25th May 2005 15:05
Bodycote International PLC25 May 2005 EMBARGOED UNTIL 1505 HRS: Wednesday 25 May 2005 ANNUAL GENERAL MEETING STATEMENT - 25 MAY 2005 Speaking at the Annual General Meeting, James Wallace, Chairman, reviewed theGroup's performance during 2004 and made the following comments concerningtrading during the current year: At the time of the preliminary results announcement on 1 March 2005, we werepleased to report a significant uplift in the performance of the Group in 2004after more than two years of difficult trading conditions. This included amajor improvement in sales, operating profit and free cash flow generation. Inaddition we established the PVD strategic alliance with IonBond and all butcompleted our exit from the electroplating business. This progress reflectedthe success of our 'self help' strategy and ensured that Bodycote was wellpositioned to benefit from any pick up in end markets, win new outsourcingcontracts and undertake selected value enhancing bolt-on acquisitions. I am now pleased to report that the current year continues to develop in linewith our expectations both in terms of sales growth and margin improvement.Most of the Group's key market sectors including aerospace, heavy truck & bus,power generation, oil & gas and health sciences have continued the growth trendsseen in 2004. The car and light truck sector has shown some softness in certaingeographies but this has been more than offset by continuing new business wins,notably in USA and Germany. Sales (in constant currencies) in Heat Treatment are ahead by 7%, compared withthe first four months of last year, with improvements in all regions. Of thisincrease, 5% is organic and 2% from the previously announced acquisitions inDenmark (July 2004) and Poland (February 2005). The UK is experiencing steadydemand in automotive and modest increases in aerospace and along with additionaloutsourcing has seen sales ahead by 11%. The Nordic region is experiencing highdemand in heavy truck and marine diesel, whilst our Central European Groupcontinues to benefit from the growth in automotive diesel technology. Aeroengine demand in France has picked up but there has been some softness in largevolume automotive components and tooling work continues a slow migration to lowcost countries. In North America aerospace demand is increasing but more so inour West Coast plants than in New England. Demand for titanium heat treatmentis high, the oil & gas sector is ahead strongly and Industrial Gas Turbinevolumes remain robust. Margins across the SBU continue their gradualimprovement. Materials Testing has continued with its strong record of sales growth withturnover (at constant exchange rates) up 14% year on year, of which 9% comesfrom existing laboratories and 5% from three small acquisitions in Canada (May2004) and the UK (December 2004 and January 2005). Margins have beenmaintained. In line with our strategy to accelerate the growth of our Materials Testingdivision, I am pleased to announce two further notable acquisitions. On 28April, 2005, Bodycote acquired the entire share capital of Law LaboratoriesLimited, a leading UK food testing specialist. Operating from purpose builtpremises in Birmingham, Law Laboratories had annual revenues in 2004 of £6.5mwith 160 employees and provides analytical testing and consumer advisoryservices to most of the major UK retail groups and their supply chains. Furtheracquisitions in this sub-sector are planned in the short term. On 20 May 2005, an agreement was signed to acquire CSM Materialteknik A.B. fromSAAB A.B. (subject to clearance from the Swedish Competition Authority). CSM isScandinavia's leading knowledge based company in the fields of applied materialsand process technologies and provides testing and consultancy services to theaerospace, defence and power generation industries. The business, whichoperates from three laboratories in Sweden, is headquartered in Linkoping andproduced revenues of £8.3m in 2004 with a staff of 105. Both acquisitions meet our target for return on capital and we anticipateimproving existing operating margins to the current Materials Testing SBUaverage within two years. We expect to continue the development of the Materials Testing via organicgrowth, continued outsourcing gains and by completing further value enhancingbolt-on acquisitions during the remainder of this year. The Hot Isostatic Pressing business is again providing excellent results, withpower generation demand strong and a pick up in commercial aviation. Sales (inconstant currencies) have increased by 12%. Surface engineering has recorded similar levels of sales to 2004 but profitshave been temporarily impacted, as anticipated, by start-up costs in theCoatAlloy(R) business. We expect a solid performance in the second half. The IonBond strategic alliance is performing in line with its targets. As expected, energy prices are higher in 2005 than 2004 but good progress hasbeen made to recover these additional costs. Cost control remains a key focusand annual wage settlements are in the process of being mitigated through priceincreases and productivity improvements. We remain confident of meeting our expectations for the full year and are wellplaced to respond to any change in market conditions. Work continues to restate historic financial information to InternationalFinancial Reporting Standards (IFRS). A conference call with analysts will beheld on 23 June to present a comparison between current UK GAAP and IFRS inrespect of the year ended 31 December 2004. For further information, please contact: John D. Hubbard, Chief Executive David Landless, Finance Director Bodycote International PLC Tel no: 01625 505300 Jon Simmons Sally Lewis Financial Dynamics Tel no: 020 7831 3113 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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