Interim report-2010

interim report 2010

ID5046_Bc_IR2010_Cover_06.indd 2 05/08/2010 17:05

COVER IMAGEThis photograph by Jane LaGoy shows the microstructure of a sample of an aluminium alloy casting that has undergone Hot Isostatic Pressing (HIP). The tree or skeleton-like dendrite structure is typical of aluminium. The HIP process removes voids and porosity in the casting but still preserves the original microstructure of the metal. The result is a component with many desirable features, including exceptional strength.

Bodycote continually improves the website offerings for both customers and investors. The most recent is the addition of an audio webcast of Bodycote’s 2010 Interim Results presentation in the Investor Relations section of the website. We invite you to view and to listen by visiting www.bodycote.com/audiocast

www.bodycote.com/audiocast


BODYCOTEINTERIMREPORT2010 1

FINANCIALHIGHLIGHTS

1‘Headline’excludesexceptionalitems.Exceptionalitemsaremajorfacilityclosurecostsofnil(2009:£19.8m),impairmentchargeofnil(2009:£28.6m)andamortisationofacquiredintangiblefixedassetsof£0.5m(2009:£0.7m).

2Headlineoperatingcashflowisdefinedasoperatingcashflowbeforecashflowrelatingtoexceptionalitemsof£7.2m(2009:£10.2m).3Operatingcashflowisdefinedascashgeneratedbyoperationsof£38.2m(2009:£34.2m)lessnetcapitalexpenditureof£15.7m(2009:£19.7m).4Adetailedreconciliationisprovidedinnote5oftheNotestotheCondensedConsolidatedFinancialInformation.5Seenote6oftheNotestotheCondensedConsolidatedFinancialInformation.6Returnoncapitalemployedisdefinedasheadlineoperatingprofitdividedbyaveragecapitalemployed.Capitalemployedisdefinedasnetassetsplusnetdebt.

CONTENTS

1 FinancialHighlights

2 InterimManagementReport

8 UnauditedCondensedConsolidatedIncomeStatement

8 UnauditedCondensedConsolidatedStatementofComprehensiveIncome

9 UnauditedCondensedConsolidatedBalanceSheet

10 UnauditedCondensedConsolidatedCashFlowStatement

11 UnauditedCondensedConsolidatedStatementofChangesinEquity

12 NotestotheCondensedConsolidatedFinancialInformation

23 IndependentReviewReport

24 ShareholderInformation

Halfyearto 30June 2010


Revenue £246.3m £227.9m

HeadlineOperatingProfit/(Loss)1 £22.5m £(1.7)m

OperatingProfit/(Loss) £22.0m £(50.8)m

HeadlineProfit/(Loss)BeforeTaxation1 £19.6m £(4.0)m

Profit/(Loss)BeforeTaxation £19.1m £(53.1)m

HeadlineOperatingCashFlow2 £29.7m £24.7m

OperatingCashFlow3 £22.5m £14.5m

NetDebt £87.5m £88.7m

BasicHeadlineEarnings/(Loss)PerShare4 7.8p (0.2)p

BasicEarnings/(Loss)PerShare4 7.6p (23.9)p

InterimDividendPerShare5 2.95p 2.95p

AnnualisedReturnonCapitalEmployed6 8.6% (0.6)%

ID5046_Bc_IR_2010_Inside_05.indd 1 30/07/2010 15:47

2 BODYCOTEINTERIMREPORT2010

OVERVIEWBodycotedemonstratedameaningfulstepforwardinperformanceinthefirsthalfof2010.Onrevenuesaheadofthefirstsixmonthsof2009by£18.4mto£246.3m,headlineoperatingprofitimprovedby£24.2mto£22.5m.

Therehasbeenabroadbasedimprovementindemandfromtheverylowlevelsthatexistedtwelvemonthsago,withthesecondquarterbeingstrongerthanthefirst.Thesemacrodrivenimprovements,ontheirown,onlyaccountforaportionofthemomentumevidentinthebusiness.Overall,macrodemandremainswellbelowhistoriclevelsandmanysegmentsareyettoshowmaterialdemandimprovements.Inthesegmentsthathaveimproved,theendofthelargedestockingmovementsinmanufacturingsupplychainsandmarketsharegainshavebeensubstantialdriversofthereversalofthesalestrends.Asyet,supplychainrestockingdoesnotappeartobeinevidenceinanymeaningfulway.SalestotheNorthAmericanautomotivesectorexemplifythesevariousfactors,whererevenuesareover100%aheadofH12009.

AcrosstheGroup,thetemptationtofillavailablecapacitywithcommodityorsubcontractedoverflowworkisbeingsuccessfullyavoidedandthisisresultinginanotableimprovementinmixintermsofthevalueofworkundertaken.This,combinedwiththefocusonoperationalefficiency,hasresultedinthegoodoperationalgearingthatisevidentinthefinancialresults.

Therestructuringprogrammestartedattheendof2008isnearlycomplete,exceptforongoingenvironmentalremediation.£27.5mofcashhasbeenspentwiththeremaining£21.0mtobeexpendedoverthenextseveralyears.Costsavingsareslightlyaheadofplanwith£22.0machievedinH12010comparedto£9.3mforthefirsthalfof2009.Annualisedcostsavingsarenowrunningat£44m.

Capitalexpenditurehasbeenmorerestrainedthaninprioryears,althoughanumberofcarefullyselectedinvestmentsareunderway.Asaresult,theratioofcapitalexpendituretodepreciationinH12010was0.7(2009:0.8).Therestraintoncapitalexpenditureandimprovedcashmanagementingeneralhasledtoasatisfactorycashperformanceinthefirsthalf.Thisperformancehasbeenachievednotwithstandingtheneedtofinancea£5.3mincreaseinreceivablesdrivenbythegrowthinsales.NetdebtattheendofJunestoodat£87.5m.

Bodycote’srecentlyimplementednewstrategyisdesignedtogeneratereturnsthataresuperiortothoseavailablefrommacroeconomicgrowthalone.DeploymentofthestrategyincludedtheformationoftheAGI(Automotive&GeneralIndustrial)andADE(Aerospace,Defence&Energy)businessgroups,eachfocusedontheirparticularmarketareas;thecreationofthreespecialfocusproprietarytechnologybusinessunits;anemphasisonbuildingbusinessintheemergingmarkets;andadriveforoperationalexcellence.

BoththeAGIandADEpartsofthebusinesshavemovedforward,withtargetedcustomerengagementprocessesandtailoredserviceofferingsshowingwins.WhileitisstillearlydaysforthespecialfocustechnologybusinessunitsofCPP(CorrosionPreventionProcesses),S3P(SpecialityStainlessSteelProcesses)andHIPPF(HIPProductFabrication),progressisalreadybeingmade,withHIPPFandS3Pinparticular,gainingconsiderabletractioncomparedtotheirembryonicstartingpoints.Themodernisationandexpansionofcapacityintheemergingmarketsisontrack.

TheGroup’skeyfinancialKPIsarereturnoncapitalemployed(ROCE)andheadlineoperatingmargin.Inthefirsthalfof2010,theannualisedROCEwas8.6%(2009:minus0.6%)andheadlineoperatingmarginwas9.1%(2009:minus0.7%).

Insummary,theseresultsdemonstratethattheworkundertakensofarinreshapingthebusinessandimprovingmanagementeffectivenessisdeliveringthebenefitsexpected.Theoverallenvironmentislessharshthantwelvemonthsago,butthegeneraleconomicrecoverystillappearstobeatanearlystage.Inthenearterm,andinthesecondhalfinparticular,tightoperationalcontrolremainskey.

BUSINESSREVIEWAerospace,Defence&EnergyResultsRevenuesforADEwere£98.4mforthefirstsixmonthsof2010comparedto£104.2minthesameperiodof2009(areductionof5.6%).Revenuesinconstantcurrencieswerelowerby3.6%,withimprovingaerospaceoriginalequipmentmanufacturer(OEM)demandbeingmorethanoffsetbyweaknessinaircraftmaintenancerequirementsandinpowergeneration.Actualrevenueswerereducedby2.0%asaresultofthestrengtheningofsterlingagainsttheeuroandtheUSdollar.

HeadlineoperatingprofitforADEimprovedby28.2%to£15.0m(2009:£11.7m),withheadlineoperatingmarginimprovingfrom11.2%to15.2%.Therestructuringprogrammedeliveredsavingsof£7.7mcomparedto£2.4minthesameperiodof2009.

Onaverage,capitalemployedinADEforthesixmonthsto30June2010was£239.3mcomparedto£244.2mfortheyearended31December2009,reflectingtheimpactoftherestructuringprogrammeandcontinuedrestraintincapitalexpenditure.Netcapitalexpenditureinthefirsthalfof2010was£5.6m(2009:£10.6m)whichrepresents0.6timesdepreciation(2009:1.1timesdepreciation).Returnoncapitalemployedinthefirsthalfof2010,onanannualisedbasis,roseto12.6%(2009:8.9%).

INTERIMMANAGEMENTREPORT



MarketsThefirsthalfof2010hasseenasteadyimprovementinsalestomostaerospaceOEMs.Incontrast,requirementsformaintenancerepairandoverhaulhavecontinuedtobeweak,asflyinghoursremainlow.Defencedemandhasremainedsolid.Overallaerospace&defencerevenuesdecreasedby6.3%comparedtothefirsthalfof2009.Powergenerationdemand,whichfellawaysharplyinthefinalquarterof2009,hascontinuedtodeclinemodestly.Salestothepowergenerationsectorfellby36.8%yearonyear,reflectingbothlowerenduserrequirementsandsignificantdestockinginthesupplychainandthisprincipallyaffectstheGroup’sHIPdensificationbusiness.Theoil&gassectorhascontinuedtheimprovementseenattheendof2009,withrevenuesahead1.8%comparedtothefirsthalfof2009.AcertainamountofgeneralindustrialworkisalsoprocessedintheGroup’sADEfacilitiesandstrengtheningdemandinthisareaalsohelpedperformance.

Automotive&GeneralIndustrialResultsAGIrevenueswere£147.9minthefirsthalfof2010whichcomparesto£123.7minthesameperiodof2009,anincreaseof19.6%,reflectingsustainedimprovementfromthefinalquarterof2009.Inconstantcurrenciesrevenueswereup19.4%asthestrengtheningofsterlingagainsttheeuroandtheUSdollarwaslargelyoffsetbyweakeningagainsttheSwedishkronerandBrazilianreal.

TheAGIbusinessmovedbacksharplyintoprofitwithheadlineoperatingprofitat£13.2m,whichcomparestoalossof£10.7minthefirsthalfof2009.Headlineoperatingmarginimprovedto8.9%fromminus8.6%inthefirsthalfof2009.Therestructuringprogrammeisprovidingsubstantialbenefitstothisbusinessandsavingsinthefirsthalfamountedto£14.3mcomparedto£6.9minthesameperiodof2009.

Netcapitalexpenditureforthefirsthalfof2010was£8.6m(2009:£8.6m),whichrepresents0.6timesdepreciation(2009:0.5timesdepreciation).Returnoncapitalemployedinthefirsthalfof2010,onanannualisedbasis,was8.6%(2009:minus6.5%).Onaverage,capitalemployedforthesixmonthsended30June2010was£306.1mcomparedto£315.1mfortheyearended31December2009,reflectingthecontinuationoftherestructuringprogrammeandlowlevelsofcapitalexpenditure.

MarketsandGeographiesThefirsthalfof2010hasseenawidespreadandstrongrecoveryinautomotiverequirements,partlyduetoincreasedcarsalesbutparticularlyreflectingtheendofdestocking.Gainsinmarketsharehavealsobenefitedmanyareas.Carandlighttruckrevenuesarehigherthanforthesameperiodof2009by47.9%.Salestotheheavytrucksectorhavesimilarlyimprovedstronglyandwereaheadofthefirsthalfof2009by63.1%.Generalindustrialdemandbegantheyearatalowerlevelthanthatseenattheendof2009butisnowimprovingandsalesareaheadyearonyearby7.1%.

InNorthAmerica,salestotheautomotivesectorbegantheyearmorestronglythanexpectedandhaveacceleratedastheyearhasprogressed,withrevenues100.2%higherinthefirsthalfof2010comparedtothesameperiodof2009.Incontrast,generalindustrialrequirementswerelowerinthefirstquarterof2010thanattheendof2009,butbegantoimproveinthesecondquarter.Yearonyearsalesforgeneralindustrialinthefirsthalfhaveincreasedby2.8%.

InWesternEuropeautomotivesaleshavealsobeenstronginthefirsthalfand,comparedtothefirsthalfof2009,revenuesareahead34.7%.Bodycote’sheavytruckbusinessisconcentratedinSwedenandGermanyanddemandhasimprovedsignificantly,withyearonyearrevenuegrowthof91.3%.Generalindustrialrevenueshavegrownmoreslowlythanautomotive,andyearonyearsalesgrowthhasbeen5.9%.

TheimpactoftheglobaleconomicrecessionwasbothlessmarkedandshorterindurationintheGroup’semergingmarketterritories.Incommonwiththedevelopedeconomies,automotivehasbeenthemajorengineofgrowth,withgeneralindustrialalsoimproving,butlessquickly.InEasternEurope,revenuesincreasedby27.7%,comparedtothesameperiodin2009.TheGroup’sBrazilianbusinessispartwaythroughasignificantreorganisationaimedatexitinglowvalue-addedworkbutneverthelessyearonyearsalesimprovedby42.6%.TherecoveryinAsia,whichstartedinthesecondhalfof2009,hascontinuedstronglyinthefirstsixmonthsof2010andrevenuehasincreasedby79.2%comparedtothefirsthalfof2009.

RESTRUCTURINGNonetadditionalrestructuringchargeshavebeenincurredinthefirsthalfof2010andnoneareanticipatedforthesecondhalf.RestructuringactionsarenowcompleteinmostpartsoftheGroup;theonlynotableexceptionsbeingFrance,BrazilandItaly,whichareallexpectedtobefinishedbytheendofthefirstquarterof2011.TherestructuringplaninFrancecommencedinthemiddleof2009andthetimingofexecutionhasbeensubjecttovariousregulatoryrequirements.InBrazilandItaly,actionscommencedtowardstheendof2009andworkisgoingaccordingtoplan,althoughthelengthyprocesstoobtainvariousregulatoryapprovalsmeanthatprogress,whiletoplan,isslowerthandesirable.Asummaryofexpenditureisprovidedbelow.

2008 2009 2010 2011 2012 &later

£m £m £m £m £m

Cashexpenditurebyyear 2.1 19.2 15.9 3.4 7.9

In2008and2009,asaresultoftheGroup’srestructuringprogramme,assetwritedownstotalling£55.3mandcashcostsof£47.7mwerechargedtotheincomestatement.Althoughthereisnoimpactintheincomestatement,thesterlingequivalentsumofcashcostsisnowexpectedtobe£48.5m,withthedifferenceduetomovementsinexchangerates.



INTERIMMANAGEMENTREPORT(CONTINUED)

Todate,£27.5mofcashcostshavebeenexpended,ofwhich£6.2mwasduringthefirsthalfof2010.Restructuringprovisionsoutstandingat30June2010amountedto£21.3m,ofwhich£0.3mrelatestoearlierrestructuringinitiatives.Inthesecondhalf,cashexpenditureisexpectedtobe£9.7mandin2011isforecasttobe£3.4m,with£7.9minlateryears.Beyondthefirstquarterof2011,expenditurerelatessolelytoenvironmentalremediation,hencetheextendedperiod.

Attheendof2009,theexpectedcumulativelevelofannualisedsavingsin2010was£43.0mcomparedto£30.4machievedin2009.Savingsinthefirsthalfof2010were£22.0m(2009:£9.3m).Cumulativefullyear2010savingsareexpectedtobe£44.5m,splitasfollows:

Total Western Europe

North America

Emerging Markets

£m £m £m £m

2009Actual 30.4 16.1 11.1 3.22010Expected 44.5 29.6 11.4 3.5

FINANCIALOVERVIEWRevenueandHeadlineOperatingProfit/(Loss)

Halfyearto30June

Revenue Headline

OperatingProfit/(Loss)

HeadlineOperating

Margin

2010 2009 2010 2009 2010 2009 £m £m £m £m % %

ADE 98.4 104.2 15.0 11.7 15.2 11.2

AGI 147.9 123.7 13.2 (10.7) 8.9 (8.6)

Total 246.3 227.9 28.2 1.0 11.4 0.4

HeadOfficeCosts .– .– (5.7) (2.7) .– .–

GroupTotal 246.3 227.9 22.5 (1.7) 9.1 (0.7)

Revenueforthehalfyearwas£246.3m(2009:£227.9m),anincreaseof8.1%comparedtothesameperiodlastyear.Inconstantcurrenciestheincreasewas8.8%(£20.1m),allgeneratedorganically,despite£4.8m(2.1%)ofrevenuesbeinglostduetositeclosures.Headlineoperatingprofitwas£22.5m(2009:loss£1.7m)andheadlineoperatingmarginwas9.1%(2009:minus0.7%).Operatingprofit,aftercharging£0.5m(2009:£0.7m)inrespectoftheamortisationofacquiredintangibles,nil(2009:£28.6m)forimpairmentandnil(2009:£19.8m)formajorfacilityclosurecosts,was£22.0m(2009:loss£50.8m).

Theincreaseinheadofficecostsprimarilyrelatestoincreasedsharebasedpaymentsandotherperformancerelatedremunerationcharges,reflectingtheimprovementintheGroup’sprofitability.

Headlineoperatingmarginsforthefirstsixmonthsimprovedsignificantlyinbothdivisionscomparedtothesameperiodin2009.ADEreportedaheadlineoperatingmarginof15.2%(2009:11.2%)andAGIreportedaheadlineoperatingmarginof8.9%(2009:minus8.6%).

Profit/(loss)beforetaxation Halfyearto30June

2010 2009 £m £m

Headlineoperatingprofit/(loss) 22.5 (1.7)Amortisationofacquiredintangiblefixedassets (0.5) (0.7)Impairmentcharge .– (28.6)Majorfacilityclosurecosts .– (19.8)

Operatingprofit/(loss) 22.0 (50.8)Netfinancecharge (2.9) (2.3)

Profit/(loss)beforetaxation 19.1 (53.1)

Headlineprofit/(loss)beforetaxation 2010 2009 £m £m

Headlineoperatingprofit/(loss) 22.5 (1.7)Netfinancecharge (2.9) (2.3)

Headlineprofit/(loss)beforetaxation 19.6 (4.0)

FinanceChargeThenetfinancechargefortheGroupwas£2.9mcomparedto£2.3min2009(seedetailsbelow).Theincreaseisaresultofhigheraveragenetdebt(£0.1m),increasedundrawncommittedfacilityfees(£0.6m)andthecostsofrefinancingearlierthisyear(£0.4m),offsetbylowerinterestrates(£0.4m)andalowerpensionfinancecharge(£0.1m).

HalfYearto30June

2010 2009 £m £m

Netinterestpayable (0.9) (1.2)Financingcosts (1.2) (0.2)Otherbankcharges (0.3) (0.3)Pensionfinancecharge (0.5) (0.6)

Financecharge (2.9) (2.3)



ExceptionalCostsExceptionalcostsforthefirstsixmonthsamountedto£0.5m(2009:£49.1m).Withimprovedmarketconditionsandthebenefitofthewiderangingrestructuringprogrammechargedin2008and2009,theBoardhasconcludedthatnoimpairmentchargewasrequiredinthefirsthalfof2010(2009:£28.6m).

Therewerenomajorfacilityclosurecostsinthefirsthalfof2010(2009:£19.8m).The£19.8mchargein2009wasmadeupof£8.4mforassetwrite-downsand£11.4mforcashcosts.Netcashexpenditureasaresultofthisprogrammewas£6.2minthefirsthalfof2010(2009:£11.4m),including£1.0mproceedsfromthedisposalofthreesites.

Cashflow HalfYearto30June

2010 2009 £m £m

EBITDA1 48.2 13.1Workingcapitalmovement (4.1) 19.2Provisionmovement (5.9) 1.9Netcapitalexpenditure (15.7) (19.7)

Operatingcashflow 22.5 14.5Interest (2.9) (2.9)Taxation (2.6) (27.0)

Freecashflow 17.0 (15.4)

Freecashflowfortheperiodwasaninflowof£17.0mcomparedtoanoutflowof£15.4minthefirstsixmonthsof2009.ThemajorcomponentoftheincreaseisthesignificantimprovementinEBITDA,althoughtheelevatedtradinglevelshavealsoresultedinanincreaseinworkingcapital.

Networkingcapitaloutflowsforthesixmonthperiodamountedto£4.1m(2009:inflow£19.2m).Inventoriesincreasedby£4.2m(2009:£0.4mdecrease)duetoworkinprogressonanumberofelectronbeamweldingmachines,whicharedueforshipmentinthesecondhalfoftheyear.Receivablesincreasedby£5.3m(2009:£27.8mdecrease)asaresultofimprovedtrading,buttheimpactwasmitigatedbyacontinuingfocusoncashcollection.Debtordaysoutstandingat30June2010were57days(2009:58days).Payablesincreasedby£5.4m(2009:£9.0mdecrease).

Provisionbalancesdecreasedby£5.9movertheperiod(2009:£1.9mincrease)reflectingcashexpenditureonrestructuring.

TheGrouphascontinuedtomanagecarefullyitscapitalexpenditureprogrammewhilstensuringnolossofcapability.Netcapitalexpenditureforthefirsthalfwas£15.7m(2009:£19.7m).Netcapitalexpendituretodepreciationwas0.7times(2009:0.8times).Majorcapitalprojectsthatwereinprogressduringthefirsthalfof2010includedthepurchaseandinstallationofnewequipmentinBrazil,anupgradeprojectintheUSAandadditionalequipmentinChina.

Incometaxespaidduringthefirstsixmonthswere£24.4mlowerthanin2009,whenpaymentsrelatedtothedisposaloftheTestingbusinessfelldue.

TaxationThetaxchargewas£5.1mintheperiod,comparedtoataxcreditof£7.9mforthesameperiodof2009.Theeffectivetaxratefortheperiodof26.7%resultsfromtheimpactofdifferingtaxratesineachofthenumerousworldwidelocationsinwhichtheGroupoperates.Thetaxraterepresentstheweightedaveragecorporationtaxrateexpectedforthefullfinancialyear.

Earnings/(Loss)PerShareBasicanddilutedearningspersharefromoperationsforthehalfyearwere7.6p(2009:loss23.9p).

DividendTheBoardhasdeclaredanunchangedinterimdividendof2.95p(2009:2.95p).Theinterimdividendwillbepaidon5November2010toallshareholdersontheregisteratthecloseofbusinesson8October2010.

NetDebtGroupnetdebtat30June2010was£87.5m(2009:£88.7m).Loansandlettersofcreditdrawnunderthecommittedfacilitiesat30June2010totalled£108.6m,comparedto£102.7mat31December2009.TheGroupcontinuestobeabletoborrowatcompetitiveratesandthereforecurrentlydeemsthistobethemosteffectivemeansoffunding.Gearingat30June2010was21%(2009:21%).

LiquidityandInvestmentsTheGroupisfinancedbyamixofcashflowsfromoperations,short-termborrowings,longer-termloansandfinanceleases.TheGroup’sfundingpolicyaimstoensurecontinuityoffinanceatreasonablecost,basedoncommittedfacilitiesfromseveralsourcesoveraspreadofmaturities.At30June2010,theGrouphadthefollowingcommittedfacilities:

Facility Expiry Date Facility

Loan Utilisation

Letterof Credit Utilisation

Facility Headroom

£m £m £m £m

£110mRevolvingCredit

31 March 2013 110.0 5.0 .– 105.0

1125mRevolvingCredit

31 July 2013 101.1 97.7 .– 3.4

$20mRevolvingCredit

31 March 2013 13.3 .– 5.9 7.4

224.4 102.7 5.9 115.8

1Earningsbeforeinterest,tax,depreciation,amortisation,impairmentandsharebasedpayment(seenote7)



INTERIMMANAGEMENTREPORT(CONTINUED)

TheGroupalsohasaccesstouncommittedandshort-termfacilities,usedprincipallytomanageday-to-dayliquidityandworkingcapitalrequirements.Inaddition,pooling,nettingandconcentrationtechniquesareusedtominimiseborrowings.

DefinedBenefitSchemesTheGroup’sdefinedbenefitpensionobligationshavebeenreviewedasat30June2010.TheIAS19deficitintheUKschemeincreasedto£7.2m(31December2009:£3.7m).Theincreaseisprimarilyasaresultofreducedcorporatebondyieldsandhencediscountrates.InFrance,foritsprimarilyunfundedcashlumpsumobligation,thedeficitis£5.2m(31December2009:£5.7m)andthesumofallotherGroupschemesis£5.2m(31December2009:£5.6m).

PRINCIPALRISKSANDUNCERTAINTIESOperationalThereareanumberofpotentialrisksanduncertaintieswhichcouldhaveamaterialimpactontheGroup’sperformanceovertheremainingsixmonthsofthefinancialyearandcouldcauseactualresultstodiffermateriallyfromexpectedandhistoricalresults.TheDirectorsdonotconsiderthattheprincipalrisksanduncertaintieshavechangedsincethepublicationoftheannualreportfortheyearended31December2009.Adetailedexplanationoftheriskssummarisedbelowcanbefoundonpages30to33ofthe2009AnnualReportwhichisavailableatwww.bodycote.com.

MarketsThekeyriskfacedbytheGroupisareductioninendmarketdemand.Forecastingthisdemand,givenshortvisibilityandtheuncertaintyfacedbymuchofBodycote’scustomerbase,isdifficultandmeanstheGroupmustremainconstantlyreadytoadapttothechangingenvironment.

CommercialRelationshipsTheGroupbenefitsfrommanylong-termandpartnershipagreementswithkeycustomers.Damageto,orlossof,anyoftheserelationshipsmaybedetrimentaltoGroupresults,althoughmanagementbelievethisishighlyunlikely.

CompetitorsBodycote’smarketsarefragmented,althoughlesssoinAerospace,Defence&Energy,andthismeansthattheactionsofcompetitorsaretypicallyfeltlocally,ratherthanacrosstheGroup.

HumanResourcesPeopleareBodycote’sgreatestassetandalsoformitslargestcost.TheGroupworkshardatmaintainingarespectfulandtrustingrelationshipwithallemployees,whilebeingrigorouswithregardtocostcontrol.

DefinedBenefitPensionArrangementsTheGroupprovidesretirementbenefitsforitsformerandcurrentemployeesthroughanumberofpensionschemesintheUKandoverseas.Futureactuarialvaluationsandannualfundingchecksfor

thesearrangementsmayrequireincreasedemployercontributions,thelevelofwhichwilldependoninvestmentperformance,mortalityrates,annuityratesandchangesinotheractuarialassumptions.

Safety&HealthTheGroup’sworkenvironmenthasnumerousandvariedrisks.Bodycotestrivestomitigatethesebyprovidingspecificsystems,equipment,trainingandsupervisionrelatingtodifferentworkingenvironments.Riskisevaluatedbyinternalandexternalresourcessothatitiscontinuouslymanagedandmitigated.

BrandandReputationAstheworldleaderintheprovisionofthermalprocessingservices,Bodycoteisavaluableandwell-knownbusiness-to-businessbrand.Anydamagetothebrandbecauseofthebreakdownofcommercialrelationships,non-compliancewithlawsandregulations,misuseofhumanorotherresourcesinbreachoftheGroup’scorporateethoscouldhaveanadverseimpactonthebusinessasawhole.

EnergyAnincreaseinenergycostisariskwhichtheGroupislargelyabletomitigate,althoughwithsometimelag,throughpriceadjustmentsorsurcharges.

OperationsTheGroup’sstringentqualitysystems,includinginternalandexternalauditsandaswellascustomers’verificationofresults,minimisestheriskofreleasingintouseworkwhichisnotincompliancewithspecification,whichcouldariseasaresultofsystemorhumanfailure.

EnvironmentSomeoftheGroup’sheattreatmentplantsusesolventsandotherhazardouschemicalsinsmallquantities.Wheresuchsubstancesareused,thereisthepotentialforgroundcontamination.Pastexposuresareprovidedforandremediatedasandwhenrequired.

FinancialTheGroup’streasuryfunctionprovidesacentralisedservicetotheGroupforfunding,foreignexchange,interestratemanagementandcounterpartyrisk.TreasuryactivitieshavetheobjectiveofminimisingriskandtreasuryoperationsareconductedwithinaframeworkofpoliciesandguidelinesauthorisedandreviewedbytheBoard.

TherehasbeennosignificantchangetothescopeormanagementoffinancialrisksfacedbytheGroupduringthefirsthalfof2010.

LiquidityRiskLiquidityriskarisesasaresultofmismatchesbetweencashinflowsandoutflowsfromthebusiness.Thisriskismonitoredonacentralisedbasisthroughregularcashflowforecasting,athree-yearrollingstrategicplan,anannualbudgetagreedbytheBoardeachDecemberandaquarterlyre-forecastundertakenduringthefinancialyear.FurtherdetailontheGroup’sliquiditypositionisonpage5.



InterestRateRiskInterestrateriskarisesonborrowingsandcashbalances(andderivativeliabilitiesandassets)whichareatfloatinginterestrates.

Asat30June2010,4%ofnetfinancialliabilitieswereatfixedrates(2009:6%).Theweightedaveragetenorofthefixedrateloansandleasesis4.2yearscomparedto3.9yearsat31December2009.

CurrencyRiskBodycotehasoperationsin27countriesandisthereforeexposedtoforeignexchangetranslationriskwhentheprofitsandnetassetsoftheseentitiesareconsolidatedintotheGroupaccounts.

Nearly90%oftheGroup’ssalesinthesixmonthstoJune2010areincurrenciesotherthansterling(principally,EUR39%,USD28%,SEK6%andBRL5%).

ItisGrouppolicynottohedgeexposureforthetranslationofreportedprofits.

ItisGrouppolicytohedgeexposuretocashtransactionsinforeigncurrencieswhenacommitmentarises,usuallythroughtheuseofforeignexchangeforwardcontracts.Eventhoughapproximately90%oftheGroup’ssalesaregeneratedoutsidetheUK,thenatureofthebusinessissuchthatcrossbordersalesandpurchasesarelimitedandsuchexposuresarethereforeconsideredimmaterialfortheGroup.

CounterpartyRiskGrouppolicyistoenterintofinancialcontractsonlywithcounterpartieswithalong-termcreditratingofA-/A3orbetter.ThecounterpartiestothefinancialinstrumentstransactedbytheGrouparemajorinternationalfinancialinstitutionsand,whilstthesecounterpartiesmayexposetheGrouptocreditlossesintheeventofnon-performance,itconsiderstheriskofmateriallosstobeacceptable.

CreditRiskThemajorityoftheGroup’stradereceivablesaredueforpaymentwithin60days.

Concentrationsofcreditriskwithrespecttotradereceivablesarelimited.TheGrouphasadiversecustomerbaseoftensofthousandsofcustomersandisnotreliantonanyonebusinesssector,endmarketorclient.Thelargestcustomerrepresentslessthan3%oftheGroup’srevenue.

GOINGCONCERNAsstatedinnote1tothecondensedconsolidatedfinancialstatements,theDirectorshaveformedajudgement,atthetimeofapprovingthecondensedfinancialstatements,thatthereisareasonableexpectationthattheGrouphasadequateresourcestocontinueinoperationalexistencefortheforeseeablefuture.ForthisreasontheDirectorscontinuetoadoptthegoingconcernbasisinpreparingthefinancialstatements.

CURRENTTRADINGANDOUTLOOKIntherecentTradingUpdate,issuedon9July2010,theBoardstatedthattheGrouphascontinuedtoseeasteadyandbroadbasedimprovementindemandsincethetimeoftheInterimManagementStatementon28April2010,asevidencedintheseinterimresults,andnotedthatfuturedemandlevelsremainuncertainandpossiblyuneven.Salesinthesecondhalfareexpectedtobeimpactedbytheusualseasonalpatternofcustomerrequirementsandarethereforelikelytobelowerthaninthefirsthalf.

TheBoard’sexpectationsforthefullyearhavenotchangedsincetheTradingUpdate,assumingthatcurrentlevelsofdemandaresustainedandallowingfornormalseasonaldifferences.

Againstthisbackground,theBoardisconfidentthatexecutionoftheGroup’sstrategywilldeliversuperiorshareholderreturnsoverthemediumterm.

StephenCHarrisChiefExecutive28July2010

DavidFLandlessGroupFinanceDirector28July2010

RESPONSIBILITY STATEMENTWe confirm to the best of our knowledge that:(a) The condensed consolidated set of financial statements has been prepared

in accordance with IAS 34 ‘Interim Financial Reporting’;(b) The interim statement includes a fair review of the information required

by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) The interim statement includes a fair review of the information required by DTR 4.2R (disclosure of related parties’ transactions and changes therein).

By order of the Board,

Stephen C Harris David F LandlessChief Executive Group Finance Director28 July 2010 28 July 2010

CAUTIONARY STATEMENTThis interim management report has been prepared solely to provide additional information to shareholders to assess the Group’s strategies and the potential for those strategies to succeed. The interim management report should not be relied on by any other party or for any other purpose. The interim management report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.



Yearended 31Dec 2009


Halfyearto 30June 2009 Note

£m £m £m

435.4 Revenue 246.3 227.9 2

(50.2) Operatingprofit/(loss) 22.0 (50.8) 2

8.0 Operatingprofit/(loss)priortoexceptionalitems 22.5 (1.7) (1.3) Amortisationofacquiredintangiblefixedassets (0.5) (0.7) (31.5) Impairmentcharge .– (28.6) (25.4) Majorfacilityclosurecosts .– (19.8)

(50.2) Operatingprofit/(loss) 22.0 (50.8) 2

1.5 Investmentrevenue 0.2 1.2 (5.8) Financecosts (3.1) (3.5)

(54.5) Profit/(loss)beforetaxation 19.1 (53.1) 3.4 Taxation (5.1) 7.9 4

(51.1) Profit/(loss)fortheperiod 14.0 (45.2)

Attributableto: (50.1) Equityholdersoftheparent 14.0 (44.5) (1.0) Minorityinterest .– (0.7)

(51.1) 14.0 (45.2)

Earnings/(loss)pershare 5 Pence Pence Pence (27.0) Basic 7.6 (23.9) (27.0) Diluted 7.6 (23.9)

Allactivitieshavearisenfromcontinuingoperations.

UNAUDITEDCONDENSEDCONSOLIDATEDINCOMESTATEMENT

UNAUDITEDCONDENSEDCONSOLIDATEDSTATEMENTOFCOMPREHENSIVEINCOME




£m £m £m


(4.8) Exchangedifferencesontranslationofforeignoperations (9.8) (10.6) (3.3) Actuariallossesondefinedbenefitpensionschemes (3.2) (2.7) 0.9 Taxonitemstakendirectlytoequity 0.9 0.7

(7.2) Othercomprehensiveexpensefortheperiod (12.1) (12.6)

(58.3) Totalcomprehensiveincome/(expense)fortheperiod 1.9 (57.8)

Attributableto: (57.3) Equityholdersoftheparent 1.8 (57.1) (1.0) Minorityinterests 0.1 (0.7)

(58.3) 1.9 (57.8)



UNAUDITEDCONDENSEDCONSOLIDATEDBALANCESHEET

Asat 31Dec 2009

Asat 30June 2010

Asat 30June 2009 Note

£m £m £m Non-currentassets 107.9 Goodwill 106.9 113.7 10.9 Otherintangibleassets 10.6 10.9 461.8 Property,plantandequipment 442.6 461.3 0.5 Interestsinassociatesandotherinvestments 0.5 3.7 0.5 Financeleasereceivables 0.2 0.7 56.9 Deferredtaxasset 57.8 53.6 0.1 Derivativefinancialinstruments .– 0.3 3.0 Tradeandotherreceivables 2.1 2.9

641.6 620.7 647.1

Currentassets 11.6 Inventories 15.0 12.2 0.4 Financeleasereceivables 0.5 0.4 0.6 Derivativefinancialinstruments .– 2.4 91.1 Tradeandotherreceivables 95.3 88.4 19.6 Cashandbankbalances 26.2 63.6 6.2 Assetsheldforsale 6.7 3.5

129.5 143.7 170.5

771.1 Totalassets 764.4 817.6

Currentliabilities 93.2 Tradeandotherpayables 96.6 90.8 5.5 Dividendspayable .– .– 11.4 Currenttaxliabilities 14.6 3.2 0.7 Obligationsunderfinanceleases 0.4 0.6 6.0 Borrowings 8.6 5.2 4.0 Derivativefinancialinstruments 0.2 6.0 21.3 Provisions 14.5 25.8 3 .– Liabilitiesdirectlyassociatedwithassetsclassifiedasheldforsale 0.5 .–

142.1 135.4 131.6

(12.6) Netcurrentassets/(liabilities) 8.3 38.9

Non-currentliabilities 96.8 Borrowings 103.2 144.2 15.0 Retirementbenefitobligations 17.6 15.2 73.4 Deferredtaxliabilities 71.7 71.1 1.6 Obligationsunderfinanceleases 1.5 2.3 0.4 Derivativefinancialinstruments .– 0.3 11.7 Provisions 13.1 13.1 3 7.5 Otherpayables 6.3 8.7

206.4 213.4 254.9

348.5 Totalliabilities 348.8 386.5

422.6 Netassets 415.6 431.1

Equity 32.5 Sharecapital 32.8 32.4 176.0 Sharepremiumaccount 176.0 175.9 (7.3) Ownshares (8.1) (6.8) 134.1 Otherreserves 135.8 134.8 26.3 Hedgingandtranslationreserves 16.4 20.5 58.7 Retainedearnings 60.4 70.3

420.3 Equityattributabletoequityholdersoftheparent 413.3 427.1

2.3 Minorityinterest 2.3 4.0

422.6 Totalequity 415.6 431.1



UNAUDITEDCONDENSEDCONSOLIDATEDCASHFLOWSTATEMENT



Halfyearto 30June 2009 Note

£m £m £m

11.0 Netcashfromoperatingactivities 32.6 (2.6) 7

Investingactivities (35.3) Purchasesofproperty,plantandequipment (15.4) (21.5) 4.3 Proceedsondisposalofproperty,plantandequipmentandintangibleassets 0.6 2.2 (1.2) Purchasesofintangiblefixedassets (0.9) (0.4) (0.5) Acquisitionofsubsidiaries/purchaseofminorityinterests .– .– 6.9 Disposalofsubsidiaries/associates .– .– (1.5) Lumpsumcontributiontopensionscheme .– .–

(27.3) Netcashusedininvestingactivities (15.7) (19.7)

Financingactivities 2.1 Interestreceived 0.1 3.4 (6.5) Interestpaid (3.0) (6.3) (20.0) Dividendspaid (15.5) (20.0) (0.1) Dividendspaidtoaminorityshareholder (0.1) .– (231.9) Repaymentsofbankloans (12.0) (160.1) (1.5) Paymentsofobligationsunderfinanceleases (0.4) (0.7) 41.1 Newbankloansraised 19.2 18.6 0.2 Newobligationsunderfinanceleases .– .– 0.4 Proceedsonissueofordinarysharecapital 0.3 0.2 0.9 Ownsharespurchased/settlementofshareoptions (0.8) 1.2

(215.3) Netcashusedinfinancingactivities (12.2) (163.7)

(231.6) Netincrease/(decrease)incashandcashequivalents 4.7 (186.0)

249.5 Cashandcashequivalentsatbeginningofperiod 16.3 249.5

(1.6) Effectofforeignexchangeratechanges (1.6) (3.2)

16.3 Cashandcashequivalentsatendofperiod 19.4 60.3



UNAUDITEDCONDENSEDCONSOLIDATEDSTATEMENTOFCHANGESINEQUITY

Share capital

Share premium account

Own shares

Other reserves

Hedging and translation reserves

Retained earnings

Equityattributable toequity holdersof theparent

Minority interest

Total equity

£m £m £m £m £m £m £m £m £mHalfyearto30June20101January2010 32.5 176.0 (7.3) 134.1 26.3 58.7 420.3 2.3 422.6

Netprofitfortheperiod .– .– .– .– .– 14.0 14.0 .– 14.0Exchangedifferencesontranslationofoverseasoperations .– .– .– .– (21.4) .– (21.4) 0.1 (21.3)Movementonhedgesofnetinvestments .– .– .– .– 11.5 .– 11.5 .– 11.5Actuariallossesondefinedbenefitpensionschemesnetofdeferredtax .– .– .– .– .– (2.3) (2.3) .– (2.3)

Totalcomprehensiveincome/(expense)fortheperiod .– .– .– .– (9.9) 11.7 1.8 0.1 1.9Issueofsharecapital 0.3 .– .– .– .– .– 0.3 .– 0.3Acquiredintheperiod/settlementofshareoptions .– .– (0.8) .– .– .– (0.8) .– (0.8)Share-basedpayments .– .– .– 1.7 .– .– 1.7 .– 1.7Dividendspaid .– .– .– .– .– (10.0) (10.0) (0.1) (10.1)

30June2010 32.8 176.0 (8.1) 135.8 16.4 60.4 413.3 2.3 415.6

Halfyearto30June20091January2009 32.4 175.7 (10.9) 137.3 31.1 126.4 492.0 4.9 496.9

Netlossfortheperiod .– .– .– .– .– (44.5) (44.5) (0.4) (44.9)Exchangedifferencesontranslationofoverseasoperations .– .– .– .– (89.9) .– (89.9) (0.5) (90.4)Movementonhedgesofnetinvestments .– .– .– .– 79.3 .– 79.3 .– 79.3Actuariallossesondefinedbenefitpensionschemesnetofdeferredtax .– .– .– .– .– (2.0) (2.0) .– (2.0)

Totalcomprehensiveexpensefortheperiod .– .– .– .– (10.6) (46.5) (57.1) (0.9) (58.0)Issueofsharecapital .– 0.2 .– .– .– .– 0.2 .– 0.2ReturnofcapitaltoshareholdersandredemptionofBshares .– .– .– 0.7 .– (0.7) .– .– .–Acquiredintheperiod/settlementofshareoptions .– .– 1.2 .– .– .– 1.2 .– 1.2Share-basedpayments .– .– 2.9 (3.2) .– 1.0 0.7 .– 0.7Dividendspaid .– .– .– .– .– (9.9) (9.9) .– (9.9)

30June2009 32.4 175.9 (6.8) 134.8 20.5 70.3 427.1 4.0 431.1

Yearended31December20091January2009 32.4 175.7 (10.9) 137.3 31.1 126.4 492.0 4.9 496.9

Netlossfortheyear .– .– .– .– .– (50.1) (50.1) (1.0) (51.1)Exchangedifferencesontranslationofoverseasoperations .– .– .– .– (63.1) .– (63.1) (0.2) (63.3)Movementonhedgesofnetinvestments .– .– .– .– 58.3 .– 58.3 .– 58.3Actuariallossesondefinedbenefitpensionschemesnetofdeferredtax .– .– .– .– .– (2.4) (2.4) .– (2.4)

Totalcomprehensiveexpensefortheyear .– .– .– .– (4.8) (52.5) (57.3) (1.2) (58.5)Issueofsharecapital 0.1 0.3 .– .– .– .– 0.4 .– 0.4ReturnofcapitaltoshareholdersandredemptionofBshares .– .– .– 0.7 .– (0.7) .– .– .–Acquiredintheyear/settlementofshareoptions .– .– 0.9 .– .– .– 0.9 .– 0.9Share-basedpayments .– .– 2.7 (3.9) .– 0.9 (0.3) .– (0.3)Dividendspaid .– .– .– .– .– (15.4) (15.4) (0.1) (15.5)Purchaseofminorityinterest .– .– .– .– .– .– .– (1.3) (1.3)

31December2009 32.5 176.0 (7.3) 134.1 26.3 58.7 420.3 2.3 422.6



NOTESTOTHECONDENSEDCONSOLIDATEDFINANCIALINFORMATION

1. Accountingpolicies

BasisofpreparationThiscondensedsetoffinancialstatementsforthehalfyearended30June2010hasbeenpreparedinaccordancewithIAS34,‘Interimfinancialreporting’.

TheInterimManagementReporthasbeenpreparedusingaccountingpoliciesconsistentwithInternationalFinancialReportingStandards(IFRSs)asadoptedbytheEuropeanUnionandinaccordancewiththosedisclosedintheannualreportfortheyearended31December2009,whichwasfiledwiththeRegistrarofCompanieson7May2010.

GoingconcernIndeterminingthebasisofpreparationfortheInterimManagementReport,theDirectorshaveconsideredtheGroup’sbusinessactivities,togetherwiththefactorslikelytoaffectitsfuturedevelopment,performanceandpositionwhicharesetoutintheFinancialOverview.ThisincludesanoverviewoftheGroup’sfinancialposition,itscashflows,liquiditypositionandborrowingfacilities.

TheGroupmeetsitsworkingcapitalrequirementsthroughacombinationofcommittedanduncommittedfacilitiesandoverdrafts.Theoverdraftsanduncommittedfacilitiesarerepayableondemandbutthecommittedfacilitiesaredueforrenewalassetoutbelow.Thereissufficientheadroominthecommittedfacilitycovenantstoassumethatthesefacilitiescanbeoperatedascontractedfortheforeseeablefuture.

US$20mRevolvingCreditFacilitymaturing31March2013

£110mRevolvingCreditFacilitymaturing31March2013

1125mRevolvingCreditFacilitymaturing31July2013

TheGroupissubjecttoanumberofsignificantrisksanduncertainties,whicharesetoutintheFinancialOverview.TheDirectorsbelievethattheGroupisadequatelyplacedtomanageitsbusinessrisks.Inaddition,theDirectorsconsiderthat,theGroup’sforecastsandprojections,takingaccountofreasonablepotentialchangesintradingperformance,showthattheGroupshouldbeabletooperatewithinthelevelofitscurrentcommittedfacilities.

Aftermakingenquiries,theDirectorshaveformedajudgement,atthetimeofapprovingthefinancialstatements,thatthereisareasonableexpectationthattheGrouphasadequateresourcestocontinueinoperationalexistencefortheforeseeablefuture.ForthisreasontheDirectorscontinuetoadoptthegoingconcernbasisinpreparingthefinancialstatements.

ChangesinaccountingpolicyThesameaccountingpolicies,presentationandmethodsofcomputationarefollowedinthecondensedsetoffinancialstatementsasappliedintheGroup’slatestannualauditedfinancialstatements.

CopiesofthisreportandthelastAnnualReportandAccountsareavailablefromtheSecretary,Bodycoteplc,SpringwoodCourt,SpringwoodClose,TytheringtonBusinessPark,Macclesfield,CheshireSK102XF,andcaneachbedownloadedorviewedviatheGroup’swebsiteatwww.bodycote.com.CopiesofthisreporthavealsobeensubmittedtotheUKListingAuthority,andwillshortlybeavailableattheUKListingAuthority’sDocumentViewingFacilityat25TheNorthColonnade,CanaryWharf,LondonE145HS(Telephone+44(0)2076761000).

2. Businessandgeographicalsegments

TheGroupadoptedIFRS8‘OperatingSegments’witheffectfrom1January2009.However,followingthecompletionofthereorganisationoftheGroup’sstructureinthesecondhalfof2009,thecomparativesfortheinterimperiodhavebeenrestatedtoreflecttherevisedstructure.

Principally,thissplitstheGroupintotwobusinessareas,being:

Aerospace,Defence&Energy(‘ADE’);and

Automotive&GeneralIndustrial(‘AGI’).

Thisinitialsplitisdeterminedfollowingconsiderationoffactorsincludingthedifferentcustomersets,differingservicerequirementsanddifferentcharacteristicsofbusinessactivity.AfurthersplitisthenmadefortherevisedgeographicaldivisionalsplitoftheGroup,being:

WesternEurope;

NorthAmerica;and

EmergingMarkets.



2. Businessandgeographicalsegmentscontinued

Halfyearto30June2010

Group ADE AGI

Head Officeandeliminations

Total Group

£m £m £m £mRevenueTotalrevenue 98.4 147.9 .– 246.3

ResultSegmentresultpriortoexceptionalitems 15.0 13.2 .– 28.2Unallocatedcorporateexpenses .– .– (5.7) (5.7)

Headlineoperatingprofit/(loss) 15.0 13.2 (5.7) 22.5

Amortisationofacquiredintangiblefixedassets (0.3) (0.2) .– (0.5)

Segmentresult 14.7 13.0 (5.7) 22.0

Investmentrevenue 0.2Financecosts (3.1)

Profitbeforetaxation 19.1Taxation (5.1)

Profitfortheperiod 14.0

Inter-segmentsalesarenotmaterial.TheGroupdoesnotrelyonanymajorcustomers.

Aerospace,Defence&Energy Western Europe

North America

Emerging markets

Total ADE

£m £m £m £mRevenueTotalrevenue 45.3 52.7 0.4 98.4

ResultHeadlineoperatingprofit/(loss) 6.6 8.6 (0.2) 15.0

Amortisationofacquiredintangiblefixedassets (0.1) (0.2) .– (0.3)

Segmentresult 6.5 8.4 (0.2) 14.7

Automotive&GeneralIndustrial Western Europe

North America

Emerging markets

Total AGI


ResultHeadlineoperatingprofit 9.5 3.2 0.5 13.2

Amortisationofacquiredintangiblefixedassets .– .– (0.2) (0.2)

Segmentresult 9.5 3.2 0.3 13.0





Halfyearto30June2009(restated)

Group ADE AGI

Head Officeand eliminations

Total Group


ResultSegmentresultpriortoexceptionalitems 11.7 (10.7) .– 1.0Unallocatedcorporateexpenses .– .– (2.7) (2.7)

Headlineoperatingprofit/(loss) 11.7 (10.7) (2.7) (1.7)

Amortisationofacquiredintangiblefixedassets (0.3) (0.4) .– (0.7)Impairmentcharge (5.0) (23.6) .– (28.6)Majorfacilityclosurecosts (1.2) (18.6) .– (19.8)

Segmentresult 5.2 (53.3) (2.7) (50.8)


Lossbeforetaxation (53.1)Taxation 7.9

Lossfortheperiod (45.2)


North America

Emerging markets

Total ADE



Amortisationofacquiredintangiblefixedassets (0.2) (0.1) .– (0.3)Impairmentcharge .– (5.0) .– (5.0)Majorfacilityclosurecosts (0.9) (0.3) .– (1.2)

Segmentresult 4.3 1.1 (0.2) 5.2


North America

Emerging markets

Total AGI


ResultHeadlineoperatingloss (8.4) (0.3) (2.0) (10.7)

Amortisationofacquiredintangiblefixedassets .– .– (0.4) (0.4)Impairmentcharge .– (20.0) (3.6) (23.6)Majorfacilityclosurecosts (15.8) (0.3) (2.5) (18.6)

Segmentresult (24.2) (20.6) (8.5) (53.3)




Yearended31December2009

Group ADE AGI


Total Group


ResultSegmentresultpriortoexceptionalitems 24.7 (13.3) .– 11.4Unallocatedcorporateexpenses .– .– (3.4) (3.4)

Headlineoperatingprofit/(loss) 24.7 (13.3) (3.4) 8.0

Amortisationofacquiredintangiblefixedassets (0.6) (0.7) .– (1.3)Impairmentcharge (5.0) (25.7) (0.8) (31.5)Majorfacilityclosurecosts 0.9 (25.9) (0.4) (25.4)

Segmentresult 20.0 (65.6) (4.6) (50.2)


Lossbeforetaxation (54.5)Taxation 3.4

Lossfortheyear (51.1)


North America

Emerging markets

Total ADE



Amortisationofacquiredintangiblefixedassets (0.3) (0.3) .– (0.6)Impairmentcharge .– (5.0) .– (5.0)Majorfacilityclosurecosts (1.0) 1.9 .– 0.9

Segmentresult 10.4 9.9 (0.3) 20.0


North America

Emerging markets

Total AGI


ResultHeadlineoperatingprofit/(loss) (10.1) 0.6 (3.8) (13.3)

Amortisationofacquiredintangiblefixedassets (0.1) .– (0.6) (0.7)Impairmentcharge (3.0) (20.0) (2.7) (25.7)Majorfacilityclosurecosts (16.9) 0.1 (9.1) (25.9)

Segmentresult (30.1) (19.3) (16.2) (65.6)




Otherinformation

Halfyearto30June2010

Group ADE AGI

Head Officeandeliminations

Total Group

£m £m £m £m

Capitaladditions 5.6 9.3 1.4 16.3Depreciationandamortisation 9.1 14.9 0.5 24.5

BalancesheetAssets:Segmentassets 319.1 448.3 (3.5) 763.9Interestsinassociatesandotherinvestments .– 0.5 .– 0.5

Totalsegmentassets 319.1 448.8 (3.5) 764.4

Liabilities:Segmentliabilities 56.8 120.9 171.1 348.8

Segmentnetassets/(liabilities) 262.3 327.9 (174.6) 415.6


North America

Emerging markets

Total ADE

£m £m £m £m

Capitaladditions 3.2 2.4 .– 5.6Depreciationandamortisation 4.9 4.1 0.1 9.1

BalancesheetAssets:Segmentassets 162.6 154.7 1.8 319.1Interestsinassociatesandotherinvestments .– .– .– .–

Totalsegmentassets 162.6 154.7 1.8 319.1


Segmentnetassets 136.0 124.8 1.5 262.3


North America

Emerging markets

Total AGI

£m £m £m £m

Capitaladditions 3.8 0.5 5.0 9.3Depreciationandamortisation 11.2 1.6 2.1 14.9

BalancesheetAssets:Segmentassets 309.6 62.4 76.3 448.3Interestsinassociatesandotherinvestments 0.5 .– .– 0.5








Otherinformation

Halfyearto30June2009(restated)

Group ADE AGI


Total Group

£m £m £m £m

Capitaladditions 11.9 9.5 0.5 21.9Depreciationandamortisation 9.4 16.5 0.3 26.2Impairmentlossesrecognisedinincome 5.3 31.7 .– 37.0

BalancesheetAssets:Segmentassets 338.4 447.1 28.4 813.9Interestsinassociatesandotherinvestments .– 3.7 .– 3.7





North America

Emerging markets

Total ADE

£m £m £m £m

Capitaladditions 5.8 6.1 .– 11.9Depreciationandamortisation 5.1 4.2 0.1 9.4Impairmentlossesrecognisedinincome 0.3 5.0 .– 5.3






North America

Emerging markets

Total AGI

£m £m £m £m

Capitaladditions 5.4 1.6 2.5 9.5Depreciationandamortisation 12.7 1.4 2.4 16.5Impairmentlossesrecognisedinincome 6.8 20.0 4.9 31.7

BalancesheetAssets:Segmentassets 338.5 40.2 68.4 447.1Interestsinassociatesandotherinvestments 0.5 .– 3.2 3.7








Otherinformation

Yearended31December2009

Group ADE AGI


Total Group

£m £m £m £m


BalancesheetAssets:Segmentassets 331.2 464.2 (24.8) 770.6Interestsinassociatesandotherinvestments .– 0.5 .– 0.5

Totalsegmentassets 331.2 464.7 (24.8) 771.1




North America

Emerging markets

Total ADE

£m £m £m £m

Capitaladditions 14.5 6.8 .– 21.3Depreciationandamortisation 9.5 8.3 0.1 17.9Impairmentlossesrecognisedinincome (0.2) 6.1 .– 5.9






North America

Emerging markets

Total AGI

£m £m £m £m


BalancesheetAssets:Segmentassets 334.0 58.6 71.6 464.2Interestsinassociatesandotherinvestments 0.5 .– .– 0.5






3. Provisions

Restructuring Restructuring Environmental Environmental Total

£m £m £m £m

1January2010 17.6 9.5 5.9 33.0Increaseinprovision 0.2 0.8 0.3 1.3Utilisationofprovision (6.4) (0.8) .– (7.2)Exchangedifference (0.2) 0.6 0.1 0.5

30June2010 11.2 10.1 6.3 27.6

Includedincurrentliabilities 14.5Includedinnon-currentliabilities 13.1

27.6

TherestructuringprovisionrelatestotheremainingcostsassociatedwiththeclosureofvariousThermalProcessingsites.FurtherdetailsarecontainedintheInterimManagementReport.

TheGroupprovidesforthecostsofenvironmentalremediationthathavebeenidentified,eitheraspartofacquisitionduediligence,orinothercircumstanceswhereremediationbytheGroupisrequired.Thisprovisionisreviewedsemi-annually.TheenvironmentalprovisionhasbeenseparatedintoRestructuringEnvironmentalandEnvironmental,toseparatelyidentifyenvironmentalprovisionsrelatingtotherestructuringandthosearisingintheordinarycourseofbusiness.

Cashoutflowsinrespectoftheseliabilitiesareexpectedtooccurwithin5years.

DuringtheperiodtheGrouprealisedgainsondisposalofassetsof£1.0masaresultofrestructuring.

4. Taxation




£m £m £mCurrenttax:

2.0 Currenttax-chargefortheperiod 5.6 (3.3) 1.8 Currenttax-adjustmentsinrespectofpriorperiods 0.3 (0.3)

3.8 TotalCurrenttax 5.9 (3.6)

(7.2) Deferredtax (0.8) (4.3)

(3.4) Total 5.1 (7.9)

Therateoftaxfortheinterimperiodis26.7%(2009interim:14.9%)oftheprofitbeforetax.Therateoftaxisreflectiveoftheimpactofblendingprofitsandlossesfromdifferentcountriesandthedifferenttaxratesassociatedwiththosecountries.

Itisnotexpectedthattheproposed1%reductionintheUK’scorporatetaxratefrom2011willhaveasignificantimpactontheGroup’sdeferredtaxbalances.




5. Earnings/(loss)pershare

Fromcontinuingoperations

Thecalculationofthebasicanddilutedearnings/(loss)pershareisbasedonthefollowingdata:




£m £m £m Earnings/(loss)

(50.1)Earnings/(loss)forthepurposeofbasicearnings/(loss)persharebeingnetprofitattributabletoequityholdersoftheparent 14.0 (44.5)

Numberofshares Number Number Number

185,557,762Weightedaveragenumberofordinarysharesforthepurposesofbasicearnings/(loss)pershare 185,117,564 185,902,392

Effectofdilutivepotentialordinaryshares: 16,466 Shareoptions 133,331 6,724

185,574,228Weightedaveragenumberofordinarysharesforthepurposesofdilutedearnings/(loss)pershare 185,250,895 185,909,116

Earnings/(loss)pershare Pence Pence Pence

(27.0) Basic 7.6 (23.9)

(27.0) Diluted 7.6 (23.9)

Headlineearnings/(loss) £m £m £m

(50.1) Netprofit/(loss)attributabletoequityholdersoftheparent 14.0 (44.5) Addback: 31.5 Impairmentcharge .– 28.6 1.2 Amortisationofacquiredintangiblefixedassets 0.4 0.7 18.1 Majorfacilityclosurecosts .– 14.8

0.7 Headlineearnings/(loss) 14.4 (0.4)

Headlineearnings/(loss)pershare Pence Pence Pence

0.4 Basic 7.8 (0.2)

0.4 Diluted 7.8 (0.2)



6. Dividends

Amountsrecognisedasdistributionstoequityholdersintheperiod:




£m £m £m

9.9 Finaldividendfortheyearended31December2008of5.35ppershare .– 9.9 5.5 Interimdividendfortheyearended31December2009of2.95ppershare .– .– 0.7 Bsharespecialdividendorredemptionfortheyearended31December2008of40.00ppershare .– .– .– Finaldividendfortheyearended31December2009of5.35ppershare 10.0 .–

16.1 10.0 9.9

Proposedinterimdividendfortheyearended31December2010of2.95p(2009:2.95p)pershare 5.5 5.5

TheproposedinterimdividendwasapprovedbytheBoardon28July2010andhasnotbeenincludedasaliabilityinthesefinancialstatements.

7. Notestothecashflowstatement




£m £m £m


Adjustmentsfor: (1.5) Investmentrevenues (0.2) (1.2) 5.8 Financecosts 3.1 3.5 (3.4) Taxation 5.1 (7.9) 48.5 Depreciationofproperty,plantandequipment 23.4 25.0 2.4 Amortisationofintangibleassets 1.1 1.2 (0.1) Loss/(gain)ondisposalofproperty,plantandequipment .– .– (0.1) Share-basedpayments 1.7 0.7 31.5 Impairmentcharge .– 28.6 12.6 Majorfacilityclosurecosts .– 8.4

44.6 EBITDA* 48.2 13.1

1.4 (Increase)/decreaseininventories (4.2) 0.4 29.2 (Increase)/decreaseinreceivables (5.3) 27.8 (21.6) Increase/(decrease)inpayables 5.4 (9.0) (5.9) (Decrease)/increaseinprovisions (5.9) 1.9

47.7 Cashgeneratedbyoperations 38.2 34.2

(12.3) Cashoutflowfromsettlementofderivativefinancialinstruments (3.0) (9.8) (24.4) Incometaxespaid (2.6) (27.0)

11.0 Netcashfromoperatingactivities 32.6 (2.6)

*Earningsbeforeinterest,tax,depreciation,amortisation,impairmentandshare-basedpayments.

Cashandcashequivalentscomprise:

19.6 Cashandbankbalances 26.2 63.6 (3.3) Bankoverdrafts(includedinBorrowings) (6.8) (3.3)

16.3 19.4 60.3




8. Relatedpartytransactions

Transactionsbetweenthecompanyanditssubsidiaries,whicharerelatedparties,havebeeneliminatedonconsolidationandarenotdisclosedinthisnote.TransactionsbetweentheGroupanditsassociatesaredisclosedbelow.

Tradingtransactions

Duringtheperiod,GroupcompaniesenteredintothefollowingtransactionswithrelatedpartieswhoarenotmembersoftheGroup:




£m £m £m

3.3 Saleofgoodsandservices 1.7 1.8 0.2 Purchaseofgoodsandservices 0.1 0.1 .– Amountsowedtorelatedparties .– .– 18.0 Amountsowedbyrelatedparties 19.4 16.6

Salesofgoodsandservicesincludepaymentsreceivedfromfinanceleases,theprovisionofmanagementservicesandinterestreceivable.Alltransactionsweremadeatarm’slength.

Theamountsoutstandingwillbesettledincash,noneofwhicharesecured(2009Interim:£0.4m).Noguaranteeshavebeengivenorreceived.£18.6m(2009Interim:£14.7m)ofprovisionshavebeenmadefordoubtfuldebtsofwhich£1.3m(2009Interim:£1.0m)wasexpensedduringtheperiodinrespectofamountsowedbyrelatedparties.

9. Generalinformation

Theinformationfortheyearended31December2009containedwithinthesecondensedinterimfinancialstatementsdoesnotconstitutestatutoryaccountsasdefinedinsection434oftheCompaniesAct2006.AcopyofthestatutoryaccountsforthatyearhasbeendeliveredtotheRegistrarofCompanies.Theauditors’reportonthoseaccountswasnotqualified,didnotdrawattentiontoanymattersbywayofemphasis,anddidnotcontainastatementundersection498(2)or(3)oftheCompaniesAct2006.



INDEPENDENTREVIEWREPORTTOBODYCOTEPLC

WehavebeenengagedbytheCompanytoreviewthecondensedsetoffinancialstatementsinthehalf-yearlyfinancialreportforthesixmonthsended30June2010whichcomprisesthecondensedconsolidatedincomestatement,thecondensedconsolidatedstatementofcomprehensiveincome,thecondensedconsolidatedbalancesheet,thecondensedconsolidatedcashflowstatement,thecondensedconsolidatedstatementofchangesinequityandrelatednotes1to9.Wehavereadtheotherinformationcontainedinthehalf-yearlyfinancialreportandconsideredwhetheritcontainsanyapparentmisstatementsormaterialinconsistencieswiththeinformationinthecondensedsetoffinancialstatements.

ThisreportismadesolelytotheCompanyinaccordancewithInternationalStandardonReviewEngagements(UKandIreland)2410‘ReviewofInterimFinancialInformationPerformedbytheIndependentAuditoroftheEntity’issuedbytheAuditingPracticesBoard.OurworkhasbeenundertakensothatwemightstatetotheCompanythosematterswearerequiredtostatetotheminanindependentreviewreportandfornootherpurpose.Tothefullestextentpermittedbylaw,wedonotacceptorassumeresponsibilitytoanyoneotherthantheCompanyforourreviewwork,forthisreport,orfortheconclusionswehaveformed.

Directors’responsibilitiesThehalf-yearlyfinancialreportistheresponsibilityof,andhasbeenapprovedby,theDirectors.TheDirectorsareresponsibleforpreparingthehalf-yearlyfinancialreportinaccordancewiththeDisclosureandTransparencyRulesoftheUnitedKingdom’sFinancialServicesAuthority.Asdisclosedinnote1theannualfinancialstatementsoftheGrouparepreparedinaccordancewithIFRSsasadoptedbytheEuropeanUnion.Thecondensedsetoffinancialstatementsincludedinthishalf-yearlyfinancialreporthasbeenpreparedinaccordancewithInternationalAccountingStandard34,‘InterimFinancialReporting’,asadoptedbytheEuropeanUnion.

OurresponsibilityOurresponsibilityistoexpresstotheCompanyaconclusiononthecondensedsetoffinancialstatementsinthehalf-yearlyfinancialreportbasedonourreview.

ScopeofReviewWeconductedourreviewinaccordancewithInternationalStandardonReviewEngagements(UKandIreland)2410‘ReviewofInterimFinancialInformationPerformedbytheIndependentAuditoroftheEntity’issuedbytheAuditingPracticesBoardforuseintheUnitedKingdom.Areviewofinterimfinancialinformationconsistsofmakinginquiries,primarilyofpersonsresponsibleforfinancialandaccountingmatters,andapplyinganalyticalandotherreviewprocedures.AreviewissubstantiallylessinscopethananauditconductedinaccordancewithInternationalStandardsonAuditing(UKandIreland)andconsequentlydoesnotenableustoobtainassurancethatwewouldbecomeawareofallsignificantmattersthatmightbeidentifiedinanaudit.Accordingly,wedonotexpressanauditopinion.

ConclusionBasedonourreview,nothinghascometoourattentionthatcausesustobelievethatthecondensedsetoffinancialstatementsinthehalf-yearlyfinancialreportforthesixmonthsended30June2010isnotprepared,inallmaterialrespects,inaccordancewithInternationalAccountingStandard34asadoptedbytheEuropeanUnionandtheDisclosureandTransparencyRulesoftheUnitedKingdom’sFinancialServicesAuthority.

DeloitteLLPCharteredAccountantsandStatutoryAuditorsManchester,UnitedKingdom28July2010



FINANCIALCALENDAR

Interimdividendfor2010 5November2010

Resultsfor2010 February2011

AnnualGeneralMeeting April2011

Finaldividendfor2010 May2011

Interimresultsfor2011 July2011

Interimdividendfor2011 November2011

SHAREHOLDERENQUIRIES

EnquiriesonthefollowingadministrativematterscanbeaddressedtotheCompany’sregistrars,CapitaRegistrars,NorthernHouse,WoodsomePark,FenayBridge,HuddersfieldHD80LA.Telephone:08716640300(callsto0871numberscost10pperminuteplusnetworkextras)or+44(0)2086393399;Fax:+44(0)1484600911;andemail:[email protected].

-Changeofaddress-Lostsharecertificatesordividendcheques-Dividendmandates-Amalgamationofholdings

Formsforthesematterscanbedownloadedfromtheregistrars’websiteatwww.capitaregistrars.com,whereshareholderscanalsochecktheirholdingsanddetails.

SHAREDEALINGSERVICE

InformationonalowcostsharedealingserviceofferedbyourregistrarisavailablefromCapitaon08716640300(callsto0871numberscost10pperminuteplusnetworkextras)oratwww.capitadeal.com.



Bodycote plc Springwood Court Springwood Close Tytherington Business Park Macclesfield Cheshire SK10 2XF

Tel: +44 (0)1625 505300 Fax: +44 (0)1625 505313 Email: [email protected]

© Bodycote plc 2010Ref: ID5046

Designed and produced by ID www.interactivedimension.com

www.bodycote.com


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Interim report-2010