23rd May 2006 15:05
EMBARGOED UNTIL 1505 HRS: 23 May 2006 ANNUAL GENERAL MEETING STATEMENT - 23 MAY 2006 Speaking at the Annual General Meeting today, James Wallace, Chairman reviewedthe Group's performance during 2005 and made the following comments concerningtrading during the current year:At the time of the preliminary results announcement on 28 February 2006 we werepleased to report a continuing uplift in the performance of the Group in 2005.This included a major improvement in sales, operating profit and free cash flowgeneration. We noted that we expected the improvement to continue into 2006.I am pleased to report that the current year continues to develop in line withour expectations both in terms of sales growth and margin improvement. Afterfour months trading, sales for the Group (in constant currencies and excludingthe discontinued electroplating business) are ahead of last year by 16.3% ofwhich 6.4% is organic and 9.9% from the previously announced acquisitions. TheGroup's key market sectors including aerospace, heavy truck and bus, powergeneration, oil & gas and health sciences have continued the positive trendsseen in 2005. The car and light truck sector has shown some softness in France,Italy and Sweden. However, the Group's outsourcing wins in automotive as awhole have offset these areas of weakness.Sales (in constant currencies) in Heat Treatment are ahead by 7.4 %, comparedwith the first four months of last year, with improvements in all regions. Ofthis increase, 5.1% is organic and 2.3% from acquisitions completed in 2005 inPoland, France and the UK. Margins continue their gradual improvement with theUK, USA and France to the fore. Energy costs have been well recovered in the UKand North America but, as expected, increases in Central Europe, as long termcontracts expire, have retarded margin improvement there. We remain confidentof cost recovery during the remainder of the year. HIP performance remainsstrong with sales in constant currencies ahead 10.3% (all organic) asaerospace, power generation and Densal‚® demand continues to increase.Testing has accelerated its strong record of sales growth with turnover (atconstant exchange rates) up 64.8% year on year, of which 10.9% comes fromexisting laboratories and 53.9% from acquired laboratories. The rapid growth ofour Testing business has, as expected, temporarily affected margins in theexisting business due to increased overhead as the infrastructure to supportthe larger business is created. The existing Testing Group comprises businessesthat typically have a range of margins from the low teens to in excess of 20%but with a narrow range of ROCE performance at or above the Group's target. Allof the 2006 acquisitions meet our ROCE targets although several are currentlyat the lower end of the margin range. Although we expect Testing ROCE to bemaintained, margins overall will be slightly below the performance in recentyears. We expect to continue the development of Testing via organic growth,continued outsourcing gains and by completing further value enhancing bolt-onacquisitions. During the remainder of this year we anticipate a slower rate ofacquisitions as we focus on integration, although the pipeline of opportunitiesremains strong.Our plan remains to invest around ‚£90m this year on bolt-on acquisitions ofwhich about 70% is expected to be in Testing. To date we have invested c. ‚£48mof which 95% has been in Testing. Control over costs and capital remains a keyfocus and annual wage settlements of around 2% on average are in the process ofbeing mitigated through price increases and productivity improvements.With the Group's key markets performing well we remain confident of meeting ourexpectations for the full year, however, we are well placed to respond to anychange in market conditions.In line with previous years, the Interim Results will be announced on Tuesday22 August 2006.For further information, please contact:Bodycote International PLC Tel +44 (0) 1625 505300 John D. Hubbard, Chief Executive David Landless, Finance Director Financial Dynamics Tel: +44 (0) 207 831 3113 Jon Simmons Sally Lewis ENDBODYCOTE INTERNATIONAL PLCRelated Shares:
Bodycote