Bodycote
Annual Report 2020

Annual 
Report
2020

Bodycote plc

Strategic report
Strategic report

Governance

Financial statements

Additional information

Contents

Strategic report
01  Understanding Bodycote

Governance
44  Board of Directors

02  Our markets and technologies 

46  Corporate governance statement

04  Our global network

06  Highlights

08  The investment case

10  Chair’s statement

11  Chief Executive’s review

14  Strategy and objectives

15  Our business model

16  Measuring progress

18   Our stakeholders

19  Component journey – Dosing device

20  Section 172 

22  Business review 

24 

 Component journey –
Luxury watchmaking

25  Chief Financial Officer’s report

28  Component journey – Pinion gear

54  Directors’ report

56  Report of the Nomination Committee

59  Report of the Audit Committee

64  Board report on remuneration

76  Directors’ responsibilities statement

Financial statements
77 

Independent auditors’ report

86  Consolidated income statement

87  Consolidated balance sheet

88  Consolidated cash flow statement

89 

 Consolidated statement of  
changes in equity

90  Group accounting policies

98 

 Notes to the consolidated 
financial statements

29  Principal risks and uncertainties

134 Five year summary

34  Viability statement

135  Company statement of financial position

35  Component journey – Aluminium dies

136  Company statement of changes  

36  Environment, social and governance

in equity

137 Company accounting policies

140  Notes to the company 
financial statements

Additional information
145 Subsidiary undertakings

148 Shareholder enquiries

150 Company information

www.bodycote.com/investors 
for more information 

In preparing this Strategic report, the Directors 
have complied with s414C of the Companies 
Act 2006.

This Strategic report has been prepared for the 
Group as a whole and therefore gives greater 
emphasis to those matters which are significant 
to Bodycote plc and its subsidiary undertakings 
when viewed as a whole.

Bodycote plc annual report 2020

Understanding Bodycote

Bodycote is the world’s leading 
provider of thermal processing 
services. As the partner of choice 
for many of the world’s most 
respected manufacturing companies, 
our purpose is to provide a vital link 
in the manufacturing process that 
makes the products our customers 
manufacture fit for purpose. 
With our breadth of solutions across 
multiple technologies, we create 
value through superior customer 
service for our customers, across 
aerospace, defence, energy, 
automotive, and general industrial 
markets. Our unique business model, 
expertise, and global infrastructure 
mean we can adapt to our many 
customers’ needs and continue to 
deliver long-term success for our 
shareholders and other stakeholders.

Driving performance with our Core Values

Honesty and Transparency

We cultivate a culture of transparency, where 
honesty and integrity are at the foundation of our 
business and our relationships. Trust is at the heart 
of everything we do.

Respect and Responsibility

We behave individually and collectively with respect 
for each other, our stakeholders and the environment, 
conducting business responsibly, taking ownership 
of our actions.

Creating Value

We create value for our employees, customers 
and shareholders, and this is the very essence 
of Bodycote.

Page 41 for more information

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Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportUnderstanding Bodycote
Our markets 

Bodycote offers materials solutions for virtually every market sector, providing 
expertise across both classical heat treatment and specialist thermal processes. 
Bodycote addresses the markets we serve with our superior levels of service 
and unmatched ability to satisfy customers’ needs. Bodycote supports many 
market sectors; however, we categorise our business into four major groups:

Aerospace and Defence

Energy

The aerospace market is highly complex; we primarily treat engine 
components and landing gear that rely on our solutions to improve 
performance. Our services provide thermal processing solutions 
across a wide range of applications which include commercial, 
business and military aircraft.

Using industry-leading thermal processing, we can extend the 
life of industrial gas turbines, power generation, and oil & gas 
components (onshore, offshore, and subsea) by reducing the 
wear caused to them through abrasion, erosion, and corrosion 
thus helping to minimise downtime.

Bodycote operates an international network of quality accredited 
facilities, in support of prime aerospace manufacturers and their 
supply chains. 

Automotive

General Industrial

Focused on key components in the car, light truck, heavy truck, 
and bus markets, thermal processing delivers greater strength 
and durability. 

Bodycote has developed strategic partnerships with major 
automotive original equipment manufacturers (OEMs) and their 
supply chains by offering comprehensive thermal processing 
support on a global basis.

We serve a very broad range of customers across multiple industry 
segments in our General Industrial business. These customers 
range from industrial machinery to agricultural equipment, 
construction, electronics, and medical equipment. 

Our success in this market is due to superior customer service, 
using the breadth of processes available within Bodycote and 
extensive technical resources allowing for the development 
of cost-effective solutions for our customers.

2

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic reportOur technologies

Bodycote’s purpose is to support our customers in producing superior 
components. Our thermal processing services encompass a variety of heat 
treatment techniques and specialist technologies that improve the properties 
of metals and alloys and extend the life of components. Bodycote addresses 
the markets we serve with our superior levels of service and unmatched 
ability to satisfy customers’ needs.

Classical  
Heat Treatment

Specialist  
Technologies

Classical Heat Treatment is the process of 
controlled heating and cooling of metals 
in order to obtain the desired mechanical, 
chemical, and metallurgical properties during 
the manufacturing of a product.

Classical Heat Treatment is an 
indispensable set of processes 
within the manufacturing 
chain of most of the products 
used in daily life. By providing 
wear resistance, strength, or 
toughness, depending on the 
application, the components 
we treat last longer and reduce 
downtime for the products 
our customers manufacture. 
Surface hardness can be 
controlled by diffusing 
elements such as carbon and 
nitrogen into the metal during 
the heating stages of the 
process. The heat treatment 
of products impacts lives 
every day, whether it's the 
seat belt buckle to ensure 
that it keeps the passenger 
safe during an accident or a 
turbine blade bringing power 
to your neighbourhood. 

Product life is extended by 
accurately treating products, 
carried out in precisely 
controlled industrial furnaces 
which can heat up to 
temperatures above 1000°C 
and use quenchants like oil, 
water, or nitrogen gas to cool 
the heated material. During the 
process, the microstructure 
of the metal transforms into a 
different structure which results 
in hardening or softening of 
the material depending on 
the process. Engineers can 
design thinner, lighter, but 
stronger components with 
the help of Classical Heat 
Treatment. The extended life 
of our customers’ products also 
has a positive impact on the 
environment by reducing waste.

A selection of highly differentiated, early-
stage processes with high margins, significant 
market opportunities, and good growth 
prospects. Bodycote is either the clear market 
leader or one of the top players among a small 
number of competitors. 

Hot Isostatic Pressing 
(HIP) Services 
Improves component integrity 
and strength by application 
of extreme pressure and heat. 

HIP PF inc. Powdermet® 
Additive manufacturing of 
often complex components 
by combining with HIP. 

Specialty Stainless Steel 
(S³P) Processes 
Improves the strength, 
hardness, and wear 
resistance of stainless steels. 
Standard heat treatments 
negatively impact corrosion 
resistance of stainless steel, but 
our proprietary S³P can provide 
dramatically improved material 
properties while maintaining 
corrosion resistance. 

Surface Technology 
Enhances component life 
using ceramic and ceramic/
metal coatings. 

Low Pressure Carburising 
(LPC) 
Obtains a hardened surface 
and a tough core under vacuum 
using a cleaner process than 
atmospheric carburising, 
providing improved wear 
resistance and fatigue life 
with less distortion. 

Corr-I-Dur® (CiD)
Improves corrosion resistance 
and wear properties, and 
is primarily used as an 
environmentally friendly 
substitute for hard chrome. 

3

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportUnderstanding Bodycote
Our global network

Delivering quality through our international  
network of facilities.

As the only global provider of subcontract thermal processing 
services, Bodycote is able to offer significant advantages to 
its customers. Through an international network of facilities, 
Bodycote can effectively utilise a wealth of knowledge, 
experience and specialist expertise to deliver quality service 
when and where it is needed.

The network operates from more than 165 facilities, with customers able to benefit from 
Bodycote’s comprehensive range of services across multiple locations. Customers know 
that if their business expands, Bodycote will have the capability to meet their needs. 
They recognise that if they were to broaden their manufacturing footprint, Bodycote would 
be able to assist them. They are aware that they can obtain the same process to the same 
quality standards from multiple locations.

Such a large network brings economies of scale, with technology developed at one location 
being available globally if the market requires it. Similarly, network utilisation is enhanced 
by using logistics to put customers’ work into the most effective facility to meet their 
requirements. Moreover, the network allows Bodycote to specialise in fewer technologies 
per location, reducing complexity and increasing the efficiency of our operations.

The Bodycote network has a wealth of technical accreditations, some industry or customer 
specific, others more general. Individual operations concentrate on the accreditations suited 
to their market.

> 40,000

customers

4,7471

employees

23

countries

> 165

facilities

1  At year end 2020.

4

Revenue by geography

£598.0m

 North America

 Western Europe

 Emerging Markets  

37.9%

51.3%

10.8%

Revenue by market sector

£598.0m

Aerospace and Defence

Energy

Automotive

General Industrial  

26.2%

8.5%

26.5%

38.8%

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic report 
 
 
 
 
North America

Western Europe

Emerging Markets

Bodycote is the largest provider of thermal 
processing services in North America by 
a significant margin with comprehensive 
network coverage. This network offers more 
than 60 facilities convenient to customers in 
all areas where manufacturing and technical 
industries are concentrated.

Bodycote operates more than 80 facilities 
in Western Europe and is the number one 
provider of thermal processing services, 
with by far the largest network and 
comprehensive service offering.

Bodycote has more than 25 facilities in 
Emerging Markets covering Eastern Europe, 
China, and Mexico. Bodycote is the number 
one thermal processing provider in Eastern 
Europe and is the leading Western provider 
in China.

£226.8m

£306.8m

£64.4m

Revenue by market sector – £m

Revenue by market sector – £m

Revenue by market sector – £m

 Aerospace and Defence

 Energy

 Automotive

 General Industrial

45.6%

8.2%

21.0%

25.2%

 Aerospace and Defence

 Energy

 Automotive

 General Industrial

16.0%

10.3%

 23.4%

50.3%

 Aerospace and Defence

 Energy

 Automotive

 General Industrial

5.9%

1.0%

61.5%

31.6%

61
facilities

1,610
employees

83
facilities

2,289
employees

26
facilities

848
employees

5

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic report 
 
 
 
 
 
 
 
 
 
 
 
Understanding Bodycote
Highlights

Highlights

Financial summary

Revenue

Headline operating profit1

Headline EBITDA margin1

Headline operating margin1

Exceptional items3

Free cash flow1 

Basic headline earnings per share1,2

Ordinary dividend per share

Return on capital employed1

Additional statutory measures

Operating profit

Profit after tax

Net cash generated from operating activities

Basic earnings per share

2020

£598.0m

£75.3m

26.4% 

12.6% 

£(58.4)m

£106.1m 

27.8p

19.4p

9.8% 

£5.0m

£0.8m

£139.1m

0.2p

2019

£719.7m 

£134.9m 

29.2%

18.7% 

– 

£123.1m

52.1p

19.3p 

17.7% 

£128.6m

£94.0m

£177.3m

49.4p

 – The health and wellbeing of our people remains our top priority

 – Financial performance

– Organic revenues declined 20%

– Resilient headline EBITDA margin performance at 26.4% (2019: 29.2%)

– Excellent free cash flow conversion1 of 141% (2019: 91%) 

– Closing net debt of £23m after paying £96m of the consideration for Ellison

– £36m of cash restructuring costs, generating £30m of annual savings by 2022 

 – Continued programme of strategic investment 

 – Structured to align with long-term megatrends in road transport electrification, point-to-point 

air travel, and the reducing use of fossil fuels

 – Uninterrupted 30+ year track record of growing or maintaining dividend

1  The headline performance measures represent the statutory results excluding certain non-operational items. These are deemed alternative performance measures under the 

European Securities and Markets Authority guidelines. Please refer to note 1 to the financial statements on page 98 for a reconciliation to the IFRS equivalent.

2  A detailed EPS reconciliation is provided in note 10 on page 110.

3  Detail of exceptional items is provided in note 6 on page 107.

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Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic report 
 
 
 
 
 
Financial highlights

Revenue 
£m

6
.
8
2
7

7
.
9
1
7

2
.
0
9
6

0
.
8
9
5

6
.
0
0
6

Dividend per share
pence

0
.
9
1

3
.
9
1

4
.
9
1

4
.
7
1

8
.
5
1

£598.0m

19.4p

‘16

‘17

‘18

‘19

‘20

‘16

‘17

‘18

‘19

‘20

Headline operating profit 
£m

Headline earnings per share 
pence

7
.
0
4
1

9
.
4
3
1

2
.
6
2
1

9
.
1
0
1

3
.
5
7

£75.3m

9
.
5
2 5
.
9
4

1
.
2
5

0
.
7
3

27.8p

8
.
7
2

‘16

‘17

‘18

‘19

‘20

‘16

‘17

‘18

‘19

‘20

Free cash flow 
£m

8

.

3
3
7 1
1
1
1

.

.

1
3
2
1

.

1
6
0
1

0

.

8
9

Return on capital employed 
%

9

.

8
1

.

7
7
1

8

.

7
6 1

.

5
1

£106.1m

8
9

.

9.8%

‘16

‘17

‘18

‘19

‘20

‘16

‘17

‘18

‘19

‘20

7

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic report 
 
 
 
 
 
 
Understanding Bodycote
The investment case

We provide expertise across both classical heat  
treatment and specialist thermal processes with 
a focus on four core markets.

Bodycote is the world’s 
No.1 service provider of heat 
treatment and specialist 
thermal processing 

Core business is resilient in 
a downturn despite inherent 
operational leverage, due 
to mixture of improvement, 
flexibility of workforce, 
diversity of end markets and 
geographic spread

Significant barriers to entry 
across majority of Bodycote’s 
business which are practical, 
financial and technical in nature

Consistently strong margins 
and excellent free cash 
flow generation 

Highly cash 
generative business 
funding both 
investment and cash 
returns to shareholders

Well positioned  
for the future

Experienced 
management team 
with a clear strategy 
and proven track 
record of execution 
and delivery

Resilient Classical 
Heat Treatment is 
robust in downturns

Specialist 
Technologies 
potential for higher 
margins and growth 
rates to become a 
larger proportion of 
the Group

Plentiful investment 
opportunities to drive 
margins and returns

8

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic reportKey investment strengths 

What you can expect?

Specialist Technologies 
28% of Group revenue – 
higher margin and growth 
businesses; expected to 
consistently outperform 
Classical Heat Treatment

Classical Heat Treatment 
should perform ahead of 
the market, driven by:

–  Increasing demand for 

improved materials

–  Investment in emerging/

high growth markets

Selected acquisitions

–  9 key acquisitions in 
the last five years, 
including Ellison 
Surface Technologies

All on top of underlying 
Industrial Production growth

Experienced management team with 
a strategy in place to further enhance 
margins and growth through:

 –  Increasing the relative size of Specialist 
Technologies with its superior margins 
and higher growth characteristics

 –  Investment in growth and localisation 

opportunities in emerging/high 
growth markets

 –  Further improving the mix in parts of 
the Classical Heat Treatment business

 –  Investment in structural end market 

growth opportunities

 –  Investment in acquisitions and 

greenfield sites

 – Strategy can accommodate widely 

differing market outcomes

Robust balance sheet strength through: 

c.£400m

invested in capacity growth 
in last five years

>£250m

returned to shareholders 
in last five years

2020

restructuring has accelerated 
the  improvement in the quality 
of the business

9

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportChair’s statement

We have taken further steps to 
ensure that our sustainability 
activities, with a particular 
emphasis on climate change, are 
more widely understood by both 
customers and investors as well  
as our entire employee population.

A. C. Quinn CBE 
Chair

Overview 
In 2020, the world and Bodycote faced unusual times as markets 
reacted to the global pandemic. While the world underwent 
a significant downturn in demand, I am pleased to report that 
management responded quickly, implementing both disaster 
recovery scenarios and restructuring plans very successfully. 
While these plans had not been generated with a global pandemic 
in mind, our preparedness for the kind of rapid change that 
we experienced was evident, and the end result was a highly 
commendable performance. While Bodycote did initially take 
advantage of the UK government's COVID-19 Job Retention Scheme 
for employees that were furloughed, these monies were repaid to 
the government as soon as it was evident that we had stabilised 
the business and cash flows would continue to be strong. 

Dividend 
The Board is proposing a final dividend of 13.4p, which will be paid 
on 4 June 2021, subject to shareholder approval at the 2021 Annual 
General Meeting (AGM). This brings the total ordinary dividend 
for 2020 to 19.4p (2019: 19.3p) costing £25.5m which continues 
Bodycote’s 30+ year uninterrupted track record of paying dividends 
and reflects the Board’s confidence in the Group’s future earnings 
and cash flow potential, despite the lower earnings achieved in 2020.

Sustainability
We have raised our emphasis on ESG, taking a continuous 
improvement approach to refining our ESG credentials. We aim 
to be transparent on the impact of our activities on shareholders, 
employees, the communities in which our employees work, on 
the environment and more particularly on climate change. We have 
taken further steps to ensure that our sustainability activities, with 
a particular emphasis on climate change, are more widely understood 
by both customers and investors as well as our entire employee 
population. We expect to see the results of this activity in the 
coming year.

People 
In 2020, engaging with employees took on a new dimension as 
most of the year required social distancing and severely limited 
cross-border travel. The Board fully utilised video conferencing for 
its meetings and for keeping in close contact with the Executive 
Directors throughout the year. Together with my Board colleagues, 
we were pleased to have 'virtual' meetings with a variety of 

10

employees and senior managers throughout the year. We were 
able to engage in subjects pertinent to the situation of the business, 
including employee engagement and the application of the 
Group’s strategy.

Board and governance 
The Board places great importance on the constant development of 
its understanding of the business. It is also attentive to its obligations 
under the corporate governance code, and we continued to ensure 
we address these obligations throughout the year.

As Chair, one of my roles is to ensure that the Board members 
possess relevant, complementary skills that add value to Bodycote’s 
stakeholders. During the year, I was pleased to have Kevin Boyd join 
the Board as a Non-Executive Director. Kevin joined in September 
2020, and is a member of the audit, remuneration and nomination 
committees. Kevin was most recently the Chief Financial Officer 
of Spirax-Sarco Engineering plc. I am pleased to have him on the 
Board to complement our skills. I am confident that the Bodycote 
Board remains well-positioned to meet our governance duties. 
By maintaining high standards of corporate governance, we are able 
to enhance business performance, underpinned by our strategy and 
the business model. The approach to governance is set by the Board 
and implemented by our Executive Committee, and effective and 
robust governance remains a strong pillar supporting the sustainable 
success of the Group. 

Shareholders 
Shareholder meetings took place almost exclusively via video calls 
during the year. I look forward to engaging with you during the 
coming year, either personally or virtually. Our AGM will take place 
in May 2021, and we will adhere to the government guidelines for 
gatherings at that time. 

Summary 
2020 was a challenging year for the Group in a number of our key 
market sectors. Nevertheless, the resilient Group performance has 
proven the agility of the operations and reinforces the dynamism 
of our strategy. 

A.C. Quinn CBE Chair  
12 March 2021

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic reportChief Executive’s review

I am immensely proud of the 
fortitude and resilience shown 
by our people as they continued 
to deliver first-class service to 
our customers under the most 
trying conditions.

S. C. Harris 
Group Chief Executive

Full Year commentary
As the COVID-19 pandemic hit, the critical need to safeguard 
the wellbeing of our employees drove an immediate, large scale 
mobilisation of resources across the Bodycote Group. I am pleased 
to see how effective the measures we took have been and I would 
like to acknowledge the remarkable performance of the global, and 
many local, management teams involved in this unprecedented 
effort. This year has been hugely challenging for our employees. 
Not only have they been confronted with the impact on their personal 
lives from the COVID-19 pandemic and all its consequences, but 
they have also had to deal with significant changes in the working 
environment and organisation. I am immensely proud of the fortitude 
and resilience shown by our people as they continued to deliver first-
class service to our customers under the most trying conditions.

We responded quickly, implementing disaster recovery scenarios and 
restructuring plans successfully. These plans had not been generated 
with a global pandemic in mind but our preparedness for the kind of 
rapid change that we experienced was evident. 

Results overview 
It is hard to imagine a set of circumstances that could be more testing 
than those encountered in 2020. The fall in demand that occurred in 
the second quarter led to an unprecedented drop in revenues that was 
significantly greater than even the worst points of the global financial 
crisis in 2008 and 2009. The acquisition of Ellison during the year did 
help to ease the fall in revenues, though they still declined by 16.9% 
(compared with 2019) to £598.0m (16.6% at constant currency). 
The organic constant currency revenue decline was 20%. 

The headline EBITDA margin of 26.8% (excluding Ellison) 
was only 2.3% lower than 2019 and still above 2016 and 2017 
levels. Moreover, the 12.6% headline operating margin in 2020 
(2019: 18.7%) is similar to the peak achieved in the decade prior to 
2009. This noteworthy result is not just a reflection of management's 
cost control activities during the year but is also testament to the 
transformation that has taken place since 2009 in both the quality 
of Bodycote's business and the flexibility of the cost base.

Headline operating profit decreased to £75.3m (2019: £134.9m), 
while, after taking account of the exceptional charge of £58.4m, 
the statutory result was an operating profit of £5.0m. The Group 
delivered strong free cash flow of £106.1m (2019: £123.1m) and 

ended the year with net debt (excluding lease liabilities) of £23m 
after paying £96m in connection with the Ellison acquisition.

With significant trade receivables on our balance sheet and a much 
lower level of trade payables, there is a natural cash flow hedge as 
revenues decline and the level of outstanding trade receivables also 
declines. As a result, the cash flow performance of the business has 
been strong during 2020 and we achieved free cash flow conversion 
of 141% (2019: 91%). Net cash from operating activities was £139m 
(2019: £177m).

Basic headline earnings per share for the Group were 27.8p 
(2019: 52.1p). Basic earnings per share were 0.2p (2019: 49.4p), 
reflecting the exceptional charges taken in the year.

Revenues and margins
In reviewing the 2020 performance, it should be noted that business 
trends varied sharply through the year. These trends were normal 
until the third week of March, when significant government 
restrictions started to be implemented around the world in response 
to COVID-19. These restrictions had an immediate and severe impact 
on demand throughout the second quarter, followed by a gradual 
improvement in most end markets during the second half of the year. 
Thus, the year-on-year quarterly organic revenue declines were -6%, 
-33%, -24%, and -18% for Q1 through Q4 respectively.

The following commentary reflects constant currency year-on-year 
growth rates unless stated otherwise.

Our AGI and ADE businesses experienced contrasting fortunes 
during the year and emerged with starkly different short-
term outlooks. 

In AGI, automotive revenues dropped by more than 50% in Q2 
as OEMs closed their facilities; they recovered significantly in 
the second half as facilities came back on stream. Coupled with 
sequential quarterly improvement in the general industrial business 
in H2, it meant that, by the end of the year, our AGI business in 
the developed markets was experiencing only single digit revenue 
declines versus the final quarter in 2019. Given the scale of action 
taken to address our cost base, we succeeded in offsetting the 
impact from the short-term operating leverage and, by the end of 
the year, were able to post higher margins in most parts of this 
business compared with the previous year. AGI revenues in the 

11

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportChief Executive’s review continued

Emerging Markets fared even better with Q4 revenues achieving 
growth of over 16%. In total, our second half headline operating 
margin for the AGI business as a whole was flat on 2019, at 15.0%, 
almost double that of the first half margin of 8.4% and despite the 
H2 decline in revenues of 11.5%.

The situation in ADE was quite different. Organic civil aerospace 
revenues reduced through the year which, coupled with weak energy 
demand, meant that we experienced revenue declines of more than 
30% throughout the second half. While we have taken swift action 
on costs in the ADE business, the scale of the revenue decline was 
significantly greater than the short-term cost mitigation actions that 
we were able to take. As a result, ADE headline operating margins 
declined significantly to 8.5% in the second half. During the second 
half, we implemented further cost saving measures which will be 
finally completed in 2021. These will help the business' profitability, 
but we have taken the strategic decision not to materially change 
the aerospace footprint as we expect the civil aerospace market to 
recover significantly in due course. As a result, a return to the ADE 
margins in the mid-20%s, that was achieved prior to 2020, is likely 
in late 2022 and beyond, even though civil aerospace volumes are 
not anticipated to recover above 2019 levels until 2023/2024.

Also noteworthy in terms of profit development is the fact that our 
Specialist Technologies businesses represented 48% of Group 
operating profit during the year, up from 38% in 2019. This is a 
natural consequence of the fact that the revenue performance was 
relatively better across these businesses when compared with our 
Classical Heat Treatment businesses, and margins in Specialist 
Technologies, which are higher, declined by similar absolute 
percentages to Classical Heat Treatment.

Market sectors 
Automotive revenues declined 20% in the year, to £159m. 
The drop in revenues in the Western European and North American 
markets were both similar in percentage terms, although the shape 
by quarter was different. Compared with Western Europe, North 
America experienced a more severe decline in Q2 but recovered 
more strongly in the second half. Emerging Markets recovered 
strongly through Q3 and Q4, posting 5% year-on-year growth in 
the second half.

General Industrial revenues declined 11% to £232m. This decline 
was broad based across our developed markets, with circa 20% 
declines in the tooling, industrial machinery, construction, and 
agriculture market segments offset by electronics, medical and 
general manufacturing which grew significantly in the second half. 
Emerging Markets' revenues increased 15% during the second half 
of the year.

Aerospace & Defence organic revenues declined 29%. 
Aerospace and defence did not experience the same immediate 
contraction as the automotive and general industrial segments but 
ended up weaker. Civil aerospace revenues stabilised at a decline 
of 43% in both Q3 and Q4, including the benefit of the contribution 
to revenues from Ellison. Ellison was acquired at the beginning of 
Q2 2020. 

Energy, which now represents only 8% of Bodycote's entire 
business, had revenues of £51m, down 18%. The North American 
onshore oil & gas business, which is primarily driven by the Permian 
Basin, declined significantly in response to the lower activity there. 
Subsea oil & gas fared relatively better given the longer life of 
subsea projects. Industrial Gas Turbines (IGT) and Power Generation 
revenues also declined significantly.

Specialist Technologies
Bodycote has, for many years, been expanding its "Specialist 
Technologies" activities. These are differentiated, early stage 

processes with high margins, large market opportunities and good 
growth prospects. Bodycote is either the clear market leader or 
one of the top players among few competitors. These technologies 
are embedded into both the ADE and AGI businesses and address 
multiple market sectors. Boosted by the contribution from the Ellison 
acquisition, Specialist Technologies constituted 30% of Bodycote's 
revenues in the second half of the year. Revenue declined 5% 
to £168.7m for the full year. Bodycote's AGI focused Specialist 
Technologies' revenues grew 8% during the second half, which 
compares very favourably with the 12% second half decline in the 
combined automotive and general industrial Classical Heat Treatment 
revenues. Bodycote's ADE focused Specialist Technologies' 
revenues naturally fared worse, given the more negative end market 
performance in the civil aerospace and energy market sectors, with 
organic revenues declining 33% during the second half. However, 
this still represented outperformance compared with the 40% 
decline in the comparable organic aerospace, defence, and energy 
Classical Heat Treatment revenues.

Emerging Markets
Investment in Emerging Markets continues to be a strategic 
priority. Our growing presence in Emerging Markets is concentrated 
in the automotive sector with the balance in general industrial. 
Our Emerging Market footprint is in Eastern Europe, China and 
Mexico. After a sharp fall in the second quarter, revenues benefited 
from the recovering automotive market sector. Indeed, Emerging 
Markets revenues grew in the second half to leave total revenues 
(excluding the contribution from Ellison) for the full year flat on 
2019, despite a decline in our Mexican revenues (which are largely 
dependent on developments in the US car & light truck market). 
China recorded strong second half revenues to deliver double 
digit growth for the full year. In total, Emerging Markets' revenues 
constituted almost 11% of total Group revenues for the first time, 
and, for the second half of the year, represented more than 12% of 
total Group revenues.

Cost reductions and restructuring
During the year, semi variable costs such as energy and industrial 
gases were successfully reduced in line with the revenue reductions. 
The most significant cost input for Bodycote's business is labour, 
which represents circa 40% of sales. Full Time Employees (FTEs) 
were reduced by 18% (1,020 FTEs). A large proportion of these 
positions will be replaced as revenues return, albeit in the form of 
temporary labour. However, the strategic restructuring programme 
that was initiated in late 2019 and expanded during 2020 will result 
in permanent structural savings in infrastructure once completed. 
The programme was largely completed in 2020. 

The restructuring programme is more than a reaction to the 
immediate situation. The expansion of the programme in 2020 
represents an acceleration of what we would have done in any 
event over a longer period of time, with the financial rationale being 
boosted as a result of the decline in revenues. The goal is not simply 
to reduce cost and increase flexibility. It is also to align our business 
to the long trends mega trends of electrification of road vehicles, 
point to point travel in civil aerospace, and the transition away from 
fossil fuels. 

The first phase of the restructuring programme was focused on 
reducing the capacity serving internal combustion engines (ICE) 
vehicles in Western Europe and increasing electric vehicle (EV) 
exposure in Eastern Europe. It improves Bodycote's geographic and 
customer footprint in line with the shift in production underway by 
the OEMs and their Tier 1 suppliers. This part of the programme 
includes 15 site closures and three new facilities in Eastern Europe. 
Redundant capacity in Western Europe has been transferred to 
Eastern Europe or repurposed for serving customers in the general 
industrial markets.

12

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic reportThe second phase extension to the programme in turn consists 
of two parts:

 – The consolidation of aerospace capacity to improve efficiency, 
as well as rebalancing the market exposure away from wide 
bodies in favour of narrow bodies.

 – This part of the programme includes one plant closure in North 
America, one in Belgium and two in the UK, and equipment has 
been transferred to other plants. Total aerospace capacity has 
been retained in order to serve this market as it recovers, and in 
the meantime, capacity that is underutilised is being targeted at 
the medical, electronics and other general industrial markets that 
use the same processes as the aerospace market.

 – The consolidation of North American legacy, facilities serving the 

automotive, general industrial, oil and gas markets.

 – This part of the programme includes seven plant closures and the 
construction of two new facilities. Both of the new plants opened 
in the first quarter of 2021.

In total, we have either closed or announced the closure of 26 of 
our facilities during the year. Of the new facilities, two were already 
operational in 2020 and all five will be operational by the end of 2021.

The Group entered 2021 in a stronger position, with capacity 
concentrated where demand will be greatest and with larger more 
flexible facilities that can be operated more efficiently whatever the 
level of demand. 

The exceptional restructuring charge associated with the 
redundancies and closures totals £52m, including £36m of 
cash costs (of which, only c£10m was spent in 2020). Once the 
restructuring programme has been fully implemented, we expect 
to see net permanent annual costs savings of approximately £30m 
per annum, £20m of which will materialise in 2021 and the balance 
in 2022. The benefit in 2020 was negligible as the structural savings 
generated were offset by the inefficiencies associated with the 
plant closures. 

Strategic progress
Bodycote's strategy is based on improving the overall quality 
of the business and focusing investment to drive long-term 
profitable growth. 

An important part of the Group's strategy has been to ensure 
flexibility in the cost base, so that the business can react quickly in 
response to a downturn. Observers of our business will know that 
the closure and opening of facilities is a part of normal business-
as-usual activity at Bodycote and, over time, this has formed an 
important part of the activity which has improved the quality of 
the business. The restructuring announced during the year clearly 
represented a significantly different pace of footprint change from 
the norm. The main strategic themes we have accelerated are:

 – A much better alignment of capacity to serve the electrification 

of road transport.

 – A shift of capacity toward the more fuel efficient and longer range 
narrow body aircraft and away from high passenger capacity wide 
body aircraft. Narrow body aircraft are anticipated to grow at a rate 
that is significantly above the growth trend in revenue passenger 
kilometres as point to point travel becomes more efficient and 
flexible. High passenger capacity has historically been used for hub 
to hub transport with passengers transiting to short haul single 
aisle aircraft at the hub. This logistics model has been under threat 
for some time, putting downward pressure on demand for wide 
body aircraft.

 – Downsizing our capacity serving the fossil fuel sectors.

We have continued to invest in our Specialist Technologies, which 
are another key pillar of the Group’s strategy, reflecting their superior 
returns and growth potential. 

We are also driving growth in our Emerging Markets’ business, which 
has grown its share of our overall business considerably over the 
years. Indeed, opportunities continue to abound and the investment 
pipeline in support of these opportunities remains strong. 

In implementing the restructuring, the business has retained virtually 
all of its physical capacity and capabilities but now is better aligned 
with the opportunities for growth. As a result, we believe that 
we have made a step change in improving the sustainability and 
underlying financial performance quality of the business, which will 
be reflected in the Group's results for the years to come.

Growth through acquisition is another important part of our strategy. 
Given the circumstances in 2020, I am pleased with the integration 
and performance of the Ellison acquisition, which has strengthened 
our Specialist Technologies. I am confident that this is a sound 
acquisition for us and will go from strength to strength as civil 
aerospace revenues return to growth.

In 2020, Bodycote has taken action to document and 
communicate current initiatives associated with the broader 
impacts we have on the environment, the communities where we 
operate, our employees, shareholders, and society as a whole. 
Bodycote summarises our approach to Environment, Social and 
Governance (ESG) as ‘Our approach to sustainability’.

Summary and outlook
Bodycote weathered the adversity of 2020, generating a headline 
EBITDA margin of 26.4%, a headline operating margin of 12.6% and 
producing a strong free cash flow conversion of 141% (£106 million). 

Looking ahead, markets are recovering, though the uncertain timeline 
for recovery in the civil aerospace market clouds the short-term 
outlook for this part of the business. Nonetheless, our restructuring 
programme is now largely complete, resulting in a higher quality 
business aligned to the growth opportunities we are seeing. 
The Board is confident that Bodycote is well placed to drive growth 
and take advantage of the upturn in activity across all of its markets 
as they strengthen.

S.C. Harris
Group Chief Executive  
12 March 2021

13

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategy and objectives

Bodycote’s objective is to create superior shareholder returns 
through the provision of selected thermal processing services 
that are highly valued by our customers, giving full regard to 
a safe working environment for our employees and with a 
minimal environmental impact.

Strategic priorities

Objectives

Safety and  
environment

At the foundation of our business is the provision of a 
safe working environment for our employees, and to 
operate with minimal environmental impact.

Driving operational  
improvement

Continuous improvement of business processes 
and systems which make us more efficient 
and responsive.

Capitalising on and investing 
in our Specialist Technologies

Delivering unique solutions that provide customers 
with innovative, high value-added products to meet  
the changing needs within component manufacturing.

Investing in  
Emerging Markets

Expanding with our customers in rapid growth 
countries with an emphasis on Eastern Europe, 
Mexico, and China.

Investing in structural  
growth opportunities

We invest in markets with long-term structural 
opportunities such as the civil aerospace market.

Acquisitions

Core values

Honesty and  
Transparency

1.

3.

Creating  
Value

Adding bolt-on acquisitions to improve our plant 
network in Classical Heat Treatment, and investing in 
larger acquisitions and adjacent technologies to grow 
Specialist Technologies.

We cultivate a culture of transparency, where 
honesty and integrity are at the foundation of our 
business and our relationships. Trust is at the heart 
of everything we do. 

Core markets

Aerospace and Defence

2.

Respect and 
Responsibility

We behave individually and collectively with 
respect for each other, our stakeholders and the 
environment, conducting business responsibly, 
taking ownership of our actions.

Energy

Automotive

We create value for our employees, customers 
and shareholders, and this is the very essence 
of Bodycote.

General Industrial

1

2

3

4

5

6

In addition to the 
strategic icons 
above, we also 
link our markets 
and values via 
the following 
icons throughout 
the report.

14

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic reportOur business model

Our business model focuses on ensuring we are the supplier  
of choice for customers’ thermal processing needs.

We provide essential 
solutions to customers...

Our thermal processing services simplify customer 
manufacturing by reducing their non-core activities. 
Bodycote adds value while reducing the impact 
on the environment by operating more efficiently. 
Our global network of engineers and metallurgists 
collaborate with customers to solve complex challenges, 
enhance operational efficiencies and help improve 
product performance.

A Global network
 – A global network of more than 165 market-

focused facilities in 23 countries.

  See our global network on pages 4-5
Unmatched expertise
 – With the best metallurgists, engineers and 

technicians in the industry, Bodycote is ideally 
placed to provide solutions for customers, 
whatever their market or wherever in the world 
they may be.

  See managing our people on pages 40-42
Scale and investment 
 – Bodycote’s scale enables continuous yet 
focused investment, both in the latest 
processes and in the most efficient and 
environmentally friendly equipment.

  See Chief Executive’s review on pages 11-13 

Customer focus
 – Building strong customer relationships 

through local service expertise; the scope 
of Bodycote’s network enables us to 
specialise at individual locations and provide 
comprehensive backup for our customers 
more effectively than competitors.

 – We secure service-specific agreements with 

our customers providing protection from 
supply disruption, leveraging Bodycote’s 
unique facility network.

  See business review on pages 22-23

 – Unique opportunities for the transfer of 

knowledge, skills and technology across 
the network.

  See our customer component journeys throughout 

the strategic report 

utilising our 
strategic 
competitive 
advantages...

and focusing on  
service and quality... 

Service and expertise
 – We provide highly efficient, cost-effective services 
to the highest quality standards through strategic 
investment in people and the latest technology, 
equipment and quality systems.

Quality
 – Bodycote’s quality management systems, validated 
by major engineering OEMs, have been developed 
to meet the requirements of international and 
national accrediting bodies.

 – Bodycote’s extensive facilities and expertise 

 – Our facilities hold industry and customer approvals 

mean that projects can extend beyond customers’ 
in-house capabilities, combining identification 
and provision of technical solutions to deliver 
value-adding material properties with a lower 
environmental and often lower cost.

appropriate to the services they offer and the 
markets they serve.

creating value for customers, Bodycote and our investors.

For our customers

 – Value-adding services

 – Global supplier meeting multiple 

For Bodycote

 – Mutually beneficial 

customer relationships

For our investors 

 – Financially stable and 
sustainable business

processing needs

 – Wide customer base means 

 – Good growth drivers

 – Access to entire Bodycote 

knowledge base and expertise

 – Cost and environmental benefits 

versus inhouse operations

Bodycote is not reliant on any 
one customer

 – Ideally positioned to promote 

growth in Emerging Markets and 
selected technologies

 – Superior return on investment

 – Strong margins and cash flows

15

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportMeasuring progress
Our key performance indicators

Performance 
Return on capital employed declined by 7.9 percentage points during the year, 
down from 17.7% to 9.8%

Definition
Headline operating profit as a percentage of the average of the opening and closing 
capital employed.

Capital employed is defined as net assets adjusted for net cash/(debt).

Return on capital employed
(%)

9
.
8
1

7
.
7
1

8
.
7
6 1
.
5
1

8
.
9

‘16

‘17

‘18

‘19

‘20

Headline earnings per share 
(pence)

Performance
Headline earnings per share decreased by 24.3p (47%) from 52.1p to 27.8p.

Definition
Headline earnings per share is defined in note 1 to the financial statements.

Performance
Headline operating margin declined by 6.1 percentage points during the year, from 18.7% 
to 12.6%. Headline operating profit decreased by 44% from £134.9m to £75.3m, while 
revenue decreased by 17% from £719.7m to £598.0m.

Definition
Headline operating profit as a percentage of revenue.

9
.
5
2 5
.
9
4

1
.
2
5

0
.
7
3

8
.
7
2

‘16

‘17

‘18

‘19

‘20

Headline operating margin
(%)

3
.
9
1

7
.
8
1

0
.
8
1

6
.

6
1

.

6
2
1

‘16

‘17

‘18

‘19

‘20

16

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic report 
 
 
Performance 
Free cash flow for the Group was £106.1m (2019: £123.1m). This was 141% of headline 
operating profit (20191: 91%).

Definition
Free cash flow is defined in note 1 to the financial statements.

Performance
Bodycote works tirelessly to improve safety and reduce workplace incidents and is 
committed to providing a safe environment for everyone who works at or visits our locations. 
The TRC rate decreased to 2.3 this year (2019: 2.8). Further details are included in the 
Environmental, Social and Governance (ESG) section on page 42.

Definition
TRC is defined as the number of lost time incidents, restricted work cases and medical 
treatment cases x200,000 hours (approximately 100 man years), divided by the total 
number of employee hours worked.

Performance
On a normalised basis, the carbon footprint increased by 13% from 427.2 tonnes per £m 
sales to 481.2 tonnes per £m sales. Further details are included in the Environmental, 
Social and Governance (ESG) section.

Definition
Carbon footprint is defined as tonnes of CO2 equivalent emissions divided by £m revenue. 
CO2 equivalent emissions are calculated by taking electricity and gas usage in kilowatt hours 
and multiplying by country specific conversion factors provided by the International Energy 
Agency (IEA). Normalised emissions statistics restate prior year figures using current year 
country specific conversion (IEA) factors and current year average exchange rates.

Free cash flow
(£m)

8
.
3
3
7 1
.
1
1
1

1
.
3
2
1

1
.
6
0
1

0
.
8
9

‘16

‘17

‘18

‘19

‘20

Total Reportable Case Rate (TRC)

8
.
2

7
.
2

8
.
6 2
.
2

3
.
2

‘16

‘17

‘18

‘19

‘20

Carbon footprint 
(tonne CO2e/£m sales normalised1)

8
.
8
5
4

6
.
8
5
4

5
.
4
3
4

2
.
7
2
4

2
.
1
8
4

‘16

‘17

‘18

‘19

‘20

1  Normalised statistics restate prior-year figures using current year IEA carbon conversion factors and current year average exchange rates

17

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic report 
 
 
 
Our stakeholders
How and why we engage

Engagement undertaken

Reason for engagement

Stakeholders’ key interests

Investors

Continued access to capital is important 
to the long-term performance of our 
business. We work to ensure that 
our investors and analysts have a 
good understanding of our strategy 
and performance.

 – Financial performance and economic/

political impact

 – Capital allocations and dividends
 – Mergers and acquisitions
 – Safety, Health and 

Environment performance
 – Alignment of shareholder and 

management interests

 – Governance and transparency
 – Sustainability of performance

 – Annual Report and accounts/Annual 

General Meeting

 – Corporate website, including investor 

relations section

 – Results presentation and regular 

engagement with top shareholders
 – Meetings throughout the year with 

existing and prospective shareholders, 
including investor roadshows in Europe 
and North America

 – Meetings throughout the year with 

existing and prospective banking partners

 – Press releases (including 
LSE announcements)

 – Addressing regular analysts’ enquiries

 – Annual individual performance reviews
 – Works councils and their representatives
 – Employee engagement groups
 – Internal intranet and communications, 

suggestion boxes and 
grievance mechanisms

 – Annual Report and accounts
 – Safety, Health and Environment briefings 

and Toolbox Talks

 – Twitter and LinkedIn communications

Employees

Employee engagement is vital for our 
success. We work to create a diverse 
and inclusive workplace where every 
employee can reach their full potential. 
We engage with our people to ensure 
we are delivering to their expectations 
and making the right business decisions. 
This ensures we can retain and develop 
the best talent.

 – Reputation
 – Wages, benefits and social packages
 – Employee development/engagement
 – Talent retention/career opportunities
 – Safety, Health and 

Environment performance

 – Diversity and inclusion

Customers

We collaborate with our customers 
to improve our customers’ product 
characteristics and to develop  
a project pipeline.

 – Customer satisfaction
 – Service performance, efficiency 

and quality

 – Sustainable performance
 – Supply chain transparency

Society/Communities

Bodycote operates in a very large number 
of local communities across the world and 
it is imperative that the business has no 
negative impacts on these communities 
that could jeopardise the ongoing viability 
of the business.

 – Future talent pipeline
 – Local operational impact
 – Environmental impact
 – Safety, health and 

environmental performance

 – Management of ongoing 
customer relationships

 – Participation in industry forums/events
 – Full customer marketing communication 

programme including utilisation 
of the Bodycote plc website 
‘www.bodycote.com’ including the 
Annual and Interim Reports

Engaging with our customers helps 
us to understand their needs and 
identify opportunities and challenges. 

 – Individual employee volunteering
 – Corporate website
 – Local site community activities

18

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic reportA component journey
Bottled perfection – Dosing device

The device begins its 
journey as steel billet. 
Quality and purity of the 
steel is critical – it must 
be free from inclusions 
to generate a defect 
free surface.

The device is 
machined to tight 
tolerances for 
shape and surface 
perfection to 
ensure no leaks in 
the equipment.

The part is polished 
to a mirror finish 
to eliminate 
any remaining 
surface defects.

The device is vacuum 
annealed to eliminate 
machining stresses 
and to impart corrosion 
resistant properties.

Bodycote’s S³P 
processing is applied 
to ensure the material 
can withstand the harsh 
conditions of high speed 
production, wear from 
food and drink, and attack 
from cleaning chemicals.

End application: 
food and beverage 
production

  The Bodycote ‘B’ next to a component journey stage shows where Bodycote’s vital services have been applied. 

19

There are several important factors influencing the productivity of machines used in the food and beverage industry.Of the utmost importance is cleanliness, not only from microbes but also from external pollutants from machine degradation.For machines which operate 24/7 with production rates of several thousands of bottles per minute, equipment must perform faultlessly and be able to withstand aggressive wear and cleaning chemicals – Bodycote’s Specialty Stainless Steel Processes (S3P) provide the ultimate protection.Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportCompliance with Directors’ duties
Section 172 statement

Strategy

Performance

People

Governance

At every Board meeting the 
Directors review, with the 
management team, the progress 
against strategic priorities and the 
changing shape of the business 
portfolio. This collaborative 
approach by the Board, together 
with the Board’s approval of the 
company strategy, helps it to 
promote the long-term success 
of the Group. Ultimately Board 
decisions are taken against the 
backdrop of what it considers 
to be in the best interest of the 
long-term financial success 
of the company and the 
Group’s stakeholders, including 
investors, employees, customers 
and society. We made strong 
progress with our restructuring 
and are in a good position 
for when markets recover. 
This further strengthens the 
company’s underlying financial 
position, enabling us to pursue 
new opportunities for the 
Group within our disciplined 
financial framework.

The Board regularly reviews 
and monitors the Group’s safety, 
reliability and environmental 
performance, with the 
aim of continually making 
Bodycote safer for our entire 
workforce and minimising our 
environmental impact. 

In 2020 a recordable injury 
frequency rate of 2.3 was 
the lowest since reporting 
began, while the number of 
injuries recorded fell by 18%. 
The safety, health and wellbeing 
of our employees will always 
be our highest priority. This is 
important to our workforce and 
local communities, while strong 
operational availability and 
reliability is crucial to our partners 
and customers. 

The Board also focuses on 
maintaining financial discipline and 
delivering strong earnings, cash 
flow and returns to shareholders. 

A core pillar of the Group’s 
strategy is growth via selected 
acquisitions. In 2020, Bodycote 
acquired Ellison Surface 
Technologies, strengthening our 
Specialist Technologies business 
and the Surface Technology 
offering in particular.

Bodycote’s workforce is key to 
its success. Our people help us 
maintain our strong reputation 
for high standards of business 
conduct, which is fundamental in 
delivering our purpose to support 
our customers in producing 
superior components. 

Bodycote operates Employee 
Engagement Groups on a bi-
annual basis which are chaired 
by a Non-Executive Director. 
The feedback from these forums 
is reported to the Board and 
the Executive Directors charged 
with addressing any particular 
items that arise. In 2020 these 
forums were held electronically. 
Feedback was generally very 
positive and no material concerns 
were expressed by employees 
during the year.

The Board, led by the Chair, 
believes that strong governance 
is essential to the success of 
the company. The Board regularly 
commissions the external 
evaluation of its performance, 
which most recently took place 
in 2018. The Board discussed 
the findings of this review and 
recommendations, such as the 
recruitment of an additional 
Non-Executive Director to the 
Board, have been implemented. 
The governance framework 
continues to drive the highest 
levels of business standards and 
best practice, aligning these with 
Bodycote’s business purpose, 
values, strategy, and culture. 
The Board will continue to assess 
and monitor culture and will look 
to obtain useful insight through 
effective dialogue with our key 
stakeholders, taking feedback into 
account in the Board’s decision-
making process.

Relevant section 172 factors

Decision making

Decision making

The Board
(including delegation of authority) 

Engagement

Investors

Employees

Customers

The knowledge, expertise, and 
skill of our employees are a major 
part of the Group’s intangible 
value. We work to attract, 
develop and retain the best talent, 
equipped with the right skills for 
the future. Our people have a 
crucial role in delivering against 
our strategy and creating value.

Our services are provided to the 
aerospace, defence, energy, 
automotive and general industrial 
markets. We work closely with 
our customers to understand 
their evolving needs so we can 
continually improve and adapt 
to meet them.

Society/Communities

We are committed to building 
positive relationships with 
communities where we operate.

We consult through our plant 
network to gain valuable 
perspectives on the ways in which 
our activities could impact the 
local community or environment.

£235m 

>40,000 

>165 plants 

in staff remuneration

customers worldwide

in 23 countries

Capital is rewarded through 
dividends and share price 
increases. Our investment 
proposition builds upon our 
strengths to create value for 
shareholders. We communicate 
progress on our financial and  
non-financial plans in order to 
cultivate the support of our 
investors, analysts, banks 
and proxy voting agencies.

£37m 

in dividends

20

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic reportSection 172 cross reference

The Board, in line with their duties under section 172 of the Companies Act 2006, must act in the way they consider, in good faith, would 
most likely promote the success of the Company for the benefit of the shareholders. Our Directors must also have regard to the likely long-
term consequences of their decisions, and the impact that these may have on the Company’s key stakeholders. Further information about 
how these duties have been applied can be found throughout the Annual Report.

Section 172 duties 

Consequences of decisions  
in the long term

Key examples

Strategic progress

Board activities in the year

Restructuring

Financial report

Going Concern and Viability statements

Principal Risks

Interests of employees

Chair and Chief Executive statements

Fostering business relationships 
with suppliers, customers and others

Impact of operations on the community 
and the environment

Our stakeholders

Environment, Social and Governance report

Board activities in the year

Our stakeholders

Environment, Social and Governance report

Board activities in the year

Environment, Social and Governance report

Maintaining high standards  
of business conduct 

Environment, Social and Governance report

Corporate governance statement

Acting fairly between members 

Shareholder engagement

Page

13, 16-17

20-21

12-13

25-27

27, 34

29

10-13

18

36-43

18, 20-21

10-13, 18

36-43

50-53

36-43

36-43

46

20

The table on page 18 sets out our key stakeholder groups and how they were engaged with directly and indirectly by the Board throughout 
the year.

21

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportBusiness review

Bodycote has more than 165 
facilities around the world which are 
organised into two customer-focused 
businesses: the ADE business and 
the AGI business. 

Our ADE business focuses on aerospace, defence, and energy 
customers, who tend to think and operate globally. Our AGI 
business focuses on automotive and general industrial customers. 
These include many multinational companies that tend to operate on 
a regionally-focused basis and numerous medium-sized and smaller 
businesses, all of which are important to Bodycote. Much of the 
AGI business is locally oriented. Strategically we have focused on 
building customer relationships to enable our participation in long-
term programmes. Not only do we have a competitive advantage 
as a result of our scale and capabilities, but our global reach allows 
customers to work with us on multiple projects simultaneously, 
making us a valued business partner. 

The ADE Business  

ADE revenue by market 
sector and geography
£m

Market sector 

Aerospace and Defence

145.6

Energy

Automotive

General Industrial

Total

Geography

Western Europe

North America

Emerging Markets  

Total

41.5

9.7

52.4

249.2

103.1

143.3

2.8

249.2

A large number of Bodycote's global 
customers fall within our ADE business 
and Bodycote intends to continue to 
leverage its unique market position to 
grow our business in the aerospace, 
defence, and energy sectors. 
Within ADE, we have more than 60 facilities around the world, 
including Hot Isostatic Pressing (HIP) and Surface Technology 
facilities, alongside our Classical Heat Treatment plants.

The following review reflects constant currency growth rates unless 
stated otherwise.

Revenue in 2020 was £249.2m, a decrease of 17% (17% at actual 
rates), including the benefit of the contribution to revenues from the 
Ellison acquisition. On an organic basis, the full year decline was 
25% (25% at actual rates), including a 34% decline (35% at actual 
rates) in the second half. Organic civil aerospace revenues declined 
35% in the  full year, registering a 50% decline in the second half. 
Energy revenues also declined significantly.

As a consequence of the decline in revenues, headline operating 
profit dropped to £36.8m (2019: £75.8m), and headline operating 
margin decreased to 14.8% (2019: 25.1%). Reflecting the exceptional 
restructuring charge, statutory operating profit declined to £12.1m 
(2019: £73.4m).

In light of the revenue declines, we only spent £2.2m on expansionary 
capital expenditure as we have plenty of capacity available to service 
these lower volumes.

Return on capital employed decreased to 10.3% (2019: 24.2%) as a 
result of the lower profitability. 

22

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic report  
  
 
 
 
 
 
The AGI Business  

AGI revenue by market 
sector and geography
£m

Market sector 

Aerospace and Defence

Energy

Automotive

General Industrial

Total

Geography

Western Europe

North America

Emerging Markets  

Total

11.0

9.2

149.3

179.3

348.8

203.7

83.5

61.6

348.8

Our extensive network of more 
than 100 AGI facilities enables the 
business to offer the broadest range 
of capability and security of supply. 
Bodycote has a long and successful 
history of servicing its wide-ranging 
customer base.
Each of our AGI facilities works with their customers to respond with 
the expertise and appropriate service level required, no matter the 
size of the customer's demand. 

The following review reflects constant currency growth rates unless 
stated otherwise.

Revenue was £348.8m, a decline of 16% on the prior year (17% at 
actual rates). 

Headline operating profit was £41.0m (2019: £65.9m), and headline 
operating margin correspondingly declined to 11.8% (2019: 15.8%). 
However, given that the revenue decline in the second half was 
lower than that in the first half and much of the action on costs was 
beginning to take effect as the year progressed, AGI's headline 
operating margin in the second half was actually flat on the 2019 
level at 15.0%, representing a creditable achievement and placing 
the business in good shape to benefit from further revenue recovery. 
Reflecting the exceptional restructuring charge, statutory operating 
profit declined to £1.6m (2019: £62.0m).

We spent £16.4m on expansionary capital expenditure. Return on 
capital employed decreased to 8.8% (2019: 13.8%), reflecting the 
lower profitability. 

23

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic report 
  
 
 
 
 
 
 
A component journey
Standing the test of time – Luxury watchmaking

A luxury watch is a highly engineered, precision work of art, 
often consisting of as many as 300 components. 

Chronographs, pilot’s watches, diving watches, and mission timepieces are designed to 
perform both in demanding conditions but also in everyday life. While significance is placed 
on aesthetic design, the quality and longevity of components is equally important.

Bodycote’s S3P (Specialty Stainless Steel Processes) technology provides the ultimate long-
lasting protection against surface scratches whilst preserving the metal’s appearance.

The first step of 
the manufacturing 
journey involves a 
3D virtual design 
of all the watch’s 
parts, such as bezels, 
seals, crowns, cases, 
backs etc.* 

Bodycote’s S3P 
technology is applied to 
bezels, cases and straps 
to provide an exceptionally 
wear and scratch resistant 
surface. The hardening 
process has no negative 
effect on the appearance 
or natural corrosion 
resistance of the steel. 

The watch case begins its 
journey as a steel billet. 
An austenitic stainless steel 
with high nickel and chromium 
content is selected for its 
non-magnetic properties 
and corrosion resistance. 
Quality and purity of the 
steel is critical to guarantee 
functionality and an 
optimal surface.

Grinding and 
polishing is 
used to achieve 
a smooth and 
uniform surface.* 

The case – a 
complex 3D shape – 
is machined from a 
disc or circular blank 
to tight tolerances, 
to meet the 
demands of 
specification 
and functionality.* 

The utmost precision 
is required when 
pressing the sapphire 
crystal glass into 
the hardened 
watch case.*

The watch is tested for 
performance – a diving 
watch, for example, 
must withstand a 125 bar 
(nominal) pressure test.* 

The individual watch 
components – up 
to 300 parts – are 
manually assembled.* 

   The Bodycote ‘B’ next to a component journey stage shows where 
Bodycote’s vital services have been applied. 

* Photos courtesy of Sinn Spezialuhren GmbH and SUG GmbH 

24

End application: 
the perfect timepiece – 
a scratch resistant, 
high quality watch 

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic reportChief Financial Officer’s report

Headline operating cash 
conversion was 173% 
as the Group continues 
its great track record of 
converting profit into cash.

D. Yates  
Chief Financial Officer

Financial overview

Revenue

Headline operating profit
Amortisation of acquired intangible assets
Acquisition costs

Exceptional items
Operating profit 
Net finance charge
(Loss)/profit before taxation
Taxation credit/(charge)
Profit for the year

2020
£m
598.0

75.3
(9.8)
(2.1)

(58.4)
 5.0
(6.5)
 (1.5)
2.3
 0.8

 2019 
£m
719.7

134.9
(4.6)
(1.7)

 –
128.6
(4.7)
123.9
(29.9)
94.0

Group revenue was £598.0m, representing a decline of 16.9% at actual exchange rates, and 16.6% at constant currency.

Headline operating profit for the year declined by 44% to £75.3m (2019: £134.9m), and headline operating margin was a resilient 12.6% 
(2019: 18.7%). Statutory operating profit declined to £5.0m (2019: profit of £128.6m). 

25

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportChief Financial Officer’s report continued

Finance charge
The net finance charge was £6.5m (2019: £4.7m) analysed in the 
table below. The reader will note the inclusion of interest on deferred 
consideration resulting from the acquisition of Ellison Surface 
Technologies in April 2020, with final consideration due in April 2021.

Interest received on bank overdrafts and loans
Interest on deferred consideration 
Loan interest payable
Interest on lease liabilities
Financing and bank charges
Pension finance charge
Total finance charge
Net finance charge

2020 
£m
0.2
(0.8)
(0.7)
(2.2)
(2.9)
(0.1)
(6.7)
(6.5)

2019 
£m
0.2
–
(0.3)
(2.4)
(1.9)
(0.3)
(4.9)
(4.7)

As at 31 December 2020, headroom on the Group’s £251m Revolving 
Credit Facility was £199.2m and has a remaining life of 4.4 years. 

Profit before taxation

Headline profit before taxation

Amortisation of acquired intangibles

Acquisition costs
Exceptional items
(Loss)/profit before taxation

2020
£m
68.8

(9.8)
(2.1)
(58.4)
(1.5)

2019 
£m
130.2

(4.6)
(1.7)
–
123.9

The statutory loss before tax in the year was £1.5m (2019: profit of 
£123.9m), while headline profit before tax decreased 47% to £68.8m 
(2019: £130.2m). Within the exceptional items charge, the Group 
incurred a restructuring charge on a targeted strategic programme 
to position the business for the future. Acquisition costs and 
amortisation of acquired intangibles rose as a result of the successful 
completion of the Ellison Surface Technologies acquisition in the 
first half. 

Tax
As a result of the statutory loss, there was a tax credit of £2.3m in 
the year (2019: tax charge of £29.9m). In line with previous guidance, 
the headline tax rate, being stated before accounting for amortisation 
of acquired intangibles, acquisition costs and exceptional costs, was 
22.5% (2019: 23.8%).

Provisions of £22.1m are carried in respect of potential future additional 
tax assessments related to ‘open’ historical tax years. Reference is made 
in note 8 to the financial statements for more information.

Following the acquisition of the Ellison business in the US, Bodycote 
is entitled to claim US tax relief over the next 15 years for purchased 
goodwill generating an annual cash flow benefit of £1.8m at current 
US tax rates. This will not impact the Group’s tax rate, as, under 
IFRS, a growing deferred tax liability will be established in respect of 
any tax relief claimed.

As reported last year in April 2019, the European Commission 
published their decision that certain tax exemptions offered by the 
UK authorities constituted State Aid and, as such, will need to be 
recovered. The UK government subsequently appealed against this 
decision. In the meantime, the UK tax authorities have indicated 
that they will be raising assessments on affected UK companies in 
line with the current judgement. To date, Bodycote has not been 
assessed and there is no provision against this contingent liability. 
More details can be found in note 31 of the financial statements.

26

Earnings per share
Basic headline earnings per share fell 47% to 27.8p (2019: 52.1p) as a 
result of the lower headline operating profit. Basic earnings per share 
for the year fell to 0.2p (2019: 49.4p).

(Loss)/profit before taxation
Taxation credit/(charge)
Profit for the year
Basic headline earnings per share
Basic earnings per share

2020
£m
 (1.5)
2.3
0.8
27.8
0.2

2019 
£m
123.9
(29.9)
94.0
52.1
49.4

Return on capital employed
Return on capital employed (including right-of-use assets) fell in the 
year to 9.8% from 17.7% in 2019. The decline reflects the reduction 
in the Group’s headline operating profit as well as increase in 
average capital employed resulting from the investment in the Ellison 
acquisition in the first half. The Group continues to exert strong 
financial discipline over capital expenditure projects in order to target 
strong returns.

Cash Flow

2020

2019

Post 
IFRS 16 
£m
75.3 
82.0
0.4
(0.2)
0.6
158.1 

Headline operating profit
Depreciation and amortisation
Impairment of PPE
Income from associates
Loss/(profit) on disposal of PPE
Headline EBITDA
Net maintenance capital 
expenditure
(45.1)
17.2
Net working capital movement
Headline operating cash flow 130.2
(11.6)
Restructuring
(4.7)
Financing costs
(7.8)
Tax
106.1
Free cash flow
(20.0)
Expansionary capital expenditure
(25.1)
Ordinary dividend
(99.3)
Acquisition spend
Special dividend
–
Own shares purchased less SBP 
and others
Reduction in net cash
Opening net (debt)/cash
Foreign exchange movements
Closing net (debt)/cash

(0.1)
(38.4)
(58.5)
(1.2)
(98.1)

Pre 
IFRS 16 
£m
72.5
67.2 
0.4
(0.2)
0.7
140.6 

Post 
IFRS 16 
£m
134.9 
79.6
–
(0.2)
(4.4)
209.9 

Pre 
IFRS 16 
£m
132.6
65.1 
–
(0.2)
(4.4)
193.1 

(38.7)
17.2
119.1
(11.6)
(2.5)
(7.8)
97.2
(19.5)
(25.1)
(96.0)
–

(0.1)
(43.5)
20.9
0.1
(22.5)

(50.2)
(4.2)
155.5
(3.2)
(4.5)
(24.7)
123.1
(32.2)
(36.8)
(29.0)
(38.1)

(4.9)
(17.9)
(44.1)
3.5
(58.5)

(39.1)
(4.2)
149.8
(3.2)
(2.1)
 (24.7)
119.8
(32.2)
(36.8)
(22.9)
(38.1)

(4.9)
(15.1)
36.2
(0.2)
20.9

Despite the £59.6m decline in headline operating profit, 
headline operating cash flow declined only £25.3m to £130.2m 
(2019: £155.5m). This was a result of careful cash management, 
coupled with the benefit of significant working capital inflow, mainly 
resulting from lower trade receivables associated with the lower 
revenues. Headline operating cash conversion was 173% as the 
Group continues its great track record of converting profit into cash. 
Free cash flow remained strong, falling only £17.0m to £106.1m 
(2019: £123.1m), with a free cash flow conversion ratio of 141% 
(2019: 91%), despite some restructuring related outflows.

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic reportAlternative performance measures
Bodycote uses alternative performance measures such as headline 
operating profit, headline earnings per share, headline profit before 
taxation, headline operating cash flow, headline operating cash 
conversion, free cash flow and return on capital employed together 
with current measures restated at constant currency. These assist 
users of the financial statements to gain a clearer understanding of 
the underlying performance of the business, allowing the impact of 
restructuring and reorganisation activities, and acquisition costs to be 
identified separately. These alternative performance measures can 
be found in Note 1 to the financial statements.

Going concern
As described on pages 90 to 91 of the financial statements, 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 the foreseeable future. In making this 
judgement, they have considered the impacts of current and severe 
but plausible consequences arising from COVID-19 to the Group's 
activities. For this reason, the directors continue to adopt the going 
concern basis in preparing the financial statements. 

D. Yates
Chief Financial Officer 
12 March 2021

Expansionary capital expenditure and acquisitions
The Group invested £20.0m in expansionary projects, mainly related 
to investment in a new plant in Hungary and two new plants in North 
America, all in the AGI business. The two new North American 
plants have facilitated some of the restructuring activities undertaken 
during the year, which, in turn, has improved the overall quality of 
our operations. 

The Group remains committed to invest in maintaining its assets 
to the highest standards of quality and safety, with repairs and 
maintenance expenditure maintained, despite the reduction 
of revenue. 

In April, the Group completed the acquisition of Ellison Surface 
Technologies for $200m (£154m). Within this, deferred consideration 
of $79.0m (£57.8m, based on the exchange rate at 31 December) will 
be paid in the first half of 2021. More details on this acquisition are 
provided in note 25 of the financial statements.

Exceptional items
The exceptional charge for the year was £58.4m, including £35.7m 
of restructuring cash costs, most of which will be paid during 2021. 
The Group also completed an assessment of its software during the 
year which has resulted in an impairment of £6.2m, occasioned by 
the decision to invest in new ERP software. 

Dividend and dividend policy
The Group aims to pay ordinary dividends so that dividend cover 
will be at or above 2.0 times earnings on a ‘normalised’ multi-year 
basis. The Board may also recommend payment of a supplemental 
distribution to shareholders. The amount of any supplemental 
distribution will be assessed in light of the cash position of the 
Group, along with funding requirements for both organic growth 
and acquisitions.

In line with this policy, the Board has recommended a final ordinary 
dividend of 13.4p (2019: 13.3p), bringing the total ordinary dividend 
to 19.4p (2019: 19.3p). The interim dividend of 6.0p, approved by 
the Board on 24 November 2020, was paid on 12 February 2021 to 
shareholders on the register at the close of business on 8 January 
2021. The final ordinary dividend will be paid on 4 June 2021 to 
shareholders on the register at the close of business on 23 April 
2021. In light of the net debt position at the year end on the balance 
sheet, the Board is not recommending a special dividend. 

Borrowing facilities
The Group is financed by a mix of cash flows from operations, 
short-term borrowings, and leases. The Group’s funding policy aims 
to ensure continuity of financing at a reasonable cost, based on 
committed and uncommitted facilities and loans to be procured from 
several sources over a spread of maturities. The Group continues 
to have access to committed facilities at competitive rates and 
therefore currently deems this to be the most effective means of 
long-term funding.

In May, the Group negotiated a new Revolving Credit Facility 
extending the borrowing base to £251m for five years expiring in May 
2025. As at 31 December 2020 £51.7m (2019: £nil) was drawn on 
this facility.

Facility

£251m Revolving Credit

Expiry 
date
27 May
2025

Facility 
£m

Facility 
utilisation 
£m

Facility 
headroom 
£m

250.9

51.7

199.2

27

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportA component journey
In gear – Pinion gear

A pinion gear is a critical automotive component used in virtually all 
transmission units. During use, a vehicle places heavy demand on its 
transmission, requiring a fast and reliable response to the drive controls.

The gears require high strength and wear resistance in order to withstand the stresses 
applied to each gear during use. Bodycote’s heat treatment processes, in particular Low 
Pressure Carburising (LPC), enable modern transmissions to deliver high performance 
and seamless response, even reducing noise during gear changes.

The gears begin life 
as low alloy steel. 

The gears are machined 
to shape using a shaving 
or hobbing method.

The gears are dimensionally measured 
before heat treatment to monitor and 
maintain repeatability of distortion. 
The gears are then heat treated using 
LPC to enhance functionality by adding 
a ‘case depth’ to provide strength and 
resistance to wear and tear.

The gears are quenched 
using Nitrogen gas to 
minimise part distortion, 
then tempered to relieve 
internal stresses.

The parts are inspected and 
tested for surface hardness, 
core hardness and effective 
case depth.

The gears are 
assembled into the 
transmission unit.

The gears are shot peened 
to add compressive 
residual stress – this allows 
the parts to withstand 
more wear and tear. 
The gears are measured 
again after heat treatment 
to check any distortion is 
within limits.

End application: 
automobile

   The Bodycote ‘B’ next to a component journey stage shows where 
Bodycote’s vital services have been applied. 

28

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic reportPrincipal risks and uncertainties

The Board is responsible for the Group’s risk management and 
determining the Group’s risk appetite. The review of financial risk 
has been delegated to the Audit Committee. The Group’s risk 
framework, which has continued to operate as normal throughout 
the COVID-19 pandemic, employing a variety of top-down and 
bottom-up approaches, is used to identify, monitor and report 
risks. Risk registers are maintained throughout the business and 
the content of these are discussed at regular meetings with senior 
management. Risks are aggregated first at a divisional level and then 
at Group level. For each business critical risk, assurance activities 
have been documented in risk assurance maps and these are used 
to direct assurance activity, including that of internal audit. 

The Group Head of Risk is supported by the Sustainability and 
Risk Committee which met twice during 2020. Due to COVID-19 
the meetings in 2020 were held virtually rather than in person. 
The meetings are attended by a Vice President from each of 
the operating divisions, the Group Head of Safety, Health and 
Environment and the General Counsel. The Sustainability and Risk 
Committee assists the Group Head of Risk in identifying critical risks, 
embedding risk management and facilitating the implementation of 
risk management measures throughout the Group. A series of virtual 
risk workshops were also conducted during 2020 across all business 
areas, culminating in several externally facilitated risk workshops 
with the full Executive Committee. The Group Head of Risk provides 
an update to the Executive and Audit Committees on the Group’s 
risk activities at every meeting and a comprehensive review of 
the Group’s business critical and emerging risks is presented to 
the Board in June and in December. The Board concluded that an 
ongoing process of identifying, evaluating and managing the Group’s 
significant risks has been in place throughout 2020 and a robust 
assessment of the principal and emerging risks had been undertaken. 

The tables on the following pages highlight the major risks that 
may affect Bodycote’s ability to deliver the strategy, as laid out on 
page 14. The risks to the business have been reviewed throughout 
the year, and it has been determined that there are three new 
principal risks to the Group: contract review, machine downtime 
and loss of key accreditations. It has also been determined that two 
risks previously reported as principal should no longer be reported 
as such: capital projects and loss of key customers. The capital 
project risk has been reduced by improvements in the control 
environment; for example, improvements in project management 
and the monitoring of costs. The loss of key customer risk has been 
re-evaluated, as no single customer loss would be significant to the 
Group; it would require the loss of multiple customers to become a 
significant risk. The loss of multiple customers would more likely be 
the consequence of a market downturn, poor quality, or customer 
service failures; all of which are principal risks in their own right.

Per the criteria that the Board has agreed to assess potential 
risks, they may be classified as principal risks by virtue of their 
potential financial impact on the Group in the foreseeable future, 
in combination with the likelihood of this impact occurring, and 
taking into account the appropriate internal controls and other risk 
mitigation actions. 

Details of the Group’s financial risks (liquidity, credit, interest rate 
and currency), which are managed by the Group’s treasury function, 
are provided in note 20 to the financial statements. The mitigating 
activities described below will reduce the impact or likelihood of the 
major risk occurring, although the Board recognises that it will not 
be possible to eliminate these risks entirely. 

The UK formally left the EU at the end of the Brexit transition period 
on 31 December 2020. Cross-border trading between the UK and 
the EU member states continues to be a very small part of the UK 
business with the majority of the businesses served through locally 
situated plants. Consequently, there is no change to the view that 
Brexit does not present a material risk to the Group.

Emerging risk
Bodycote’s emerging risk identification process was introduced 
in 2019 and is based on horizon scanning. This process takes 
place alongside the annual risk review, with emerging risks being 
considered in facilitated risk workshops, including those conducted 
with the Executive Committee. 

Each emerging risk is assessed on its potential impact on the 
Group on a high, medium or low rating across three time horizons: 
0-2 years; 2-5 years; more than five years. The 2019 emerging risk 
process identified a number of potential risks to the Group posed by 
the wider effects of climate change on Bodycote’s business. This has 
also been reflected in the 2020 review. The emerging risk review 
identified four risks, three of which were highlighted in 2019 and one 
new risk which has been added in 2020. The previously identified 
emerging risks are: 

The acceleration in the transition to electric vehicles (EV); EVs tend 
to have fewer components that require heat treatment and this 
could reduce the number of components Bodycote has to process. 
However, to capture more of this growing market, Bodycote has 
already started to position itself as the supplier of choice to EV 
manufactures and OEMs. It is also the case that Bodycote has a very 
strong market position in the technologies that are likely to be more 
favoured in the production of electric vehicles.

Continued environmental activism around climate change has started 
to influence some consumers to reduce their carbon footprints. 
There is the potential that this could start to impact some of the 
sectors Bodycote operate in, such as civil aerospace.

Greater geopolitical risk, with increased international tensions, 
tariffs and other barriers to international trade. If countries pursue 
aggressive trade barriers that reduce the movement of goods this 
could result in companies having to move their production locations. 
As Bodycote sites tend to be located in close proximity to our 
customers this could result in Bodycote having to relocate facilities.

The COVID-19 pandemic, as well as the potential for more 
pandemics in the future, has been added as a new emerging risk in 
2020, including its long-term effects for which the full impacts are 
still not known. The pervasive impact of COVID-19 on the Group has 
been reflected throughout the identified risks. 

29

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportRelevance 
to strategy

3 

1

4 

2 

5 

3

1

Principal risks and uncertainties continued

Risk description

Risk rating 

Mitigation and control

Market and customer risks

Markets

Increasing

Bodycote operates in 23 countries, 
and the Group’s revenues are closely 
linked to general macroeconomic 
trends and the economic environment. 
The economic environment continues 
to be impacted by global issues such 
as COVID-19, which developed in 
early 2020. As events have shown, 
COVID-19 had a material impact on the 
markets in which Bodycote operates. 
There has been a significant revenue 
decline in a number of market sectors 
and the pace and extent of the revenue 
recovery is uncertain, although the 
rollout of vaccine programmes is 
certainly a positive development.

The high proportion of short-term 
fixed costs in the business means 
that a drop in sales can have a 
significant impact on profitability. 

 – Bodycote’s presence in 23 countries servicing 
more than 40,000 customers across a wide 
variety of end-markets acts as a natural hedge 
to neutralise localised economic volatility and 
component life cycles. 

 – As demonstrated during 2020, Bodycote has 
demonstrated good short-term flexibility in 
managing its cost base. On a like-for-like basis, 
Bodycote achieved operational gearing (the 
change in profitability divided into the change in 
revenues) of 41%.

Competitor action

Stable

The entry of competitors into 
one or more of the Group’s 
Specialist Technologies. 

The entrance of new competitors 
could result in the erosion of 
market share with a loss of 
revenue and profitability. Indeed, 
there are a few new small and mid-
sized HIP furnaces being installed 
by competitors. So far, however, 
investments in large HIP furnaces, 
where Bodycote has a very strong 
market position, has been limited.

 – The close control of proprietary knowledge. 

 – Rapid increase in the scale of the Group’s 

offerings to maintain the position as supplier 
of choice.

 – A focus on customer service to ensure that 
satisfied customers have no cause to seek 
alternative suppliers.

 – There are high financial barriers to entry.

Corporate and community risks

Safety and health

Stable

The inherent nature of Bodycote’s 
activities presents safety and health 
risks that have been increased by 
the additional health threats that 
COVID-19 has presented. 

Bodycote is committed to 
providing a safe work environment 
for its employees but Bodycote’s 
operations, if not properly 
managed, could have a significant 
impact on individual employees. 
Furthermore, poor safety and 
health practices could lead to 
disruption of business, financial 
penalties and loss of reputation. 

 – Group-wide health and safety policies 

developed by the Group Head of SHE, ratified 
by the Sustainability and Risk Committee and 
approved by the Chief Executive.

 – OHSAS 18001 and ISO 14001 compliant SHE 

management systems being used by the 
Group Head of Safety, Health and Environment 
with support of divisional safety, health and 
environmental teams.

 – Programme in place to focus on reduction of 
incidents which could have a high impact. 

 – Safety compliance audits at all plants at least 

every two years. 

 – Oversight of safety and health framework 

provided by the Sustainability and 
Risk Committee. 

 – Bodycote facilities responded proactively, 

and positively, to COVID-19. Where required, 
facilities and offices closed ahead of any 
local requirements to allow remote working 
for office based staff. Additional precautions 
have also been adopted in all plants with new 
SHE guidance including temperature checks, 
additional PPE, social distancing measures and 
staff communication and discussion sessions. 

1

Safety and  
Environment

2

Driving operational  
improvement

3

Capitalising on and investing 
in our Specialist Technologies

4

Investing in  
Emerging Markets

5

Investing in structural  
growth opportunities

6

Acquisitions

30

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic reportRisk description

Risk rating 

Mitigation and control

Relevance 
to strategy

Environment, social and governance

Environment

Increasing 

Actual or potential environmental 
contamination in any of our facilities 
could lead to health risks, disruption 
of business, financial costs and loss 
of reputation. 

By its very nature, heat treatment also 
consumes a significant amount of 
energy and consequently, Bodycote is 
likely to receive increased scrutiny in 
the future in relation to emissions and 
climate change.

Social and governance issues are 
also climbing the agenda of many 
regulatory bodies, as well as all 
stakeholders, including shareholders. 

Operational risks

Service quality

The Bodycote brand is reliant on the 
repeatable delivery of parts to agreed 
specification to an agreed time.

Investors and stakeholders 
are increasingly seeking ‘best 
in class’ companies across a 
growing set of ESG criteria. 
Bodycote is committed to 
continuous improvement in 
the management of corporate 
responsibility issues and is 
implementing policies and 
initiatives to further this goal. 
The future success and growth of 
the Group is intrinsically linked to 
our ability to ensure the Group’s 
operations are sustainable. 

Stable 

There is a risk that a deterioration 
in quality or service levels can 
cause serious long-term damage 
to Bodycote’s reputation with 
financial consequences such as 
the loss of a customer and the cost 
of damages or litigation. Work that 
is released into use which is not 
in compliance with specification 
could arise as a result of human 
failure. Customers are tending to 
demand higher liabilities in respect 
of any quality defects or delays on 
Bodycote’s part. 

Contract review

Stable

Parts that are not treated according 
to the confirmed specifications 
can lead to customer claims and 
reputational damage. Ensuring that all 
specifications’ changes are properly 
recorded and formally agreed with 
the customer is, therefore, extremely 
important. Customers can also 
reject parts if they have not been 
processed in accordance with 
contractually agreed specifications, 
leading to lost revenues and potential 
compensation payments. 

Parts that are released into use 
which are not in compliance 
with the contractually agreed 
specification could arise as 
a result of system or human 
failure. Customers can amend 
the specification Bodycote is 
expected to work to and the end 
failure to update the process 
at a plant could result in parts 
being rejected or failing. Equally, 
specifications’ changes requested 
by the customer may not have 
been formally agreed contractually, 
again, potentially leading to 
parts being rejected or failing. 
Both of these could result in 
material claims against Bodycote 
with significant reputational 
damage, financial penalties and 
a loss of future revenue. 

 – We manage, measure and report our impacts, 
risks and opportunities in environmental and 
social areas through the TCFD model (as 
described on pages 36 to 37).

 – Environmental procedures and measures in 

place conforming to ISO 14001.

 – Remediation of contaminated sites or additional 

emissions abatements.

 – Bodycote has stringent quality systems in place 

managed by qualified staff. 

 – Quality systems and processes operated 
at plant level with oversight by divisional 
quality teams. 

 – Where necessary, plants maintain industry 
relevant accreditations, such as ISO 9001, 
Nadcap and IATF 16949. 

 – Each facility has regular audits by quality staff, 

accreditation bodies and customers.

 – Each facility has a robust quality management 
system with regular audits by quality staff, 
accreditation bodies and customers. 

 – Bodycote carefully negotiates terms and 
conditions associated with the supply of 
services to its customers, carefully managing 
potential liabilities.

 – As this is a new principal risk this area will be 
specifically reviewed by Internal Audit in 2021.

 – Some potential damages resulting from this 
risk are fully or partially covered through the 
Group’s various insurance policies.

1

2

2

31

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportPrincipal risks and uncertainties continued

Risk description

Risk rating 

Mitigation and control

Relevance 
to strategy

Operational risks continued

Loss of key accreditations

Stable

Bodycote is required to maintain 
specific accreditations in order to 
provide heat treatment and thermal 
processing services on parts for 
certain customers.

Bodycote facilities have 
accreditations from a number of 
different bodies, such as Nadcap 
for aerospace and defence work 
and IATF 6949 for automotive. 
Should a number of facilities fail 
to maintain their accreditations, 
customers could potentially move 
work to a competitor resulting in a 
loss of revenue to Bodycote. 

 – Each facility has a robust quality management 
system with regular audits by quality staff, 
accreditation bodies and customers. 

2

 – Should a facility fail an accreditations audit a 
remediation plan to fix any non-conformities 
would be implemented.

 – Bodycote has a global network of more than 
165 facilities and this enables work to be 
transferred to another accredited facility. 

 – As this is a new principal risk this area will be 
reviewed by Internal Audit in 2021 alongside 
the contract review risk.

Major disruption at a facility 

Stable

Bodycote’s facilities are subject 
to man-made and natural hazards 
that could lead to their potential 
closure. Some business processes 
are inherently risky, and there is 
a possibility that a major incident, 
such as a fire or utility outage, could 
occur. In addition, some facilities are 
exposed to natural hazards, such as 
earthquakes, flooding and storms.

2

5

Any significant incident at a site 
could result in the service to 
Bodycote’s customers from the 
affected site being disrupted. 
A number of Bodycote plants have 
been closed during 2020 as a 
result of the impact of COVID-19 
on the markets in which Bodycote 
operates. Aside from disruptions 
resulting directly due to mandated 
closures for COVID-19, none of the 
Group’s facilities suffered any other 
significant disruption during 2020. 

 – Bodycote has a global network of more 

than 165 facilities. These facilities create a 
framework to provide backup capability. 

 – Business continuity plans are in place for all 

plants. These are updated and tested annually. 

 – As a response to COVID-19 in 2020 

independent insurer physical inspections 
to facilities to assess hazard and business 
interruption risks did not take place. Instead, 
a series of self-assessment property risk 
questionnaires have been developed with the 
insurers, to ensure proper management of 
this risk.

 – Insurance cover, including business 

interruption cover. 

 – Scheduled equipment maintenance 

and inspections.

Machine downtime

Stable

Bodycote relies upon its operational 
equipment, across the network of 
plants, being available to meet the 
requirements of its customers. 

Significant periods of equipment 
downtime, for example, as a result 
of breakdowns would impact 
customer service. Moreover, 
without an effective preventative 
maintenance programme, more 
equipment redundancy needs 
to be built in to facilities in 
order to cope with unexpected 
equipment breakdowns.

 – A project is underway to further study and 
mitigate the risk, for example, by using 
maintenance data to develop a comprehensive 
preventative maintenance programme.

 – Bodycote has a global network of facilities with 
robust business continuity plans to minimise 
the impact of equipment downtime.

2

5

1

Safety and  
Environment

2

Driving operational  
improvement

3

Capitalising on and investing 
in our Specialist Technologies

4

Investing in  
Emerging Markets

5

Investing in structural  
growth opportunities

6

Acquisitions

32

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic report 
 
Risk description

Risk rating 

Mitigation and control

Relevance 
to strategy

Operational risks continued

Information technology  
and cybersecurity

Increasing 

The Group relies upon its IT systems, 
including a range of ERP solutions 
to manage its operations. There are 
increasing global threats faced by 
these systems from sophisticated 
cyber-attacks, including ransomware 
and phishing.

A significant failure of IT systems 
as a result of external factors, 
such as a cyber-attack, could 
disrupt service to our customers, 
and result in reputational and 
financial loss.

 – The Group has robust governance processes to 
ensure that IT projects are adequately reviewed 
and approved to ensure that they are consistent 
with the Group’s IT Strategy. 

 – Increased focus on IT security 

management processes.

 – Bodycote maintains a focus on improving 

information security and has well-protected 
data centres supported by effective business 
recovery planning and data back-up procedures.

Regulatory risks

Regulatory and legislative 
compliance

Stable

The global nature of Bodycote’s 
operations means that the Group 
has to comply with a wide range 
of local and international legislative 
requirements, including modern 
slavery, anti-bribery and anti-
competition legislation, employment 
law and import and export controls. 
The Group also has to comply with 
taxation legislation and the EU have 
challenged as illegal state aid, the 
advantages associated with the 
UK's controlled foreign companies 
that the Group has employed in its 
financing structures.

Failure to comply with legislation 
could lead to substantial financial 
penalties, disruption to business, 
diversion of management time, 
personal and corporate liability and 
loss of reputation.

 – Business processes are supported by 

Human Resources policies and the Group 
Code of Conduct alongside training and 
awareness programmes. 

 – The ‘Open Door Line’ whistleblower facility 

operated by a third party. 

 – Engagement of specialists to support Bodycote 

at local, divisional and Group levels. 

 – Regular audits of the effectiveness of 

implemented procedures.

 – The Group continues to monitor developments 

around the EU State Aid case.

2

2

33

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportViability statement

In preparing this statement of viability, the Directors have considered the prospects of the Group over the three-year period immediately 
following the 2020 financial year. This longer-term assessment process supports the Board’s statements on both viability, as set out below, 
and going concern (on pages 90 to 91). The Directors have determined that a three-year period is an appropriate period over which the 
business could be restructured in the event that any material changes to demand for the Group’s services transpired. This period is also 
consistent with that used for the Group’s normal planning process. As a result, the Board determined that a period of longer than three years 
would not be meaningful for the purpose of concluding on longer-term viability.

The forecast used considers metrics which enable the assessment of the Group’s key performance indicators (including return on capital 
employed, headline earnings per share and headline operating cash flow) in addition to net debt, liquidity and financing requirements. 
The performance of the Group over the period of the assessment is then assessed against the covenants that exist in the Group's Revolving 
Credit Facility, as explained on page 117, and the Group's liquidity.

In conducting the review of the Group’s prospects, the Directors assessed the three-year forecasts alongside the Group’s current 
position, the Group’s strategy and the principal risks facing the Group (all of which are detailed in the Strategic Report on pages 1 to 43). 
This assessment considered the impact of the principal risks on the business model and on future performance, liquidity and solvency and 
was mindful of the limited forward visibility that the Group has as it carries no order backlog. The Directors’ viability assessment included 
a review of the sensitivity analysis performed on the three-year financial forecasts. These forecasts assume that 2023 revenues are still 
some way below those in 2019 for most of the business and management consider this to be conservative. The principal risks were then 
applied to this conservative forecast in a number of diverging scenarios. The developed scenarios were designed to be plausible, yet severe. 
Examples of the scenarios reviewed were:

 – A further decrease in forecast group revenue of 10%

 – An increase of 10 days in forecast debtor days

 – A 10% strengthening of sterling against other currencies

The combined effect of those elements was also reviewed, to reflect the effects of an economic downturn. These scenarios, applied on top 
of the conservative underlying cash flows, are considered by the Directors to be severe, but plausible, as they incorporate potential financial 
impacts identified in our principal risks and uncertainties, specifically market and operational risks. In all scenarios there were no breaches to 
the Group's covenants, and substantial covenant and liquidity headroom was maintained. 

In making this viability statement the Directors considered the mitigating actions (such as reducing discretionary capital expenditure) that may 
be taken by the Group in the event that the principal risks of the Company become realised but note that none of these actions were modelled 
in performing the assessment since the Group maintained substantial headroom in the combined scenario. 

The Directors also took into consideration the Group’s financial position at 31 December 2020, with available liquidity of £228.4m and a history 
of strong and resilient cash flow generation. Uncommitted facilities were not taken into account in performing the assessment, and there is 
no requirement for refinancing in the viability period given the Group's RCF extends to May 2025.

The Directors have assessed the viability of the Group and, based on the procedures outlined above in addition to activities undertaken 
by the Board in its normal course of business, confirm that they have a reasonable expectation that the Group will be able to continue in 
operation and meet its liabilities as they fall due over the period to 31 December 2023.

34

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic reportA component journey
Strong profile – Aluminium dies

The metal die 
begins life as 
forged steel bar.

A section is cut from 
the bar and machined 
to the die shape required.

The part undergoes a stress-
relieving heat treatment to 
eliminate material stresses 
introduced during the 
forging process.

The die is nitrided using 
a low pressure process. 
The introduction of 
Nitrogen into the surface 
gives increased hardness, 
toughness and ductility.

The part is 
inspected and its 
core hardness is 
tested against  
specification.

The die is finish 
machined using 
processes such 
as grinding, EDM 
and polishing.

   The Bodycote ‘B’ next to a component journey stage shows where 
Bodycote’s vital services have been applied. 

End application: 
Aluminium profiles are 
used for a wide variety 
of applications, such as 
window profiles

35

Aluminium extrusion dies are used to manufacture aluminium profiles for a wide range of industries.During their working life they are subject to erosion and wear and this can cause defects in the aluminium parts they are used to produce. Bodycote’s nitriding processes improve the surface properties of these dies, providing optimal durability and wear resistance. Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportEnvironment, Social and Governance

Our approach to sustainability
Bodycote's Core Values provide a framework for 
how we operate as a Group and the behaviours 
we embody when acting as a good corporate 
citizen. Respect and Responsibility are part 
of Bodycote's Core Values demonstrating our 
commitment to reducing the environmental 
impact of our activities while providing our 
employees a safe working environment.

Our sustainability approach focuses on the broader impacts we 
have on the environment, the communities where we operate, 
our employees, shareholders, and society as a whole. Bodycote's 
stakeholder model shows how its interactions on various levels 
contribute towards socio-economic growth and development. 
We seek to understand and build mutually beneficial relationships, 
allowing for Bodycote's growth and sustainability, which in return 
provides benefits to employees, investors, customers, and society.

Bodycote is dedicated to improving the management of sustainability 
issues and has policies and initiatives to achieve this goal. The future 
success and growth of Bodycote are intrinsically linked to our ability 
to ensure our operations are sustainable and that we can nurture 
and develop our talent. 

The services Bodycote supplies to its customers improve the 
lifespan of products and enable a reduction in the environmental 
footprint of their components. The services we offer are more 
efficient and productive than our customers' in-house operations, 
enabling the benefit of reduced carbon footprint, which our 
customers highly value, allowing us to create superior shareholder 
returns. We continually seek to minimise environmental impact 
and as such we have embarked on our path to net-zero carbon.

Our positive impact
As a thermal processing services provider, climate-related 
issues affect the way we develop new processes and how 
we manage existing ones.

We process our customers' goods in a concentrated way and 
at much higher efficiency levels than individual customers can 
achieve. Our services enable a positive impact in the carbon 
footprint of our customers' activities by increasing the usability 
of their products, improved metallurgical properties and 
enhanced corrosion resistance. By working with our customers 
in the most environmentally friendly manner possible, we can 
reduce the total carbon footprint on products being brought 
to market.

Thermal processing is an energy-intensive business; 
its use saves the energy it consumes many times over. 
By effectively consolidating our many customers' heat 
treatment requirements, we significantly reduce the overall 
required energy consumed compared with the energy that 
would be consumed if each customer treated their products 
in-house.

Governance
We manage and measure our impacts, risks and opportunities in 
regard to environmental and social impacts through the Task Force on 
Climate-Related Financial Disclosures (TCFD)1 model:

Governance

Strategy

Risk
Management

Metrics 
and Targets

Governance
Our Sustainability and Risk Committee, reporting to the Executive 
Committee, oversees the management of our climate-related risks 
and opportunities. Stephen Harris, our Group Chief Executive, 
has overall accountability for the environment and sustainability. 
As part of his role, he oversees the review and performance of our 
environmental and climate-related work.

Strategy
Bodycote takes a proactive approach to improve sustainability and 
energy efficiency. At every stage where Bodycote is involved in the 
manufacturing cycle, our operational aim is to reduce the overall 
impact on the environment, not just in our operations but also those 
of our customers. Bodycote operates efficiently, working around the 
clock to optimise treatment processing cycles. Without Bodycote, 
many companies would be using older in-house technology and 
running their equipment at reduced capacity, draining energy 
resources. Working with Bodycote enables our customers to 
commit more easily to carbon reduction initiatives. Our proactive 
carbon reduction initiatives are throughout operations and extend 
to our service offering by encouraging customers to switch to 
more efficient processes such as Gas Nitriding or our Specialist 
Technologies including Low Pressure Carburising, Corr-I-Dur, Surface 
Technology, and Speciality Stainless Steel Processing (S3P); all of 
which have an inherently low carbon footprint. As a company, we 
are building a path to net-zero carbon.

Bodycote is committed to reducing its carbon emissions in 
accordance with the Paris Agreement on Climate Change, reducing 
energy consumption and carbon emissions for the benefit of the 
business and society as a whole. Our business strategy involves 
continuous improvement of business processes and systems. 
When managing our plants, we have a significant focus on energy 
and carbon reduction, ensuring our plants operate as efficiently as 
possible. As a result, our strategy centres around the concept of 
continual improvement which ensures a high degree of both climate 
and financial resilience. 

1  Task Force on Climate-Related Financial Disclosures (TCFD) The TCFD has developed a framework to help public companies and other organisations more effectively disclose climate-related 

risks and opportunities through their existing reporting processes.

36

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic reportRisk management
Each year, senior managers from various business areas collate 
their key risks, including sustainability and climate change-related 
risks. The Executive Committee and the Board assess the risks to 
understand their severity, likelihood and the optimal controls and/or 
mitigation required.

The supply chain for Bodycote’s businesses is principally energy in 
the form of natural gas and electricity. Bodycote does not use fuel 
oil. In addition, Bodycote consumes the industrial gases Nitrogen, 
Argon, Ammonia (NH3) and some Hydrogen. Bodycote has no raw 
materials supply chain other than marginal amounts of base metals. 
As such there is no raw material supply chain risk. Clearly any risk to 
the supply of energy puts Bodycote at risk of being unable to provide 
its thermal processing services.

Metrics and targets
We measure the material impacts and outputs from our business 
based on standards and regulations as are relevant to our operations 
and these are reported throughout this section of the report.

Environment
As the world's leading provider of thermal processing services, 
Bodycote plays an important role in minimising climate change. 
By effectively consolidating, our many thousands of customers' heat 
treatment requirements, Bodycote significantly reduces the overall 
required energy consumed compared with the energy that would 
be consumed if each customer treated their own products. In this 
regard, Bodycote should be viewed as an enabler to the goal of a 
reduction in emissions. 

The total global energy consumption reduced by 6% in 2020 
compared with the previous year.

Total Global Energy Consumption

Global energy consumption kWh

2020

2019

Scope 1
Scope 2
Total Energy Consumption kWh

762,220,152
494,124,666

773,786,598
569,018,057
1,256,344,818 1,342,804,654

As individual facilities and as a Group, one of our core competencies 
is to manage energy efficiently, reducing our carbon footprint and 
creating value for our shareholders. 

We actively minimise energy use in a number of ways, optimising 
production capacity and providing energy-efficient processes. This is 
supplemented by an effective equipment maintenance programme to 
ensure that equipment consistently operates at highly effective and 
efficient levels. It is essential to the business that we monitor energy 
usage to identify opportunities for improvement so that we can react 
quickly to address any deficiency in our energy use. To facilitate 
this, we align ourselves in many countries to ISO 50001 (Energy 
Management Systems Standard), allowing a consistent approach to 
energy measurement. Doing so will enable us to meet the Energy 
Efficiency Directive 2012/27/EU requirements. The UK remains 
compliant with the directive through the Energy Savings Opportunity 
Scheme (ESOS).

Bodycote's services reduce our customers' carbon footprint by 
increasing the lifespan of their products by improving metallurgical 
properties, and enhancing corrosion resistance. For example, Surface 
Technology is widely used in the reclamation of damaged and worn 
components, offering a cost-effective and energy-efficient alternative 
to the need to manufacture new replacement parts. The treated parts 
often last up to twenty times longer than the original.

Bodycote's total CO2e emission data is based on Scope 1 and Scope 
2, and data relating to this has been calculated to include country-
specific electricity conversion factors from the International Energy 
Agency (IEA). Scope 1 emissions are direct emissions resulting from 
fuel usage and the operation of facilities. Scope 2 emissions are 
indirect energy emissions resulting from purchased electricity, heat, 
steam, or cooling for own use. 

The Group collects electricity, natural gas and LPG consumption 
information from each facility every month. The Group then applies 
the DEFRA and International Energy Agency (IEA) published national 
carbon conversion factors to calculate the total tonnage of CO2e 
produced, which along with the geographical sales for the year 
provides the normalised tCO2e per £m of sales.

Carbon footprint 
Bodycote offers some of the most energy-efficient processes 
available on the market place, strives to ensure full capacity 
utilisation, thereby providing maximum benefit to the client, the 
company and the environment. Bodycote has been able to reduce 
our carbon footprint with a 14% reduction in total carbon emissions 
since 2018. Our total carbon footprint is positively impacted by every 
customer who works with us to move from atmospheric treatments 
to our Specialist Technologies, particularly LPC, Corr-I-Dur, S3P, as 
well as gas nitriding and vacuum heat treatment. These processes 
are more efficient than the classical atmospheric carburising heat 
treatments that companies typically use if they process the work 
in-house. 

Year-on-year, Bodycote continuously improves our energy 
consumption through investments in energy improvement projects. 
Projects to reduce energy consumption vary in size and scope and 
collectively help us on our path to net-zero. The projects are as 
simple as upgrading to ultra-efficient lighting systems or installing 
solar panels or a broader directive to purchase renewable energy 
where possible.

37

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportEnvironment, Social and Governance continued

In 2020, Bodycote's total carbon emissions (ktCO2e) reduced by 8% 
compared with the previous year. 

The total CO2e emissions per £m sales in 2020 were 486.0 Te 
(2019: normalised† 427.2 Te). The impact of COVID-19 has meant 
throughput of customer product has fluctuated; notwithstanding 
this the energy used in the processes remains the same.

All entities and facilities under financial control are included within 
the disclosure. Emissions less than 1% of the Group's total CO2e 
relating to fugitive emissions and owned vehicles are not significant 
and are excluded. As such there are no significant omissions from 
this disclosure.

Total Global CO2 Emissions 

Scope 1
Scope 2
Statutory total2

CO2e emissions (ktCO2e)

2020
140.4
150.3
290.6

2019
142.6
174.4
317.0

2019
(normalised)
142.5
167.4
309.9

Water 
Bodycote reduces water consumption wherever possible; 
Bodycote's processes by design are not intensive in water 
consumption, and often, water is reused. However, during some 
services, minimal water is used for either cooling operational 
equipment or washing customer parts and is recycled. Any water 
discharge resulting from these operations is controlled using 
for example, measures such as interception tanks to capture 
water discharged. This allows the water to be checked for any 
contaminant levels and ensuring it is of an acceptable level prior 
to final discharge. Both internal and external auditing verifies all 
such control measures are in line with ISO 14001:2015 to ensure 
compliance with legal obligations.

The total water consumption, as a ratio of thousand m3 per 
£ million sales (103m3/ £ m), increased by 13%. In 2020 total water 
consumption reduced however this was primarily driven by lower 
production hours in 2020. 

When reviewing the actual total water consumption, there is a 6% 
decrease in 2020 from 2019, and a 9% reduction since 2018. 

Water consumption normalised 
(103m3/£ million sales normalised)

Total global consumption 
(x100,000 m3)

CO2 Emissions Intensity Ratios

Intensity ratio CO2e emissions (tCO2e/£m)3
2019
(normalised)
196.4
230.8
427.2

2019
198.1
242.3
440.4

2020
234.7
251.3
486.0

Scope 1
Scope 2
Statutory total2

8
3
.
1

2
3
.
1

0
3
.
1

8
2
.
1

5
4
.
1

9
1
.
9

9
7
.
8

2
6
.
9

2
3
.
9

7
7
.
8

Carbon emission normalised 
(tonne CO2e/£m 
sales normalised)

Total global carbon emissions                                     
(ktCO2e)

‘16

‘17

‘18

‘19

‘20

‘16

‘17

‘18

‘19

‘20

8
.
8
5
4

6
.
8
5
4

5
.
4
3
4

2
.
7
2
4

2
.
1
8
4

1
.
0
4
3

9
.
6
3
3

5
.
1
2
3

0
.
7
1
3

6
.
0
9
2

‘16

‘17

‘18

‘19

‘20

‘16

‘17

‘18

‘19

‘20

†  Normalised statistics restate prior-year figures using current year IEA carbon conversion factors and current year average exchange rates

2  Statutory carbon reporting disclosures required by Companies Act 2006 

3  tCO2e/£m as a consumption intensity ratio to sales is defined as tonnes of CO2 equivalent per million GBP of sales and is denoted as tCO2e/£m

38

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic report   
 
 
 
 
 
  
 
  
Supporting the manufacture 
of electric vehicles… 

ISO 14001 accredited facilities 
Reducing the environmental impact of Bodycote's activities is 
taken very seriously. The actions we undertake to reduce our 
environmental impact will align all our facilities to the compliance 
requirements of ISO 14001. At the end of 2020, 92% (155 of our 
operating facilities) had achieved or maintained ISO 14001: 2015 
accreditation (2019: 90%). The accreditation rates for 2020 have 
increased. The remaining thirteen facilities will achieve ISO 14001 
in 2021.

ISO 14001 accredited facilities 
(%)

9
8

0
7 9
8

2
0 9
9

The evolution of the electric vehicle (EV) is speeding up; greater 
consumer awareness of the environmental impact of vehicle 
emissions and improvements in charging infrastructure and 
distance range are increasingly leading the consumer towards 
electric vehicles.

Bodycote expertise in the automotive market and our global 
approvals mean we are the trusted partner for component 
manufacturers and OEMs. We are preparing for the future with 
our customers' needs in mind. Our Emerging Market facility 
investments support the growth in the EV market. In particular, 
our Vlkanova, Slovakia and Prague, Czech service EV vehicle 
components. The new Budapest facility in Hungary will open in 
2021 and will support the expansion of EV and Hybrid vehicle 
manufacturing in the region. 

As technology progresses in the electrification of cars, buses, 
and trucks; the market for electric vehicles is significantly 
expanding. Bodycote is supporting our customers around the 
world with solutions that enable the particular challenges faced 
by manufacturers of these types of vehicles. 

Electric vehicles require lighter components machined to 
tighter tolerances. Modern thermal processing techniques 
have allowed design engineers and manufacturers to reduce 
component weight and at the same time significantly prolonged 
component lifetimes. 

For example, by treating the transmission rings and gear 
components used in EVs and hybrids, the weight of the 
vehicle is reduced, which in turn leads to improved efficiency. 
Without thermal processing and in particular Bodycote's 
Specialist technologies, the electric vehicle would weigh 
substantially more and require frequent replacement of 
parts due to wear resulting in more mining, more transport, 
more machining, more waste – in short, a significant 
environmental impact.

‘16

‘17

‘18

‘19

‘20

Waste
Bodycote provides services to our customers, and as such, most 
of the customers' parts that arrive in packaging or containers are 
returned to the customers in the same packaging or containers. 
Not only does this practice reduce environmental impact and 
the waste produced, but it provides efficiency to our customers. 
Therefore, direct waste is not a significant environmental impact 
and is principally limited to office materials, packaging and 
containers from maintenance supplies plus chemical and oil waste 
from maintenance activities. All waste is segregated into waste 
streams and disposed of in accordance with local legislation. 
Waste transfer arrangements are validated via internal and external 
audit mechanisms.

Streamlined Energy and Carbon Reporting (SECR)
for UK listed companies and their UK subsidiaries
Electricity, natural gas, LPG and transportation fuel consumption 
information is collected from each facility on a monthly basis. 
The DEFRA conversion factors are then applied to calculate the total 
tonnage of CO2e produced.

Bodycote PLC and UK subsidiaries total CO2e emissions (ktCO2e) 
for 2020 were 13.4. 100% of Bodycote PLC and it's UK subsidiaries 
energy consumption was consumed in the UK. 

Scope 1
Scope 2
Scope 3
Total
Proportion of energy  
consumed in the UK

PLC and UK Subsidiaries 2020

CO2e  
emissions  
(ktCO2e)
4.6
8.6
0.1
13.4

Energy 
Consumption 
kWh
 24,809,194 
 36,949,645 
 515,662 
 62,274,501 

100%

39

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic report 
Environment, Social and Governance continued

Equality, diversity and inclusion
Bodycote recognises the value of a diverse and skilled workforce 
and is committed to creating and maintaining an inclusive and 
collaborative workplace culture that will provide sustainability 
into the future. As such, we regularly review our recruitment and 
working practices to identify how we can continue to attract and 
retain a diverse workforce. We recognise that diversity and an 
inclusive workplace enriches our solutions and adds value for our 
stakeholders. Per our Equality, Diversity and Inclusion Policy and 
Recruitment Policy we maintain equal opportunities; we give full 
and fair consideration to all employment applicants. Recruitment, 
training, reward, and career progression are based purely on merit. 
We embrace a culture of acceptance and inclusion, accommodating 
part-time, agile, and flexible working requests.

Bodycote supports employees with a set of policies that fortify 
our culture and Core Values. The policies help the organisation 
'do the right thing' every time. Our employment policies are 
non-discriminatory and comply with all current legislation to 
engender equal opportunity irrespective of age, race, gender, 
ethnic origin, nationality, religion, health, disability, marital status, 
sexual orientation, political or philosophical opinions or trade union 
membership. Due to the nature of our business, we operate with a 
multi-cultural team and encourage inclusivity throughout the Group 
Harassment of any kind is not tolerated.

Female representation on our Board during 2020 was 38% 
(2019: 43%) and at senior manager level it is 30% (2019: 25%). 
Females represent 18% (2019: 19%) of our total workforce.

Total Male Female

Directors
Managers
Other staff

Male Female
3 
20
807
857

5 
47
3838
3890

8 
67
4672
4747

Total
62% 38% 100%
70% 30% 100%
82% 18% 100%
82% 18% 100%

The overall UK gender pay gap figures are published on our website 
www.bodycote.com. The UK mean gender pay gap is 4% in favour 
of women.

Health and well-being
Bodycote has a long history of supporting the health and wellbeing 
of our employees. However, in 2020, due to the changes brought on 
by COVID-19, maintaining a healthy workplace took new additional 
measures. Our local management and the Safety, Health, and 
Environment team reacted ahead of local guidelines to implement 
measures to protect employees and their families. Through increased 
communications, adapting workspaces, flexibility and continuous 
improvements, Bodycote put employees' health and safety as the 
number one priority. 

We recognise that individuals work best and can achieve sustainable 
high-performance over time when they are healthy and feeling 
valued. Bodycote promotes an environment that encourages line 
management to support the health and wellbeing of all employees. 
Bodycote encourages facilities to initiate wellness programmes and 
the Company sponsors worldwide fitness and wellbeing activities. 

Social
During 2020, individually and collectively, we faced new and unique 
challenges. Within Bodycote, our priority will always be the safety 
and wellbeing of our people. 

Our sustainability approach focuses on the broader impacts 
we have on the environment, the communities where we 
operate, our employees, shareholders, and society as a whole. 
Bodycote's stakeholder model (see page 17) shows how its 
interactions on various levels contribute towards socio-economic 
growth and development. Our people are at the heart of our 
sustainability activities.

Bodycote is dedicated to improving the management of sustainability 
issues and is implementing policies and initiatives to achieve this 
goal. The future success and growth of the Group is intrinsically 
linked to our ability to ensure the Group's operations are sustainable 
and that we can nurture and develop our talent.

Our people
The Group's strength is based on its people and we strive to support 
our employees' health and wellbeing while driving a performance 
culture of business understanding and shared Core Values. 
We employ proactive individuals who embody our Core Values and 
ensure they are qualified to support continued growth. Bodycote is 
fortunate to have a competent and committed international team that 
is well respected in technical and business circles. 

Bodycote invests in the training and development of its people 
both at the local and Group level. The Group is committed to 
providing the appropriate skills and training to allow its employees 
to operate effectively and safely in their roles and deliver results. 
Regular internal satisfaction surveys are undertaken that provide 
feedback on the level of satisfaction of centrally provided services. 
Overall satisfaction reaches appropriate levels.

We use performance management tools globally to track skills, 
competency progression, and annual achievements throughout 
our management population. By communicating clear directions 
coupled with skills development, the organisation aims to raise its 
management capability in driving performance. 

Response to COVID-19
The COVID-19 Pandemic compelled Bodycote to be agile in 
its response to safeguard the wellbeing of our employees, our 
customers as well as the business. This resulted in balanced, socially 
responsible approach resulting in changing work environments, 
work from home for some employees at short notice and temporary 
mandatory shutdowns of some locations. 

The rapid implementation of new safety measures highlights 
the resilience and commitment of our people. During these 
unprecedented times, Bodycote communicated often, providing the 
latest information and worked with individuals to offer the highest 
level of flexibility. 

40

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic reportCulture and Core Values 
It is not just important what we do but how we do it, and how 
we behave in our Company. How we operate as a Group and the 
behaviours that we expect from all our employees are expressed 
in our Core Values. Our values represent Bodycote and its people 
and our commitment to the Company and the business.

Our Core Values are straightforward and are as follows:

Honesty and Transparency
We are honest and act with integrity. Trust stems from 
honesty and trust is at the heart of everything we engage in: 
our customers trust us to deliver what we say we will, our 
colleagues trust us to act in their best interests and our suppliers 
trust us to conduct business according to agreed terms. This is 
not something we take for granted. Bodycote lives by a culture 
of honest and transparent behaviour, which is at the core of all 
our business relationships.

Respect and Responsibility
We manage our business with respect, applying an ethical 
approach to our dealings with those we interact with. 
We respect our colleagues, who are all of the employees 
of Bodycote. Part of our respect for our colleagues is our 
commitment to safe and responsible behaviour and our 
fundamental belief that no one should come to any harm at 
work. We show respect for our customers, our suppliers and 
our competitors. We respect the communities around us and 
behave as responsible corporate citizens by being compliant 
with the laws and regulations of the countries in which we do 
business and by ensuring that our effect on the environment is 
minimal. We believe in taking ownership for, and being mindful 
of the impact of our actions.

Creating Value
Creating value is the very essence of our business and needs 
to be the focus of our endeavours. We create value for our 
customers, our employees and our shareholders. The realities 
are harsh. If we do not create value for our customers then 
we have no reason for existence. If we do not create value 
for our employees there will be no one to create value for 
our customers.

Our shareholders rightfully require that we ultimately create 
value for them as they are the owners of the business.

Human rights
As an international business, Bodycote's Human Rights policy is 
consistent with the Universal Declaration of Human Rights and the 
UN Global Compact's ten principles, and the Group’s Human Rights 
Policy applies to all our businesses worldwide. 

We prohibit forced, compulsory, and underage labour and any form of 
discrimination based on age, race, gender, ethnic origin, nationality, 
religion, health, disability, marital status, sexual orientation, 
gender reassignment, pregnancy, and maternity or paternity, 
political or philosophical opinions or trade union membership. 
Appropriate mechanisms are in place to minimise the potential for 
any contravention of these rules.

By publicly posting our Human Rights Policy and Equality, Diversity 
and Inclusion Policy on www.bodycote.com, stakeholders worldwide 
can alert us to potential breaches of the policy. Our internal systems 
also support compliance with our policy and we have a robust Open 
Door Line, which is our third-party confidential whistleblower's 
programme, for employees to report alleged violations of law and/or 
our policies on a confidential basis and in their own language. In the 
jurisdictions in which we employ a majority of our employees, there 
are laws applicable to many of the areas dealt with in our Human 
Rights Policy and our Equality, Diversity and Inclusion Policy.

We have a Code of Conduct that sets out our policy on compliance 
with legislation, child labour, anti-slavery and human trafficking, and 
conditions of employment, health, safety and the environment.

The Modern Slavery Act
Bodycote plc has conducted a risk assessment on our supply 
chain using the UK Government's published guidance entitled 
'Transparency in Supply Chains'. Suppliers in those countries 
identified in Walk Free Foundation's 2016 Global Slavery Index as 
being the most vulnerable to human rights issues in the supply 
chain have been identified for further review and audit. All relevant 
employees undergo Anti-Slavery training.

The Anti-Slavery and Human Trafficking Statement is published on 
our website and reviewed by the Board of Directors annually. 

Suppliers 
Bodycote's operations are such that the Group does not have 
significant suppliers who are wholly dependent upon the Group's 
business and has no significant suppliers on which the Group is 
dependent upon for a substantial part of its business. We manage 
our suppliers with respect, honesty, and integrity, no matter the size 
of the transaction. Suppliers are paid in line with contractual and 
legal obligations. 

We expect suppliers to adhere to our Code of Conduct for all 
relevant items. 

Customers
Bodycote works with our customers to service their demand in 
the most efficacious manner possible. By surveying customer 
satisfaction levels, we modify our methodologies to become a better 
thermal processing solutions provider. We endeavour to respond 
quickly to changing customer demands, identify emerging needs and 
improve service availability and quality. We stay close to our current 
and potential customers by building long-term relationships. 

Community
Bodycote seeks to play a positive role in the local communities 
in which it operates by providing employment opportunities, and 
building goodwill and a reputation as a good neighbour and employer. 
Our operations are international but our strength lies in the local 
nature of our facilities that are close to our customers. Our facilities 
are relatively small plants that typically employ approximately 
30 people. We encourage community involvement activities 
championed by our plants and their employees locally. 

41

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic report 
Environment, Social and Governance continued

Responsible business ethics
The Group has a robust governance structure to support business 
ethics and a series of policies that detail its commitments and 
standards in this area. We recognise that rules alone are not 
sufficient to ensure wrongdoing is avoided – a combination of rules 
and values is needed to help embed a healthy business culture. 
The Group's approach is to set the tone of an ethical business culture 
from the top, demonstrating a commitment to the right values and 
behaviours of all employees.

All Bodycote personnel are expected to apply a high ethical standard, 
that is in keeping with being an international UK-listed company.

Directors and employees are expected to ensure that their personal 
interests do not at any time conflict with those of Bodycote. 
Shareholder employees are advised of and comply with the share 
dealing code.

Bodycote has systems in place that are designed to ensure 
compliance with all applicable laws and regulations and conformity 
with all relevant codes of business practice. Furthermore, Bodycote 
does not make political donations.

With regard to competition, Bodycote aims to win business in a 
differentiated, high-value manner. The Group does not employ unfair 
trading methods and it competes vigorously, but fairly, within the 
requirements of applicable laws. Employees are prohibited from 
either giving or receiving any inducements.

Our Open Door Policy is communicated in all languages used 
throughout the Group. The policy allows employees to report their 
concerns confidentially, verbally or in writing, to an independent 
third-party provider, ensuring anonymity.

When incidents are reported, whether through internal or external 
mechanisms, they are passed to the Group Head of Risk for 
investigation and determination of the appropriate steps to be taken 
for the matter to be addressed.

Supporting employees who speak up
When our employees do the right thing by speaking up against 
instances of wrongdoing, we believe it is crucial that the Company 
also does the right thing and ensures that there are no repercussions 
for their actions.

Online training courses regarding Anti-Bribery and Competition Law 
have been designed and translated into the major languages used 
throughout the Group. All relevant employees have completed the 
interactive courses.

Safety and health
Bodycote continues to manage hazards and thereby minimise risks 
to employees through the deployment of robust safety management 
systems and procedures. Bodycote uses a global incident reporting 
and Safety, Health and Environment management tool at every 
site. This enables a consistent and thorough reporting of workplace 
injuries, near misses, and unsafe conditions.

A key element in the Bodycote Safety, Health, and Environment 
strategy is the development of a vigorous safety and health culture 
that values the identification and reporting of near misses, unsafe 
acts or conditions, and suggestions for improvement– collectively 
known as 'opportunities for improvement' (OFIs). In 2020, there 
were over 9,000 OFIs raised across the business which is a 
decrease of 22% against 2019. The significant decrease was 
attributed to the impact of COVID-19. The relatively high number of 
OFI's demonstrates the engagement of employees in proactively 
raising and rectifying safety issues. Though regrettable and 
unacceptable, accidents represent learning opportunities and are 
why accurate reporting is an essential part of building a robust safety 
management system.

The most frequent cause of reportable cases is related to manual 
handling of parts and lifting operations and has a number of 
underlying causes. Therefore, it continues to focus on risk reduction 
activities over the next few years. In 2020, there was continued 
Group Safety, Health and Environment capital investment for manual 
and material handling improvements.

All reportable cases and lost time injuries are reviewed during 
Executive Committee meetings and by the Board. The Executive 
Committee reviews incidents that do not result in injury but are 
considered to have been serious or to have had a high potential 
impact. All serious incidents and high potential incidents are 
reviewed by the Group Safety, Health, and Environment Committee 
and cascaded as appropriate within the business to ensure that 
preventive actions are taken. 

In 2020, the Total Reportable Case (TRC) rate decreased to 2.3 
(2019: 2.8), and the Lost Time Injury (LTI) rate decreased to 1.3 
(2019: 1.4)

Total Reportable Case rate (TRC) 
Total Reportable Cases (TRC) include:

 – Any lost time incident (>1 day or shift, not including the day 

of the accident)

 – Any restricted work case (where the injured person cannot 

do their usual work)

 – Any medical treatment case (specialist medical treatment, 

not first aid)

Total Reportable Case Rate (TRC)

8
.
2

7
.
2

8
.
6 2
.
2

3
.
2

‘16

‘17

‘18

‘19

‘20

The significant drop in the TRC rate for 2020 (30% drop in TRC's) 
is visible in the chart above. This impressive result during 2020 is a 
consequence of short working hours, and closures resulting in fewer 
working hours being reported. This situation would normally cause 
the frequency rate to increase, and not decrease, as there would be 
less hours to suppress the frequency rate. 

Operational Safety, Health and Environment performance
Bodycote is committed to continuous improvement in our safety, 
health, and environmental performance (SHE). We are committed to 
complying with all local legislative requirements as a minimum and 
establishing consistent and robust best practices at all of our sites, 
enabling the delivery of consistently high performance across all 
aspects of Safety, Health and Environment management.

1  Total reportable case rate is the number of lost time injuries, medical treatment cases and restricted work cases X 200,000 hours, divided by the total number of employee hours worked.

42

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportStrategic report 
Non-financial reporting statement 

The table below sets out where information relevant to the Non-Financial Reporting Directive can be found in our 2020 Annual Report 
and on our website.

Our Core Values, Code of Conduct, and Group policies underpin everything we do at Bodycote. Our Values and Code of Conduct ensures 
we comply with all applicable international and local rules and regulations. They provide guidance, including through real-life scenarios, 
to help colleagues address challenging and ethical issues they may encounter at work. The Core Values and Code of Conduct are available 
on our website, and our Group policies support and enhance our behaviour in line with the principles set out in the Code of Conduct.

Relevant to  
UN Sustainable  
Development 
Goals

Standards, policies 
and actions which 
govern our approach

Where to  
find further  
information

Key  
metrics

Internal processes  
to monitor 
performance

 – Safety, Health, and  
Environment (SHE) 
Policy

 – Carbon Footprint 

and Water 
consumption statements 

 – Reduction of greenhouse  

gas emissions

 – Graduate  

and Apprenticeship  
Programme

 – Performance Goal 

Management System

 – Safety, Health, and  
Environment (SHE) 
Policy

 – Succession 

Planning Process 

 – Equality,Diversity and 

Inclusion Policy

 – Equal 

Opportunities Policy

 – Data Protection Policy

 – Open Door Policy

 – Core Values

 – Code of Conduct

 – Ethics Policy

 – Anti-Slavery and Human  
Trafficking statement

 – Human Rights Policy 

 – Anti-Bribery and 
Corruption Policy

 – Competition and  
Anti-Trust Policy

 – Control and 

Compliance Statement

 – Tax Strategy

Environmental

For further information 
pages: 37 to 39

Visit bodycote.com

Progress on reductions  
in carbon footprint and  
water consumption

Energy and Greenhouse 
gas management is  
tracked per facility 
monthly. 

Social

For further information 
pages: 40 to 42

Visit bodycote.com/ 
investors/governance

% of female representation 
in total workforce and 
on Executive Committee 
and Board of Directors

Executive committee 
monitors SHE 
performance on a 
monthly basis.

Lost work case  
incident rate

Recordable incident rate

UK Gender Pay Gap Report

Executive committee 
monitors employee 
turnover rate performance 
on a monthly basis.

Regular Open Door 
incident update to the 
Board and Executive 
committee.

Business Governance

For further information 
pages: 36 to 37

Visit bodycote.com/ 
investors/governance

% of relevant employees 
trained on our policies

# of breaches

The implementation  
and effectiveness of  
the training is overseen  
by the Group General 
Counsel and Group 
Company Secretary.

43

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportBoard of Directors

1

2

3

4

Executive Directors

Non-Executive Directors

1 Stephen Harris

GROUP CHIEF EXECUTIVE

3 Anne Quinn CBE

CHAIR

4

Ian Duncan
SENIOR INDEPENDENT DIRECTOR

APPOINTED: January 2018  

APPOINTED: November 2014 

External roles
None.
Past roles
Worked in various roles for NZ Forest Products 
Ltd, followed by management consultancy 
with Resource Planning Associates, a 
management position with Standard Oil and 
various senior management roles with BP 
plc from 1987 to 2007. Managing Director of 
Riverstone Holdings LLC from 2008 to 2009. 
Non-Executive Director of BOC Group plc 
from 2004 to 2006, Non-Executive Director 
and Remuneration Committee Chair as well 
as Senior Independent Director of Mondi plc 
from 2007 to 2017 and Non-Executive Director 
and Remuneration Committee Chair of Smiths 
Group plc from 2009 to 2018.
Qualifications
B.Com University of Auckland and MSc 
Management Sciences, Massachusetts 
Institute of Technology.
Skills and experience
International Operations, Emerging Markets, 
Mergers and Acquisitions, Management
Leadership, Manufacturing, Capital Intensive 
Industry, Managing Director

External roles
None.
Past roles
Worked on a variety of audits with Deloitte 
& Touche, followed by four years with 
Dresdner Kleinwort Wasserstein. From 1990 
to 1992 he worked for Lloyds Bank plc and 
then switched to British Nuclear Fuels plc 
from 1993 to 2006. In 2006 he took on the 
role of Group Finance Director with Royal 
Mail Holdings plc leaving in 2010. He was 
Non-Executive Director of Fiberweb plc 
during 2013, Mouchel Group from 2013 to 
2015, WANdisco plc from 2012 to 2016, 
Babcock International Group from 2010 to 
2020 and SIG plc from 2017 to 31.01.2021. 
Qualifications
Chartered Accountant, qualified with 
Deloitte & Touche after graduating from 
University of Oxford.
Skills and experience
International Operations, Current Financial 
Experience, Supply Chain and Logistics, 
Mergers and Acquisitions, Service Industry

APPOINTED: November 2008 
and Chief Executive from January 2009  

External roles 
Non-Executive Director, Senior Independent 
Director for Mondi plc.
Past roles
Spent his early career in engineering with 
Courtaulds plc and then moved to the 
USA to join APV Inc from 1984 until 1995, 
where he held several senior management 
positions. He was appointed to the Board 
of Powell Duffryn plc as an Executive Director 
in 1995 and then went on to join Spectris 
plc as an Executive Director from 2003 to 
2008. He was also a Non-Executive Director 
of Brixton plc from 2006 to 2009.
Qualifications
Chartered Engineer, graduated from 
Cambridge University, Master’s degree in 
business administration from the University 
of Chicago, Booth School of Business.
Skills and experience
Management, Leadership, Mergers 
and Acquisitions, International Operations, 
Emerging Markets, Engineering, 
Service Industry, Capital Intensive Industry

2 Dominique Yates

CHIEF FINANCIAL OFFICER

APPOINTED: November 2016  

External roles
None.
Past roles
Held various senior positions in Imperial 
Tobacco Group plc followed by Chief 
Financial Officer positions at Symrise 
AG, LM Windpower and most recently at 
Regus plc from 2011 to 2015.
Qualifications
Chartered Accountant, graduated 
from Bristol University in Economics 
and Accounting.
Skills and experience
Leadership, International Operations, 
Mergers and Acquisitions, Emerging Markets, 
Current Financial Experience, Service Industry

44

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic report  
5

6

7

8

9

KEY TO COMMITTEES:

Executive

Nomination

Remuneration

Audit

Committee Chair

5 Eva Lindqvist

6 Patrick Larmon

8 Kevin Boyd

NON-EXECUTIVE DIRECTOR 

NON-EXECUTIVE DIRECTOR

NON-EXECUTIVE DIRECTOR

APPOINTED: June 2012  

APPOINTED: September 2016  

APPOINTED: September 2020 

External roles
Non-Executive Director of Tele 2 AB from 
2014 and Keller Group plc since 2017. 
Past roles
Began her career in various positions with 
Ericsson working in Continental Europe, North 
America and Asia from 1981 to 1990 followed 
by director roles with Ericsson from 1993 to 
1999. Joined Teliasonera in 2000 as Senior 
Vice President moving to Xelerated initially 
as Chairperson and later as Chief Executive 
from 2007 to 2011. Non-Executive Director of 
Transmode Holdings AB from 2007 to 2013, 
Blekinge Institute of Technology from 2010 to 
2013, Tieto Corporation from 2010 to 2016, 
Assa Abloy from 2008 to 2018, Caverion 
Oy from 2013 to 2018, Alimak Holding from 
2015 to 2018, Micronic Mydata AB from 
2013 to 2016, Mr Green & Co AB from 2016 
to February 2019 and Sweco AB from 2013 
to 2020. 
Qualifications
Engineer, graduated with a Masters from 
Linköping Institute of Technology, Diploma 
in Marketing from IHM Business School 
and MBA Financial Analysis from University 
of Melbourne. 
Skills and experience
International Operations, Manufacturing, 
Engineering, Technology, Mergers and 
Acquisitions, Service Industry, 
Sales and Marketing, Sustainability

External roles
Non-Executive Director of Huttig Building 
Products Inc., a NASDAQ listed international 
distributor of construction products since 2015.
Past roles
Executive Vice President and owner of 
Packaging Products Corporation until 1990 
when the company was acquired by Bunzl plc. 
Held various senior management positions 
for over 13 years before becoming President 
of Bunzl’s North America business in 2003, 
then Chief Executive Officer, North America, 
of Bunzl plc in 2004, joining the Bunzl plc 
board in 2005. Retired from Bunzl plc on 
31 December 2018. 
Qualifications
Graduated from Illinois Benedictine 
University (major Economics & Business 
Economics) followed by achieving Certified 
Public Accountant, followed by an MBA 
from Loyola University of Chicago and a 
Masters of International Business from 
St. Louis University.
Skills and experience 
International Operations, Mergers and 
Acquisitions, Service Industry, 
Manufacturing, Distribution, Sales and 
Marketing, Chief Executive Officer

7 Lili Chahbazi1

NON-EXECUTIVE DIRECTOR

APPOINTED: January 2018 

External roles
Strategy consultant and since 2008 a 
global partner in the London office of 
Bain & Company.
Past roles
Lili began her career as an actuary before 
joining Bain & Company.
Qualifications
Graduated with a BSc in Mathematics from 
Concordia University, Montreal followed 
by an MBA from INSEAD, Fontainebleau. 
Associate of the Society of Actuaries.
Skills and experience
Strategy and Consultancy, International 
Operations, Mergers and Acquisitions,
Oil & gas industry, Business Services Industry, 
Oilfield Services and Engineering Services 
Industries, Transport Industry
1  Lili considers herself a person of colour due to her part 

Iranian/Middle East background

External roles
Non-Executive Director of EMIS Group since 
2014 and Chair of the Audit Committee since 
2019. Non-Executive Director and Chair of the 
Audit Committee of Polypipe Group plc from 
22 September 2020.
Past roles
Held the positions of Group Finance Director 
at Oxford Instruments plc and Radstone 
Technology plc and, most recently, Chief 
Financial Officer at Spirax Sarco plc which 
he stepped down from in September 2020.
Qualifications
Chartered Accountant, Chartered Engineer. 
Fellow of the Institute of Chartered 
Accountants and the Institute of Engineering 
and Technology. BEng, Electronic and 
Information Engineering from Queen’s 
University Belfast.
Skills and experience
International Operations, Current Financial 
Experience, Mergers and Acquisitions 
Engineering, Manufacturing

9 Ute Ball

GROUP COMPANY SECRETARY

Registered office 
Springwood Court
Springwood Close
Tytherington Business Park
Macclesfield  
Cheshire  
SK10 2XF

Registered Number 519057  
England and Wales.

Tel: +44 1625 505300
Fax: +44 1625 505313

45

Bodycote plc annual report 2020Additional informationFinancial statementsStrategic reportGovernance  
  
  
Corporate governance statement

Chair’s message
Dear Shareholders

On behalf of the Board, I am pleased to present Bodycote’s Corporate Governance Statement for 2020.

The coronavirus pandemic was declared in March 2020 and brought significant human, social, economic and business uncertainty. The Board 
has taken steps to understand and mitigate the risks posed by and the impacts arising from the ongoing situation. 

Most full meetings of the Board and its Committees have been conducted virtually during 2020. In the first few months of the pandemic 
regular board meetings were held to keep contact with the Board members. The agendas were developed with active consideration of the 
status of the coronavirus pandemic and the current priorities of the Group. Full updates were provided in March and April on preparedness and 
response activities to ensure control and co-ordination across the Group. This provided confirmation of employee safety, business resilience 
and mitigating actions being driven by senior management. The response to the pandemic was the backdrop for the operational, financial and 
commercial discussions at Board level.

The Board agreed that employee support and well-being should be a key priority, at the forefront of response workstreams – recognising that 
the pandemic represents a test of the efficacy of the Group’s culture. In particular communications to all employees were increased and the 
health of all employees monitored and a high-level summary provided to the Board. 

Shareholder feedback and engagement has continued despite the coronavirus outbreak with shareholder perspectives having been received 
and considered. 

The date for the 2020 Annual General Meeting in May remained as initially announced, but in view of social distancing and the requirement 
to safeguard shareholders', employees', and advisers' safety, the format of the Annual General Meeting was changed to a meeting ‘behind 
closed doors’. The 2019 year-end dividend was announced in early March for payment in June 2020. This dividend was deferred to allow the 
Board greater clarity on the impact of the pandemic and a catch-up dividend was subsequently paid in September 2020. 

Dialogue with shareholders will continue in line with the Group’s broader commitment to meaningful engagement with key stakeholder 
groups. The Group’s key stakeholders and their differing perspectives are identified and taken into account, not only as part of the 
Board’s annual strategy and corporate planning discussions but also in our project assessments and in our other Board conversations. 
These discussions, assessments and conversations focus not only on delivering increased value for shareholders, but also address the 
impacts of our decisions and strategies on the Group’s wider stakeholders. The Board recognises the importance of regular, open and 
constructive dialogue with shareholders and other stakeholders, and the interests of our stakeholders have been a key aspect of our culture 
and factor in our decision making.

In line with the Director’s Duties, the Board’s engagement with employees, shareholders, customers, and communities in 2020 is explained 
in our stakeholder section on page 18. 

The Directors receive regular reports on Safety, Health and Environment to support their decisions. The Board also conducted a review 
of the existing sustainability processes with a view to establishing a broader ESG policy. As a first priority, the Board agreed to focus on 
improving the effectiveness of communicating current actions and the role of Bodycote as an energy optimiser in its customer supply chains. 
Further information on Board activities can be found on pages 50 to 53. 

Ensuring high standards of business conduct is critical for the success of the Group. Employee Engagement Groups led by the designated 
Non-Executive Director, Patrick Larmon, are in place and meetings have taken place during the year. The feedback from these forums is 
reported to the Board and the Executive Directors charged with addressing any particular items that arise. In 2020 these forums were held 
virtually. Feedback was generally very positive, and no material concerns other than the general concerns over the pandemic were expressed 
by employees during the year.

Succession planning is a regular topic for discussion, although the outcome of these discussions is only visible from time to time when new 
appointments are made. For each appointment we are looking to appoint an outstanding candidate, with a diverse range of experience, to 
maximise Board effectiveness. When we think about diversity, we recognise that this can take many forms including diversity of gender, 
nationality, social, and ethnic backgrounds, and of cognitive and personal strength. Diversity at Board level and throughout the Company 
is a valuable strength.

The Board continues to ensure that effective succession plans are in place and has appointed a further Non-Executive Director, Kevin Boyd, 
as of 1 September 2020.

A.C. Quinn
Chair

Compliance Statement
In respect of the financial year 2020, Bodycote’s obligation under the Disclosure and Transparency Rules is to prepare a corporate governance 
statement with reference to the UK Corporate Governance Code issued by the FRC in July 2018 (‘the Code’).

In respect of the year ended 31 December 2020, Bodycote has complied with the provisions of the Code with the exception of Provision 
36, a formal policy for post-employment shareholding requirements, and Provision 23, progress on achieving objectives on diversity and 
inclusion. Concerning Provision 36, whilst the Board has not put a formal policy for post-employment shareholding requirements in place, a 
two-year holding period for share scheme awards as of the date of the approval of the Remuneration Committee policy in May 2019, as well 
as bonus deferral, are in place to provide a partial post-employment holding policy. Concerning Provision 23, the Board is strong on diversity 
and inclusion with female representation at 38%, 5 different nationalities including a member who meets the Parker Committee definition of 
a person of colour. At the senior management level, there is broad international representation, and growing female representation. The Board 
and the management are committed to the principles of diversity and inclusion. 

46

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportA further exception is provision 38, the alignment of pension contribution rates for Executive Directors. We are, however, partially compliant 
as we have a plan in place for pension contribution rates for Executive Directors to be aligned by 1 January 2022. Salary supplements in lieu 
of pension contributions have been reduced to 24% of base salary with effect from 1 January 2021, and then will be reduced to 23.5% of 
base salary with effect from 1 January 2022. The Executive Directors pension contributions will then be aligned with the company pension 
contributions of the wider workforce in the countries where the Executive Directors live. A review of workforce policies was undertaken 
during the year and progress on culture has been made and information provided to the Board. 

The Board considers that P. Larmon, E. Lindqvist, I.B. Duncan, L. Chahbazi and K. Boyd are all independent for the purposes of the Code. 
The Chair was also considered independent upon appointment.

Taken together with the Report of the Audit Committee, the Report of the Nomination Committee and the Board report on remuneration 
presented on pages 64 to 75, this statement explains how Bodycote has applied the principles of good corporate governance as set out in 
the Code.

Code principles – board areas of focus

Area of focus

Board leadership and Company purpose

Read more on pages 10-13, 25-27

 – Regularly discussing strategy at Board meetings during  

 – Approving capital expenditure in excess of £4m

the year

 – Receiving presentations from operational management on 

 – Considering and approving strategic opportunities  

performance against the strategy

e.g. the restructuring plans in AGI and ADE

 – Considering potential acquisition opportunities

 – Approving the Group’s strategy, budget, tax and dividend

Division of responsibilities

 – Review of Group policies

Read more on pages 36-42, 46-53

 – Modern Slavery review

 – Review of schedule of matters reserved for the Board

 – Convening the AGM, approval of shareholder materials

 – Review of corporate governance code and guidelines

 – Review of terms of reference of all committees

 – Review of Safety, Health and Environmental updates at 

 – Determining/maintaining the Group’s values and ensuring 

each meeting

that these are reflected in business practice

 – Overview of stakeholder relationship/

workforce engagement

Composition, succession and evaluation

Read more on pages 56-58

 – Considering proposals on succession planning, when 

 – Reviewing proposals on senior executive 

required, for the Board 

succession planning

 – Considering the talent management programme and 
the need to develop the managers and executives for 
the future

 – Reviewing the size, composition and diversity of both the 

Board and the Committees

 – Ongoing Board training

 – Approving further terms as Non-Executive Directors for 
I.B. Duncan, E. Lindqvist, P. Larmon, L. Chahbazi and  
A.C. Quinn

 – Tailored induction, when required

 – Reviewing Board and Committee effectiveness and 

Directors’ conflicts

Audit, risk and internal control

Read more on pages 29-34, 59-63

 – Approval of year-end and interim results

 – Review future scenarios and other factors 

 – Recommending the final and interim dividends 

 – Viability statement 

 – Annual review of principal risks, risk management and 

 – Consider whether the Annual Report and Accounts are fair, 

control systems

Remuneration

 – Remuneration policy review and approval 
(including Executive Directors’ and senior 
management remuneration)

balanced and understandable

Read more on pages 64-75

 – Chair, and independent Non-Executive Directors; 

fees review

Strategic 
priorities

1

4 

2 

5 

3 

6 

2

1 

2

2

1 

2

1

Safety and  
Environment

2

Driving operational  
improvement

3

Capitalising on and investing 
in our Specialist Technologies

4

Investing in  
Emerging Markets

5

Investing in structural  
growth opportunities

6

Acquisitions

Core Values

47

Bodycote plc annual report 2020Additional informationFinancial statementsStrategic reportGovernanceCorporate governance statement continued

Governance framework 
The Board’s areas of focus in 2021 are expected to include:
 – The Group’s culture

 – Execution of strategic priorities

 – Continued monitoring of financial and operational performance

 – Continued strong focus on safety improvements

 – Principal and emerging risks review

 – Increased emphasis on sustainability and, more broadly ESG

 – Board dynamics, diversity and development

Overseeing Culture
A healthy culture is one in which the Group has a purpose, values and strategy that are respected by the Group’s stakeholders and an 
operating environment that is inclusive, diverse and engaging; encouraging employees to make a positive difference for stakeholders. 
Corporate culture is guided by pillars and principles against which the Board monitors how the culture exists and is viewed by employees. 
These are:

 – Values as explained in the Environment, Social and Governance section on pages 36 to 43

 – Attitudes as summarised in the Group policies

 – Behaviours as stated in the Group’s code of conduct

The ongoing implementation of key messages and expectations is driven through initiatives overseen by the Executive Committee 
and the divisions. This includes targeted communications and mandatory training, with the output reported back to the Board. 

The role of the Board in relation to purpose, strategy, long-term goals and stakeholder engagement is key in supporting a healthy 
corporate culture. The Board Committees support this role. The Board recognises that this will continue to be an evolving area.

The Board structure

Shareholders

The Chair – key responsibilities
 – Effective running of the Board

 – Guidance to Executive Directors

 – Monitors progress of strategy and objectives

 – Safeguards the interests of shareholders

The Board – key responsibilities

 – Oversight of the Group’s strategy and the long-term success of the Group’s business

Audit
Committee

Monitors the 
integrity and 
effectiveness 
of the 
Group’s financial 
reporting and 
performance of 
audits and 
assesses 
financial risks

Nomination
Committee

Ensures an 
effective Board 
that consists of 
individuals with 
the right balance 
of skills, 
knowledge 
and experience

Remuneration
Committee

Determines 
remuneration 
policy and senior 
executives’ 
remuneration 
packages

Finance
Committee

Implementation of 
treasury and tax 
policies and, within 
limits defined by 
the Board, 
authorises capital 
expenditure 
and other 
financial activities 

Employee
Engagement

Groups

Assist the Board 
as a workforce 
engagement 
mechanism and  
in understanding  
the views  
of employees

Chief  
Executive

Responsible 
for running 
the Group’s 
business, interfaces 
with shareholders 
and analysts, and 
oversees health and 
safety as well as 
environmental  
matters

Executive Committee
Focuses on the development and implementation of the Group’s strategy, financial structure,  
organisational development and policies as well as reviewing financial performance

48

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportThe Sustainability and Risk Committee reports to the Executive Committee.

Finance Committee
In order that necessary actions can be taken promptly, a finance sub-committee, comprising the Chair, the Senior Independent Director, the 
Group Chief Executive and the Chief Financial Officer is authorised to make decisions, within limits defined by the Board, in respect of certain 
finance, treasury, tax or investment matters.

The Employee Engagement Groups
We have two Groups run in parallel, an European and an American Engagement Group. Each Group meets either in person or virtually at least 
annually. The Groups are led by Patrick Larmon, the designated Non-Executive Board Director. Representatives from across the business are 
the members of the Groups. Participation of the Groups is rotated at certain intervals to allow a variety of opinions and voices to be heard. 

Main activities of the Employee Engagement Groups
Participants are encouraged to discuss all aspects of the business including views, motivations and conditions of employees of Bodycote. 
This applies to all levels and activity in the Group. However, individual grievance or employment conditions of individual employees are not 
part of the remit of the Employee Engagement Groups.

The minutes of the meetings are part of the next set of Board meeting papers and are presented by the designated Non-Executive Board 
Director to the Board. As a result of feedback received from employees a communication improvement plan is in progress.

In addition, both the Board and the Executive Committee take every opportunity to meet with local employees when visiting different 
business locations. During 2020, the Board and the Executive Committee were unable to visit sites due to COVID-19 restrictions but visits will 
be resumed as soon as possible.

Board information
In advance of Board meetings, Directors are supplied with up to date information regarding the trading performance of each operating division 
and subdivision, in addition to the Group’s overall financial position and its achievement against prior year results, budgets and forecasts 
(where appropriate). They are also supplied with the latest available information on safety, health and environmental and risk management 
issues and details of the safety and health performance of the Group, and each division, in terms of severity and frequency rates for accidents 
at work. Senior management from across the Group and advisers attend some of the meetings to provide updates. The exposure to members 
of senior management from across the Group helps enhance the Board’s understanding of the business, the implementation of strategy and 
the changing dynamics of the markets in which the Group operates.

Complementing the regular briefings from operational and functional management about Group-specific matters (such as a report at each 
Board meeting from the CEO on health and safety), the Board also has a programme of briefings from the Group’s external advisers on a 
range of topics. This enables current and future plans to be set in the wider context of the broader environment.

Matters reserved for the Board
Matters reserved for the Board were reviewed during the year and updated where required. Certain defined powers and issues reserved for 
the Board to decide are, inter alia:

 – Strategy;

 – Approval of financial statements and circulars;

 – Capital projects, acquisitions and disposals;

 – Annual budgets;

 – Directors’ appointments, service agreements, remuneration and succession planning;  
policies for financial statements, treasury, safety, health and environment, donations;

 – Committees’ terms of reference;

 – Board and Committee Chairs and membership;

 – Investments;

 – Equity and bank financing;

 – Internal control and risk management;

 – Corporate governance;

 – Key external and internal appointments; and

 – Employee share incentives and pension arrangements.

49

Bodycote plc annual report 2020Additional informationFinancial statementsStrategic reportGovernanceCorporate governance statement continued

Leadership and engagement
Role and responsibilities of the Board and its principal committees
The Board is responsible to shareholders for good corporate governance, setting the Group’s strategic objectives, values and standards, 
and ensuring the necessary resources are in place to achieve the objectives.

The Board met on 12 occasions during 2020 (seven formal and five pandemic related meetings), including a specific meeting to review 
the Group’s long-term strategy. The Board of Directors comprises eight members, of whom six are Non-Executive Directors and two are 
Executive Directors, led by the Group’s Non-Executive Chair, A.C. Quinn, who also chairs the Nomination Committee. The Group Chief 
Executive is S.C. Harris, and the Senior Independent Non-Executive Director is I.B. Duncan, who also chairs the Audit Committee.  
E. Lindqvist is Chair of the Remuneration Committee and P. Larmon is the Chair of the Employee Engagement Groups. L. Chahbazi  
and K Boyd are Non-Executive Directors. Brief biographical details of all Directors are given on pages 44 to 45. During the year the Board 
intended to visit a number of overseas facilities, but due to COVID-19 these visits have been deferred until such time that these visits can 
be undertaken safely. Such events involve meeting with local management and the workforce to understand more clearly technical and 
operational performance in countries where Bodycote has a significant presence.

Chair

Group Chief Executive

Chief Financial Officer

 – leadership and governance of the Board 
and chairs the Nomination Committee

Group performance

 – overall responsibility and leadership of 

 – maintains strong financial management 

 – Board effectiveness

 – stewardship of Group assets

 – ensures Board members receive 

 – plans and executes objectives 

accurate, timely and clear information 
on Board issues

 – ensures, together with the Group 

Company Secretary, a comprehensive 
induction of new Directors

and strategies

 – maintains a close working 

relationship with the Chair, ensuring 
effective dialogue with investors 
and stakeholders

 – sets Board agenda, style and tone of 

 – ensures leadership and development 

Board discussions

 – ensures effective communication 

with shareholders

 – ensures progress on ESG impact 

tracking and reporting 

frameworks are developed to 
generate a positive pipeline for future 
opportunities for the Group

 – has overall responsibility for the 

Group’s sustainability performance,
 communicates the vision and values of 
the Group

and implements effective 
financial controls

 – provides financial and commercial 

decision leadership, vision and support

 – ensures the appropriateness of risk 

management systems

 – oversees all aspects of accounting/ 

finance operations including accounting 
policies and integrity of financial data 
and external financial reporting

 – responsible for corporate finance 
functions, financial planning and 
budget management

 – supports and advises the senior 

management team

 – leads the development of investor 

 – manages the senior management team

relations strategy and communications

Senior Independent Director 

Non-Executive Directors

Group Company Secretary

 – acts as a sounding board for the Chair

 – provide constructive challenge

 – secretary to the Board and 

 – serves as an intermediary for 

 – help develop strategy

other directors

 – is available to meet shareholders if 

they have concerns which they have 
not been able to resolve through the 
normal channels

 – conducts an annual review of the 

performance of the Chair and convenes 
a meeting of the Non-Executive 
Directors to discuss the same

 – ensure financial controls and systems 

of risk management are robust 
and defensible

 – determine appropriate levels 

of remuneration for the 
Executive Directors

 – monitor reporting of performance

 – scrutinise performance of management

 – are available to meet with 

major shareholders

its committees

 – ensures efficient information flows 

within the Board and its committees 
and between senior management and 
Non-Executive Directors

 – facilitates induction of new Directors 

and assists with training and 
development needs as required

 – regularly updates the Board on 
corporate governance matters, 
legislative changes and regulatory 
regimes affecting the Group

 – ensures compliance with 

Board procedures

 – co-ordinates external Board evaluation 
and conducts internal Board evaluation

50

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportBoard and Board Committees meeting attendance
Attendance of Directors at regular scheduled meetings of the Board and its Committees is shown in the table below:

Board
Formal meetings

Pandemic related 
meetings

Audit  
Committee

Nomination  
Committee

Remuneration 
Committee

Meetings held during 
the year

7  

5  

4  

4  

5  

Executive Directors

Meetings attended Meetings attended Meetings attended Meetings attended Meetings attended

Meetings attended

Meetings attended Meetings attended Meetings attended

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

Stephen Harris

Dominique Yates

Non-Executive 
Directors

Anne C. Quinn

Eva Lindqvist 

Ian Duncan

Patrick Larmon

Lili Chahbazi
Kevin Boyd (appointed  
1 September 2020)

All directors attended the maximum number of formal Board, Audit and Nomination Committee meetings that they were scheduled to attend. 
P. Larmon and E. Lindqvist did not attend one pandemic related meeting called at short notice due to prior commitments. K. Boyd having 
started on 1 September 2020 did not attend one Remuneration Committee meeting due to a prior commitment. Non-members A.C. Quinn,  
S.C. Harris and D. Yates attended by invitation some parts of the meetings of the Audit, Nomination and Remuneration Committees. 
Note that the Employee Engagement Groups are led by P. Larmon and supported by the Company Secretary. There were two Employee 
Engagement Group meetings in 2020.

Diversity and length of service
Bodycote is a global business with operations in 23 countries and diversity is an integral part of how we do business. The Nomination 
Committee considers diversity when making appointments to the Board, taking into account relevant skills, experience, knowledge, 
personality, ethnicity, and gender. Our prime responsibility, however, is the strength of the Board and our overriding aim in any new 
appointment must always be to select the best candidate. The Nominations Committee also considers capability and capacity to commit 
the necessary time to the role in its recommendation to the Board. The intention is to appoint the most suitable qualified candidate to 
complement and balance the current skills, knowledge and experience of the Board and who will be best able to help lead the Company in 
its long-term strategy. The Nomination Committee is advised by international search companies, who have been briefed on our diversity policy 
and are required to reflect the policy in the long list submitted to the Committee.

In 2020 female representation on our Board was 38% (2019: 43%). At manager level it is 30% (2019: 25%). Females represent 18% 
(2019: 19%) of our total workforce. Whilst we are above the 33% by 2020 voluntary target for female representation on Boards recommended 
by the Hampton-Alexander review, we continue to believe it is difficult to set targets or timescales for increasing the proportion of women, 
or any other minority group, on our Board and do not propose to do so. We will increase female and/or other minority representation on the 
Board if appropriate candidates are available when Board vacancies arise. Lili Chahbazi considers herself a person of colour due to her Iranian/
Middle East background.

The ESG report contains further details regarding the male and female representation within the Group, including Board representation.

NED tenure per year 

Board diversity

8

6

5

3

3

Anne Quinn

Lili Chahbazi Patrick Larmon

Eva Lindqvist

Ian Duncan

Kevin Boyd

1

Female

38%

Male

62%

51

Bodycote plc annual report 2020Additional informationFinancial statementsStrategic reportGovernance 
 
 
 
 
Corporate governance statement continued

E. Lindqvist was appointed as a Non-Executive Director on 1 June 
2012 and is approaching the end of her ninth consecutive year as 
a Non-Executive Director. After careful consideration, the Board 
has asked E. Lindqvist to continue to serve for a further year as a 
Non-Executive Director and Chair of the Remuneration Committee, 
subject to re-election. The Board considers that this is in the best 
interests of the Group and shareholders. In particular, it will ensure 
that there is a smooth transition of Remuneration Committee Chair 
responsibilities to E. Lindqvist’s successor. The Board considers 
that E. Lindqvist remains independent for the purposes of the Code. 
With the exception of serving on the Board for more than nine years, 
none of the circumstances which can impair independence set out in 
provision 10 of the Code apply to E. Lindqvist.

Effectiveness
Board evaluation
Following the external Board Evaluation in 2018, the Board agreed to 
undertake an internal evaluation in 2020. To ensure that all aspects 
of good governance are covered by the review, the Group Company 
Secretary distributed a tailored questionnaire to each member of the 
Board. Questions were framed under the following seven topics:

 – Remit and objectives;

 – Composition, training and resources;

 – Corporate governance/risk management;

 – Stakeholder engagement;

 – Board meetings and visits;

 – Board procedures and administration; and

 – Evaluation and effectiveness.

The process of the internal Board and Committee evaluation consists 
of four steps: a) design and initiation b) data collection  
c) review by chairs and e) discussion and actions. 

At a meeting of the Nomination Committee in October 2020, the 
directors assessed the conclusions reached and are in the process of 
implementing a number of recommendations. Additional emphasis 
will be placed on risk management, strategy and operational matters. 
The Board evaluation covered the activities of the main Board and 
each of its Committees.

Arising from the exercise, the Board concluded that its focus should 
remain on divisional growth strategies, risk and sustainability as 
well as continued training. The overall conclusion is that the Board is 
performing well and high governance standards have been adopted. 
The Executive Committee is strongly challenged by the Board 
when appropriate.

As in previous years, the Chair has assessed the performance of 
each Board member by conducting individual interviews and we 
can confirm that all Directors continue to perform effectively and 
demonstrate commitment to their roles. The Executive Directors 
S.C.Harris and D. Yates will be appraised in March 2021.

Led by the Senior Independent Director, the Directors carried out an 
evaluation of the Chair’s performance in September 2020. The Board 
was satisfied with the Chair’s commitment and performance.

Proposals for re-election
The Board decided, in line with the Code, that all directors will retire 
annually and, other than in the case of any Director who has decided 
to stand down from the Board, will offer themselves for re-election 
at the AGM. Accordingly, A.C. Quinn, S.C. Harris, E. Lindqvist, P. 
Larmon, I.B. Duncan, D. Yates and L. Chahbazi will stand for re-
election at the AGM in May 2021 and K. Boyd will stand for election. 

The Board recommends to shareholders that they re-elect all the 
directors. The performance of each director was evaluated and the 
Board confirms in respect of each that their performance continues 
to be effective and that each continues to demonstrate commitment 
to his or her respective role.

Meetings with shareholders
The Group Chief Executive and Chief Financial Officer regularly 
talk with and meet institutional investors, both individually 
and collectively, and this has enabled institutional investors to 
increase their understanding of the Group’s strategy and operating 
performance. In addition, internet users are able to view up-to-date 
news on the Group and its share price via the Bodycote website 
at www.bodycote.com. Users of the website can access recent 
announcements and copies of results presentations and can enrol 
to hear live presentations. On a regular basis, Bodycote’s financial 
advisers, corporate brokers and financial public relations consultants 
provide the Directors with opinion surveys from analysts and 
investing institutions following virtual visits and meetings with the 
Group Chief Executive and Chief Financial Officer. The Chair and SID 
are available to discuss any issues not resolved by the Group Chief 
Executive and Chief Financial Officer. On specific issues, such as the 
review of remuneration packages or elevated levels of votes against 
a resolution, the Group has sought, and will continue to seek, the 
views of leading investors.

Where required, a Director may seek independent professional 
advice, the cost of which is reimbursed by the Group. All Directors 
have access to the Group Company Secretary, and they may also 
address specific issues with the SID. In accordance with the 
Articles of Association, all newly appointed Directors must submit 
themselves for election. All Directors stand for yearly re-election. 
Non-Executive Directors, including the Chair, are appointed for fixed 
terms not exceeding three years from the date of first election by 
shareholders (maximum of two three-year terms), after which the 
appointment may be extended by mutual agreement on an annual 
basis. A statement of the Directors’ responsibilities is set out on page 
50. All Non-Executive Directors (excluding the Chair) serve on each 
Board Committee.

In line with best practice provisions in the Pre-Emption Group 
Statement of Principles, the Board confirms that it does not intend to 
issue more than 7.5% of the issued share capital of the Group on a 
non-pre-emptive basis in any rolling three-year period.

Training
We provide training to employees where and when required, but 
it is important that Directors continue to develop and refresh their 
understanding of the Group’s activities. Every year, the Board as part 
of site trips, meets local management at operations and Directors 
familiarise themselves with the technology used, logistics, health and 
safety standards and customers served. Due to COVID-19 Board site 
trips were not possible but this will be reinstated as soon as possible, 
and alternative visits are being investigated. The Board is kept 
informed of relevant developments in the Group by way of monthly 
management reports and the progress of capital projects. 

It is also essential that the Directors regularly refresh and update 
their skills and knowledge with both external and internal training 
when necessary. Members of the Board individually attend 
seminars, conferences and training events to keep up-to-date about 
developments in key areas. Board meetings include presentations 
from Group experts to ensure the Directors have access to the 
wealth and knowledge within the Group as well as presentations 
from external providers. 

52

Bodycote plc annual report 2020Additional informationFinancial statementsGovernanceStrategic reportDirectors’ information and training sessions  
2020 Board
March
April

Insurance Captive Study – overview
 Liquidity and covenant situations under 
various scenarios
Insurances – market overview
IT Security Update
Economist briefing
ESG agenda and culture 
Regulatory and governance update (proxy advisers)

June
July
October
December

Audit Committee
Oct

BDO Internal Audit Perspectives
PwC updates on regulatory and 
accounting changes

Remuneration Committee
July

Remuneration review – market update (Deloitte)

Accountability
Internal control and risk management
In accordance with the FRC ‘Guidance on Risk Management, 
Internal Control and Related Financial Business Reporting’ the Board 
recognises that it is responsible for the Group’s system of internal 
control and risk management. The system has been designed to 
manage rather than eliminate the risk of failure to achieve business 
objectives, and can only provide reasonable and not absolute 
assurance against material misstatement or loss. This system has 
continued to operate throughout the COVID-19 pandemic.

The Board has embedded a continuous process for identifying, 
evaluating and managing the Group’s significant risks, including 
risks arising out of Bodycote’s corporate and social engagement. 
The Board’s monitoring covers all significant strategic, financial, 
operational and compliance risks. It is based principally on reviewing 
reports from management and from Internal Audit (IA) to consider 
whether any significant failings or weaknesses are promptly 
remedied or indicate a need for more extensive monitoring. 
The Audit Committee assists the Board in discharging these 
review responsibilities.

The emerging risk review, based around horizon scanning, has 
explored what the future might look like and seeks to identify early 
warning signals. These emerging risks are characterised by their high 
level of uncertainty both in terms of likelihood and potential impact 
and are therefore more difficult to manage or mitigate. Risks that 
have been considered by the Board have included:

 – COVID-19 – the long-term effect of this and other 

possible pandemics

 – Geopolitical risks – increased international tensions and tariffs 

 – Move to electric vehicles 

The Board is satisfied that the Group maintains an effective system 
of internal controls and that there were no significant failings or 
weaknesses in the system. The system was in operation throughout 
2020 and continues to operate up to the date of the approval of this 
report. The key elements of the Group’s system of internal control 
that is monitored by the Board includes:

 –  Key financial, legal and compliance policies that apply across 

the Group including: Detailed Financial Policies, Group Authority 
Matrix, Anti-Bribery and Anti-Corruption, Anti-Slavery and Human 
Trafficking, Core Values and Code of Conduct.

 –  A comprehensive financial planning, accounting and 

reporting framework.

 –  Bodycote has engaged BDO to monitor and assist in improving the 
Group’s internal control system. IA reviews are conducted on the 
basis of a risk-based plan approved annually by the Audit Committee. 
As a result of COVID-19, this plan was revised during 2020 and 
re-approved by the Audit Committee. The revised plan took account 
of the various national and regional restrictions impacting the ability 
of auditors to visit Bodycote locations. To provide assurance on the 
continued operation of controls, financial control self-assessments 
(CSA) have been developed and implemented in each division. 
The results of these CSA have been verified by IA using video 
technologies. Other risk-based reviews have been conducted using 
techniques such as remote data analytics to provide assurance of 
the controls operating in the shared service centres and accounting 
centres. The findings and recommendations from IA are reported on 
a regular basis to the Executive and Audit Committees.

 –  An annual internal control self-assessment, with management 

certification, is undertaken by every Bodycote plant. The assessment 
covers the effectiveness of key financial, compliance and selected 
operational controls. The results are validated by IA through spot 
checks and are reported to the Executive and Audit Committees.

 –  The Chief Financial Officer, Group Financial Controller, President 
and Vice President of Finance for each division sign a letter of 
representation annually. This is to confirm the adequacy of their 
systems of internal controls, their compliance with Group Core 
Values and Group Policies, relevant laws and regulations, and that 
they have reported any control weaknesses and actual, or attempted, 
frauds or thefts through the Group’s assurance processes.

 –  A Group-wide risk register and assurance map is maintained 
throughout the year to identify the Group’s key strategic and 
operational risks. Any changes to these risks during the year are 
promptly reported to the Executive Committee and the Board.

During 2020, in compliance with provision 29 of the Code, 
management performed an assessment of its risk management 
processes for the purpose of this Annual Report. Management’s 
assessment, which has been reviewed by the Audit Committee and 
the Board, included a review of the Group’s key strategic, operational 
and emerging risks. The review was based on work performed by 
the Group Head of Risk and the Group’s Sustainability and Risk 
Committee (by means of workshops, interviews, investigations, and 
by reviewing departmental or divisional risk registers). These risks 
have been reviewed throughout the year and three new key risks 
have been added for 2020: contract review, equipment downtime 
and loss of key accreditations. Two risks previously reported as key 
are no longer considered as such: capital projects and the loss of 
key customers. Further information regarding the ways in which the 
principal business risks and uncertainties affecting the Group are 
managed is shown on pages 29 to 33.

By order of the Board:

U.S. Ball
Group Company Secretary 

12 March 2021

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

53

Bodycote plc annual report 2020Additional informationFinancial statementsStrategic reportGovernanceStrategic report

Governance

Financial statements

Additional information

Directors’ report

Directors’ report
The Directors are pleased to submit their report and the audited 
financial statements for the year ended 31 December 2020.

The Chair’s statement, the Chief Executive’s review, the Chief 
Financial Officer’s report and all the information contained on pages 
10 to 27 together comprise the Directors’ report for the year ended 
31 December 2020. Concerning going concern please see the CFO 
statement on page 27 and page 90-91 of the financial statements.

Strategic report
The Strategic report is provided on pages 1 to 43 of this Annual 
Report. This is a review of the development of the Group’s 
businesses, the financial performance during the year ended 
31 December 2020, key performance indicators and a description 
of the principal risks and uncertainties facing the Group.

The Strategic report has been prepared solely to assist the 
shareholders in assessing the Group’s strategies and the potential 
of those strategies. It should not be relied on by any other party for 
any other purpose. Forward-looking statements have been made 
by the Directors in good faith using information available up to the 
date of this report and such statements should be regarded with 
caution because of the inherent uncertainties in economic trends 
and business risks. Since the end of the financial year, no important 
events affecting the business of the Group have occurred.

Dividends
The Board has recommended a final dividend of 13.4p (2019: 13.3p) 
bringing the total ordinary dividend to 19.4p per share (2019: 19.3p). 
If approved by shareholders, the final dividend of 13.4p per share 
will be paid on 4 June 2021 to all shareholders on the register at the 
close of business on 23 April 2021.

During 2019 year, the Group became aware of an issue concerning 
technical compliance with the Companies Act 2006 in respect 
of the declaration and payment of the 2018 interim dividend and 
2018 special dividend. Although the Group had such distributable 
reserves at the time of declaration and payment, the Group had 
not lodged interim accounts with Companies House to show that 
each of the dividends were supported by sufficient distributable 
reserves. The Group’s historical reported trading results and financial 
condition are entirely unaffected, and the Group put a resolution to 
shareholders at the Company’s annual general meeting on 28 May 
2020. Shareholders approved the resolution hence rectifying 
the issue.

Share capital
The Company’s issued ordinary share capital as at 31 December 
2020 was £33.1m. No shares were issued during the year. At the 
Annual General Meeting on 28 May 2020, the shareholders 
authorised the Company to purchase up to 22,046,468 of its own 
shares. This authority expires at the conclusion of the forthcoming 
Annual General Meeting to be held on 27 May 2021, at which time a 
further authority will be sought from shareholders.

Capital structure
Details of the issued share capital are shown in note 24.

The Company has one class of ordinary shares, which carries no 
right to fixed income. Each share carries the right to one vote at 
general meetings of the Company. There are no specific restrictions 
on the size of a holding nor on the transfer of shares, both of which 
are governed by the general provisions of the Articles of Association 
and prevailing legislation. The Directors are not aware of any 
agreements between holders of the Company’s shares that may 
result in restrictions on the transfer of securities or on voting rights. 
Details of employee share schemes are set out in note 28 and shares 
held by the Bodycote Employee Benefit Trust abstain from voting 
and waive dividend rights. No person has any special rights of control 
over the Company’s share capital and all issued shares are fully paid. 
The appointment and replacement of Directors is governed by the 
Company’s Articles of Association, the UK Corporate Governance 
Code, the Companies Act and related legislation. The Articles of 
Association may be amended by a special resolution of shareholders. 
The powers of the Directors are described in the Corporate 
governance statement on page 46. Under the Articles of Association, 
the Company has authority to issue ordinary shares with a nominal 
value of £11,023,234.

There are also a number of other agreements that take effect, alter, 
crystallise or terminate upon a change of control of the Company 
following a takeover bid such as commercial contracts, bank loan 
agreements, property lease agreements, employment contracts 
and employee share plans. None of these are considered to be 
significant in terms of their likely impact on the business of the Group 
as a whole, and the Directors are not aware of any agreements 
between the Company and themselves or employees that provide for 
compensation for loss of office or employment that occurs because 
of a takeover bid except where specifically mentioned in this report.

Directors
The current directors and their biographies are listed on pages 
44 to 45 and all with the exception of Kevin Boyd have served 
throughout the year. In line with the UK Corporate Governance 
Code, all Directors retired at the Annual General Meeting in 2020 
and stood for re-election by the shareholders. All Directors will retire 
at the next Annual General Meeting and will stand for re-election 
by the shareholders, if they wish to continue to serve as Directors 
of the Company. Accordingly, those Directors retiring and offering 
themselves for re-election at the 2021 Annual General Meeting 
are A.C. Quinn, S.C. Harris, D. Yates, I.B. Duncan, E. Lindqvist, 
P. Larmon and L. Chahbazi. K. Boyd having joined the Board on 
1 September 2020 will stand for election. The service agreements for 
Messrs S.C. Harris and D. Yates are terminable by 12 months’ notice. 
The remaining Directors do not have a service agreement with the 
Company and their appointments are terminable by six months’ 
notice.

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Additional information

Directors’ interests in contracts and shares
Details of the Executive Directors’ service contracts and details of 
the Directors’ interests in the Company’s shares and share incentive 
plans are shown in the Board report on remuneration on pages 64 
to 66. No Director has had any dealings in any shares or options in 
the Company since 31 December 2020. None of the Directors had 
a material interest in any contract of significance in relation to the 
Company and its subsidiaries at any time during the financial year.

Potential conflicts of interest
During 2008, the duties owed by Directors to a company were 
codified and extended by the Companies Act 2006 so that Directors 
not only had to declare actual conflicts of interest in transactions 
as they arose, but also had a duty to avoid such conflicts whether 
real or potential. Potential conflicts of interest could arise where a 
single Director owes a fiduciary duty to more than one organisation 
(a ‘Situational Conflict’) which typically will be the case where a 
Director holds directorships in more than one company. In order 
to ensure that each Director was complying with the duties, each 
Director provided the Company with a formal declaration to disclose 
what Situational Conflicts affected him or her. The Board reviewed 
the declarations and approved the existence of each declared 
Situational Conflict up until September 2021 and permitted each 
affected Director to attend and vote at Bodycote Directors’ meetings, 
on the basis that each such Director continued to keep Bodycote’s 
information confidential, and provided overall that such authorisation 
remained appropriate and in the interests of shareholders. 
Where such authorisation becomes inappropriate or not in the 
interests of Bodycote's shareholders, the Chair or the Nomination 
Committee can revoke an authorisation. No such revocations have 
been made.

Employment
The Group recognises the value that can be added to its future 
profitability and strength through the efforts of its employees. 
The commitment of employees to excel is key to the Group’s 
continued success. Through their attendance at or participation 
in strategy, production, safety and health meetings at site level, 
employees are kept up-to-date with the performance and progress 
of the Group, the contribution to the Group made by their site, and 
are advised of safety and health issues. Employees are able to voice 
any concerns through the Group’s anonymous and confidential 
Open Door Line, a phone line accessed in the local language. 
Approximately 3,000 Bodycote employees are connected to the 
Bodycote intranet, which improves knowledge of Group activities, 
and assists greatly with technology exchange and co-ordination. It is 
the Group’s policy to give full and fair consideration to applications for 
employment from disabled persons, having regard to their particular 
aptitudes and abilities, and to encourage the training and career 
development of all personnel employed by the Group, including 
disabled persons. Should an employee become disabled, the Group, 
where practicable, will seek to continue the employment and arrange 
appropriate training. An equal opportunities policy is in operation 
in the Group.

Stakeholder engagement
For details refer to page 18.

Greenhouse gas emissions

Details of greenhouse gas emissions are included within the 
Environment, Social and Governance section of this report. 

Donations
There were no political contributions in 2019 or 2020.

Shareholders
An analysis of the Company’s shareholders and the shares in issue 
at 2 March 2021 together with details of the interests of major 
shareholders in voting shares notified to the Company pursuant to 
chapter 5 of the Disclosure and Transparency Rules are given on 
page 149.

External auditor
In accordance with the provisions of section 489 of the 
Companies Act 2006, a resolution for the re-appointment of 
PricewaterhouseCoopers LLP (PwC) as external auditor is to be 
proposed at the forthcoming Annual General Meeting. Each person 
who is a Director at the date of approval of this Annual Report 
confirms that:

 – so far as each Director is aware, there is no relevant audit information 

of which the Company’s auditor is unaware; and

 – each Director has taken all the steps that he or she ought to have 

taken as a Director to make himself or herself aware of any relevant 
audit information and to establish that the Company’s auditor is 
aware of that information.

This statement is given and should be interpreted in accordance with 
the provisions of section 418 of the Companies Act 2006.

Annual General Meeting
The 2021 Annual General Meeting will be held on 27 May 2021 
in accordance with the notice being sent to shareholders under 
separate cover.

By order of the Board:

U.S. Ball
Group Company Secretary 
12 March 2021

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

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Additional information

Report of the Nomination Committee

No. of meetings  
2020: 4 
Attendance

Committee  
membership
Director
A.C. Quinn 
I.B. Duncan 
E. Lindqvist 
P. Larmon 
L. Chahbazi  
K. Boyd (appointed 
1 September 2020)

Dear Shareholders, 

Main committee responsibilities

 – Regularly review the structure, size and composition (including the skills, knowledge, 
experience, and diversity) of the Board and make recommendations to the Board with 
regard to any changes.

 – Give full consideration to succession planning for Directors and other senior executives 

in the course of its work.

 – Be responsible for identifying and nominating for the approval of the Board, candidates 

to fill Board vacancies as and when they arise.

I am pleased to introduce the Nomination Committee report for 2020. Board composition is a key focus for the Nomination Committee, 
ensuring that the Board has the right skills and experience to direct the Company in the successful execution of its strategy.

The Committee will continue to focus on ensuring that the present and future composition of the Board is appropriate for the delivery of the 
Group’s strategy and that all relevant UK Corporate Governance Code requirements continue to be met. As part of the ongoing refreshment 
of the Board, Kevin Boyd was appointed as of 1 September 2020.

A.C. Quinn
Chair of the Nomination Committee

Role of the Nomination Committee
The Nomination Committee is a sub-committee of the Board, whose principal purpose is to advise on the appointment and, if necessary, 
dismissal of executive and Non-Executive Directors. The Committee’s terms of reference, which are listed on the Group’s website, include all 
matters required by the UK Corporate Governance Code (‘the Code’). Further information on the Code can be found on the Financial Reporting 
Council’s website www.frc.org.uk. The terms of reference are reviewed annually by the Group Company Secretary and the Chair, and any 
changes are then referred to the Board for approval. No changes were made to the terms of reference during the year.

Key Activities

Board composition/succession planning
 – Reviewed and updated succession plans for the Board and 

Non-Executive Directors
 –  Reviewed continued independence of the Non- Executive Directors

senior management

 – Appointed a further Non-Executive Director
Diversity
 – Reviewed the Group’s diversity policy on governance and evaluation

Recruitment Process

 – Reviewed the Non-Executive Director time commitments and 

over boarding

Governance and evaluation
 – Reviewed the Committee’s Terms of Reference

 – Evaluated the Committee’s effectiveness

 – Reviewed the performance of Executive Directors

Director appointment policy and progress
The Committee has developed a formal rigorous and transparent 
procedure for the appointment of new Directors. Prior to making any 
appointment, the Committee, having evaluated the skills, experience, 
and diversity of the Board, determines the qualities and experience 
they seek and then prepares a detailed description of the role with a 
view to appointing the most appropriate candidate. The Committee 
uses open advertising or the services of independent external 
advisers to facilitate the search.

A long list of candidates is drawn up, from which an appropriate 
number will be selected for interview. Upon completion the 
Committee recommends to the Board the appointment of the 
preferred candidate. 

Succession 
Planning

Board 
composition

Recruitment

 – Vacancy for a Director is identified when one of the existing 
directors confirms his/her intention to resign or retire, or 
when it is decided to add another NED to the board

 – The need for specific knowledge, skills and role 

behaviours is identified during discussions at Nomination 
Committee meetings

 – External international search consultancies are 

appointed to assist with the search 

 – A sub-committee examines the long list of candidates 

Selection

against the role specifications and a shortlist of 
candidates is identified

 – Candidates are initially interviewed by the Chair and the 
Group Chief Executive for a Non-Executive Director role. 
The final candidates then meet with all other Directors

 – In order to maximise the effectiveness of the Board, 
candidates are carefully considered ensuring that the 
Board has the right skills and experiences

 – The New director is announced as joining the Board 

Interview

Balance 
of skills

Appointment

Induction

 – The Committee and the Group Company Secretary play 
an active part in an induction programme that is tailored 
to the needs, skills and experiences of the new Director 

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Composition of the Nomination Committee
As recommended by the Code, the Chair of the Board acts as the Chair of the Committee whose members also comprise the Directors listed 
above. The Chair cannot chair the Committee when it is dealing with either the succession to the Chairship of the Group or the review of his 
or her own performance. Only members of the Committee have the right to attend the Committee meetings. Other individuals and external 
advisers may be invited to attend for all or part of any meeting when it is appropriate. The quorum necessary for the transaction of business 
is two.

The Group Company Secretary is secretary to the Committee.

The Committee has the authority to seek any information that is required, from any officer or employee of the Company or its subsidiaries. 
In connection with its duties, the Committee is authorised by the Board to take such independent advice (including legal or other professional 
advice, at the Group’s expense) as it considers necessary, including requests for information from, or commissioning investigations by, 
external advisers.

Directors’ induction and training
Induction programmes are individually tailored for all new Directors, following the appointment process as overseen by the Nomination 
Committee. Each programme considers existing expertise and any prospective Board or Committee roles.

In advance of Kevin Boyd’s first Board meeting in September 2020, arrangements were made for introductions and briefings to ensure there 
was an appropriate opportunity to understand and ask questions about the strategic, financial and operational context. The ongoing COVID-19 
pandemic placed restrictions on the format with briefings conducted by videoconferencing and face-to-face engagements, with site visits 
to follow.

Board induction programme for Kevin Boyd
Topic
Business strategy
Finance
Governance
Legal
IT
Plant visit

Meetings held
Video call with Group CEO
Video call with Group CFO and meeting with Head of Internal Audit and Risk
Video call with Group Company Secretary
Meeting with General Counsel
Meeting with Head of IT Operations
Visit to the UK Derby plant  
Meetings with Human Resources, Shared Services, Tax and Treasury, and Marketing to be arranged in 2021 subject 
to COVID-19 guidelines. Further plant visits will take place as part of the annual Board plant visit programme, 
COVID-19 permitting.

As part of the mandatory training programme, all Directors are further required to complete courses which address areas most pertinent 
to Bodycote and their role on the Board. This covers both statutory obligations and ethical considerations and include the legal duties of a 
Director, competition law, anti-bribery and corruption, the share dealing code and anti-slavery regulations.

Board succession planning
K. Boyd joined the Board as Non-Executive Director on 1 September 2020. The recruitment process was led by the Chair, who was advised 
by international search consultancy Russell Reynolds in the process of identifying suitably qualified individuals. Russell Reynolds has no other 
connections to Bodycote plc. There were no further changes to the Board structure during the year.

As in previous years the Committee spent time during 2020 considering the important topic of succession planning across the business. 
The Committee received papers on Executive Director and senior management succession (this includes members of the Executive 
Committee and all senior management roles in the business). The plan identifies immediate successors for these roles and identifies 
candidates as potential successors to roles in the longer term. The Committee was satisfied that plans remain sufficiently robust to enable 
vacancies to be filled on a short to medium term basis while taking account of the continuing need to consider all types of diversity.

The Committee acknowledges that in a business the size of Bodycote, it is not always possible to identify internal successors for all roles.

The Committee is confident that it has carried out its role effectively during the year and its work will help to ensure that a strong pipeline of 
talented individuals is available to support the Group and meet its future business objectives and fulfil its strategic goals.

Nomination Committee – allocation of agenda time

35%

10%

Board Composition and Succession Planning

Performance of Chairman and Group Chief Executive

Governance and reporting

Independence and re-election

20%

35%

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Report of the Nomination Committee continued

Main activities of the Nomination Committee
In 2020 the Committee met formally four times and reviewed the composition and skills of the Board, with a view to considering the current 
and future skills and experience that the Board might require.

The Committee discussed Board diversity and reviewed the performance of the Group Chief Executive and other senior executives.

In particular, the Board discussed its membership with respect to gender, ethnicity, and age. The Committee has sought to ensure that 
appointments are of the best candidates to promote the success of the Company and are based on merit, with due regard for the benefits 
of diversity on the Board. Further information concerning Board diversity can be found on page 46 as part of the Corporate Governance 
statement. We are pleased to report that as of 1 January 2018 the female representation on the Board had reached 43% and continued at 
43% until 1 September 2020 when it reduced slightly to 38% with the appointment of K. Boyd.

The Committee considered and authorised the potential conflicts of interest which might arise where a Director has fiduciary responsibilities 
in respect of other organisations. The Committee concluded that no inappropriate conflicts of interest exist. The Committee also assigned 
the Chair to review and agree with the Group Chief Executive his personal objectives for the forthcoming year.

Following the external Board evaluation in 2018, the Board agreed to undertake an internal evaluation during 2020. Further details of the 
review can be found in the Corporate Governance section of the Annual Report. Recommendations arising from the 2018 external Board 
evaluation have been addressed.

In December 2020, the Nomination Committee reviewed the Board’s size and composition, the frequency of the process for Board and 
Committee meetings, and best practice for dealing with Board issues including drawing up a training and/or induction programme for 
the Directors. The terms of reference of the Committee were reviewed in conjunction with the Model Terms of Reference issued by the 
Institute of Chartered Secretaries and Administrators. The biographical details of the current Directors can be found on pages 44 and 45. 
The Committee, having reviewed their independence and contribution to Board matters, confirms that the performance of each of the 
Directors standing for re-election at this year’s Annual General Meeting continues to be effective and demonstrates commitment to their 
roles, including independence of judgement and time commitment for Board and Committee meetings. The Board, after careful review and 
cognisant of Eva Lindqvist’s contributions to the Board both as a Non-Executive Director and as the Chair of the Remuneration Committee, 
is proposing her reappointment for a further year. Accordingly, the Committee has recommended to the Board that all current Directors 
of the Company be proposed for re-election at the forthcoming Annual General Meeting.

As chair of the Committee, I will be available at the Annual General Meeting, in May 2021, to answer questions relating to the work of the 
Committee. Should physical attendance not be permitted, questions can be submitted in advance of the meeting either to the registered 
office address or to agm@bodycote.com. Representative answers will be published on the company website in due course.

On behalf of the Nomination Committee:

A.C. Quinn CBE
Chair of the Nomination Committee 
12 March 2021

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Additional information

Report of the Audit Committee

No. of meetings  
2020: 4  
Attendance

Committee  
membership
Director

I.B. Duncan 
E. Lindqvist 
P. Larmon 
L. Chahbazi 
K. Boyd1

Main committee responsibilities

 – Encourage and safeguard the highest standards of integrity, financial reporting, financial 

risk management and internal controls;

 – Monitor the integrity of the financial statements including annual and half-yearly 

reports, trading updates and any other formal announcements relating to its financial 
performance. Reviewing and reporting to the Board on significant financial reporting 
issues and judgements;

 – Review the content of the Annual Report and advise the Board whether, taken as a 

whole, it is fair, balanced and understandable and provides the information necessary 
for shareholders to assess the Group’s position and performance, business model 
and strategy;

 – Monitor and review the adequacy and effectiveness of the Group’s internal financial 
control and risk management systems, including the robust assessment of both 
emerging and principal risks;

 – Monitor and review the effectiveness of the Group’s internal audit function and its key 

findings and trends arising, and the resolution of these matters;

 – Oversee the relationship with the external auditor including approving the remuneration, 

audit scoping and terms of engagement, reviewing outcomes of external audits, ensuring 
compliance with the policy for the provision of non-audit services, conducting the 
tender process and making recommendations to the Board, subject to the approval by 
shareholders, on the appointment, reappointment or removal of the external auditor;

 – Monitor policy on the engagement of the external auditor to supply non-audit services, 
ensuring there is prior approval of non-audit services, considering the impact this may 
have on independence, taking into account the relevant regulations and ethical guidance 
in this regard and report to the Board on any improvement or action required; and

 – Review and monitor the external auditor’s independence, effectiveness and objectivity.

The full terms of reference for the Committee can be found on the Group’s website.

1  K. Boyd was appointed on 1 September 2020. 

Introduction
I am pleased to present the 2020 report of the Audit Committee, which describes how the Committee has carried out its responsibilities 
during the year. In addition to the on-going core responsibilities, we have had a number of critical topics to consider in 2020, most significantly 
being our focus on monitoring the impact of the COVID-19 pandemic on the Group’s financial results, as well as the impact on the principal 
risks directly associated with the Group’s financial arrangements. This included assessing the impact of restrictions on the Group’s Internal 
Audit activities, and agreeing on the focus of future audits, also taking into account the impact of and the Group’s response to COVID-19.

Objective
The Committee’s objective is to provide effective governance over the Group’s reporting, including the adequacy of related disclosures, the 
management and oversight of the Group’s systems of internal control, the management of financial risks, and the performance of internal 
audit as well as the appointment and evaluation of the external auditors. During the year, the Committee continued to focus on the integrity 
of Bodycote’s financial reporting, financial risk management, internal controls, and on the quality of the external and internal audit processes. 
The Committee will continue to keep its activities under review as the regulatory environment changes.

Committee membership and meetings
The members of the Audit Committee are all independent Non-Executive Directors. Their biographical details are shown on pages 44 and 45, 
and their remuneration on page 69. The Group Company Secretary is the secretary to the Audit Committee. 

I.B. Duncan is Chairman of the Audit Committee. He is a Chartered Accountant with substantial experience in senior finance roles. The Board 
considers that I.B. Duncan has recent and relevant financial, accounting and sector experience required to Chair the Committee. 

All Committee members have significant and widespread experience in both executive and Non-Executive capacities of multinational industrial 
companies and are considered to have competencies relevant to their duties.

The Audit Committee met four times during 2020, and in March 2021. All members attended all the meetings except Mr. Boyd, who joined 
the Audit Committee effective 1 September 2020. The Committee Chairman also invited the Board Chair, Group Chief Executive, Group 
Chief Financial Officer, Group Financial Controller and Group Head of Risk (who is responsible for internal audit) to attend all regular meetings. 
Other senior management from the Group were also invited, as appropriate, to attend meetings to provide a deeper level of insight into key 
issues. Furthermore, the external auditor PricewaterhouseCoopers LLP (PwC) attended every meeting, and BDO LLP, who provides internal 
audit services, also attended one meeting. As part of the process of working with the Board to carry out its responsibilities and to maximise 
effectiveness, meetings of the Committee generally take place just prior to Board meetings.

I.B. Duncan also held preparatory meetings separately with the external auditor, the Group Chief Financial Officer, the Group Financial 
Controller and the Group Head of Risk before Committee meetings to review their reports and discuss issues in detail. PwC, the Group Head 
of Risk and the internal auditors (BDO LLP) met with the Audit Committee without the executives present. 

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Report of the Audit Committee continued

Main activities of the Committee during the year
The Committee is responsible for reviewing the Interim results for the half year and the Annual Report and financial statements before 
recommending them to the Board for approval. 

At its meetings, the Committee focused on the following main areas:

Financial reporting 
The primary recurring role of the Committee in relation to financial reporting has been to review, with management and the external auditor, 
the appropriateness and integrity of the interim results for the half year and Annual Report and financial statements concentrating on, amongst 
other matters:

 – the quality and acceptability of accounting policies and practices including interpretation of reporting standards and the adoption of policies; 

 – the application and impact of significant judgements, accounting estimates and matters where there was a significant discussion with the 

external auditor;

 – the clarity of disclosures and compliance with International Financial Reporting Standards;

 – the key points of disclosure and presentation to ensure the adequacy, clarity and completeness in the Annual Report and financial statements;

 – whether the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to 

assess the Group’s strategy, business model and performance; 

 – reviewing with both management and the external auditor to ensure audit scoping was appropriate and that the external auditor had applied the 

necessary level of professional scepticism in performing their work; and

 – reviewing various materials to support the statements on risk management and internal control and related disclosures made in the Annual 

Report and financial statements on this matter.

Reports from management were reviewed on significant matters, including litigation, accounting, treasury and tax matters and also reports 
from the external auditor on the outcome of their work. A summary of the areas of focus considered by the Committee in respect of the 2020 
financial statements is set out in the table below.

Fair, balanced and understandable
The Committee has reviewed the form and content of the interim results for the half year and the Annual Report and financial statements 
and a paper prepared by management setting out the approach taken in its preparation. The review included the consideration of oversight 
throughout the year based on review of regular financial results and reports from both senior management and PwC, consideration of 
regulatory and governance requirements for reporting, the process of preparing the Annual Report and ensuring it contains complete and 
accurate information, and reviews performed to ensure feedback was appropriately reflected (including internal and external reviews). 

Based on the activities described above and on robust discussion with both management and the external auditor, the Committee 
was satisfied with the work performed and advised the Board that the Annual Report, taken as a whole, presents a fair, balanced and 
understandable view of the business and its performance for the year under review and that it provides the information necessary for 
shareholders to assess the Group’s strategy, business model, position and performance.

In addition to these matters, the Committee considered the following significant topics impacting the financial statements:

Area of Focus

Actions

Valuation of assets
As set out in the accounting policies, the Group reviews 
the carrying amounts of goodwill, tangible and intangible 
assets for impairment at least annually. Refer to note 11 of 
the financial statements. 

Restructuring, reorganisation and environmental provisions
Assumptions and judgement are exercised in the 
development of restructuring, reorganisation and 
environmental provisions.

The Committee considered reports from management describing potential 
impairment indicators for tangible and intangible assets and the outcomes of 
related impairment tests performed at both half-year and at year-end. 

The Committee reviewed these reports and challenged the results including the 
future forecasts underlying the value-in-use calculations, and the assumptions, 
particularly the discount rate, growth factors and scenarios used in the 
discounted cash flow calculations and the impact of the COVID-19 pandemic for 
each cash generating unit and the sensitivity analysis applied. The Committee 
also reviewed and challenged assumptions used for the valuation and impairment 
of the intangible ERP asset.

The Committee considered the adequacy of the disclosures provided. Details of 
sensitivity analysis applied to key assumptions used in the impairment review as 
well as conclusions are set out in note 11 to the Financial Statements. 

The Committee was satisfied with the carrying value of assets and goodwill and 
the related disclosures.

The Committee received reports from management and reviewed the basis 
and the completeness of the assumptions used to calculate the provisions and 
the appropriateness of disclosures in the financial statements and concluded 
that the basis of presentation was appropriate. The Committee discussed with 
management the key judgements behind provisions, taking note of the range of 
possible outcomes, and agreed with their recommendation. The Committee also 
reviewed and agreed on the exceptional nature of the restructuring costs and 
their presentation as exceptional costs, in light of FRC guidance.

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Additional information

Going concern and viability statement
Assumptions and judgement are exercised in preparing 
the going concern assessment. 

Taxation
The Group operates in a number of countries and is 
subject to reviews by different tax authorities in the 
ordinary course of business. A number of judgements 
are involved in calculating tax provisions and the level of 
deferred tax assets to be recognised. 

The Group is regularly subject to routine tax audits and 
provisions are made based on the tax laws in the relevant 
country and the expected outcomes of any negotiations 
or settlements. 

Recognition of deferred tax assets relating to future 
utilisation of accumulated tax losses is dependent 
on future profitability and performance of the 
underlying business.

Refer to notes 8 and 21 of the financial statements. 

Retirement benefits schemes
There will often be a range of reasonable assumptions 
and judgements involved in determining pension 
liabilities in relation to the Group’s defined 
benefit schemes. 

The Committee reviewed and challenged the validity of the going concern 
assumption and viability statement prepared by management and used in the 
preparation of the Annual Report, in particular considering the Group’s forecast 
for profits and cash generation, its liquidity position, available borrowing facilities 
and covenant compliance. The impact that the COVID-19 pandemic has had 
on the business since the beginning of the outbreak and the related decline in 
revenues has also been regularly considered. Sensitivity analysis was undertaken 
to understand the impact of changes to key variables and included severe but 
plausible downside scenarios that may result following the COVID-19 pandemic. 
The analysis also included the potential impacts of the recent UK free trade 
agreement with the EU on the above considerations. The Committee agreed with 
management’s assessment.

The Committee receives regular reports from management about new legislative 
developments that may impact the Group’s tax positions. 

The Committee has focused on reviewing, understanding and challenging the 
Group’s critical tax risks and management’s assessment and valuation of these 
risks. The Committee has supported transparency over the Group’s tax risks and 
strategy in external reporting. Key risks, notably in the European Commission’s 
State Aid decision, resolving Brexit implications and internal cross border funding 
arrangements have been reviewed and challenged including management’s 
views on the future profitability of the relevant businesses. The Committee was 
satisfied with the Group’s tax approach and with the accounting treatment and 
disclosure in respect of tax exposures.

Management took external professional advice in determining pension liabilities. 
The Committee reviewed reports prepared by management and key assumptions 
used from external advisers and is comfortable that the fundamental assumptions 
are reasonable. 

The Committee agreed to the treatment and the corresponding disclosures on 
these matters. See note 30 of the financial statements.

Acquisition and goodwill
The significant acquisition of Ellison in the first half of 
the year resulted in the recording of significant acquired 
intangibles and goodwill and a focus on the valuation and 
recognition of these acquired intangibles and goodwill.

The Committee received a report outlining the details of the Ellison acquisition, 
including explanation of the assumptions used to value acquired intangibles and 
goodwill as well as an assessment of the useful life of the acquired intangibles.

The Committee challenged the assumptions and agreed with the valuation, 
recognition and the related financial statement disclosure

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Additional information

Report of the Audit Committee continued

External audit
The Committee is responsible for managing the relationship with the Group’s external auditor on behalf of the Board.

The Committee continues to review and make recommendations with regard to the reappointment of the external auditor each year. In making 
these recommendations, the Committee considers auditor effectiveness and independence, partner rotation and any other factors which may 
impact the external auditor’s reappointment. 

The Group last undertook a tender for external audit services during 2018 which led to the appointment of PwC at the May 2019 Annual 
General Meeting. 2020 was Mr. Simon Morley’s second year as the lead audit partner.

The Group requires the lead partner to change every five years in order to protect independence and objectivity and provide a fresh challenge 
to the Group.

At the October Committee meeting, PwC presented its audit plan for the year-end audit. The Committee considered, challenged and agreed 
the scope and materiality to be applied to the Group audit and its components. The Committee considered the scope carefully in respect of 
smaller and more remote locations as well as Emerging Market locations and noted that the majority of the Group’s local audits are performed 
by PwC. The Committee also considered the audit approach as a result of the COVID-19 pandemic and its impact on working arrangements. 
2020 audit fees were agreed at £1.8m.

Key audit matters and the audit approach to these matters are discussed in the Independent Auditor’s Report (pages 77 to 85), highlighting the 
other significant matters that PwC drew to the Committee’s attention.

Assessment of effectiveness 
The Committee has adopted a formal framework for the review of the effectiveness of the external audit process and audit quality which 
includes the following aspects:

 – assessment of the engagement partner, other partners and the audit team;

 – audit approach and scope, including identification of risk areas;

 – execution of the audit;

 – interaction with management;

 – communication with, and support to, the Audit Committee;

 – insights, management letter points, added value and reports; and 

 – independence, objectivity and scepticism.

An assessment questionnaire is completed by each member of the Committee, the Group Chief Executive, the Group Chief Financial Officer, 
and other senior finance executives. The feedback from the process is considered by the Audit Committee and provided to the external auditor 
and management. 

The Committee assessed the effectiveness of management in the external audit process by considering timely identification and resolution of 
areas of accounting judgement, the quality and timeliness of papers analysing those judgements and other documents provided for review by 
the external auditor and the Committee.

The Committee considered the FRC Audit Quality Review report on PwC dated July 2020. If the audit is selected for quality review, the 
Committee understands that any resulting reports will be sent to the Committee by the FRC. After considering the above matters, the 
Committee concluded that the external audit had been effective. During 2020, the Group complied with The Statutory Audit Services for Large 
Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014.

Non-audit services 
The external auditor may be invited to provide services where their position as auditor renders them best placed to undertake the work. 
In order to safeguard the auditor’s independence and objectivity, and in accordance with the FRC’s Ethical Standard, the Group does not 
engage PwC for any non-audit services except where the proposed services are permissible in the context of the Ethical Standard in the first 
instance, and where it is work that it must, or is clearly best suited to perform. Non-audit services cannot be awarded to the external auditor 
without prior approval from the Committee Chairman. The non-audit fees paid to the auditor in 2020 were for the half year interim review. 
Non-audit fees represent 9% (2019: 9%) of the audit fee. Refer to note 3 for more information.

Independence
The independence of the external auditor was confirmed by PwC at the July 2020 Audit Committee and was confirmed again in March 2021. 
The Committee considered PwC’s presentation and confirmed that it considered the auditor to be independent.

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Financial statements

Additional information

Internal audit
The internal audit plan for 2020 was presented to the Committee in October 2019. The plan took into account the Group’s strategic objectives 
and risks and provides the degree of coverage deemed appropriate by the Committee. The Committee reviewed and accepted the plan 
following discussions and challenge as to the scope and areas of focus. As a result of the COVID-19 pandemic, the internal audit plan and 
approach was reviewed in May 2020. The plan was revised and endorsed by the Committee to deliver assurance over the key financial and IT 
controls and the impact of COVID-19 on working arrangements.

At each regular meeting, the Group Head of Risk presented a report to the Committee on the status of the internal audit plan, points arising 
from audits completed and follow-up action plans to address areas of weakness. The status of these actions is monitored closely by the 
Committee until they are completed. The Committee also received reports on actual or suspected frauds and thefts by third parties and 
employees. None had any material financial impact on the Group and, where necessary, systems and procedures were altered to minimise the 
risk of recurrence.

The Group Head of Risk provides independent assurance over the key financial processes and controls in operation across the Group. 
The Group engaged BDO LLP to provide co-sourced internal audit services. 

Additional financial control assurance has been obtained through a control self-assessment. Internal auditors have received self-certification 
from every plant that internal controls have been complied with and noting any non-compliance. A control self-assessment has also been 
introduced for each of the divisional finance teams. A summary of the results was presented to the Committee. The accuracy of returns was 
monitored by Internal Audit by verification calls to a random sample of sites.

The effectiveness of internal audit is reviewed and discussed annually with the Group Head of Risk and the BDO LLP engagement partner. 
The result of this assessment was shared with the Committee. Audit quality is assured through a detailed review of each report being carried 
out by the Group Head of Risk, and a summary of each report’s findings being reviewed by the Audit Committee. The review confirmed that 
the internal audit function was independent and objective and remained an effective element of the Group’s corporate governance framework. 

Risk management
The Committee reviewed the Group’s financial risk management and internal control systems’ effectiveness through updates at each meeting 
from the Group Head of Risk who has responsibility for developing the Group’s risk management and internal controls framework. 

The Committee reviewed changes to the principal financial risks, and mitigating actions identified by management and also monitored the 
emerging risk identification process. Refer to the Principal Risks and Uncertainties report on pages 29 to 33. 

Internal control
At each meeting, the Committee considered and challenged reports from the internal auditors on internal controls’ effectiveness and noted no 
significant failings or weaknesses. The Committee also performed an annual review of the Group’s internal control processes and concluded 
the system to be effective and in accordance with the Guidance on Risk Management, Internal Control and Related Financial and Business 
Reporting as issued by the FRC (September 2014). Refer to page 53 for further information.

Committee evaluation
The Committee’s activities formed part of an internal review of Board effectiveness which was undertaken in August 2020 and approved by 
the Board in October 2020. There were no material deficiencies noted in the review and Directors indicated a high level of satisfaction with 
the work of the Committee. Based on this, and as a result of the work done during the year, the Committee has concluded that it has acted in 
accordance with its terms of reference and carried out its responsibilities effectively.

On behalf of the Audit Committee:

I.B. Duncan
Chairman of the Audit Committee 
12 March 2021

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Financial statements

Additional information

Board report on remuneration

No. of meetings  
2020: 5  
Attendance

Committee 
membership
Director
E. Lindqvist 
I.B. Duncan 
P. Larmon 
L. Chahbazi 
K.Boyd1

Main committee responsibilities

 – Responsibility for setting and reviewing the remuneration and remuneration policy for all 

Executive Directors, senior management and the Company’s Chair.

 – Recommend and monitor the level and structure of remuneration for 

senior management.

 – Review workforce remuneration and related policies and the alignment of incentives and 
rewards with culture, taking these into account when setting the policy for Executive 
Director remuneration.

 – Approve the design of and determine targets for Executive Directors’ and other senior 

executives’ incentive arrangements.

 – Review the design of all share incentive plans for approval by the Board and shareholders. 

Determine whether awards will be made on an annual basis.

 – Appoint remuneration consultants.

1  K. Boyd was appointed on 1 September 2020.

Chair’s letter
As Chair of the Remuneration Committee (‘the Committee’) and on behalf of the Board of Directors, I am pleased to present our Board report 
on remuneration for 2020.

The report is split into the following sections:

 – This letter, which provides an overview of the key decisions made on Directors’ remuneration during the year (pages 64-66)

 – An ‘at a glance’ of remuneration decisions (page 67)

 – The Annual Report on Remuneration, which describes how our Directors' Remuneration Policy was applied during 2020 (pages 64-75)

The Directors’ Remuneration Policy was approved by shareholders at the 2019 Annual General Meeting and became effective from that date. 
There are no proposals to amend the Policy at the 2021 Annual General Meeting. The Committee addressed the principles prescribed in 
Provision 40 of the 2018 UK Corporate Governance Code when determining the Policy (see below).

The full Policy is available on our website at www.bodycote.com/wp-content/annual-report-2019.pdf on page 68.

Business performance and incentive outcomes for 2020
In spite of the pandemic, good progress has been made against the Group strategy. Our Emerging Markets’ business continues to grow, both 
in relative and absolute terms; our Specialist Technologies businesses represented almost half of the Group’s operating profit in the year; and 
the restructuring undertaken has undoubtedly improved the quality of our Classical Heat Treatment business. Moreover, the sharp revenue 
decline represented a stern test in terms of our ability to flex costs, and the results demonstrate the great flexibility of our cost base.

Annual bonus
As noted on page 70, given the impact of the COVID-19 pandemic on financial performance and the experience of employees and 
shareholders, the Committee, in consultation with the Executive Directors, cancelled the bonus for 2020. This decision was made in 
May 2020.

Bodycote Incentive Plan (BIP)
The 2018 BIP awards were based on performance against return on capital employed (ROCE) (50%) and headline earnings per share (EPS) 
(50%) targets over a three-year period ended 31 December 2020. 

The threshold targets were not achieved and the awards therefore lapsed in full. The Committee concluded that the vesting outcome was 
appropriate given the pandemic’s impact on underlying financial performance and the experience of key stakeholders, and no discretion was 
exercised. See page 70 for further details. 

In-flight BIP awards
The 2019 and 2020 BIP awards are subject to EPS and ROCE performance over a three year period ending 31 December 2021 and 
31 December 2022 respectively. The Committee is mindful that the global pandemic has significantly impacted the vesting capability of these 
awards. The Committee will keep the terms of the awards under review during 2021, keeping in mind the need to ensure that Executive 
Directors and senior management remain incentivised to deliver strong performance for our shareholders. The Committee will engage with 
investors, as appropriate.

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Financial statements

Additional information

Application of Policy for 2021
An overview of our intended application of Policy for 2021 is set out below.

 –  Base salaries: The Group Chief Executive and Chief Financial Officer received salary increases of 2% and 2% respectively, in line with the 
average inflationary increases awarded to the Czech Republic and Swiss employee populations. This is to reflect pay practices and salary 
inflation in the countries in which the Executive Directors live. In determining the salary increases for the Executive Directors, the Committee 
also considered salary increases awarded to Group employees across the UK and Europe more generally.

 – Benefits: There will be no changes to benefits provided to the Executive Directors.

 – Pension: Salary supplements in lieu of pension contributions will be reduced to 24% of base salary with effect from 1 January 2021, and then 
to 23.5% of base salary with effect from 1 January 2022. This is so that they are aligned with the company pension contributions of the wider 
workforce in the countries where the Executive Directors live.

 – Annual bonus: The maximum bonus opportunity remains at 200% of salary for the Group Chief Executive and 150% of salary for the Chief 
Financial Officer, with 35% of any bonus earned being deferred in shares for three years. The measures and weightings have been reviewed 
and we believe a bonus consisting of 77% headline operating profit, 10% headline operating cash flow and 13% personal scorecard continues 
to enable the annual bonus to be aligned to the Company’s strategy and ensures our Executive Directors are focused on delivery of improved 
profitability and control of working capital.

 – Bodycote Incentive Plan (BIP): The maximum opportunity remains at 175% of salary for Executive Directors. The measures and weightings 
have been reviewed and we believe the equal focus on returns and earnings is strongly aligned with our strategic priorities. The growth of our 
business and our ability to deliver strong and sustainable returns to investors is based on delivery of an effective deployment of capital in rapid 
growth areas and on acquisitions, which ROCE and EPS continue to create alignment to.

How the Committee addressed the factors in Provision 40 of the 2018 UK Corporate Governance Code 
when determining the Policy
Our Policy is designed to support an effective pay-for-performance culture which enables the Company to attract, retain and motivate 
Executive Directors who have the necessary experience and expertise to execute our strategy and deliver value to shareholders. Below is an 
explanation of how the Committee has addressed the principles prescribed in Provision 40 of the 2018 UK Corporate Governance Code.

Principle
Clarity and simplicity

Risk

Predictability

Proportionality

Alignment to culture

How the Committee has addressed the principle
The Committee ensures that remuneration arrangements are transparent, comprising 
a simple incentive structure that is commonplace in the market and best practice 
remuneration provisions.
The Committee promotes long-term sustainable performance through sufficiently 
stretching performance targets, whilst ensuring that the incentive structure does not 
encourage Executive Directors to take inappropriate risks.

The Committee has recourse to recover incentive payments in certain circumstances.
The ‘illustration of application of remuneration policy’ chart on page 68 indicates the 
potential values that may be earned through the remuneration arrangements.
The Committee believes that the Policy table clearly sets out how each element of 
remuneration links to the delivery of strategy. The disclosure of BIP performance 
targets provides a clear link between incentives and the long-term performance of 
the Group.

The Committee has discretion to adjust incentive outcomes so that they fairly and 
accurately reflect the performance of the Group over the relevant performance period.
The Committee believes that the incentive arrangements are consistent with the 
Group’s values:

 – Honesty and Transparency: The incentive arrangements are simple, transparent and 

in line with market practice, facilitating understanding by all stakeholders.

 – Respect and Responsibility: The Committee has recourse to recover incentive 

payments in certain circumstances. 

 – Creating Value: The incentives are calibrated to reward participants for delivering 

exceptional performance. The Committee reviews all outcomes for Executive 
Directors and has discretion to adjust outcomes where appropriate.

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Governance

Financial statements

Additional information

Board report on remuneration continued

Shareholder and employee engagement
The Group obtained a vote in favour of 74% in respect of approval of the 2019 Annual Report on Remuneration. Whilst the Committee was 
pleased that the Annual Report on Remuneration was approved by shareholders, it also acknowledges the views of shareholders who 
opposed the resolution. The concerns of such shareholders related to the 2020 salary increase awarded to the Group Chief Executive. 
In particular, determining the Group Chief Executive’s salary increase by reference to the average increase award to the Czech Republic 
workforce (where he lives and works) resulted in a larger increase compared to the average Group employee salary increases observed across 
the UK and Western Europe more generally. 

The Committee considers the principles of its approach to reviewing Executive Director salaries to be appropriate. That is, to consider 
Executive Director salary increases by reference to the average increases awarded to the wider workforce in the country where the Executive 
Director lives and works, whilst ensuring that any salary increase does not result in an excessive total remuneration opportunity. 

However, the Committee is also mindful of the views of shareholders. Therefore, going forward, the Committee proposes to review Executive 
Director salary increases by considering the following reference points in the round:

 – the average salary increases awarded to the wider workforce in the country in which the Executive Director lives and works; and

 – the average salary increases awarded to Group employees across Western Europe, including the UK.

The Committee believes that this approach strikes an appropriate balance between awarding Executive Directors with salary increases which 
reflect pay practices and salary inflation in countries in which they live and work, and having regard to salary increases awarded to Group 
employees across Western Europe. 

The Committee wrote to the Company’s largest shareholders and key proxy voting agencies following the 2020 Annual General Meeting 
outlining its approach and inviting comments. 

We operate Employee Engagement Groups (please see page 49 of the Corporate Governance Statement), where employees are encouraged 
to discuss the views, motivation and employment conditions of all employees. This applies to all levels and activity in the Group, with the 
exception of individual grievances. This assists the Board in understanding the views of employees. In addition, the Committee takes into 
account information provided by the Human Resources function on pay and conditions across the Company, and considers these as part of its 
discussions and decision making, along with feedback from employee satisfaction surveys.

Conclusion
I trust the information presented in this report enables our shareholders to understand both how we have operated our Directors’ 
Remuneration Policy over the year and the rationale for our decision making. We believe that the Policy operated as intended and we consider 
that the remuneration received by Executive Directors during the year was appropriate taking into account Group and personal performance, 
and the experience of shareholders and employees.

We remain fully committed to continuing an open and transparent dialogue with our shareholders. I would welcome your views on the content 
of this report or any other items you would like to discuss and I look forward to meeting you and answering any questions you may have at the 
Annual General Meeting.

Should physical attendance not be permitted, questions can be submitted in advance of the meeting either to the registered office address or 
to agm@bodycote.com. Representative answers will be published on the company website in due course.

E. Lindqvist 
Chair of the Remuneration Committee 
12 March 2021

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Financial statements

Additional information

Remuneration at a glance
Set out below is a summary of the key elements of the Remuneration Policy for Executive Directors, together with how the Policy was 
implemented in 2020 and its intended application in 2021. 

Full details of how the Policy was implemented in 2020 can be found in the Annual Report on Remuneration.

Salary  
and fees

Key features

 – Base salaries are 

reviewed in January 
every year

 – Salary reviews are based 

on role, experience, 
performance, internal 
increases and the 
external market

Purpose and link 
to strategy

Outcomes  
for 2020

Implementation  
for 2021

 – To award competitive 
salaries to attract and 
retain the talent required 
to execute the strategy 
while ensuring the 
Group pays no more 
than necessary

 – S.C. Harris will receive a salary 
of £609,199, an increase of 2%

 – D. Yates will receive a salary of 
£420,254, an increase of 2%

 – Non-Executive Director fees will 
next be reviewed at the March 
2021 meeting and the outcome 
will be disclosed in the 2021 
Directors’ Remuneration Report

 – S.C. Harris received a 
salary of £597,254, an 
increase of 7%

 – D. Yates received a salary 
of £412,014, an increase 
of 2.3%

 – The Executive Directors 

received salary increases 
in line with the average 
increases awarded to 
the workforce in the 
country that the Executive 
Directors live

Benefits

 – A range of cash benefits 

 – Provides market 

 – Benefits consist 

 – No changes proposed

and benefits in kind

competitive benefits at 
an appropriate cost

of company car (or 
allowance), private 
medical insurance, life 
assurance and sick pay

Pension

 – Contribution to the 
company’s defined 
contribution scheme, or 
cash equivalent

 – Provide a market 

competitive level of 
provision for post-
retirement income

 – Salary supplement 
in lieu of pension of 
24.5% of base salary for 
Executive Directors

 – 24% of base salary with effect 

from 1 January 2021, and 
23.5% of base salary with 
effect from 1 January 2022

Annual Bonus

 – Maximum opportunity of 
200% and 150% of base 
salary for S.C. Harris and 
D. Yates respectively

 – 35% of any bonus 
earned is deferred 
into shares for three 
years, conditional on 
continued employment

 – To incentivise delivery 
of corporate strategy 
on an annual basis 
and reward delivery of 
superior performance

 – Based on three elements: 
headline operating profit 
(77%), headline operating 
cash flow (10%) and 
personal scorecard (13%)

 – The deferred 

 – S.C. Harris and D. 

portion of the bonus 
supports longer-term 
shareholder alignment

Yates received no annual 
bonuses for 2020 (see 
page 70)

 – Aligned with the company 
pension contributions of 
the wider workforce in the 
countries where the Executive 
Directors live

 – Maximum opportunity of 
200% and 150% of base 
salary for S.C. Harris and 
D. Yates respectively

 – Performance measures 
and weightings same as 
2020 award

 – Performance targets are 
considered commercially 
sensitive and will be fully 
disclosed in the 2021 Directors’ 
Remuneration Report

Bodycote 
Incentive Plan 
(BIP)

 – Annual grants at 

175% of base salary, 
subject to a three-year 
performance period

 – Beginning with the 
2019 grant, vested 
awards are subject to a 
two-year post-vesting 
holding period

 – To incentivise delivery 
of long-term strategic 
goals and shareholder 
value and aid retention of 
senior management

 – The award granted in 2018 
and vesting in 2021 was 
based on ROCE (50%) and 
headline EPS (50%)

 – The award did not vest as 
performance conditions 
were not met (see 
page 70)

 – Maximum opportunity of 
175% of salary for both 
Executive Directors

 – Performance measures 
and weightings same as 
2020 award

 – Performance targets are set 

out below

Shareholding 
requirement

 – Executive Directors are 
required to build up a 
holding of 200% of base 
salary over five years

 – To provide alignment 
of interest between 
Executive Directors 
and shareholders

 – Both Executive Directors 
exceed the minimum 
shareholding requirement 
(see page 72)

 – No changes proposed

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Governance

Financial statements

Additional information

Board report on remuneration continued

2021 BIP awards
The targets for the 2021 BIP awards are disclosed below. The Committee considers the targets to be appropriately stretching taking into 
account internal and external forecasts, the challenging market conditions and the level of uncertainty faced by the business over the next 
three years as a result of the pandemic. 

Maximum performance
Threshold performance

ROCE1 (50% of award)

Performance target
19.5%
13.0%

Vesting of element 
(% of maximum)
100%
0%

Headline EPS (50% of award)
Performance  
target
64.0p
42.0p

Vesting of element 
(% of maximum)
100%
0%

1  For the purposes of the BIP, pre-tax ROCE is calculated using actual exchange rates. Capital Employed includes the goodwill existing as at the start of the performance period (1 January 

2021) only.

If headline EPS at the end of the performance period is below 36.0p, then no awards will vest. Furthermore, the Committee has discretion to 
amend the vesting outcome where it considers that it is not a fair and accurate reflection of business performance. This includes consideration 
of any potential 'windfall gains' at the point of vesting.

Illustration of application of remuneration policy for 2021 
The remuneration package for the Executive Directors is designed to provide an appropriate balance between fixed and variable performance-
related components. The Committee is satisfied that the composition and structure of the remuneration package is appropriate, clearly 
supports the Group’s strategic ambitions and does not incentivise inappropriate risk taking. This is reviewed on an annual basis. The chart 
below sets out illustrations of the value of each Executive Director’s remuneration package, should they achieve minimum, on-target or 
maximum performance. 

Fixed pay1 

Annual Bonus 

BIP 

£4,000,000

£3,500,000

£3,000,000

£2,500,000

£2,000,000

£1,500,000

£3,612,825

44%

£3,079,776

35%

£1,915,032

£2,282,755

48%

39%

34%

£1,295,158

38%

£2,059,368

26%

35%

£1,000,000

£795,280

£500,000

100%

39%

26%

22%

28%

29%

£549,207

33%

28%

100%

43%

29%

24%

£0

Minimum

On-target

Maximum

Maximum
with 50%
share price
increase

Minimum

On-target

Maximum

Maximum
with 50%
share price
increase

Group Chief Executive – Stephen Harris

Chief Financial Officer – Dominique Yates

For the purposes of the above analysis, the following methodology has been used:

Minimum performance
On-target performance

Maximum performance

 – Fixed remuneration only
 – Fixed remuneration

 – 60% of maximum annual bonus is earned

 – 50% of maximum BIP vests
 – Fixed remuneration

 – 100% of maximum annual bonus is earned

Maximum performance + 50% share price growth

 – 100% of maximum BIP vests
 – As per the maximum performance illustration, but also assumes for the purposes 

of the BIP that share price increases by 50% over the vesting period

1  Fixed remuneration comprises base salary as at 1 January 2021, benefits received in 2020 and pension opportunity applying from 1 January 2021.

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Governance

Financial statements

Additional information

Annual Report on remuneration
This section provides details of remuneration outcomes for Directors who served during the financial year ended 31 December 2020. 
This section of the report is audited and subject to an advisory vote by shareholders at the 2021 Annual General Meeting.

Auditable section
Total single figure table

Executive Directors
S.C. Harris

D. Yates

Non-Executive Directors
A. C. Quinn

P. Larmon

E. Lindqvist

I.B. Duncan

L. Chahbazi

K. Boyd5

Fixed pay

Variable pay

Financial 
year

Salary/
fees
(£000)

Pension
(£000)

Taxable 
benefits1,6
(£000)

Subtotal
(£000)

Annual 
bonus
(£000)

BIP
(£000)

Subtotal
(£000)

Total
(£000) 

2020
2019
2020
2019

2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019

597
558
412
403

239
232
69
65
69
67
79
77
59
58
20
–

146
140
101
101

–
–
–
–
–
–
–
–
–
–
–
–

40
42
28
27

0
1
0
1
0
3
0
1
0
1
0
–

783
740
541
531

239
233
69
66
69
70
79
78
59
59
20
–

–
563
–
300

–2
5593,4
–2
4153,4

–
1,112
–
715

–
–
–
–
–
–
–
–
–
–
–
–

–
–
–
–
–
–
–
–
–
–
–
–

–
–
–
–
–
–
–
–
–
–
–
–

783
1,862
541
1,246

239
233
69
66
69
70
79
78
59
59
20
–

Notes accompanying the total single figure table

1  Taxable benefits consist of company car (or allowance), family level private medical insurance, life assurance cover and sick pay. Certain other expenses incurred in pursuit of bona fide 
business activities are, under UK tax regulations, treated as a taxable benefit in kind, and the Directors have received grossed-up compensation for this in order to leave him/her in a 
neutral position.

2  The 2020 figures relate to BIP awards granted on 12 April 2018 with a performance period ended on 31 December 2020. Based on performance against the targets the awards lapsed in full. 

3  This included dividend equivalents equal to £92,469 for S.C. Harris and £68,721 for D. Yates. A share price of £8.08 calculated as the three months’ average from 1 October to 31 December 

2019 was used to estimate the value of the awards in the 2019 Annual Report. This has now been updated with the share price of £5.29 at the close of markets on the vesting date of 
16 March 2020.

4  BIP awards granted on 18 May 2017 vested on 16 March 2020. The share price has decreased from £7.605 to £5.29 between the grant date and vesting date. Therefore, none of the value 

reported in the single figure table is attributable to share price growth between the grant date and vesting date. 

5  K. Boyd was appointed to the Board on 1 September 2020.

6  Non-Executive Directors received benefits in the year of less than £500.

Salary
The base salaries of the Executive Directors are reviewed in January every year. The Group Chief Executive and Chief Financial Officer 
received salary increases in line with the average increases awarded to the Czech Republic and Swiss wider workforces respectively. This is 
to reflect pay practices and salary inflation in the countries where the Executive Directors work and live. The table below sets out the base 
salary figures for 2021 along with comparative figures for 2020.

Executive Director
S.C. Harris
D. Yates

Pension

Salary from 
1 January 2020
£597,254
£412,014

Salary from 
1 January 2021
£609,199
£420,254

Salary  
increase
2.0%
2.0%

S.C. Harris and D. Yates received a salary supplement in lieu of pension at a rate of 24.5% of base salary during 2020. 

Salary supplements in lieu of pension contributions will be reduced to 23.5% of base salary by 1 January 2022. This is so that they are aligned 
with the company pension contributions of the wider workforce in the country that the Executive Directors work and live.

Taxable benefits
The Group provides other cash benefits and benefits in kind to Executive Directors as well as sick pay and life insurance. These include the 
provision of company car (or allowance) and family level private medical insurance.

Executive Director
S.C. Harris
D. Yates

Car/car allowance
13,600
12,000

Fuel
2,400
1,200

Healthcare
23,873
14,892

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Additional information

Board report on remuneration continued

Incentive outcomes for 2020 
Annual bonus

At the start of the year a maximum salary opportunity was available for awards to be granted to the Group Chief Executive and Chief Financial 
Officer equal to 200% and 150% of base salary respectively. The annual bonus was split 77% in respect of headline operating profit, 10% in 
respect of headline operating cash flow and 13% on personal strategic objectives. Given the impact of the COVID-19 pandemic on financial 
performance and the experience of employees and shareholders, the Committee, in consultation with the Executive Directors, cancelled 
the bonus for 2020. This decision was made in May 2020. For completeness, the Group achieved headline operating profit of £75.3m and 
headline operating cash flow of £130.2m for 2020, which fell short of the threshold targets set at the start of the year prior to the bonus 
being cancelled. 

Bodycote Incentive Plan (BIP) 
BIP awards granted on 12 April 2018 had a three-year performance period ended 31 December 2020, with 50% of the award subject to ROCE 
targets and 50% subject to headline EPS targets. Furthermore, if headline EPS at the end of the performance period was below 42.5p, then 
no awards would vest. 

The threshold targets were not achieved and the awards therefore lapsed in full. The Committee concluded that the vesting outcome was 
appropriate given the pandemic’s impact on underlying financial performance and the experience of key stakeholders, and no discretion 
was exercised. 

The threshold and maximum targets along with the vesting schedule are set out in the table below.

Maximum performance
Threshold performance
Performance achieved

ROCE1

Headline EPS

Performance target 
(pre IFRS16)
23.0%
17.0%
10.9%

Vesting of element  
(% of max)
100%
0%
0%

Performance  
target
64.0p
50.0p
27.8p

Vesting of element 
(% of max)
100%
0%
0%

1  For the purposes of the BIP, pre-tax ROCE is calculated using actual exchange rates. Capital Employed includes the goodwill existing as at the start of the performance period (1 January 

2018) only.

S.C. Harris
D. Yates

Grant date

12 Apr 2018
12 Apr 2018

Number of shares 
granted

96,911
69,924

End of performance period

% award vesting

31 Dec 2020
31 Dec 2020

0%
0%

BIP awards granted during the financial year
Awards consisting of conditional shares were granted to both Executive Directors, equivalent in value to 175% of their base salaries on 
23 March 2020, and will vest after three years in March 2023. The performance period will end on 31 December 2022. Awards are subject 
to continued employment and the achievement of post-IFRS 16 ROCE and headline EPS growth performance targets, as summarised in 
the table below. The Committee considered the targets to be appropriately stretching taking into account internal and external forecasts 
at the time, the challenging market conditions and the level of uncertainty faced by the business over the next three years as a result of 
the pandemic.

Maximum performance
Threshold performance

ROCE1

Headline EPS

Performance target
19.5%
14.0%

Vesting of element  
(% of max)
100%
0%

Performance  
target
62.0p
44.0p

Vesting of element 
(% of max)
100%
0%

1  For the purposes of the BIP, pre-tax ROCE is calculated using actual exchange rates. Capital Employed includes the goodwill existing as at the start of the performance period (1 January 

2020) only.

If headline EPS at the end of the performance period is below 37.4p, then no awards will vest. Dividend equivalents are payable in respect of 
those shares that vest. Shares that vest are subject to a two year post-vesting holding period. 

The number of awards that were granted to the Executive Directors during the year is set out below.

S.C. Harris
D. Yates

Grant date
23 Mar 2020
23 Mar 2020

Number of shares 
granted
183,611
132,483

Market price at grant 
date1
£5.32
£5.32

Face value at grant 
date
£976,810
£704,809

1  The three day average share price following the announcement of results for 2019 (12, 13 and 16 March 2020).

The Committee has discretion to amend the vesting outcome where it considers that it is not a fair and accurate reflection of business 
performance. This includes consideration of any potential 'windfall gains' at the point of vesting. 

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Additional information

Chair and Non-Executive Directors’ fees 
Chair of the Board and other Non-Executive Directors fees were as follows:

A.C. Quinn

P. Larmon

E. Lindqvist

I.B. Duncan

L. Chahbazi

K. Boyd2

Roles
 – Non-Executive Chair

 – Chair of Nomination Committee

 – Member of Nomination Committee
 – Non-Executive Director

 – Chair of Employee Engagement Groups

Fee for  
2019
£231,750

Fee for  
2020
£238,703

% increase in 
NED role fees
3.0

£67,1371

£69,151

 – Member of Audit, Remuneration and Nomination Committees
 – Non-Executive Director

£67,137

£69,151

 – Chair of Remuneration Committee

 – Member of Audit, Remuneration and Nomination Committees
 – Non-Executive Director

£76,647

£78,946

 – Chair of Audit Committee

 – Member of Audit, Remuneration and Nomination Committees

 – Senior Independent Director
 – Non-Executive Director

 – Member of Audit, Remuneration and Nomination Committees
 – Non-Executive Director

 – Member of Audit, Remuneration and Nomination Committees

£57,627

£59,356

–

£59,356

3.0

3.0

3.0

3.0

–

1  P. Larmon is chairing the Employee Engagement Groups and his fee was increased as of 1 April 2019 to reflect the additional time commitment, but the £67,137 shown is the annual 

fee which was not paid for the full 12 months.

2  K. Boyd was appointed to the Board on 1 September 2020, but the £59,356 shown is the annual fee which was not paid for the full 12 months.

Non-Executive Director fees were increased for 2020 based on market benchmarking against Non-Executive Director fees in the FTSE 250 
and other companies of similar size and complexity in line with the Policy approved at the 2019 AGM.

At 31 December 2020 the aggregate annual fee for all Non-Executive Directors, including the Chair, was £574,663, which is below the 
maximum aggregate fee allowed by the Company’s Articles of Association of £1,000,000 p.a.

Board changes in 2020
Payments for loss of office
No payments for loss of office were made during the year.

Payments to past Directors
No payments to past Directors were made during the year.

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Additional information

Board report on remuneration continued

Directors’ shareholdings
The Board operates a shareholding retention policy under which Executive Directors and other senior executives are expected, within five 
years of appointment, to build up a shareholding in the Company. For the purposes of this requirement, only beneficially-owned shares and 
the net of tax value of deferred shares under the annual bonus (as they are not subject to further performance conditions) will be counted.

The shareholding requirement for the Executive Directors is 200% of salary.

The interests in ordinary shares of Directors and their connected persons as at 31 December 2020, including any interests awarded under the 
annual bonus or BIP, are presented below along with whether Executive Directors have met the shareholding guidelines. Share awards under 
the annual bonus and the BIP are conditional on continued employment until vesting.

Executive Directors
S.C. Harris (200% of salary min holding requirement)
D. Yates (200% of salary min holding requirement)
Non-Executive Directors
A.C. Quinn
P. Larmon
E. Lindqvist
I.B. Duncan
L. Chahbazi
K. Boyd

1  Figures relate to deferred shares granted in 2018, 2019 and 2020. 

Counted towards the  
shareholding requirement

Beneficially 
owned

Deferred shares 
granted  
under the  
annual bonus1

Outstanding interests (not counted 
towards the shareholding requirement)
Shares  
subject to  
performance  
conditions BIP2

Shareholding 
requirement  
met as at  
31 December 2020

384,870
299,981

20,000
5,000
12,200
–
–
3,000

106,168
49,444

395,754
285,551

–
–
–
–
–
–

–
–
–
–
–
–

Yes
Yes

n/a
n/a
n/a
n/a
n/a
n/a

2  Figures relate to unvested awards granted under the BIP in 2018, 2019 and 2020. The BIP awards granted on 12 April 2018 lapsed in full in March 2021.

As at 12 March 2021, the Company has not been advised of any changes to the interests of Directors and their connected persons as set out 
in the above table.

Summary of outstanding share awards, including share awards granted during the year – Executive Directors
The interests of the Executive Directors in the Company’s share plans as at 31 December 2020 are as follows. 

BIP

Deferred bonus
shares

S.C. Harris
D. Yates
S.C. Harris
D. Yates

Interests as at  
1 January 2020
323,712
235,984
69,139
29,716

Granted in 
year
183,611
132,483
37,029
19,728

Vested  
in year
94,164
69,981
–
–

Lapsed  
in year
17,405
12,935
–
–

Interests as at 
31 December 
20201
395,754
285,551
106,168
49,444

1  The BIP awards granted on 12 April 2018 lapsed in full in March 2021. 

End of auditable section

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Additional information

Fees retained for external Non-Executive Directorships
To broaden the experience of Executive Directors, the position of Non-Executive Director may be held in other companies, provided that 
permission is sought in advance. Any external appointment must not conflict with the Directors’ duties and commitments to Bodycote plc. 
S.C. Harris has held the position of Non-Executive Director of Mondi plc since 1 March 2011 and in accordance with Group policy he retained 
fees for the year of £91,050.

Comparison of overall performance and pay
The chart below shows the value over the last 10 financial years of £100 invested in Bodycote plc compared with that of £100 invested in the 
FTSE All Share Industrial index. The Committee has chosen this index as it is a broad market index of which Bodycote plc is a constituent and 
reflects the wider sector in which the Group operates. The points plotted represent the values at each financial year end.

Historical TSR Performance
Growth in the value of a hypothetical £100 holding over ten years 
FTSE All Share Industrial Index comparison based on spot values

£500

£450

£400

£350

£300

£250

£200

£150

£100

£50

£0

Dec 10

Dec 11 Dec 12 Dec 13 Dec 14

Dec 15 Dec 16

Dec 17 Dec 18 Dec 19

Dec 20

Bodycote

FTSE All Share 
Industrial Index

The table below shows how total remuneration for the Group Chief Executive, S.C. Harris, developed over the last 10 years.

Single figure of remuneration (£000)
Annual bonus (% of max)
Long-term incentive (% of max)

2011
3,252
95%

2012
3,840
73%
100% 100%

2013
3,089
46%
99%

2014
1,803
73%
44%

2015
771
20%
0%

2016
875
19%
0%

2017
2,280
98%
48%

2018
2,728
68%
89%

2019
1,862
50%
84%

2020
783
0%
0%

Percentage change in remuneration
The table below sets out the annual percentage change in remuneration from 2019 to 2020 for each of the Directors compared to that for an 
average employee.

Salary/fees

Benefits4

Annual bonus3

2019 to 2020

Executive Director
S.C. Harris
D. Yates
Non-Executive Directors
A.C. Quinn
P. Larmon
E. Lindqvist
I.B. Duncan
L. Chahbazi
K. Boyd1
Average employee2

7.0%
2.3%

3.0%
3.0%
3.0%
3.0%
3.0%
n/a
4.1%

2.8%
0.8%

-70.6%
-83.2%
-93.3%
-61.5%
-70.6%
n/a
2.4%

(100%)
(100%)

–
–
–
–
–
–
(100%)

1  K. Boyd was appointed to the Board on 1 September 2020.

2  The annual percentage change of the average remuneration of the listed parent entity employees (excluding Directors), calculated on a full-time equivalent basis.

3  No bonuses were paid to Executive Directors in respect of 2020.

4  Percentage change in Benefits is calculated on unrounded figures. Non-Executive Directors received benefits in the year of less than £500. Hence not showing 100% reductions from 2019.

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Board report on remuneration continued

Pay ratio of Group Chief Executive to UK average employee
The table below sets out the Group Chief Executive’s remuneration as a ratio against the full-time equivalent remuneration of the 25th, 50th 
(median) and 75th percentile UK employees.

Year
2020
20191

Method
Option A
Option A

25th percentile  
pay ratio
28:1
70:1

Median  
pay ratio
21:1
55:1

75th percentile  
pay ratio
15:1
40:1

1  The 2019 CEO pay ratio figures disclosed in the 2019 Annual Report on Remuneration were based on salary, taxable benefits and pension only as Group annual bonus information was not 

available at the time. The 2019 CEO pay ratio figures have been updated so that they are based on single total single figure remuneration (i.e. salary, taxable benefits, pension, annual bonus 
outcome and BIP outcome).

Option A methodology was selected on the basis that it is a robust approach and is preferred by shareholders and proxy voting agencies. 
The calculations for the representative employees were performed as at the final day of the relevant financial year.

A substantial proportion of the Group Chief Executive’s total remuneration is performance related and delivered in shares. The ratios will 
therefore depend significantly on the Group Chief Executive’s annual bonus and BIP outcomes, and may fluctuate year-to-year. 

2020 pay ratios have significantly decreased from 2019, largely due to a 58% reduction in the Group Chief Executives total remuneration. 
The Group Chief Executive's bonus and BIP 2020 remuneration was £nil (2019: £1.1m). In 2019 the Group Chief Executive's bonus and BIP 
remuneration equated to 60% of total remuneration.

Our broad remuneration policy reflects the diversity of cultures, legislative environments and employment markets of our geographical spread. 
However, in line with the UK reporting regulations we have reported solely on the UK employee population. The Board believes that the 
median pay ratio is consistent with the pay, reward and progression policies for the UK employee population.

Total pay and benefits used to calculate the ratios
The table below sets out the UK employee percentile pay and benefits used to determine the above pay ratios and the salary component for 
each figure.

2020
Total pay and benefits
Salary component
2019
Total pay and benefits
Salary component

Group Chief 
Executive
(£)

783,4541
597,254

1,861,5011
558,181

25th percentile2,3
(£)

Median2,3
(£)

75th percentile2,3
(£)

27,728
26,150

26,512
25,248

36,895
34,859

33,685
32,166

51,090
47,373

46,206
42,643

1  The Group Chief Executive remuneration is the total single figure remuneration for the relevant financial year.

2  The UK employee percentile total pay and benefits has been calculated based on the amount paid or receivable for the relevant financial year. The calculations are on the same basis as 

required for the Group Chief Executive’s remuneration for single figure purposes. For pension related benefits, employer pension costs have been estimated using the employer contribution 
rates applicable to the member’s pension scheme. No other estimates or adjustments have been used in the calculations and no remuneration components have been omitted.

3  For employees employed on a part-time basis, their remuneration has been annualised to reflect the full-time equivalent.

Relative importance of pay spend
The table below sets out the total expenditure in relation to staff and employee costs and distributions to shareholders in 2019 and 2020.

Staff and employee costs
Distribution to shareholders

2020 (£m)
235.1
25.1

2019 (£m)
280.6
74.7

% change
-16.2%
-66.4%

Service contracts and letter of appointment
Executive Directors’ service contracts are terminable by either side on 12 months’ notice. All Directors’ service contracts and letters of 
appointment are available for inspection at the Company’s registered office. The dates of the Executive Directors’ service contracts are set 
out below.

S.C. Harris
D. Yates

Date of service contract
6 October 2008
1 November 2016

All Non-Executive Directors (including the Chair) are engaged for an initial period of three years which thereafter may be extended by a further 
three years and then on an annual basis. Non-Executive Directors (including the Chair) are subject to re-election at each Annual General 
Meeting. The appointment of Non-Executive Directors (including the Chair) may be terminated by either side on six months’ notice. The dates 
of each Non-Executive Director’s initial appointment are set out below.

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A.C. Quinn
P. Larmon
E. Lindqvist
I.B. Duncan
L. Chahbazi
K. Boyd

Date of initial appointment
1 January 2018
13 September 2016
1 June 2012
17 November 2014
1 January 2018
1 September 2020

Expiry of current term
AGM 2023
AGM 2022
AGM 2022
AGM 2022
AGM 2023
31 August 2023

Committee membership
During 2020 the Committee was chaired by E. Lindqvist. The Committee also comprised I.B. Duncan, P. Larmon, L. Chahbazi and K. Boyd as 
of 1 September 2020.

The Committee’s full terms of reference are available on the Group’s website. No Committee members have any personal financial interest 
(other than as a shareholder), conflict of interest, cross-directorships or day-to-day involvement in the running of the business. 

Committee activities
During 2020 the Committee met five times to consider, amongst other matters:

Theme
Best practice

Agenda items
 – Consideration of and responding to feedback from shareholders following the 2020 AGM

Executive Directors’  
and senior executives' 
remuneration

Reporting

 – Update on market practice and corporate governance
 – Base salary increases

 – Pension opportunities for Executive Directors

 – Granting annual bonus and BIP awards, including the setting of targets

 – Assessment of annual bonus and BIP outcomes
 – Consideration and approval of the Directors’ Remuneration Report

Advisers to the Committee
The Committee appointed Deloitte LLP as Committee advisers as of 1 January 2020, following a competitive tender process. Deloitte LLP is 
a founder member of the Remuneration Consultants Group and as such voluntarily operates under its Code of Conduct in relation to executive 
remuneration in the UK. 

The Committee reviews the objectivity and independence of the advice it received from its remuneration consultants at a private meeting 
each year. The Committee is satisfied that the advice provided by Deloitte LLP on executive remuneration is objective and independent, and 
that no conflict of interest arises as a result of these services. 

The fees paid to Deloitte LLP for their services to the Committee during the year, based on time and expenses, amounted to £56,580. 
Deloitte LLP also provided business tax services and financial advisory services to the Company during the year.

The Committee also received assistance from the Group Chief Executive and Group Company Secretary, although they do not participate 
in discussions relating to the setting of their own remuneration. The Committee in particular consulted with the Group Chief Executive and 
received recommendations from him in respect of his direct reports.

Statement of shareholder voting

The table below sets out the voting results in respect of the remuneration resolution to approve the Annual Report on Remuneration at the 
2020 Annual General Meeting and to approve the Remuneration Policy at the 2019 Annual General Meeting.

Votes cast
For
Against
Number of abstentions

E. Lindqvist
Chair of the Remuneration Committee 
12 March 2021

2020 Annual Report  
on Remuneration
(% votes)
85%
74%
26%
14,812

2019 Directors’  
Remuneration Policy
(% votes)
81%
97%
3%
613,242

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Additional information

Directors’ responsibilities statement

Statement of Directors’ responsibilities in respect of the financial statements
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the 
Group financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 
2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union 
and Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting 
Standards, comprising FRS 101 'Reduced Disclosure Framework', and applicable law).

Under company law, Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the 
state of affairs of the Group and Company and of the profit or loss of the Group for that period. In preparing the financial statements, the 
Directors are required to:

 – select suitable accounting policies and then apply them consistently;

 – state whether applicable international accounting standards in conformity with the requirements of the Companies Act 2006 and international 
financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union have been followed for 
the Group financial statements and United Kingdom Accounting Standards, comprising FRS 101 have been followed for the Company financial 
statements, subject to any material departures disclosed and explained in the financial statements;

 – make judgements and accounting estimates that are reasonable and prudent; and

 – prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue 

in business.

The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the 
prevention and detection of fraud and other irregularities.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and Company’s 
transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure 
that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006. 

The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing 
the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors’ confirmations
The Directors consider that the Annual Report and accounts, taken as a whole, is fair, balanced and understandable and provides the 
information necessary for shareholders to assess the Group’s and Company’s position and performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the governance report, confirm that, to the best of their knowledge:

 – the Group financial statements, which have been prepared in accordance with international accounting standards in conformity with the 

requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 
as it applies in the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Group;

 – the Company financial statements, which have been prepared in accordance with United Kingdom Accounting Standards, comprising FRS 101, 

give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

 – the Strategic Report includes a fair review of the development and performance of the business and the position of the Group and Company, 

together with a description of the principal risks and uncertainties that it faces.

In the case of each Director in office at the date the Directors’ report is approved:

 – so far as the Director is aware, there is no relevant audit information of which the Group’s and Company’s auditors are unaware; and

 – they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information 

and to establish that the Group’s and Company’s auditors are aware of that information.

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Additional information

Independent auditors’ report to the members 
of Bodycote plc

Report on the audit of the financial statements
Opinion
In our opinion:

–  Bodycote plc’s group financial statements and company financial statements (the “financial statements”) give a true and fair view of the 

state of the group’s and of the company’s affairs as at 31 December 2020 and of the group’s profit and the group’s cash flows for the year 
then ended;

–  the group financial statements have been properly prepared in accordance with international accounting standards in conformity with the 

requirements of the Companies Act 2006;

–  the company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice 

(United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”, and applicable law); and

–  the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements, included within the Annual Report, which comprise: the Group consolidated balance sheet 
and Company statement of financial position as at 31 December 2020; the Group consolidated income statement and Group consolidated 
statement of comprehensive income, the Group consolidated cash flow statement, and the Group consolidated and Company statements 
of changes in equity for the year then ended; the Group and Company accounting policies; and the notes to the financial statements.

Our opinion is consistent with our reporting to the Audit Committee. 

Separate opinion in relation to international financial reporting standards adopted pursuant to 
Regulation (EC) No 1606/2002 as it applies in the European Union
As explained in the Group accounting policies to the group financial statements, the group, in addition to applying international accounting 
standards in conformity with the requirements of the Companies Act 2006, has also applied international financial reporting standards 
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

In our opinion, the group financial statements have been properly prepared in accordance with international financial reporting standards 
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities 
under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe 
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements 
in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical 
responsibilities in accordance with these requirements.

To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided 
to the group.

Other than those disclosed in note 3 to the group financial statements, we have provided no non-audit services to the group in the period 
under audit.

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Additional information

Independent auditors’ report continued

Our audit approach
Context
Bodycote plc is a global business operating in the thermal processing sector. The business operates in a number of countries around the 
world and provides services primarily to the automotive, general industrial, aerospace, defence and energy markets. During 2020, the 
business has been impacted by COVID-19, resulting in a slow down in many of its key markets. The Group has undertaken a large-scale 
restructuring programme, resulting in a significant level of restructuring costs being incurred during the year, which have been recorded 
as exceptional items.

Overview
Audit scope 
–  The Group financial statements are a consolidation of a number of reporting units (each of which were deemed to be components) representing 
the Group’s trading entities around the world, its centralised functions and consolidation adjustment reporting units. The reporting units vary 
in size, and our approach to scoping considers those entities which are of most significance to the Group as a whole, in particular in North 
America and Europe. We also requested component teams to perform full scope audit procedures over additional components to ensure we 
achieved an appropriate level of audit coverage. 

Key audit matters 
–  Impairment assessment of goodwill and other intangible assets (group and parent)

–  Restructuring costs (group)

–  Acquisition of Ellison Surface Technologies (group)

–  Uncertain tax positions (group)

–  Impact of COVID-19 (group and parent)

Materiality 
–  Overall group materiality: £5,200,000 (2019: £6,200,000) based on approximately 5% of the 3-year average of profit before 

tax and exceptionals (2019: approximately 5% of annual profit before tax).

–  Overall company materiality: £5,500,000 (2019: £5,100,000) based on approximately 1% of total assets.

–  Performance materiality: £3,900,000 (group) and £4,125,000 (company).

The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.

Capability of the audit in detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our 
responsibilities, outlined in the Auditors’ responsibilities for the audit of the financial statements section, to detect material misstatements 
in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is 
detailed below.

Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations 
related to breaches of environmental regulations and health and safety regulations, and we considered the extent to which non-compliance 
might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the 
preparation of the financial statements such as the Companies Act 2006 and the Listing Rules. We evaluated management’s incentives 
and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls) and determined that the 
principal risks were related to posting inappropriate journal entries and management bias in accounting estimates and judgements. The group 
engagement team shared this risk assessment with the component auditors so that they could include appropriate audit procedures in 
response to such risks in their work. Audit procedures performed by the group engagement team and/or component auditors included:

–  Discussions with management, internal audit and the Group’s internal legal counsel, including consideration of potential instances of non-

compliance with laws and regulation and fraud;

–  Assessment of matters reported through the Group’s whistleblowing helpline and the results of management’s investigation of such matters;

–  Substantive testing of journal entries which met a defined risk criteria, focusing on where and how fraud could arise; and.

–  Challenging assumptions and judgements made by management in its accounting estimates or judgements, in particular in relation to 

uncertain tax positions, restructuring provisions and its impairment assessment of goodwill.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance 
with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not 
detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate 
concealment by, for example, forgery or intentional misrepresentations, or through collusion.

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Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial 
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) 
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; 
and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, 
were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide 
a separate opinion on these matters.

This is not a complete list of all risks identified by our audit.

Impact of COVID-19, Restructuring costs and Acquisition of Ellison Surface Technologies are new key audit matters this year. Adoption of IFRS 
16, “Leases”, which was a key audit matter last year, is no longer included because of the prior year being the year of adoption of this standard 
and, therefore, there being a lower level of associated audit risk in 2020. Otherwise, the key audit matters below are consistent with last year.

Key audit matter

How our audit addressed the key audit matter

Impairment assessment of goodwill and other intangible 
assets (group and parent)

The Group has goodwill of £215.5 million as at 31 December 2020 
(2019: £169.8 million). For the CGUs to which goodwill relates 
(which require an annual impairment test), the determination of 
the recoverable amount, being the higher of value in use (VIU) and 
fair value less costs of disposal (FVLCD), requires judgement and 
estimation by management. This is because the determination 
of a recoverable amount includes management’s consideration 
of key internal inputs and external market conditions such as 
future market and pricing trends in those industries in which the 
Group’s customers operate, which impacts future cash flows, 
and the determination of the most appropriate discount rate. 
During 2020, COVID-19 had a significant impact on the business, 
and there is uncertainty around the rate of recovery for the Group 
in the coming years. Therefore, we considered the impairment 
assessment of goodwill to be a key audit matter.

Specifically, we identified the valuation of the North America ADE 
and North America AGI goodwill balances as significant risks due 
to their lower level of headroom relative to the carrying value of 
the CGUs and the material goodwill balances held in those CGUs.

In addition, during 2020, a £6.2m impairment was recorded 
against the Group’s ERP system and other software assets, which 
will no longer be used in the business. The determination of the 
impairment charge was a judgement, given that elements of the 
ERP remain in development.

Refer to notes 11 and 12 of the Group financial statements, note 3 
of the Company financial statements and the Audit Committee’s 
views set out on page 60 of the Annual Report.

We obtained the Group’s impairment analyses and tested the integrity 
of the calculation. We corroborated the 2021 forecast to the Board 
approved budget, and assessed the assumptions made by management 
in the budgeting process. We also understood management’s process 
for forecasting longer term cash flows, in particular focusing on the 
assumptions used through to 2025 and the expected recovery in the 
Group’s revenues.

We agreed the underlying carrying values of the CGUs to audited 
financial information.

We challenged management’s key assumptions for profit and cash 
flow budgets by comparing them with third party forecast market data, 
where available, and considering the allocation of central costs to CGUs. 
We also performed look back testing to understand how accurate 
management had been in its forecasting historically, taking into account 
the unforeseen impact of COVID-19.

We used our valuations experts to assess the reasonableness of the 
discount rates used by management, by independently calculating 
a range for the weighted average cost of capital (“WACC”) and 
considered if the rate used by management was within a supportable 
range. Our valuations experts also compared management’s long-term 
growth rate with economic forecasts. We used this independently 
calculated WACC and our estimate of the long-term growth rate, 
alongside our view of an appropriate allocation of corporate overheads 
to each CGU and certain other assumptions, to determine the impact of 
these inputs on the recoverable amount.

We obtained management’s sensitivity analyses, which showed the 
impact of its view of reasonably possible changes to key assumptions 
and performed our own sensitivity analyses.

On the software assets, we tested the costs capitalised in the year 
and considered management’s plans for its future use of these ERP 
solutions. We understood the rationale applied by management in 
determining the associated impairment charge and tested the balance 
written-off. We satisfied ourselves that, based on the non-recurring 
nature of the charge, the classification of this charge as exceptional 
was appropriate. 

We also assessed the appropriateness of the related disclosures in 
notes 11 and 12 of the Group financial statements and note 3 of the 
Company financial statements.

Based on the procedures performed, we noted no material issues 
from our work.

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Independent auditors’ report continued

Key audit matter

Restructuring costs (group)

The Group has recorded significant exceptional restructuring 
costs of £52.2m during the year ended 31 December 2020, 
relating to programmes announced in 2020 in both the AGI 
and ADE divisions. These costs are split between impairment 
of £16.5m, and cash costs of £35.7m, including severance and 
site closure costs. Provisions of £24.1m are held at the year end 
date in relation to these items.

There is judgement involved in determining both the nature and 
quantum of amounts to impair under IAS 36, “Impairment of 
Assets”, and to provide under IAS 37, “Provisions, Contingent 
Liabilities and Contingent Assets”, given the extensive nature 
of the restructuring programme, and what can be classified in 
exceptional items.

Refer to notes 6 and 23, and the Audit Committee’s views set 
out on page 60 of the Annual Report.

Acquisition of Ellison Surface Technologies (group)

The Group acquired Ellison Surface Technologies in April 2020 
for £130.0m. As part of the accounting for the transaction, 
material goodwill and other intangible assets have been 
recognised, namely customer relationships. The purchase 
price allocation remains provisional as at 31 December 2020. 
There is significant judgement in determining the value of 
these other intangible assets, and there were a number of 
assumptions used in management’s valuation calculations. 
For these reasons, we determined that the valuation of the 
other intangible assets recognised was a significant risk for our 
audit and a key audit matter.

Refer to note 25 and the Audit Committee’s views set out on 
page 61 of the Annual Report.

How our audit addressed the key audit matter

Our audit work at the Group level included an assessment of 
management’s accounting policies for provisions and exceptional items.

Audit procedures were performed to confirm the completeness of the 
provisions recognised by considering historical costs on similar site 
closures, in particular in determining the trigger point for recognising 
environmental restructuring provisions and the associated quantum 
of amounts recorded.

We tested severance costs paid and provided for, and agreed these 
to final settlements, where appropriate. We also validated that 
severance costs were underpinned by pre year-end communications 
to impacted employees.

We considered management’s impairment assessment for property, 
plant and equipment to be scrapped and satisfied ourselves that the 
assets did not appear to have future value in the business.

We agreed that, based on the material and non-recurring nature of 
these items, presentation as exceptional items was appropriate. 

Based on the procedures performed, we noted no material issues 
from our work.

We obtained the purchase price allocation performed by management. 
With the support of our valuation experts, we examined management’s 
methodology and the mathematical accuracy of its calculations and 
considered the useful economic lives of the identified intangible assets 
in the valuation model prepared by management.

For the intangible assets identified, we also tested other key 
assumptions, including assessing the cash flow projections that 
underpin management’s valuations by comparing future cash flows 
with historical experience and validating the reasons for the profile 
of projections. Supported by our valuation experts, we also assessed 
the anticipated synergies giving rise to goodwill. This evaluation 
included benchmarking growth and profitability ratios against 
industry data. We also performed sensitivity analysis over key 
assumptions, such as revenue growth and the discount rate used 
in management’s valuation.

In assessing the above factors, we challenged the completeness 
of intangible assets that were identified by management. 

Finally, we assessed the disclosure in respect of the transaction 
to determine whether it meets the requirements of IFRS 3, 
“Business Combinations”.

Based on the procedures performed, we noted no material issues 
from our work.

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Key audit matter

Uncertain tax positions (group)

The Group has operations in a number of geographical locations 
and as such is subject to multiple tax jurisdictions, giving rise to 
complexity in accounting for the Group’s taxation.

In particular, the interpretation of complex tax regulations and 
the unknown future outcome of any pending rulings by the 
tax authorities results in the need to provide against a number 
of uncertain tax positions. The Group undertakes financing 
activities between jurisdictions and non-financing cross 
border transactions, which require judgement to determine 
the appropriate tax charge and any associated provisions. 
These transactions result in the recognition of material 
provisions for tax, and for this reason, we considered uncertain 
tax positions to be a key audit matter.

Refer to notes 8, 21 and 31, and the Audit Committee’s views 
set out on page 61 of the Annual Report.

Impact of COVID-19 (group and parent)

COVID-19 had a significant impact on the Group in 2020, 
resulting in a material decline in revenues and profits. 
Consequently, we have considered the impact of COVID-19 
on the financial statements, including the accounting 
implications and associated disclosures. The following key areas 
were identified:

–  The Group’s going concern assessment (see the Group’s 
accounting policies and the Going Concern section of our 
report below);

–  Impairment assessment of goodwill (see key audit 

matter above);

–  The ability of both management and us to conduct inventory 

counts where local restrictions were in place;

–  Recoverability of trade receivables in the Group financial 

statements (see note 16 of the Group financial statements) 
and of investments in subsidiaries in the parent company 
financial statements (see note 6); and

–  Restructuring costs included in exceptional items related to 

the restructuring of the business (see key audit matter above).

COVID-19 also required us to perform a remote audit due to 
international travel restrictions.

How our audit addressed the key audit matter

Our audit work, which involved taxation audit specialists at the Group 
level, included the assessment of the Group’s uncertain tax positions. 

Our assessment included considering the current status of new and 
historical tax assessments and investigations to monitor developments 
in ongoing disputes, in addition to reviewing correspondence with tax 
authorities. We considered external tax advice received by the Group 
where relevant, to satisfy ourselves that the tax provisions had been 
appropriately recorded or adjusted to reflect the latest tax legislative 
developments. We also considered significant transactions to identify 
uncertain tax positions that may arise from those transactions.

In assessing the adequacy of the tax provisions, we considered factors 
such as possible penalties and interest that could be imposed by the 
local tax authorities. We also determined whether the tax provisions 
were recognised and measured in accordance with the relevant 
accounting standards.

Where provisions have not been established, including for material 
potential exposures like EU State Aid, we evaluated the basis for 
management’s judgements, including an assessment of the treatment 
of similar exposures at comparable companies. We evaluated third party 
advice obtained by the Group as we independently formed our view 
about the likelihood of these possible tax risks crystallising in future 
cash outflows.

We considered the appropriateness of the related disclosures in notes 
8, 21 and 31 to the financial statements.

Based on the procedures performed, we noted no material issues from 
our work.

We issued specific audit instructions to component teams, requesting 
additional risk assessments to be performed on the impact of 
COVID-19 locally, and directed component auditors to perform further 
procedures to address the additional areas that may be subject to 
significant estimates or judgements to ensure the appropriateness and 
completeness of our audit risk assessment and planned audit response. 
These areas included the impact of COVID-19 on accounting estimates 
such as expected credit losses and the ability for management, and 
ourselves, to conduct appropriate inventory count procedures.

We assessed our ability to execute the audit when operating under 
lockdown and the related international travel restrictions, in particular 
given the Group finance function is based in the Czech Republic. 
We implemented alternative communication and review protocols 
with management and with our component auditors. We also held a 
planning meeting ahead of the year-end audit, involving management, 
and agreed ways to facilitate a remote audit, including agreeing how we 
could ensure appropriate access to relevant audit documentation.

We assessed management’s disclosures in the Annual Report in 
relation to the impact of COVID-19, considering whether the disclosures 
were consistent with our underlying audit procedures both at the Group 
and at the component level. 

With the support of our component teams where necessary, we also 
evaluated management’s accounting estimates in light of COVID-19, 
including assessing the restructuring charges incurred in the year, as 
described in the above key audit matter on restructuring costs, and the 
recoverability of trade receivables. We also considered its impact on 
impairment as set out in the above key audit matter.

Our conclusions related to the audit of the going concern assessment 
are reported separately below.

Based on the procedures performed, we noted no material issues from 
our work.

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Independent auditors’ report continued

How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as 
a whole, taking into account the structure of the group and the company, the accounting processes and controls, and the industry in which 
they operate.

In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed at components by us, 
as the Group engagement team, or component auditors operating under our instruction.

We identified one component (2019: one) as financially significant in 2020 (as defined within ISAs (UK)). We obtained full scope audit 
reporting from a further seven components (2019: eight), where we concluded that the component engagement leader is a Key Audit 
Partner (as defined under ISAs (UK)), and an additional fourteen components where full scope audits were also performed. Together, 
these components were in twelve countries, representing the Group’s principal businesses, and accounted for 80% of the Group’s revenue 
(2019: 78%), 73% of consolidated absolute profit before tax and exceptionals (2019: 70%) and 73% of consolidated absolute profit before 
tax (2019: 70%). 

Specified procedures over a specific financial statement line item were performed at one further component (2019: one) and central 
testing was performed on selected items, such as goodwill, uncertain tax positions and the consolidation, primarily to ensure appropriate 
audit coverage.

The components included within our audit scope were determined based on the individual components’ contribution to the Group’s key 
financial statement line items (in particular revenue and profit before tax and exceptionals), and considerations relating to aggregation risk 
within the Group. Where work was performed by component auditors, we determined the level of involvement we needed to have in the 
audit work at those components to be able to conclude on whether sufficient appropriate audit evidence had been obtained as a basis for 
our opinion on the Group financial statements as a whole.

We issued formal written instructions to all component auditors setting out the audit work to be performed by each of them and maintained 
regular communication with them throughout the audit cycle. Due to COVID-19, all interactions with component auditors were virtual but, 
through the utilisation of technology, our interactions included attending certain component audit clearance meetings, as well as considering 
and assessing any matters reported. The Group engagement team also reviewed selected audit working papers for certain in-scope 
component teams, including those components where we concluded that the component engagement leader is a Key Audit Partner.

In addition, given the extent of testing performed by our Czech Republic team at the Group’s Prague Shared Services Centre, which supports 
the financial accounting for the majority of the Group’s European businesses, a working paper review was also conducted of this team’s work.

Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together 
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the 
individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate, on 
the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall  
materiality

How we 
determined it

Rationale for 
benchmark 
applied

Financial statements - group

Financial statements - company

£5,200,000 (2019: £6,200,000)

£5,500,000 (2019: £5,100,000).

Approximately 5% of the 3-year average of profit before tax 
and exceptionals (2019: approximately 5% of annual profit 
before tax).

Based on the benchmarks used in the Annual Report, profit 
before tax and exceptionals is the primary measure used by 
shareholders in assessing the performance of the Group. 
Exceptional items are excluded as the directors consider that 
these items do not reflect the underlying performance of the 
business. The impact of COVID-19 on the Group has resulted 
in a significant reduction in profits during the year, but the 
consolidated balance sheet remains of a similar size to the prior 
year. On that basis it is appropriate to use a 3-year average of 
profits (2019: annual profits), which is a generally accepted 
auditing benchmark.

Approximately 1% of total assets.

The company holds the Group’s investments in 
subsidiary companies. The strength of the balance 
sheet is the key measure of financial health that is 
important to shareholders as this determines the 
Company’s ability to pay dividends.

For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of 
materiality allocated across components was £375,000 to £2,800,000.

We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected 
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the 
nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. 
Our performance materiality was 75% of overall materiality, amounting to £3,900,000 for the group financial statements and £4,125,000 for 
the company financial statements.

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In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and 
aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £260,000 (group audit) 
(2019: £310,000) and £275,000 (company audit) (2019: £255,000) as well as misstatements below those amounts that, in our view, warranted 
reporting for qualitative reasons.

Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and the company’s ability to continue to adopt the going concern basis of 
accounting included:

–  Obtaining the directors’ assessment and understanding the assumptions used in the base case scenario and the severe but plausible scenario 

over the next twelve months;

–  Agreeing the budget for 2021 used in the base case scenario to the Board approved budget and testing the assumptions used in determining 

these cash flows;

–  For the period of the assessment not covered by the budget, we analysed the forecasts projected by management and considered these in 

the context of wider market data; and

–  We reperformed the stress-testing applied by management to ascertain the resilience of the Group to ongoing economic downturn, including 

against any potential future impacts of COVID-19, and what it would take to cause a liquidity shortfall or a covenant breach.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or 
collectively, may cast significant doubt on the group’s and the company’s ability to continue as a going concern for a period of at least twelve 
months from when the financial statements are authorised for issue.

In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation 
of the financial statements is appropriate.

However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group’s and the company’s 
ability to continue as a going concern.

In relation to the company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw 
attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt 
the going concern basis of accounting.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report 
thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information 
and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of 
assurance thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether 
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to 
be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to 
conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based 
on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that 
fact. We have nothing to report based on these responsibilities.

With respect to the Strategic report and the Directors’ report, we also considered whether the disclosures required by the UK Companies Act 
2006 have been included.

Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as 
described below.

Strategic report and the Directors’ report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and the Directors’ report 
for the year ended 31 December 2020 is consistent with the financial statements and has been prepared in accordance with applicable 
legal requirements.

In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we did 
not identify any material misstatements in the Strategic report and the Directors’ report.

Directors’ Remuneration
In our opinion, the part of the Board report on remuneration to be audited has been properly prepared in accordance with the Companies 
Act 2006.

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Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the corporate 
governance statement relating to the company’s compliance with the provisions of the UK Corporate Governance Code specified for our 
review. Our additional responsibilities with respect to the corporate governance statement as other information are described in the Reporting 
on other information section of this report.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance 
statement is materially consistent with the financial statements and our knowledge obtained during the audit, and we have nothing material 
to add or draw attention to in relation to:

–  The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;

–  The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an 

explanation of how these are being managed or mitigated;

–  The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of 

accounting in preparing them, and their identification of any material uncertainties to the group’s and company’s ability to continue to do 
so over a period of at least twelve months from the date of approval of the financial statements;

–  The directors’ explanation as to their assessment of the group’s and company’s prospects, the period this assessment covers and why 

the period is appropriate; and

–  The directors’ statement as to whether they have a reasonable expectation that the company will be able to continue in operation and meet its 
liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications 
or assumptions.

Our review of the directors’ statement regarding the longer-term viability of the group was substantially less in scope than an audit and only 
consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is in alignment 
with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the financial 
statements and our knowledge and understanding of the group and company and their environment obtained in the course of the audit.

In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate 
governance statement is materially consistent with the financial statements and our knowledge obtained during the audit:

–  The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the 

information necessary for the members to assess the group’s and company’s position, performance, business model and strategy;

–  The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and

–  The section of the Annual Report describing the work of the Audit Committee.

We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the company’s compliance 
with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review 
by the auditors.

Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements 
in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible 
for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material 
misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group’s and the company’s ability to continue as a going 
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors 
either intend to liquidate the group or the company or to cease operations, or have no realistic alternative but to do so.

Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, 
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, 
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. 
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected 
to influence the economic decisions of users taken on the basis of these financial statements.

Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. 
However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to 
target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw 
a conclusion about the population from which the sample is selected.

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.

Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 
16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other 
purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior 
consent in writing.

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Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:

–  we have not obtained all the information and explanations we require for our audit; or

–  adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not 

visited by us; or

–  certain disclosures of directors’ remuneration specified by law are not made; or

–  the company financial statements and the part of the Board report on remuneration to be audited are not in agreement with the accounting 

records and returns; or

–  a corporate governance statement has not been prepared by the company.

We have no exceptions to report arising from this responsibility.

Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 24 May 2019 to audit the financial statements 
for the year ended 31 December 2019 and subsequent financial periods. The period of total uninterrupted engagement is two years, covering 
the years ended 31 December 2019 to 31 December 2020.

Simon Morley (Senior Statutory Auditor) 
for and on behalf of PricewaterhouseCoopers LLP 
Chartered Accountants and Statutory Auditors 
London 
12 March 2021

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Consolidated income statement
For the year ended 31 December 2020

Revenue
Cost of sales and overheads
Net impairment gains/(losses) on financial assets
Operating profit prior to exceptional items
Exceptional items
Operating profit
Finance income
Finance costs
(Loss)/profit before taxation
Taxation credit/(charge)

Profit for the year

Attributable to:
Equity holders of the parent
Non-controlling interests

Earnings per share

Basic
Diluted

All activities have arisen from continuing operations.

Note
2

2,3
6
3

7

8

10

2020
£m
598.0
(535.0)
0.4 
63.4
(58.4)
5.0
0.2
(6.7)
(1.5)
2.3

0.8

0.4
 0.4 
0.8

Pence
0.2
0.2

Consolidated statement of comprehensive income
For the year ended 31 December 2020

Profit for the year

Items that will not be reclassified to profit or loss:
Actuarial gain/(loss) on defined benefit pension schemes
Tax on items that will not be reclassified
Total items that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit or loss:
Exchange losses on translation of overseas operations
Movements on hedges of net investments
Total items that may be reclassified subsequently to profit or loss
Other comprehensive income/(expense) for the year
Total comprehensive income for the year
Attributable to:
Equity holders of the parent
Non-controlling interests

Note

30
21

20

2020
£m
0.8

0.5 
(0.1)
0.4

(1.4)
1.1 
(0.3)
0.1
0.9

0.8
0.1
0.9

2019
£m
719.7
(590.5)
(0.6)
128.6
–
128.6
0.2
(4.9)
123.9
(29.9)

94.0

93.8 
0.2 
94.0

Pence
49.4 
49.2 

2019
£m
94.0

(2.0)
0.9 
(1.1)

(26.4)
–
(26.4)
(27.5)
66.5

66.4
0.1
66.5

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Financial statements

Additional information

Consolidated balance sheet
At 31 December 2020

Non-current assets

Goodwill
Other intangible assets
Property, plant and equipment
Right-of-use assets
Investment in associate
Deferred tax assets
Trade and other receivables

Current assets
Inventories
Current tax assets
Trade and other receivables
Cash and bank balances
Assets held for sale

Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Borrowings
Lease liabilities
Provisions

Net current (liabilities)/assets
Non-current liabilities
Lease liabilities
Retirement benefit obligations
Deferred tax liabilities
Provisions
Other payables

Total liabilities
Net assets
Equity
Share capital
Share premium account
Own shares
Other reserves
Translation reserves
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interests
Total equity

Note

11
12
13
14
26
21
16

15

16
17
18

22

19
14
23

14
30
21
23
22

24

2020
£m

215.5 
108.0 
522.6 
69.0 
4.1 
2.4 
2.1 
923.7

15.8 
20.7 
116.2 
30.7 
2.9 
186.3
1,110.0

170.9 
30.7 
53.2 
13.6 
26.0 
294.4
(108.1)

62.0 
16.2 
42.7 
11.0 
2.3 
134.2
428.6
681.4

33.1 
177.1 
(6.9)
132.6 
37.9 
306.7 
680.5
0.9
681.4

2019
£m

169.8 
42.6 
534.5 
73.3 
4.2 
6.1 
1.2 
831.7

14.8 
15.7 
142.9 
22.0 
− 
195.4
1,027.1 

127.4 
31.2 
1.1 
13.4 
4.0 
177.1
18.3

66.0 
17.9 
48.6 
9.5 
2.2 
144.2
321.3
705.8

33.1 
177.1 
(11.6)
136.7 
37.9 
331.8 
705.0
0.8
705.8

The financial statements of Bodycote plc, registered number 519057, were approved by the Board of Directors and authorised for issue on 
12 March 2021. 

They were signed on its behalf by:

S.C. Harris  

D. Yates

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Financial statements

Additional information

Consolidated cash flow statement
For the year ended 31 December 2020

Net cash from operating activities
Investing activities
Purchases of property, plant and equipment
Proceeds on disposal of property, plant and equipment and intangible assets
Purchases of other intangible assets
Acquisition of businesses, net of cash acquired
Interest received1
Net cash used in investing activities
Financing activities
Interest paid
Dividends paid
Principal elements of lease payments
Drawdown of bank loans
Repayments of bank loans
Own shares purchased
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of year

Note
27

25

9

27

2020
£m
139.1

(57.8)
1.9 
(2.1)
(66.7)
0.3 
(124.4)

(5.0)
(25.1)
(15.5)
101.9 
(62.1)
(0.5)
(6.3)
8.4
20.9
(0.1)
29.2

2019
£m
177.3

(77.7)
7.4 
(1.0)
(19.1)
0.2 
(90.2)

(4.7)
(74.9)
(14.4)
35.0 
(37.3)
(6.0)
(102.3)
(15.2)
36.2
(0.1)
20.9

1 

Interest received has been restated to present this as an investing activitiy cash flow item rather than a financing activity cash flow item.

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Consolidated statement of changes in equity
For the year ended 31 December 2020

1 January 2019
Profit for the year
Exchange differences on translation 
of overseas operations
Actuarial losses on defined benefit pension 
schemes net of deferred tax
Total comprehensive income for the year
Acquired in the year/settlement of share 
options
Share-based payments

Deferred tax on share-based 
payment transactions
Dividends
31 December 2019
Profit for the year
Exchange differences on translation 
of overseas operations
Movements on hedges of net investments
Actuarial gains on defined benefit pension 
schemes net of deferred tax
Total comprehensive income for the year
Acquired in the year/settlement of 
share options
Share-based payments

Share 
capital
£m
33.1
–

Share 
premium 
account
£m
177.1
–

Own  
shares
£m
(14.8)
–

Other 
reserves
£m
141.4
–

Translation
reserves
£m
64.2
–

Retained 
earnings
£m
317.6
93.8 

Equity  
attributable  
to equity  
holders of  
the parent
£m
718.6
93.8

Non- 
controlling 
interests
£m
0.7
0.2

Total  
equity
£m
719.3
94.0

–

–
–

–
–

–

–
–

–
–

–
–
33.1
–

–
–
177.1
–

–
–

–
–

–
–

–
–

–
–

–
–

–

–
–

3.2
–

–
–
(11.6)
–

–
–

–
–

–

–
–

(5.8)
1.1 

–
–
136.7
–

–
–

–
–

4.7 
–

–
(6.9)

(4.5)
0.4

–
132.6

(26.3)

–

(26.3)

(0.1)

(26.4)

–
(26.3)

–
–

–
–
37.9
–

(1.1)
1.1 

–
–

–

–
37.9

(1.1)
92.7

(3.4)
–

(0.4)
(74.7)
331.8
0.4

–
–

0.4
0.8

(0.8)
–

(25.1)
306.7

(1.1)
66.4

(6.0)
1.1

(0.4)
(74.7)
705.0
0.4

(1.1)
1.1 

0.4
0.8

(0.6)
0.4

(25.1)
680.5

–
0.1

–
–

–
–
0.8
0.4 

(1.1)
66.5

(6.0)
1.1

(0.4)
(74.7)
705.8
0.8

(0.3)
–

(1.4)
1.1 

–
0.1

–
–

–
0.9

0.4
0.9

(0.6)
0.4

(25.1)
681.4

Dividends
31 December 2020

–
33.1 

–
177.1

Included in other reserves is a capital redemption reserve of £129.8m (2019: £129.8m) and a share-based payments reserve of £2.0m 
(2019: £6.1m). The capital redemption reserve arose from B shares which were converted into deferred shares in 2008 and 2009, and as a 
result, £129.8m was transferred from retained earnings to a capital redemption reserve.

The own shares reserve represents the cost of shares in Bodycote plc purchased in the market. At 31 December 2020 865,565 
(2019: 1,405,555) ordinary shares of 17 3/11p each were held by the Bodycote International Employee Benefit Trust to satisfy share-based 
payments under the Group's incentive schemes (see note 28).

Certain subsidiaries in the UK have taken an exemption to be audited. Refer to page 142 for further information.

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Additional information

Group accounting policies
Year ended 31 December 2020

Basis of preparation
The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued 
by the International Accounting Standards Board (IASB). The financial statements have also been prepared in accordance with international 
accounting standards in conformity with the requirements of the Companies Act 2006 and IFRS adopted pursuant to Regulation (EC) No 
1606/2002 as it applies in the European Union. There are no differences for the Group in applying each of these accounting frameworks.

The Group has adopted Standards and Interpretations issued by the IASB and the International Financial Reporting Interpretations Committee 
of the IASB (IFRS IC). Individual standards and interpretations have to be adopted by the European Commission (EC) and the UK Endorsement 
Board (UKEB) respectively, and the process leads to a delay between the issue and adoption of new standards and in some cases 
amendments. International Financial Reporting Standards are subject to ongoing amendment by the IASB and subsequent endorsement by 
the EC and UKEB and are therefore subject to change.

The financial statements have been prepared on the historical cost basis, except for items that are required by IFRS to be measured at fair 
value, principally certain financial instruments measured at fair value, and retirement benefit assets. Historical cost is generally based on the 
fair value of the consideration given up in exchange for the assets. 

Basis of consolidation
The consolidated financial statements incorporate the financial statements of Bodycote plc ('the Company') and entities controlled by the 
Company (its subsidiaries) made up to 31 December each year. A subsidiary is an entity controlled, directly or indirectly, by Bodycote plc. 
Control exists when the Group has power over the subsidiary, has exposure or rights to the variable returns from its involvement with a 
subsidiary and then holds ability to use its power to affect its returns.

The results of subsidiaries acquired or disposed during the year are included in the consolidated income statement from the effective date of 
acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to subsidiary financial statements 
to bring the accounting policies used in line with those used by the Group. All intra-group transactions, balances, income and expenses are 
eliminated on consolidation.

Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. Those interests of non-controlling 
shareholders that are present ownership interests entitling their holders to a proportionate share of net assets upon liquidation may initially 
be measured at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. 
The choice of measurement is made on an acquisition-by-acquisition basis. Other non-controlling interests are initially measured at fair value. 
Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-
controlling interests’ share of profits and losses less any distributions made. 

Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying 
amount of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the 
subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration 
paid or received is recognised directly in equity and attributed to the owners of the Company.

Going concern
In determining the basis of preparation for the Group’s financial statements, the Directors have considered the Group’s business activities, 
together with the factors likely to affect its future development, performance and position. The Chief Financial Officer’s report included in this 
Annual Report includes a summary of the Group’s financial position, cash flows, liquidity position and borrowings.

The current and plausible future impact of COVID-19 on the Group’s activities and performance has been considered by the Board of Directors 
in preparing its going concern assessment. Whilst the situation is uncertain and evolving, the Group has modelled potential severe but 
plausible impacts on revenues, profits and cash flows in its assessment. In preparing its assessment, the Directors have considered the 
actual impact that COVID-19 has had on the business since the beginning of the outbreak and the related decline in revenues. Revenues on 
an organic basis for the last 9 months of the year ended 31 December 2020 were 25% below those in the prior year, reflecting the impact of 
shutdowns at the Group’s customers’ locations and reduced demand, particularly in the area of civil air traffic. 

Management has modelled a base case scenario, built upon the budgeting process for 2021 and extended up to July 2022. This model shows 
an improvement on performance in 2020 in both revenue and profits, but still a decline on 2019 actuals. Management then established a 
severe but plausible downside scenario under which the crisis would have a prolonged impact, with a significant revenue shortfall compared 
with 2019 actuals modelled through to the end of July 2022, the period that has been modelled for the purpose of assessing going concern. 
The Group’s record of cash conversion during recent months was used to estimate the cash generation and level of net debt over that period, 
with the cost reductions achieved during 2020 through restructuring programmes resulting in future improvements in operating margins. 

The key covenants attached to the Group’s Revolving Credit Facility relate to financial gearing (net debt to EBITDA) and interest cover, which 
are measured on a pre-IFRS 16 basis. The maximum financial gearing ratio permitted under the covenants is 3.0x (with an acquisition spike at 
3.5x) and the minimum interest cover ratio permitted is 4x. In the severe but plausible downside scenario modelled, the Group continues to 
maintain sufficient liquidity and meets its gearing and interest cover covenants under the Revolving Credit Facility with substantial headroom.

The Group meets its working capital requirements through a combination of committed and uncommitted facilities and overdrafts. For the 
purposes of the going concern assessment, the Directors have only taken into account the capacity under existing committed facilities, being 
the Group’s Revolving Credit Facility. The Group’s uncommitted facilities totalled £61m as at 31 December 2020.

On 27 May 2020, the Group negotiated a new £250.9m Revolving Credit Facility for five years to May 2025. At 31 December 2020, the 
Group's Revolving Credit Facility had drawings of £51.7m (2019: £nil) and the Group's net debt was £22.5m (2019: net cash of £20.9m). 
The liquidity headroom was £221.7m at 31 December 2020 excluding uncommitted facilities.

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In addition to the above scenarios, management has performed reverse stress testing over the model to determine the extent of downturn 
which would result in a breach of covenants. Assuming similar levels of cash conversion as seen in recent months, a monthly revenue decline 
compared with 2019 actuals, well in excess of that experienced in any month in 2020, would need to persist throughout the going concern 
period for a covenant breach to occur, which is considered very unlikely. This stress test also does not incorporate certain mitigating actions or 
cash preservation responses, which the Group would implement in the event of a severe and extended revenue decline.

Following this assessment, the Directors have formed a judgement, at the time of approving the financial statements, that there are no 
material uncertainties that cast doubt on the Group’s going concern status and that it is a reasonable expectation that the Group has adequate 
resources to continue in operational existence for at least the next 12 months. For this reason, the Directors continue to adopt the going 
concern basis in preparing the consolidated financial statements.

Critical accounting judgements and significant accounting estimates 
In the course of preparing the financial statements certain estimates and assumptions, and judgements in the process of applying the Group’s 
accounting policies have been made that have had a significant effect on the amounts recognised in the financial statements. Although the 
estimates and judgements are based on management’s best information about current circumstances and future events and actions, actual 
results may differ and result in material variances.

Critical accounting judgements 

 – The Group operates in a number of countries and is subject to taxes in numerous jurisdictions. The recognition of a provision for taxes is a 
significant judgement which is based upon the interpretation of applicable tax legislation on a country-by-country basis and an assessment 
of the likely outcome of any open tax computations. Refer to notes 8, 21 and 31 for more information.

 – Certain items have been disclosed as exceptional costs where they meet this classification as outlined in the Group’s accounting policy below 

and note 6. 

 – Goodwill allocation and valuation of acquired intangible assets, specifically the identification of customer relationships relating to the acquisition 
of business during the year which have been valued based on estimated customer loss ratios and projected sales values. Refer to notes 11, 12 
and 25 for more information.

Significant accounting estimates

 –  Accounting for retirement benefit schemes under IAS 19 (revised) requires an assessment of the future benefits payable in accordance with 
actuarial assumptions. The discount rate and the mortality rates applied in the calculation of scheme liabilities is a key source of estimation 
uncertainty for the Group. Details of the accounting policies applied in respect of retirement benefit schemes are set out on page 94 and see 
note 30 for further details.

Other areas of judgement and accounting estimates

 – The Group has taken the decision not to recognise an asset in relation to the surplus on the UK defined benefit pension scheme.

 – The Group has considered whether the valuation of goodwill and the related value-in-use calculation assumptions used for the annual 

impairment testing was a significant estimate and has concluded that there is no reasonably possible material change expected in the next 
12 months. This estimate is therefore not considered as significant. Refer to note 11 for more information.

 – The impact of the COVID-19 pandemic has brought considerable change to the risk landscape during the year. The Group has re-assessed its 
principal risks and where necessary, management have implemented several mitigation activities. Given the measures implemented during 
the year, our view is that there is no significant risk of COVID-19 causing a material adjustment to the carrying amounts of assets and liabilities 
within the next financial year and therefore this does not represent a material estimation uncertainty.

 – Climate change is a global challenge and an emerging risk for the Group. The Group has a role to play in limiting environmental impact by 

improving energy management, reducing carbon emissions and helping our customers do the same. Growing awareness of climate change will 
contribute to the Group’s business growth as it provides products, services and solutions that increase efficiency and reduce energy use. As a 
result, the Group does not view climate change as a material estimation uncertainty. For further detail, refer to the Principal Risks section and 
Environmental, Social, Governance section of the Strategic Report. 

 – No key sources of estimation uncertainty have been identified in relation to Brexit and the recent Free Trade Agreement between the UK and 

the EU. 

Group Accounting Policies
Revenue recognition
The Group predominantly has one revenue stream relating to specific thermal processing services with either identifiable customer contracts 
or specific terms and conditions and pricing specific performance obligations. Revenue is recognised net of discounts, VAT and other sales-
related taxes. The Group’s right to consideration equates to the value of the services provided, the transaction price of which is based upon 
pricing as agreed with the customer. In general, the services provided to the Group’s customers consist of one performance obligation, 
being the delivery of a service which happens either at a point in time or over a short timeframe. Revenue is recognised on completion of the 
service rendered and therefore any spread of revenue over time would not have a material impact on revenue recognition. Where multiple 
performance obligations are determined to exist in one transaction, the allocation of transaction price and delivery of services are considered 
on a case by case basis. The determination of the transaction price is based upon pricing as agreed with the customer. In general, there are 
limited instances of judgements made in assessing revenue recognition under IFRS 15 given the relative simplicity of the contracts, and that 
revenue is recognised at a point in time.

In certain cases, the Group will use third parties as part of delivering customer contracts. When a third party is involved in providing goods 
or services, the Group determines if there is a Principal or an Agency relationship with that third party. Due to the nature of the contractual 
arrangements, it is initially assumed that the Group enters into a Principal relationship with third party contractors and thus recognises the 
related revenue on a gross basis with related costs included in cost of sales and overheads in the Consolidated income statement. In some 

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Additional information

Group accounting policies continued
Year ended 31 December 2020 

circumstances, third party work arranged for a customer of the Group could validly be considered as agency activity. In such a case, the 
revenue and related cost of sale is recorded in net revenue in the consolidated income statement on a net basis.

Other operating income represents scrap sales, asset sales and other items of operating income not provided in the normal course 
of business.

Foreign currencies
Transactions in currencies other than the functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. 
At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing 
on the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. 
Gains and losses arising on retranslation are included in net profit or loss for the period.

Exchange differences are recognised in profit or loss in the period in which they arise except for:

 – exchange differences on transactions entered into to hedge certain foreign currency risks (see pages 121 to 122); and

 – exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely 

to occur (therefore forming part of the net investment in the foreign operation). These are recognised initially in the Consolidated statement of 
comprehensive income and reclassified from equity to profit or loss on disposal or partial disposal of the net investment.

On consolidation, the assets and liabilities of the Group’s overseas operations are translated at exchange rates prevailing on the balance sheet 
date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly. 
Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation differences are 
recognised as income or as expenses in the period in which the operation is disposed of.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and 
translated at the closing rate. 

Government assistance 

Economic support provided to the Group as part of government and state initiatives to support local economies is recorded in line with IAS 
20, and is recognised in the income statement on the date at which the conditions attached to the receipt of such assistance have been met, 
in the period it becomes receivable. The income is presented net against the applicable staff costs within cost of sales and overheads in the 
income statement.

Operating profit/(loss)
Operating profit is stated after charging restructuring costs, goodwill impairment, impairment of intangible assets, amortisation of acquired 
intangible assets, support from government grants and after the post-tax share of results of associates but before finance income and 
finance costs.

Dividends
The dividend distributions (ordinary and special) to Bodycote plc’s ordinary shareholders are recognised as a liability when the dividends are 
paid. Final dividends are accrued when approved by the ordinary shareholders at its Annual General Meeting.

Borrowing costs
Borrowing costs are recognised in the income statement in the period in which they are incurred as finance costs. Borrowing costs directly 
attributable to the acquisition, construction or production of qualifying assets, which are assets that take a substantial period of time to get 
ready for their intended use, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. 
Interest costs on borrowings are expensed to the consolidated Income Statement as they fall due and accounted for as financing cash flows 
as they are settled.

Exceptional items
The Group considers exceptional items to be those which derive from events or transactions which are significant for separate disclosure 
by virtue of their size or incidence in order for the user to obtain a proper understanding of the Group’s financial performance. These items 
include, but are not limited to, impairment charges, costs associated with significant restructuring and reorganisation costs, profits and losses 
on disposal of subsidiaries and other one-off items which meet this definition.

Goodwill
Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is 
measured as the excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and 
contingent liabilities of a subsidiary or associate at the date of acquisition. If the Group’s interest in the net fair value of the acquiree’s 
identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in 
the income statement.

Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each 
cash-generating unit expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated 
are tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable 
amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying 
amount of any goodwill allocated to the unit and then to assets of the unit on a pro-rata basis. Any impairment loss recognised for goodwill 
cannot be reversed in a subsequent period.

On disposal of a subsidiary or associate, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. 

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Other intangible assets
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated 
impairment losses. Intangible assets under development are carried at cost (less any accumulated impairment losses) until available for use. 
Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at fair value at the 
acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination are 
reported at cost less accumulated amortisation and accumulated impairment losses.

Amortisation of these assets is recognised in the consolidated Income Statement on a straight-line basis over their estimated useful lives, 
on the following bases:

Software 

10%–33%

Non-compete agreements  20%–33%

Customer relationships 

7%–10%

Amortisation is recognised within administration expenses, which is included in cost of sales and overheads.

Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.

Depreciation is charged so as to write off the cost of assets, other than freehold land and assets under construction which is not depreciated, 
less their residual values, over their estimated useful lives, using the straight-line method, on the following bases:

Freehold buildings 

2%

Leasehold improvements  over the projected life of the lease

Fixtures and fittings 

10%–20%

Plant and machinery 

5%–20%

Motor vehicles 

20%–33%

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying 
amount of the asset and is recognised in income in the consolidated income statement.

Assets in the course of construction are carried at cost, plus appropriate borrowing costs, less any recognised impairment loss. 
Depreciation commences when the assets are ready for their intended use and they have been transferred to the relevant asset class.

Business combinations
Acquisitions of subsidiaries and businesses are generally accounted for under IFRS 3, where appropriate. The consideration for each 
acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity 
instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments. 
All other subsequent changes in the fair value of any contingent consideration classified as an asset or liability are accounted for in accordance 
with relevant IFRSs.

The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at 
their fair value at the acquisition date, except that:

 – deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance 

with IAS 12 Income Taxes and IAS 19 (revised) Employee Benefits respectively; and

 – liabilities or equity instruments related to the replacement by the Group of an acquiree’s share-based payment awards are measured in 

accordance with IFRS 2 Share-based Payments.

Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any 
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated 
in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from 
other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to dispose and value-in-use. In assessing value-in-use, the estimated future cash 
flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and 
the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of 
the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately in the 
consolidated income statement.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate 
of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined 
had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as 
income in the consolidated income statement immediately.

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Group accounting policies continued
Year ended 31 December 2020 

Retirement benefit schemes
Obligations for contributions to defined contribution pension plans are recognised as an expense in the consolidated income statement 
as incurred.

The cost of providing pensions under defined benefit schemes are calculated in accordance with a qualified actuarial evaluation and are 
spread over the period during which the benefit is expected to be derived from the employees’ services. The Group’s net obligation 
or surplus is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for 
their service in the current and prior periods. Past service costs resulting from plan amendments or curtailments and gains or losses on 
settlements are charged to the consolidated income statement.

The average discount rate for the plans’ liabilities is based on investment grade rated corporate bonds or similar government bonds of 
suitable duration and currency. Plans’ assets are measured using market values at the end of the reporting period. Actuarial gains and 
losses, differences between the expected and actual returns, and the effect of changes in actuarial assumptions are recognised in the 
Statement of Comprehensive income in the year they arise. Any scheme surplus (to the extent it is considered recoverable under the 
provisions of IFRIC 14) or deficit is recognised in full in the consolidated balance sheet. 

Right-of Use assets 
To the extent that a right-of-control exists over an asset subject to a lease, with a lease term exceeding one year, a right-of-use asset, 
representing the Group’s right to use the underlying leases asset, and a lease liability, representing the Group’s obligation to make lease 
payments, are recognised in the Group’s balance sheet at the commencement of the lease.

The right-of-use asset is measured at cost and includes the amount of initial measurement of the lease liability and any direct costs 
incurred, including advance lease payments, and an estimate of the dismantling, removal, and restoration costs required by the terms 
and conditions of the lease. Contracts may contain both lease and non-lease components such as administrative charges and taxes. 
The Group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. 
They are subsequently measured at cost less accumulated depreciation and impairment losses.

Depreciation is charged to the consolidated income statement to depreciate the right-of-use asset from the commencement date until 
the earlier of the end of the useful life of the right to use asset or the end of the lease term. The lease term shall include the period of any 
extension option where it is reasonably certain that the option will be exercised. Where the lease contains a purchase option the asset is 
written off over the useful life of the asset when it is reasonably certain that the purchase option will be exercised.

The lease liability is measured at the present value of the future lease payments, including fixed payments less any lease incentives 
receivable, amounts expected to be payable by the Group under residual value guarantees and the exercise price of purchased 
options where it is reasonably certain that the option will be exercised, discounted using the interest rate implicit in the lease, if easily 
determinable. If the rate cannot be readily determined, the lessee’s incremental borrowing rate is used. Finance charges are recognised in 
the consolidated income statement over the period of the lease.

Lease arrangements that are short-term in nature in relation to low value assets are charged directly to the income statement 
when incurred. Short-term leases are leases with a lease term of 12 months or less and low value assets are defined based on 
quantitative criteria.

Investments in associates
An associate is an entity over which the Group is in a position to exercise significant influence, but not control or joint control, through 
participation in the financial and operating policy decisions of the investee.

The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. 
Investments in associates are carried in the balance sheet at cost as adjusted by post-acquisition changes in the Group’s share of the 
net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group’s 
interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the 
associate) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of 
the associate.

Any excess of the cost of acquisition over the Group’s share of the fair values of the identifiable assets, liabilities and contingent 
liabilities of the associate at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the 
investment. Any deficiency of the cost of acquisition below the Group’s share of the fair values of the identifiable assets, liabilities and 
contingent liabilities of the associate at the date of acquisition (i.e. discount on acquisition) is credited in the income statement in the 
period of acquisition.

Where a Group company transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest 
in the relevant associate. Losses may provide evidence of an impairment of the asset transferred, in which case appropriate provision is 
made for impairment.

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Assets held for sale
Assets are classified and presented as held for sale at lower of carrying amount and fair value less cost to sell if their carrying amount will 
be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly 
probable and the asset (or disposal group) is available for immediate sale.

Inventories
Inventories are stated at the lower of cost and net realisable value and are accounted for on a first in, first out basis or, in some cases, a 
weighted-average basis, if deemed more appropriate for the business. For finished goods and work-in-progress, cost comprises direct 
materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their 
present location and condition. Net realisable value represents the estimated selling price less all estimated costs of completion and costs 
to be incurred in marketing, selling and distribution.

Financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual 
provisions of the instrument. Financial liabilities are classified according to the substance of the contractual arrangements entered into. 
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. 
Financial liabilities are not generally interest-bearing and are stated at their nominal value unless otherwise described below.

Receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are 
classified as ‘receivables’. Receivables are measured at original invoice amount (which is considered fair value) and are subsequently 
held at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective 
interest rate where applicable, except for trade receivables which do not carry any interest and are stated at their nominal value as 
reduced by appropriate allowances for expected credit losses and estimated irrecoverable amounts.

For trade receivables initially recognised at fair value less allowance for impairments, a simplified lifetime Expected Credit Loss (ECL) 
model is used to assess trade receivables for impairment. ECL is the present value of all cash shortfalls over the expected life of a 
trade receivable. Expected credit losses are based on historical loss experience on trade receivables, adjusted to reflect information 
about current economic conditions and reasonable and supportable forecasts of future economic conditions. At the date of initial 
recognition, the credit losses expected to arise over the lifetime of a trade receivable are recognised as an impairment in the consolidated 
income statement.

Cash and bank balances
Cash and bank balances comprise cash in hand and demand deposits and other short-term highly liquid investments that are readily 
convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Derivative financial instruments
The Group uses derivative financial instruments, in particular foreign currency swaps and forward exchange contracts, to manage the 
financial risks arising from the business activities and the financing of those activities. The Group does not use derivative financial 
instruments for speculative purposes.

The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors, which provide written principles 
on the use of derivative financial instruments.

Derivative financial instruments are initially recognised as assets and liabilities measured at their fair value on the balance sheet date. 
Changes in the fair value of any derivative instruments that do not fulfil the criteria for hedge accounting contained in IFRS 9 Financial 
Instruments are recognised immediately in the consolidated income statement. A derivative is presented as a non-current asset or a non-
current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 
12 months.

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Group accounting policies continued
Year ended 31 December 2020 

Net investment hedge
The Group uses foreign currency debt to hedge its exposure to changes in the underlying value of net assets of overseas operations arising 
from foreign exchange rate movements. The Group maintains documentation of the relationship between the hedged item and the hedging 
instrument at the inception of a hedging transaction together with the risk management objective and the strategy underlying the designated 
hedge. The Group also documents its assessment, both at the inception of the hedging relationship and subsequently on an ongoing basis, of 
the effectiveness of the hedge in offsetting movements in the fair values or cash flows of the hedged items. 

To the extent the hedge is effective, changes in the fair value of the hedging instrument arising from the hedged risk are recognised in the 
consolidated statement of comprehensive income and accumulated in the hedging and translation reserve. The gain or loss relating to any 
ineffective portion is recognised immediately in the consolidated income statement and is included in other operating expenses. 

Trade and other payables 
Trade and other payables are recognised at the amounts expected to be paid to counterparties and subsequently held at amortised cost. 

Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year or tax assessment adjustments made to prior years. Taxable profit differs from 
net profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in 
other years and it further excludes items that are never taxable or deductible. The Group’s asset and liability for current tax is calculated using 
tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the 
financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet 
liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to 
the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets 
and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business 
combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, except where 
the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the 
foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only 
recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary 
differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that 
sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based 
on tax laws and rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the 
consolidated income statement, except when it relates to items charged or credited in other comprehensive income, in which case the 
deferred tax is also dealt with in other comprehensive income. 

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group 
expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group intends to 
settle its current tax assets and liabilities on a net basis.

Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the fair value, net of transaction costs. Finance charges, including premiums 
payable on settlement or redemption and direct issue costs, are accounted for on an accrual's basis to the consolidated income statement 
using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period 
in which they arise.

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Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, when it is probable that 
the Group will be required to settle that obligation and when a reliable estimate can be made of the amount of the obligation. If the obligation 
is expected to be settled within 12 months of the reporting date the provisions are included within current liabilities and if expected to be 
settled after 12 months included in non-current liabilities.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet 
date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated 
to settle the present obligation, and the difference between the carrying amount and the present value of those cash flows is material to the 
financial statements, the carrying amount is the present value of those cash flows.

Share-based payments
The Group has applied the requirements of IFRS 2 Share-based Payments.

The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value 
at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line 
basis over the vesting period. At each balance sheet date, the Group revises its estimate of the number of equity instruments expected to 
vest as a result of the effect of non-market based vesting conditions. The impact of the revision of the original estimates, if any, is recognised 
in the consolidated income statement such that the cumulative expense reflects the revised estimates with a corresponding adjustment to the 
equity-settled employee benefits reserve.

Adoption of new and revised standards
IFRS 16, 'COVID-19-Related Rent Concessions' 

During the year the IASB published an amendment to IFRS16, 'COVID-19-Related Rent Concessions' amending the standard to provide 
lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification, effective for annual reporting 
periods beginning on or after 1 June 2020. As at 31 December 2020 there would have been no impact of this amendment had the effective 
date been required for the Group 2020 accounts.

IFRS 3 Business Combination amendments

The IASB issued amendments to IFRS 3 Business Combinations that revised the definition of a business, which assist entities with the 
evaluation of when an asset or group of assets acquired should be considered a business. This amended standard is effective to transactions 
entered into on or after 1 January 2020. The adoption of this amended standard on 1 January 2020 did not have a significant impact on the 
consolidated financial statements and is not expected to have a significant impact in future periods.

There are no other IFRS standards or interpretations not yet effective that would be expected to have a material impact on the Group.

General information
Bodycote plc is a Company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is given 
on page 45.

The nature of the Group’s operations and its principal activities are included within the Group’s Strategic report.

Information on the Group’s objectives, policies and processes are included within the Group’s Strategic 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 consolidated financial statements are presented in pounds sterling, which is the functional and presentation 
currency of the Company. Foreign operations are included in accordance with the policies set out in the Foreign Currencies accounting policy 
on page 94.

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Notes to the consolidated financial statements
Year ended 31 December 2020

1.  Alternative performance measures (APMs)
Bodycote uses various APMs, in addition to those reported under IFRS, as management consider these measures enable users of the 
financial statements to assess the underlying trading performance of the business. These APMs of financial performance, position or cash 
flows are not defined or specified according to International Financial Reporting Standards (IFRS) and are defined below and, where relevant, 
are reconciled to IFRS measures. APMs are prepared on a consistent basis for all periods presented in this report.

The APMs used include headline operating profit, headline operating margin, headline profit before taxation, EBITDA, headline EBITDA, 
headline tax charge, headline tax rate, headline earnings per share (EPS), headline operating cash flow, free cash flow, headline operating 
cash conversion, net (debt)/cash, net (debt)/cash plus lease liabilities and Return On Capital Employed (ROCE). These measures reflect the 
underlying trading performance of the business as they exclude certain non-operational items, exceptional items, acquisition costs and the 
amortisation of acquired intangible assets. The Group also uses revenue growth percentages adjusted for the impact of foreign exchange 
movements, where appropriate, to better represent the underlying performance of the business. The measures described above are also 
used in the targeting process for executive and management annual bonuses (headline operating profit and headline operating cash flow) with 
headline EPS and ROCE also used in executive share schemes.

The constant exchange rate comparison uses the current year reported segmental information, stated in the relevant functional currency, 
and translates the results into its presentational currency using the prior year’s monthly exchange rates. Expansionary capital expenditure is 
defined as capital expenditure invested to grow the Group's business.

Headline operating profit

Operating profit
Add back:
Amortisation of acquired intangibles
Acquisition costs
Exceptional items
Headline operating profit

Headline operating margin

Headline operating profit
Revenue
Headline operating margin

Headline profit before taxation

(Loss)/profit before taxation
Add back:
Amortisation of acquired intangibles
Acquisition costs
Exceptional items
Headline profit before taxation

2020
£m
5.0

9.8 
2.1 
58.4
75.3 

2020
£m
75.3 
598.0 
12.6%

2020
£m
(1.5)

9.8 
2.1 
58.4 
68.8 

2019
£m
128.6 

4.6 
1.7 
–
134.9 

2019
£m
134.9 
719.7 
18.7%

2019
£m
123.9 

4.6 
1.7 
–
130.2 

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1.  Alternative performance measures (APMs) continued
EBITDA and Headline EBITDA (Earnings Before Interest, Taxation, Depreciation, and Amortisation)

Operating profit
Depreciation and amortisation

Impairment of property, plant and equipment and other assets - recognised in exceptional items

Impairment of property, plant and equipment and other assets - recognised in operating profit

Impairment of other intangible assets - recognised in exceptional items 
Loss/(profit) on disposal of property, plant and equipment 
Share-based payments 
Income from associate
EBITDA
Acquisition costs
Exceptional items, excluding impairments
Share-based payments
Headline EBITDA
Headline EBITDA margin

Headline operating cash flow

Headline EBITDA
Less:
Net maintenance capital expenditure
Net working capital movement
Headline operating cash flow

Free cash flow

Headline operating cash flow
Less:
Restructuring cash flows
Income taxes paid
Interest paid
Free cash flow

Headline operating cash conversion

Headline operating cash flow
Headline operating profit
Headline operating cash conversion

Headline tax charge

Tax (credit)/charge
Tax on amortisation of acquired intangibles
Tax on exceptional items 
Headline tax charge

Bodycote plc annual report 2020

2020
£m
5.0
91.9 

16.5 

0.3
6.2 
0.6 
0.4 
(0.2)
120.7 
2.1 
35.7 
(0.4)
158.1 
26.4%

2020
£m
158.1 

(45.1)
17.2 
130.2 

2020
£m
130.2 

(11.6)
(7.8)
(4.7)
106.1 

2020
£m
130.2 
75.3 
172.9%

2020
£m
(2.3) 
2.4 
15.4 
15.5 

2019
£m
128.6 
84.2 

–

–
–
(4.4)
1.1 
(0.2)
209.3 
1.7 
–
(1.1)
209.9 
 29.2%

2019
£m
209.9 

(50.2)
(4.2)
155.5 

2019
£m
155.5 

(3.2)
(24.7)
(4.5)
123.1 

2019
£m
155.5 
134.9 
115.3%

2019
£m
29.9 
1.1 
–
31.0 

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Additional information

Notes to the consolidated financial statements continued
Year ended 31 December 2020

1.  Alternative performance measures (APMs) continued
Headline tax rate

Headline tax charge
Headline profit before taxation
Headline tax rate

Headline earnings per share
A detailed reconciliation is provided in note 10.

Net (debt)/cash and net debt plus lease liabilities

Cash and bank balances
Bank overdrafts (included in borrowings)
Bank loans (included in borrowings)
Net (debt)/cash
Lease liabilities
Net debt plus lease liabilities

Return on capital employed

Headline operating profit
Average capital employed1
Return on capital employed

2020
£m
15.5 
68.8 
22.5%

2020
£m
30.7 
(1.5)
(51.7)
(22.5)
(75.6)
(98.1)

2020
£m
75.3 
770.5 
9.8%

2019
£m
31.0 
130.2 
23.8%

2019
£m
22.0 
(1.1)
–
20.9 
(79.4)
(58.5)

2019
£m
134.9 
762.4 
17.7%

Revenue and headline operating profit at constant exchange rates
Reconciled to revenue and headline operating profit in the table below:

Revenue
Constant exchange rates adjustment
Revenue at constant exchange rates
Headline operating profit
Constant exchange rates adjustment
Headline operating profit at constant exchange rates

Year to 31 December 2020

Central 
cost and 
eliminations
£m
–
–
–
(2.5)
0.1 
(2.4)

AGI
£m
348.8 
2.0 
350.8 
41.0 
0.7 
41.7 

Consolidated
£m
598.0 
2.3 
600.3 
75.3 
0.5 
75.8 

ADE
£m
249.2 
0.3 
249.5 
36.8 
(0.3)
36.5 

1  Average capital employed is defined as the average opening and closing net assets adjusted for net (debt)/cash plus lease liabilities. 

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2.  Business and geographical segments
The Group has more than 165 facilities across the world serving a range of market sectors with various thermal processing services. 
The range and type of services offered is common to all market sectors.

In accordance with IFRS 8 Operating Segments, the segmentation of Group activity reflects the way the Group is managed by the chief 
operating decision maker, being the Group Chief Executive, who regularly reviews the operating performance of six operating segments, 
split between the Aerospace, Defence & Energy (ADE) and Automotive & General Industrial (AGI) business areas, as follows:

 – ADE – Western Europe; 

 – ADE – North America; 

 – ADE – Emerging Markets; 

 – AGI – Western Europe; 

 – AGI – North America; and 

 – AGI – Emerging Markets. 

The split of operating segments by geography reflects the business reporting structure of the Group.

We have also presented combined results of our two key business areas, ADE and AGI. The split being driven by customer behaviour and 
requirements, geography, and services provided. Customers in the ADE segment tend to operate and purchase more globally and have long 
supply chains, whilst customers in the AGI segment tend to purchase more locally and have shorter supply chains.

Bodycote plants do not exclusively supply services to customers of a given market sector. Allocations of plants between ADE and AGI is 

therefore derived by reference to the preponderance of markets served. 

Group
Revenue
Total revenue
Result
Headline operating profit prior to share-based payments 
and unallocated central costs
Share-based payments (including social charges)
Unallocated central costs
Headline operating profit/(loss)
Amortisation of acquired intangible assets
Acquisition costs
Operating profit/(loss) prior to exceptional items
Exceptional items

Segment result
Finance income
Finance costs
Loss before taxation
Taxation
Profit for the year

ADE
2020
£m

249.2

36.8 
–
–
36.8 
(5.7)
(2.1) 
29.0 
(16.9)

12.1

Central costs 
and eliminations
2020
£m

AGI
2020
£m

Consolidated
2020
£m

348.8

–

598.0

41.0 
–
–
41.0 
(4.1)
–
36.9 
(35.3)

1.6

–
0.9 
(3.4)
(2.5)
–
–
(2.5)
(6.2)

(8.7)

77.8 
0.9 
(3.4)
75.3 
(9.8)
(2.1)
63.4 
(58.4)

5.0
0.2 
(6.7)
(1.5)
2.3
0.8

Inter-segment sales are not material in either year. 

The Group does not have any one customer that contributes more than 10% of revenue. 

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Notes to the consolidated financial statements continued
Year ended 31 December 2020

2.  Business and geographical segments continued

Aerospace, Defence & Energy
Revenue
Total revenue
Result
Headline operating profit/(loss)
Amortisation of acquired intangible assets
Acquisition costs
Operating profit/(loss) prior to exceptional items
Exceptional items
Segment result

Automotive & General Industrial
Revenue
Total revenue
Result
Headline operating profit/(loss)
Amortisation of acquired intangible assets
Acquisition costs
Operating profit/(loss) prior to exceptional items
Exceptional items
Segment result

Western  
Europe
2020
£m

North  
America
2020
£m

Emerging 
Markets
2020
£m

Total ADE
2020
£m

103.1 

143.3 

17.0 
– 
– 
17.0 
(10.3)
6.7 

20.0 
(5.7)
(2.1) 
12.2 
(6.5)
5.7

2.8

(0.2)
– 
– 
(0.2)
(0.1)
(0.3)

249.2 

36.8 
(5.7)
(2.1) 
29.0 
(16.9)
12.1

Western  
Europe
2020
£m

North  
America
2020
£m

Emerging 
Markets
2020
£m

Total AGI
2020
£m

203.7

26.7 
(0.5)
– 
26.2 
(24.8)
1.4

83.5

(0.4)
(3.2)
– 
(3.6)
(9.4)
(13.0)

61.6

14.7 
(0.4)
– 
14.3 
(1.1)
13.2

348.8

41.0 
(4.1)
– 
36.9 
(35.3)
1.6

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2.  Business and geographical segments continued

Group
Revenue
Total revenue
Result
Headline operating profit prior to share-based payments and 
unallocated central costs
Share-based payments (including social charges)
Unallocated central costs
Headline operating profit/(loss)
Amortisation of acquired intangible assets
Acquisition costs
Segment result
Finance income
Finance costs
Profit before taxation
Taxation
Profit for the year

Aerospace, Defence & Energy
Revenue
Total revenue
Result
Headline operating profit prior to share-based payments
Share-based payments (including social charges)
Headline operating profit
Amortisation of acquired intangible assets
Acquisition costs
Segment result

Automotive & General Industrial
Revenue
Total revenue
Result
Headline operating profit prior to share-based payments
Share-based payments (including social charges)
Headline operating profit
Amortisation of acquired intangible assets
Acquisition costs
Segment result

Bodycote plc annual report 2020

ADE
2019
£m

AGI
2019
£m

Central costs  
and eliminations
2019
£m

Consolidated
2019
£m

301.4 

418.3 

–

719.7 

76.8 
(1.0)
– 
75.8 
(1.1)
(1.3)
73.4

65.6 
0.3 
– 
65.9 
(3.5)
(0.4)
62.0

– 
(0.6)
(6.2)
(6.8)
– 
– 
(6.8)

142.4 
(1.3)
(6.2)
134.9 
(4.6)
(1.7)
128.6 
0.2 
(4.9)
123.9 
(29.9)
94.0

Western  
Europe
2019
£m

North 
America
2019
£m

Emerging  
Markets
2019
£m

Total ADE
2019
£m

141.3

158.7 

35.9 
(0.4)
35.5 
– 
– 
35.5

40.6 
(0.6)
40.0 
(1.1)
(1.3)
37.6

1.4

0.3 
– 
0.3 
– 
– 
0.3

301.4

76.8 
(1.0)
75.8 
(1.1)
(1.3)
73.4

Western  
Europe
2019
£m

North 
America
2019
£m

Emerging  
Markets
2019
£m

Total AGI
2019
£m

246.0

107.4

40.5 
0.6 
41.1 
(0.4)
(0.4)
40.3

9.7 
(0.3)
9.4 
(2.9)
 – 
6.5

64.9 

15.4 
– 
15.4 
(0.2)
– 
15.2

418.3

65.6 
0.3 
65.9 
(3.5)
(0.4)
62.0

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Notes to the consolidated financial statements continued
Year ended 31 December 2020

2.  Business and geographical segments continued
Other information 

Group
Gross capital additions
Depreciation and amortisation
Balance sheet
Segment assets
Segment liabilities
Segment net assets

Aerospace, Defence & Energy
Gross capital additions
Depreciation and amortisation
Balance sheet
Segment assets
Segment liabilities
Segment net assets

Automotive & General Industrial
Gross capital additions
Depreciation and amortisation
Balance sheet
Segment assets
Segment liabilities
Segment net assets

Group
Gross capital additions
Depreciation and amortisation
Balance sheet
Segment assets
Segment liabilities
Segment net assets

ADE
2020
£m
18.1 
35.8 

484.9
(150.2)
334.7

Western  
Europe
2020
£m
6.8 
12.9 

168.6
(47.8)
120.8

Western 
Europe 
2020 
£m
17.1 
27.2 

267.9
(97.1)
170.8

ADE
2019
£m
27.5 
29.1 

375.5
(82.4)
293.1

Central  
costs and 
eliminations
2020
£m
5.0 
2.9 

Consolidated
2020
£m
63.9 
91.9 

53.7
(114.3)
(60.6)

Emerging 
Markets
2020
£m
2.3 
0.5 

5.4
(1.9)
3.5

Emerging 
Markets  
2020  
£m
7.7 
10.5 

131.9
(36.8)
95.1

1,110.0
(428.6)
681.4

Total ADE
2020
£m
18.1 
35.8 

484.9
(150.2)
334.7

Total AGI 
2020  
£m
40.8 
53.2 

571.4
(164.1)
407.3

Central costs  
and eliminations
2019
£m
4.8 
2.3 

Consolidated
2019
£m
81.9 
84.2 

44.5
(67.1)
(22.6)

1,027.1
(321.3)
705.8

AGI
2020
£m
40.8 
53.2 

571.4
(164.1)
407.3

North  
America
2020
£m
9.0 
22.4 

310.9
(100.5)
210.4

North  
America 
2020  
£m
16.0 
15.5 

171.6
(30.2)
141.4

AGI
2019
£m
49.6 
52.8 

607.1
(171.8)
435.3

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2.  Business and geographical segments continued 

Aerospace, Defence & Energy
Gross capital additions
Depreciation and amortisation
Balance sheet
Segment assets
Segment liabilities
Segment net assets

Automotive & General Industrial
Gross capital additions
Depreciation and amortisation
Balance sheet
Segment assets
Segment liabilities
Segment net assets

Western 
Europe 
2019  
£m
10.4 
13.1 

181.5 
(43.7)
137.8 

Western  
Europe
2019
£m
18.1 
27.4 

289.2 
(101.5)
187.7 

North  
America 
2019  
£m
17.0 
15.9 

189.2 
(38.5)
150.7 

North 
America
2019
£m
19.4 
15.3 

182.2 
(30.3)
151.9 

Emerging  
Markets  
2019  
£m
0.1 
0.1 

4.8 
(0.2)
4.6 

Emerging  
Markets
2019
£m
12.1 
10.1 

135.7 
(40.0)
95.7 

Total ADE 
2019  
£m
27.5 
29.1 

375.5 
(82.4)
293.1 

Total AGI
2019
£m
49.6 
52.8 

607.1 
(171.8)
435.3 

Geographical information 
The Group's revenue from external customers and information about its segment assets (non-current assets excluding financial 
instruments, deferred tax assets and other financial assets) by country are detailed below:

USA
France
Germany
UK
Sweden
Netherlands
Others

Revenue from external customers 

Non-current assets

2020 
£m
219.1 
76.4 
69.7 
44.3 
37.9 
24.9 
125.7 
598.0 

2019 
£m
255.3 
102.6 
87.6 
62.3 
44.2 
26.9 
140.8 
719.7 

2020 
£m
429.7 
70.6 
78.0 
83.2 
42.6 
23.1 
192.0 
919.2 

 2019 
£m
315.2 
71.9 
82.9 
96.5 
40.4 
23.3 
194.2 
824.4 

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Notes to the consolidated financial statements continued
Year ended 31 December 2020

3.  Operating profit 

Revenue
Cost of sales
Gross profit
Other operating income
Distribution costs
Administration expenses
Other operating expenses
Headline operating profit
Amortisation of acquired intangible assets
Acquisition costs (see note 25)
Operating profit prior to exceptional items
Exceptional items (see note 6)
Operating Profit

2020
£m
598.0 
(401.3)
196.7 
4.4 
(15.6)
(109.0)
(1.2)
75.3 
(9.8)
(2.1)
63.4 
(58.4)
5.0

Further details of acquisition costs and exceptional items are included in the Chief Executive's and Chief Financial Officer's report.  

Profit for the year has been arrived at after (crediting)/charging:

Net foreign exchange gain
Inventory expensed
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of other intangible assets
Loss/(gain) on disposal of property, plant and equipment
Gain on disposal of leases
Staff costs (see note 4)
Government assistance support received (see note 5)
Acquisition costs
Impairment (gain)/loss on trade receivables
Impairments - recognised in exceptional items (see note 6)
Impairment of property, plant and equipment and other assets - recognised in operating profit
Share of profit of associate undertaking

The analysis of auditors’ remuneration on a worldwide basis is as follows:

Fees payable to the auditor for the audit of the annual accounts
Fees payable to the auditor and its associates for other services:

The audit of the Group’s subsidiaries

Total audit fees
Audit related assurance services1
Other non-audit fees2
Total fees payable to the auditor

2020
£m
(0.3)
48.8 
65.2 
14.8 
11.9 
0.6 
(0.1)
235.1 
(4.3)
2.1 
(0.4)
22.7 
0.3
0.4 

2020
£m
0.7 

1.1 
1.8 
0.2 
– 
2.0 

2019
£m
719.7 
(452.3)
267.4 
14.4 
(21.6)
(124.7)
(0.6)
134.9 
(4.6)
(1.7)
128.6 
– 
128.6 

2019
£m
(0.1)
52.9 
63.3 
14.5 
6.4 
(4.4)
– 
280.6 
– 
1.7 
0.6 
– 

0.2 

2019
£m
0.4 

0.7 
1.1 
0.1 
0.1 
1.3 

1  This includes £0.2m (2019: £0.1m) for the review of the half year report and nominal fees charged in connection with a merger statement between two legal entities in Sweden 

required by local regulation.

2  2019: Agreed upon procedures over adoption of IFRS 16.

The audit fees disclosed for 2020 include £0.1m of fees in connection with the 2019 audit. A description of the work of the Audit 
Committee, including an explanation of how auditor objectivity and independence is safeguarded when non-audit services are provided by 
the auditor, is set out in the Audit Committee report.

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4.  Staff costs
The average monthly number of employees (including Executive Directors) was: 

ADE:

Western Europe
North America
Emerging Markets

AGI:

Western Europe
North America
Emerging Markets

Shared services
Head office

Their aggregate remuneration comprised:
Wages and salaries1
Social security costs
Pension costs

2020 
Number

2019 
Number

733 
947 
12 

1,687 
692 
737 
215 
45 
5,068 

2020 
£m

198.6 
30.8 
5.7 
235.1 

899 
810 
21 

1,894 
926 
761 
223 
39 
5,573 

2019 
£m

238.3 
34.0 
8.3 
280.6 

1  For the year ending 31 December 2020 the Group received government and state employee support towards wages and salaries of £3.6m which are presented as net against staff costs 

(2019: £nil). See note 5 for more information.

Included in wages and salaries are share-based payments (excluding social charges) resulting in a charge of £0.4m (2019: £1.1m). Included in 
pension costs are £7.3m relating to defined contribution schemes (2019: £7.8m) and a £1.2m credit relating to defined benefit schemes 
(2019: £1.1m charge).

Disclosure of individual Directors' remuneration, share interests, share options, long term incentive schemes, pension contributions and 
pension entitlements are shown in the tables in the Board report on remuneration on pages 64 to 75 and form part of these financial 
statements. See also note 30 for more information on retirement benefit schemes.

5  Government assistance 
As a result of the COVID-19 pandemic, the Group has benefited from £4.3m of government assistance programmes relating to economic 
support as part of state initiatives to support local economies (£0.7m) and job retention assistance for costs of employees on 'short-time 
working' in Europe (£3.6m).

The Group has not taken advantage of all schemes available and returned all payments received in support of furloughed employees from 
the UK government in 2020. Government assistance income related to employee support is presented net against the applicable staff costs 
within cost of sales and overheads in the income statement.

6.  Exceptional items

Severance and redundancy costs
Property, plant and equipment impairments for assets no longer required
Impairment of other assets
Site closure costs
Environmental provisions – see note 23
Total exceptional restructuring items
Impairment of other intangible assets - see note 12
Total exceptional items

Bodycote plc annual report 2020

2020
£m
20.8 
15.9 
0.6 
12.0 
2.9 
52.2 
6.2 
58.4

2019
£m
– 
– 
– 
– 
– 
– 
– 
– 

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Additional information

Notes to the consolidated financial statements continued
Year ended 31 December 2020

6.  Exceptional items continued 
Exceptional restructuring costs of £52.2m relate to initiatives across the Group (AGI (£35.3m) and ADE (£16.9m)), announced in 2020. 
The organisational restructuring was driven by a combination of both macroeconomic uncertainties and longer term automobile and aerospace 
market structural shifts. A total of 26 plants will close as a result of these restructuring activities, 20 plants in 2020 and 6 in 2021. These costs 
have been recorded as exceptional in line with the Group's accounting policy for exceptional items. Further detail of this restructuring 
programme is outlined in the Chief Executive's review on pages 11 to 12.

Restructuring cash spend to date amounts to £11.6m, with £24.1m held as provisions at 31 December 2020. Refer to note 23.

7.  Finance costs

Interest on bank overdrafts and loans
Interest on deferred consideration
Interest on lease liabilities
Total interest expense
Net interest on the defined benefit pension liability
Other finance charges
Total finance costs

8.  Taxation

Current taxation – charge for the year
Current taxation – adjustments in respect of previous years
Deferred tax (see note 21)

2020
£m
0.7 
0.8 
2.2 
3.7 
0.1 
2.9 
6.7 

2020
£m
9.4 
(9.7)
(2.0)
(2.3)

2019
£m
0.3 
– 
2.4 
2.7 
0.3 
1.9 
4.9 

2019
£m
24.8 
(3.9)
9.0 
29.9 

The Group uses a weighted average country tax rate rather than the UK tax rate for the reconciliation of the charge for the year to the profit 
before taxation per the consolidated income statement. The Group operates in several jurisdictions, many of which have a tax rate in excess 
of the UK tax rate. As such, a weighted average country tax rate is believed to provide the most meaningful information to the users of the 
financial statements. The appropriate tax rate for this comparison which in 2020 is based on a loss before taxation is 24.1% (2019: 25.9%).

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8.  Taxation continued
The charge for the year can be reconciled to the profit before taxation per the consolidated income statement as follows:

(Loss)/profit before taxation
Tax at the weighted average country tax rate of 24.1% (2019: 25.9%)
Tax effect of expenses not deductible in determining taxable profit1
Impact of recognition or derecognition of deferred tax balances
Tax effect of other adjustments in respect of previous years:

Current tax2
Deferred tax2

Effect of financing activities between jurisdictions3
Impact of trade and minimum corporate taxes
Effect of changes in statutory tax rates on deferred tax assets and liabilities
Other tax risk provision movements4
Tax (credit)/expense for the year

2020
£m
(1.5)
(0.4)
0.3 
2.0 

(9.7)
8.7 
(2.8)
0.8 
(1.1)
(0.1) 
(2.3)

2019
£m
123.9 
32.1 
0.7 
(0.5)

(3.9)
2.9 
(3.6)
1.1 
(0.1)
1.2 
29.9 

Tax on items taken directly to equity is a charge of £0.1m (2019: credit of £0.5m).

1  Those costs in various jurisdictions are not deductible in calculating taxable profits.

2  2020 and 2019 adjustments in current and deferred tax in respect of previous years relate mainly to changes in assumptions and outcomes in UK and overseas tax positions.

3 

 The Group is externally financed by a mix of cash flows from operations and short-term borrowings. Internally, operating subsidiaries are predominantly financed via intercompany loans. 
The effect is net of provisions based on management's estimation of tax risk relating to the potential disallowance of interest. £9.9m of interest deductions were restricted in the US in 2020 
(2019: £1.7m).

4 

Includes provisions for local tax risks and non-financing cross border transactions.

As part of the calculation of the tax charge, the Group recognises a number of tax risk provisions in respect of ongoing tax enquiries and 
in recognition of the multinational tax environment that Bodycote operates in where the nature of the tax positions that are taken is often 
complex and subject to change. Tax provisions totalling £22.1m were recognised at 31 December 2020 (2019: £15.3m). £5.4m (2019: £3.0m) 
of the tax provisions are expected to crystalise within 12 months. The provisions included are based on an assessment of a range of possible 
outcomes to determine reasonable estimates of the consequences of tax authority audits in the various tax jurisdictions in which the Group 
operates. Management judgement is exercised to determine the quantum of the tax risk provisions based on an understanding of the 
appropriate local tax legislation, taking into consideration the differences of interpretation that can arise on a wide variety of issues including 
the nature of ongoing tax audits and the experience from earlier enquires, and determining whether any possible liability is probable.

Note 31 to the accounts refers to a contingent liability in respect of the European Commission state aid investigation into the Group financing 
exemption in the UK controlled foreign company rules.

9.  Dividends

Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 December 2018 of 13.3p per share
Special dividend for the year ended 31 December 2018 of 20.0p per share
Interim dividend for the year ended 31 December 2019 of 6.0p per share
Deferred dividend for the year ended 31 December 2019 of 13.3p per share

Proposed final dividend for the year ended 31 December 2020 of 13.4p per share
Interim dividend for the year ended 31 December 2020 of 6.0p per share

2020
£m

–
–
–
25.1
25.1 
25.5
11.4 

2019
£m

25.2 
38.1 
11.4
–
74.7 
– 
–

As a consequence of the impact of COVID-19, the declared 2019 final dividend of 14.0p per share was deferred and was not presented for 
approval at the AGM. The Board approved a deferred 2019 dividend of 13.3p which was paid on 25 September 2020. 

The Board approved the payment of an interim dividend for 2020 of 6.0p (£11.4m) on 24 November paid on 12 February 2021 to shareholders 
on the register at the close of business on 8 January 2021. The Board has proposed a 2020 final ordinary dividend of 13.4p per share 
to be paid on 4 June 2021 to shareholders on the register at close of business at 23 April 2021 subject to approval by shareholders at 
the Annual General Meeting. As the proposed dividend is subject to shareholder approval in 2021, it is not included as a liability in these 
financial statements.

The dividends are waived on shares held by the Bodycote International Employee Benefit Trust.

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Additional information

Notes to the consolidated financial statements continued
Year ended 31 December 2020

10. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:

Earnings
Earnings for the purpose of basic earnings per share being net profit attributable to equity holders of 
the parent 

Number of shares
Weighted average number of ordinary shares for the purpose of basic earnings per share
Effect of dilutive potential ordinary shares

Shares subject to performance conditions1

Weighted average number of ordinary shares for the purpose of diluted earnings per share

Earnings per share:
Basic
Diluted1

Headline earnings
Net profit attributable to equity holders of the parent
Add back:

Amortisation of acquired intangible assets (net of tax)
Acquisition costs (net of tax)
Exceptional items (net of tax)

Headline earnings

Headline earnings per share:
Basic
Diluted1

2020
£m

2019
£m

0.4

93.8 

Number

Number

190,374,428

189,921,112

–
190,374,428

794,287 
190,715,399

Pence

Pence

0.2
0.2

£m

0.4

7.4
1.5 
43.6
52.9

49.4 
49.2 

£m

93.8 

3.5 
1.7 
– 
99.0 

Pence

Pence

27.8 
27.8 

52.1 
51.9 

1   As at 31 December 2020, in accordance with IAS 33 the related performance conditions for all open plans have not been met resulting in nil dilution of earnings per share (2019: 794,287). 

11.  Goodwill

Cost

At 1 January
Exchange differences
Recognised on acquisition of businesses
At 31 December

Accumulated impairment

At 1 January
Exchange differences
At 31 December
Carrying amount

2020
£m

230.7 
(4.4)
50.0 
276.3 

60.9 
(0.1)
60.8 
215.5 

2019
£m

225.2 
(4.9)
10.4 
230.7 

61.3 
(0.4)
60.9 
169.8 

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11.  Goodwill continued
Goodwill acquired through business combinations is allocated to the cash generating units (CGUs) that are expected to benefit from the 
synergies of the combination. The recoverable amounts of these CGUs are the higher of fair value less costs to dispose and value-in-use. 
The goodwill arising on the recently acquired Ellison business has been included in the North America ADE CGU (refer to note 25) as the 
synergies arising on the acquisition are expected to benefit this CGU and the goodwill will, therefore, be monitored at this level. Goodwill is 
allocated to the CGUs as follows:

ADE:

Western Europe
North America

AGI:

Western Europe
North America
Emerging Markets

2020
£m

27.0 
93.1 

28.8 
54.3 
12.3 
215.5 

2019
£m

26.8 
47.9 

27.6 
55.5 
12.0 
169.8 

The Group tests goodwill at least annually for impairment, or more frequently if there are indications that goodwill might be impaired.

The recoverable amounts of the cash generating units were determined from value-in-use calculations and are the sum of the discounted cash 
flows. The key assumptions for those calculations include the discount rates and both the rate of recovery and growth in revenues and their 
relative impact on future cash flows. The forecast recovery incorporates management’s expectations of the limited impact of climate change 
on the Group. 

Growth rates are determined by a combination of management's budget and forecasts based on certain revenue and operating profit 
assumptions for the first five years, together with a further estimate of cash flows into perpetuity using GDP growth rates based on the 
historical weighted average growth in GDP in the respective geographies. The cash flows are discounted using a pre-tax Weighted Average 
Cost of Capital (WACC) which reflects current market assessments of the time value of money and the risks specific to the cash generating 
units, including country risk premium. The pre-tax rates used to discount the forecast cash flows for each cash generating unit were between 
9.5% (2019: 11.7%) and 11.7% (2019: 12.7%).

The projected cash flows reflect management's expectation of how movements in revenues and operating profits are correlated and will 
develop, and the extent to which changes in these metrics will convert into cash. The correlation between movements in revenue and 
operating profits is referred to as operational gearing and is a key assumption in determining these cash flows. In formulating the view on 
future cash flows, consideration has been given to various external data sources on the strength and timing of any expected economic 
recovery and industry specific information, recognising the uncertainty regarding the near-term future economic outlook. In particular, the 
assessment for North America ADE is sensitive to the recovery of the Aerospace sector and management considers that the impairment 
assessment reflects a conservative but supportable view on NA ADE revenue recovery back to 2019 levels.

Maintenance capital expenditure projections are based on historical experience and include expenditure necessary to maintain the projected 
cash flows from existing assets and the replacement cost of assets in future years. The cash flows are adjusted for the expected working 
capital requirements to deliver sales and the timing of converting operating profits into cash. GDP growth rates used to determine cash flows 
for 2026 and into perpetuity are in the range of 2.2% (2019: 2.3%) to 5.3% (2019: 5.4%) depending on the geographical region of each CGU.

The majority of goodwill is allocated to two of the CGUs, being North America ADE and North America AGI. The long-term growth rates applied to 
cash flows after 2026 and the rates used to discount the projected cash flows for these CGUs are shown below:

Cash generating unit

North America ADE
North America AGI

Cash generating unit

North America ADE
North America AGI

Goodwill 
carrying value
2020
£m

Long term 
growth rate
2020
%

Discount rate
2020
%

93.1 
54.3 

2.8 
2.8 

9.5 
9.5 

Goodwill  
carrying value
2019
£m

Long term  
growth rate
2019
%

Discount rate
2019
%

47.9 
55.5 

2.8 
2.8 

11.7 
11.7 

Expected future cash flows are inherently uncertain and could change materially over time. They are affected by a number of factors, including 
market and production estimates, together with economic factors such as prices, discount rates, currency exchange rates, estimates 
of production costs, and future maintenance capital expenditure, and therefore the Group has conducted sensitivity analysis on the key 
assumptions applied to the value-in-use calculations for the cash generating units. This uncertainty is especially relevant in light of the 
impact of the COVID-19 pandemic across the world and this has been reflected in the sensitivity analyses performed of reasonably plausible 

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Notes to the consolidated financial statements continued
Year ended 31 December 2020

changes in the underlying assumptions for the cash generating units. This analysis included a reduction in long-term growth rates across all 
geographies to 1% and an increase in the discount rate of 1%. None of these scenarios resulted in an impairment.

While the reasonably possible changes summarised above do not indicate an impairment, the immediate outlook varies by sector, and it is 
difficult in the current environment to predict how the world’s economies will recover. In the event that revenues do not ultimately recover to 
historical levels, or the Group is unable to achieve the anticipated cost savings from its recent restructuring, a risk of impairment may arise in 
the future, absent further management mitigating action. However based on current available information the Directors do not consider that 
there are any reasonable possible sensitivities that could arise in the next 12 months that would result in a material impairment charge being 
recognised. The Directors have concluded that no impairment charge is required in 2020.

12. Other intangible assets

Cost

At 1 January 2019
Exchange differences
Additions
Acquired on acquisition of businesses
At 1 January 2020
Exchange differences
Additions
Acquired on acquisition of businesses (see note 25)
Disposals
At 31 December 2020

Amortisation

At 1 January 2019
Exchange differences
Charge for the year
At 1 January 2020
Charge for the year
Exchange differences
Impairment loss
Disposals
At 31 December 2020

Carrying amount

At 31 December 2020
At 31 December 2019

Software 
£m

Customer 
relationships 
£m

Non–compete 
agreements 
£m

40.5 
(0.5)
1.0 
– 
41.0 
0.2 
2.1 
–
(1.8)
41.5 

17.4 
(0.4)
1.8 
18.8 
2.0 
0.2 
6.2 
(1.8)
25.4

16.1 
22.2 

50.5 
(2.3)
– 
5.7 
53.9 
(8.0)
– 
87.3 
– 
133.2 

30.6 
(1.6)
4.6 
33.6 
9.9
(1.5) 
– 
– 
42.0 

91.2 
20.3 

3.1 
– 
– 
0.1 
3.2 
– 
– 
0.6 
– 
3.8 

3.1 
– 
– 
3.1 
– 
– 
– 
– 
3.1 

0.7 
0.1 

Total 
£m

94.1 
(2.8)
1.0 
5.8 
98.1 
(7.8)
2.1 
87.9 
(1.8)
178.5 

51.1 
(2.0)
6.4 
55.5 
11.9
 (1.3) 
6.2 
(1.8)
70.5

108.0 
42.6 

Following a review of the production and finance ERP functionality, a new ERP software solution has been approved by the Board for 
development. Occasioned by the decision to invest in this new ERP software impairments of £6.2m (2019: £nil) have been recognised 
in exceptional items in the consolidated income statement, principally relating to the impairment of the production ERP software module 
(£3.6m), a proportion of Finance ERP software module (£1.4m) and HR management software module (£1.2m). The production ERP module 
has a retained carrying value of £7.7m, the finance ERP module has a retained carrying value of £7.1m while the HR management software 
module has a carrying value of £nil as at 31 December 2020. 

Some elements of the Finance ERP software module will be retained in the new ERP solution (£2.9m) and these will continue be amortised 
over their current remaining useful life, while £4.2m will not be retained and used in the ERP solution and therefore amortisation will 
be accelerated. 

These assets are all held centrally. The impairment assessments were carried out on a value-in-use basis to determine the retained value-in-
use.

Included in software assets are £7.7m of ongoing development costs related to the new ERP software solution (held centrally). These costs 
are related to assets that are not yet available for use and are therefore not amortised. Contractual commitments related to the software 
development of the replacement ERP solution were £1.3m at 31 December 2020. 

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Financial statements

Additional information

13. Property, plant and equipment

Land and buildings

Long 
leasehold
improvements
£m

Short 
leasehold
improvements
£m

Freehold
£m

Plant and 
machinery
£m

Fixtures and 
fittings
£m

Assets under 
construction
£m

Cost or valuation

257.6 
0.2 
– 
(12.5)

0.9 
4.7 
(2.5)
248.4 
– 
6.7 
7.4 

At 1 January 2019
Additions
Acquisition of businesses
Exchange differences
Transfer to assets held for 
sale
Recategorisation
Disposals
At 1 January 2020
Additions
Acquisition of businesses
Exchange differences
Transfer to assets held for 
sale¹
Recategorisation
Disposals
At 31 December 2020

(10.3)
4.1 
(1.9)
254.4 
Accumulated depreciation and impairment
119.6 
6.8 
(5.9)
– 
(1.9)
118.6 
6.9 
3.1 
3.9 

At 1 January 2019
Charge for the year
Exchange differences
Recategorisation
Eliminated on disposals
At 1 January 2020
Charge for the year
Impairment losses incurred
Exchange differences
Transfer to assets held for 
sale
Recategorisation
Eliminated on disposals
At 31 December 2020

Carrying amount

At 31 December 2020
At 31 December 2019

(7.4)
(0.2)
(1.8)
123.1 

131.3 
129.8 

10.5 
0.6 
– 
(0.4)

– 
0.6 
(0.1)
11.2 
–
– 
0.1 

– 
0.2 
(1.4)
10.1 

4.6 
1.2 
(0.2)
– 
(0.1)
5.5 
1.2 
0.1 
– 

– 
– 
(1.4)
5.4 

4.7 
5.7 

16.5 
– 
– 
(0.7)

– 
1.4 
(1.0)
16.2 
0.4 
1.1 
(0.3)

– 
1.5 
(0.7)
18.2 

7.9 
1.0 
(0.4)
– 
(1.0)
7.5 
1.4 
0.8 
(0.2)

– 
0.1 
(0.7)
8.9 

9.3 
8.7 

974.3 
3.7 
7.7 
(44.7)

– 
64.3 
(23.1)
982.2 
3.4 
6.5 
14.4 

(0.1)
47.2 
(33.6)
1,020.0 

661.5 
52.9 
(30.8)
0.8 
(22.7)
661.7 
54.4 
11.8 
11.7 

(0.1)
(0.4)
(31.6)
707.5 

312.5 
320.5 

29.7 
0.4 
– 
(1.4)

– 
1.2 
(2.2)
27.7 
0.3 
0.2 
0.6 

– 
0.7 
(0.9)
28.6 

23.4 
1.4 
(1.1)
(0.8)
(1.0)
21.9 
1.3 
0.1 
0.5 

– 
– 
(0.9)
22.9 

5.7 
5.8 

Total
£m

1,363.6 
69.1 
7.9 
(62.9)

0.9 
– 
(28.8)
1,349.7 
53.0 
14.8 
22.7 

(10.4)
(0.5)
(38.8)
1,390.5 

817.0 
63.3 
(38.4)
– 
(26.7)
815.2 
65.2 
16.0 
15.9 

(7.5)
(0.5)
(36.4)
867.9 

75.0 
64.2 
0.2 
(3.2)

– 
(72.2)
– 
64.0 
48.9 
0.3 
0.5 

– 
(54.2)
(0.3)
59.2 

– 
– 
– 
– 
– 
– 
– 
0.1 
– 

– 
– 
– 
0.1 

59.1 
64.0 

522.6 
534.5 

At 31 December 2020 the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to 
£4.6m (2019: £1.3m).

1  See note 18 for further detail on Non-current Assets Held for Sale 

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Financial statements

Additional information

Notes to the consolidated financial statements continued
Year ended 31 December 2020

13. Property, plant and equipment continued
The Group restructured various operations during 2020 and identified plant and equipment impairments amounting to £16.0m for assets no 
longer required, to £nil carrying value at 31 December 2020, assessed on a value-in-use basis. Asset impairments broken down by business 
segment in the current year were as follows:

ADE:

Western Europe
North America

AGI:

Western Europe
North America

2020
£m

1.5 
2.4 

7.5 
4.6 
16.0 

2019
£m

– 
– 

– 
– 
– 

14. Right-of-use assets
As a lessee
Information about leases for which the Group is the lessee is presented below:

Amounts recognised in the balance sheet

Right-of-use assets
Land and buildings
Plant and machinery
Vehicles
Fixtures and fittings

Right-of-use assets cost

Accumulated depreciation

2020
£m

129.4
21.1
18.4
0.6
169.5 

2019
£m

126.1
21.5
17.2
0.4
165.2 

2020
£m

(72.2)
(15.0)
(12.9)
(0.4)
(100.5)

2019
£m

(66.6)
(13.5)
(11.5)
(0.3)
(91.9)

Additions to right-of-use assets during 2020 were £8.7m (2019: £11.8m) and additions through acquisition of businesses amounted to £4.5m 
(2019: £6.1m). Asset impairments in the year due to plant closures amounted to £0.2m (2019: £nil) to £nil carrying value at 31 December 
2020, assessed on a value-in-use basis. 

Lease liabilities

Maturity analysis – contractual undiscounted cash flows
Less than one year
One to five years
More than five years
Total undiscounted cash flows
Total lease liabilities
Current
Non-current

The total cash outflow for leases in 2020 was £17.6m (2019: £16.8m).

2020
£m

15.6
37.5
59.5
112.6 
75.6 
13.6
62.0

2019
£m

15.9
41.5
62.0
119.4 
79.4 
13.4
66.0

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Financial statements

Additional information

14. Right of-use assets continued
Amounts recognised in the consolidated income statement

Depreciation charge
Interest on lease liabilities
Expenses relating to short-term leases
Expenses relating to leases of low value assets
Right-of-use asset impairment charge 

2020
£m
14.8 
2.2 
1.1 
0.6 
0.3 

2019
£m
14.5 
2.4 
1.2 
0.6 
– 

Contracts may contain both lease and non-lease components such as administrative charges and taxes. The Group allocates the consideration 
in the contract to the lease and non-lease components based on their relative stand-alone prices.

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not 
impose any covenants other than the security interests in the leased assets that are held by the lessor.

As a lessor
The Group sub-leases a small number of properties. There were no material arrangements where the Group is the lessor.

15. Inventories 

Raw materials
Work-in-progress
Finished goods and goods for resale
Less: obsolescence provision

Inventory expensed disclosed in note 3

16. Trade and other receivables

Amounts falling due within one year:

Amounts receivable for the supply of services
Allowance for expected credit loss
Net trade receivables
Other receivables
Prepayments

Amounts falling due after more than one year:

Trade and other receivables

2020
£m
15.1 
1.6 
0.2 
(1.1)
15.8 

2020
£m

97.7 
(4.5)
93.2 
13.0 
10.0 
116.2 

2.1 

2019
£m
13.1 
1.8 
0.4 
(0.5)
14.8 

2019
£m

115.0 
(4.8)
110.2 
23.5 
9.2 
142.9 

1.2 

The average credit period given to customers for the supply of services as at 31 December 2020 is 63 days (2019: 63 days). An allowance has 
been made for estimated irrecoverable amounts from the supply of services of £4.5m (2019: £4.8m). This allowance has been determined by 
reference to expected credit losses as set out in the Group's accounting policies on page 95.

The carrying amount of trade and other receivables approximates their fair value.

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Financial statements

Additional information

Notes to the consolidated financial statements continued
Year ended 31 December 2020

16. Trade and other receivables continued
Included in the Group's trade receivables balance are specific debtor balances with a carrying amount of £20.8m (2019: £26.5m) which 
are past due but not impaired at the reporting date. The Group has assessed these balances for recoverability and considers the credit 
quality intact.

The average credit terms offered to customers is 34 days, with a range from 13 days to 66 days.

Ageing analysis of net trade receivables:

Trade receivables within terms
Ageing of past due but not impaired receivables:

31-60 days
60-90 days
91-120 days
Greater than 120 days

Movement in the allowance for expected credit loss:

At 1 January 
Impairment losses recognised

Allowance acquired with businesses

Amounts written off as uncollectable
Impairment losses reversed
Exchange differences
At 31 December

2020
£m
72.4 

11.1 
6.6 
2.3 
0.8 
93.2 

2020
£m
4.8 
1.1 

0.5

(0.6)
(1.5)
0.2 
4.5 

2019
£m
83.7 

13.1 
8.8 
2.6 
2.0 
110.2 

2019
£m
5.1 
1.3 

– 

(0.7)
(0.7)
(0.2)
4.8 

In determining the recoverability of a trade receivable the Group considers any change in the quality of the trade receivable from the date 
credit was initially granted up to the reporting date. The Group uses judgement in making these assumptions and selecting the inputs to the 
impairment calculation, based on the Group’s past history and existing market conditions, as well as forward-looking estimates at the end 
of each reporting period. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the 
Directors believe that there is no further credit provision required in excess of the allowance for expected credit loss.

Included in the allowance for expected credit loss are individually impaired trade receivables with a gross balance of £6.1m (2019: £4.8m). 
The impairment recognised represents the difference between the carrying amount of these trade receivables and the present value of the 
expected proceeds. The Group does not hold any collateral over these balances.

Ageing of impaired trade receivables:

Less than 3 months
3-12 months
Over 12 months

2020
£m
0.1 
1.7 
4.3 
6.1 

2019
£m
0.1 
2.6 
2.1 
4.8 

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Financial statements

Additional information

17.  Cash and bank balances
Cash and bank balances comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less. 
The carrying amount of these assets approximates to their fair value. A breakdown of significant cash and bank balances by currency is 
as follows:

US dollar
Euro
Sterling
Swedish krona
Chinese yuan
Mexican peso
Other
Total cash and bank balances1

1  Refer to note 19 for an analysis of overdraft by currency.

2020
£m
7.1 
10.0 
2.1 
2.0 
4.7 
1.8 
3.0 
30.7 

2019
£m
6.0 
5.4 
4.8 
1.7 
1.5 
0.9 
1.7 
22.0 

18. Assets held for sale
Included in Property, plant and equipment are £2.9m (2019: £nil) of assets held for sale resulting from restructuring related plant closures 
during the year. The assets have been classified as held for sale in line with the criteria set out in IFRS 5. All assets categorised as held for 
sale are recorded at the lower of their carrying amount and fair value less costs to sell and in line with IFRS 5 the assets will no longer be 
depreciated whilst categorised as held for sale. 

These assets comprise of properties owned by the Group in Western Europe and North America.

The assets held for sale are analysed between operating segments as follows:

AGI:

Western Europe
North America

19. Borrowings

Revolving Credit Facility
Bank overdrafts
Total Borrowings

Weighted average interest rate paid

Analysis of Revolving Credit Facility drawdowns by currency:

US dollar
Euro
Sterling

Analysis of bank overdrafts by currency:

US dollar
Other

2020
£m

2.5 
0.4 
2.9 

2020
£m
51.7 
1.5 
53.2 
1.6%

16.6
18.1 
17.0 

51.7 

1.1 
0.4 
1.5 

2019
£m

– 
– 
– 

2019
£m
– 
1.1 
1.1 
1.7%

– 
– 
– 

– 

1.0 
0.1 
1.1 

Bank overdrafts are repayable on demand. No overdrafts are secured.

The Group holds a Revolving Credit Facility in the amount of £250.9m. This new facility commenced on 27 May 2020 and matures on 27 May 
2025. The Group has considered both qualitative and quantitative factors in accordance with IFRS 9 and has concluded that the former RCF 
has extinguished. Loan origination fees of £1.4m have therefore been capitalised and will be amortised over the life of the loan. 

At 31 December 2020, the Group's revolving credit facility had drawings of £51.7m (2019: £nil). During the year the Group utilised £101.9m 
(2019: £35.0m) under the committed facility, £50.2m of which was subsequently repaid during the year.

All borrowings are classified as financial liabilities measured at amortised cost. Given their short term nature, the carrying amount of bank 
overdrafts approximate their fair value.

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Financial statements

Additional information

Notes to the consolidated financial statements continued
Year ended 31 December 2020

19. Borrowings continued
Other financial liabilities
The following table details the Group's remaining contractual maturity for its financial liabilities. The table has been drawn up based on the 
undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both 
interest and principal cash flows.

Non-interest bearing
Bank loans and overdrafts
Deferred consideration on acquisition 
of businesses
Lease liabilities
Derivative financial instruments

Non-interest bearing
Bank loans and overdrafts
Lease liabilities
Derivative financial instruments

Less than  
1 year
2020
£m
65.5 
53.2 

59.0 
15.6 
2.3 
195.6

Less than
1 year
2019
£m
65.4 
1.1
15.9
1.4
83.8 

1-2 years
2020
£m
0.4 
– 

– 
13.3 
– 
13.7 

1-2 years
2019
£m
1.1 
– 
14.5 
– 
15.6 

2-5 years
2020
£m
0.5 
– 

– 
24.2 
– 
24.7 

2-5 years
2019
£m
0.1 
– 
27.0 
– 
27.1 

5+ years
2020
£m
0.3 
– 

– 
59.5 
– 
59.8 

5+ years
2019
£m
1.0 
– 
62.0 
– 
63.0 

Total
2020
£m
66.7 
53.2 

59.0 
112.6 
2.3 
293.8 

Total
2019
£m
67.6 
1.1 
119.4 
1.4 
189.5 

Of the £53.2m (2019: £1.1m) bank loans and overdrafts outflows disclosed above, £51.7m (2019: £nil) of bank loans are drawn under the 
committed facility maturing on 27 May 2025. The overdrafts are repayable on demand and some are part of pooling arrangements, which 
include offsetting cash balances. The net impact on the balance sheet of derivative cashflows were £nil (2019: £nil) being the net of £2.3m 
(2019: £1.4m) derivative financial instruments outflows disclosed above, and £2.3m (2019: £1.4m) derivative cash inflows. 

Net cash plus lease liabilities as at 
1 January 2019

Cash flows
New bank loans raised
Repayment of bank loans
Debt acquired on acquisition of businesses
Repayment of debt acquired on acquisition 
of business
Additions – leases
Foreign exchange adjustments
Net cash plus lease liabilities as at 
31 December 2019
Cash flows
New bank loans raised
Repayment of bank loans
Debt acquired on acquisition of businesses
Repayment of debt acquired on acquisition 
of business
Additions – leases
Foreign exchange adjustments
Net cash plus lease liabilities and 
borrowings as at 31 December 2020

Borrowings
£m

Leases
£m

Financing activities

Total liabilities 
from financing 
activities
£m

Cash/bank 
overdraft
£m

–

– 
35.0 
(35.0)
2.3 

(2.3)
– 
– 

–
–
101.9 
(50.2)
11.9 

(11.9)
–
–

51.7

80.3 

(14.4)
– 
– 
– 

– 
17.2 
(3.7)

79.4
(17.6)
–
–
–

–
13.2 
0.6 

75.6

80.3 

(14.4)
35.0 
(35.0)
2.3 

(2.3)
17.2 
(3.7)

79.4
(17.6)
101.9 
(50.2)
11.9 

(11.9)
13.2 
0.6 

127.3

(36.2)

15.2 
– 
– 
– 

– 
– 
0.1

(20.9)
(8.4)
–
–
–

–
–
0.1 

(29.2)

Total
£m

44.1 

0.8 
35.0 
(35.0)
2.3 

(2.3)
17.2 
(3.6)

58.5
(26.0)
101.9 
(50.2)
11.9 

(11.9)
13.2 
0.7 

98.1

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Financial statements

Additional information

20. Financial instruments
(a) Financial instruments by category
In accordance with IFRS 9, the group categorises its financial instruments as those measured at ‘amortised cost’, ‘fair value through profit  
or loss’ and ‘fair value through other comprehensive income’.

Financial assets
Trade and other receivables
Cash and bank balances

Financial assets
Trade and other receivables
Cash and bank balances

Financial liabilities
Borrowings - loans and overdrafts
Lease liabilities
Trade and other payables
Deferred consideration
Other non-current liabilities

Financial liabilities
Borrowings – loans and overdrafts
Lease liabilities
Trade and other payables
Other non-current liabilities

Fair value  
hierarchy

Fair value  
hierarchy

Fair value  
hierarchy

Level 3

Level 2/3

Fair value  
hierarchy

Level 3

Level 2/3

At amortised  
cost
2020
£m
106.7 
30.7 
137.4 

At amortised  
cost
2019
£m
123.8 
22.0 
145.8 

At amortised  
cost
2020
£m
53.2 
75.6 
65.8 
58.7 
1.2 
254.5

At amortised  
cost
2019
£m
1.1 
79.4 
62.2 
2.2 
144.9 

At fair value 
through profit
or loss
2020
£m
–
–
–

At fair value
through profit
or loss
2019
£m
–
–
–

At fair value 
through profit
or loss
2020
£m
–
–
–
–
–
–

At fair value  
through profit
or loss
2019
£m
–
–
–
–
–

At fair value 
through OCI
2020
£m
–
–
–

At fair value  
through OCI
2019
£m
–
–
–

At fair value 
through OCI
2020
£m
–
–
–
–
–
–

At fair value  
through OCI
2019
£m
–
–
–
–
–

Total 
2020
£m
106.7 
30.7 
137.4 

Total 
2019
£m
123.8 
22.0 
145.8 

Total 
2020
£m
53.2 
75.6 
65.8 
58.7 
1.2 
254.5

Total 
2019
£m
1.1 
79.4 
62.2 
2.2 
144.9 

 For information on derivative financial instruments with a fair value of £nil refer to section (d) of note 20.

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Financial statements

Additional information

Notes to the consolidated financial statements continued
Year ended 31 December 2020

20. Financial instruments continued
(b) Fair value measurement
There have been no transfers of assets or liabilities between levels of the fair value hierarchy during the year.

The carrying values of financial instruments at amortised cost as presented in the consolidated financial statements approximate their 
fair values.

(c) Financial risk management
The Group's multinational operations expose it to a variety of financial risks. In the course of its business, the Group is exposed to foreign 
currency risk, interest rate risk, liquidity risk and credit risk. Financial risk management policies are set by the Board. The Group’s treasury 
function provides a centralised service to the Group for funding, foreign exchange, interest rate management and counterparty risk. 
Treasury activities have the objective of minimising risk and treasury operations are conducted within a framework of policies and guidelines 
reviewed and authorised by the Board. 

In accordance with its treasury policy, the Group does not use or hold derivative financial instruments for trading or speculative purposes. 
The Group may however use derivative instruments, for risk management purposes only, transacted by specialist treasury personnel. The use 
of financial instruments, including derivatives, is permitted when approved by the Board, where the effect is to minimise risk for the Group. 
There has been no significant change during the financial year, or since the end of the year, to the types or scope of financial risks faced by 
the Group.

Liquidity risk
Liquidity risk is defined as the risk that the Group might not be able to settle or meet its obligations on time or at a reasonable price. 
Liquidity risk arises as a result of mismatches between cash inflows and outflows from the business. This risk is monitored on a centralised 
basis through regular cash flow forecasting, strategic planning, an annual budget agreed by the Board each year and re-forecasts undertaken 
during the financial year. To mitigate the risk, the resulting forecast net cash/(debt) is measured against the liquidity headroom policy which, at 
the current net cash/(debt) levels, requires committed facilities (plus term loans in excess of one year) to exceed net debt by 50% (minimum 
facilities of £75m).

As at 31 December 2020, the Group had £199.2m available on the committed revolving credit facility of £250.9m (2019: £230.0m) which, 
together with net cash and cash equivalents of £29.2m (2019: £20.9m), resulted in available funds of £228.4m (2019: £250.9m). The Group 
also uses uncommitted short-term bank facilities to manage short-term liquidity but these facilities are excluded from the liquidity headroom 
policy. The Group manages longer-term liquidity through its committed bank facilities and will, if appropriate, raise funds on capital markets.

As at 31 December 2020 the Group’s principal committed bank facility of £250.9m had a maturity date of 27 May 2025 (4.4 years to maturity) 
and had drawings of £51.7m (2019: £nil).

Cash management pooling, netting and concentration techniques are used to minimise borrowings. As at 31 December 2020, the Group had 
gross cash of £30.7m (2019: £22.0m).

Credit risk
Credit risk primarily arises because a counterparty may fail to perform its obligations. The Group is exposed to credit risk on financial assets 
such as cash balances, derivative financial instruments and trade and other receivables.

The Group's credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of appropriate 
allowances for expected credit losses based on a simplified lifetime Expected Credit Loss (ECL) model to assess trade receivables for 
impairment where ECL is the present value of all cash shortfalls over the expected life of a trade receivable. In response to the changing 
economic environment resulting from COVID-19 additional processes were put in place to access customer credit terms and management 
of trade receivables and Bodycote has not experienced a notable increase in credit losses resulting from the COVID-19 impact on the wider 
economy. An allowance for impairment is made when one or more events have occurred that have a significant impact on the expected future 
cash flows of the financial asset such that there is sufficient evidence of a reduction in the recoverability of the asset. The quantitative analysis 
of credit risk relating to receivables is included in note 16. 

Counterparty risk encompasses settlement risk on derivative financial instruments and money market contracts and credit risk on cash, time 
deposits and money market funds. The Group monitors its credit exposure to its counterparties via their credit ratings (where applicable) and 
through its policy, thereby limiting its exposure to any one party to ensure there is no significant concentration of credit risk. The credit risk 
on liquid funds (cash balances) and derivative financial instruments is limited because the counterparties are banks with high credit-ratings 
assigned by international credit-rating agencies and Group policy is to enter into such transactions only with counterparties with a long-term 
credit rating of A-/A3 or better. However, acquired businesses occasionally have dealings with banks with lower credit ratings. Business with 
such banks is moved as soon as practicable.

The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers. 

Interest rate risk
Interest rate risk arises on borrowings and cash balances (and derivative liabilities and assets) which are at floating interest rates. Changes in 
interest rates could have the effect of either increasing or decreasing the Group’s net profit. Under the Group’s interest rate management 
policy, the interest rates on each of the Group’s major currency monetary assets and liabilities are managed to achieve the desired mix of fixed 
and variable rates for each major net currency exposure. The major interest rate risk is to rates in the UK, Europe and USA. Measurement of 
this interest rate risk and its potential impact due to volatility on the Group’s reported financial performance is undertaken on a monthly basis 
and the Board uses this information to determine, from time to time, an appropriate mix of fixed and floating rates. By the end of 2021, LIBOR 
is expected to be phased out, which necessitates adopting a new interest reference rate for new and existing loan agreements. The impact of 
this on existing loans is under review.

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20. Financial instruments continued
Interest rate sensitivity
To represent management's best estimate of a reasonable range of potential outcomes, the Group has measured the estimated change to the 
income statement and equity of either an instantaneous increase or decrease of 1% (100 basis points) in market interest rates, which did not 
indicate any material impact on the financial statements. This analysis was for illustrative purposes only. The sensitivity analysis excludes the 
impact of market risks on net post employment benefit obligations.
The interest rate sensitivity analysis is based on the following assumptions:
 – changes in market interest rates affect the interest income or expense of variable interest financial instruments; and

 – changes in market interest rates affect the fair value of derivative financial instruments designated as hedging instruments.

Under these assumptions, a one percentage point fall or rise in market interest rates for all currencies in which the Group has variable net 
cash or net borrowings at 31 December 2020 would reduce or increase profit before tax by approximately £0.2m (2019: £0.1m). There is no 
significant impact on equity in the current or previous year. 

Currency risk 
Bodycote has operations in 23 countries and is therefore exposed to foreign exchange translation risk when the profits/losses and net assets 
of these entities are consolidated into the Group accounts.

Ninety-three per cent of the Group’s revenues are in currencies other than sterling (EUR 35%, USD 37% and SEK 6%). Cumulatively over the 
year, sterling rates moved such that the sales for the year were £2.3m lower than if sales had been translated at the rates prevailing in 2019.

It is Group policy not to hedge exposure for the translation of reported profits. Refer to section (e) for further disclosure of the Group's financial 
instrument risk management activities. 

The Group’s balance sheet translation policy is not to actively hedge currency net assets. However, where appropriate, the Group will still 
match centrally held currency borrowings to the net assets. The Group generally borrows in sterling but also maintains debt in US dollars and 
euro, consistent with the location of the Group’s assets. The Group recognises foreign exchange movements in equity for the translation of 
net investment hedging instruments and balances (see section e).  

Transactional foreign exchange exposures arise when entities within the Group enter into contracts to pay or receive funds in a currency 
different from the functional currency of the entity concerned. It is Group policy to hedge exposure to cash transactions in foreign currencies 
when a commitment arises, usually through the use of foreign exchange forward contracts. Even though approximately 93% of the Group’s 
sales are generated outside the UK, the nature of the business is such that cross border sales and purchases are limited and immaterial for 
the Group.

Currency sensitivity 
Taking the 2020 sales by currency, a 10% weakening/strengthening in the 2020 cumulative average rates for all currencies versus sterling 
would have given rise to a +£61.5m/-£50.3m movement in sales respectively. The impact on headline operating profit is affected by the 
mix of losses and profits in the various currencies. However, taking the 2020 operating profit mix, a 10% weakening/strengthening in 2020 
cumulative average rates for all currencies would have given rise to a +£7.0m/-£5.9m movement in headline operating profit.

(d) Derivative financial instruments
The Group’s financial instruments are considered to be classified as level 2 instruments. Fair value measurements are those derived from 
inputs other than quoted prices included within level 1 that are observable for the asset or liabilities, either directly (i.e. as prices) or indirectly 
(i.e. derived from prices).

The Group uses foreign currency forward contracts in the management of its exchange rate exposures. The contracts are primarily 
denominated in the currencies of the Group's principal markets. The gains recognised in the income statement on the contracts which 
matured in 2020 amounted to £0.4m (2019: £0.1m). The unrecognised gains and losses were not material in either 2020 or 2019.

The following summarises the aggregate notional amount (aggregate face value) of all open contracts and their related fair values as of the 
balance sheet date: 

Currency forward foreign exchange contracts

Contractual or 
notional amount
2020
£m
2.3 

Fair value
2020
£m
–

Contractual or 
notional amount
2019
£m
1.4 

Fair value
2019
£m
–

In accordance with IFRS 7 Financial Instruments: Disclosures, fair value is determined using quoted forward exchange rates and yield curves 
derived from quoted interest rates matching maturities of the contracts.

All forward foreign exchange contracts are on demand or due within one year.

The Group's interest rate risk is primarily in relation to its floating rate borrowings (cash flow risk). From time to time the Group will use 
interest rate derivative contracts to manage its exposure to interest rate movements within Group policy. However, at the balance sheet date, 
the Group had no interest rate derivative contracts (2019: nil).

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Notes to the consolidated financial statements continued
Year ended 31 December 2020

20. Financial instruments continued 
(e) Net Investment hedge
Whilst low levels of debt are typically maintained, at the balance sheet date the Group has drawn on the Revolving Credit Facility (RCF) to 
partly fund the Ellison acquisition. The related loans are denominated in USD and EUR and the amounts designated as hedges of the net 
investments of the Group's subsidiaries with matching functional currency on a 1:1 ratio. The effects and performance of the net investment 
hedges at 31 December 2020 are set out as follows: 

Carrying amount (bank loan) and denominations 
Hedge Ratio 
Change in bank loan carrying amount as a result of foreign currency movements 
since 1 January 2020
Change in value of hedged item used to determine hedge effectiveness

£m
(34.7)
1:1

1.1 
(1.1)

€m
20.0
–

–
–

$m
23.0
–

–
–

The foreign exchange gain of £1.1m on translation of borrowings to GBP at the end of the reporting period is recognised in other 
comprehensive income and accumulated in the foreign currency translation reserve in shareholder's equity. There was no ineffectiveness 
to be recorded from the net investment hedges. 

21. Deferred tax
The following are the major deferred tax liabilities and (assets) recognised by the Group and movements thereon during the current and prior 
reporting periods:

At 1 January 2019
Charge to the consolidated 
income statement
(Credit)/debit to equity
Acquisition of businesses
Transfers
Exchange differences
Effect of change in tax rate:

Income statement

At 1 January 2020

Charge/(credit) to the consolidated 
income statement
Debit to equity
Acquisition of businesses
Transfers
Exchange differences
Effect of change in tax rate:

Income statement
At 31 December 2020

Accelerated tax 
depreciation
£m
50.7

Tax losses
£m
(2.5)

Retirement 
benefit 
obligations
£m
(4.4)

4.5 
–
0.5 
–
(2.7)

(0.2)
52.8 

1.5 
– 
1.1 
–
0.6 

0.1 
56.1

0.4 
–
–
0.1 
–

–
(2.0)

(0.6)
– 
–
–
– 

– 
(2.6)

0.1 
(0.9)
–
–
0.2 

0.1 
(4.9)

1.5 
0.1 
–
–
(0.3)

–
(3.6)

Other
£m
(8.1)

4.1 
0.4 
0.3 
(0.1)
–

–
(3.4)

(4.7)
– 
–
(1.8)
0.1 

0.2 
(9.6)

Total
£m
35.7

9.1 
(0.5)
0.8 
–
(2.5)

(0.1)
42.5 

(2.3)
0.1 
1.1
(1.8) 
0.4 

0.3 
40.3

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21. Deferred tax continued
The following is the analysis of the deferred tax balances for financial reporting purposes: 

Deferred tax liabilities
Deferred tax assets

2020
£m
42.7 
(2.4) 
40.3 

2019
£m
48.6 
(6.1)
42.5 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities 
and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities 
on a net basis.

Other deferred tax assets relate to provisions recognised in the financial statements that are not yet deductible for tax purposes, in particular 
in relation to restructuring charges, share-based payments and local profit differences that are expected to reverse over time.

At the balance sheet date, the Group has unused tax losses of £50.9m (2019: £19.8m) available for offset against future profits. A deferred tax 
asset has been recognised in respect of £9.0m (2019: £7.3m) of such losses, based on management forecasts of future taxable profits against 
which the assets can be recovered in the relevant jurisdictions. No deferred tax asset has been recognised in respect of the remaining £41.9m 
(2019: £12.5m) of such losses where there remains uncertainty over the timing of utilisation relating to future profitability. The majority of 
losses may be carried forward indefinitely. 

The Group has capital losses of £55.8m (2019: £55.8m) which are not recognised for deferred tax as there is uncertainty over the timing of 
future suitable profits against which the losses could be utilised.

A deferred tax liability of £1.1m (2019: £1.0m) relating to the temporary differences on unremitted earnings of overseas subsidiaries has been 
recognised as the Group believes it is probable that these temporary differences will reverse in the foreseeable future. Temporary differences 
arising in connection with interests in associates and joint ventures are insignificant.

The majority of the deferred tax liability is expected to reverse in over 12 months.

22. Trade and other payables 

Amounts falling due within one year:

Trade payables
Other taxes and social security
Deferred consideration on acquisition of businesses
Other payables
Accruals1

Amounts falling due after more than one year:

Other payables

1  Accruals include £21.0m (2019: £28.0m) of payroll related accruals.

2020
£m

28.3 
22.6 
58.7 
11.8 
49.5 
170.9 

2.3 

2019
£m

31.3 
28.8 
– 
12.1 
55.2 
127.4 

2.2

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken 
for trade purchases as at 31 December 2020 is 35 days (2019: 33 days). The Directors' consider the carrying value of trade payables to equate 
to their fair value.

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Notes to the consolidated financial statements continued
Year ended 31 December 2020

23. Provisions

At 1 January 2020

Increase in provision
On acquisition of subsidiary
Utilisation of provision
Exchange difference
At 31 December 2020
Included in current liabilities
Included in non-current liabilities

Restructuring
£m
3.0 

Restructuring 
environmental
£m
2.4 

Environmental
£m
8.1 

32.8 
–
(11.2)
(0.1)
24.5

2.9 
–
(0.4)
(0.1)
4.8

–
0.2 
(0.5)
(0.1)
7.7

Total
£m
13.5 

35.7 
0.2 
(12.1)
(0.3)
37.0
26.0 
11.0 
37.0

£35.7m of restructuring provisions have been recorded following the announcement of several restructuring initiatives across the Group. 
The restructuring provisions consist of provisions for employee severance and redundancy (£20.8m) and costs associated with closing plants 
(£12.0m) and (£2.9m) for environmental provisions. These restructuring provisions have been included in exceptional items and further details 
of this programme can be found in the Chief Executive's report on pages 11 to 12 and in note 6.

Cash outflows in relation to restructuring initiatives were £11.6m with the remaing outflows to occur in 2021 and 2022. 

The Group provides for the costs of environmental remediation that have been identified at the time of plant closure if there is a probable 
outflow of economic resources identified, as part of acquisition due diligence, or in other circumstances where remediation by the Group is 
required and a probable outflow of economic resources is identified. This provision is reviewed annually and is separated into restructuring 
environmental and environmental to identify separately environmental provisions relating to the restructuring programme from those arising in 
the ordinary course of business.

The majority of cash outflows in respect of these liabilities are expected to occur within five years. 

The Group remains exposed to contingent liabilities in respect of environmental remediation liabilities. In particular, the Group could be 
subjected to regulatory or legislative requirements to remediate sites in the future. However, it is not possible at this time to determine 
whether and to what extent any liabilities exist, other than for those recognised above. Therefore no provision is recognised in relation to 
these items. 

24. Share capital

Issued and fully paid:
191,456,172 (2019: 191,456,172) ordinary shares of 17 3/11p each 

2020
£m

33.1 

2019
£m

33.1 

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25. Acquisition of businesses
During the year the Group completed the acquisition of 100% of the ordinary share capital of Ellison Surface Technologies ('Ellison') for total 
provisional consideration of £130.0m. Ellison is a Surface Technology business located in North America with a number of sites primarily 
serving the aerospace sector.

The acquisition significantly strengthens the Group's network, enhances processes and creates synergies allowing the Group to deliver 
industry-leading solutions that address aerospace customers' heat treatment and specialist thermal treatment requirements.

The accounting is provisional as the Group has twelve months to finalise the valuation of the acquired assets and liabilities and the 
resultant goodwill under IFRS 3.

The transaction has been accounted for as a business combinations under IFRS 3 and is summarised below: 

Fair value of net assets acquired:
Other intangible assets
Property, plant and equipment
Right-of-use assets
Inventories
Trade and other receivables
Trade and other payables
Lease liabilities
Deferred tax liabilities
Provisions
Bank loans

Goodwill
Total consideration
Satisfied by:
Cash consideration
Deferred consideration
Total consideration transferred
Net cash outflow arising on acquisition:
Cash consideration
Deferred consideration paid
Payment of debt and other payables acquired post completion

2020
£m
87.9 
14.8 
5.1 
2.6 
7.3 
(19.4)
(5.1)
(1.1)
(0.2)
(11.9)
80.0 
50.0 
130.0

66.1 
63.9 
130.0 

66.1 
0.6
28.8 
95.5 

Acquisition related costs amounted to £2.1m (2019: £1.7m of which £1.3m related to the Ellison acquisition) and have been included in the 
Income Statement.

The gross contractual value of the trade and other receivables was £7.8m. The best estimate at the acquisition date of the contractual cash 
flows not expected to be collected was £nil.

Deferred consideration is settled in US dollars which translated to £63.9m at the acquisition date, on a discounted basis. £0.6m of the original 
deferred consideration was paid in October as per agreement with the seller. The remaining deferred consideration is payable on 3 April 2021, 
being 12 months after the completion date of the acquisition. 

As the deferred consideration is settled in US dollars, it is subject to exchange rate movements of £5.4m when translated at 31 December 
2020 rates. This foreign exchange difference is recorded within foreign exchange reserves in the financial statements. The deferred 
consideration payable held on the balance sheet at 31 December 2020 is £58.7m, including the impact of £0.3m due to discounting.

The goodwill arising on the acquisition is expected to be deductible for tax purposes and is attributable to:

 – the anticipated profitability of the distribution of the Group’s services in new markets; and

 – the synergies that can be achieved in the business combination including management, processes and maximising site capacities.

The business was acquired on 3 April 2020 and contributed £22.6m revenue, £0.9m headline operating profit and £4.0m operating loss, for 
the period between the date of acquisition and the balance sheet date.

If the acquisition had been completed on the first day of the financial year, the acquisition would have contributed £34.3m to Group revenue, 
£1.7m to Group headline operating profit and £3.2m operating loss.

In the prior year the group acquired two facilities that were accounted for as business combinations for total consideration of £20.0m resulting 
in £10.4m of goodwill being recognised in the consolidated financial statements, and payments totalling £0.1m were made in respect of 
deferred consideration due on acquisitions made in 2016. Refer to note 23 in the 2019 Annual Report for further information.

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Notes to the consolidated financial statements continued
Year ended 31 December 2020

26. Investment in associate
Set out below are the details of the Group's investment in Techmeta Engineering SAS, being the only investment in an associate held by the 
group. The entity is registered in France and has share capital consisting solely of ordinary shares of which the Group owns 49%, having made 
a disposal of 51% of the ordinary share capital in 2018. 

Investment in associate
Loan receivable from associate

Profit after tax from continuing operations

2020
£m
1.8 
2.3 
4.1 
0.4 

2019
£m
1.6 
2.6 
4.2 
0.2 

Prior to disposal in 2018 the Group provided an interest bearing credit facility of £3.6m to Techmeta Engineering repayable over 10 years. 
During the year, Techmeta Engineering reimbursed £0.3m of the loan receivable. There were no other transactions.

27.  Notes to the cash flow statement

Profit for the year
Adjustments for:

Finance income
Finance costs
Taxation (credit)/charge

Operating profit
Adjustments for:

Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of other intangible assets

Loss/(profit) on disposal of property, plant and equipment
Share-based payments
Income from associate
Impairment of property, plant and equipment and other assets - recognised in exceptional items
Impairment of property, plant and equipment and other assets - recognised in operating profit
Impairment of other intangible assets - recognised in exceptional items

EBITDA (See note 1)

Decrease/(increase) in inventories

Decrease/(increase) in receivables
Decrease in payables
Increase/(decrease) in provisions

Cash generated by operations

Income taxes paid

Net cash from operating activities

Cash and cash equivalents comprise:

Cash and bank balances
Bank overdrafts (included in borrowings)

2020
£m
0.8

(0.2)
6.7 
(2.3) 
5.0

65.2 
14.8 
11.9 

0.6 
0.4 
(0.2)
16.5 
0.3 
6.2 
120.7 
2.1 

35.6 
(35.1)
23.6 
146.9
(7.8)
139.1

2020
£m

30.7 
(1.5)
29.2 

2019
£m
94.0 

(0.2)
4.9 
29.9 
128.6

63.3 
14.5 
6.4 

(4.4)
1.1 
(0.2)
–
–
–
209.3 
(1.5)

(1.1)
(2.1)
(2.6)
202.0
(24.7)
177.3

2019
£m

22.0 
(1.1)
20.9 

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28. Share-based payments 
Bodycote Incentive Plan (BIP)
The Company operates the BIP under which Executive Directors and Senior Executives receive a conditional award of Bodycote shares up to 
a maximum of 175% of base salary. Vestings of awards are based upon two performance measures, over a three year period.

Fifty percent of the award is subject to a Return On Capital Employed (ROCE) performance condition and fifty percent of the award is subject 
to headline earnings per share (EPS) performance condition for Executive Directors and in the event that threshold performance for both EPS 
and ROCE is not achieved, none of the conditional awards will vest. Senior Executives target measures are subject to headline operating profit 
and headline operating cash flow. 

The number of outstanding share awards is as follows:

At 1 January 
Granted during the year
Exercised during the year
Expired during the year
At 31 December
Average fair value of share awards granted during the year at date of grant (pence)
Fair value of awards granted during the year (£)

BIP
2020
1,898,174 
1,137,145 
(639,850)
(79,366)
2,316,103 
571.9 
6,503,332 

The exercise price of shares exercised was £nil. As at year ended 31 December 2020 10,279 shares were exercisable.

The inputs to the Black-Scholes simulation model, used to determine the charge to the income statement for BIP, are as follows:

Weighted average share price (pence)
Weighted average exercise price (pence)
Expected life (years)
Expected dividend yields (%)
Average fair value of share awards granted during the year at date of grant (pence)
Fair value of awards granted during the year (£)

2020
571.9 
nil
3.0 
3.5 
571.9 
6,503,332 

BIP
2019
2,512,501 
691,088 
(1,140,967)
(164,448)
1,898,174 
725.6 
5,014,535 

2019
725.6 
nil
3.0 
4.2 
725.6 
5,014,535 

The Group recognised a total charge to the income statement of £0.4m (2019: £1.1m) related to equity-settled share-based 
payment transactions. 

29.  Related party transactions
Transactions between subsidiaries of the Group, which are related parties to each other, have been eliminated on consolidation and are not 
disclosed in this note. Transactions with investments in associates are disclosed in note 26.

The remuneration of the Board of Directors, who are considered key management personnel of the Group, was as follows:

Short-term employee benefits
Share-based payments
Pensions

2020

1.6 
–
0.3 
1.9 

2019

2.4 
1.5 
0.2 
4.1 

Further information about the remuneration of the individual Directors is provided in the Board Report on Remuneration on pages 64 to 75.

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Notes to the consolidated financial statements continued
Year ended 31 December 2020

30. Retirement benefit schemes
Defined contribution schemes
The Group operates defined contribution retirement benefit schemes for employees in the United Kingdom, France, Belgium, Canada and 
the United States of America. The assets of the schemes are held separately from those of the Group in funds under the control of trustees. 
Where there are employees who leave the schemes prior to vesting fully in the contributions, the contributions payable by the Group are 
reduced by the amount of forfeited contributions.

The Group's employees in Denmark, Finland, Sweden, Italy, Slovakia, Switzerland and the Netherlands are members of state-managed 
retirement benefit schemes operated by the governments of each country. The relevant subsidiaries are required to contribute a specified 
percentage of payroll costs to the retirement benefit schemes to fund the benefits. The only obligation of the Group with respect to these 
retirement benefit schemes is to make the specified contributions.

The total cost charged to income of £7.3m (2019: £7.8m) represents contributions payable to these schemes by the Group at rates specified 
in the rules of the plans. As at 31 December 2020 contributions of £0.2m (2019: £0.2m) due in respect of the current reporting period had not 
been paid over to the schemes.

Defined benefit schemes
The Group operated a number of pension schemes and provided leaving service benefits to certain employees during the year. The defined 
benefit obligation less fair value of assets at the end of the year and total expense recognised in the income statement are summarised below 
as follows:

Defined benefit obligation less fair value of assets 

UK Scheme
Non-UK Schemes

Total (credit)/expense recognised in the income statement

UK Scheme
Non-UK Schemes

2020
£m
–
16.2 
16.2 

2020
£m
0.4 
(1.6)
(1.2)

2019
£m
–
17.9 
17.9 

2019
£m
0.1
1.0 
1.1 

UK Scheme
The Group sponsors the Bodycote UK Pension Scheme ("the Scheme") which is a funded defined benefit arrangement for certain former UK 
employees, and pays out pensions at retirement based on service, final pensionable pay and price inflation. The Scheme is funded by the 
Group. The Scheme exposes the Group to actuarial risks such as longevity risk, interest rate risk and market (investment) risk.

The Scheme operates under UK trust law and the trust is a separate legal entity from the Group. The Scheme is governed by a board of 
trustees, composed of two member representatives, two employer representatives and one independent trustee. The trustees are required 
by law to act in the best interests of scheme members and are responsible for setting certain policies (e.g. investment, funding) together with 
the Group.

Funding of the Scheme is based on a separate actuarial valuation for funding purposes for which the assumptions may differ from the 
assumptions above. Funding requirements are formally set out in the Statement of Funding Principles, Schedule of Contributions and 
Recovery Plan agreed between the Trustees and the Group in respect of the 6 April 2017 actuarial valuation. The actuarial valuation of the 
Scheme as at 6 April 2017 was completed by a qualified independent actuary and the results of this have been updated on an approximate 
basis to 31 December 2020. 

The contributions made by the employer over the financial year have been £0.4m in respect of ongoing expenses. It is the policy of the Group 
to recognise all actuarial gains and losses in the year in which they occur outside of the profit and loss account and in Other Comprehensive 
Income. The UK scheme was closed to new entrants in 2019.

The Group acknowledges that the recognition of pension scheme surplus is an area of accounting judgement, which depends on the 
interpretation of the wording of the Scheme Rules and the relevant accounting standard, IFRIC 14. In the Group's view there is uncertainty 
over whether the wording of the Scheme Rules provides the Group with an unconditional right to a refund of surplus from the Scheme either 
on an ongoing basis or assuming the full settlement of Scheme liabilities. The Group's interpretation of the Scheme Rules is that there is 
material uncertainty over whether the power to wind-up the Scheme is wholly within the Group's control as would be required under the 
terms of IFRIC 14 in order to recognise a surplus on the balance sheet. Consistent with previous years, given this uncertainty the Group has 
adopted the provisions of IFRIC 14 and the associated additional reporting requirements. As the Scheme is in surplus as at 31 December 
2020 a restriction has been applied to the balance sheet, and the net surplus recognised on the balance sheet has been restricted to £nil. 
On this basis, the net balance sheet position as at 1 January 2019 would remain the same, and therefore the restatement of disclosures 
is limited to those referencing the opening balance sheet position in the prior year. There is no impact on the net balance sheet position 
at 31 December 2019.

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30. Retirement benefit schemes continued
Over the period, the Scheme Trustee undertook work to consolidate the Scheme Rules which identified changes to the understanding of 
certain Scheme benefits from 1985 to 1999. Further investigation resulted in additional liabilities of £4.6m being recognised by restating the 
liabilities as at 1 January 2019. After recognition of the additional liabilities as at 1 January 2019, the Scheme remains in a surplus position. 
Due to the provisions of IFRIC14, this surplus would be restricted to a net surplus recognised on the balance sheet of £nil. On this basis, 
the net balance sheet position as at 1 January 2019 would remain the same, and therefore the restatement of disclosures is limited to those 
referencing the opening and closing balance sheet position of the liabilities in the prior year. The gross interest on the restated liabilities of the 
scheme and the imputed actuarial movement have not been restated given these items would not be material. There is no impact on the net 
balance sheet position at 1 January 2019 and 31 December 2019. 

Reconciliation of opening and closing balances of the present value of the defined benefit obligation 

2020
£m
111.2 
–
2.0 
–
(0.5)
15.5 
(3.5)
0.2 
124.9

2020
£m
115.4 
2.1 
13.0 
(0.2)
0.4 
(3.5)
127.2

2020
£m
– 
0.2 
–
0.2 
0.4

Restated
2019 
£m
104.8 
0.1 
2.6 
–
(0.6)
12.1 
(7.5)
(0.3)
111.2

2019
£m
111.0 
2.9 
8.8 
(0.3)
0.5 
(7.5)
115.4

2019
£m
0.1 
(0.3)
–
0.3 
0.1

Defined benefit obligation at start of year
Current service cost
Interest expense
Contributions by plan participants
Actuarial gains arising from changes in demographic assumptions
Actuarial losses arising from changes in financial assumptions
Benefits paid, death in service insurance premiums and expenses
Past service cost/(credit)
Defined benefit obligation at end of year

Reconciliation of opening and closing balances of the fair value of the assets

Fair value of assets at start of year
Interest income
Return on scheme assets excluding interest income
Scheme administration expenses
Contributions by employer
Benefits paid, death in service insurance premiums and expenses
Fair value of assets at end of year

Total expense recognised in the income statement

Current service cost
Past service cost/(credit)
Net interest on the defined benefit asset
Scheme administration expenses
Total expenses

Assets

Bonds
Cash
Liability Driven Investment
Diversified credit funds

2020
Quoted
£m
35.8 
1.7 
32.1 
35.6 
105.2

2020
Unquoted
£m
9.0 
–
–
13.0 
22.0

2019
Quoted
£m
33.7 
2.9 
23.7 
32.1 
92.4

2019
Unquoted
£m
9.8 
–
–
13.2 
23.0

None of the fair value of the assets shown above include any of the Group’s own financial instruments or any property occupied by, or other 
assets used by the Group.

The Scheme's current strategic target is to allocate 70% of the investment portfolio to 'non-matching' asset classes, predominantly longer-
term credit-based investments and 30% to a 'liability-matching' portfolio, comprising Liability Driven Investment ('LDI'), money market and 
shorter-term credit based investments. The LDI portion of the strategy has been put in place to reduce interest and inflation risk.

Bodycote plc annual report 2020

129

 
 
 
 
 
 
 
 
 
Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued
Year ended 31 December 2020

30. Retirement benefit schemes continued
Assumptions

RPI inflation
CPI inflation
Salary increases
Rate of discount
Allowance for pension in payment increases of RPI or 3% p.a. if less
Allowance for revaluation of deferred pensions

Mortality – current pensioners:

Actuarial tables used
Life expectancy for members currently aged 65

Mortality – future pensioners:

Actuarial tables used
Life expectancy at age 65 for members currently aged 45

Cash commutation

2020
% per annum
3.00
2.55
n/a
1.30
2.42
2.55

2019
% per annum
3.00
2.20
n/a
1.85
2.43
2.20

2020
S2PxA YoB CMI 
2019 1.5% long 
term trend
22.3

2019
S2PxA YoB CMI 
2018 1.5% long 
term trend
22.3

2020
S2PxA YoB CMI 
2019 1.5% long 
term trend
23.9

2019
S2PxA YoB CMI 
2018 1.5% long 
term trend
24.0

2020
All members 
commute 75% 
of maximum 
permitted

2019
All members 
commute 75% 
of maximum 
permitted

The weighted average duration of the defined benefit obligation at 31 December 2020 is approximately 18 years (31 December 
2019: 18 years).

The defined benefit obligation at 31 December 2020 can be approximately attributed to the scheme members as follows:

 – Active members: 

0% (31 December 2019: 0%)

 – Deferred members:  50% (31 December 2019: 50%)

 – Pensioner members:  50% (31 December 2019: 50%)

All benefits are vested at 31 December 2020 (unchanged from 31 December 2019).

Present value of defined benefit obligations, fair value of assets and deficit

Present value of defined benefit obligation
Fair value of plan assets
Scheme surplus
Adjustment relating to asset ceilings and minimum funding requirements
Net defined benefit asset before deferred tax

2020
£m
124.9 
(127.2)
(2.3)
2.3 
– 

Restated 
2019 
£m
111.2 
(115.4)
(4.2)
4.2 
– 

130

Bodycote plc annual report 2020

Strategic report

Governance

Financial statements

Additional information

30. Retirement benefit schemes continued
Reconciliation of asset ceiling 

Restriction due to asset ceiling at beginning of period
Interest on asset restriction
Other changes in asset restriction
Restriction due to asset ceiling at end of period

The best estimate of contributions to be paid into the plan for the year ending 31 December 2021 is £0.4m.

Amounts recognised in Other Comprehensive Income

Return on scheme assets excluding interest income
Effects of changes in financial assumptions underlying the present value of the liabilities
Effects of changes in demographic assumptions underlying the present value of the liabilities
Gain due to change in asset restriction   
Total loss recognised in Other Comprehensive Income

Impact of changes to assumptions

2020
£m
4.2 
0.1 
(2.0)
2.3

2020
£m
13.0 
(15.5)
0.5 
2.0 
–

Restated 
2019
£m
6.2 
0.3 
(2.3)
4.2

2019
£m
8.8 
(12.1)
0.6 
2.3 
(0.4)

0.25% change in discount rate
0.25% change in price inflation (and associated assumptions)
1 year change in life expectancy at age 65

2020

Increase
£m
(5.7)
2.7 
5.7 

 Decrease
£m
5.7 
(2.7)
(5.7)

2019

Increase
£m
(4.9)
2.0 
4.3 

Decrease
£m
4.9 
(2.0)
(4.3)

The sensitivity table is based on an illustrative 0.25% change, although the assumptions may vary by greater amounts. Therefore, the Group 
considers the retirement benefit obligations a key source of estimation uncertainty.

Combined non-UK disclosures
The Group operates defined benefit schemes in the USA and continental Europe. 

In Europe the Group operates defined benefit pension, post retirement and long-service arrangements for certain employees in France, 
Germany, Italy, Turkey, Switzerland and Liechtenstein. 

Reconciliation of opening and closing balances of the present value of the defined benefit obligation

Defined benefit obligation at start of year
Current service cost
Interest expense

Actuarial losses arising from changes in financial assumptions
Experience gains on liabilities
Benefits paid, death in service insurance premiums and expenses
Employee contributions
Curtailments
Past service credit
Exchange rate loss/(gain)
Defined benefit obligation at end of year

Bodycote plc annual report 2020

2020
£m
27.5 
0.8 
0.3 

1.0 
(0.6)
(1.2)
0.1 
(0.9)
(1.7)
1.1 
26.4

2019
£m
26.3 
0.7 
0.5 

2.9 
(0.4)
(1.4)
0.1 
–
–
(1.2)
27.5

131

 
 
 
Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued
Year ended 31 December 2020

30. Retirement benefit schemes continued
Reconciliation of opening and closing balances of the fair value of plan assets

Fair value of assets at start of year
Interest income
Return on scheme assets excluding interest income

Contributions by employer
Contributions by employees
Benefits paid, death in service insurance premiums and expenses
Exchange rate gain/(loss)
Fair value of assets at end of year

Total expense/(credit) recognised in the income statement

Current service cost
Net interest on the defined benefit liability
Curtailments
Past service credit

Total (credit)/expense

Assets

Equities
Insurance contracts
Total

2020
£m
10.1 
0.1 
1.1 

0.2 
0.1 
(0.6)
0.2 
11.2

2020
£m
0.8 
0.2 
(0.9)
(1.7)

(1.6)

2019
£m
9.5 
0.2 
1.2 

0.2 
0.1 
(0.9)
(0.2)
10.1

2019
£m
0.7 
0.3 
–
–

1.0

2020

Quoted
£m
5.1 
–
5.1

Unquoted
£m
–
6.1 
6.1

2019

Quoted
£m
4.6 
–
4.6

Decrease
£m
–
5.5 
5.5

None of the fair values of the assets shown above include any of the Group’s own financial instruments or any property occupied by, or 
other assets used by the Group. 

Assumptions for 2020

USA
France
Germany
Italy
Turkey
Liechtenstein
Switzerland

Salary  
increases %  
per annum
n/a
2.5 
2.5 
2.5 
8.5 
2.5 
n/a

Rate of  
discount %  
per annum
2.3 
0.5 
1.0 
0.3 
13.5 
0.2 
0.2 

Inflation %  
per annum
n/a
1.5 
n/a
1.5 
8.5 
n/a
n/a

Pension 
increases
% per annum
n/a
1.0 
1.8 
n/a
n/a
n/a
n/a

There were no significant changes to these assumptions compared to the prior year.

Duration
The weighted average durations of the defined benefit obligations of the overseas schemes at 31 December 2020 range from 12 years to 
21 years. The durations ranged from 12 years to 18 years as at 31 December 2019.

132

Bodycote plc annual report 2020

Strategic report

Governance

Financial statements

Additional information

30. Retirement benefit schemes continued 
Present value of defined benefit obligations, fair value of assets and deficit

Present value of defined benefit obligation
Fair value of plan assets
Deficit in the schemes
Adjustment relating to asset ceilings and minimum funding requirements
Net defined benefit liability, before deferred tax

2020
£m
26.4 
(11.2)
15.2
1.0
16.2

As all actuarial gains and losses are recognised, the deficit shown above at 31 December 2020 is that recognised in the balance sheet.

Amounts recognised in Other Comprehensive Income 

Gain from experience on plan liabilities
Loss due to change in asset restriction
Return on scheme assets excluding interest income
Effects of changes in financial assumptions underlying the present value of the liabilities
Total gain/(loss) recognised in Other Comprehensive Income

2020
£m
0.6 
(0.4)
1.1 
(1.0)
0.3 

2019
£m
27.5 
(10.1)
17.4
0.5
17.9

2019
£m
0.4 
(0.5)
1.2 
(2.9)
(1.8)

The only funded plans are those operated in USA, France, Switzerland and Liechtenstein. The best estimate of contributions to be paid into 
the plans for the year ending 31 December 2021 is £0.2m.

Sensitivities (changes to total defined benefit obligations)

0.25% change in discount rate
0.25% change in price inflation (and associated assumptions)

2020

Increase
£m
(1.0)
0.5 

Decrease
£m
1.0 
(0.5)

2019

Increase
£m
(1.0)
0.6 

Decrease
£m
1.0 
(0.6)

The sensitivity table is based on an illustrative 0.25% change, although the assumptions may vary by greater amounts. Therefore, the Group 
considers the retirement benefit obligations a key source of estimation uncertainty. 

31. Contingent liabilities
The international tax environment has received increased attention and seen rapid change over recent years, both at a US and European level, 
and by international bodies such as the Organisation for Economic Cooperation and Development (OECD). Against this backdrop, Bodycote 
has been monitoring developments and continues to engage transparently with the tax authorities in the countries where we operate. 
On 25 April 2019, the European Commission released its decision that part of the UK Group Financing Exemption measures in the UK-
controlled foreign company rules were unlawful and incompatible State Aid and have instructed HM Revenue & Customs to recover the State 
Aid. The UK Government has subsequently appealed against the decision.

In common with other UK-based international companies whose arrangements were in line with current UK CFC legislation, Bodycote may 
be affected by the outcome of this decision and has calculated the maximum potential liability to be approximately £22.0m (2019: £21.6m). 
Bodycote is reviewing the details of the decision and assessing any impact upon the Company's tax position. At present, Bodycote believes 
that no provision is required in respect of this matter.

The Group is subject to certain legal proceedings, claims, complaints and investigations arising out of the ordinary course of business. 
Legal proceedings may include, but are not limited to, alleged breach of contract and alleged breach of environmental, competition, securities 
and health and safety laws. The Group may not be insured fully, or at all, in respect of such risks. The Group cannot predict the outcome 
of individual legal actions or claims or complaints or investigations. The Group may settle litigation or regulatory proceedings prior to a final 
judgment or determination of liability. The Group may do so to avoid the cost, management efforts or negative business, regulatory or 
reputational consequences of continuing to contest liability, even when it considers it has valid defences to liability. The Group considers that 
no material loss is expected to result from these legal proceedings, claims, complaints and investigations. Provision is made for all liabilities 
that are expected to materialise through legal and tax claims against the Group.

Bodycote plc annual report 2020

133

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Governance

Financial statements

Additional information

Five year summary (unaudited)

Revenue
Profit:
Headline operating profit
Amortisation of acquired intangible fixed assets
Acquisition costs
Operating profit prior to exceptional items
Exceptional items
Operating profit
Net finance costs
(Loss)/Profit before taxation
Taxation
Profit after taxation
Non-controlling interests
Profit attributable to the equity holders of the parent
Headline earnings per share (pence)
Dividend per share (pence)
Special dividend per share (pence)
Assets employed
Intangible assets
Property, plant and equipment
Other assets and liabilities

Financed by
Share capital
Reserves
Shareholders' funds
Non-controlling interests
Lease liabilities
Net debt/(cash)
Capital employed
Net assets per share (pence)
Return on capital employed:
Headline operating profit divided by the average 
of opening and closing capital employed

1  Restated following adoption of IFRS 16, Leases on 1 January 2018. 

2  Periods prior to the adoption of IFRS 16, Leases on 1 January 2018 have not been restated.

2020
£m
598.0 

75.3 
(9.8)
(2.1)
63.4 
(58.4)
5.0
(6.5)
(1.5)
2.3
0.8
(0.4)
0.4
27.8 
19.4
–

323.5 
522.6 
(66.6)

779.5

33.1 
647.4 
680.5 
0.9 
75.6 
22.5 
779.5
355.4

2019
£m
719.7 

134.9 
(4.6)
(1.7)
128.6 
–
128.6 
(4.7)
123.9 
(29.9)
94.0 
(0.2)
93.8
52.1 
19.3 
–

212.4 
534.5 
17.4 

764.3

33.1 
671.9 
705.0 
0.8 
79.4 
(20.9)
764.3
368.2

20181
£m
728.6 

140.7 
(3.7)
(0.5)
136.5 
–
136.5 
(4.3)
132.2 
(28.6)
103.6 
(0.4)
103.2
55.9 
19.0 
20.0 

206.9 
546.6 
9.9 

763.4

33.1 
685.5 
718.6 
0.7 
80.3 
(36.2)
763.4
375.3

20172
£m
690.2 

123.9 
(4.5)
–
119.4 
–
119.4 
(2.4)
117.0 
(19.7)
97.3 
(0.2)
97.1
49.2 
17.4 
25.0 

201.0 
520.5 
(63.6)

657.9

33.1 
663.9 
697.0 
0.5 
–
(39.6)
657.9
364.1

20162
£m
600.6 

99.6 
(4.5)
(0.6)
94.5 
–
94.5 
(2.6)
91.9 
(24.9)
67.0 
− 
67.0
37.0 
15.8 
–

206.7 
509.0 
(88.5)

627.2

33.1 
594.8 
627.9 
0.4 
–
(1.1)
627.2
328.0

9.8%

17.7%

18.9%

19.3%

17.1%

134

Bodycote plc annual report 2020

Strategic report

Governance

Financial statements

Additional information

Company statement of financial position
At 31 December 2020

Fixed assets

Intangible fixed assets
Tangible fixed assets
Right-of-use assets
Investments in subsidiaries
Receivables

Current assets
Receivables

Current liabilities
Payables
Net current liabilities
Total assets less current liabilities
Payables: Amounts falling due after more than one year
Net assets
Capital and reserves
Called-up share capital
Share premium account
Other reserves
Profit for the year
Retained earnings/(accumulated losses)
Total shareholders’ funds

Note

3
4
5
6
7

7

8

8

10

2020
£m

 15.4 
 0.7 
 0.3 
 391.0 
 148.3 
 555.7 

5.7 
5.7 

 (27.0)
 (21.3)
 534.4 
 (1.3)
 533.1 

 33.1 
 177.1 
 125.4 
 44.6 
 152.9 
 533.1 

2019
£m

 21.5 
 0.1 
 0.5 
 391.0 
 101.1 
 514.2 

 4.6 
 4.6 

 (10.3)
 (5.7)
 508.5 
 (0.8)
 507.7 

 33.1 
 177.1 
 124.8 
 176.7 
 (4.0)
 507.7 

The financial statements of Bodycote plc, registered number 519057, were approved by the Board of Directors and authorised for issue on 
12 March 2021. 

They were signed on its behalf by:

S.C. Harris  
Director    

D. Yates
Director

Bodycote plc annual report 2020

135

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Governance

Financial statements

Additional information

Company statement of changes in equity
Year ended 31 December 2020

1 January 2019
Profit for the year
Actuarial gain on defined benefit pension 
schemes net of deferred tax
Total comprehensive income for the year
Dividends paid
Shares acquired
Share-based payments
Settlement of share options
31 December 2019
Profit for the year
Actuarial gain on defined benefit pension 
schemes net of deferred tax
Total comprehensive income for the year
Dividends paid
Shares acquired
Share-based payments
Settlement of share options
31 December 2020

 Called-up  
share capital 
 £m 
33.1
 − 

 Share  
premium 
account 
 £m 
 177.1 
 − 

 Other  
reserves 
 £m 
 126.3 
 − 

 Profit and  
 loss account 
 £m 
 71.6 
 176.7 

 − 
−
 − 
 − 
 − 
 − 
33.1
 − 

 − 
 − 
 − 
 − 
 − 
 − 
 33.1 

 − 
−
 − 
 − 
 − 
 − 
 177.1 
 − 

 − 
 − 
 − 
 − 
 − 
 − 
 177.1 

 − 
 − 
 − 
 (6.0)
 1.1 
 3.4 
 124.8 
 − 

 − 
 − 
 − 
 (0.5)
 0.4 
 0.7 
 125.4 

 0.4 
 177.1 
 (74.7)
 - 
 - 
 (1.3)
 172.7 
 44.6 

 0.3 
 44.9 
 (25.1)
 − 
 − 
 5.0 
 197.5 

 Total 
 £m 
 408.1 
 176.7 

 0.4 
 177.1 
 (74.7)
 (6.0)
 1.1 
 2.1 
 507.7 
 44.6 

 0.3 
 44.9 
 (25.1)
 (0.5)
 0.4 
 5.7 
 533.1 

Details of dividends paid are set out in note 9 of the consolidated financial statements.

Details of share-based payment transactions are set out in note 28 of the consolidated financial statements.

The other reserves are stated after deducting £7.0m (2019: £11.6m) relating to shares held in the Bodycote International Employee 
Benefit Trust. The Bodycote International Employee Benefit Trust holds Bodycote plc shares and satisfies awards made under various 
employee incentive schemes when issuance of new shares is not appropriate.

At 31 December 2020 865,565 (2019: 1,405,555) ordinary shares of 17 3/11p each were held by the Bodycote International Employee 
Benefit Trust and, following recommendations by the employer, are provisionally allocated to satisfy awards under employee incentive 
schemes. The market value of these shares was £6.5m (2019: £13.4m).

Included in other reserves is £2.0m (2019: £6.0m) relating to a share option reserve and a capital redemption reserve of £129.8m 
(2019: £129.8m). The capital redemption reserve arose from B shares which were converted into deferred shares in 2008 and 2009, and 
as a result, £129.8m was transferred from retained earnings to a capital redemption reserve. 

136

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Governance

Financial statements

Additional information

Company accounting policies

Basis of accounting
The financial statements have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) 
and in accordance with the Companies Act 2006 as applicable to companies using FRS 101. The financial statements have been prepared 
under the historical cost convention and in accordance with applicable law. The principal accounting policies are summarised below, and have 
been applied consistently. In accordance with Section 408 of the Companies Act 2006, a separate profit and loss account dealing with the 
results of the Company has not been presented.

As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to share-
based payments, financial instruments, capital management, presentation of a cash flow statement, standards not yet effective and related 
party transactions. 

Where required, equivalent disclosures are given in the consolidated financial statements of Bodycote plc, which are publicly available.

Dividends
The dividend distributions to Bodycote plc’s ordinary shareholders are recognised as a liability when the dividends are declared and approved 
by the Board and the ordinary shareholders at its Annual General Meeting. Further detail is contained in note 9 of the Group consolidated 
financial statements.

Going concern
The directors have at the time of approving the financial statements a reasonable expectation that the Company has adequate resources to 
continue in operational existence for the at least the next 12 months and continue to adopt the going concern basis of accounting in preparing 
the Company’s financial statements. Further detail is contained in the Group going concern accounting policy on pages 90 to 91.

Investments
Investments are held at cost less provision for impairment. Any potential impairment is determined on a basis of the carrying value of the 
investment against the higher of net assets or discounted future cash flows.

Foreign currencies
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At each 
balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the 
balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Gains and 
losses arising on retranslation are included in net profit or loss for the year.

Pension costs
The Company participates in a final salary defined benefit pension scheme in the United Kingdom which is funded by the payment 
of contributions to a separately administered trust fund. This is a defined benefit plan which shares the risks between entities under 
common control. 

There is no contractual arrangement or policy for charging the net benefit cost between the entities who participate in this scheme. 
The Company is considered to be the entity that is legally the sponsoring employer of this scheme. As such, the Company recognises the 
net defined benefit cost as per the requirements of IAS 19 Employee Benefits, as described in further detail in the accounting policies of the 
Group consolidated financial statements on page 94.

For defined contribution schemes, the amount charged to the profit and loss account in respect of pension costs is the contributions payable 
in the year.

Right-of-use assets
To the extent that a right-of-control exists over an asset subject to a lease, with a lease term exceeding one year, a right-of-use asset, 
representing the Company’s right to use the underlying leased asset, and a lease liability, representing the Company’s obligation to make 
lease payments, are recognised in the Company’s Balance Sheet at the commencement of the lease.

The right-of-use asset is initially measured at cost and includes the amount of initial measurement of the lease liability and any direct costs 
incurred, including advance lease payments and an estimate of the dismantling, removal and restoration costs required by the terms and 
conditions of the lease.

Depreciation is charged to the Income Statement to depreciate the right-of-use asset from the commencement date until the earlier of the 
end of the useful life of the right-of-use asset or the end of the lease term. The lease term shall include the period of any extension option 
where it is reasonably certain that the option will be exercised. Where the lease contains a purchase option the asset is written off over the 
useful life of the asset when it is reasonably certain that the purchase option will be exercised.

The lease liability is measured at the present value of the future lease payments, including any variable lease payments where applicable that 
depend on an index and the exercise price of purchased options where it is reasonably certain that the option will be exercised, discounted 
using the interest rate implicit in the lease, if readily determinable. If the rate cannot be readily determined, the Company's incremental 
borrowing rate is used. Finance charges are recognised in the Income Statement over the period of the lease.

Lease arrangements that are short-term in nature or low value are charged directly to the Income Statement when incurred.

Tangible fixed assets
Tangible fixed assets are stated at cost net of depreciation and any provision for impairment. Depreciation is provided on a straight-line basis, 
to reduce the carrying value to the estimated residual value at the point of sale, at the following annual rates:

Fixtures and fittings 10% to 20%

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137

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Governance

Financial statements

Additional information

Company accounting policies continued

Intangible fixed assets
Intangible fixed assets are stated at cost net of amortisation and any provision for impairment. Amortisation is provided on a straight-line basis 
over their estimated useful lives, at the following annual rates:

Software 10% to 33%

Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any 
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated 
in order to determine the extent of the impairment loss (if any).

Recoverable amount is the higher of fair value less costs to dispose and value in use. If the recoverable amount of an asset is estimated to be 
less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an 
expense immediately in the income statement.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable 
amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment 
loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

Receivables
Receivables are initially recognised at fair value. Trade receivables, loans, and other receivables that have fixed or determinable payments that 
are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the 
effective interest method, less any impairment. 

Per IFRS 9, a simplified lifetime Expected Credit Loss (ECL) model is used to assess receivables for impairment. 

Amounts owed by subsidiary undertakings falling due after more than one year are classified as such according to the loan agreement in place 
until 30 June 2022. On each 30 June anniversary the loan facility is to be extended for a further 12 months. The interest rate for such facility 
was at LIBOR plus 1.20% margin in 2020. 

Payables
Financial liabilities are classified according to the substance of the contractual arrangements entered into. Non-interest-bearing financial 
liabilities are stated at their nominal value. Trade payables are recognised at fair value. 

The Company derecognises financial liabilities when, and only when, the Company obligations are discharged, cancelled or they expire.

Amounts owed to subsidiary undertakings falling due after more than one year are classified as such according to the loan agreement in place 
until 30 June 2022. On each 30 June anniversary the loan facility is to be extended for a further 12 months. The interest rate for such facility 
was at LIBOR plus 1.95% margin in 2020.

Taxation
Current UK corporation tax and foreign tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have 
been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the balance sheet date where 
transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the 
balance sheet date. Temporary differences are differences between the Company’s taxable profits and its results as stated in the financial 
statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in 
the financial statements.

A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be 
regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying temporary 
differences can be deducted.

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the temporary differences are expected to 
reverse based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

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Share-based payments
The Company issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at 
fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a 
straight-line basis over the vesting period. At each balance sheet date, the Company revises its estimate of the number of equity instruments 
expected to vest as a result of the effect of non-market based vesting conditions. The impact of the revision of the original estimates, if any, 
is recognised in profit or loss such that the cumulative expense reflects the revised estimates with a corresponding adjustment to the equity-
settled employee benefits reserve.

The Company recognises and maintains the share-based payment reserve for all eligible Group employees. Appropriate provisions for non-
Company employees vesting share awards are passed on to other Group companies in the form of a non-interest bearing loan payable to the 
Company. When share awards are exercised by non-Company employees the Company charges other Group companies for the weighted 
average cost to purchase the shares exercised. The Company reduces the loan receivable from the other Group company for the shares 
exercised, recognising the difference between grant and exercise price within retained earnings settlement of share options.

Critical judgements in applying the Company’s accounting policies and key sources of 
estimation uncertainty
In the course of preparing the Company’s financial statements, no key source of estimation uncertainty have been identified. Refer to 
note 12 for judgements identified in recognised pension commitments.

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Notes to the company financial statements
Year ended 31 December 2020

1.  Profit for the year
Bodycote plc has made use of the exemption from presenting a profit and loss account, in accordance with Section 408 of the Companies 
Act 2006.

Bodycote plc reported a profit for the financial year ended 31 December 2020 of £44.6m (2019: £176.7m).

The auditor's remuneration for audit and other services is disclosed in note 3 of the Group's consolidated financial statements.

2.  Staff costs

Average monthly number of employees 

Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Pension costs

2020
56

£m

3.0
(0.5)
0.6
3.1

2019
61

£m

7.4
1.1
0.5
9.0

The above table has been included in 2020 to comply with Companies Act 2006 s411.

Included in wages and salaries are share-based payments (excluding social charges) resulting in a charge of £0.1m (2019: £0.4m).

All Directors of the Group with exception to Dominique Yates are remunerated through the Company and these costs are reflected in the 
financial statements of the Company. Dominique Yates is remunerated through Bodycote (Suisse) SA, a direct subsidiary of the Company and 
these costs are reflected in the financial statements of the Group and Bodycote (Suisse) SA. Disclosure of individual Directors' remuneration, 
share interests, share options, long-term incentive schemes, pension contributions and pension entitlements required by the Companies Act 
2006 are shown in the tables in the Board Report on remuneration on pages 64 to 74 and form part of these financial statements.

3. 

Intangible fixed assets

Cost
At 1 January 2020
Additions
Disposals
At 31 December 2020
Amortisation
At 1 January 2020
Charge for the year
Disposals
Impairment losses
At 31 December 2020
Net book value
At 31 December 2020
At 31 December 2019

Software
£m

 32.3 
 1.9 
 (1.6)
 32.6 

 10.8 
 1.8 
 (1.6)
 6.2 
 17.2

 15.4
 21.5

The Company completed a valuation assessment of its ERP and HR management software during the year. Impairments of £6.2m (2019: £nil) 
were recognised relating to ERP software assets (£5.0m) and HR management software assets (£1.2m). Further details are contained in note 
12 of the Group consolidated financial statements.

Included in software assets are ongoing development costs related to the Group’s ERP solutions. £7.6m (2019: £9.8m) of these costs are 
related to assets that are not yet available for use and are therefore not amortised. As such solutions become available for use they will be 
amortised according to Group policy.

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Notes to the company financial statements continued
For the year ended 31 December 2020

4.  Tangible fixed assets

Cost
At 1 January 2020
Additions
At 31 December 2020
Depreciation
At 1 January 2020 and 31 December 2020
Net book value
At 31 December 2020
At 31 December 2019

5.  Right-of-use assets

Cost
At 1 January 2020 and 31 December 2020
Depreciation
At 1 January 2020
Charge for the year
At 31 December 2020
Net book value
At 31 December 2020
At 31 December 2019

Lease liabilities
Maturity analysis – contractual undiscounted cash flows
Less than one year
One to five years
Total undiscounted cash flows

Current
Non-current
Total lease liabilities

Fixtures  
and fittings
£m

 0.9 
 0.6 
 1.5 

 0.8 

 0.7 
 0.1 

 Buildings  
and vehicles 
£m 

 2.3 

 1.8 
 0.2 
 2.0 

 0.3 
 0.5 

2019
£m

 0.2 
 0.5 
 0.7 

 0.2 
 0.5 
 0.7 

2020
£m

 0.2 
 0.3 
 0.5 

 0.2 
 0.3 
 0.5 

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Notes to the company financial statements continued
For the year ended 31 December 2020

6. 

Investments in subsidiaries

Cost
At 1 January 2020 and 31 December 2020
Provision for impairment
At 1 January 2020 and 31 December 2020
Net book value
At 31 December 2020
At 31 December 2019

£m

 397.6 

 6.6 

 391.0 
 391.0 

The following subsidiaries in the UK have taken advantage of an exemption from audit under section 479A of the Companies Act 2006. 
As the ultimate parent, Bodycote plc has provided a statutory guarantee for any outstanding liabilities of these businesses. These subsidiaries 
have been included in the consolidated financial statements of Bodycote plc as at 31 December 2020.

Bodycote Heat Treatments Limited 
Bodycote Surface Technology Limited 
Bodycote H.I.P. Limited 
Bodycote America Finance Limited 
Bodycote America Treasury Limited 
Bodycote Finance Limited 
Bodycote Finance UK Limited 
Bodycote International Limited 
Bodycote Investments 
Bodycote Nominees No. 1 Limited 
Bodycote Pension Trustees Limited 
Bodycote HIP Germany Limited 
Bodycote Treasury Services Limited 
Bodycote Thermal Processing Mexico Limited 
Bodycote America Capital Limited

A full list of directly and indirectly owned subsidiary undertakings can be found on page 145.

7.  Receivables

Amounts falling due within one year:
Amounts owed by subsidiary undertakings
Corporation tax
Deferred taxation (note 9)
Other receivables and prepayments

Amounts falling due after more than one year:
Amounts owed by subsidiary undertakings1
Other receivables

2020
£m

 0.3 
 2.7 
1.7 
1.0 
5.7 

 147.3 
 1.0 
148.3 
154.0 

2019
£m

1.9 
 2.6 
 – 
0.1 
4.6 

 101.1 
 – 
101.1 
105.7 

1    An assessment regarding the expected credit losses (ECL) of these amounts has been made and no allowance for ECL has been recognised on the basis that the loans do not exceed the 

borrowers liquid assets. Loans are repayable on 30 June 2022 and on each 30 June anniversary the loan facility is to be extended for a further 12 months.

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Notes to the company financial statements continued
For the year ended 31 December 2020

8.  Payables

Amounts falling due within one year:
Bank loans
Amounts owed to subsidiary undertakings
Other taxes and social security
Lease liabilities due within one year
Other payables
Accruals

Amounts falling due after more than one year:
Amounts owed to subsidiary undertakings1
Lease liabilities due after one year

2020
£m

 17.0 
 4.6 
 0.3
 0.2 
 0.9 
 4.0 
 27.0 

 1.0 
 0.3 
 1.3 

2019
£m

 – 
 0.9 
 0.9 
 0.2 
 3.1 
 5.2 
 10.3 

 0.3 
 0.5 
 0.8 

1   Intercompany loan from Bodycote Finance Limited, repayable on 30 June 2022. On each 30 June anniversary the loan facility is to be extended for a further 12 months.

9.  Deferred tax
The following are the deferred tax assets and liabilities recognised by the Company and movements thereon during the current and prior year.

At 1 January 2019 
(Charge) to profit or loss
Credit to other comprehensive income
At 1 January 2020
Credit/(Charge) to profit or loss
Credit to other comprehensive income
At 31 December 2020

Accelerated tax 
depreciation
(0.3)
(0.2)
– 
(0.5)
1.8 
– 
1.3

 Retirement 
benefit 
obligations 
 £m 
– 
(0.1)
0.1 
– 
(0.1)
0.1 
– 

 Other timing 
differences 
 £m 
0.6 
(0.1)
– 
0.5 
(0.1)
– 
0.4 

 Total 
 £m 
0.3 
(0.4)
0.1 
– 
1.6 
0.1 
1.7 

Deferred tax assets and liabilities are offset where the Company has a legally enforceable right to do so. The following is the analysis of the 
deferred tax balances (after offset) for financial reporting purposes:

Net deferred tax asset

10. Called-up share capital

Share capital:
Ordinary shares (allotted, called-up and fully paid)

At 1 January 2020
At 31 December 2019

2020
£m
 1.7 

2019
£m
– 

Number of 
shares
191,456,172 
191,456,172 

£m
33.1 
33.1

Details of share options in issue on the Company's share capital and share-based payments are set out in note 28 of the consolidated 
financial statements.

11.  Contingent liabilities
The Company has guaranteed bank overdrafts, loans and letters of credit of certain subsidiary undertakings amounting to £3.6m 
(2019: £0.7m).

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Notes to the company financial statements continued
For the year ended 31 December 2020

12. Pension commitments
The Company participates in a final salary defined benefit scheme in the UK, the details of which are disclosed in note 30 of the consolidated 
financial statements. This is a defined benefit plan which shares the risks between entities under common control. There is no contractual 
agreement or policy for charging the net benefit cost between entities who participate in this scheme. The Company is considered to be the 
entity that is legally the sponsoring employer of this scheme. The net defined benefit costs are recognised as per the requirements of IAS 19 
(revised) Employee Benefits.

The Company acknowledges that the recognition of pension scheme surplus is an area of accounting judgement, which depends on 
the wording of the scheme rules and IFRIC 14. The pension asset not recognised at 31 December 2020 was £2.3m (2019: £8.8m). 
Full disclosures concerning the scheme as required by IAS 19 (revised) are set out in note 30 of the consolidated financial statements 
and full disclosure concerning IFRIC 14 is set out in note 30 on pages 128 to 129.

Over the period, the Scheme Trustee undertook work to consolidate the Scheme Rules which identified changes to the understanding of 
certain Scheme benefits. This has resulted in additional liabilities of £4.6m being recognised by restating the liabilities as at 1 January 2019 
and 31 December 2019. After recognition of the additional liabilities as at 1 January 2019 and 31 December 2019, the Scheme remains in a 
surplus position. Due to the provisions of IFRIC 14, this surplus would be restricted to a net surplus recognised on the balance sheet of £nil. 
Given that there would be no change in the net balance sheet position, the additional liabilities have been disclosed but the disclosures for 
the year to 31 December 2019 have not been restated.

The contributions made by the Company over the financial year to the defined contribution scheme amounted to £0.4m (2019: £0.5m). 
As at 31 December 2020, contributions of £nil (2019: £nil) due in respect of the current year had not been paid over to the scheme.

13. Related party transactions
Other than payments made to Directors, which are set out in the Board Report on Remuneration on pages 64 to 75 and note 29 of the 
consolidated financial statements, there are no other related party transactions to disclose. The company has taken the exemption available 
under FRS 101 not to disclosure transactions with wholly-owned subsidiary companies.

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Subsidiary undertakings

Incorporated in the UK
Springwood Court, Springwood Close, Tytherington Business Park, Macclesfield SK10 2XF 
Bodycote America Capital Limited6 
Bodycote America Finance Limited6  
Bodycote America Treasury Limited6  
Bodycote Developments Limited2,4  
Bodycote Finance Limited6 
Bodycote Finance UK Limited6  
Bodycote Heat Treatments Limited1  
Bodycote H.I.P. Limited1  
Bodycote HIP Germany Limited3  
Bodycote International Limited3  
Bodycote Investments6  
Bodycote K-Tech Limited2  
Bodycote Nominees No. 1 Limited2  
Bodycote Nominees No. 2 Limited2  
Bodycote Pension Trustees Limited5  
Bodycote Processing (Skelmersdale) Limited2,4  
Bodycote Surface Technology Limited1  
Bodycote Thermal Processing Limited2  
Bodycote Thermal Processing Mexico Limited1  
Bodycote Treasury Services Limited6 
Expert Heat Treatments Limited2,4  
Taylor & Hartley Fabrics Limited2

Incorporated in Belgium
Font Saint Landry 11, 1120 Brussels, Belgium  
Bodycote Belgium SA1 

Industrie Park Noord 7, 9100 Sint-Niklaas, Belgium  
Bodycote Hot Isostatic Pressing NV1 

Incorporated in Canada
630 Newpark Boulevard, Newmarket ON L3X 2S2, Canada 
Bodycote Canada Property Inc.4  
Bodycote Thermal Processing Canada, Inc.1 

50 Queen Street North, Suite 1020, Kitchener ON N2H 6M2, Canada  
Bodycote Heat Treatment Canada, Inc.1

30 de l’Aeroport Boulevard, Bromont Québec JSL 1S6, Canada 
Bodycote Surface Technology Canada Property, Inc.4 
Bodycote Surface Technology Canada Ltd.1

Incorporated in China
No. 68 Ningbo East Road, Taicang Economic Development Area, Taicang City, Jiangsu, China  
Bodycote Heat Treatments Technology (Taicang) Co., Limited1 

2012 Kehang Road, High Tech District, Jinan City, Shandong, China  
Bodycote (Jinan) Heat Treatments Technology Co., Ltd.1 

No.12 Building, No. 78, Gu Cheng Zhong Road, Yu Shan Town, Kunshan City, Jiangsu Province, China  
Bodycote (Kunshan) Heat Treatments Technology Co., Ltd.1 

No.B2-A, Wuxi National Hi-New Tech Industrial Development Z, Wuxi City, Jiangsu Province, 214028, China  
Bodycote Wuxi Technology Co., Ltd.1 

Incorporated in Czech Republic
Liberec 30, Tanvaldska 345, PSC, 46311, Czech Republic  
Bodycote HT s.r.o1 

Rohanske nabrezi 671/15, Karlin, 186 00, Praha 8, Czech Republic  
Bodycote SSC s.r.o6  

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Subsidiary undertakings continued

Incorporated in France
Ilena Park – Bât. B2, Parc Technologique de Lyon, 117, allée des Parcs, 69800 Saint Priest, France 
Bodycote Bourgogne SAS1  
Bodycote France Holdings SA3  
Bodycote Haute-Savoie SAS2  
Bodycote Lyon SNC6  
Bodycote Metz-Tessy SAS1  
Bodycote SAS1  
Bodycote Sud-Ouest SAS1  
HITEC SAS2  
Nitruvid SAS1 

Incorporated in Germany
Schiessstrasse 68, 40549 Düsseldorf, Germany 
Bodycote Deutschland GmbH6  
Bodycote European Holdings GmbH3  
Bodycote Hirzenhain GmbH1  
Bodycote Specialist Technologies GmbH1  
Bodycote Specialist Technologies Deutschland GmbH1  
Bodycote VHK Vakuum-Härterei Köllner GmbH1  
Bodycote Wärmebehandlung GmbH1 

Incorporated in Ireland
12 Merrion Square North, Dublin 2, Ireland 
Bodycote Ireland Finance DAC6  
Bodycote Ireland Treasury Limited6 – A and B ordinary shares

Incorporated in Jersey
50 La Colomberie, St Helier, JE2 4QB, Jersey  
Bodycote Jersey Finance Limited6 
Bodycote Jersey Holdings Limited3 

Incorporated in Mexico
Oficinas en el Parque Torre Baker & McKenzie, Piso 10, Blvd. Antonio L. Rodríguez 1884 Pte, Monterrey, NL, 64650, Mexico 
Bodycote de Mexico, S. de R.L. de C.V.1  
Bodycote de SLP, S. de R.L. de C.V.1  
Bodycote Testing de Mexico, S. de R.L. de C.V.2  
Bodycote Thermal Processing de Mexico, S. de R.L. de C.V.1  
Bodycote Thermal Processing de Mexico Servicios, S. de R.L. de C.V.6 

Incorporated in Sweden
Box 209, 735 23, Surahammar, Sweden  
Bodycote Hot Isostatic Pressing AB1 

Box 353, 681 23, Kristinehamn, Sweden  
Bodycote Kristinehamn AB1 – being merged into Bodycote Värmebehandling AB

Box 124, 424 23, Angered, Sweden  
Bodycote Fabrikören 7 AB4 – company sold 1/2/2021 
Bodycote Sweden AB3  
Bodycote Thermotreat AB2  
Bodycote Utmeland 73:154 AB 
Bodycote Värmebehandling AB1 
Bodycote Ytbehandling AB1 

Incorporated in USA
12750 Merit Drive, Suite 1400, Dallas, TX 75251, USA 
Bodycote Americas, Inc.3  
Bodycote IMT, Inc.1  
Bodycote K-Tech, Inc.1  
Bodycote Syracuse Heat Treating Corporation1  
Bodycote Thermal Processing, Inc.1  
Bodycote USA, Inc.3 

8118 Corporate Way Suite 201, Mason OH 45040, USA 
Bodycote Surface Technology Property LLC4 
Bodycote Surface Technology Mexico LLC1 
Bodycote Surface Technology, Inc.1 
Bodycote Surface Technology Group, Inc.6

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1237 Knoxville Hwy, Wartburg TN 37887, USA 
Bodycote Surface Technology Wartburg, Inc.1

Incorporated in other overseas countries
Boehlerdurplatz 1, 8605 Kapfenberg, Austria  
Bodycote Austria GmbH1 

Groethofstraat 27, 5916PA Venlo, Netherlands  
Bodycote Hardingscentrum BV1 
Bodycote Hardingscentrum No.2 BV3 

Orczy ut 46, Budapest, H-1089, Hungary  
Bodycote Hungary Hökezelö KFT1 

Kemalpasa OSB, Izmir Kemalpasa Asfalti No:17/1, 35730 Kemalpasa-IZMIR, Turkey  
Bodycote Istas Isil Islem Sanayi ve Ticaret AS (79.3% owned)1 

Gesällvägen 7, 01730 Vantaa, Finland  
Bodycote Lämpökäsittely Oy1 

Wilgowa 65D, Czestochowa, 42-271, Poland  
Bodycote Polska sp z.o.o.1 

Im alten Riet 123, 9494 Schaan, Liechtenstein  
Bodycote Rheintal Wärmebehandlung AG1 

Matuškova 48, Vlkanová, Banksá Bystrica, 976 31, Slovakia 
Bodycote Slovakia s.r.o.1

Avenue Perdtemps 23, 1260 Nyon, Switzerland  
Bodycote (Suisse) SA6 

Via Moie 28, 25050, Rodengo Saiano, Italy  
Bodycote Trattamenti Termici SpA1 

Brasov, str. Zizinului nr. 119, cod 500407, Romania  
Bodycote Tratamente Termice SRL1 

Industribuen 16-18, 5592, Ejby, Denmark  
Bodycote Varmebehandling A/S1 

Other: 
Incorporated in France
Lieu-dit Champ Corbert, 74370, Metz Tessy, France  
Techmeta Engineering SAS (49% Investment)

Incorporated in USA
13753 Otterson Court, Livonia, MI 48150, USA  
Thixomat Technologies, LLC (13.9% Investment)

Classifications Key
1.  Thermal processing company 
2.  Dormant 
3.  Holding company 
4.  Property holding company 
5.  Trustee 
6.  Provision of services to Group companies

Except where stated, these companies are wholly-owned subsidiaries and have only one class of issued shares.

It is agreed that the six German subsidiaries Bodycote European Holdings GmbH, Bodycote Hirzenhain GmbH, Bodycote Specialist 
Technologies Deutschland GmbH, Bodycote Specialist Technologies GmbH, Bodycote VHK Vakuum-Härterei Köllner GmbH, and 
Bodycote Wärmebehandlung GmbH make use of the exemption option under Sec. 264 para. 3 German Commercial Code for the fiscal 
year 2020, and will not publish their annual financial statements according to Sec. 325 et seq. German Commercial Code.

It is also agreed that the Dutch subsidiary Bodycote Hardingscentrum BV makes use of the exemption under Article 403, paragraph 1 
of Book 2 Dutch Civil Code and will not publish its annual financial statements.

The financial data of the above German and Dutch companies for 2020 are included in the consolidated annual accounts of Bodycote plc.

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Shareholder enquiries 

Enquiries on the following administrative matters can be addressed to the Company’s registrars at Equiniti Limited, Aspect House, 
Spencer Road, Lancing, West Sussex BN99 6DA. Telephone 0333 207 5951 (+44 121 415 0804 if calling from outside the UK). 
Lines open 8.30am to 5.30pm (UK time), Monday to Friday excluding public holidays in England and Wales. Email: Log on to help.
shareview.co.uk (from here you will be able to email your query securely).

 – Change of address

 – Lost share certificates or dividend cheques

 – Dividend mandates

 – Amalgamation of holdings

Forms for some of these matters can be downloaded from the registrars’ website www.shareview.co.uk. Shareholders can easily access 
and maintain their shareholding online by registering at www.shareview.co.uk. To register, shareholders will require their shareholder 
reference number which was recently provided. This is the 11 digit number found on recent dividend correspondence.

Share dealing service
For information on the share dealing service offered by Equiniti Limited, telephone 0345 603 7037 (+44 121 415 7560 if calling 
from outside the UK). Lines open 8.00am to 4.30pm (UK time), Monday to Friday excluding public holidays in England and Wales). 
Please either telephone Equiniti or look online at www.shareview.co.uk for up-to-date commission rates.

Dividend reinvestment plan (DRIP)
Equiniti’s Dividend Re-investment Plan offers a convenient way for shareholders to build up their shareholding by using dividend payments 
to purchase additional shares. The plan is provided by Equiniti Financial Services Limited, part of Equiniti Group, which is authorised and 
regulated by the Financial Conduct Authority.

For more information and an application pack please call 0333 207 5951 (+44 121 415 0804 if calling from outside the UK). 
Lines open 8.30am to 5.30pm (UK time), Monday to Friday excluding public holidays in England and Wales. Alternatively go to 
shareview.co.uk/info/drip 

It is important to remember that the value of shares and dividend payments can fall as well as rise and you may not recover the amount 
of money that you invest. Past performance should not be seen as indicative of future performance.

Overseas shareholders
Equiniti provides a service to overseas shareholders that will convert sterling dividends into local currency at a competitive rate. 
Dividend payments will then be made directly into your local bank account. For more information log on to www.shareview.co.uk/info/ops 
where you will find the answer to any queries you have, as well as the full terms and conditions of the service. Alternatively please call 
0333 207 5951 (+44 121 415 0804 if calling from outside the UK). Lines open 08.30am to 5.30pm (UK time), Monday to Friday excluding 
public holidays in England and Wales.

Duplicate share register accounts
If you are receiving more than one copy of our report, it may be that your shares are registered in two or more accounts on our register 
of members. If that was not your intention you might consider merging them into one single entry. Please contact Equiniti, who will be 
pleased to carry out your instructions.

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Shareholder analysis
Analysis of share register as at 2 March 2021:

Holding range
1 to 1,000
1,001 to 10,000
10,001 to 100,000
100,001 to 500,000
500,001 and over

Type of shareholders
Directors’ interests
Major institutional and corporate holdings
Other shareholdings

Number of
shareholders
825
697
189
94
78
1883

%
43.8
37.0
10.1
5.0
4.1
100.0

Number of
shares
339,332
2,222,073
6,935,487
22,302,135
159,657,145
191,456,172

% of
shareholders
0.3
33.4
66.3
100.0

As at 23 February 2021 the following voting rights in the Company had been notified in accordance with the Disclosure and 
Transparency Rules.

Name of shareholders
Aberdeen Standard Investments
Franklin Templeton Fund Management Limited 
Alantra Asset Management SGIIC, S.A.
BlackRock Investments Management (UK) Ltd
The Vanguard Group, Inc.
Baillie Gifford & Co.
Schroder Investment Management Ltd
Aberdeen Asset Managers Ltd.
Dimensional Fund Advisors, LP

Number of 
shares
18,684,960
12,915,775
10,814,128
7,945,690
7,832,431
6,998,080
6,404,430
6,357,356
5,779,641

%
0.2
1.2
3.6
11.6
83.4
100.0

% of total
shares
0.4
98.4
1.2
100.0

%
9.8
6.7
5.6
4.2
4.1
3.7
3.3
3.3
3.0

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Company information

Advisers
Auditor  
PricewaterhouseCoopers LLP

Principal bankers 
HSBC UK Bank plc, National Westminster Bank plc, Handelsbanken plc, UniCredit Bank AG, Wells Fargo Bank, N.A., and KBC Bank N.V.

Solicitors 
Herbert Smith Freehills LLP and DLA Piper UK LLP.

Financial calendar 

Annual General Meeting
Final dividend for 2020
Interim results for 2021
Interim dividend for 2021
Results for 2021

27 May 2021
4 June 2021
July 2021
November 2021
March 2022

150

Bodycote plc annual report 2020

www.bodycote.com

For the online version of this report go to 
www.bodycote.com/investors

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

Tel: +44 (0)1625 505300 
Fax: +44 (0)1625 505313 
Email: info@bodycote.com

© Bodycote plc 2021 
Produced by Radley Yeldar 
www.ry.com