024 Annual report set out a description of the Group’s principal risks and
related mitigation measures, as agreed by the Board, and describe how these
principal risks may affect Bodycote’s ability to deliver its strategy. The
identified principal risks relate to:
• Markets and competitor action;
• Health and safety;
• Climate change ;
• Operational risks covering service quality, contract
review, loss of key accreditations, major disruption at a facility, machine
downtime, information technology and cybersecurity, and investment and capital
deployment; and
• Regulatory and legislative compliance risks.
The risk of global pandemics and their impact on both supply chain issues and
operations are no longer considered as either an emerging or principal risk
for the Group.
Alternative performance measures (APMs)
To provide additional information and analysis and to enable a full
understanding of the Group’s results, management makes use of a number of
APMs in its internal management of the business and as part of its internal
and external reporting. During the year the Group has renamed a number of its
APMs from headline to adjusted with no change to their definition other than
where explained. These APMs can be found in the APMs section below.
Going concern
As described in 2024 Annual report, 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. In making
this judgement, they have considered the impacts of potential severe but
plausible consequences arising from the Group’s activities. For this reason,
the Directors continue to adopt the going concern basis in preparing the
condensed consolidated financial statements.
Directors’ responsibilities statement
This responsibilities statement has been prepared in connection with the Group
consolidated financial statements,
extracts of which are included within this announcement.
The Directors confirm that to the best of their knowledge:
• The condensed consolidated financial statements included in
this document are derived from the audited
consolidated financial statements of the Group, prepared in accordance with
UK-adopted international
accounting standards (they do not contain sufficient information to comply
with UK-adopted international
accounting standards);
• The Group's consolidated financial statements, prepared in
accordance with UK-adopted internal accounting.
standards, give a true and fair view of the assets, liabilities, financial
position, cash flows and profit of the Group;
• There have been no significant individual related party
transactions during the year; and
• 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 2024.
The Group's consolidated financial statements, and related notes, including
this responsibilities statement, were
approved by the Board and authorised for issue on 13 March 2025 and were
signed on their behalf by:
By order of the Board,
Director Director
J. Fairbairn B. Fidler
Audited financial information
The condensed consolidated financial statements and notes 1 to 12 for the year
ended 31 December 2024 included
below are derived from the Group’s consolidated financial statements which
have been audited by
PricewaterhouseCoopers LLP. The unmodified audit report is available for
inspection at the Group’s registered office.
Consolidated income statement
For the year ended 31 December 2024
2024 2023
Note £m £m
Revenue 1 757.1 802.5
Cost of sales and overheads 1 2 (647.8) (694.4)
Other operating income 2 9.7 12.6
Other operating expenses 1 2 (0.4) (1.3)
Net impairment losses on financial assets (2.4) (0.2)
Operating profit before exceptional items 1,2 116.2 119.2
Exceptional items 3 (78.3) -
Operating profit 2 37.9 119.2
Finance income 0.8 0.8
Finance charges (10.3) (8.3)
Profit before taxation 28.4 111.7
Taxation charge 4 (7.7) (24.9)
Profit for the year 20.7 86.8
Attributable to:
Equity holders of the Parent 20.0 85.6
Non-controlling interests 0.7 1.2
20.7 86.8
Earnings per share 5
Pence Pence
Basic 10.8 45.1
Diluted 10.7 44.8
1 Excludes exceptional items. Total cost of sales and overheads,
including exceptional items are £648.5m (2023: £694.4m), net impairment
losses on financial assets are £2.7m (2023: £0.2m) and total other operating
expenses including exceptional items are £77.7m (2023: £1.3m).
All activities have arisen from continuing operations.
Consolidated statement of comprehensive income
For the year ended 31 December 2024
2024 2023
Note £m £m
Profit for the year 20.7 86.8
Items that will not be reclassified to profit or loss:
Actuarial losses on defined benefit pension schemes (0.3) (0.1)
Tax on retirement benefit obligations that will not be reclassified (0.1) -
Total items that will not be reclassified to profit or loss (0.4) (0.1)
Items that may be reclassified subsequently to profit or loss:
Exchange losses on translation of overseas operations (13.8) (29.7)
Movements on hedges of net investments 4.1 1.5
Movements on cash flow hedges (0.1) 0.4
Total items that may be reclassified subsequently to profit or loss (9.8) (27.8)
Total other comprehensive expense for the year (10.2) (27.9)
Total comprehensive income for the year 10.5 58.9
Attributable to:
Equity holders of the parent 10.1 58.5
Non-controlling interests 0.4 0.4
10.5 58.9
Consolidated balance sheet
At 31 December 2024
2024 2023
Note £m £m
Non-current assets
Goodwill 6 207.0 221.5
Other intangible assets 114.4 111.2
Property, plant and equipment 481.2 504.9
Right-of-use assets 56.4 58.5
Deferred tax assets 7.0 2.6
Trade and other receivables 2.8 1.3
868.8 900.0
Current assets
Inventories 28.1 29.5
Current tax assets 10.1 13.1
Trade and other receivables 141.3 148.4
Cash and bank balances 19.1 45.2
Assets held for sale - 0.5
198.6 236.7
Total assets 1,067.4 1,136.7
Current liabilities
Trade and other payables 146.7 122.7
Current tax liabilities 4 32.2 46.0
Borrowings 87.4 32.6
Lease liabilities 13.1 11.8
Provisions 7 11.9 12.0
291.3 225.1
Net current (liabilities)/assets (92.7) 11.6
Non-current liabilities
Lease liabilities 50.4 52.5
Retirement benefit obligations 11.3 11.1
Deferred tax liabilities 41.2 51.8
Provisions 2.5 3.0
Other payables 0.8 0.9
106.2 119.3
Total liabilities 397.5 344.4
Net assets 669.9 792.3
Equity
Share capital 8 31.6 33.1
Share premium account 177.1 177.1
Own shares (11.1) (15.6)
Capital redemption reserve 131.3 129.8
Other reserves 10.0 10.1
Translation reserves 38.8 52.3
Retained earnings 290.4 404.0
Equity attributable to equity holders of the parent 668.1 790.8
Non-controlling interests 1.8 1.5
Total equity 669.9 792.3
Consolidated cash flow statement
For the year ended 31 December 2024
2024 2023
Note £m £m
Net cash from operating activities 11 152.6 191.6
Investing activities
Purchases of property, plant and equipment (70.1) (74.1)
Proceeds on disposal of property, plant and equipment 13.4 10.4
Purchases of other intangible assets (4.1) (8.3)
Acquisition of businesses, net of cash acquired 10 (52.2) -
Net proceeds on disposal of business 3 0.4 -
Loans issued (1.0) -
Interest received 0.8 0.8
Net cash used in investing activities (112.8) (71.2)
Financing activities
Interest paid (9.7) (7.2)
Dividends paid 9 (42.9) (40.6)
Principal elements of lease payments (13.5) (13.1)
Drawdown of bank loans 75.2 25.7
Repayments of bank loans (19.0) (61.8)
Ordinary shares purchased for share buyback (57.7) -
Own shares purchased to be held as treasury shares - (13.2)
Net cash used in financing activities (67.6) (110.2)
Net (decrease)/increase in cash and cash equivalents (27.8) 10.2
Cash and cash equivalents at beginning of year 44.7 36.2
Effect of foreign exchange rate changes (0.9) (1.7)
Cash and cash equivalents at end of year 11 16.0 44.7
Consolidated statement of changes in equity
For the year ended 31 December 2024
Share capital Share premium account Own shares Capital redemption reserve Other reserves Translation reserves Retained earnings Equity attributable to equity holders of the parent Non-controlling interests Total equity
£m £m £m £m £m £m £m £m £m £m
1 January 2023 33.1 177.1 (5.2) 129.8 5.1 81.2 359.8 780.9 1.1 782.0
Profit for the year - - - - - - 85.6 85.6 1.2 86.8
Exchange differences on translation of overseas operations - - - - - (28.9) - (28.9) (0.8) (29.7)
Movements on hedges of net investments - - - - 1.5 - - 1.5 - 1.5
Movements on cash flow hedges - - - - 0.4 - - 0.4 - 0.4
Actuarial gains on defined benefit pension schemes net of deferred tax - - - - - - (0.1) (0.1) - (0.1)
Total comprehensive income for the year - - - - 1.9 (28.9) 85.5 58.5 0.4 58.9
Ordinary shares acquired - - (13.2) - - - - (13.2) - (13.2)
Settlement of share awards - - 2.8 - (2.0) - (0.8) - - -
Share-based payments - - - - 5.1 - - 5.1 - 5.1
Deferred tax on share-based payment transactions - - - - - - 0.1 0.1 - 0.1
Dividends - - - - - - (40.6) (40.6) - (40.6)
31 December 2023 33.1 177.1 (15.6) 129.8 10.1 52.3 404.0 790.8 1.5 792.3
Profit for the year - - - - - - 20.0 20.0 0.7 20.7
Exchange differences on translation of overseas operations - - - - - (13.5) - (13.5) (0.3) (13.8)
Movements on hedges of net investments - - - - 4.1 - - 4.1 - 4.1
Movements on cash flow hedges - - - - (0.1) - - (0.1) - (0.1)
Actuarial losses on defined benefit pension schemes net of deferred tax - - - - - - (0.4) (0.4) - (0.4)
Total comprehensive income for the year - - - - 4.0 (13.5) 19.6 10.1 0.4 10.5
Ordinary shares acquired (1.5) - - 1.5 - - (90.6) (90.6) - (90.6)
Settlement of share awards - - 4.5 - (4.7) - 0.2 - - -
Share-based payments - - - - 0.6 - - 0.6 - 0.6
Dividends - - - - - - (42.8) (42.8) (0.1) (42.9)
31 December 2024 31.6 177.1 (11.1) 131.3 10.0 38.8 290.4 668.1 1.8 669.9
Other reserves include a share-based payments reserve of £5.5m (31 December
2023: £9.7m).
The capital redemption reserve of £131.3m consists of £129.8m transferred
from retained earnings on the conversion of B shares into deferred shares in
2008 and 2009 and £1.5m arising on the share buyback programmes announced in
January 2024 and December 2024. As at 31 December 2024 8,558,676 shares with a
nominal value of 173/11p had been repurchased under the share buyback
programmes which were announced in January 2024 (and commenced in March 2024)
and December 2024 (to commence in 2025), for a total consideration of £57.7m
(including costs £0.4m). A liability of £32.9m has been recognised relating
to the Group’s remaining contractual commitment to buy shares under the
share buyback programmes as at 31 December 2024. Refer to note 8 of these
condensed consolidated financial statements for more information.
The own shares reserve represents the cost of shares in Bodycote plc purchased
in the market and held by the Bodycote International Employee Benefit Trust to
satisfy share-based payments under the Group’s incentive schemes. As at 31
December 2024, 1,627,781 (31 December 2023: 2,292,243) ordinary shares of
173/11p each were held by the Bodycote International Employee Benefit Trust.
Notes to the condensed consolidated financial statements
Year ended 31 December 2024
General information
Bodycote plc is a company incorporated in the United Kingdom under the
Companies Act 2006.
The nature of the Group’s operations and its principal activities, and
information on the Group’s objectives, are included within the Group’s
Strategic report in the 2024 Annual report.
Items included in the financial statements of each entity in the Group are
measured using the currency of the primary economic environment in which the
entity operates. The condensed consolidated financial statements are presented
in pounds sterling, which is the functional and presentation currency of the
Parent Company. Foreign operations are included in accordance with the
policies set out in the Foreign Currencies accounting policy in the 2024
Annual report.
Basis of Preparation and non-statutory financial statements
The financial statements of the Group, from which these condensed consolidated
financial statements are derived, have been prepared in accordance with
UK-adopted international accounting standards as applied in accordance with
the provisions of the Companies Act 2006.
The financial information set out above does not constitute the Company's
statutory accounts for the years
ended 31 December 2024 or 2023 but is derived from those accounts. Statutory
accounts for 2023 have
been delivered to the Registrar of Companies and those for 2024 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.
1. Business and geographical segments
The Group has 153 operational locations across the world providing a range of
market sectors with thermal processing services. After the completion of a
strategic review during 2024, the Group has reorganised its plants into three
divisions:
* Specialist Technologies: This division includes the Group’s Hot Isostatic
Pressing (‘HIP’) business; its Speciality Stainless Steel Processes (S3P)
business and its Surface Technology business.
* Precision Heat Treatment: This division includes the Group’s business
centred on the controlled heating and cooling of metals to obtain the desired
mechanical, chemical and metallurgical properties for the end process. It also
includes the Group’s Low Pressure Carburising and Corr-I-Dur processes.
* Non-core: As a result of its strategic review carried out in 2024, the
business identified a number of plants that form part of its strategic
optimisation programme and are considered non-core. These plants typically
provide heat treatments services using older, less efficient and more carbon
intensive technologies. The Group is managing these sites with a view to
merging them with other plants in the portfolio, closing plants, or selling
them over the coming 24 months.
The Group’s Chief Executive Officer is considered to be the Chief Operating
Decision Maker (‘CODM’) of the Group and reviews the results of each of
the divisions on a monthly basis focussing on adjusted operating profit which
is defined as operating profit before acquisition costs, amortisation of
acquired intangibles and exceptional items. Accordingly, the three divisions
outlined above are considered to be the Group’s Operating and Reportable
segments as defined in IFRS 8 Operating Segments.
In determining the segments’ adjusted operating profit, the Group makes
certain allocations of costs that are incurred centrally to benefit each of
the segments. To the extent that these costs are of a nature that will
continue to be incurred after the Group’s optimisation programme has been
completed, they have not been allocated to the non-core segment.
Prior to the strategic review in 2024, the business presented its results
split into six Operating Segments which were determined based on the geography
of its plants and the preponderance of markets that they served. The prior
year segmental analysis has been restated to present it on a consistent basis
with the current year.
Specialist Technologies Precision Heat Treatment Central costs and eliminations Total core Non-core Total Group
2024 2024 2024 2024 2024 2024
£m £m £m £m £m £m
Revenue 224.2 488.3 - 712.5 44.6 757.1
Result
Adjusted operating profit/(loss) 65.0 83.0 (20.4) 127.6 1.4 129.0
Amortisation of acquired intangible assets (8.7) (1.3) - (10.0) (0.4) (10.4)
Acquisition costs (2.4) - - (2.4) - (2.4)
Operating profit/(loss) before exceptional items 53.9 81.7 (20.4) 115.2 1.0 116.2
Exceptional items (2.1) (21.7) (30.7) (54.5) (23.8) (78.3)
Operating profit/(loss) 51.8 60.0 (51.1) 60.7 (22.8) 37.9
Finance income 0.8
Finance charges (10.3)
Profit before taxation 28.4
Taxation (7.7)
Profit for the year 20.7
Specialist Technologies Precision Heat Treatment Central costs and eliminations Total core Non-core Total Group
2023 2023 2023 2023 2023 2023
£m £m £m £m £m £m
Revenue 212.4 534.9 - 747.3 55.2 802.5
Result -
Adjusted operating profit/(loss) 55.2 94.4 (24.8) 124.8 2.8 127.6
Amortisation of acquired intangible assets (6.4) (1.3) - (7.7) (0.4) (8.1)
Acquisition costs - - (0.3) (0.3) - (0.3)
Operating profit/(loss) 48.8 93.1 (25.1) 116.8 2.4 119.2
Finance income 0.8
Finance charges (8.3)
Profit before taxation 111.7
Taxation (24.9)
Profit for the year 86.8
Inter-segment revenues are not material in either year.
The Group does not have any one customer that contributes more than 10% of
revenue in either year.
Specialist Technologies Precision Heat Treatment Total core Non-core Total Group
2024 2024 2024 2024 2024
Revenue £m £m £m £m £m
Western Europe 121.0 239.3 360.3 20.8 381.1
North America 95.7 165.0 260.7 23.8 284.5
Emerging Markets 7.5 84.0 91.5 - 91.5
Group 224.2 488.3 712.5 44.6 757.1
Specialist Technologies Precision Heat Treatment Total core Non-core Total Group
2023 2023 2023 2023 2023
Revenue £m £m £m £m £m
Western Europe 120.9 271.7 392.6 24.9 417.5
North America 83.9 173.2 257.1 30.3 287.4
Emerging Markets 7.6 90.0 97.6 - 97.6
Group 212.4 534.9 747.3 55.2 802.5
Other information
Specialist Technologies Precision Heat Treatment Central costs and eliminations Total core Non-core Total Group
2024 2024 2024 2024 2024 2024
£m £m £m £m £m £m
Gross capital additions 18.9 61.4 5.2 85.5 4.5 90.0
Depreciation and amortisation 24.2 51.3 3.8 79.3 6.4 85.7
Impairments 1.5 20.7 28.4 50.6 14.7 65.3
Specialist Technologies Precision Heat Treatment Central costs and eliminations Total core Non-core Total Group
2023 2023 2023 2023 2023 2023
£m £m £m £m £m £m
Gross capital additions 19.9 59.9 10.0 89.8 4.7 94.5
Depreciation and amortisation 21.5 50.7 3.1 75.3 6.8 82.1
Impairments 0.3 0.5 - 0.8 0.1 0.9
Geographical information
The Group’s revenue from external customers analysed by country in which the
service is delivered is detailed below:
2024 2023
£m £m
USA 271.2 271.7
France 104.2 116.9
Germany 72.3 82.3
UK 68.5 66.3
Sweden 50.3 50.9
Netherlands 29.5 34.9
Others 161.1 179.5
Group 757.1 802.5
2. Operating profit
2024 2023
£m £m
Revenue 757.1 802.5
Cost of sales (460.4) (500.6)
Gross profit 296.7 301.9
Selling costs (22.3) (21.8)
Administration expenses (165.1) (172.0)
Other operating income 9.7 12.6
Other operating expenses (0.4) (1.3)
Net impairment losses on financial assets (2.4) (0.2)
Operating profit before exceptional items 116.2 119.2
Exceptional items (see note 3) (78.3) -
Operating profit 37.9 119.2
Operating profit for the year has been arrived at after charging/(crediting):
2024 2023
£m £m
Net foreign exchange (gain)/loss (0.4) 0.2
Employee costs 1 297.3 307.5
Pension scheme administration expenses 0.6 0.5
Inventory expensed 70.5 76.8
Utility costs 68.8 98.3
Consumables and gases 52.6 55.3
Transport and carriage costs 12.4 12.8
Depreciation of property, plant and equipment 59.7 59.4
Depreciation of right-of-use assets 13.6 12.9
Amortisation of other intangible assets 12.4 9.8
Gain on disposal of property, plant and equipment recognised in operating profit (5.5) (3.4)
Loss on disposal of property, plant and equipment recognised in exceptional items (see note 3) 0.1 -
Gain on disposal of right-of-use assets (0.2) (0.2)
Impairment loss on trade receivables 2.4 0.2
Impairment of other intangible assets recognised in exceptional items (see note 3 ) 29.2 -
Impairment of goodwill recognised in exceptional items (see notes 3 & 6) 18.0 -
Impairment of property, plant and equipment recognised in exceptional items (see note 3) 16.9 -
Impairment of property, plant and equipment - recognised in operating profit 0.1 0.9
Impairment of right-of-use assets recognised in exceptional items (see note 3) 1.1 -
Repairs and maintenance 25.5 27.2
Government assistance support received 2 (1.0) (6.4)
Acquisition costs 2.4 0.3
1 Employee cost include costs of temporary agency contractors of £16.7m
(2023: £17.3m).
2 Government assistance consists of support towards R&D of £0.4m (2023:
£0.2m); local regional economic support of £0.4m (2023: £nil); energy
support programmes £0.1m (2023: £6.1m); and £0.1m in respect of other
support programmes.
3. Exceptional items
The following items were charged to exceptional items:
2024 2023
£m £m
Impairment of ERP intangible asset 28.4 -
Impairment of goodwill 18.0 -
Strategic optimisation programme: 31.9 -
Impairment of assets 18.8
Severance and redundancy cost 4.1 -
Site closure and associated closure costs 5.2 -
Losses on sale of business and property, plant and equipment 2.8 -
Other 1.0 -
Total exceptional items 78.3 -
Impairment of ERP intangible asset
Included within intangible assets at 31 December 2023 were £32.2m of
internally developed software costs relating to the development of an ERP
solution that had been in development since 2020 and was not yet available for
use. Development of the ERP solution progressed through H1 2024 with a further
£3.1m capitalised. During this period, as part of the development process, a
pilot programme continued at a small number of sites across the Group. The ERP
solution includes two components: an Operations module and a Finance and
Procurement module.
During the first half of 2024 the Directors were regularly updated on the
programme, including the initial results of the pilot programme. Having
considered these results, management ultimately concluded that the future
benefits of the Operations module of the system did not outweigh the likely
future costs. Consideration was also given to the business interruption
challenges of rolling out the Operations module across the Group’s multiple
sites. As a result, the decision was reached to cease further development and
roll-out of the Operations module and abandon its use, resulting in an
exceptional impairment charge of £28.4m being booked in June 2024.
The roll-out of the Finance and Procurement module across the Group continues
and is expected to complete in the first half of 2026. The remaining
intangible asset of £7.0m relating to the Finance and Procurement module is
being amortised over its useful life of 15 years beginning 1 July 2024.
Impairment of goodwill
The Group recognised a goodwill impairment charge of £18.0m within
exceptional costs in the year in relation to the Group’s North American
Automotive and General Industrial CGU (‘NA AGI’). The impairment follows a
prolonged period in which the CGU has faced challenging market conditions
which meant that it was no longer able to support its high level of goodwill
related to historic acquisitions. Further details are set out in note 6.
Strategic optimisation programme
During 2024, the Group undertook a strategic review as a result of which it
announced its intention to undertake a number of optimisation actions to drive
step changes and improvements across the business, primarily centered on sites
utilising older, more commoditised technologies, with higher carbon
footprints. Implementation of the programme commenced in 2024, and the Group
announced a number of site closures during the year as a result of which it
has recognised an exceptional charge of £31.9m.
Impairments of £18.8m have been charged to exceptional items relating to the
planned site closures and operational lines that will no longer be used. These
impairments comprise of £16.9m for property, plant and equipment, £1.1m for
right-of-use assets, and £0.8m of acquired intangibles for customer
relationships.
Provisions of £5.2m have been charged for site closure and associated
environmental costs, where the closures have been announced before 31 December
2024, and £3.3m for redundancy and severance costs, of which £0.3m was
utilised in 2024, related to employees impacted by the announced closures and
related reductions in overhead positions. An additional £0.8m of redundancy
and severance costs were charged directly to the consolidated income statement
in the year.
In December 2024 the business sold its Metz Tessy business for cash proceeds
of £0.8m less costs of disposal of £0.4m. The business consisted of a single
plant and was not considered a core part of the business. As part of the
agreement of the sale, a loan was issued to the purchaser for £0.6m against
which an expected credit loss provision of £0.3m has been recognised. Net
assets disposed were £1.8m with other costs associated with the closure of
£1.0m. The total net loss on disposal of the business was £2.7m. A loss of
£0.1m was charged to exceptional costs related to the sale of property, plant
and equipment from affected sites.
See also the strategic review of the 2024 Annual report for further details of
the optimisation programme.
4. Taxation charge
2024 2023
£m £m
Current taxation - charge for the year 20.7 26.0
Current taxation - adjustments in respect of previous years 1.5 (2.7)
Deferred tax - charge for the year (13.2) 1.5
Deferred tax - adjustments in respect of previous years (1.3) 0.1
Total taxation charge 7.7 24.9
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. This is
therefore the appropriate tax rate for comparison being, 25.1% in 2024 (2023:
25.4%).
With effect from 1 January 2024 the Group was subject to the OECD Pillar II
GloBE Rules. The Group has performed an overall assessment of the impact and
determined that the adoption of the Pillar II GloBE Rules by jurisdictions
where Bodycote operates does not have a material impact on the Group’s
current tax charge. The Group has applied the exception provided for by the
Pillar II GloBE Rules (amendments to IAS 12) and has not recognised, or
disclosed, information about deferred tax assets and liabilities related to
these Pillar II GloBE rules.
The charge for the year can be reconciled to the profit before taxation per
the consolidated income statement as follows:
2024 2023
£m £m
Profit before taxation 28.4 111.7
Tax at the weighted average country tax rate of 25.1 % (2023: 25.4%) 7.2 28.4
Tax effect of expenses not deductible in determining taxable profit 1 1.6 1.1
Impact of recognition or derecognition of deferred tax balances 0.8 0.5
Tax effect of other adjustments in respect of previous years:
Current tax 2 1.5 (2.7)
Deferred tax 2 (1.3) 0.1
Effect of financing activities between jurisdictions 3 (2.5) 0.3
Impact of trade and minimum corporate taxes 0.2 0.3
Effect of changes in statutory tax rates on deferred tax assets and liabilities (0.2) 0.3
Other tax risk provision movements 4 0.4 (3.4)
Tax expense for the year 7.7 24.9
1 Those costs in various jurisdictions that are not deductible in calculating
taxable profits.
2 2024 and 2023 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 including a
credit relating to a provision release of £2.5m (2023: £nil) based on
management’s estimation of the tax risk relating to the potential
disallowance of interest.
4. Includes provisions for local tax risks and cross-border
transactions. 2024 includes a credit of £2.2m (2023: £4.3m) for the release
of provisions for tax risks which are no longer within an audit period.
Tax on retirement benefit obligations taken directly to equity was a charge of
£0.1m (2023: credit of £0.1m).
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 in which Bodycote operates where the nature
of the tax positions that are taken is often complex and subject to change.
Included within current tax liabilities of £32.2m (2023: £46.0m) on the
consolidated balance sheet as at 31 December 2024 are tax provisions totalling
£24.9m (2023: £26.4m), £4.2m (2023: £4.2m) of which are out of the period
of tax audit within 2025. The provisions are based on an assessment of a range
of possible outcomes to determine reasonable estimates of the consequences of
tax authority audits in the various tax jurisdictions in which the Group
operates. The material provisions relate to the financing of the Group’s
operations where management’s judgement is exercised to determine the
quantum of the tax risk provisions based on an understanding of the
appropriate local tax legislation, taking into consideration the differences
of interpretation that can arise on a wide variety of issues including the
nature of ongoing tax audits and the experience from earlier enquiries, and
determining whether any possible liability is probable. The Group’s
individual provisions by country vary in quantum from £1.9m to £8.8m.
5. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
2024 2023
£m £m
Earnings
Earnings for the purpose of basic earnings per share being net profit attributable to equity holders of the parent 20.0 85.6
Number Number
Number of shares
Weighted average number of ordinary shares for the purpose of basic earnings per share 186,012,493 189,877,099
Effect of dilutive potential ordinary shares:
Shares subject to performance conditions 418,728 661,721
Shares subject to vesting conditions 448,614 344,050
Weighted average number of ordinary shares for the purpose of diluted earnings per share 186,879,835 190,882,870
Pence Pence
Earnings per share:
Basic 10.8 45.1
Diluted 10.7 44.8
2024 2023
£m £m
Adjusted earnings
Net profit attributable to equity holders of the parent 20.0 85.6
Add back:
Amortisation of acquired intangible assets (net of tax) 8.3 6.1
Acquisition costs (net of tax) 1.8 0.2
Exceptional items (net of tax) 60.3 -
Adjusted earnings 90.4 91.9
Pence Pence
Adjusted earnings per share:
Basic 48.6 48.4
Diluted 48.4 48.1
As at 31 December 2024, the performance conditions for a number of open plans
have been met resulting in a 0.1p dilution of earnings per share (2023: 0.3p)
and 0.2p dilution of adjusted earnings per share (2023: 0.3p).
6. Goodwill
2024 2023
£m £m
Cost
At 1 January 282.3 288.9
Exchange differences (0.2) (6.6)
Recognised on acquisition of businesses 3.8 -
Total cost 285.9 282.3
Accumulated impairment
At 1 January 60.8 61.1
Impairment 18.0 -
Exchange differences 0.1 (0.3)
Total accumulated impairment 78.9 60.8
Carrying amount 207.0 221.5
Goodwill acquired through a business combination is allocated to the cash
generating units (CGUs) that are expected to benefit from the synergies of the
combination. Goodwill is tested for impairment at least annually or more
frequently if there are indications that its carrying value may not be
recoverable. To test the goodwill for impairment, the carrying value of the
CGUs containing goodwill are compared to their recoverable amounts, calculated
as the higher of their fair value less costs to dispose and value-in-use.
The Group has determined its CGUs based on geography, customer groupings, and
processes. The CGUs reflect the lowest level at which the Group’s operations
generate cash inflows that are largely separate to each other. They are also
the lowest level at which the Group has monitored goodwill during the year.
The Group continues to review its CGUs in the light of the changes to the
Group’s strategy, operational structure and internal reporting that were
introduced during the second half of 2024. To the extent that these future
changes affect how CGUs are identified in the Group, they will be reflected in
future years. Consistent with the change to the Group’s reporting structure
in 2024, the Group’s North America Surface Technology (NA ST) business that
previously formed part of the North America Aerospace, Defence and Energy (NA
ADE) CGU has been separated out and now forms a separate CGU. All other CGUs
are consistent with the prior year.
In assessing value-in-use, estimated post-tax future cash flows for each CGU
are discounted to their present value using a post-tax discount rate which
reflects current market assessments of the time value of money and the risks
specific to the CGU, including country risk premium.
Fair value less costs to dispose is determined in a similar manner but takes
into account the benefits of actions that a rational buyer would take during
the forecast period. Those actions include those that form part of the
Group’s strategic optimisation programme that the business had not announced
to the affected plants as at 31 December 2024 as well as other capital
expenditure and growth initiatives that are planned. Such actions are not
permitted to be reflected in the value in use calculations as at 31 December
2024. Because the majority of the inputs into the fair value calculations are
not observable, they are categorised as level 3 in the fair value hierarchy.
In 2024, the recoverable amounts of all of the Group’s CGUs were determined
using value in use with the exception of the North American Automotive and
General Industrial CGU (NA AGI) and NA ST for which the recoverable amount has
been determined using fair value less costs to dispose. The fair value less
costs to dispose of NA AGI and NA ST are in excess of their value in use since
most of the benefits referred to above had not been announced prior to the
year end.
The cash flows of each CGU have been based on the 2025 budget, and the
five-year financial plan up to and including 2029, both of which have been
approved by the Board. A long-term growth rate has been applied into
perpetuity from 2030 onwards.
The key assumptions applied in determining the recoverable amount of each CGU
were as follows:
Revenue: Revenue for 2025–2029 was projected based on management’s growth
expectations of the underlying market sectors served by each CGU. These were
benchmarked against external projections for each market. Pricing expectations
were based on recent experience in the market and forecast inflation
expectations.
Operational margin: Operational margin represents the CGU’s operating profit
as a percentage of revenue. The margin levels assumed reflect management’s
expectations of future business performance and are informed by past
performance.
Capital expenditure: The future cash flows include estimates of capital
expenditure required to maintain the existing asset base of each CGU and are
based on historical experience. In determining the estimates of capital
expenditure, management has assumed that capital expenditure will at least
equal depreciation in the long term.
Long-term growth rate: Long-term growth rates have been applied into
perpetuity based on the long-term average GDP growth projections of the
geographies relevant to each CGU. Growth rates are in the range of 2.0% to
2.2% (2023: 2.0% to 2.2%).
Discount rate: The discount rates have been derived from a weighted average
cost of capital, adjusted for the geographies in which each CGU operates. The
post-tax discount rates range from 9.4% to 10.1% (2023: 9.6% to 10.4%). The
pre-tax discount rates are the rates which, when applied to the pre-tax cash
flows, result in the same NPV as calculated by the post-tax discount rate
applied to the post-tax cash flows. The pre-tax discount rates range from
11.6% to 12.7% (2023: 11.9% to 13.0%).
Goodwill is allocated to the Group’s operating segments as set out below:
2024 2023
£m £m
Specialist Technologies 47.2 66.3
Precision Heat Treatment 159.8 155.2
207.0 221.5
No goodwill was allocated to the Group’s non-core segment on the basis that
the value of that segment was minimal compared to the Group’s core segments.
A summary of the goodwill allocated to each of the Group’s CGUs with
goodwill in excess of 10% of the Group’s total goodwill, along with the long
term growth rates and discount rates used to determine their recoverable
amount, is set out below:
Goodwill carrying value Long term growth rate Post-tax discount rate Pre-tax discount rate
2024 2024 2024 2024
Cash generating units £m % % %
Specialist technology:
North American Surface Technology 28.5 2.2 9.4 11.7
European Surface Technology 12.6 2.0 9.6 12.2
Other smaller Specialist Technology CGUs 6.1 2.0-2.2 9.4-9.6 11.8-12.3
Precision Heat Treatment:
North America Aerospace, Defence and Energy 69.7 2.2 9.4 11.7
North America Automotive and General Industrial 39.4 2.2 9.4 11.6
European Automotive and General Industrial 26.9 2.0 9.6 12.3
Other smaller Precision Heat Treatment CGUs 23.8 2.0-2.2 9.6-10.1 12.3-12.7
With the exception of NA AGI, recoverable amount was higher than book value
for all CGUs. Accordingly, the Directors have concluded that no impairment
charge is required as at 31 December 2024, except as described below with
respect to NA AGI.
Expected future cash flows are inherently uncertain and could change
materially over time. They are affected by several factors, including market
and production estimates, together with economic factors such as prices,
discount rates, currency exchange rates, operational costs, and future capital
expenditure.
The Group has conducted sensitivity analysis by considering reasonably
possible changes to the key assumptions applied in the recoverable amount
calculations for each CGU. The sensitivity analysis considered downside
scenarios including an increase in discount rates, a reduction in sales growth
throughout the forecast period, and a persistent reduction in operating
margin. In respect of NA ST, the sensitivity analysis indicated that in the
unlikely event that operating margins in the forecast period fell to a level
equivalent to that achieved in 2023 (which is below that achieved in 2024), an
immaterial impairment of goodwill could arise. With the exception of NA AGI
and NA ST, no reasonably possible downside reductions to any of the
assumptions resulted in an impairment for any of the Group’s CGUs.
During the year, the Group recognised an impairment of £18.0m in respect of
NA AGI. The impairment arose following a prolonged and extended period of
challenging trading conditions in the North American Industrial markets that
continued through 2024 and is expected to persist. As a result the CGU is no
longer able to support its elevated level of goodwill arising from historic
acquisitions. In response to the downturn, management has taken a number of
actions, including those announced as part of the strategic optimisation
programme, to improve the CGU’s profitability. However, even after
considering the actions taken and the further actions that the Group intends
to implement, its recoverable amount has fallen below its carrying value.
Further impairments of NA AGI may arise in subsequent years if the CGU does
not perform in line with its forecasts. Management have modelled downside
scenarios to illustrate the effect of a reasonably possible downside variation
in each of the key assumptions. A summary of the potential effects of these
reasonably possible downside scenarios is set out below:
Value assigned to assumption Sensitivity Additional impairment
2024 2024 2024
Key assumption % bps change £m
Post-tax discount rate 9.4 100 19.0
Terminal growth rate 2.1 (50) 5.9
The forecasts include assumptions about revenue and profit growth, both from
ongoing activities and the effects of initiatives that the Group has
implemented as part of its optimisation programme which, by 2029, result in a
cumulative increase in the level of adjusted operating profit before non-cash
depreciation of 62% over 2024. If this profit growth was reduced by 10% over
the five year period then the impairment would be increased by £6.5m. The
forecasts also include capital expenditure of circa £63m over the course of
the 5 year forecast period. A 10% increase in capital expenditure in the
forecast period would result in an increase to the impairment of £4.7m.
The sensitivities modelled are intended to reflect an unlikely but reasonably
possible downturn in key assumptions that persists in the long term. None of
the potential additional impairments reflect mitigating actions that
management would take in the event that such a situation developed.
In determining the sensitivities to apply, consideration was given to the
impact that climate change risks and opportunities may have on the Group’s
businesses. Specific scenarios relating to the potential risks of climate
change, as set out in the TCFD section of the Annual Report, were considered
to determine if these should be included in the modelling performed and it was
determined that none of these scenarios would have a material impact on the
outcome. Furthermore, the impact of the above sensitivities was deemed
sufficiently severe to cover a range of potential risks, some of which could
relate to these potential climate change risks.
7. Provisions
Restructuring Environmental Legal Total
2024 2024 2024 2024
£m £m £m £m
At 1 January 2024 0.5 9.2 5.3 15.0
Additions 9.0 1.4 1.7 12.1
Released - (0.1) (0.9) (1.0)
Utlisation (1.1) (6.5) (3.9) (11.5)
Exchange difference - (0.1) (0.1) (0.2)
At 31 December 2024 8.4 3.9 2.1 14.4
Included in current liabilities 11.9
Included in non-current liabilities 2.5
14.4
During 2024, the Group undertook a strategic review as a result of which it
announced its intention to undertake a number of optimisation actions to drive
step changes and improvements across the business, primarily centered on sites
utilising older, more commoditised technologies with higher carbon footprints.
Refer to the strategic review of the 2024 Annual report and note 3 of these
condensed consolidated financial statements for further information.
Restructuring
Included in restructuring provision additions in the year are £8.5m (2023:
£nil) which have been charged to exceptional items in the consolidated income
statement in respect of provisions made as a result of the strategic
optimisation programme. These changes related to redundancy and severance of
employees at affected sites at which announcements of closure have been made,
along with site closure costs and consequential reductions in management
overheads announced in the year. The majority of cash outflows in respect of
these provisions are expected to occur within 2 years.
Environmental Provisions
The Group provides for the costs of environmental remediation if there is a
probable outflow of economic resources that has been identified at the time of
plant closure, as part of acquisition due diligence or in other circumstances
where remediation by the Group is required. This provision is reviewed
annually to determine the best estimate of expenditure required to settle the
identified obligations and where applicable, external confirmations are
obtained to determine the best estimate of future liabilities. During the
year, environmental provisions of £1.0m were created as part of the Group’s
strategic optimisation programme (see note 3 of these condensed consolidated
financial statements for details).
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.
Legal and operational provisions
Legal provisions include, but are not limited to, alleged breach of contract
and alleged breach of environmental legislation. While the Group cannot
predict the outcome of individual legal actions, where the exposure can be
reliably measured and an outflow of economic benefits is considered probable,
provisions are recognised following legal advice. There were no individually
material provisions as at 31 December 2024.
8. Share capital
Ordinary Shares Share Capital 1
2024 2023 2024 2023
Number Number £m £m
At 1 January 191,456,172 191,456,172 33.1 33.1
Share buyback programmes (8,558,676) - (1.5) -
Total 182,897,496 191,456,172 31.6 33.1
1 Nominal value of shares held is 173/11p each.
In the year the Group announced share buyback programmes totaling £90.0m. The
first programme commenced on 15 March 2024 and the second, announced on 12
December 2024, commenced on 15 January 2025 and is due to complete by no later
than the 14 July 2025.
As at 31 December 2024, a total of 8,558,676 shares have been repurchased for
a total price, including transactional costs, of £60.4m, of which £57.7m was
paid in cash in the year. The nominal value of the shares purchased is £1.5m,
which was transferred to the capital redemption reserve and the difference
between the nominal value and the purchase price was recorded within retained
earnings.
As at 31 December 2024 a liability of £32.7m, plus £0.2m transactional
costs, remained for shares contracted to be repurchased but for which the
repurchases were still outstanding.
9. Dividends
2024 2023 2024 2023
Per share Per share £m £m
Interim dividend for the year ended 31 December 6.9 6.7 12.7 12.7
Proposed final /Final dividend for the year ended 31 December 16.1 16.0 29.2 30.1
Total dividend 23.0 22.7 41.9 42.8
The 2023 final dividend of 16.0p per share was paid on 6 June 2024. The 2024
interim dividend of 6.9p per share was paid on 7 November 2024. The proposed
final dividend for 2024 of 16.1p to be paid on 5 June 2025 to shareholders on
the register at close of business on 25 April 2025, is subject to approval at
the AGM on 21 May 2025 and therefore is not included as a liability in these
condensed consolidated financial statements.
For the year ended 31 December 2024 unclaimed dividends which are fortified
after a period of 6 years from the date for payment and reverted back to the
Group amounted to £nil (2023: £0.6m).
10. Acquisition of business
Acquisition of Lake City Heat Treating LLC
On 19 January 2024 the Group acquired 100% of the ordinary share capital of
Lake City Heat Treating (‘Lake City’) in North America for a total gross
consideration of £52.2m ($66.5m) on a cash and debt free basis which was
settled through the Group’s existing cash and borrowing facilities.
Lake City is a leading hot isostatic pressing (HIP) and vacuum heat treatment
business primarily supplying the orthopedic medical implant market as well as
civil aerospace. The acquisition was made to strengthen the Group’s network
and service offering in the medical market, complementing the Specialist
Technologies divisions strategy in North America. The business has been
integrated into the Group’s Specialist Technology division.
The transaction has been accounted for as a business combination under IFRS 3.
The assets and liabilities recognised as a result of the acquisition are as
follows:
2024
£m
Fair value of net assets acquired:
Goodwill 3.8
Other intangible assets 39.9
Property, plant and equipment 7.7
Trade and other receivables 1.2
Trade and other payables (0.4)
Fair value of net assets acquired 52.2
Total consideration transferred 52.2
Net cash outflow arising on acquisition:
Cash consideration 52.2
The goodwill arising on the acquisition is expected to be deductible for tax
purposes and is attributable to the assembled workforce and anticipated
synergies that can be achieved in the business. Intangible assets recognised
on acquisition relate to customer relationships of £39.4m, non-compete
agreements of £0.3m and trade names of £0.2m and will be amortised in line
with the Group accounting policies which can be found in the 2024 Annual
report.
Related acquisition costs totaling £2.7m were included in the consolidated
cash flow statement within net cash from operating activities of £2.4m in
2024 and £0.3m in 2023. The gross contractual value of the trade and other
receivables was £1.2m and the best estimate at the acquisition date of the
contractual cash flows not expected to be collected was £nil. Net deferred
tax recognised on the acquisition is £nil.
The business has contributed £9.5m to revenue and £3.5m to operating profit
for the period between the date of acquisition and 31 December 2024. There
would be no significant difference if the acquisition had been completed on
the first day of the financial year due to the proximity of the acquisition
date to the start of the year.
11. Notes to the cash flow statement
2024 2023
£m £m
Profit for the year 20.7 86.8
Adjustments for:
Finance income (0.8) (0.8)
Finance charges 10.3 8.3
Taxation charge 7.7 24.9
Operating profit 37.9 119.2
Adjustments for:
Depreciation of property, plant and equipment 59.7 59.4
Depreciation of right-of-use assets 13.6 12.9
Amortisation of other intangible assets 12.4 9.8
Profit on disposal of property, plant and equipment (5.5) (3.4)
Loss on disposal of property, plant and equipment recognised in exceptional items 0.1 -
Profit on disposal of right-of-use assets (0.2) (0.2)
Disposal of business 2.6 -
Impairment of goodwill - recognised in exceptional items 18.0 -
Impairment of acquired intangibles - recognised in exceptional items 0.8 -
Impairment of fixed assets - recognised in exceptional items 46.4 -
Impairment of property, plant and equipment and other assets recognised in operating profit 0.1 0.9
EBITDA 185.9 198.6
Share-based payments 0.6 5.1
Decrease/(increase) in inventories 1.3 (1.7)
Decrease in receivables 7.2 6.2
Decrease in payables (7.6) (1.0)
Decrease in provisions (0.6) (3.1)
Cash generated by operations 186.8 204.1
Net income taxes paid (32.1) (9.0)
Settlement of derivatives - (0.3)
Net exchange differences (2.1) (3.2)
Net cash from operating activities 152.6 191.6
2024 2023
£m £m
Cash and cash equivalents comprise:
Cash and bank balances 19.1 45.2
Bank overdrafts (included in borrowings) (3.1) (0.5)
16.0 44.7
Cash and cash equivalents include £1.1m (2023: £1.3m) held in the USA
relating to the refund of a pension surplus which the Group intends to use to
fund future pension contributions for its USA employees to avoid the full
amount becoming subject to regulatory restrictions in the USA. Restricted cash
of £0.8m that was held in escrow as at 31 December 2023 related to
environmental provisions has been used to settle the related liability in the
year.
Alternative performance measures (APMs) – unaudited
The Group’s Financial Statements are prepared using the basis of preparation
and accounting policies described in the 2024 Annual report. To provide
additional information and analysis and to enable a full understanding of the
Group’s results, management also makes use of a number of APMs in its
internal management of the business and as part of its internal and external
reporting. These APMs are prepared and presented as described below:
Revenue excluding surcharges presents the revenue of the Group as it would be
excluding the effect of energy surcharges that were introduced in 2022 to pass
on increased fuel and energy costs to customers.
Adjusted results (including adjusted operating profit; adjusted profit before
tax; adjusted EBITDA; and adjusted tax charge) are defined as being the
respective GAAP measure excluding the effect of exceptional items, acquisition
costs and amortisation of acquired intangibles. These measures form the basis
of the Group’s internal reporting and are presented to give greater insight
into the ongoing trading performance of the Group excluding the effects of
acquisitions and one-off items.
Constant currency results (including constant currency revenue and constant
currency adjusted operating profit) present the 2024 results translated into
GBP using the same exchange rates as were used in 2023. Constant currency
results are intended to provide further insight into the trading performance
of the business excluding the effects of foreign exchange movements that are
beyond its control.
Organic results (including organic revenue and organic adjusted operating
profit) present the results of the business stated at constant currency
excluding the results of any businesses acquired or disposed of in either the
current or prior year. Organic results are provided to give greater insight
into the trading performance of the Group excluding the effects of changes to
the Group. In 2024, the only business excluded from the organic results is
Lake City which was acquired in January 2024. No businesses have been excluded
from 2023.
EBITDA (Earnings before interest, taxation, depreciation and amortisation) is
used by management to provide further information about the ability of its
businesses to generate cash before working capital and other movements. EBITDA
is stated before profits and losses on disposal of assets and impairment
charges in respect of assets. A similar measure is used for the Group’s
covenant calculation. A reconciliation of EBITDA to operating profit and cash
generated by activities is included in note 11 of these condensed consolidated
financial statements.
Core measures reflect the results of the Group’s two segments based on its
technology based platforms. Those segments include the parts of the business
that are expected to continue to exist once the Group’s strategic
optimisation programme is complete and so give an indication of performance of
the ongoing part of the Group.
Net Debt is defined as the Group’s borrowings (including finance lease
liabilities) net of the Group’s cash and overdrafts balance. It is used to
provide an overall picture of the net indebtedness of the Group.
Free cash flow is defined as the movement in the Group’s net debt excluding
payments made to the Group’s shareholders in respect of dividends and share
purchases, spend in relation to acquisitions of businesses and movements in
net debt due to lease liability additions and disposals. It is presented to
give an indication of the businesses’ ability to generate cash to support
acquisitive growth and return to shareholders.
Adjusted operating cashflow is defined as free cash flow adjusted to exclude
the effects of payments in respect of exceptional items (typically
restructuring payments), finance costs and net tax. Adjusted operating
cashflow forms part of the basis of the Group’s internal reporting and is
presented to give greater insight into the ongoing cash generation of the
Group before financing costs and excluding the effects of acquisitions and
one-off items. The definition of adjusted operating cashflow is consistent
with the definition of the equivalent adjusted profit measures.
Return on capital employed is defined as adjusted operating profit divided by
capital employed, which is defined as the average opening and closing net
assets adjusted for net (debt)/cash. Return on capital employed provides a
measure of how well the business has deployed capital to generate profit.
During the year the Group has renamed a number of its APMs from headline to
adjusted with no change to their definition other than where explained.
A reconciliation of each of the APMs to its nearest GAAP measure is set out
below. Whilst broadly consistent with the treatment adopted by both the
Group’s business sector peers and by other businesses outside of the
Group’s business sector, these APMs are not necessarily directly comparable
with those used by other companies.
Revenue excluding surcharges
2024
Specialist Technologies Precision Heat Treatment Total core Non-core Consolidated
£m £m £m £m £m
Total revenue 224.2 488.3 712.5 44.6 757.1
Less energy surcharges (4.0) (28.9) (32.9) (2.7) (35.6)
Total revenue excluding surcharges 220.2 459.4 679.6 41.9 721.5
2023
Specialist Technologies Precision Heat Treatment Total core Non-core Consolidated
£m £m £m £m £m
Total revenue 212.4 534.9 747.3 55.2 802.5
Less energy surcharges (7.4) (54.4) (61.8) (5.0) (66.8)
Total revenue excluding surcharges 205.0 480.5 685.5 50.2 735.7
Adjusted operating profit
Adjusted operating profit is reconciled to Operating Profit in note 1 of these
condensed consolidated financial statements.
Adjusted operating margin
2024
Specialist Technologies Precision Heat Treatment Central cost Total core Non-core Consolidated
and eliminations
£m £m £m £m £m £m
Adjusted Operating Profit 65.0 83.0 (20.4) 127.6 1.4 129.0
Revenue 224.2 488.3 - 712.5 44.6 757.1
Adjusted operating margin (%) 29.0% 17.0% n/a 17.9% 3.1% 17.0%
2023
Specialist Technologies Precision Heat Treatment Central cost Total core Non-core Consolidated
and eliminations
£m £m £m £m £m £m
Adjusted Operating Profit 55.2 94.4 (24.8) 124.8 2.8 127.6
Revenue 212.4 534.9 - 747.3 55.2 802.5
Adjusted operating margin (%) 26.0% 17.6% n/a 16.7% 5.1% 15.9%
Adjusted profit before taxation
2024 2023
£m £m
Profit before taxation 28.4 111.7
Add back:
Amortisation of acquired intangibles 10.4 8.1
Acquisition costs 2.4 0.3
Exceptional items 78.3 -
Adjusted profit before taxation 119.5 120.1
Revenue, organic revenue and adjusted operating profit at constant currency
Reconciled to revenue and adjusted operating profit in the table below:
2024
Specialist Technologies Precision Heat Treatment Central cost Total core Non-core Consolidated
and eliminations
£m £m £m £m £m £m
Revenue 224.2 488.3 - 712.5 44.6 757.1
Constant exchange rates adjustment 5.0 18.1 - 23.1 1.2 24.3
Revenue at constant currency 229.2 506.4 - 735.6 45.8 781.4
Less adjustments for revenue from acquisitions completed in the current or prior year (9.8) - - (9.8) - (9.8)
Organic revenue at constant currency 219.4 506.4 - 725.8 45.8 771.6
Adjusted operating profit 65.0 83.0 (20.4) 127.6 1.4 129.0
Constant exchange rates adjustment 1.4 3.5 - 4.9 - 4.9
Adjusted operating profit at constant currency 66.4 86.5 (20.4) 132.5 1.4 133.9
Less adjustments for operating profit from acquisitions completed in the current or prior year (4.1) - - (4.1) - (4.1)
Organic adjusted operating profit at constant currency 62.3 86.5 (20.4) 128.4 1.4 129.8
Adjusted EBITDA (earnings before interest, taxation, depreciation and
amortisation)
2024 2023
£m £m
EBITDA 185.9 198.6
Acquisition costs 2.4 0.3
Exceptional items, excluding impairments and disposal of business 10.4 -
Adjusted EBITDA 198.7 198.9
Adjusted EBITDA Margin 26.2% 24.8%
Adjusted operating cash flow1
2024 2023
£m £m
Adjusted EBITDA 198.7 198.9
Less:
Net capital expenditure (60.5) (72.0)
Principal elements of lease payments (13.5) (13.0)
Provisions movement (7.3) (0.9)
Working capital movement (1.9) (0.8)
Adjusted operating cash flow 115.5 112.2
Add back:
Maintenance principal elements of lease payments 12.4 10.1
Expansionary capital expenditure including ROU additions/disposals 20.4 27.8
Lease additions and disposals relating to maintenance capital expenditure (13.2) (10.6)
Adjusted operating cash flow as previously stated 1 135.1 139.5
1 In 2024 the definition of adjusted operating cash flow and free cash flow
has been updated to include expansionary capital expenditure, which was
previously recorded outside of both adjusted operating cash flow and free cash
flow. In addition, they have also both been restated to include the principal
element of lease payments and exclude non-cash movements in net debt arising
from lease liability asset additions and disposals. The restatement results in
a net reduction of £19.6m (31 December 2023: £27.3m) in adjusted operating
cash flow and free cash flow and the prior period comparatives have been
changed to reflect this. The Group considers that the revised definition more
appropriately reflects the cash flows of the business.
Free cash flow1
2024 2023
£m £m
Adjusted operating cash flow 115.5 112.2
Less:
Restructuring cash flows (3.9) (1.6)
Net income taxes paid (32.1) (9.0)
Net Interest paid (8.9) (6.4)
Free cash flow 70.6 95.2
Add back:
Maintenance principal elements of lease payments 12.4 10.1
Expansionary capital expenditure including ROU additions/disposals 20.4 27.8
Lease additions and disposals relating to maintenance capital expenditure (13.2) (10.6)
Free cash flow as previously stated 1 90.2 122.5
1 In 2024 the definition of adjusted operating cash flow and free cash flow
has been updated to include expansionary capital expenditure, which was
previously recorded outside of both adjusted operating cash flow and free cash
flow. In addition, they have also both been restated to include the principal
element of lease payments and exclude non-cash movements in net debt arising
from lease liability asset additions and disposals. The restatement results in
a net reduction of £19.6m (31 December 2023: £27.3m) in adjusted operating
cash flow and free cash flow and the prior period comparatives have been
changed to reflect this. The Group considers that the revised definition more
appropriately reflects the cash flows of the business.
Adjusted operating cash conversion
2024 2023
£m £m
Adjusted operating cash flow 115.5 112.2
Adjusted operating profit 129.0 127.6
Adjusted operating cash conversion 89.5% 87.9%
Free cash flow conversion
2024 2023
£m £m
Free cash flow 70.6 95.2
Adjusted operating profit 129.0 127.6
Free cash flow conversion 54.7% 74.6%
Adjusted tax charge
2024 2023
£m £m
Tax charge 7.7 24.9
Tax on amortisation of acquired intangibles 2.1 2.0
Tax on acquisition costs 0.6 0.1
Tax on exceptional items 18.0 -
Adjusted tax charge 28.4 27.0
Adjusted tax rate
2024 2023
£m £m
Adjusted tax charge 28.4 27.0
Adjusted profit before taxation 119.5 120.1
Adjusted tax rate 23.8% 22.5%
Adjusted earnings and adjusted earnings per share
A detailed reconciliation is provided in note 5 of these condensed
consolidated financial statements.
Net (debt)/cash excluding lease liabilities and net debt
2024 2023
£m £m
Cash and bank balances 19.1 45.2
Bank overdrafts (included in borrowings) (3.1) (0.5)
Bank loans (included in borrowings) (84.3) (32.1)
Net (debt)/cash excluding lease liabilities (68.3) 12.6
Lease liabilities (63.5) (64.3)
Net debt (131.8) (51.7)
Return on capital employed (%)
Year to 31 December 2024
Specialist Technologies Precision Heat Treatment Central cost Total core Non-core Consolidated
and eliminations
£m £m £m £m £m £m
Adjusted operating profit 65.0 83.0 (20.4) 127.6 1.4 129.0
Average capital employed 1 311.9 543.1 (57.0) 798.0 24.9 822.9
Return on capital employed (%) 20.8% 15.3% n/a 16.0% 5.6% 15.7%
Year to 31 December 2023
Specialist Technologies Precision Heat Treatment Central cost Total core Non-core Consolidated
and eliminations
£m £m £m £m £m £m
Adjusted operating profit 55.2 94.4 (24.8) 124.8 2.8 127.6
Average capital employed 1 310.5 545.8 (31.6) 824.7 38.1 862.8
Return on capital employed (%) 17.8% 17.3% n/a 15.1% 7.3% 14.8%
1 Average capital employed is defined as the average opening and closing net
assets adjusted for net debt.
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