Bodycote plc
Annual Report 2024
METALLURGY.
MASTERED.
EXPERTISE.
DELIVERED.
We are a leading, global performance
metallurgy business, improving properties
and extending lives of our customers’
products through advanced thermal and
surface processing.
As experienced metallurgists, engineers and
technicians, we bring a wealth of knowledge,
experience and specialist expertise to deliver
quality service whenever and wherever it
is needed.
We are the metallurgy
performance experts.
In this report
FUTURE.
POWERED.
POWERING.
SUSTAINABILITY.
DIRECTION.
DRIVEN.
23
21
40
Bodycote plc Annual Report 2024
IFC
STRATEGIC
REPORT
Chair’s statement
11
Chief Executive’s review
13
Executive Committee
16
Strategic levers
17
Our business model
18
Our key performance indicators
19
Business review –
Specialist Technologies
20
Business review –
Precision Heat Treatment
22
Chief Financial Officer’s review
24
Principal risks and uncertainties
28
Viability statement
34
Section 172 statement
35
Our stakeholders
37
Sustainability report
40
FINANCIAL
STATEMENTS
Independent auditors’ report
120
Consolidated income statement
129
Consolidated statement
of comprehensive income
129
Consolidated balance sheet
130
Consolidated cash flow statement
131
Consolidated statement
of changes in equity
132
Group accounting policies
133
Notes to the consolidated
financial statements
141
Company balance sheet
166
Company statement
of changes in equity
167
Company accounting policies
168
Notes to the Company
financial statements
170
GOVERNANCE
Board of Directors
70
Chair’s introduction
72
Corporate governance statement
73
Directors’ report
82
Report of the
Nomination Committee
84
Report of the Audit Committee
87
Directors’ report on remuneration
94
Directors’ responsibilities statement 118
ADDITIONAL
INFORMATION
Five-year summary (unaudited)
174
Alternative performance
measures (APMs) (unaudited)
175
Subsidiary undertakings
179
Shareholder enquiries
181
Company information
182
Contents
03
04
05
02
COMPANY
OVERVIEW
Bodycote at a glance
02
Our markets
03
Highlights
04
Our purpose and values
06
Investment proposition
07
Our processes
08
01
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01
Bodycote plc Annual Report 2024
Bodycote at a glance
Precision Heat Treatment
Precisely controlled heating and
cooling to achieve performance-
critical metallurgical properties
– Atmospheric and vacuum
heat treatment
– Nitriding and Corr-I-Dur®
– Low Pressure Carburising
(LPC)
Delivering high-quality through
our international network of
facilities. Bodycote offers significant
advantages to our customers as
a global thermal processing
service provider. Through this
network, Bodycote effectively
utilises its wealth of knowledge,
experience and specialist expertise
to deliver unmatched quality
service whenever and wherever
it is needed.
Revenue by geography and division
1 During FY 2024.
The Group’s network operates from more than 150 facilities,
with customers benefiting from Bodycote’s comprehensive
range of services across multiple locations. Customers know that
if their business expands, Bodycote has the capability to meet
their needs and support their global manufacturing footprint.
They recognise that they can rely on the same excellent process
and high-quality standards across our multiple locations.
Customers understand that Bodycote operates its facilities more
efficiently than in-house operations so can reduce their overall
costs and impact on the environment, assisting them in achieving
their climate impact targets.
Such an extensive network brings economies of scale, with
technology developed at one location being available globally
if the market requires it. 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, increasing efficiency and reducing the
carbon footprint of our operations.
The Bodycote network has a wealth of industry, regulatory
and technical accreditations, which are industry- or
customer-specific.
>50
processes
>150
facilities
4,439¹
average employees
22
countries
Specialist Technologies
Advanced, distinctive processes
to improve product strength,
performance and durability
– Hot Isostatic Pressing (HIP)
– Surface Technology
– Specialty Stainless Steel
Processes (S3P)
Revenue by division
Specialist Technologies
30%
Precision Heat Treatment
64%
Non-core
6%
Geography
Western Europe
50%
North America
38%
Emerging Markets
12%
£757.1m
Company overview
Strategic report
Governance
Financial statements
02
Bodycote plc Annual Report 2024
Additional information
Our markets
ENERGY
Bodycote offers materials
solutions for virtually
every market sector,
providing expertise
across heat treatment
and specialist thermal
processes. Bodycote
supports many market
sectors; however,
we categorise our
business into five major
end markets.
The aerospace market is highly complex
and demands significant technical expertise.
We specialise in thermal processing solutions
for engine components operating under
extreme conditions, as well as landing gear
and other aircraft parts. Our services span
commercial, business, and military aviation.
Bodycote’s global network of quality
accredited facilities supports aerospace
Original Equipment Manufacturers (OEMs),
aftermarket providers, and their supply chains.
The automotive industry is evolving with
hybrid/electrification and the demand for
lighter, high-performance components.
Bodycote supports this transition by delivering
thermal processing solutions that strengthen
and enhance critical components in passenger
cars, light and heavy trucks, and buses.
Partnering with leading automotive OEMs
and their supply chains, we offer global
thermal processing services to meet the
industry’s changing needs.
We deliver specialised treatments for critical
components in the energy sector. This includes
the oil and gas market as well as a number
of power generation applications including
industrial gas turbines, nuclear energy, and
renewables. In the oil and gas market, safety
and reliability are critical, with products
often operating in extreme environments.
Our success is built on our technical expertise
and reliable, high-quality service. We help to
enable continued innovation and support the
rising demand for electrified and clean energy.
2024 revenues by end market:
Aerospace & Defence
30%
Industrial Markets
24%
Automotive
23%
Energy
11%
Consumer, Medical & Other
12%
£757.1m
Bodycote supports a wide array of industrial
markets, including components for machining,
machinery and tooling, and equipment used
in construction, mining, and agriculture.
Our customer base ranges from leading
equipment manufacturers to material and
machining suppliers. Leveraging our global
network of facilities, we provide technical
expertise, high-quality services and a diverse
range of value-added solutions which are
tailored to this broad range of industrial
applications.
We serve a number of niche and high-tech
markets, including medical devices,
semiconductors and electronics, and consumer
products. These markets are driven by global
trends such as expanding healthcare,
electrification, and growing demand for cloud
computing and AI. Our processes enhance the
properties of critical components, improving
wear and corrosion resistance, while meeting
stringent product requirements in each
industry. We partner with leading medical
technology and semiconductor manufacturers
to address these industry-specific demands.
AEROSPACE
& DEFENCE
AUTOMOTIVE
INDUSTRIAL
MARKETS
CONSUMER,
MEDICAL & OTHER
Company overview
Strategic report
Governance
Financial statements
03
Bodycote plc Annual Report 2024
Additional information
Highlights
1 Adjusted performance measures and measures excluding surcharges represent the statutory results excluding certain items and are considered alternative
performance measures (APMs). A reconciliation to the nearest IFRS equivalent is provided at the end of this Full Year 2024 Results (hereafter ‘Report’).
2 An earnings per share reconciliation is provided in note 5 to the condensed consolidated financial statements.
3 Organic measures are stated at constant currency and exclude contributions from acquisitions. Further details are provided at the end of this Report.
4 The definition of the cash flow APMs have been modified and prior year figures have been restated. Refer to the Financial Review for more information.
Group summary
Adjusted
Statutory
Full year
2024
Full year
2023
Organic
Growth
Full year
2024
Full year
2023
Organic
Growth3
Revenue1
£757.1m
£802.5m
-5.7%
£757.1m
£802.5m
-5.7%
Operating profit1
£129.0m
£127.6m
+1.1%
£37.9m
£119.2m
-68.2%
Operating margin1
17.0%
15.9%
+110bps
5.0%
14.9%
-990bps
Operating cash flow1,4
£115.5m
£112.2m
+2.9%
£152.6m
£191.6m
-20.4%
Basic earnings per share1,2
48.6p
48.4p
+0.4%
10.8p
45.1p
-76.1%
Full year ordinary dividend per share
23.0p
22.7p
+1.3%
Group Financial Performance (including Non-Core)
– Total revenue of £757.1m, down 5.7% reflecting lower
Non-Core revenue, reduced energy surcharges, and FX
– Adjusted Group operating profit of £129.0m,
1.1% higher with margins +110bps to 17.0%
– Statutory operating profit of £37.9m, reflects previously
indicated charges: £31.9m related to the Optimisation
programme, £28.4m ERP-related impairment, and a
goodwill impairment of £18.0m
– Adjusted operating cash flow modestly higher
year-on-year at £115.5m (90% conversion)
Core summary1 (excludes sites to be exited under Optimise programme)
Full year
2024
Full year
2023
Organic
Growth3
Revenue
£712.5m
£747.3m
-2.9%
Revenue excluding surcharges
£679.6m
£685.5m
+1.0%
Adjusted operating profit
£127.6m
£124.8m
+2.9%
Adjusted operating margin
17.9%
16.7%
Core1 Financial Performance
– Revenue up 1.0% year-on-year organically,
excluding surcharges
– Adjusted operating profit up 2.9% organically
to £127.6m, led by Specialist Technologies
– Adjusted operating margins 120bps higher at 17.9%
Key achievements
– Stable organic revenue performance, excluding surcharges, in a challenging market environment
– Significant improvement in adjusted operating margin, progressing towards >20% target by 2028
– Performance led by Specialist Technologies, with further growth and margins +300bps to 29%
– Early progress delivered on strategic plan to create an efficient, high performing Bodycote
– Optimise: first plant closures commenced, £12m-14m profit benefit at full run-rate (end 2026)
– Perform: HEAT programme to improve operational performance rolled-out to pilot sites
– Grow: growth framework in place and attractive investment options identified in high margin areas
– Close to £100m returned to shareholders in 2024 (~£40m dividend and ~£60m buyback)
– Further £30m buyback now underway; leverage remains low at ~0.3x net debt/adjusted EBITDA (pre-leases)
2025 Outlook
All guidance comments are provided on an organic basis3
– End markets remain mixed, with challenging conditions
in Automotive and Industrial. Structural demand in
Aerospace & Defence remains strong, although there
continues to be a temporary impact from industry-wide
supply chain disruption
– Reflecting this backdrop, current run-rate profit
performance is at a broadly similar level to H2 2024.
We are successfully executing our Optimisation
programme, which will deliver additional profit benefits
as we move into H2 2025
– Our continued focus on cost control and progressing our
strategic actions is ensuring we are well positioned to
capitalise when markets recover. We remain confident in
the delivery of our medium-term financial targets
Company overview
Strategic report
Governance
Financial statements
04
Bodycote plc Annual Report 2024
Additional information
Highlights continued
Financial highlights
£757.1m
Revenue
(£m)
23.0p
Full year dividend per share
(pence)
£129.0m
Adjusted operating profit
(£m)
48.6p
Basic adjusted earnings
per share (pence)
£115.5m
Adjusted operating cash flow
(£m)1
243.3
Carbon footprint
(ktCO2e)
1.8
Total Recordable
Incident Rate (TRIR)
15.7%
Return on capital
employed (ROCE) (%)
802.5
743.6
615.8
757.1
598.0
2020
2024
2023
2022
2021
14.8
13.3
12.0
15.7
9.8
2020
2024
2023
2022
2021
127.6
112.2
94.8
129.0
75.3
2020
2024
2023
2022
2021
22.7
21.3
20.0
23.0
19.4
2020
2024
2023
2022
2021
48.4
42.7
35.8
48.6
27.8
2020
2024
2023
2022
2021
2.8
2.5
2.9
1.8
2.3
2020
2024
2023
2022
2021
112.2
87.9
98.2
115.5
101.7
2020
2024
2023
2022
2021
265.3
270.7
284.9
243.3
294.5
2020
2024
2023
2022
2021
1 Adjusted operating cash flow has been restated to more closely align to common
market practice, most notably by including expansionary capex. For further
details see the ‘alternative performance measures (APMs)’ section on page 175.
Company overview
Strategic report
Governance
Financial statements
05
Bodycote plc Annual Report 2024
Additional information
Our purpose and values
Our values govern how we operate and underpin our purpose.
Our 5-year vision is to be widely recognised
as a sustainability leader.
OUR PURPOSE
STRATEGIC LEVERS
Our performance is driven
by our strategic levers.
46% reduction
in Scope 1 and 2 greenhouse
gas emissions vs 2019 by 2030
125,000 tonnes
of CO2e avoided by our customers
of atmospheric processing by 2030
20% increase
in the proportion of our revenue which
supports sustainable end-use markets
and applications to 20% by 2035
SUSTAINABILITY
Safety
For us, safety is not only a priority, it is
a way of life. Our belief in the value of
recognising and reducing unnecessary
risks, far exceeds the demands of regulation
or compliance. It ensures our people,
property, partners and customers always
feel protected, able to flourish and operate
with confidence.
Performance
Products destined for extreme operating
environments not only require precision
engineering and insights, but performance
thinking and action. For us, there can be no
shortcuts or compromises. The result is
unequalled service quality and performance
value because our customers’ reputations
depend on us, and we depend on them.
Customer experience
As ingenious solvers of engineering
challenges, we focus on building
strong customer relationships and
close collaborations that unleash
remarkable outcomes. These actions
reinforce our market relevance and
strengthen our financial resilience but,
more importantly, they create exceptional
customer experiences and the basis for
lifelong trust. Our customers see and
feel our openness, transparency and
our sense of shared ambition.
Sustainability
Visionary engineering is changing the
world, and we have a leading role to play
in shaping its future. This comes with
considerable responsibility that, in meeting
our business needs, we do not compromise
the ability of future generations to meet theirs.
To do this, we will pursue technologies
and methodologies which reduce our
environmental impact and help us to
deliver positive, measurable, environmental,
societal and economic effects, in the
global geographies we operate in.
OUR VALUES
Optimise
Perform
Grow
See more on page 17
See more on page 42
See more on pages 08 to 09, 11 to 15 and 18
Defining who we are, why we do what
we do and the difference we bring.
We deliver performance
metallurgy that
powers sustainable
global progress.
Company overview
Strategic report
Governance
Financial statements
06
Bodycote plc Annual Report 2024
Additional information
Investment proposition
Mix of total capital deployed (2018–2024)
Total capital expenditure
40%
Acquisitions
24%
Ordinary dividend
23%
Additional shareholder returns
13%
We deliver performance
metallurgy that powers
sustainable global
progress through two
leading divisional
platforms: Specialist
Technologies and
Precision Heat Treatment.
We service a wide range of end markets,
enabling improved, longer lasting and more
efficient products. We are focused on creating
sustainable value for all our stakeholders,
whether investors, customers, employees,
or the communities where we operate.
Investment proposition has three essential components:
Highly differentiated processes
Leading technology positions
Growing addressable market
Quality and performance
Maximise growth
A strong market
position with two
leading platforms
with defined
strategies and targets
Three clear
strategic levers
Our strategy
supports delivery
of a compelling
set of five key
financial targets
and one key
sustainability target
Clear market leader
Global scale and network
Deep customer partnerships
Strong
growth
Mid-single-digit
total annual
revenue growth
through the cycle
Improved
mix
35–40%
of revenue
from Specialist
Technologies
by 2028
Converting
to cash
80–90%
operating cash
conversion through
the cycle
Higher
margins
>20%
operating
margins
by 2028
Attractive
returns
15–20%
return on capital
employed through
the cycle
46%
reduction in CO2 emissions by 20301
Underpinned and accelerated by sustainability
01
02
03
Specialist Technologies
Precision Heat Treatment
1 SBTi-aligned target versus 2019 baseline.
Optimise
Perform
Grow
Company overview
Strategic report
Governance
Financial statements
07
Bodycote plc Annual Report 2024
Additional information
Our processes
Our Specialist Technologies business
comprises highly differentiated
processes with high margins, significant
market opportunities and appealing
growth prospects. These are cleaner
processes which have lower carbon
emissions. These technologies include:
Hot Isostatic Pressing (HIP) Services
Through the application of extreme pressure and heat,
HIP improves component integrity and strength
HIP PF including Powdermet®
Additive manufacturing of often complex components
in conjunction with HIP
Specialty Stainless Steel Processes (S³P)
Our proprietary S3P process improves the strength,
hardness and wear resistance of stainless steels while
maintaining corrosion resistance
Surface Technology
The application of ceramic and metal coatings enhances
component life
SPECIALIST
TECHNOLOGIES
Revenue by end market:
Aerospace & Defence
37%
Industrial Markets
16%
Automotive
9%
Energy
22%
Consumer, Medical & Other
16%
Company overview
Strategic report
Governance
Financial statements
08
Bodycote plc Annual Report 2024
Additional information
Precision Heat Treatment is the process
of precise and controlled heating and
cooling of metals to obtain improved
mechanical, chemical and metallurgical
properties of complex products.
– Precisely controlled industrial furnaces can heat to temperatures
above 1000°C
– The microstructure of metal is transformed, resulting
in the hardening or softening of the material depending
on the process
– Surface hardness can be controlled by diffusing elements such
as carbon and nitrogen into the metal during the heating stages
– As a result of our processes we can fine-tune material properties
allowing our customers to design thinner, lighter, but stronger
components
– The environment is positively impacted by extending the life
of our customers’ products, reducing their carbon footprint
– Additionally we offer our customers the benefit of lower CO2
emissions per part compared with in-house treatment
Our processes continued
PRECISION
HEAT TREATMENT
Revenue by end market:
Aerospace & Defence
27%
Industrial Markets
28%
Automotive
28%
Energy
6%
Consumer, Medical & Other
11%
Company overview
Strategic report
Governance
Financial statements
09
Bodycote plc Annual Report 2024
Additional information
IN THIS SECTION
Chair’s statement
11
Chief Executive’s review
13
Executive Committee
16
Strategic levers
17
Our business model
18
Our key performance indicators
19
Business review – Specialist Technologies
20
Business review – Precision Heat Treatment
22
Chief Financial Officer’s review
24
Principal risks and uncertainties
28
Viability statement
34
Section 172 statement
35
Our stakeholders
37
Sustainability report
40
02
STRATEGIC
REPORT.
Company overview
Strategic report
Governance
Financial statements
10
Bodycote plc Annual Report 2024
Additional information
Chair’s statement
PERFORMANCE.
DELIVERED.
Overview
We delivered a resilient performance during 2024, despite
challenging conditions in a number of our end markets.
Maintaining revenue, excluding energy surcharges, while
delivering strong margin progress in the year, are both testament
to the underlying quality of our businesses as well as the agility
and capability of our people.
Following a detailed review, we have clarified the Company’s
strategy, and defined ambitious medium-term operational and
financial targets reflecting our plans to further improve the
business. We build on solid foundations and in 2024 took some
significant early steps towards realising Bodycote’s full potential.
Board
Our new Chief Executive, Jim Fairbairn, joined the Board in
March 2024, succeeding Stephen Harris who retired from
Bodycote and stepped down from the Board at the end of
May 2024. Since joining, Jim has assessed the business,
travelling extensively to see many sites first-hand, to meet our
people, and engage with key customers. He and the team have
undertaken a comprehensive strategic review and a detailed
plant-by-plant assessment of our footprint to ensure the
business is well-positioned for the next chapter of Bodycote’s
development. He has also made significant changes to
strengthen his leadership team, upgrading capabilities across
a number of areas and adding new expertise in operational
efficiency and execution.
The Board and I are delighted with the impact Jim has had since
joining and the pace of early progress. The organisation has also
responded with real enthusiasm and excitement to the refreshed
culture and pace. At our Capital Markets Event in December 2024,
Jim announced our new strategy, including for the first time, a set
of compelling and comprehensive medium-term financial and
ESG targets. As we move into 2025 the key focus for Bodycote
will be execution against this clear plan to deliver value.
As we head into 2025, we acknowledge that Patrick Larmon’s
tenure on the Board will reach nine years. Patrick intends to
step down as Senior Independent Director at the 2025 Annual
General Meeting, with this role being passed to our existing
Non-Executive Director, Lili Chahbazi. A process to recruit a new
Non-Executive Director commenced in early 2025.
The Group delivered well
despite some challenging
end markets in 2024 and we
look forward with confidence,
remaining committed to
delivering leading performance
for all our stakeholders.”
Daniel Dayan
Chair
Company overview
Strategic report
Governance
Financial statements
11
Bodycote plc Annual Report 2024
Additional information
Chair’s statement continued
Governance
Good governance is an integral part of our success.
Our commitment to maintaining high governance standards
remains a key point for me as Chair and for the Board as a whole.
As regulation and best practice evolve, we strive to keep our
governance approach under review to ensure it remains effective.
During 2024, we completed an externally-facilitated Board
effectiveness review, which critically assessed the content and
conduct of Board discussions. While the outcome of this review
was positive and concluded that the Board continues to operate
effectively, several improvement opportunities were identified
for further discussion within the Board. The evaluation process
enabled us to reflect positively on the Board’s role in adding
value to the business in the implementation of our strategic
and operational objectives. Further details are set out on
pages 80 and 81.
Sustainability
The Board has been actively involved throughout the year in the
continued oversight of the development and execution of our
sustainability strategy. Our much-improved Sustainability report
highlights the significant progress made throughout 2024,
particularly in relation to the achievement of our carbon reduction
plans, which have allowed us to deliver against the Science Based
Target initiative (SBTi) targets several years ahead of schedule.
In December 2024 we laid out new targets, including a more
ambitious carbon reduction target and a customer-avoided
emissions target; more information can be found on page 42.
Dividend and shareholder returns
The Board is proposing a final dividend of 16.1 pence per share,
to be paid on 5 June 2025, subject to shareholder approval at the
2025 AGM. Combined with the interim dividend of 6.9 pence, this
takes the full year dividend to 23.0 pence per share for the year,
a 1.3% increase, extending our unbroken record of 37 years of
maintaining or increasing the dividend to shareholders.
In addition to our regular dividend, the Group launched
Bodycote’s first share buyback programme in March 2024.
The £60 million buyback programme concluded in January 2025,
with the purchase and cancellation of 8.98m shares, representing
4.9% of the issued share capital. In December 2024, we
announced a further £30m extension to the buyback programme
which is currently underway. Taken together with our dividend,
we returned almost £100m to shareholders in 2024. Our balance
sheet remains strong and the buyback demonstrates the Board’s
continued commitment to disciplined and balanced capital
allocation and to delivering value for our shareholders.
Our People
Our people are critical to our success and, as a service business,
it is our colleagues’ dedication to delivering outstanding service
levels that materially contributes to our competitive advantage.
We are fortunate to have impressive teams across all levels of
the organisation who continue to deliver against demanding
expectations. I would like to share my thanks and appreciation
for everyone within Bodycote for their efforts during 2024.
Shareholders
During the year, I have again had the privilege of engaging
with many of our shareholders and investors to better
understand their views and expectations. Our December
Capital Markets Event was well attended by a range of investors,
analysts and advisers and this provided the Company with the
opportunity to outline the plans being put in place to deliver our
new strategic objectives. The Board appreciates the support of
our shareholders, and we endeavour to ensure their views are
considered as part of our decision-making processes. I look
forward to further opportunities to meet with shareholders
throughout 2025.
Summary
This has been a year of transition for Bodycote, with a new leader
at the helm, new strategic levers and an exciting and challenging
action plan. Overall, the Group has made good progress and
while short-term macro-economic challenges remain, I look
forward with confidence. With a newly-defined and compelling
strategy, excellent leadership and the continued commitment of
our people, I am optimistic about our prospects to deliver further
value to our customers, shareholders and employees.
Daniel Dayan
Chair
13 March 2025
Company overview
Strategic report
Governance
Financial statements
12
Bodycote plc Annual Report 2024
Additional information
POTENTIAL.
ENHANCED.
Chief Executive’s review
Bodycote has strong
foundations, as well as
significant opportunities
to drive further value.
Our new strategic approach
will create a higher quality,
more efficient and faster
growing Company.”
Jim Fairbairn
Chief Executive Officer
Introducing our new CEO
“Since joining Bodycote in March,
I’ve had the opportunity to travel
extensively around our plant network
and to meet our staff, customers and
investors. What struck me from day
one was the capability of our people,
the enthusiasm for metallurgy, and the
importance of the services we provide.
We deliver performance metallurgy
which transforms the characteristics of
our customers’ products, enabling them
to perform in critical environments.
The business has strong foundations,
and I firmly believe there is further potential
to enhance the quality of the portfolio
and improve our financial performance.
Our aim is to create an efficient and high
performing group, with stronger growth
and an emphasis on customer experience.
We’ve taken our first steps on this journey
with the launch of our new strategy at the
end of 2024. As we look forward, the team
is motivated and energised to deliver.
The passion and potential of the
business is evident, and it’s inspiring to
lead the Company during this next phase
in its evolution.”
Company overview
Strategic report
Governance
Financial statements
13
Bodycote plc Annual Report 2024
Additional information
Core Overview
Core revenue grew by 1.0% organically in 2024, excluding
surcharges. This was despite a challenging market environment,
with both North America and Western Europe seeing low levels
of demand in Automotive and Industrial Markets. The resilient
performance reflected further growth in Specialist Technologies
(+5.0% organic, excluding surcharges), partly offset by a modest
decline in Precision Heat Treatment (-0.8%). Growth in Specialist
Technologies was supported by market share gains, continued
efforts to expand the addressable market with new applications,
as well as strong demand globally in Aerospace & Defence and
Energy markets. Precision Heat Treatment delivered good growth
globally in Aerospace & Defence and outperformed a challenging
Automotive market, supported by growth in Emerging Markets
and new customer wins in Western Europe. The modest revenue
decline was driven by soft demand in North America and Europe
across Industrial, Consumer and Medical markets.
Profitability in our Core business improved significantly year-
on-year, with adjusted operating profit up 2.9% organically to
£127.6m and margins 120bps higher at 17.9%. The improvement
was led by Specialist Technologies, where adjusted operating
margins increased by 300bps to 29.0% thanks to improved
utilisation, better operational performance in our HIP business,
and a positive contribution from the Lake City business acquired
in January 2024. Precision Heat Treatment margins were resilient
at 17.0% (down 60bps year-on-year), which reflected the soft
volume environment and the non-recurrence of government
energy grants received in 2023, offset by decisive cost actions
taken in the year. Central costs also reduced year-on-year
reflecting tight cost control and a lower level of incentive-based
pay, which is expected to normalise in 2025.
Group Overview
Including Non-Core businesses, total Group revenue was
£757.1m (2023: £802.5m), 5.7% lower year-on-year and 3.9%
lower organically excluding the impact of Lake City. This reflected
1.0% organic growth in the Core business excluding surcharges,
offset by the decline in Non-Core revenue, FX headwinds and
a significant fall in surcharges year-on-year, which reduced
by around 50% due to the normalisation of energy prices.
Group adjusted operating profit of £129.0m was modestly
higher year-on-year (2023: £127.6m), representing a significant
improvement in margins to 17.0% (+110bps).
Our Non-Core businesses, which are almost entirely focused
on European and North American Automotive and Industrial
markets, declined during the year. Revenue was down by 17.1%
organically to £44.6m and adjusted operating margins reduced
by 200bps to 3.1%. This business represents a small number of
sites with lower differentiation and a less attractive financial
profile than the rest of the Group. The difference in performance
between our Core Precision Heat Treatment division and the
Non-core division in 2024 demonstrates the higher quality and
greater resilience of our Core business. As outlined at our
December 2024 Capital Markets Event, we plan to exit all
Non-Core activity as part of our optimise programme to
enhance the quality and profitability of the Group.
Group statutory operating profit reduced year-on-year to
£37.9m (2023: £119.2m). This was due to the impact of previously
indicated one-off charges, which totalled £78.3m in 2024. In H1
we announced a £28.4m impairment charge arising from the
decision to cease the rollout of the operations module of our
ongoing ERP upgrade programme. In addition, as part of the
Optimise programme announced at our December 2024 Capital
Markets Event, we recognised a £31.9m restructuring charge.
This programme will deliver a significant improvement in the
quality of our plant portfolio and in our financial performance.
Finally, goodwill of £18.0m was impaired in H2 2024, relating to
our North American Automotive and Industrial focused activities,
which have seen challenging market conditions and carry a high
level of associated goodwill from historical acquisitions.
Basic adjusted earnings per share grew to 48.6p (2023: 48.4p),
reflecting higher operating profit offset by a 125bp increase in the
tax rate and higher finance costs. The lower statutory operating
profit resulted in basic earnings per share of 10.8p (2023: 45.1p).
Adjusted operating cash flow of £115.5m was 2.9% ahead of the
prior year (2023: £112.2m), driven by the growth in adjusted
operating profit alongside lower capital expenditure, partly
due to the timing of investment in key projects around year-end.
Free cash flow was lower year-on-year at £70.6m (2023: £95.2m),
which reflected a higher level of cash tax compared with the prior
year, which had benefited from a substantial tax refund.
Chief Executive’s review continued
£757.1m
Group revenue
(2023: £802.5m)
17.0%
Group adj. operating margin,
up 110bps (2023: 15.9%)
15.7%
Group ROCE,
up 90bps (2023: 14.8%)
Company overview
Strategic report
Governance
Financial statements
14
Bodycote plc Annual Report 2024
Additional information
The closing net debt position, excluding lease liabilities, was
£68.3m1, reflecting the acquisition of Lake City (£54.9m including
acquisition costs) and the share buyback programme (£57.7m
executed in 2024) compared with a net cash position of £12.6m
at year end 2023. The Group continues to have a strong balance
sheet and leverage remains low with net debt/adjusted EBITDA
of 0.3x (excluding lease liabilities).
Strategic progress: Optimise, Perform, Grow
As outlined at our Capital Markets Event in December, our
strategy consists of three key levers: Optimise, Perform, and
Grow, which are focused on creating a higher quality, more
efficient and faster growing Bodycote. We have already begun
to make good early progress executing on these levers in 2024.
Optimise: approximately 6% of Group revenue has been
classified as Non-Core (FY 2024: £45m). This comprises heat
treatment activity with lower differentiation and financial
characteristics that do not fit with our revised strategy and focus.
A significant portion of this revenue will be transferred to other
more profitable sites in our network at a higher margin, while
the remainder will be exited. We are also making a number of
reductions to our overhead cost base, enabled by the smaller
footprint. Work has already commenced on transferring or
exiting activity in over a third of the impacted locations, and
approximately one third of the targeted overhead cost reductions
have been completed. We anticipate a benefit of low-to-mid
single-digit millions of pounds to adjusted operating profit in
2025, reflecting the gradual transfer of customer sales, with the
full run-rate benefit of £12m-14m expected to be reached by
the end of 2026.
Perform: the HEAT framework will enable us to deliver more
consistent and sustained levels of performance. It will embed
systematically across the Group a high performance culture,
enhanced service quality, and a more agile cost base, while also
enabling us to transition to a sustainable future. Once in place,
this approach will drive a significant improvement in our
operational performance and margins. Our new Chief Excellence
Officer will join the business in June 2025, with a focus on driving
these Group-wide operational improvements. We have already
rolled-out the key elements of HEAT to a select group of pilot sites
which represent around 10% of our total footprint. We are seeing
early benefits materialise in these pilot sites, and in 2025 we
expect to begin the group-wide rollout of HEAT, with more
material benefits to begin from 2026.
Grow: we see potential for a significant acceleration in growth
and aim to deliver mid-single-digit revenue growth through the
cycle. To achieve this, we are focused on a number of higher-
growth and higher-margin areas, including structural growth end
markets, driving adoption of Specialist Technologies and more
advanced heat treatment processes, and expanding in attractive
geographies. In 2024 we compiled a funnel of initiatives in these
target areas, and we have begun to allocate management
resource and capital to specific projects. In 2025 this includes
Specialist Technologies expansion projects across HIP, S3P,
and Surface Technology in North America, Europe and Asia.
In Precision Heat Treatment, investment is focused on
modernising and expanding our Aerospace footprint in North
America, as well as capacity expansions in Turkey and China.
Our growth strategy will also be supported by improved
commercial capability and inter-divisional collaboration.
Our new Chief Marketing Officer joined in late 2024 and is
building capability in strategic marketing and key account
management. In addition, we are aiming to leverage our ability
to reduce our customers’ carbon emissions to drive revenue
growth. We have developed proprietary tools to demonstrate the
carbon reductions we can offer, and have now trained our sales
teams and deployed these tools. Live discussions are ongoing
with a number of large customers on our sustainability offering.
Sustainability
The increasing pressure to decarbonise provides a growing
opportunity to support customers in achieving their sustainability
goals. Our suite of energy efficient processes in both Specialist
Technologies and Precision Heat Treatment can help customers
to reduce their emissions and environmental impact.
Outsourcing is already recognised by customers as one of the
key levers for achieving their carbon reduction targets, some of
whom would pay a premium for a more sustainable service.
We are focused on developing and executing our strategy to
capture sustainability-related growth opportunities, and we
have recently launched three new environmental targets:
Chief Executive’s review continued
– By 2030, to reduce our absolute Scope 1 and 2 greenhouse gas
emissions by 46% versus 2019 levels. This now aligns to a
1.5ºC pathway, enhancing our existing SBTi approved target
of a 28% reduction which we achieved in 2024, six years early.
– To enable our customers of atmospheric processing to avoid
at least 125,000 tonnes of CO2e by 2030. This target has been
externally validated and is aligned with best practice guidance.
– An increase in the share of revenue which supports sustainable
end-use markets to at least 20% by 2035 (from 7% in 2023).
This year, we have also broadened our emissions measurement
to include a full Scope 3 emissions inventory and set ourselves
new supply chain goals. These include targets to reduce
emissions from our fuel and energy-related activities by 45% by
2030, and for 30% of our suppliers to have an SBTi or equivalent
carbon reduction target by 2030. Over the next 12-18 months we
will build on this to develop our longer-term decarbonisation
strategy and evaluate our roadmap towards net zero.
Summary and outlook
We delivered a resilient performance in 2024 despite a
challenging market backdrop. Core revenue grew by 1%
organically, pre-surcharges, and Core adjusted operating margins
reached 17.9%. This was led by strong performance in Specialist
Technologies and supported by decisive cost actions taken in the
adversely impacted areas of Precision Heat Treatment.
End markets remain mixed, with challenging conditions in
Automotive and Industrial. Structural demand in Aerospace &
Defence remains strong, although there continues to be a
temporary impact from industry-wide supply chain disruption
Reflecting this backdrop, current run-rate profit performance is at
a broadly similar level to H2 2024. We are successfully executing
our Optimisation programme, which will deliver additional profit
benefits as we move into H2 2025
Our continued focus on cost control and progressing our
strategic actions is ensuring we are well positioned to capitalise
when markets recover. We remain confident in the delivery of our
medium-term financial targets
Jim Fairbairn
Chief Executive Officer
13 March 2025
1 Net debt/cash is considered an alternative performance measures (APM).
A reconciliation to the nearest IFRS equivalent is provided at the end of
this Report.
Company overview
Strategic report
Governance
Financial statements
15
Bodycote plc Annual Report 2024
Additional information
Executive Committee
Bodycote’s strength is its people
and technology and it is our
employees who set us apart.
JIM FAIRBAIRN
Chief Executive Officer
BEN FIDLER
Chief Financial Officer
RICK LLOPE
President, Global AGI
HEIDI McNARY
President, Global ADE
THOMAS OURY
President,
Specialist Technologies
BARIS¸ TELSEREN
Executive Vice President,
Emerging Markets
ALISON BROUGHTON
Group Company Secretary
MICHELA FUSCO
Chief Marketing Officer
MICHAEL HARKCOM
Group General Counsel
LILY HEINEMANN
Chief Sustainability Officer
VICKI POTTER
Chief Human Resources Officer
JAMES RICHARDSON
Chief Information Officer
We are determined that Bodycote should be a place where
people feel proud to work, as well as a place where they feel safe.
We are therefore looking to the refreshed executive team to
develop their respective parts of the business to ensure we
maintain consistent standards and implement our values
throughout the Group.
Company overview
Strategic report
Governance
Financial statements
16
Bodycote plc Annual Report 2024
Additional information
Strategic levers
1
Improve portfolio quality
Objective: Our aim is to create a high-quality portfolio
focused on differentiated processes, complex customer
applications and attractive end markets where we can
add the most value and optimise our returns.
Our improved portfolio is structured around two leading,
technology-focused divisions: Specialist Technologies
and Precision Heat Treatment. For a temporary period
we are also reporting a small Non-core division as we
progress with the Group’s Optimise programme.
2
Maintain an efficient operating model
Objective: Maintain a low-cost corporate centre and
ensure that our support functions are appropriately
sized to provide the necessary capability at the lowest
reasonable cost.
1
High performance culture
Objective: We aim to have a winning team of highly
capable and engaged people, all working towards the
same clear strategic goals and collaborating effectively
across divisions.
2
Enhance service quality
Objective: We are a service business, and are focused
on delivering the highest levels of customer service,
including quality, cost, and turnaround times.
3
Agile cost base
Objective: Preserve and enhance the flexibility of our
cost base, to ensure we are able to respond to changes
in market conditions.
4
Transition to a sustainable future
Objective: Continue to reduce our energy consumption
and thereby reduce our costs, improve our customer
offering, and reduce our impact on the planet.
1
Target high-growth, high-margin areas
Objective: Focus our sales efforts and disciplined
investments on structural growth end markets
(eg. Aerospace, Medical), advanced processes
(including Specialist Technologies), and emerging
market geographies, improving our mix.
2
Accelerate via sustainability
Objective: Drive growth and accelerate outsourcing
through our ability to process parts with significantly
lower carbon emissions than in-house treatment.
3
Add aligned M&A
Objective: Boost growth through disciplined M&A,
aligned to our target high-growth, high-margin areas
and with compelling financial returns.
PERFORM
OPTIMISE
GROW
Company overview
Strategic report
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Financial statements
17
Bodycote plc Annual Report 2024
Additional information
Our business model
Our business model ensures we are the supplier of choice for performance metallurgy solutions.
Utilising our strategic differentiators
Creating value for…
Supported by our focus on…
Global and local
With 153 facilities in
22 countries, we are an
established global partner
to multinationals,
whilst serving deep local
relationships with our
customers. This network
provides customers, large
and small, with unique
access to the Group’s
extensive capabilities,
expertise and backup
processing.
Expert knowledge
With decades of experience
in all major markets and
deep knowledge of all areas
of metallurgy, Bodycote’s
engineers and metallurgists
are able to utilise the global
network of expertise, skills
and experience to provide
solutions for customers,
whatever their market or
wherever in the world they
may be.
Technology leader
The broadest range of
metallurgical processing
capabilities and an
unrivalled equipment
network enable our
customers to access
materials performance
solutions that fulfil multiple
requirements from a single
quality-assured provider,
whilst reducing their
carbon footprint.
Fully accredited
Quality has always been at
the forefront of Bodycote’s
services, delivering the very
best in precision-controlled
treatments and quality
inspection. Our facilities
hold multiple certifications
for critical industries and
approved supplier status
with key OEMs.
– Value-adding services
– Global supplier meeting multiple processing needs
– Carbon reduction versus in-house operations,
reducing overall emissions
– Cost reduction benefits versus in-house operations
– Access to the entire Bodycote knowledge
base and expertise
– Attracting, developing
and retaining a
diverse workforce
– Ongoing and
open engagement
– Operating as a
responsible business
– Appealing growth drivers
– Strong margins, cash flows
and balance sheet
– High return on investment
– Proactive approach to
sustainability and
climate change
Customers
Investors
Employees
Customer service
A focus on enhancing customer experience
underpins our business. We build strong
customer relationships through local
service expertise, delivering quality
processing and turnaround that adds
value to our customers’ workflows and
their components.
Carbon reduction
Bodycote has achieved existing targets and
set new ambitious targets for sustainability.
We actively work towards transitioning to
lower carbon technologies that have a lower
environmental impact. Bodycote’s
proprietary carbon reduction app has been
rolled out globally to enable our teams to
support our customers meet their carbon
reduction targets.
Operational excellence
Improving safety and optimising
productivity and efficiency are our
foundations for operational excellence.
Targeted investment in the latest processes
and the most efficient and environmentally
friendly equipment, combined with
key geographies, enables us to access
high-growth markets and extend our
customer base.
Our Specialist Technologies and Precision Heat Treatment
divisions provide performance metallurgy solutions that are
vital to the safe and effective working life of thousands of
components. Our services allow our customers’ parts to
achieve optimal performance and reduce their environmental
impact, supporting a more sustainable future.
WE PROVIDE ESSENTIAL
MATERIALS SCIENCE
SOLUTIONS.
Our global network of engineers and metallurgists
collaborate with customers to solve complex materials
challenges, enhance operational efficiencies and help
reduce carbon emissions.
Company overview
Strategic report
Governance
Financial statements
18
Bodycote plc Annual Report 2024
Additional information
Our key performance indicators1
Adjusted operating margin is a
key measure of the efficiency
of our business in generating
profit from operations.
ROCE shows how efficiently
we have deployed our capital
to generate returns.
Earnings per share is an
important profitability metric
and a key measure of how our
business operations have
driven shareholder value.
Adjusted operating cash flow
is used to assess how well our
business generates cash
from operations.
TRIR is a key health and
safety performance metric.
TRIR represents the number of
lost time incidents, restricted
work cases and medical
treatments cases x 200,000,
divided by the total number of
employee hours worked.
Our Scope 1 and 2 footprint is
a key measure of our progress
towards our science-based
Greenhouse Gas reduction
target. See page 59.
1 Adjusted operating cash flow has been restated to reflect common industry and investor practice. For further details see the ‘alternative performance measures (APMs)’ section on page 175.
Part of the Executive Directors’ Remuneration
15.9
15.1
15.4
17.0
12.6
2020
2024
2023
2022
2021
Adjusted operating margin
(%)
14.8
13.3
12.0
15.7
9.8
2020
2024
2023
2022
2021
Return on capital
employed (ROCE) (%)
48.4
42.7
35.8
48.6
27.8
2020
2024
2023
2022
2021
Basic adjusted earnings
per share (pence)
112.2
87.9
98.2
115.5
101.7
2020
2024
2023
2022
2021
Adjusted operating
cash flow (£m)
2.8
2.5
2.9
1.8
2.3
2020
2024
2023
2022
2021
Total Recordable
Incident Rate (TRIR)
265.3
270.7
284.9
243.3
294.5
2020
2024
2023
2022
2021
Carbon footprint (ktCO2e)
(Scope 1 and 2)
110bps
90bps
0.2p
2.9%
1.0
8.3%
Company overview
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19
Bodycote plc Annual Report 2024
Additional information
Business review
Specialist Technologies
Specialist Technologies delivered
a good performance in 2024 despite
the mixed market environment,
demonstrating the strong
underlying characteristics of this
set of differentiated technologies.
Organic revenue growth was 3.3%, and 5.0% excluding
surcharges, which reflected good growth in both North America
and Europe in Aerospace and Defence, as well as growth in
Energy supported by market share gains. We also continue to
drive above market growth by expanding the addressable market
in Specialist Technologies with new applications. To keep pace
with the demand growth in Specialist Technologies, capacity
expansions were made during the year in both HIP and S3P,
focused primarily in North America. Operating margin improved
by 300bps during the year to 29.0%, driven by a significant
improvement in operational performance in our HIP business,
as well as volume benefits and pricing improvements on
long-term contracts secured in Surface Technology.
The acquisition of Lake City was completed in January 2024
and has proved an excellent fit for the Group, delivering strong
profit performance in 2024.
Revenue by geography (£m)
Revenue by market sector (£m)
Aerospace & Defence
83.5
Industrial Markets
34.9
Automotive
19.9
Energy
52.5
Consumer, Medical & Other
33.4
Total
224.2
Western Europe
121.0
North America
95.7
Emerging Markets
7.5
Total
224.2
Company overview
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20
Bodycote plc Annual Report 2024
Additional information
Case study
Ian Tough
Market Development Manager, Energy
ENERGY EFFICIENCY
In the quest for more sustainable and energy-efficient production
methods that also support cost, quality and lead-time drivers,
a study was undertaken during the year to compare the energy
consumption of Bodycote’s Powder Metallurgy-Hot Isostatic
Pressing (PM-HIP) process to produce near-net-shape parts
versus traditional hot forging for fabricating metallic components
for industrial applications. The study focused on the energy use
in the manufacturing stages of each process, a crucial topic as
industries aim for sustainable production without compromising
quality or timelines. The results of the study showed that hot
forging used 15.1 MWh, while our PM-HIP used just 5.3 MWh,
a 65% reduction; enough to power an average home for a year.
Key factors included a 60% weight reduction in the optimised
PM-HIP design, consolidated post-process heat treatment,
reduced machining, and no overlay welding, which also reduces
risk and lead time. Bodycote’s PM-HIP Powdermet® technology
offers freedom of design and superior material properties,
transforming primitive forged shapes into sleeker, lighter designs
with homogenous material properties and leaner manufacturing
processes. This enables customers to produce improved
products while reducing costs and lead times.
We contribute to sustainable
manufacturing, demonstrating
that focusing on environmental
factors can reduce costs,
lead-times, and enhance quality.”
Ian Tough
Market Development Manager, Energy
Further information about this study can be found at:
https://www.bodycote.com/energy-efficiency-in-manufacturing/.
FUTURE.
POWERED.
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Additional information
21
Bodycote plc Annual Report 2024
Business review
Precision Heat Treatment
Precision Heat Treatment
performance reflected the
challenging market conditions
in 2024, offset by decisive
cost control actions.
Industrial demand softened through the year in both Europe
and the US, and demand was also sluggish in Automotive
across developed markets. Despite this backdrop, performance
in Precision Heat Treatment was resilient. Revenue was down
5.3% organically, however the majority of this was driven by
lower energy surcharges with organic revenue down just 0.8%
excluding surcharges. The business outperformed its underlying
end markets in Automotive, driven by good growth in Emerging
Markets and market share gains in Europe. There was also strong
growth in both Europe and North America in Aerospace &
Defence. These tailwinds helped to offset the majority of the
broader weakness in developed markets industrial demand.
Cost agility was a key focus during the year, with a number of
decisive actions taken to reduce capacity and flex labour cost to
meet the level of market demand. Operating margins reduced by
60bps in the year, to 17.0%, driven by soft volumes coupled with
the non-repeat of energy grants received in 2023, partly offset by
stringent cost control measures.
Aerospace & Defence
134.1
Industrial Markets
135.6
Automotive
138.1
Energy
28.9
Consumer, Medical & Other
51.6
Total
488.3
Western Europe
165.0
North America
239.3
Emerging Markets
84.0
Total
488.3
Revenue by geography (£m)
Revenue by market sector (£m)
Company overview
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22
Bodycote plc Annual Report 2024
Additional information
TOOLS IN ACTION
During the year, Bodycote partnered with a world-leading
manufacturer of marine engines and power systems to improve
the technical and environmental credentials of their products.
Work was undertaken to encourage the customer to switch
from atmospheric processing to low pressure carburising (LPC),
which creates less distortion and has a lower carbon footprint.
The team demonstrated the potential of LPC by using our
proprietary product carbon footprint calculator which has
been recently developed.
Bodycote collaborated with the customer’s innovation team
to set the correct processing specification and support their
extensive testing and approval procedures. As a result of
transitioning to LPC, the customer’s thermal processing
emissions have reduced from 9.8kg to 0.68kg CO2 per part,
equating to a 93% reduction, which means the emissions
associated with the overall manufacture of their product are
materially reduced. Bodycote is a global leader in LPC processing,
and through tools like our new carbon footprint calculator we are
increasingly able to show customers the remarkable carbon
savings that can be achieved by switching technology, while also
improving the final product performance characteristics versus
conventional atmospheric processing.
Our technical expertise, coupled
with our focus on strong customer
relationships, enables us to deliver
high-value solutions that minimise
environmental impact.”
Alexander Larsson
Technical Sales, Sweden
Alexander Larsson
Technical Sales, Sweden
Case study
DIRECTION.
DRIVEN.
Company overview
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Additional information
23
Bodycote plc Annual Report 2024
Financial overview
2024
£m
2023
£m
Revenue
757.1
802.5
Adjusted operating profit
129.0
127.6
Exceptional charges
(78.3)
–
Amortisation of acquired
intangible assets
(10.4)
(8.1)
Acquisition costs
(2.4)
(0.3)
Operating profit
37.9
119.2
Net finance charge
(9.5)
(7.5)
Profit before taxation
28.4
111.7
Taxation charge
(7.7)
(24.9)
Profit for the year
20.7
86.8
Group revenue decreased by 5.7% to £757.1m (2023: £802.5m)
at actual exchange rates and 2.6% at constant currency. The fall
in revenue reflected a 47% reduction in energy surcharges to
£35.6m (2023: £66.8m) as energy prices normalised. At constant
FX rates and normalised for surcharges, revenue performance
was stable, increasing by 1.3% (-0.1% organic).
Despite the challenging end markets, adjusted operating profit
for the year increased by 1.1% to £129.0m (2023: £127.6m),
representing growth of 4.9% at constant currency (+1.7% organic).
Adjusted operating margin further improved to 17.0%
(2023: 15.9%) reflecting good growth in Specialist Technologies
and pro-active cost management in Precision Heat Treatment
in response to the challenging conditions in Automotive and
Industrial markets. Statutory operating profit was £37.9m
(2023: £119.2m) after a charge of £78.3m for exceptional items
(see below).
Excluding the Non-Core businesses which we plan to exit
as part of the Optimise programme, Core revenue reduced by
4.7%. On an organic basis and excluding the impact of lower
surcharges, Core revenue increased by 1.0%, demonstrating
the stronger underlying growth potential of the Core business
despite challenging market conditions. Core adjusted operating
margins increased by 120bps to 17.9%.
RETURNS.
IMPROVED.
A resilient performance
showing good margin
progression despite
challenging end markets.”
Ben Fidler
Chief Financial Officer
Chief Financial Officer’s review
Company overview
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24
Bodycote plc Annual Report 2024
Additional information
Chief Financial Officer’s review continued
Exceptional items
Exceptional charges for the year of £78.3m (2023: £nil) comprised
£28.4m in respect of the write-down of the Group’s ERP system;
£31.9m in respect of the Group’s strategic Optimisation
programme; and a £18.0m goodwill impairment in respect of our
North American Automotive and Industrial focused operations.
The Group has been developing a new enterprise-wide ERP
solution and after a detailed evaluation the decision was taken
in June 2024 to cease further investment in the Operations
module. This decision significantly reduced risk and future
implementation costs but has resulted in an impairment charge
of £28.4m which was recorded as an exceptional item in the first
half of the year.
As part of the Group’s strategic review, we announced a
number of Optimisation actions to enhance the quality of
our plant footprint and improve operational and financial
performance. The associated plant closures and overhead cost
reduction actions led to an exceptional cost of £31.9m in the
year comprising £4.1m of severance costs and £27.8m of asset
write-downs and site closure costs, including a loss of £2.7m
on the sale of a site in France.
An £18.0m goodwill impairment was taken relating to our
North America Automotive and Industrial focused operations in
Precision Heat Treatment. This area of our business has seen
challenging market conditions for a number of years and has a
high level of associated goodwill based on historical acquisitions.
Further detail can be found in note 7 to the financial statements.
Net finance charge
The net finance charge increased to £9.5m (2023: £7.5m),
as summarised in the table below:
2024
£m
2023
£m
Interest on loans and bank overdrafts
(3.9)
(2.7)
Interest on lease and pension liabilities
(3.0)
(2.7)
Financing and bank charges
(3.4)
(2.9)
Total finance charge
(10.3)
(8.3)
Interest received
0.8
0.8
Net finance charge
(9.5)
(7.5)
The increase in interest charges during the year were driven
primarily by higher borrowing as a result of the acquisition of
Lake City Heat Treating in January 2024 and outflows in respect
of share buybacks of £57.7m in the year.
Profit before taxation
2024
£m
2023
£m
Adjusted profit before taxation
119.5
120.1
Exceptional charges
(78.3)
–
Amortisation of acquired intangibles
(10.4)
(8.1)
Acquisition costs
(2.4)
(0.3)
Profit before taxation
28.4
111.7
Adjusted profit before tax remained broadly in line with the
prior year at £119.5m (2023: £120.1m) at actual exchange rates,
reflecting our active management of the cost base in light of the
challenging end market conditions. Statutory profit before
taxation fell to £28.4m (2023: £111.7m). This reflected the impact
of exceptional charges of £78.3m, as well as higher amortisation
of acquired intangibles and acquisition costs, both as a result of
the Lake City Heat Treating acquisition.
Taxation
The tax charge for the year was £7.7m (2023: £24.9m).
The adjusted tax rate for the Group was 23.8% (2023: 22.5%),
before accounting for amortisation of acquired intangibles,
acquisition costs and exceptional items. This was in line with
our expectations. The Group’s overall tax rate reflects the
blended average of the tax rates in the jurisdictions around
the world in which the Group trades and generates profit.
Looking ahead, the adjusted tax rate is expected to moderately
increase over the next few years.
The effective statutory tax rate was 27.1% (2023: 22.3%) with
the increase reflecting that not all of the exceptional costs were
deductible. Provisions of £24.9m (2023: £26.4m) are carried in
respect of potential future tax assessments related to ‘open’
historical tax years. Note 5 of the consolidated financial
statements provides more information.
The OECD Pillar II Rules for a global minimum tax rate have been
applicable to the Group from 1 January 2024. The changes have
not had a material impact on the Group’s tax charge in 2024.
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Bodycote plc Annual Report 2024
Additional information
Chief Financial Officer’s review continued
Earnings per share
Basic adjusted earnings per share increased 0.4% to 48.6p
(2023: 48.4p) reflecting the improved operating profit and the
impact of share buybacks during the year, offset by higher
interest costs and the higher adjusted tax rate. Basic statutory
earnings per share for the year decreased to 10.8p (2023: 45.1p)
reflecting the exceptional charges recorded in the year. Note 6 of
the consolidated financial statements provides further details
of the basis of these calculations.
2024
£m
2023
£m
Profit for the year
20.7
86.8
Attributed to non-controlling interests
0.7
1.2
Earnings attributable to equity
holders of the parent
20.0
85.6
Weighted average number of
ordinary shares in issue
186,012,493
189,877,099
Basic adjusted EPS
48.6p
48.4p
Basic EPS
10.8p
45.1p
Return on capital employed
Return on capital employed rose by 90bps in the year to 15.7%
from 14.8% in 2023. The increase reflects improvement in
adjusted operating profit together with the Group’s disciplined
approach to the capital expenditure projects, focused on
delivering the Group’s strategy and driving attractive returns.
Cash flow
2024
£m
20232
£m
Adjusted operating profit
129.0
127.6
Depreciation and amortisation
75.3
74.0
Other, including impairment and profit on
disposal of PPE
(5.6)
(2.7)
Adjusted EBITDA1
198.7
198.9
Net capital expenditure
(60.5)
(72.0)
Principal element of lease payments
(13.5)
(13.0)
Provisions movement
(7.3)
(0.9)
Net working capital movement
(1.9)
(0.8)
Adjusted operating cash flow
115.5
112.2
Restructuring
(3.9)
(1.6)
Financing costs, net
(8.9)
(6.4)
Tax, net
(32.1)
(9.0)
Free cash flow
70.6
95.2
Net lease liability additions and disposals
(0.7)
(0.5)
Ordinary dividend
(42.9)
(40.6)
Acquisition spend
(55.6)
(0.1)
Ordinary shares purchased for
share buyback
(57.7)
–
Own shares purchased less
share-based payments
0.6
(8.1)
(Increase)/reduction in net debt
(85.7)
45.9
Opening net debt
(51.7)
(99.4)
Foreign exchange movements
5.6
1.8
Closing net debt
(131.8)
(51.7)
Lease liabilities
63.5
64.3
Net (debt)/cash excluding lease liabilities
(68.3)
12.6
1 Refer to page 177 of the Annual Report for a reconciliation of operating profit to
Adjusted EBITDA.
2 In 2024 the definition of adjusted operating cash flow has been updated to
include expansionary capital expenditure, which was previously reflected outside
free cash flow. In addition, adjusted operating cash flow has been restated to
include the principal element of lease payments and exclude non-cash
movements in net debt arising from lease liability asset additions and disposals.
These changes aim to bring the definition of adjusted operating cash flow closer
to market norms. A reconciliation to adjusted operating cash flow and free cash
flow as previously stated is included on page 177.
Adjusted operating cash flow increased to £115.5m
(2023: £112.2m), a conversion ratio of 90% (2023: 88%), as a result
of the improved operating profit and lower capital expenditure,
due partly to timing and partly to additional discipline around
our capital spend given the challenging market conditions.
These tailwinds were partially offset by higher provision outflows
(£6.4m higher year-on-year) driven almost entirely by a first half
payment to resolve a historical environmental issue that was fully
provided for.
Free cash flow fell to £70.6m (2023: £95.2m) for the year.
This was driven almost entirely by higher tax, with net tax
payments in 2024 of £32.1m compared with just £9.0m in 2023.
The low level of payments in 2023 reflected the receipt of tax
refunds relating to prior years and other timing differences.
The statutory measure, net cash from operating activities, fell to
£152.6m (2023: £191.6m) largely reflecting the increased cash tax
outflows in the year and the payments to resolve the historical
environmental issue.
Closing net debt was £131.8m (2023: £51.7m). Excluding lease
liabilities, the Group moved from a net cash position of £12.6m
in 2023 to a net debt of £68.3m in 2024 after returning £100.6m
(2023: £40.6m) to shareholders through dividends and share
buybacks and after acquisition spend relating to Lake City Heat
Treating of £54.9m (including acquisition costs).
Capital expenditure
Total capital expenditure in the year – including both maintenance
and expansionary – was £60.5m (2023: £72.0m). The reduction
year-on-year was partly driven by the timing of payments on
certain projects around year-end, and partly by decisions taken
during the second half of the year to delay certain investments in
response to the challenging market environment. The Group
remains committed to maintaining its assets to the highest
standards of quality and safety.
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Bodycote plc Annual Report 2024
Additional information
Chief Financial Officer’s review continued
Dividend and dividend policy
The Group has a long and stable track record of dividend growth
and aims to pay ordinary dividends so that dividend cover will be
at or above 2.0 times earnings on a ‘normalised’ multi-year basis.
In line with this policy, the Board has recommended a final
dividend of 16.1p (2023: 16.0p), bringing the full year dividend
to 23.0p (2023: 22.7p). The interim dividend of 6.9p, approved
by the Board on 30 July 2024, was paid on 7 November 2024
to shareholders on the register at the close of business on
4 October 2024. Subject to shareholder approval at the 2025
AGM, the final dividend will be paid on 5 June 2025 to
shareholders on the register at the close of business on
25 April 2025.
Borrowing facilities
During the year the Group renewed and extended its existing
Revolving Credit Facility by over 2 years. The Group is financed
by a mix of cash flows from operations, short-term borrowings
and leases. The Group’s funding policy aims to ensure continuity
of financing at a reasonable cost, based on committed and
uncommitted facilities and loans to be procured from several
banking partners. The Group continues to have access to
committed facilities at competitive rates and currently deems
this to be the most effective means of long-term funding.
At 31 December 2024, the facility was drawn as follows:
Facility
Expiry date
Facility
£m
Facility
utilisation
£m
Facility
headroom
£m
Revolving
Credit Facility
19 September
2029
251.0
84.3
166.7
In addition to the Revolving Credit Facility, the Group also has
access to an additional committed facility of £8.7m (undrawn)
bringing total committed facility headroom to £175.4m at
31 December 2024 (2023: £228.3m).
Alternative performance measures
To provide additional information and analysis and to enable
a full understanding of the Group’s results, management
makes use of a number of APMs in its internal management
of the business and as part of its internal and external reporting.
Definitions of these alternative performance measures,
the reasons why they are used, along with reconciliations
to equivalent IFRS measures can be found on page 175.
During the year the Group has renamed a number of its APMs
from headline to adjusted with no change to their definition
other than where explained.
Going concern
As described on page 133 of the consolidated 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 at least the next 12 months. In making this judgement,
they have considered the impacts of potential severe but
plausible consequences arising from the Group’s activities.
For this reason, the Directors continue to adopt the going
concern basis in preparing the consolidated financial statements.
Ben Fidler
Chief Financial Officer
13 March 2025
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Bodycote plc Annual Report 2024
Additional information
Principal risks and uncertainties
The Board is committed to protecting and enhancing the
Group’s interests through the effective management of risk.
As a global business operating in 22 countries we understand
that effectively managing risk underpins the successful
performance of the Group.
The Board has ultimate responsibility for the Group’s systems of
risk management and internal control and ensures the Group’s
risk processes and systems of internal control are robust and
monitored and that they evolve to address changing business
conditions and threats. The Board determines the Group’s risk
appetite and ensures that the Group’s exposures to risk are
appropriate and align to the Group’s strategic levers
and priorities.
The Board also provides direction and sets the tone on the
importance of risk management. The review of financial risk has
been delegated to the Group’s Audit Committee.
The Executive Committee has taken ownership of specific
business risks. Each risk is evaluated based on its likelihood of
occurrence and severity of impact on the Group‘s strategy.
Risks are then assessed at both a gross and net level,
i.e. before and after the effect of mitigation. The Executive
Committee also assists in the identification and evaluation of
principal risks and controls as part of the Group’s risk assessment
and risk management processes.
This approach allows the identification and consistent evaluation
of significant and principal risks, as well as consideration of the
effect of current lines of defence in mitigation.
In addition, there are established, routine oversight and reporting
processes in place including regular operational review meetings
with each Division that cover key areas of performance and risk.
This includes market, customer and supplier risks, health, safety
and environmental performance, projects, capital expenditures,
resources and other topical areas for consideration.
Divisional and functional leadership also inherently manage risk
through the day-to-day running of the business.
Group Internal Audit provides independent assurance to help
ensure that the Group’s risk management, governance and
internal control processes are operating effectively. Updates are
provided at the Board, Audit Committee and Executive
Committee throughout the year on the Group’s risk and internal
control activities.
A comprehensive review of the Group’s current and emerging
risks was also presented to, and discussed with, the Board in
June 2024 and January 2025. The Board is satisfied that an
ongoing process of identifying, evaluating and managing the
Group’s significant risks has been in place throughout 2024 and a
robust assessment of both the Group’s principal and emerging
risks has been undertaken.
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 16 to the consolidated financial
statements. The mitigating activities described in this report will
reduce the impact or likelihood of these risks occurring, although
the Board recognises that it will not be possible to eliminate these
risks entirely.
Key events in the year
During 2024 the Aerospace and Defence sector has seen
increased growth and demand, however continued supply chain
disruption has impacted production rates.
As with previous years, macro-economic conditions have
remained challenging in the automotive and industrial markets.
In the automotive sector the focus on the electric vehicle (EV)
market continues albeit with some uncertainty over the pace and
timing of transition from internal combustion engines (ICE) to EV.
Conditions in the industrial markets have remained challenging
due to slow demand and de-stocking.
Bodycote has continued to manage inflationary cost pressures
throughout the year. The Ukraine war and geopolitical tensions in
the Middle East have continued, albeit Bodycote has no direct
exposure to any of the countries involved and has no facilities,
customers, or suppliers in those territories.
Emerging risk
Bodycote’s emerging risk identification process is based on
horizon scanning. Each emerging risk is assessed based on its
potential impact on the Group on a high, medium or low rating
across three time horizons: 0-2 years; 2-5 years; and more than
five years. This process takes place alongside the annual risk
review, with emerging risks being considered in facilitated risk
workshops conducted with the Executive Committee.
This review helps to ensure that any new and emerging risks
are appropriately identified and ensures close monitoring of
any emerging risks to ensure appropriate mitigating actions
are undertaken.
As an international Group operating in multiple countries,
the Group inevitably has exposure to a range of risks and
uncertainties where internal and external factors are considered
and inform the Group’s response to managing such risks,
many of which are similar in nature to those experienced by
comparable companies and may not always be within the
Group’s control.
The Board has highlighted geopolitical risk, specifically,
the unpredictable geopolitical landscape and the uncertainty
over future global events as an emerging risk.
If tensions in the geopolitical landscape result in the
implementation of aggressive trade barriers that reduce the
movement of goods, this could result in customers shortening
their supply chains and moving them closer to their main
production locations. The emerging risk is mitigated by the fact
that Bodycote has a global network of sites which allow us to
service customers from multiple locations, such that the residual
risk exposure is not considered significant.
An additional area of emerging risk identified during the year
relates to the Group’s ability to attract, retain and develop key
skills, knowledge and capabilities. As the global employment
environment continues to evolve, attracting new talent to the
industry, particularly in engineering and operations will become
an increasing priority. The Group appointed a new Chief Human
Resources Officer in January 2025 who will drive the Group’s
people and transformation process going forward.
The risk of global pandemics and their impact on both supply
chains and operations are no longer considered as either an
emerging or principal risk for the Group.
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Bodycote plc Annual Report 2024
Additional information
Principal risks and uncertainties continued
Risk description
Risk rating
Mitigation and control
Relevance
to strategic
priority
Market and customer risks
Markets
Bodycote operates in 22 countries. There is a risk that
macro-economic trends and changes in the economic
and geopolitical environment will impact the end-
markets that the Group serves, and, consequently,
the number of parts that need to be treated.
These events may result in supply chain disruptions,
rising energy prices and labour shortages which can
escalate inflationary pressure on earnings if not
passed on to customers.
The rate of transition from internal combustion engines
(ICE) to hybrid and electric vehicles (EV) presents both
a market risk and an opportunity to the Group.
Bodycote needs to maintain progress in building a
strong market position in the EV supply chain.
Conditions in the industrial markets remain very
challenging in the US and Europe.
Geopolitical uncertainties arising from conflict, tariffs
and other significant impacts to global aerospace and
trading activity could impact Group revenue
and profitability.
The high proportion of short-term fixed costs in the
business means that a movement in sales can have
a significant impact on the Group’s profitability.
High levels of cost inflation exert pressure on the
Group’s profitability if it is not successfully passed
on to customers.
The EV market continues to grow strongly,
driven by the general focus on reducing global
greenhouse gas (GHG) emissions resulting in a shift
in consumer spending.
Globally increased levels of geopolitical instability.
– Bodycote’s presence in 22 countries, servicing customers across a
wide variety of end-markets, acts as a natural hedge to neutralise
localised economic volatility and component lifecycles.
– Bodycote has demonstrated the ability to manage its cost structure in
response to revenue shocks, supply chain issues and significant cost
inflation, protecting profitability and returns.
– Restructuring activities in prior years have been aimed at successfully
adapting the Group’s facilities footprint to respond to trends in
end-markets in order to mitigate pressure on earnings. Bodycote has
a long track record of passing on cost inflation to its customers and
has acted quickly in the past to ensure that the surge in cost inflation
is offset by energy surcharges and price increases to our customers.
– Bodycote continues to focus on increasing its market share in the
EV market.
– Bodycote keeps its cost base and activity level under constant review
and adjusts its capacity and investments as conditions evolve.
Competitor action
The threat of new and existing competitors affecting
one or more of the Group’s Specialist Technologies.
A number of small and mid-sized HIP vessels have
been installed by competitors, but investment in
large HIP vessels has, to date, been limited.
The entrance of new competitors could result in the
erosion of market share with a loss of revenue
and profitability.
– The close control of proprietary knowledge.
– Expansion in the Group’s offerings to maintain its 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.
Optimise
Grow
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Group Principal Risks
The following tables set out a description of the Group’s principal risks and related mitigation measures, as agreed by the Board, and describe how these principal risks may affect Bodycote’s ability to
deliver its strategy. The risk rating sets out the direction of change from 2023. Please refer to page 17 for further information on our strategic levers.
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Bodycote plc Annual Report 2024
Additional information
Principal risks and uncertainties continued
Risk description
Risk rating
Mitigation and control
Relevance
to strategic
priority
Corporate and community risks
Health and safety
The inherent nature of Bodycote’s activities and
the equipment operated presents safety and
health risks. 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.
Bodycote is committed to providing a safe
work environment for its employees.
– Well established Groupwide health and safety policies ensure continuous
improvement of safety standards, monitoring and investigation of all events.
– ISO 45001 and ISO 14001 aligned EHS management systems overseen by the
Group Head of EHS and implemented with support of divisional environment,
safety and health teams.
– Programmes in place to focus on the reduction of incidents which could have
a high impact.
– Safety compliance audits at all plants at least every two years.
– The Group appointed a new Senior Vice President, Health & Safety in
February 2025.
Environment
Climate change
As a thermal processing company, the Group’s
carbon reduction strategy is of particular
importance to stakeholders, both as a potential
risk and a commercial opportunity.
Climate change poses a range of potential risks,
arising from current and emerging regulation,
technology, legal, market, reputational, and
physical climate risk drivers, which could lead to
business disruption, health risks, loss of
reputation and financial costs.
Climate change risk continues to rise in
prominence in light of stakeholders’
expectations, changing regulations and
reporting requirements, and potential physical
weather-related impacts.
– Centre of expertise established to drive climate-related activity.
Risk and Sustainability Committee supports execution of strategy.
– SBTi-validated Scope 1 and 2 emissions reduction target – SBTi target of 28%
reduction by 2030 achieved six years early and new target set of
46% reduction by 2030 versus 2019.
– A climate scenario process established to support the identification and
mitigation of potential risks (see the TCFD report on pages 48 to 56).
– Climate-related stakeholder communications, in alignment with internationally
recognised standards.
– Adherence to the ISO 14001 standard for environmental impact management
(98% of the Group’s facilities are accredited). Remediation of contaminated
sites continues.
Grow
Increasing
Stable
Perform
Optimise
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Additional information
Principal risks and uncertainties continued
Risk description
Risk rating
Mitigation and control
Relevance
to strategic
priority
Operational risks
Service quality
The Bodycote brand is reliant on the repeatable
delivery of parts to agreed specification within
an agreed time period.
There is a risk that Bodycote fails to meet the
needs of customers in terms of quality, delivery,
innovation and problem-solving.
The risk of poor quality, poor service levels or
non-compliance with agreed specifications can
cause serious long-term damage to Bodycote’s
reputation with financial consequences such as
customer loss or the cost of damages
or litigation.
– Bodycote has stringent quality systems in place managed by qualified staff.
– Quality systems and processes are operated within our plants with strong
oversight by our divisional quality teams.
– Where necessary, our plants maintain industry relevant accreditations,
such as ISO 9001, Nadcap and IATF 16949.
– Each facility undergoes regular audits by quality staff, accreditation bodies
and customers.
Contract review
There is risk that parts are not treated according
to contractually agreed specification or
additional customers’ amendments.
Non-compliance with agreed specifications or
failure to update the process at a plant to
comply with specification changes requested by
the customer may potentially lead to parts
being rejected or failing, which could result in
material claims against Bodycote with
significant reputational damage, financial
penalties and a loss of future revenue.
– 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.
– Certain potential damages resulting from this risk are fully or partially covered
through the Group’s various insurance policies.
Loss of key accreditations
Bodycote is required to maintain specific
accreditations in order to provide heat
treatment and thermal processing services on
parts for certain customers.
Failing to maintain such accreditations would
prevent Bodycote from delivering services to
customers in these markets.
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.
– Should a facility fail an accreditations audit, a remediation plan to fix any
non-conformities is implemented.
– Bodycote has a global network of more than 150 facilities enabling work to be
transferred to another accredited facility.
Grow
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Stable
Perform
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Additional information
Principal risks and uncertainties continued
Risk description
Risk rating
Mitigation and control
Relevance
to strategic
priority
Operational risks
Major disruption at a facility
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.
Any significant incident at a site could result
in the service to Bodycote’s customers from the
affected site being disrupted.
– Business continuity plans are in place for all plants.
– Independent insurer physical inspections of facilities to assess hazard and
business interruption risks have been conducted during the year.
– Insurance cover, including business interruption cover, is in place.
– Scheduled equipment maintenance and inspections are carried out on
a regular basis.
– Bodycote’s global network of more than 150 facilities creates a framework
to provide backup capability if required.
Machine downtime
Bodycote relies upon its operational equipment,
across its network of plants, being available to
meet the requirements of its customers.
Therefore unexpected equipment downtime
would potentially affect Bodycote’s ability to
service its customers. Moreover, without an
effective preventative maintenance programme
there is a risk that equipment redundancy plans
would need to be built into facility management
in order to cope with equipment breakdowns.
Significant periods of equipment downtime
would impact customer service and revenue.
– Preventative maintenance programmes mitigate the risk of downtime
occurrence associated with major breakdowns ensuring business continuity
and customer satisfaction.
– Spare parts replenishment programme ensures efficient maintenance activities
occur according to plan.
– Bodycote’s global network of facilities with robust business continuity plans help
to minimise the impact of equipment downtime on customer service. If required,
customer work can be transferred to another facility within the network.
Information technology and cybersecurity
The Group relies upon its IT systems, including
a range of ERP solutions, to manage its
operations. IT system interruptions could lead
to business process disruption and interruption
to key business services.
There is an increasing global risk of
sophisticated cyber-attacks, including
ransomware and phishing with the complexity
of these attacks rising.
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.
– The Group continues to focus on information security management processes,
business recovery planning and data backup procedures.
– Regular training and awareness programmes are provided for our users.
Grow
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Perform
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Additional information
Principal risks and uncertainties continued
Risk description
Risk rating
Mitigation and control
Relevance
to strategic
priority
Operational risks
Investment and capital deployment
It is important that where systems investments
and programmes are implemented across
Bodycote, they are delivered on target, with the
expected benefits and within the timescales.
Therefore, it is critical to the strategic objectives
of Bodycote, that the rollout of key systems
investments and programmes is successful.
A failure of key systems, projects and/or
acquisitions would adversely impact critical
business operations or financial performance.
– For acquisitions, specified due diligence processes and procedures are
established (including integrations).
– Periodic assessments of progress on all key investments.
– Project governance processes in place for all key business and IT projects
(including contracts with third parties) to ensure deliverables.
Regulatory risks
Regulatory and legislative compliance
The global nature of Bodycote’s operations
means that the Group must comply with a wide
range of local and international regulatory and
legislative requirements, including modern
slavery, anti-bribery and anti-competition
legislation, employment law and import and
export controls.
The Group must also comply with taxation
legislation and the advantages associated with
the UK’s controlled foreign companies that the
Group has employed in its financing structures.
Failure to comply with current and new
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’ whistleblowing facility operated by a third-party.
– Engagement of specialists (lawyers, accountants, tax specialists, trade
compliance consultants and freight forwarders) to support Bodycote at local,
divisional and Group levels.
– Regular audits of the effectiveness of implemented procedures.
– Regular assessment to ensure continuing compliance with the UK Corporate
Governance Code, including any proposed changes.
Grow
Increasing
Stable
Perform
Optimise
Company overview
Strategic report
Governance
Financial statements
33
Bodycote plc Annual Report 2024
Additional information
Viability statement
In preparing this statement of viability, the Directors have
considered the prospects of the Group over the five-year period
immediately following the 2024 financial year. This longer-term
assessment process supports the Board’s statements on both
viability, as set out below, and going concern (on page 27).
The Directors have determined that a five-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 planning process. As a result,
the Board determined that a period of longer than five years
would not be meaningful for the purpose of concluding on
longer-term viability.
The base case forecasts which underpin this assessment are
based on the Board approved 2025 budget and the Board
approved five-year strategic plan. These reflect the £30m share
buyback announced in December 2024 which is assumed to
be completed over a six month period ending June 2025.
The projections reflect ongoing growth in the Group’s
geographies and end markets over the forecast period.
The performance of the Group over the period of the assessment
has then been assessed against the covenants that exist in the
Group’s Revolving Credit Facility, as explained on page 27,
and the Group’s liquidity.
In conducting their review of the Group’s prospects,
the Directors assessed the five-year plan alongside the Group’s
current position, the Group’s strategy and the principal and
emerging risks facing the Group (all of which are detailed in the
Strategic Report on pages 11 to 67). This assessment included
consideration of the principal risks to the business model,
future performance, liquidity and solvency and was mindful
of the limited forward visibility that the Group has as it carries
limited order backlog. The Directors’ viability assessment
included a review of the sensitivity analysis performed on the
five-year financial forecasts.
The assessment included two scenarios designed to stress-test
the Group’s base case forecasts as follows:
– A plausible downside scenario which assumes a slow-down
in the global economy, resulting in a fall in FY25 revenues of
13% versus FY24 and limited revenue growth thereafter.
This scenario represents a 19% reduction in revenues versus
the base case over this period with no net revenue growth in
that time. Profit margins are significantly lower than those
achieved by the Group in recent years.
– A break-case scenario designed to establish the decline in
revenues required to result in the Group’s liquidity being
exhausted or loan covenants breached. This scenario shows
that FY25 revenues would need to fall 19% below FY24 levels,
and demonstrate zero growth thereafter, before the Group’s
leverage ratio covenant is breached at the end of the five year
review period. Whilst this scenario is not considered remotely
plausible, it was designed to stress-test the financial resilience
of the Group.
Both scenarios applied a 50% profit gearing to the fall in revenue.
In the plausible downside scenario, capital expenditure was
reduced versus the base case and dividends were maintained at
the same level as FY24 through FY25, before increasing at the
same percentage growth rate as the base case thereafter. In the
break-case scenario, capital expenditure was further reduced,
reflecting the reduced maintenance capital expenditure required
in that scenario due to sustained lower equipment utilisation, and
the lower levels of expansionary capital expenditure that would
be required. In addition, dividends were reduced significantly
and the Group’s share buyback programme was assumed to be
paused at the end of the non-cancellable period with the broker.
No mitigating actions such as undertaking further restructuring
were included.
In the base case and plausible downside scenario, there were
no breaches to the Group’s covenants, and substantial headroom
was maintained.
In making this viability statement the Directors considered
the other mitigating actions (including, but not limited to, cost
reduction initiatives, further discretionary capital expenditure
reduction and the reduction of dividends) 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 both scenarios.
The Directors also took into consideration the Group’s financial
position at 31 December 2024, with available liquidity of £194m
(December 2023: £274m) and a history of strong and resilient
cash flow generation. Uncommitted facilities were not taken
into account in performing the assessment. It is noted that the
Group’s RCF matures in September 2029, before the end of
the assessment period, however the Directors have a reasonable
belief that, based on previous experience and ongoing supportive
discussions with our lenders, should any debt facility be required,
the RCF will be able to be refinanced or extended.
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 2029.
Company overview
Strategic report
Governance
Financial statements
34
Bodycote plc Annual Report 2024
Additional information
Section 172 statement
The Board is mindful of the duties of directors under section 172
of the Companies Act 2006, to act in the way they consider,
in good faith, would most likely promote the long-term success of
the Company for the benefit of shareholders as a whole, and with
regard to other key stakeholders. Our Directors fully recognise
the importance of our stakeholders in the successful operation
of the business. We are also aware, that in some situations,
stakeholders’ interests may conflict, which may require some
interests to be prioritised. The Board, led by the Chair, therefore
ensures that an intrinsic part of its decision-making process
includes an assessment of the likely long-term consequences
of decisions taken and the potential impact on our stakeholders.
The Board is governed by a robust governance framework,
which includes Groupwide policies and our Code of Conduct.
Aligning with our purpose and values, we believe that by
understanding what matters to our key stakeholders, we are
better able to secure long-term success for the Group. We
place a strong emphasis on proactive, transparent, and open
engagement with our key stakeholder groups, which in turn
promotes mutually beneficial relationships and value.
Further information about how these duties have been applied
can be found throughout this Annual Report, as set out below.
An overview of how and why we engage with key stakeholders
and how we have considered their requirements relating to
principal decisions taken during the year to ensure effective
and continued engagement is set out on pages 37 to 39.
Section 172 duties
Key examples
Page
Consequences of decisions in the long-term
Strategic progress
06
Chief Executive and Chief Financial Officer’s reviews
13 and 24
Our business model
18
Going concern and viability statements
34 and 133
Principal risks and uncertainties
28
Interests of employees
Chair’s statement and Chief Executive’s review
11 and 13
Our stakeholders
37
Sustainability report (including TCFD report)
40
Board activities in the year
75
Fostering business relationships with suppliers,
customers and others
Our stakeholders
37
Sustainability report
40
Strategy and objectives
13 to 17
Board activities in the year
75
Impact of operations on the community and the environment
Sustainability report (including TCFD report)
40
Principal risks and uncertainties
28
Maintaining high standards of business conduct
Sustainability report (including TCFD report)
40
Corporate governance statement
73
Acting fairly between members
Shareholder engagement
37 and 76
Company overview
Strategic report
Governance
Financial statements
35
Bodycote plc Annual Report 2024
Additional information
Compliance with Directors’ duties
Strategy
In determining the Group’s strategic
direction, and the sustainability of our
business model, the Board is conscious
of its collective responsibility to all
stakeholders, seeking to ensure that
corporate and management structures are
in place for our strategy to be implemented
effectively. At each Board meeting, progress
against our strategic priorities and the
changing shape of the business portfolio is
reviewed. This approach, together with the
Board’s approval of the Group strategy,
helps the Board to promote the long-term
success of the Group. Board decisions are
ultimately taken against the backdrop of
what it considers to be in the best interests
of the long-term financial success of
the Company and each of the Group’s
stakeholders. The Group’s strong
underlying financial position enables us to
pursue new opportunities for the Group
within our disciplined financial framework.
Performance
We endeavour to drive performance
through the communication of clear
objectives and skills development and are
committed to continuous improvement.
The Board regularly reviews and monitors
the Group’s safety and environmental
performance, with the aim of making
Bodycote safer for our entire workforce and
minimising our impact on climate change.
In 2024, the Group recorded a significant
improvement in its total recordable injury
rate of 1.8 (2023: 2.8). We conducted a
comprehensive review of our health and
safety strategy during the year and
introduced a groundbreaking initiative
called ’House of Safety’. This forward-
thinking approach represents a significant
milestone in our ambition to achieve
world-class health and safety standards
within the next five years.
The safety, health and wellbeing of our
employees will always be our highest
priority and we will remain focused on
delivering targeted and timely employee
engagement to tackle the occurrence of
incidents. This is important to our workforce
and local communities, while strong
operational availability and reliability is
crucial to our partners and customers.
The Board’s oversight ensures the Group
continues to focus on maintaining financial
discipline and delivering strong earnings,
cash flow and returns to shareholders.
People
As a service business, it is our employees
who are the key to our success. It is their
attitudes, capabilities and skills that help
us maintain our strong reputation for high
standards of business conduct. This in turn
is fundamental to delivering our purpose
to support our customers in producing
superior components. We are committed
to ensuring we have safe and effective
working environments, which enable
everyone to perform to their true potential.
Bodycote operates Employee Engagement
Groups, which are chaired by a Non-
Executive Director. In 2024, two regional
forums were held, with c.30 employee
representatives in attendance in the virtual
meetings. Feedback from these forums
was reported to the Board, with Executive
Directors charged with addressing
particular items that were raised.
Governance
The Board believes that strong governance
is essential to the success of our business
and recognises that the Group’s long-term
success depends on a commitment to
maintaining good governance standards.
The Board sets the tone of the Group with
regard to our governance framework,
which underpins good governance practices
and enables the Board to provide effective
stewardship of the Group. It drives the
highest levels of business standards and
best practices, aligning these with
Bodycote’s business purpose, values,
strategy and culture. The Board assesses
and monitors culture and looks to obtain
useful insight through effective dialogue
with our key stakeholders, taking feedback
into account in the Board’s decision-making
processes. The Board understands the
benefits of annual performance evaluations
and, in 2024, undertook an external
evaluation process, the details of which
are set out on pages 80 and 81.
Section 172 statement continued
Company overview
Strategic report
Governance
Financial statements
36
Bodycote plc Annual Report 2024
Additional information
Our stakeholders
By understanding what matters to our key stakeholders and building strong, positive relationships,
we believe we are better able to achieve long-term success for our business.
This section describes how we have engaged with our key stakeholders during the year as well as how this engagement has influenced the Board’s discussions and decision-making.
Further details on Board stakeholder engagement can be found in our Governance report on page 76.
Delivering an attractive return is
a core priority for the Board.
Our investment proposition builds
upon our strengths to create value
for shareholders, with capital
rewarded through dividends
and share price increases.
We communicate progress on
our financial and non-financial
plans to cultivate the support of
our investors, analysts, banks and
proxy voting agencies.
c.£40m
in dividends paid and
£60m share buyback
completed in the year
Reasons for engagement
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 clear
understanding of our strategic
objectives, performance and the
risks and uncertainties we
are managing.
Our investors rely on us to protect
and manage their capital in a
responsible and sustainable way
while generating long-term value.
Their interests
– Financial performance and
financial returns
– Effective capital allocations
and dividends
– Commitment to sustainability
and climate change
– Health and safety performance
– Good governance
and transparency
– Strong leadership
– Mergers and acquisitions
Key engagement channels
– Results presentations and
regular engagement with
top shareholders
– Annual General Meeting
– Annual Report and Accounts
– Investor communications and
our corporate website
– Regular meetings throughout the
year with existing and prospective
shareholders and banking partners
– Press releases (including
regulatory announcements)
– Addressing enquiries promptly
Outcome of engagement
– Capital Markets Event in December
2024 attended by c.70 investors
and analysts
– £60m share buyback programme
completed, with a £30m buyback
extension announced in
December 2024
– Continued engagement undertaken
throughout the year, with meetings
held with key shareholders, investors
and analysts
– Regular market updates issued
to keep the market informed on
business performance
– Series of ESG-focused investor
meetings, with shareholder
input into the sustainability
materiality assessment
We are committed to building
positive relationships with the
communities in which we operate.
We consult through our plant
network to better understand
and manage the social impacts of
our business and gain valuable
perspectives on the ways in which
our activities could impact the local
community or environment.
>150
facilities in 22 countries
Reasons for engagement
Bodycote operates in a very large
number of local communities
across the world, and we aim to
ensure that the business is seen
as something that contributes
positively to these communities
and their inhabitants.
Their interests
– Positive social impact
– Employment opportunities
– Future talent pipeline
– Minimised environmental
impact in the locations in
which we operate and on the
global community
– Safety, health and
environmental performance
– Individual employee volunteering
– Local site community activities
– Labour and Human rights matters
Key engagement channels
– Employee engagement activities
involving families
– Employee volunteering in
local communities
– Local site community activities
– Our corporate website
Outcome of engagement
– Continued to work on our supply
chain strategy and engagement
process to mitigate potential human
rights risks and ensure everyone
working for, and with, us is treated
with fairness, dignity and respect
– Increased understanding of the
Company’s impact on society and
communities through our materiality
assessment process (see page 42)
– Local support at plant level
for charitable and community
initiatives
Shareholders and investors
Society and communities
Company overview
Strategic report
Governance
Financial statements
37
Bodycote plc Annual Report 2024
Additional information
Our stakeholders continued
The knowledge, capabilities,
expertise and skills 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 remuneration policies
have been designed to support the
Group’s strategy, in alignment with
the Group’s purpose, values and
culture to promote the long-term
success of the organisation.
£280.6m
in annual staff costs
Reasons for engagement
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 employees to ensure we meet
their expectations and make the
right business decisions. This helps
us to retain and develop the
best talent.
Their interests
– Health, safety and wellbeing
– Fair pay and reward
– Career development opportunities
– Training opportunities
– Reputation of the organisation
– Sustainability
– Diversity and inclusion
– Two-way engagement
Key engagement channels
– Employee Engagement Groups
– Regular town hall meetings to
update employees
on performance
– Annual performance reviews
– Updates provided to the Board
from the CEO on matters affecting
or impacting the workforce
– Grievance and whistleblowing
mechanisms
– Regular interaction between the
Board and management during
and after Board meetings
– Board site visits
– Environment, health and safety
briefings and trainings
– Annual Report and Accounts
– Social media communications
Outcome of engagement
– Two virtual Employee Engagement
Group meetings held during 2024,
hosted by Patrick Larmon,
with c.15 employees in attendance
at each meeting
– Regular in-person and virtual town
hall meetings held throughout the
year to provide strategic and
performance updates
– The Board visited three plants in
Los Angeles, USA and one plant in
Haag-Winden, Germany during the
year, meeting with a range of
employees, which helps them to
better understand the business at
plant level
We provide our services to the
aerospace and defence,
automotive and general industrial
markets. Working closely with
our customers, and seeking their
feedback, we are better able to
understand their evolving needs
so we can continually improve
and adapt to meet them, finding
solutions to create value and
improve their overall experience.
>50
processes
Reasons for engagement
We collaborate with our customers
to improve our customers’ product
characteristics and to develop a
project pipeline.
Engaging with our customers
helps us to understand their needs
and identify opportunities and
challenges.
Their interests
– Value-enhancing services and
satisfaction of their needs
– Service performance, efficiency
and quality
– Commitment to sustainability
and emissions reduction
– Supply chain transparency
– Implementation of
strategic agenda
Key engagement channels
– Through ongoing customer
relationship management
– Participation in industry forums
and trade events, such as the
Farnborough and Paris airshows
– Surveys of customer satisfaction
– Customer marketing
communication programme,
including utilisation of our
corporate website
Outcome of engagement
– Continued development of long-term
customer relationships
– Support for customers to achieve
their climate and environmental goals
– Review of ways to harness innovation
and digital technology to add value
Employees
Customers
Company overview
Strategic report
Governance
Financial statements
38
Bodycote plc Annual Report 2024
Additional information
Examples where the Board actively considered the interests of key stakeholders when making decisions during the year:
Our stakeholders continued
Share buyback
Examples
In January 2024, the Board recognising a lower than
anticipated acquisition spend and consistent with its
balanced approach to capital allocation, announced
a £60 million share buyback programme.
In determining whether there was sufficient capital
to be distributed to shareholders, the Board assessed
the likelihood of near-term M&A opportunities, the
Company’s financial resilience, and the sustainable
growth of dividends, while remaining conscious of
the need to promote the success of the Company for
the benefit of all stakeholders. This review included
giving consideration to the Group’s balance sheet,
the Company’s valuation, trading outlook and high-level
business plan, as well as available funding facilities.
The Board considered the macro-environment and
market sentiment, noting that feedback received from
the top 20 shareholders reflected a desire for the
Company to demonstrate a balanced approach to
capital allocation.
The share buyback programme commenced in March
2024 and concluded in January 2025, with nine million
ordinary shares bought and cancelled. A £30 million
extension to the programme was announced in
December 2024. In line with its capital allocation policy,
the Board will continue to periodically evaluate
returning surplus capital to shareholders, either via
share buyback programmes or special dividends.
The share buyback programme has been well-received
by stakeholders.
Section 172(1) considerations
The Board considered the share
buyback programme to be for the
benefit of its members as a whole,
having given fair consideration to
all members and key stakeholders.
The share buyback programme was
thought to be an efficient way to
manage the Company’s capital
allocation, increasing shareholders’
overall ownership of the Company,
which is also beneficial to those
employees who are also
shareholders. The share buyback
programme has been conducted
in a clear and transparent manner
through daily RIS announcements,
updates on our corporate website,
and through Companies House
and FCA filings.
Climate change – updated SBTi target
Examples
In October 2022, the Board agreed to set carbon
reduction targets in conjunction with the Science Based
Targets initiative (SBTi) for Scopes 1 and 2. This target
committed the Company to an absolute reduction of
28% in carbon emissions by 2030 compared with 2019.
To achieve this, ambitious but realistic goals were set,
based on clear and specific projects, with our progress
to achieve these targets measured by metrics and an
annual scorecard.
During 2024, the Board has been actively involved in the
continued oversight of the development and execution
of our integrated sustainability strategy. It became
apparent that the Company was on track to achieve the
original SBTi targets by the end of 2024, six years ahead
of schedule and, as a result, consideration was given to
upgrading the existing SBTi target. Recognising the
Company’s ambition to becoming a sustainability
leader, the Directors acknowledged that upgrading the
SBTi targets and setting new and wider sustainability
targets would help to accelerate the sustainability
strategy and further confirm Bodycote’s commitment to
tackling climate change, while also helping our
customers meet their own sustainability targets.
At our Capital Markets Event in December, these new
targets were announced. They included a tougher SBTi
carbon reduction target, reducing our Scope 1 and 2
greenhouse gas emissions by 46% versus 2019 levels,
up from 28%, introducing a customer-avoided
emissions target of 125,000 tonnes of CO2e by 2030, and
increasing our proportion of sustainable revenue in
end-use markets and applications to 20% by 2035, up
from 7% in 2024. Further details are set out on page 42.
Section 172(1) considerations
The Board considered the upgrading
of the sustainability targets would
have a wide impact on key
stakeholders, as well as on the
community and the environment.
In helping to foster business
relationships with customers and
suppliers, the Board reviewed the
work to be undertaken to reduce
emissions targets, help avoid
emissions that would otherwise be
released, while working towards a
continuous reduction in greenhouse
gases aligned with the SBTi.
The investment and business
impacts, including the ability to
secure long-term access to low
and zero carbon electricity were
considered. The Board will monitor
the Company’s approach to meeting
these targets and managing its
climate-related risks, cognisant of
increasing stakeholder expectations,
and keep pace with regulation to
build on the strong foundations in
place to reach our 2030 ambitions.
Company overview
Strategic report
Governance
Financial statements
39
Bodycote plc Annual Report 2024
Additional information
Sustainability report
Our approach
We recognise our opportunity to influence emissions and
environmental performance across many end-markets.
As well as impacting the Group’s own productivity,
our sustainability record influences customers’ performance by
extension. We process components for a wide range of industries
and have an extensive sphere of influence. As global leader in
the thermal processing industry, we take responsibility for being
at the forefront of decarbonisation and setting the standard
for sustainability. Our ability to provide solutions for the
sustainability challenges our customers are facing also gives us a
clear competitive advantage, and is a key focus of our strategy.
We have driven significant progress in our sustainability
performance in recent years. In 2024, we delivered a step
change in our safety performance, reducing the Total Recordable
Incident Rate by 35%, and delivered our first SBTi-approved
carbon reduction target six years early, having reduced emissions
by 29% since 2019. This year, we introduced a new, integrated
sustainability strategy to amplify our positive impact for
customers and support the development of low-carbon
industries. It is designed to meet customers’ key requirements
of Bodycote (CO2 emissions reduction, safety and social
responsibility, and environmental management) and, in parallel,
drive performance within Bodycote in the areas that play the
greatest role in enabling us to meet customers’ expectations,
and deliver operational and financial performance.
Sustainability is a key part of our ‘Optimise, Perform and Grow’
strategy, both underpinning and accelerating its execution.
Our sustainability commitments are also enshrined in our
new corporate values: Safety First, Performance, Customer
Experience, and Sustainability. This ensures that both what we
do as a business, and how we do it, is directed by our beliefs and
maximises value creation for the benefit of all our stakeholders.
As a global leader in our
industry, we are setting the
standard for sustainability.
We are committed to an
ambitious journey towards
lower environmental impact
and we have the technologies,
capabilities, and resources
to succeed. We have already
reached significant milestones
and continue to set higher
goals to further accelerate
our progress.”
Jim Fairbairn
Chief Executive Officer
POWERING.
SUSTAINABILITY.
We enable customers to produce
better, stronger and more sustainable
components through our deep
engineering expertise, world class
range of metallurgy solutions and
cutting-edge specialist technologies.
Bodycote’s Powdermet® – Hot Isostatic Pressing
manufactured component – see case study on page 20.
Company overview
Strategic report
Governance
Financial statements
40
Bodycote plc Annual Report 2024
Additional information
Sustainability report
Our approach continued
Our new integrated sustainability
strategy positions Bodycote as
a global leader both now and
for the future.
In 2024 we developed a new, integrated sustainability strategy.
It is rooted in our business strategy, which focuses on providing
a world class range of metallurgy solutions and cutting-edge
specialist technologies that enable customers to produce better,
stronger and more sustainable components. Its execution will
be enabled by our new corporate values, which directly align to,
and support, our sustainability goals. They guide the behaviours
essential for our success: Safety First, Performance, Customer
Experience, and Sustainability, motivating the global Bodycote
team to drive our performance and growth goals in the right way.
Our sustainability strategy has been tailored to advance
customer priorities (service, quality, expertise and sustainability),
and business priorities (leadership, technology, culture and
responsibility). It is structured around these two key areas, which
together cover sustainability (what we do) and responsibility
(how we do it). Through our materiality assessments, we have
identified four main drivers in each area that will maximise the
value creation potential of our sustainability agenda.
Our ‘Sustainable Impact’ pillar addresses the following key
customer priorities:
– Low-carbon processes
– Solutions for improved product safety
– Greater resource efficiency
– Support for sustainable industries
Our ‘Responsible Business’ pillar underpins our delivery
of sustainable impact externally, by focusing on four key
business priorities internally:
– Zero harm culture
– Environmental leadership
– Maximising employee engagement
– A diverse and dynamic workplace
The adjacent diagram depicts how these areas come together
to form our new, integrated sustainability strategy.
GROW
OPTIMISE & PERFORM
OUR FOCUS
OUR FOCUS
SUSTAINABLE
IMPACT.
RESPONSIBLE
BUSINESS.
ACCELERATING
GREEN GROWTH
SUPPORTING PEOPLE
AND PLANET
LOW TO NO
EMISSIONS
OUR PRIORITIES
SUSTAINABLE
END-MARKETS
SAFE &
COMPLIANT
RESOURCE
EFFICIENT
OUR PRIORITIES
ZERO
HARM
ENVIRONMENTAL
LEADERSHIP
ENGAGED
TEAM
DIVERSE
WORKPLACE
BUSINESS
STRATEGY
OUR 2030 AMBITIONS
OUR 2030 AMBITIONS
Company overview
Strategic report
Governance
Financial statements
41
Bodycote plc Annual Report 2024
Additional information
Sustainability report
Our approach continued
Transparent communications
Bodycote is on a journey towards world class for sustainability.
Transparent disclosure forms a key part of our strategy. We are
committed to transparent communication of our sustainability
policies, actions and performance.
We have continued to augment our disclosures this year to
support stakeholders in their assessment of our performance,
referencing standards such as the Global Reporting Initiative
(GRI) Index, the SASB standards, ESG ratings’ assessment
frameworks, and the European Sustainability Reporting
Standards (ESRS) for the development of our disclosures.
Following the recent release of the European Commission’s
Omnibus Simplification Package proposals, we continue to
keep abreast of developments and will evolve our future
disclosures roadmap as necessary, while ensuring that our
disclosures continue to add value and maximise the benefits
to our stakeholders.
Determining materiality
In 2024, we completed a ‘double materiality’ assessment.
Insights obtained through the assessment informed our new
sustainability strategy and helped us understand areas of
potential expansion in our data and disclosures.
Our materiality assessment involved undertaking a deep
analysis of the impacts Bodycote has, or could have, on people
and the environment (impact materiality), as well as risks
and opportunities related to sustainability drivers (financial
materiality). It was conducted in accordance with reporting
standard ESRS 1, which provides guidance for materiality
assessment. This framework supported our evaluation of key
sustainability impacts, risks and opportunities to inform our
strategy, business model and response to sustainability-related
challenges. We engaged an expert third-party to support our
work and ensure objectivity.
46%
reduction in absolute
Scope 1 and Scope 2
greenhouse gas emissions
by 2030
125,000
tonnes of CO2e of atmospheric
processing avoided by 2030
Ambitious new targets
We launched our new sustainability strategy in December 2024
and announced three new environmental targets as part of its
initial roll out:
– By 2030, to reduce absolute Scope 1 and Scope 2 greenhouse
gas emissions by 46% versus 2019 levels. This is an increase
from our initial SBTi approved target, which we have met six
years early.
– Enabling our customers of atmospheric processing services
to avoid 125,000 tonnes of CO2e cumulatively by 2030.
Our avoided emissions quantification and target setting
methodologies have been validated as being aligned to
external best practice guidelines. See page 44 for details.
– An increase in the proportion of our revenue which supports
sustainable end-use markets and applications to at least 20%
by 2035 (from a current level of approximately 7%).
In addition we have set two new, voluntary Scope 3 emissions
reduction goals under our ‘Environmental Leadership’ focus area.
These are as follows:
– To reduce absolute Scope 3 GHG emissions from fuel and
energy-related activities by at least 45% by 2030 from a 2019
base year.
– For 30% of suppliers of purchased goods and services
(by emissions) to have science-based or other carbon
reduction targets by 2030.
The design of our new strategy was informed by customer
interviews, investor and employee engagement, and a materiality
assessment, ensuring it is aligned to our key risks and
opportunities and provides clear strategic direction.
Further details on these targets and our plans to achieve them are
set out in the Sustainable Impact and Environmental Leadership
sections on pages 44 and 59 respectively. We will continue to
develop our capability to measure progress and introduce
additional KPIs and targets in future iterations of the framework.
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Our approach continued
Our materiality assessment process involved undertaking an
extensive review of public reports and internal documentation,
and engaging with internal and external stakeholders, including
customers, shareholders, employees, and suppliers. We also
incorporated proxy data to represent the environment as a
‘silent stakeholder’.
The assessment was overseen by a governance committee
comprising the Group’s Chief Executive, Chief Financial Officer,
Chief Sustainability Officer and Company Secretary, and
undertaken by a working group representative from key
corporate and operational functions.
Our materiality assessment comprised the following steps:
1. Value chain mapping
– Mapping the Group’s business model and value chain across
its global operations to identify i) all sources of potential and
actual impacts on people and/or environment; and, ii) where
Bodycote relies on natural, human and social resources that
could be subject to changes.
– Employing the value chain map to identify key stakeholder
groups - those whose interests are, or could be, affected
either positively or negatively by Bodycote, as well as users
of sustainability statements.
2. Sustainability impact, risk and opportunity definition
– Establishing a long-list of sustainability impacts, risks and
opportunities as informed by the value chain mapping exercise,
Bodycote’s policies and other internal documents, a media
scan, peer review, ESG reporting and ratings frameworks,
and the ESRS standards.
3. Stakeholder engagement
– Conducting interviews with key stakeholder groups to qualify
value chain information and ensure all relevant impacts, risks
and opportunities were captured and appropriately framed in
our long-list.
4. Scoring potential and actual impacts, risks and opportunities
– Developing an impact, risk and opportunity scoring framework,
aligned to Bodycote’s Enterprise Risk Management processes
as well as ESRS definitions and guidance on time horizons
(short-, medium-, and long-term) when assessing the
significance and impact of sustainability topics.
– Scoring each impact, risk and opportunity through a four-stage
process comprising: i) scoring by one of our subject matter
experts; ii) review by a second subject matter expert;
iii) calibration of scores by the Group Sustainability team;
and, iv) review and challenge by our independent external
sustainability consultants.
– Establishing and validating a materiality threshold above
which sustainability topics are deemed to be material for
Bodycote, with Executive Committee approval of the threshold
and topics subsequently deemed as material.
Priority issues identified through the assessment have been
integrated into our new sustainability strategy and associated
short- and medium-term targets. We expect our suite of KPIs
and targets to develop as we continue to mature our strategic
approach, and will continue to augment our disclosures in line
with leading sustainability reporting frameworks and standards
as part of our commitment to continuous improvement, and to
ensure alignment to evolving sustainability-related regulations.
Delivering our agenda
The Group has established a clear governance structure to
deliver its sustainability agenda. The Group CEO is ultimately
responsible for the execution of the Group’s sustainability
strategy. The Chief Sustainability Officer, a member of the
Group Executive Committee, leads the definition, implementation
and communication of the Group’s sustainability agenda.
The CEO, and the Chief Sustainability Officer, provide regular
updates to the Board, including through deep dive sessions at
least twice a year. The Risk and Sustainability Committee
supports the Executive team in implementing sustainability
actions. It usually meets three times a year.
Sustainability incentives
Bodycote recognises the benefit of incorporating ESG measures
in executive compensation. Non-financial KPIs, such as those
relating to carbon reduction, have been incorporated in Executive
Directors’ remuneration plans for several years.
In 2024, the annual bonus scheme for Executive Directors,
Senior Executives and the wider leadership population included
an ESG metric, with colleagues incentivised to achieve an
absolute reduction in energy consumption. This focus on energy
efficiency drove a reduction of 8.4% year-on-year in energy
consumption, delivering both environmental and
financial benefits.
The suitability of incentives is reviewed annually, taking into
account shareholder feedback and changes to the Group’s
strategy, to ensure continued alignment. In 2025, to align with
our long-term sustainability targets and ambition to be known as
a sustainability leader, the Group’s long-term incentive plan has
been amended to incorporate a metric with a greater weighting
(20%) aligned to the achievement of the Group’s new carbon
emissions reduction target (46% reduction in CO2e by 2030 vs
2019). See the Remuneration Report on page 95 for information.
Measuring our progress
Bodycote engages with external agencies to measure progress
and identify areas for improvement. We proactively engaged
with ESG ratings agencies in 2024 to improve their understanding
of our performance. Our rankings improved as a result.
Bodycote is rated ‘A-’ by CDP, up from ‘D’ two years' prior.
We achieved a score of 60/100 in our latest EcoVadis assessment,
up from 42/100 the prior year, placing the Group in the 71st
percentile of all companies rated by EcoVadis globally.
The Group’s ISS ESG score increased by 9 points, resulting in a
‘C’ rating, up from ‘C- ‘. Sustainalytics’ classification of Bodycote
improved to ‘medium risk’ (previously ‘high risk’). Bloomberg’s
ESG scores for Bodycote also improved, resulting in a sector
‘Leading’ score in 2024.
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Sustainable impact
In delivering a suite of energy
efficient and sustainable thermal
processing services, Bodycote helps
customers reduce emissions and
environmental impacts across the
entire manufacturing process.
The increasing pressure to decarbonise industrial value chains
provides a growing opportunity for Bodycote to support
customers in achieving their environmental sustainability goals.
Outsourcing is already recognised by customers as one of their
key levers for achieving their carbon reduction targets, and by
partnering with Bodycote, customers can be assured that
their outsourced emissions will also decrease in line with a
1.5 degree trajectory.
Bodycote is focused on developing and executing its strategy to
capture and create sustainability-related growth opportunities.
As part of this, we have developed a suite of carbon calculation
tools to provide the necessary proof points to customers.
They enable us to illustrate the energy, carbon emissions,
material use, and waste management benefits that can be
unlocked by switching heat treatment and surface technology
processes to Bodycote. We now have best-practice calculator
tools in place for thermal processes representing 70% of sales.
Avoided emissions calculator
Our proprietary ‘avoided emissions’ tool compares a customer’s
thermal processing emissions to Bodycote’s, illustrating the
emissions reduction customers can achieve by outsourcing
processing to Bodycote. The tool uses a range of input data –
such as the type of furnace, number of parts processed per cycle,
processing time, and type of processing gas used – compared
with ‘real world’ data inputs from Bodycote’s own operations
where the customer’s parts would be processed. Outputs run for
specific customer scenarios have shown the potential to reduce
emissions by up to 60% for a comparable treatment approach.
OUR COMMITMENT
Our low-carbon processes help customers
accelerate the achievement of their
environmental ambitions faster and
more effectively.
OUR 2030 GOAL
We will help our batch atmospheric
processing customers reduce their
greenhouse gas emissions by at least
125,000 tonnes of CO2e by 2030.
LOW TO NO
EMISSIONS
OUR PRIORITIES
– Lower carbon processing
– Customer saved emissions (Scope 1 and Scope 2)
– Avoided emissions (Scope 4)
– Carbon calculation
Product carbon footprint calculators
Our evolving suite of carbon calculator tools now also includes
product carbon footprint calculators for Bodycote’s most
popular processes. They have been developed to align with the
ISO 14064-3:2019 standard and enable us to offer customers
product carbon footprint data for batch atmospheric processing,
low pressure carburizing (LPC), vacuum heat treatment,
Hot Isostatic Pressing (HIP) and gas nitriding services.
Importantly, our product carbon footprint calculators enable us
to compare the relative impacts of different thermal processes.
The case study on page 23 provides an example illustrating how
Bodycote’s expert team used product carbon footprint insights to
switch a key customer from a batch atmospheric process to low
pressure carburising – resulting in a 93% reduction in emissions
per part, as well as a better quality product for the customer.
We plan to develop calculators for four additional processes
during 2025, to support our strategic drive to increase
outsourcing by customers and create opportunities to switch
them to lower carbon, higher margin thermal processing.
New customer avoided emissions target
Bodycote announced its first avoided emissions target in
December 2024, underpinning our commitment to providing
solutions that lower our customers’ carbon emissions. Our target
is to enable our batch atmospheric processing customers to
avoid 125,000 tonnes of CO2 by 2030 on a cumulative basis1.
Heat treatment is typically an energy intensive step in component
manufacturing, and our investment in efficiency and innovation
enables customers to tackle this crucial element of their product
lifecycle. We intend to expand our focus over time to include
additional processes – to augment our understanding, guide our
customers towards carbon reduction, and amplify our impact.
Our avoided emissions calculation methodology, and our avoided
emissions baseline and target, have been externally validated as
being aligned to the World Business Council for Sustainable
Development’s guidelines for avoided emissions accounting
and target setting.
1 Bodycote’s atmospheric processing service lowers emissions intensity per batch
vs. customers’ comparative in-house treatment due to our operational efficiency
and decarbonisation measures. This, our first avoided emissions target covers a
single, widely used thermal processing technology. We intend to expand the
scope to include other processes in future.
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OUR PRIORITIES
– Supporting low-carbon industries
– Enabling the development of wind, solar,
wave and fuel cell technologies
– Accelerating the implementation
of low-carbon solutions
OUR COMMITMENT
Our technologies support emerging
low-carbon industries such as clean tech,
EV manufacturing and renewable energy
generation sectors.
OUR 2035 GOAL
We will increase the proportion of revenue
supporting sustainable end-use markets
and applications to at least 20% by 2035.
SUSTAINABLE
END-MARKETS
Sustainability report
Sustainable impact continued
Bodycote recognises its
opportunities to support growth
in new sustainable products and
sectors that will enable the global
transition to net zero.
In 2024, Bodycote developed a ‘Green Revenue’ framework to
measure the proportion of our revenue that supports sustainable
end-use applications and markets to help advance our strategic
response to green growth opportunities.
The purpose of our Green Revenue framework is to understand
our exposure to markets that enhance sustainability and drive
action towards our goal of growing the role we play in these
sectors. Over 7% of Bodycote’s revenue is currently supporting
end-use markets and applications that align to our Green
Revenue framework, based on an initial, conservative
assessment, and excluding short-term transitional technologies.
We have set a target to increase the share of green revenues to
at least 20% by 2035 – nearly three times today’s level.
Our internal framework is guided by leading taxonomies such
as the FTSE Russell Green Revenues Classification System
and EU Taxonomy. It identifies markets and end-use
applications of the components we treat that facilitate positive
environmental impact. We do not include our own processes or
any enhancements to the sustainability attributes of products
within this particular framework.
Our sustainable end-use application and market revenue can
be split into the following categories:
1. End-use markets and applications that manufacture zero
or low-carbon vehicles
2. End-use markets and applications that develop renewable
and low-carbon energy solutions
3. End-use markets and applications that enable resource
and energy efficiency
We have mapped our revenues to end-markets, taking care to
apply conservative assumptions where our visibility of the
end-use of products is unclear. This is our first year in applying
our framework, providing an initial indication of Bodycote’s
revenue exposure to markets and applications that enhance
environmental impact. We will work to improve our analysis over
time, aligning to any updates in global green taxonomies, and
leverage the framework to identify where there may be increased
demand for services as part of the net zero transition to inform
our customer relationships and business planning processes.
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Sustainable impact continued
OUR PRIORITIES
– Certified solutions (eg. REACH compliant)
– Improving sustainability performance
(eg. via surface technology)
– Safer coatings (eg. HVOF coating)
OUR COMMITMENT
Our solutions improve product safety
and assist with adherence to important
compliance requirements.
OUR 2030 GOAL
We will work as the industry standard-setter
for material science that prioritises safety,
health, and the preservation of the planet.
SAFE &
COMPLIANT
Innovative coatings for improved safety
Bodycote’s Surface Technology business provides High-Velocity
Oxygen Fuel (HVOF) coatings for materials such as metals, alloys,
ceramics, plastics, and composites. HVOF is an advanced thermal
spray coating technique that uses a high-speed stream of oxygen
and fuel gas to propel molten particles onto a substrate surface
to create a dense, tightly bonded coating with excellent adhesion
and high-quality mechanical properties.
HVOF coatings offer exceptional hardness, wear resistance,
and corrosion protection, making them suitable for demanding
applications. Importantly, Bodycote has proven that HVOF
coatings provide a viable substitute for processes that have
traditionally used hexavalent chrome, without compromising
the performance and functionality of the coated parts
or components.
Also known as chromium (VI), hexavalent chrome has been
widely used in industry to secure corrosion resistance and
durability of components. However, its toxicity presents
significant risks to human health and the environment,
and as a result, it is subject to strict restrictions under the EU’s
Registration, Evaluation, Authorisation and Restriction of
Chemicals (REACH) regulation.
HVOF coating technology offers a REACH-compliant solution
that surpasses customers’ specified performance requirements,
while minimising environmental impacts across a wide range of
applications in critical sectors, including aerospace, automotive,
and other manufacturing industries.
Bodycote has worked with OEMs and their tier 1 suppliers in the
aerospace industry on new generation components that use
HVOF to replace hexavalent chrome solutions. We have
successfully transitioned customers to HVOF coatings for landing
gears, engines and fuel pumps. These customer collaborations to
drive uptake of HVOF coatings have delivered improvements to
workplace safety, reduced environmental contamination risks,
extended components’ lifespans and demonstrated an overall
pathway to a more sustainable future.
PRIORITISING ENVIRONMENTAL
PRESERVATION
Our focus on driving more sustainable solutions through
our engineering expertise extends to our own operations
and ways of working. We have an ongoing programme
to minimise waste and enhance wastewater treatment
processes in our Katrineholm, Sweden plant.
We have concentrated on reducing the amount of
wastewater produced by our processes and improving
the efficiency of our on-site wastewater treatment plant.
By optimising the replacement rate for degreasing
cleaning cycles, we have reduced the volume of
degreasing solution used in our cleaning processes by
over 75% in the past three years. This has resulted in
savings on disposal costs and a reduction in vehicle
movements by waste contractors.
Focusing on improving our on-site wastewater treatment
plant, including changing the coagulants used to clean the
wastewater, has helped reduce our chemical coagulant
consumption by over 70% in the past three years. This has
also led to a 65% decrease in the waste metal hydroxide
slurry we dispose of.
Our continued focus on operational efficiency and
environmental impact reduction will be further enabled
by our new Groupwide chemical management system.
See page 58 for details.
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Sustainable impact continued
OUR PRIORITIES
– Specialist technologies that support
customer sustainability
– Solutions that enable materials, energy,
waste and water savings for customers
(eg. powder metallurgy, additive manufacturing)
– Involvement in customer R&D into more
sustainable solutions
OUR COMMITMENT
Our treatments enable customers to achieve
more with less by increasing durability,
resilience, and sustainability performance.
OUR 2030 GOAL
We will provide specialist technologies and
support research and development that
enables customers to realise their growth
and sustainability ambitions.
RESOURCE
EFFICIENT
Bodycote’s Specialist
Technologies are also enabling
positive environmental impact
for customers.
Our leading treatments enable lighter, thinner components to
be adopted that require fewer replacement parts, less machining,
less energy, and lower water use. We offer a range of solutions
that help customers reduce emissions at each stage of the
manufacturing process (Scopes 1–3) to enable positive
environmental impact for customers and help them meet
their goals.
Bodycote’s Powdermet® (powder metallurgy) Hot Isostatic
Pressing technology (PM-HIP) offers freedom of design and
superior material properties, replacing forged shapes with
sleeker, lighter designs with homogenous material properties
and leaner manufacturing processes. This enables customers to
produce improved products while reducing costs and lead times,
and delivering better sustainability outcomes.
During the year, we studied the energy use of near-net-shape
PM-HIP compared with hot forging for industrial metallic
components. Our study focused on the energy use in the
manufacturing stages of each process, a crucial topic as
industries aim for sustainable production without compromising
quality or timelines. This is particularly relevant to new power
and energy facility construction, where the energy efficiency
and carbon intensity of the components used in the initial
construction are critical factors in evaluating the net benefits of
clean energy supply and reducing carbon related costs, but it is
essential that these factors can be delivered in a cost-effective
manner without extending project timeframes, or reducing
quality. Our analysis established that PM-HIP is significantly
more energy-efficient, whilst also supporting cost, quality, and
lead-time drivers. Results showed hot forging used 15.1 MWh,
while PM-HIP used just 5.3 MWh, a 65% reduction; enough to
power an average home for a year. Key factors included a 60%
weight reduction in the optimised PM-HIP design, consolidated
post-process heat treatment, reduced machining, and no overlay
welding, which also reduces risk and lead time. A combination of
Powdermet® and HIP enables a transformational approach to
manufacturing that vastly improves resource efficiency,
significantly reducing both the amount of material and energy
inputs needed for product manufacture.
Sustainably manufactured components offer industries
significant environmental benefits by minimising the raw
materials used, lower energy and associated carbon emissions
from manufacturing, and a reduction in the waste produced.
These more efficient manufacturing processes deliver industries
a pathway to meet their own sustainability goals, enabling a
reduction in the overall environmental footprint of their products,
and aligning with global efforts to tackle climate change and
minimise resource depletion.
Bodycote is aiming to increase the addressable market for
Powdermet® as a key element of our growth strategy, supporting
customers to achieve superior, more sustainable components.
See page 20 for our Specialist Technologies business review.
NEXT STEPS
– Grow our partnerships with customers to capture and
create new business opportunities through delivering
their carbon reduction and environmental goals.
– Augment our suite of product carbon footprint
calculators to include additional thermal processing
services and obtain external verification of
our methodologies.
– Expand the range of technologies covered by our
avoided emissions target, to increase understanding
of our impact and guide customers towards solutions
that support their carbon reduction goals.
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Task Force on Climate-related Financial Disclosures (TCFD) report
Bodycote continued aligning
with the TCFD recommendations,
ensuring climate-related impacts
are understood and incorporated
into our business strategy.
This year, we refreshed our qualitative and quantitative scenario
analysis and conducted an assessment of the potential financial
impacts of climate-related risks and opportunities under
different scenarios, to guide the continued development of
our climate strategy.
This was supported by a wider double materiality assessment
through which we conducted an in-depth evaluation of
environmental (as well as social and ethical) impacts, risks
and opportunities. See pages 42 to 43 for details.
TCFD statement of compliance
This report sets out Bodycote’s climate-related financial
disclosures, consistent with the recommended disclosures
of the TCFD framework, and in compliance with Listing Rule
14.3.24R(1). The main disclosures are set out in this section.
There are additional disclosures on pages 44 to 47 and 59 to 62.
Bodycote has reported in full against each of the 11 specific
TCFD disclosure recommendations.
Governance
Climate-related responsibilities of the Board
Climate-related matters are integral to Bodycote’s business
model and strategy. The Board oversees the management of
climate-related issues as part of its role in supporting corporate
strategy development. The Chief Executive Officer updates the
Board on the Group’s climate strategy at least quarterly. In 2024,
the Board agenda included reviews of the sustainability strategy,
progress towards the SBTi target, and plans to pursue climate-
related commercial opportunities. Discussions were held to
review the Group’s emissions trajectory to 2030 and potential
for setting Scope 3 goals. This led to the decision to update the
SBTi target, as announced in December 2024.
The Board monitors the Group’s performance against four
financial and two non-financial key performance indicators.
Non-financial indicators include the Group’s absolute Scope 1
and Scope 2 GHG emissions (see page 59). The Board and its
Committees also consider climate-related issues when reviewing
annual budgets and as part of other decision-making, such as
capital expenditure authorisation for carbon-reducing projects.
The Audit Committee supports the Board in overseeing the
Group’s risk management procedures, including how climate and
environmental risks and opportunities are identified, measured,
and managed. It also oversees the Group’s compliance with
climate-related reporting requirements and internal controls for
carbon emissions measurement and climate disclosures.
Governance framework for climate and sustainability topics
Audit Committee
Provides oversight of the
effectiveness of the risk
management framework,
including how climate and
environmental risks are
identified and managed,
with oversight of the
internal controls for the
measurement of climate-
related disclosures.
Remuneration Committee
Responsible for ensuring
climate-related targets
are considered for
appropriate integration
into remuneration
arrangements.
Finance Committee
Consideration of climate-
related issues when
reviewing and authorising
certain finance, treasury,
tax and investment matters,
including capital
expenditure on carbon-
reduction projects.
Nomination Committee
Consideration of
candidates’ climate-related
knowledge and experience
for new appointments to
the Board.
Executive Committee
Management of climate risks and opportunities, climate-related target setting, and achievement of targets and objectives.
Individual members of the Executive Committee also have specific climate-related responsibilities according to their functions.
PLC Board
Risk and Sustainability Committee
Supports the implementation of the strategy and action plans to reduce our carbon footprint,
reporting to the CEO and Executive Committee.
Chief Executive Officer: responsible for the execution of
the Group’s climate strategy, supported by the Executive
Committee and the Risk and Sustainability Committee.
Oversight of the Group’s management of its climate agenda,
as a component of the Group’s business strategy.
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Additional information
Board members’ sustainability experience
Board members have diverse experience in climate-related
issues. Examples include:
– The Chief Executive Officer has practical experience in the
development and implementation of energy and carbon
reduction projects. He was involved in developing electrical
grid integrity and supporting the installation and maintenance
of renewable energy systems in his previous role at Megger.
– Non-Executive Chair, Daniel Dayan, has substantial climate
and sustainability experience from his leadership of major
plastics processing and recycling businesses.
– Non-Executive Director, Beatriz García-Cos Muntañola has
gained climate-related experience in renewable energy and
mining industries and through her current role as Chief
Financial Officer of Ferroglobe plc.
– Non-Executive Director Cynthia Gordon oversees the
integration of climate-related metrics in the Group’s incentive
schemes, and has experience in overseeing sustainability and
climate-related reporting, including under new regulations.
Climate-related responsibilities of management
The Chief Executive Officer has overall responsibility for the
Group’s climate strategy. The Chief Sustainability Officer,
a member of the Executive Committee, supports the definition
and execution of the strategy. Other Executive Committee
members are responsible for implementing the strategy within
their functions.
Climate-related topics are a standing agenda item at
Executive Committee meetings. Examples of topics discussed
in 2024 include:
– Progress in reducing emissions and opportunities
to accelerate.
– Proposals to upgrade the Group’s SBTi target ambition level
to a 1.5ºC trajectory.
– Setting of additional climate-related targets: a customer
avoided emissions and a sustainable revenues target.
– Assurance of the Group’s processes for calculating
GHG emissions.
– Evaluation of climate-related impacts, risks and opportunities
under a double materiality assessment process.
– Continued development of customer carbon tools and
communication materials.
Processes for oversight of climate-related issues
The Executive Committee oversees processes for climate risk
and opportunity management. Climate-related issues are
considered as part of strategy, business planning, risk
management and budgeting processes. Examples include:
– Group strategy – climate-related opportunities influence
the development of the Group’s service offerings and the
formulation of solutions that drive demonstrable emissions
reductions for Bodycote’s current and future customers.
– Capital investment – all capital investment decisions include
sustainability reviews to ensure alignment with the
achievement of the Group’s SBTi commitment.
– Major plans of action – environmental impacts and
opportunities are considered as part of decision-making
related to our asset and property portfolio.
– Risk management – climate risk assessment is integrated into
our formal risk management processes (see pages 55).
– Annual budgets, scenario planning, impairment testing and
going concern assessments – the ability to seize opportunities
and mitigate potential climate-related risks is considered as
part of the annual budget process and longer-term
financial modelling.
The Risk and Sustainability Committee supports the
Executive Committee in implementing climate-related initiatives,
risk management and reporting.
Responsibilities of individuals and teams
– Chief Executive Officer: overall responsibility for the
Group’s climate-related strategy.
– Chief Financial Officer and the Group Finance team:
supporting the assessment of financial impacts of
climate-related risks, opportunities and investments,
and scenario modelling.
– Chief Sustainability Officer and the Sustainability team:
developing the Group’s climate strategy, targets, and tools,
and monitoring and communicating progress.
– Divisional Presidents: managing climate-related topics in
the operations, including in relation to employees, assets
and property, implementing carbon reduction projects, and
creating and capturing climate-related business opportunities.
– Group Internal Audit and Risk: through the Group’s risk
process, capturing climate-related risks and, where appropriate
based on risk, providing internal audit assurance.
– Technical Services Operation (TSO): supporting facilities
in implementing carbon reduction projects and new,
energy-efficient, low-carbon technologies.
– Sales and customer key account teams: engaging with
customers to understand their sustainability goals, and
facilitating efforts to reduce their emissions.
– General managers of sites: day-to-day management of
facilities, furnaces and other equipment to optimise efficiency
and energy consumption.
Climate-related incentives
Bodycote recognises the importance of incentivising progress
towards ESG targets. For 2024, an ESG metric was included in
the annual bonus scheme for Executives and senior leaders,
accounting for 5% of the award. Following a comprehensive
review of the Group’s incentive schemes, in 2025, the long-term
incentive plan has been amended to incorporate a metric aligned
to the Group’s new carbon emissions reduction target. See the
Remuneration Report on page 95 for details.
Sustainability report
Task Force on Climate-related Financial Disclosures (TCFD) report continued
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Strategy
Climate change is one of Bodycote’s top strategic priorities
(see page 07 for the Group’s strategy and objectives).
Climate change-related initiatives form a core element of our
operational strategy, under our ‘Optimise’ and ‘Perform’ pillars,
as well as our commercial growth strategy, under our ‘Grow’
pillar. We take a proactive approach to sustainability and
energy efficiency throughout our operations, recognising
the commercial imperative in optimising the use of energy,
industrial gases and other materials across our cutting-edge
material science solutions.
Growing awareness of climate change and sustainability
continues to be a catalyst for business growth as we provide
services and solutions that reduce our customers’ energy use,
carbon emissions, and total value chain impacts. With our proven
efficiency and public commitment to ambitious carbon reduction
targets, we offer industrial customers a route to meet their own
carbon goals by transitioning their in-house heat treatment to an
outsourced partner, delivering efficiency today and a pathway to
even lower emissions in the future. We can achieve this for our
customers through our ability to reduce carbon emissions when
comparing like-for-like technology, and additionally our capability
to transition customers onto lower carbon technologies for
their processing needs, such as low pressure carburising (LPC),
which delivers an even larger reduction in energy consumption
and carbon emissions.
Climate scenario analysis
Bodycote regularly re-assesses climate-related risks and
opportunities to inform strategy, financial planning, and
investments. Senior professionals across the business support
the assessment through dedicated workshops, with input from
internal and external experts. Outputs from these assessments
allow the Group to adapt, refine, and update risks, opportunities,
and related mitigation or realisation measures. In 2024, this was
supplemented by a broader assessment of environmental and
social risks and opportunities through the completion of a
double materiality assessment process (see page 42).
Bodycote applies the same time horizons as those used for its
Principal Risks: short-term (0–2 years), medium-term (2–5 years),
and long-term (over 5 years). While climate risks typically emerge
over a longer timeframe, the Group uses these timeframes to
integrate climate risk assessment into our overall strategy and
risk evaluation. Climate-related impacts are assessed using a
range of scenarios, including a 2°C or lower scenario as required
under TCFD. These scenarios are modelled based on the latest
IPCC assessment, as detailed on page 51.
The Group has conducted an annual review of its qualitative
assessment of all identified climate-related risks and
opportunities under each scenario. The potential impacts of
several risks have also been recalculated for 2024, quantifying
impacts where suitable models and data are available, to
estimate their potential impact on the Group’s capital outlay,
operating expenditure, and annual revenue in at-risk locations.
Risks and opportunities are then prioritised based on their
potential impact. They are considered material when they could
significantly affect our strategy, either positively or negatively.
Sustainability report
Task Force on Climate-related Financial Disclosures (TCFD) report continued
Physical risks, such as heatwaves and flooding, have been
assessed using external data sources. These risks were selected
as the most relevant to the Group’s locations. Heatwave risk was
assessed using data from the IPCC’s Sixth Assessment Report,
available through the World Bank Climate Knowledge Portal
(https://climateknowledgeportal.worldbank.org/). Flooding risk
(coastal and riverine) was assessed using the same IPCC data,
along with data from the WRI Aqueduct Water Risk Atlas 4.0.
Wildfire risk was assessed using a combination of IPCC data
and NASA’s MODIS data. Other indicators were also extracted
from the IPCC’s Sixth Assessment Report. The results of our
assessment completed at December 2024 (see pages 51 to 54),
indicate that the majority of climate-related risks and
opportunities remain broadly unchanged from the 2023 and
2022 assessments.
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Additional information
1 RCP1.9/SSP1-1.9, PRI IPR: 1.5°C Required Policy Scenario.
2 RCP3.4/SSP2-4.5, PRI IPR: Forecast Policy Scenario.
3 RCP6.0/SSP3-7.0.
S1
Scenario 1 (<1.5ºC)1
Net zero emissions reached by 2050 globally
Global temperatures are limited to a 1.5°C increase by 2050 compared to
pre-industrial levels.
Physical risks are limited, and there has been a substantial shift in behaviour
and public policy (eg. higher carbon taxes).
S2
Scenario 2 (<2ºC)2
Emissions peak and start falling around 2050
Policy action is late and disruptive and while some steps have been taken,
it is largely business-as-usual.
There are limited public policies before 2025, temperatures continue to rise,
and physical impacts intensify.
S3
Scenario 3 (<3ºC)3
Emissions keep rising (doubling by 2100)
Limited global action results in accelerated global warming and significant
physical risks.
Governments fail to introduce further policies to address climate change.
Type of risk
Potential impact and mitigation measures
Time frame
Physical risks
Extreme
weather events
Risk Driver:
Acute physical
– Wildfires
– Flooding
Description
Risk of disruption to the Group’s operations and value chain
as a result of wildfires and coastal and riverine flooding,
with impacts on the Group’s employees, property and
equipment and surrounding public infrastructure.
S1
Impact assessment
Fewer than 10% of sites are currently assessed as being at
high risk of wildfires and flooding under all three scenarios.
The potential impact of operational disruption and cost of
relocation if necessary has been assessed as negligible
(see the table on page 54).
S2
Mitigation measures
– Implementation of additional mitigation measures in higher
risk sites (eg. safety, maintenance, business continuity and
shift planning, landscaping etc.)
– Automation and remote technologies for continuous
operations during disruption.
– Regular assessment of climate science and scenarios to
monitor risk exposure.
S3
Extreme
temperatures
Risk Driver:
Chronic physical
– Heatwaves
and heat stress
– Cold wave/frost
Description
Risk of increased frequency and intensity of heatwaves,
impacting employees, facilities and equipment, affecting
costs (for example, equipment maintenance) and productivity.
S1
Impact assessment
Higher risk sites have been identified, with a maximum of
20% of sites being high risk under Scenario 3. The potential
financial impact of disruption to operations and potential
investments in cooling measures has been assessed as low.
See page 54. The risk of cold wave/frost has been evaluated
as not being relevant currently.
S2
Mitigation measures
– Investment in additional insulation and cooling measures
for temperature control in at-risk sites.
– Investment in increased automation in our operations.
S3
Climate risk and opportunity assessment
Sustainability report
Task Force on Climate-related Financial Disclosures (TCFD) report continued
Short-term (0–2 years)
Long-term (5+ years)
Medium-term (2–5 years)
Not applicable
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Bodycote plc Annual Report 2024
Additional information
Type of risk
Potential impact and mitigation measures
Time frame
Transition risks
Impacts to
electricity supply
Risk Driver:
Market
– Uncertainty in
market signals
Technology
– Transitioning
to low-
emission
technology
Description
Increased demand for electricity globally could result in
an increased likelihood and occurrence of power outages,
potentially resulting in unplanned downtime. In Scenario 2,
high demand for electricity could impact energy security;
in Scenario 3 there could also be an increase in electricity
demand and cost due to additional cooling requirements.
S1
Impact assessment
The potential financial impact of this risk has not yet been
assessed. The Group demonstrated in recent years, the ability
to recover energy cost inflation through its energy
surcharge policy.
S2
Mitigation measures
– Reduction in energy consumption through energy saving
and energy efficiency measures.
– Operation during off peak hours at times of lower
energy prices.
– Implementation of measures to reduce reliance on grid
electricity (eg. solar panels).
S3
Increased pricing of
carbon emissions
Risk Driver:
Emerging
regulation
– Carbon pricing
mechanisms
Technology
– Transitioning
to low emission
technology
Description
A failure to reduce energy usage and new carbon taxes could
increase operating costs. New regulation or pressure to
reduce carbon emissions could accelerate the need to retrofit
or replace technology, requiring additional capital investment.
S1
Impact assessment
The potential financial impact of this risk has been assessed
using the estimated cost of carbon in 2030; see the table on
page 54.
S2
Mitigation measures
– Reduction in energy consumption and continued progress
towards our enhanced 1.5ºC aligned SBTi target.
– Further development of a decarbonisation roadmap and
investment in lower carbon technology and energy.
– The Group demonstrated in recent years the ability to
recover energy cost inflation through its energy
surcharge policy.
S3
Short-term (0–2 years)
Long-term (5+ years)
Medium-term (2–5 years)
Sustainability report
Task Force on Climate-related Financial Disclosures (TCFD) report continued
Type of risk
Potential impact and mitigation measures
Time frame
Transition risks
Reputational risk
Risk Driver:
Reputation
– Stigmatisation
of sector
– Increased
stakeholder
concern
Description
Ability to attract customers, employees and investors who
want to work with and for companies that are taking action
on climate issues and minimising their exposure to risk.
This could impact talent attraction, new business
development, investor sentiment and access to or cost
of debt.
S1
Impact assessment
The Group’s carbon reduction strategy positively impacts
customer, employee and investor advocacy. The Group is the
only major heat treatment company globally with an SBTi
target, offering a competitive edge for securing new business
and talent where climate action plays a role.
S2
Mitigation measures
– Ongoing tracking of stakeholders’ expectations through
direct engagement, best practice benchmarks and research.
– Regular customer engagement on Bodycote’s climate
roadmap, alignment to international standards and its
commercial offerings for carbon reduction.
S3
Increased
regulation of GHG
emissions
Risk Driver:
Emerging
regulation
– Mandates
on, and regulation
of, existing
services
Description
Increased regulation of GHG emissions could be disruptive for
the Group and its customers, leading to business disruption,
increased costs or taxes, and penalties or litigation in the
event of non-compliance. It could also accelerate the
requirement to invest in lower GHG emissions technologies.
S1
Impact assessment
The Group has evaluated the potential financial impact of
increasing deployment of low emissions technologies and
has determined this as being ‘low’. See page 54.
S2
Mitigation measures
– Continued deployment of lower emissions processes
(eg. vacuum, LPC).
– Energy reduction and decarbonisation measures.
– Monitoring of regulatory landscape to ensure timely action
and compliance.
S3
Not applicable
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Additional information
Type of risk
Potential impact and mitigation measures
Time frame
Opportunities
Increased
outsourcing by
customers to reach
GHG targets
Opportunity Driver:
Resource efficiency
– Use of more
efficient
production
processes
Description
Increased revenues resulting from increased outsourcing by
customers to Bodycote to i) reduce their own Scope 1 and 2
emissions and decrease exposure to carbon taxes, etc.;
and ii) enable emissions avoidance (Scope 4) – as emissions
per part processed by Bodycote can be up to 60% lower
through efficiency, furnace utilisation and investment in
energy efficiency (see page 54).
S1
Impact assessment
The Group has opportunities to support customers in
achieving their emissions targets across all its sectors and
markets, leading to increased revenues. Cost reductions may
also be achieved within the Group’s operations as a result of
higher efficiencies and furnace fill rates/utilisation.
S2
Realisation measures
– Current operations are already geared towards the
realisation of this opportunity and support GHG emissions
reduction and avoidance.
S3
Low-carbon
technologies
offering for
customers
Opportunity Driver:
Services
– Development
and/or expansion
of low emission
services
Description
Offering processing services that have a lower carbon
footprint for competitive advantage: allowing the Group to
meet new requirements from customers and regulations
and positioning Bodycote’s services as higher value
(with a premium).
S1
Impact assessment
The Group’s low-carbon processing services present
opportunities for higher revenues, increased margins, and
open up new markets for the Group’s metallurgy solutions.
S2
Realisation measures
– Monitoring customers’ climate plans and their expectations
of suppliers.
– Increased revenues would offset capital investment for
additional capacity.
S3
Sustainability report
Task Force on Climate-related Financial Disclosures (TCFD) report continued
Type of risk
Potential impact and mitigation measures
Time frame
Opportunities
New volumes for
Bodycote related
to low-carbon
transition
Opportunity Driver:
Products and
services
– Ability to diversify
business activities
Markets
– Access to
new markets
Description
Revenue uplift related to increased business from heat
treatment services from sectors that support the transition to
a lower carbon world (eg. internal combustion engine to EVs).
These sectors become a more significant revenue stream for
Bodycote as a result of higher and new demand for services.
S1
Impact assessment
Bodycote is able to realise this opportunity via current
facilities and technologies. The Group’s global heat treatment
capacity allows us to quickly adapt to customers’
requirements with low capital investment.
S2
Realisation measures
– No significant effort or investment is expected to be
required to diversify our customer base due to Bodycote
having flexibility to serve both existing and new industries.
S3
Government and
other incentives
Opportunity Driver:
Resource efficiency
– Use of more
efficient
production
processes
Services
– Development
of low-carbon
service offering
Description
Positive impact of Government and other incentives,
including revenue uplift as a result of increased customer
demand for services that benefit from energy tax exemptions
due to emissions avoidance, incentives for the faster adoption
of lower carbon technologies, and incentives and revenue
uplift from the adoption of low emissions thermal
processing services.
S1
Impact assessment
The impact of this opportunity has not yet been assessed.
The Group will continue monitoring the opportunity and
evaluate quantifying it as information becomes available that
allows a reasonable approach.
S2
Realisation measures
– Continued installation of low-carbon technologies across
the Group.
S3
Short-term (0–2 years)
Long-term (5+ years)
Medium-term (2–5 years)
Not applicable
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Bodycote plc Annual Report 2024
Additional information
Risk
Value drivers assessed
Potential annual
impact before
mitigation1
Time horizon
Mitigation measures
Chronic
physical risk:
Heatwaves
Potential cost of mitigation of extreme heat in sites at risk of frequent
and severe heat waves (installation and operation of cooling systems)
and probability of potential production losses2.
S1
Long-term
– Investment in additional insulation and cooling measures
for temperature control in at-risk sites
– Investment in increased automation in our operations
S2
Long-term
S3
Medium-term
Acute physical
risk: Flooding,
wildfire
Potential cost of mitigating flooding and wildfire risk through relocation,
and potential disruption to production in at-risk sites3.
S1
Medium-term
– Implementation of additional measures in at-risk sites
(eg. safety, business continuity, landscaping)
– Investment in increased automation in our operations
– Monitoring risk using climate science and models
S2
Medium-term
S3
Medium-term
Transition
risk: Increased
pricing of
carbon
emissions
Future costs of carbon applied to Groupwide Scope 1 and Scope 2
emissions using IPCC estimates for prices per tonne of carbon under
different scenarios. (Tonnes CO2e x projected cost per tonne)4.
S1
Long-term
– Carbon cost inflation recovery through pricing
– Alignment to SBTi emission reduction pathways
– Continuous reduction in absolute energy consumption,
decreasing carbon emissions
– Investment in increased automation in our operations
S2
Long-term
S3
–
Not applicable
Transition risk:
Increased
regulation of
GHG emissions
Accelerated decarbonisation of operational processes through
investment in LPC furnaces (electrically-powered, low consumption)
and retrofitting gas heated furnaces to be powered by electricity.
Assumed transition time: 25 years to 2050.
S1
Long-term
– Continued deployment of lower emissions Specialist
Technologies and low-carbon heat treatment services
– Energy reduction and decarbonisation measures
– Monitoring of regulatory landscape to ensure timely action
and compliance
S2
–
Not applicable
S3
–
Not applicable
Climate risks quantitative impact assessment
Organisational resilience to climate change
Bodycote’s climate scenario analysis process explores the
Group’s resilience to climate-related issues and identifies suitable
mitigation plans. As detailed in the risk and opportunities table,
measures have been identified for each key risk and opportunity.
The Group’s global presence and diversity of applications for its
services also provide resilience to risks, and opportunities for
growth in new areas.
All of the risks and opportunities detailed in the tables across
pages 51 to 53 are integrated into our commercial and operational
planning. Commercial opportunities are incorporated in the
‘Grow’ lever of our business strategy, while operational risks and
opportunities are integrated into the ‘Optimise’ and ‘Perform’
levers. For details on how we are executing our strategy in each
of these areas, see page 17.
1 Costs before current and planned mitigation measures.
2 Site risk assessed using CMIP6 data from the World Bank Climate
Knowledge Portal.
3 Probability of risk estimated using WRI Aqueduct, UNEP and NASA data.
4 Cost of carbon based on Intergovernmental Panel on Climate Change (IPCC)
projections for 2030 – £100 per tonne of CO2e in Scenario 1; £25 per tonne of
CO2e in Scenario 2.
Negligible (<£1m)
Low (£1m–£5m)
Moderate (£5m–£10m)
Significant (£10m–£20m)
Severe (>£20m)
The Group has determined that scenarios where global
warming is limited to 1.5ºC or less than 2ºC would be most
beneficial, helping the business thrive even with the potential
impact of higher carbon costs. This is due to the climate-related
opportunities presented in these scenarios – both commercial
and operational – and the likely lower disruption to operations
from physical climate impacts.
An increased cost of carbon would be recovered through
pricing; at the same time, the Group’s initiatives to reduce
operational energy consumption would reduce its risk exposure
in the event of an increased cost of carbon. Low-carbon
processing technology also provides resilience in reducing
energy consumption, as well as supporting the Group’s growth
objectives. Examples of ways in which the Group supports
customers’ environmental sustainability goals are provided
on pages 21 to 23.
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Bodycote plc Annual Report 2024
Additional information
Risk management
Climate risk and opportunity identification and assessment
Climate change is one of the Group’s principal risks.
Potential impacts include physical risks to operations and supply
chains from global warming, as well as transition risks and
opportunities related to regulatory and market developments
from the shift to a low-carbon economy. Risk appetite is
determined annually by the Board.
Climate-related risks and opportunities most relevant for the
Group are identified through processes including benchmarking,
research, consultation with key colleagues, and customer
engagement. Regulatory changes are also considered in
identifying and assessing risks and opportunities. External
climate data supports this assessment. As described on page 48,
the Group refreshed its climate scenario analysis in 2024 to
re-evaluate risks and opportunities. Insights from this work are
incorporated into the Group’s Principal Risks register.
The process for determining the potential impact of climate risks
and opportunities, and their relative importance, includes both
qualitative and quantitative evaluation by the Group’s
Sustainability and Finance functions. Members of the Risk and
Sustainability Committee also contribute to assessments and
corroborate outcomes.
Climate risk management
Climate risk and opportunity management is led by the Group
Chief Executive, with support from the Chief Sustainability
Officer to ensure alignment with key risks and opportunities.
This includes maintaining the Group’s climate risk register and
advising on controls to mitigate risks from current and emerging
regulation, technology, legal, market, reputational, and physical
climate developments.
Climate risks and opportunities are prioritised based on their
potential strategic and financial impact, likelihood, and
magnitude. The Executive Committee oversees operational
activity to manage priority climate risks and opportunities.
Additional human and financial resources are deployed when
needed to support risk mitigation or opportunity realisation plans.
The Group’s climate risk and opportunity management plans are
updated at least annually. Insights from our climate scenario
analysis inform the Group’s climate transition planning and
efforts to further integrate climate-related opportunities into
commercial offerings and operations. Mitigation and realisation
strategies for key climate risks and opportunities are described
on pages 51 to 53.
Integration of climate risk into overall risk management
Climate risk is assessed alongside other business risks using the
Group’s overall risk management framework. Executive Directors
and Senior Executives are assigned ownership of risk
management as appropriate, with climate risk assigned to the
Chief Sustainability Officer. The Executive Committee evaluates
all Principal Risks and their mitigations twice a year. This ensures
that climate-related risks and opportunities are incorporated into
the Group’s strategic and financial planning appropriately.
An aggregated Principal Risks register, including climate risk,
is maintained by the Head of Internal Audit and Risk at the
Group level. Operational risk management is facilitated through
Group policies, procedures, training, internal controls, reporting
reviews, and approval processes, and overseen by Group Internal
Audit and Risk, and the Audit Committee.
Climate risks are monitored throughout the year to identify
changes in the risk profile. The Risk and Sustainability Committee
supports the identification, assessment, and management of
climate-related risks. Risk descriptions, scores, and mitigating
actions are assessed at least twice a year by the Executive
Committee and reviewed annually by the Audit Committee
and the Board.
Metrics and targets
Climate-related metrics
The Group monitors various metrics to assess climate-related
risks and opportunities and track performance against targets.
The following metrics are currently tracked:
– Scope 1 and Scope 2 emissions (CO2e)
– CO2e emissions intensity (CO2e/£m revenue)
– Energy consumption (MWh)
– Energy intensity (MWh/£m revenue)
– % renewable energy use
These metrics are monitored by the Executive Committee.
The Board also receives reports on energy usage and emissions.
ESG metrics are included in executive compensation schemes.
Climate-related metrics are tracked using an EHS management
platform which is deployed Groupwide to capture environmental
and health and safety data and provide a single, comprehensive
source of data for insight and management.
Other climate-related metrics
Given the nature of our business, energy consumption is the
Group’s most material environmental topic. Our processes are
not water-intensive by design, and the Group does not produce
products requiring added water. However, water is used for some
operational processes, so water consumption is also monitored.
Wastewater arises in processes like degreasing. We regularly
monitor water use, waste generation, and wastewater treatment
chemicals consumption. The case study on page 46 featuring our
Katrineholm, Sweden plant illustrates steps we are taking to
manage these impacts and reduce our costs.
Water use data is reported on page 62. Bodycote continues to
augment its use of climate-related metrics to track performance
and control exposure to risk. In 2024 we began collating waste
production data at a Group level. See page 62 for our 2024
performance. We are also working to improve data and insights
at an asset level to enable benchmarking across facilities,
support greater operational efficiency, and inform net zero
roadmap planning.
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Bodycote plc Annual Report 2024
Additional information
Climate-related opportunity metrics
The Group’s climate strategy presents both commercial and
operational opportunities:
Commercial opportunities
Bodycote has a significant opportunity to support customers in
reducing emissions and energy consumption. We have begun
tracking customers’ sustainability requirements and new
business opportunities, particularly relating to carbon reduction
goals and their requirements of suppliers, and are proactively
engaging with customers to demonstrate how we can help them
achieve their goals.
Operational opportunities
The benefit of the Group’s efforts to reduce carbon emissions is
passed directly to customers, lowering their Scope 3 emissions
from the services we provide. At the same time, the Group
benefits from reduced energy consumption, lower operating
costs, and less exposure to financial risks. See page 59 for details
of the Group’s projects to reduce operational carbon emissions.
The Group’s Scope 1 and Scope 2 emissions decreased by 8.6%
in 2024. CO2e per £m revenue reduced by 6.8% compared with
2023. The table above shows location-based emissions. Scope 1
and Scope 2 emissions for the last five years are set out in the
‘Environmental Leadership’ section. Bodycote also reports
emissions data using the market-based methodology (see page
59). Emissions and energy consumption for the Group’s UK
operations are provided on page 62.
The majority of the Group’s energy use relates to the
consumption of electricity and gas. A breakdown of consumption
data is provided on page 59. Emissions reductions were primarily
achieved through reduced electricity and gas consumption and
energy efficiency measures.
Bodycote uses an operational control approach for reported
emissions. The Group’s 2024 Scope 1 and 2 emissions and
energy consumption data has been independently assured.
Assurance of 2024 Scope 3 data is well underway. Assurance is
conducted in accordance with the ISO 14064-3:2019 standard.
See www.bodycote.com for the assurance statements.
GHG emissions and related risks
GHG emissions
Associated risks
2024
ktCO2e
Scope 1
– Price volatility of fossil fuels
– Future carbon taxes
118.0
Scope 2
– Fluctuation in electricity costs
(including impacts of fossil-fuel
sourced generation and future
carbon taxes)
125.3
Total Scope
1 + 2
– Customer appetite for lower
emission solutions
– Faster than expected growth
resulting in an increase in emissions
beyond planned mitigation
243.3
Scope 3
– Price fluctuation in energy intensive
supplies such as industrial gases
169.2
Scope 3 emissions
Although the Group’s Scope 3 footprint has remained below
SBTi’s 40% materiality threshold (of total Scope 1, 2, and 3
emissions), we are including our full Scope 3 emissions footprint
in our disclosures from 2024 (see page 60). We have also set
goals to reduce Scope 3 emissions, aligned to the best practice
SBTi methodology for target setting. Our targets cover almost
70% of our Scope 3 footprint, and comprise the following:
– To reduce absolute Scope 3 GHG emissions from fuel and
energy-related activities by at least 45% by 2030 from a 2019
base year.
– For 30% of suppliers (by emissions) of purchased goods and
services to have science-based or other carbon reduction
targets by 2030.
In the year ahead, we will develop our supplier engagement
strategy and embed metrics associated with the largest
elements of Scope 3 emissions (specifically energy-related,
industrial gases and HIP-PF metal powders) into our internal
management reporting.
Climate-related targets
Bodycote previously set a science-based emissions reduction
target validated by SBTi. The Group committed to reducing
absolute Scope 1 and Scope 2 GHG emissions by 28% by 2030
from a 2019 base year. In 2024, the Group’s emissions were
28.7% below the base year, meaning this target was achieved
six years early.
In late 2024, the Group submitted a revised, more ambitious
short-term target to SBTi, aligning with a more stringent 1.5°C
trajectory. The new target sets a 46% reduction in absolute
Scope 1 and 2 market-based emissions by 2030 (compared
to 2019 levels).
The Group is working towards an annual goal of at least a
4% emissions reduction, in line with the new, more ambitious
1.5°C aligned emissions reduction target. Our top priority remains
energy reduction: improving efficiency and lowering energy
consumption. We have established a core programme of eight
key emission reduction initiatives, which are being implemented
across our global facilities (see page 59).
The Group’s energy efficiency initiatives also support
decarbonisation more widely. By optimising thermal processing
for manufacturers, Bodycote can prevent emissions that would
otherwise be released into the atmosphere. As a result, Bodycote
plays a major role in avoiding emissions and reducing industry’s
impact on the climate overall.
The Group has developed a number of software tools to enable
carbon and environmental impact calculation for the majority
of its core heat and surface treatments. The tools support
current and prospective customers in their understanding of
the environmental impacts of services provided, as well as the
potential avoided emissions if they outsource their in-house
processes to Bodycote. See page 44 for details.
Our position on carbon offsets
In line with the science-based approach to decarbonisation,
Bodycote focuses on absolute emissions reduction. The Group
may use carbon removal or offsets only as part of a residual
emissions strategy if required in the future or as an additional
initiative to compensate for emissions or support
nature restoration.
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Bodycote plc Annual Report 2024
Additional information
Sustainability report
Responsible business
OUR COMMITMENT
We promote a safety-first culture to
ensure that all our people return home
from work safely and securely.
OUR GOAL
We will embed our zero harm culture
Groupwide and drive continuous
improvement in our performance.
ZERO
HARM
OUR PRIORITIES
– Creating a zero-harm culture
– World-class EHS management system
– Governance, training, and accountability
– Near miss reporting for continuous improvement
In 2024, we transformed our
health and safety strategy with the
introduction of a new management
framework, our ‘House of Safety’.
At its core, the framework builds
on our commitment to ‘Safety First’
as a core organisational value.
Our new strategy takes a comprehensive approach to health and
safety, addressing risk awareness and the cultural and systemic
factors that underpin workplace safety. It has three strategic
focus areas: ‘Leadership’, ‘Risk Awareness and Assessment’,
and ‘Standardised Approach’. Together these provide a
cohesive, proactive framework for embedding a world-class
safety approach at all levels of our operations.
Strategic Area 1: Leadership
We believe that an organisation’s safety culture starts at the top
and must cascade through every layer of management. To that
end, we have implemented two key initiatives under this area:
– Daily Management: Our managers are now directly involved in
the daily oversight of health and safety practices within their
teams, integrating safety in day-to-day decision-making and
embedding accountability at every level.
– Executive Safety Walks: By visiting sites, engaging with
employees, and observing safety practices, senior executives
show their commitment to health and safety, provide real-time
feedback, and take action where further support or
improvement is needed.
Through these initiatives, we are creating a culture of visible,
hands-on leadership where safety is a shared value across
all teams.
Strategic Area 2: Risk Awareness and Assessment
The second area of our strategy focuses on equipping our
workforce with the tools and knowledge to identify and manage
risks effectively. Under this area, we have introduced two
essential practices:
– Job Safety Analysis (JSA): These analyses help employees
identify potential hazards and take precautions to mitigate
them. JSA promotes critical thinking and a culture embedding
safety in operational planning.
– Gemba Walks: These walks involve managers and supervisors
visiting work areas to observe processes, engage with
employees, and identify safety risks, to enhance risk awareness
and strengthen workplace relationships.
Together, these practices empower our workforce to be vigilant,
informed, and proactive in managing workplace risks.
Strategic Area 3: Standardised Approach
This area emphasises the creation of uniform systems and
processes that address our most critical safety challenges.
Key initiatives include:
– Bodycote’s Safety Critical Rules: Our Safety Critical Rules to
address the 12 primary safety risks across our operations.
They provide clear, actionable guidance to ensure that
everyone, regardless of location or role, follows the same
high standards (see page 58).
– Group Management System Relaunch: Our Group
Environmental, Health, and Safety (EHS) Management System
has been streamlined to harmonise regional and local EHS
systems and enable more effective implementation and
compliance across the organisation.
We are also placing strong emphasis on knowledge sharing as
a means of driving continuous improvement. EHS incidents
and best practices are shared across the organisation to enable
employees to learn from one another and replicate successful
strategies in their own areas of operation.
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Personal
protective
equipment
Confined
spaces
Machine
guarding
Line
of fire
Isolation and
zero energy
Lifting
operations
Bodycote’s Safety Critical Rules
Manual
handling
Hot
work
Forklifts
and mobile
equipment
Working
at height
Chemicals
and hazardous
substances
Surroundings
Health and safety management
Bodycote's EHS management system is aligned with the
ISO 45001 standard for occupational health and safety. We hold
ISO 45001 certification in 23% of our facilities globally. Each site
has a dedicated internal EHS audit at least once every 3 years.
In 2024, Bodycote introduced new software to enhance chemical
management practices in our facilities. The system supports best
practices in:
– Chemical compliance and risk mitigation, providing
up-to-date information on hazardous materials, classifications,
and storage requirements in line with local and
international regulations.
– Safety and efficiency, providing instant access to chemical
safety data to reduce errors in handling hazardous substances.
– Data analytics, to help track chemical usage and optimise
purchasing, reducing costs and environmental impacts.
Embedding industry-leading chemical management practices
is a key workstream in our journey to become a world-class
health and safety company. We will begin reporting on chemical
management actions in 2026 following the full rollout of
the system.
Measuring performance
The Group’s health and safety performance is monitored at
all levels, with monthly reviews by the Board and Executive
Committee. Both leading and lagging metrics are tracked.
We expect a culture of transparency among employees,
contractors, and visitors, encouraging all incidents to
be reported.
Lagging indicators
Our lagging indicators provide insight into past performance,
helping to assess the effectiveness of our health and
safety initiatives.
We use total recordable incident rate (TRIR) and lost time injury
rate (LTIR) as our two key lagging indicators. We achieved a
significant improvement in both KPIs in 2024:
– The TRIR was 1.8, reduced from 2.8 in 20231
– The LTIR was 1.1, reduced from 1.5 in 20232
There were no work-related fatalities among Bodycote
employees or contractors (nor in any of the last five years).
We applied additional focus to accidents arising from manual
handling of parts, slips, trips, and falls, and lifting operations,
due to an increase in these incidents in 2023. As a result, manual
handling incidents decreased by 24%, slips, trips, and falls by
47%, and lifting operations by 29%.
Leading indicators
Our leading indicators measure employee engagement, identify
improvement opportunities, and proactively address potential
risks before accidents occur. We track two key indicators:
– Near misses: there were 274 near misses reported in 2024
(2023: 356).
– Opportunities for improvement: 4,203 opportunities for
improvement were identified (2023: 2,454), showing a positive
trend of engagement in safety awareness and reporting.
Supporting employee health
Bodycote is committed to promoting occupational health across
all its sites by prioritising employee health and implementing
comprehensive health management standards.
The Group has a range of initiatives in place to support
employees’ wellbeing. We monitor workplace conditions such
as noise, dust levels, temperature, and ergonomics. We ensure
that our Risk Assessments support the identification of potential
health impacts and reduce risk exposure.
1 TRIR represents the number of recordable cases per 200,000 hours worked.
All workers are included in reporting – employees and contractors.
2 LTIR represents the number of lost time incidents per 200,000 hours worked.
NEXT STEPS
– Implement safety daily management at all sites in 2025
to ensure that safety policies, procedures, and
protocols are implemented correctly every day.
– Complete the rollout of our new chemical management
system to improve insights and transparency, and
support safety and operational efficiency.
Total Recordable Incident Rate (TRIR)
1.82
2.82
2024
2023
2022
2021
2020
2.52
2.90
2.30
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Bodycote plc Annual Report 2024
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A leadership position on climate
and environment-related issues
is integral to the Group’s value
proposition and key to our
operational performance.
Climate leadership enables us to provide a low-carbon service
offering for customers, while managing our costs and exposure
to risks. Commercial and operational climate-related KPIs are
included in our ‘HEAT’ transformation programme.
Energy and GHG emissions performance
Bodycote set a target in 2022 to reduce Scope 1 and 2 GHG
emissions by 28% by 2030, compared with 2019 (market-based).
This target was validated by the Science Based Targets initiative
(SBTi). At the end of 2024, the Group’s emissions were 28.7%
below 2019 levels, meeting the target six years early.
Bodycote has upgraded its ambition level and submitted a new
target to SBTi for validation, aiming for a 46% reduction by 2030,
in line with a 1.5ºC trajectory.
The Group’s absolute Scope 1 and 2 emissions reduced by
8.3% year-on-year (location-based). This was mainly driven
by lower gas consumption compared with the prior year
(12.3% lower). Bodycote emitted 343 tonnes CO2e per £m
revenue, compared with 377 tonnes in 2023, a reduction of 9.2%.
Energy consumption (kWh) reduced by 8.4% in 2024, with energy
intensity (kWh/£m revenue) reducing by 9.3% year-on-year.
OUR PRIORITIES
– Scope 1 and 2 emissions reduction
– Energy use and decarbonisation initiatives
(including renewables)
– Supply chain emissions reduction
– Net zero roadmap development
OUR COMMITMENT
We are taking direct action to manage
our use of natural resources and to improve
the energy efficiency of our processes.
OUR 2030 GOAL
We will reduce our Scope 1 and Scope 2
emissions by 46%.
ENVIRONMENTAL
LEADERSHIP
Total CO2 emissions (ktCO2e)1,2
2024
2023
% change
in 2024
2019
Scope 1 CO2e
emissions
118.0
134.3
-12.2%
170.2
Scope 2 CO2e
emissions
(location-based)
125.3
131.0
-4.3%
186.4
Scope 2 CO2e
emissions
(market-based)
145.1
145.5
-0.3%
198.7
Total Scope 1 +
Scope 2
(location-based)
243.3
265.3
-8.3%
356.6
Total Scope 1 +
Scope 2
(market-based)
263.1
279.8
-6.0%
368.9
Emissions reduction programme
Energy efficiency is Bodycote’s top environmental priority.
Efficient use of energy drives down costs and our impact on the
climate, while also supporting a competitive advantage.
We are delivering a multi-year programme of energy efficiency
measures and climate-related investments, including:
– Increasing furnace capacity by up to 50% using proprietary
equipment (without increasing energy consumption)
– Optimising heat treatment cycles to extract the most value
from energy and process gas use
– Improving furnace insulation to reduce heat loss and waste
– Identifying and fixing air and process gas leaks to minimise
energy waste
– Deploying low-energy LED lighting in facilities
– Upgrading or substituting process gas generators to increase
efficiency and limit waste
– Upgrading or substituting vacuum furnace pumps with newer,
more efficient models
– Investing in buildings’ heating and cooling systems to reduce
energy consumption
1 Statutory carbon reporting disclosures required by the Companies Act 2006.
The boundary for reported data has changed materially once in the last five
years, following the Group’s acquisition of Ellison Surface Technologies in 2020.
2 The Group’s emissions calculation methodology is provided in the document
published on our website at the following address: www.bodycote.com.
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The Group also embeds climate-related considerations within
relevant business processes. For example, capital investment
decisions include sustainability reviews to ensure alignment with
our SBTi commitment.
In 2024, Bodycote introduced a new KPI to track the proportion of
renewable energy used across the Group. In 2024, approximately
27% of electricity came from renewable sources. In 2025, we plan
to develop a Groupwide renewable energy strategy to support
furnace electrification and contribute to our decarbonisation
targets. This will include a mix of solutions such as green
electricity tariffs, renewable power purchase agreements and
on-site renewable energy installations, aligned to our evolving
energy needs and a range of regional energy markets.
We are making progress on developing our own energy
generation assets. We have recently installed 0.9MWe of solar
panels at our Wuxi, China site. See the adjacent case study.
Emissions intensity (tCO2e/£m)
2024
2023
£m sales at
actual
exchange
rate
normalised
to constant
currency
rate
£m sales at
actual
exchange
rate
normalised
to constant
currency
rate
Scope 1
163.5
166.1
182.6
190.9
Scope 2
(location-based)
173.7
176.4
178.1
186.2
Scope 1 + 2 total
337.2
342.5
360.7
377.1
Energy consumption (kWh)1
2024
2023
% change
in 2024
Scope 1 Natural gas
530,492,950
604,863,999
-12.3%
Other (LPG,
fuel oils,
diesel, petrol)
28,109,945
31,423,405
-10.5%
Scope 2 Electricity
465,139,675
481,538,420
-3.4%
Total energy
consumption (kWh)
1,023,742,570 1,117,825,824
-8.4%
1 Energy consumption data for prior years has been restated to reflect
consumption as actual data has become available.
SOLAR ENERGY, WUXI, CHINA
At our heat treatment site in Wuxi, China, we are utilising
our plant roof and surrounding car park to maximise our
installation of on-site solar panels. Working with a local
solar manufacturer, we are installing a large 900kWp solar
system providing our 24/7 operations with 0.94GWh of
renewable electricity in its first year, avoiding 556 tonnes
CO2e/year. In addition to powering our plant, we have
added a 60kW rapid charger to support our customers’
electric vehicles when they visit our site. Charging will
also be available for staff, to support their transition to
lower impact personal transport.
On-site renewables are a key element in Bodycote’s clean
energy sourcing, as set out in our recently announced
HEAT operational performance framework.
Scope 3 emissions
Although the Group’s Scope 3 emissions remain below SBTi’s
‘materiality threshold’ of 40% of total emissions, Bodycote has
introduced full Scope 3 reporting and emissions reduction goals
aligned to the SBTi methodology. All relevant Scope 3 categories
for Bodycote are disclosed in the table below. 2023 emissions
have been externally assured, with assurance of 2024 emissions
well underway (see www.bodycote.com). We consider Scope 3
an important area of focus in accelerating the decarbonisation of
our full value chain. We have set the following goals:
– To reduce absolute Scope 3 GHG emissions from fuel and
energy-related activities by at least 45% by 2030 vs 2019.
– For 30% of suppliers (by emissions) of purchased goods and
services to have science-based or other carbon reduction
targets by 2030.
We will begin reporting against these goals in next year’s report.
Scope 3 categories
2024
tCO2e
2023
tCO2e
Category 1: Purchased goods
and services
73,760
79,588
Category 2: Capital goods
14,690
12,701
Category 3: Fuel and energy
related activities
56,800
61,436
Category 4: Upstream transport
and distribution
2,261
2,161
Category 5: Waste generated
in operations
1,512
1,666
Category 6: Business travel
5,205
5,140
Category 7: Employee commuting
8,808
9,720
Category 8: Leased assets
2,520
2,386
Category 9: Downstream transport
and distribution
2,261
2,161
Category 10: Processing
of sold products
988
513
Category 12: End of life treatment
of sold products
369
508
Total
169,174
177,980
ADIABATIC COOLING IN DERBY, UK
At our site in Derby, UK, we replaced the existing
evaporative cooling towers with a new closed circuit
adiabatic cooling system. This upgrade provides energy
and maintenance savings, and a dramatic reduction in
water use. As a closed system, it also prevents
contamination of the cooling system with outside debris
and therefore avoids the need for ongoing chemical
dosing and cleaning, as well as preventing fouling of the
furnaces’ cooling jackets. This upgraded cooling
installation will deliver electricity consumption savings
(as well as peak electrical load and associated carbon
emissions) of 73% as well as a reduction in water use of
over 85%. Total system electrical load is also reduced by
over 140kW, supporting the local electricity network’s
peak loads. We continue to roll these cooling system
upgrades out in all suitable Bodycote locations.
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Our decarbonisation roadmap
Our Scope 1 and 2 greenhouse gas emissions (market-based) ktCO2e
2019
0
400
300
200
100
2024
2030
2050
2024
29%
reduction
since 2019
EFFICIENCY
Energy intensity
in 2024
(MWh/£m rev.)
27%
lower than 2019
Furnace management
and utilisation
Adiabatic cooling systems
Building energy
management systems
ELECTRIFICATION
Electricity
as proportion
of total energy
in 2024
45%
v 42% in 2019
Electrification of gas furnaces
On site renewable energy
generation
Renewable energy procurement
EVOLUTION
Specialist
Technologies
~30%
of revenue
in 2024
v ~20% in 2019
Transitioning to lower impact
furnace technologies (such as LPC)
Switching to alternative
process gases
Development of
additive manufacturing
2030
46%
reduction
target (v 2019)
We had previously set a
reduction target of 28%
(vs 2019) aligning to a
less than 2ºC trajectory.
In 2024, we enhanced
our 2030 ambition to an
absolute reduction of
46% (vs 2019), aligning
to a 1.5ºC trajectory.
As the only major heat treatment
company to have set an SBTi target,
we have aligned our ambition to
a 1.5ºC trajectory.
Actual annual emissions
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Long-term emissions strategy
Bodycote supports the aims of the Paris Agreement and
recognises the importance of aligning with global net zero goals.
We have initially focused on driving near-term emissions
reductions through our SBTi targets, and now also through our
Scope 3 goals. In addition, we have committed to evaluating a
net zero roadmap for the Group during 2025. See the TCFD report
for more information about our climate strategy.
Environmental management
Bodycote’s Environmental Policy applies to all sites worldwide
and sets the Group’s standards for environmental management.
In line with our policy, Bodycote commits to comprehensive
public disclosure about our performance.
Our environmental management system is aligned to the
international ISO 14001 standard. As at the end of 2024, 98% of
the Group’s operating facilities had achieved or maintained
ISO 14001 certification, covering 93% of the Group’s employees.
The Group complies with legislative requirements and holds all
necessary environmental licences and permits in each country
of operation.
Bodycote’s approach to energy management is aligned to the
ISO 50001 Energy Management Systems Standard. We hold
ISO 50001 certification in several countries, covering 19% of
operating facilities. This enables us to drive a consistent energy
management approach and meet the Energy Efficiency Directive
2012/27/E.U. requirements. Our UK operations are compliant with
the directive through the Energy Savings Opportunity Scheme.
We added to our suite of environmental policies in 2024 with the
introduction of an ‘Environmental Re-baseline, Restatement and
Reporting Policy’. We are also developing a new Renewable
Energy Policy for energy procurement and installation.
Bodycote’s UK footprint
In accordance with the Streamlined Energy and Carbon Reporting
(SECR) requirements, emissions and energy consumption
relating to the Group’s UK business operations are disclosed
separately in the above table. UK emissions reduced by 8.1% in
2024, while energy consumption reduced by 5.0%.
Bodycote’s UK sites (facilities and offices)1
2024
2023
Emissions
(tonnes
CO2e)
Energy
consumption
(kWh)
Emissions
(tonnes
CO2e)
Energy
consumption
(kWh)
Scope 1
4,211.7
20,021,309
4,250.0
19,988,786
Scope 2
6,835.9
34,741,963
7,768.0
37,651,991
Scope 3
9.0
37,462
13.2
54,627
Total
11,056.6
54,800,734
12,031.2
57,695,404
1 Electricity and fuel consumption information is collected from each facility on a
monthly basis. Scope 3 includes business road travel in vehicles not owned by
the Company. Scope 3 is calculated from mileage and vehicle type. The DEFRA
conversion factors are then applied to calculate the total tonnage of
CO2e produced.
Water use
Although the Group’s processes are not water-intensive, we
recognise that water is a scarce resource and work to safeguard it
where possible, re-using and recycling water extensively within
our operations. Unfortunately, water use was impacted by
significant water leaks at our plants in Wuxi, China and
Morristown, USA, resulting in around 34,000m³ of water losses in
2024. The Group withdrew around 842,516m³ of water, 3.0% more
than in 2023. Water intensity (water withdrawal m3/£m sales)
increased by 1.9% compared with 2023. Excluding these
exceptional events, the Group’s water consumption in 2024 was
808,001m³, a reduction of 1.3% compared to 2023.
While most of the water withdrawn is subsequently discharged,
some is lost through evaporation. We are tackling this through
the rollout of closed-loop adiabatic cooling systems for furnaces
to replace water supply from cooling towers, where water is lost
through evaporation. We have now installed eight adiabatic
systems in the past two years. See one example on page 60.
All water is supplied by municipal suppliers. When water is
discharged by the Group, it is controlled using interception tanks.
These check water for contaminants and ensure it is acceptable
for discharge. Audits confirm that the Group’s control methods
are in line with ISO 14001:2015 and comply with legal obligations.
Water use
2024
2023
% change
in 2024
Total water withdrawn (m3)
842,516
818,367
3.0%
Intensity (thousand m3/£m)
1.19
1.16
1.9%
Waste management
Bodycote seeks to minimise waste. The Group typically
re-uses packaging or containers that customer parts arrive in
when returning them. This avoids unnecessary waste and
provides efficiency for customers. Any waste that is produced is
segregated into appropriate streams and disposed of according
to local legislation. Chemicals and hazardous waste are stored
separately and handled as required. All hazardous waste is
disposed of with care by licenced contractors in accordance
with environmental legislation.
This year, Bodycote has introduced waste reporting. 11,626
tonnes of waste was generated in 2024, of which 3,677 tonnes
were classified as hazardous waste. Consolidation of this data
represents an important step in monitoring and managing our
wider environmental impact, and identify opportunities for
improved resource efficiency.
Waste generation (tonnes)
2024
Total waste generation
11,626
Of which:
Hazardous waste
3,677
Non-hazardous waste
7,949
NEXT STEPS
– Accelerate our progress towards meeting our new
1.5 degree aligned 2030 target and continue the
development of our longer-term roadmap to net zero
for the Group.
– Develop our electrification and renewables strategy
to decarbonise our heat treatment processes.
– Augment supplier engagement to support delivery
of our new supply chain emissions reduction goals.
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At Bodycote, we understand that it
is our people that make us a world
leader. Our technical expertise and
commitment to being a trusted
partner to our customers are
ingrained in our culture.
To sustain this, we need to attract, develop, and retain the best
people, creating a supportive, collaborative environment where
difference is valued and celebrated. We aim to be a fair employer,
creating opportunities for all colleagues to thrive. We work hard
to foster an inclusive, open culture where colleagues can be
themselves and their voices are heard.
Driving performance excellence
Bodycote's new Performance Excellence Management
Framework, ‘HEAT’, launched in December 2024, consists of
four strategic levers to take the best of Bodycote anywhere,
and embed it everywhere. Under ‘H’ of the framework, we are
focused on developing a ‘High performance culture’, using three
levers to create a winning team:
– Right people with the right skills and attitude
– Clear expectations through the organisation
– Breaking down barriers and encouraging collaboration
During 2024, we developed a new set of values that reinforce our
ambition to establish a high-performance culture Groupwide.
Our new values reflect both expected behaviours and our drive
for performance excellence, and will be rolled-out across the
organisation in the first half of 2025. As we work to develop
programmes to execute our strategy, we are focused on
advancing and measuring cultural progress in three key areas:
employee engagement, employee retention and talent
development. Our new values are detailed on page 06.
OUR PRIORITIES
– Values, culture, and purpose
– Employee engagement
– Skills and career development
– Talent attraction and retention
OUR COMMITMENT
We want to empower our expert
team by giving them the tools,
rewards, environment and resources
they need to succeed.
OUR 2030 GOAL
We want to be recognised as one
of the best companies to work for
and commit to setting an employee
engagement performance target
in 2025.
ENGAGED
TEAM
Employee engagement
Bodycote follows a formal internal communications programme
to keep colleagues informed on important topics. This year,
we have expanded the programme to include regular CEO
townhalls. We use several channels for communication, such as
a bi-monthly newsletter and weekly intranet updates. We also
share important updates via email across the Group.
Each year, the Group conducts employee engagement groups,
hosted by a Non-Executive Director for workforce engagement.
In 2024, two regional forums were held, with around 30 employee
representatives. Feedback from these forums was reported to
the Board, with Executive Directors assigned responsibility
for addressing key issues that arose. See page 38 for
further information.
In 2025, we will conduct an all employee engagement survey
using an externally benchmarked framework that will enable us
to measure ourselves against the highest performing companies
in our sector. Our aim is to be recognised as one of the best
companies to work for and, based on the baseline survey in 2025,
we will set a clear performance target and action plan to 2030.
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Developing our people
We are committed to providing the skills and training needed for
employees to operate safely and effectively. Bodycote invests in
training and development at both local and Group levels.
Training is delivered through online modules, workshops, and
hands-on sessions. The Group also encourages cross-functional
and cross-divisional sharing to support peer learning.
Colleagues joining office-based Group functions and plant-based
managerial roles typically complete around five hours of
induction training, covering core mandatory compliance topics.
During the year, other colleagues complete refresher training on
mandatory topics such as compliance, security, and cyber-
awareness. Training completion rates for in-scope employees are
reported to the Executive Committee, with appropriate escalation
for any training not completed on time.
In 2024, we began rolling out a global learning management
platform to support training and development opportunities for
employees. The rollout will be completed in 2025, enabling
broader access to skills development in all of Bodycote’s
global languages.
Bodycote recognises the importance of work-life balance as part
of our normal working practices. Our global Remote Working
Policy enables eligible office-based employees to work from the
office three days a week and from home for the remainder.
Employment practices
Bodycote believes all colleagues should be rewarded fairly for
contributing to our success. We review wage levels and
employment practices against local standards and conduct a
calibrated annual pay review process. We are committed to
complying with all applicable local and national minimum wage
regulations. The Group’s pension arrangements are based on
relevant local laws and practices.
The vast majority of our people are employed on permanent or
fixed-term contracts. We typically employ temporary workers to
supplement our workforce during busy periods, when flexible
resources are needed to fill vacancies, or to support special
projects. In 2024, 4% of our workforce were part-time employees.
PRIORITISING FACE-TO-FACE
EMPLOYEE ENGAGEMENT
A strong commitment to employee engagement is a
hallmark of Bodycote’s new leadership. Since joining the
business in March 2024, Chief Executive Officer Jim
Fairbairn has visited almost 50 facilities around the world,
engaging with hundreds of colleagues, enabling open,
two-way communication about our business, operations
and opportunities for the future.
A new virtual town hall programme has been introduced,
where our Chief Executive Officer, management team,
and external subject matter experts share information on
strategic initiatives, the Group’s performance, and key
programmes, as well as best practices and case studies
for continuous improvement. In 2024, the programme
covered topics including safety, operational excellence,
our new values and financial results, among others.
These sessions ensure colleagues are informed on key
developments, enabling them to champion our change
agenda, drive higher employee engagement, and support
the successful execution of our strategy.
NEXT STEPS
– Introduce a Groupwide employee survey to baseline
employee engagement and inform next steps in our
roadmap towards a high-performance culture.
We provide a range of benefits to our employees which meet the
minimum required in all territories that we operate in, and in
some areas exceed these standards. These include paid holiday
and life insurance. We also offer tuition reimbursement schemes
for colleagues participating in professional development courses.
Freedom of association
Bodycote upholds employees’ freedom of association and
recognises their right to collective bargaining. We are committed
to open and constructive engagement with our employees and
their representatives. Approximately 35% of the Group’s
employees are represented by unions and works councils.
We have collective agreements in place in 11 of the countries in
which we operate. They cover topics such as compensation,
holiday entitlement, working hours, paid and unpaid absence,
grievances, and local workplace changes.
Community engagement
As part of our wider approach to responsible business, Bodycote
seeks to play a positive role in the local communities in which it
operates. The Group provides high-quality employment and
seeks to build 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.
Highlights from 2024 include our Czech colleagues raising 9,200
CZK for relief following devastating floods in the region, which
was donated to ‘People in Need’. Colleagues in many of our US
plants supported local causes with food and toy donations,
supporting children, schools, and people in need; and our sites in
France partnered with disability-inclusive enterprises that
support tasks like cleaning, preparation, and packaging of parts.
We also sourced office supplies from them to support their work.
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Bodycote recognises the value
of a diverse and skilled workforce
and is committed to creating and
maintaining an inclusive and
collaborative workplace culture.
We understand that not everyone is starting from the same place,
has the same challenges, or requires the same level of support,
and so our approach is to make sure everyone has the support
they need to be successful. This is particularly pronounced as
we develop our recruitment and working practices, which are
designed to ensure we can continue to attract and retain a
diverse workforce.
Our overarching Equality, Diversity and Inclusion Policy, and our
recruitment practices, outline our stance on maintaining equal
opportunities and giving full, fair, and impartial consideration
to all employment applicants. Our employment policies are
designed to maintain 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 as well as military and
veteran status in North America. We embrace a culture of
acceptance and inclusion, accommodating part-time, agile, and
flexible working requests where appropriate, and take a zero-
tolerance position on harassment of any kind. As part of our
commitment to continuous improvement, in 2024 we introduced
a new, online anti-sexual harassment training course. To date,
this has been issued to UK employees with a PC, 100% of whom
have completed it.
We also introduced a Board Diversity & Inclusion Policy in 2024.
This sets out the Board's commitment to ensuring its
membership reflects the diversity of the business, recognising
that a diverse range of views, perspectives and backgrounds will
improve its decision-making and ability to drive value for
all stakeholders.
Sustainability report
Responsible business continued
OUR PRIORITIES
– Diversity in the workplace
– Gender and ethnicity representation
– Fair global working and recruitment practices
OUR COMMITMENT
We are committed to creating
a diverse and dynamic workplace
in which everybody can thrive.
OUR 2030 GOAL
We will continue to increase diversity
among our Board and senior management
teams and work to become a leader in
our industry.
DIVERSE
WORKPLACE
It also outlines the Board's commitment to supporting
management in its efforts to increase the proportion of senior
leadership roles held by women, those from non-white minority
ethnic backgrounds, and other under-represented groups,
to set the tone from the top.
Gender diversity
At 31 December 2024, female representation on the Board
was 37.5%, level with 2023, and 33.3% of the Group’s executive
management were female. Among the Group’s population of
senior managers (including Executive Committee), 11.8% are
female, and across all employees, the proportion is 21.8%.
We have taken steps to re-baseline our data this year to more
consistently define the boundary based on seniority of roles.
As a result, the proportion of roles held by women has reduced
compared with figures previously reported. Our 2024 data
provides an accurate baseline against which we will measure
our performance and progress in improving gender diversity
in our organisation.
The Group’s 2023/24 Gender Pay Gap report showed that the
UK mean gender pay gap is 6.9% in favour of women, while
the median gender pay gap is also in favour of women (6.5%).
This compares to a UK national median gender pay gap of 13.1%
in favour of men. Our full Gender Pay Gap report is published on
our website at www.bodycote.com.
December 2024
Male
Female
Group Board
5 (62.5%)
3 (37.5%)
Executive Committee
8 (66.7%)
4 (33.3%)
Senior managers (including
Executive Committee)
67 (88.2%)
9 (11.8%)
All employees
3,426 (78.2%)
953 (21.8%)
Company overview
Strategic report
Governance
Financial statements
65
Bodycote plc Annual Report 2024
Additional information
Sustainability report
Responsible business continued
NEXT STEPS
– Improve alignment to the FTSE Women Leaders
Review recommendations by ensuring one of four key
leadership roles (Chair, Senior Independent Director,
CEO and Finance Director) is held by a woman.
– Refresh our approach to diversity, equity, and inclusion
to strengthen our policies, actions, and targets to
encourage and support diversity in the workplace and
harness its value creation potential.
Ethnic diversity
Bodycote meets the Parker Review target for all FTSE 250 boards
to have at least one member from an ethnic minority, with two
members who meet the ONS classification of Asian/British Asian
and mixed/multiple ethnic groups, respectively.
There is broad international representation on the Executive
Committee, with five different nationalities represented,
as well as one member from an ethnically diverse background.
Further information in accordance with LR6.6.6 (9) and (10) is
provided on page 86.
Company overview
Strategic report
Governance
Financial statements
66
Bodycote plc Annual Report 2024
Additional information
Sustainability report
Ethics & governance
We operate with high standards of
ethics and compliance and expect
our partners to do the same.
The Group strives to meet a high standard of ethical and
responsible behaviour in the way we conduct business. We have
a robust governance structure to support business ethics, and a
comprehensive set of policies that detail our commitments and
standards. The Group’s Board and Executive Committee review
training completion rates and reports to the Open Door Line
whistleblowing service (number received, contents of reports)
to monitor adherence to our policies.
Our Code of Conduct sets out the Group’s policy on compliance
with legislation relating to anti-slavery, human trafficking, and
child labour; trade sanctions; employment standards; and the
promotion of health, safety, and environmental protection.
The Code is supported by detailed, subject-specific policies.
The Code and relevant policies are published on our website
at www.bodycote.com/investors/governance/our-policies/
Bodycote prohibits 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 potential contravention of our policy.
We require employees to undertake training in our key policies
to reinforce our expectations and mitigate our exposure to risks.
This training is refreshed every three years. In 2024 we reissued
our full ethics and compliance training suite to all members of
our leadership and management population and other relevant
employees based on role, comprising c.1,000 colleagues.
We plan to update our Group policies in 2025 to reflect our new
corporate values. The rollout of our new Code will be supported
by an internal communications campaign to help familiarise
colleagues with our refreshed values and expected behaviours.
Respect for human rights
Bodycote upholds and respects universal human rights.
The Group’s Human Rights Policy is aligned with the Ten
Principles of the UN Global Compact, incorporating the United
Nations Universal Declaration of Human Rights and the
International Labour Organization Fundamental Conventions.
Our policy reaffirms the Group’s commitment to freedom of
association, the abolition of forced or compulsory labour; the
elimination of child labour; the elimination of discrimination;
and a safe and healthy working environment. The Group’s
Anti-Slavery and Human Trafficking Statement is published on
our website and reviewed by the Board of Directors annually.
Colleagues working in senior management, human resources
and purchasing roles are required to complete dedicated
Modern Slavery Act training, and participate in refresher training,
at least every three years. Training was re-issued to all relevant
colleagues in these functions during 2024, with 99.8% of those
required to complete the training having done so.
Anti-bribery and corruption
The Group provides interactive online training courses on
Bribery Prevention, Data Protection, Failure to Prevent Tax
Evasion, the Group Authority Matrix, and Competition Law.
Certain employees, determined by grade or by role, are required
to undertake this training. The completion rate for training issued
during 2024 was 99% among relevant employees. Our Codes
and related training outline acceptable limits for gifts and
hospitality and make it clear that employees should never offer,
pay, or solicit bribes in any form. Furthermore, the Group has a
policy of not making political donations.
Responsible supplier management
As a world-leading provider of heat treatment and thermal
processing services, we recognise our responsibility to
contribute to improved standards of environmental protection
and sustainable business practices throughout our global
supply chain.
Our Groupwide Supplier Code of Conduct sets out the minimum
sustainability, environmental and social standards the Group
expects its suppliers to adhere to, including those relating to the
protection and promotion of human rights. We expect suppliers
to communicate Bodycote’s values and expectations to their
employees, as well as their own suppliers. This policy is
supplemented by our Sustainable Procurement Policy, which
provides guiding principles on social, ethical, and environmental
issues for employees involved in procurement.
Suppliers are screened using Denied Party Screening databases
prior to any transaction. This covers global databases for
government watch lists, sanctions, and restricted parties.
We are committed to supporting global efforts to eliminate the
use of conflict minerals and ensuring that our procurement
practices do not fuel or exacerbate conflict. In turn, suppliers
are managed with respect, honesty and integrity, irrespective
of the size of the transaction. We agree fair contracts and aim to
pay suppliers promptly in line with agreed terms.
Encouraging colleagues to speak up
The Group’s open and transparent culture encourages colleagues
to speak up whenever they have a concern, without fear of
retaliation. We offer a range of channels for colleagues to report
suspected wrongdoing, including an independent, third-party
operated whistleblowing helpline and email. Our ‘Open Door
Line’ is open to anyone who wants to report a concern
confidentially. We promote the Open Door Line via posters in
plants and offices, on our intranet homepage and on the Group’s
website. The Board and Executive Committee receive reports
about any issues raised via the Open Door Line. All reports made
in 2024 were investigated and appropriately resolved.
NEXT STEPS
– Refresh the Group's Code of Conduct and other Group
policies to reflect our new corporate values and align
them with current best practice standards.
– Augment our ethics and conduct training offering on
our new Groupwide learning management platform,
which is being rolled out during 2025.
Company overview
Strategic report
Governance
Financial statements
67
Bodycote plc Annual Report 2024
Additional information
Sustainability report
Non-financial and sustainability information statement
In accordance with the Non-Financial Reporting Directive,
the table below sets out key policies and standards that govern
our approach and due diligence in relation to environmental,
employee, social, human rights, anti-corruption and anti-bribery
matters, along with references to additional information included
elsewhere in this report. Further information to support our
disclosure can also be found on the following pages:
The required information about the business model
can be found on page 18.
Information about non-financial Key Performance
Indicators that are aligned to our business strategy
can be found on page 19.
Our climate-related financial disclosures can be found
on pages 48 to 56.
Our principal risks are summarised on pages
28 to 33.
Our Group policies can be found on our website:
www.bodycote.com/investors/governance/our-policies/.
Compliance with our policies is monitored by our Board,
Executive Committee, through our Internal Audit function
and, locally, by our General Managers.
In line with the Companies (Strategic Report) (Climate-related
Financial Disclosure) Regulations 2022, we have disclosed fully
against these requirements, which can be found in our TCFD
report on pages 48 to 56.
Reporting
requirement
Group policies that
guide our approach
Information about actions, metrics and targets
and risk management with page references
Environmental
matters
– Environmental Policy
– Environmental Re-baseline, Restatement
and Reporting Policy
– Supplier Code of Conduct
– Sustainable Procurement Policy
Company purpose and values, page 06
Sustainability report, pages 40 to 67
Principal risks and uncertainties, pages 28 to 33
TCFD disclosures, pages 48 to 56
Our business model, page 18
Section 172 statement, pages 35 to 36
Employees
– Occupational Health & Safety Policy
– Equality, Diversity and Inclusion Policy
– Corporate values
– Code of Conduct
– Human Rights Policy
– Open Door Policy
– Sexual Harassment Policy
Company purpose and values, page 06
Sustainability report, pages 40 to 67
Employee engagement, page 78
Principal risks and uncertainties, pages 28 to 33
Our business model, page 18
Section 172 statement, pages 35 to 36
Social
matters
– Code of Conduct
– Human Rights Policy
– Supplier Code of Conduct
– Board Diversity and Inclusion Policy
– Data Protection Policy
Company purpose and values, page 06
Sustainability report, pages 40 to 67
Our business model, page 18
Section 172 statement, pages 35 to 36
Respect for
human rights
– Human Rights Policy
– Anti-Slavery and Human Trafficking Policy
– Supplier Code of Conduct
– Sustainable Procurement Policy
– Conflict Minerals Procedure
Company purpose and values, page 06
Sustainability report, pages 40 to 67
Section 172 statement, pages 35 to 36
Principal risks and uncertainties, pages 28 to 33
Anti-corruption
and anti-
bribery
matters
– Supplier Code of Conduct
– Anti-Tax Evasion Policy
– Anti-Bribery and Corruption Policy
– Competition and Anti-Trust Policy
– Data Protection Policy
– Anti Money Laundering Policy
– Open Door Policy
Sustainability report, pages 40 to 67
Principal risks and uncertainties, pages 28 to 33
Report of the Audit Committee, page 87
Bodycote recognises the role we can play in advancing
the United Nation Sustainable Development Goals (SDGs)
by integrating sustainable practices into our operations
and influencing positive change in society.
In line with our strategy, we have identified five key SDGs
where we contribute to these crucial global goals:
Company overview
Strategic report
Governance
Financial statements
68
Bodycote plc Annual Report 2024
Additional information
IN THIS SECTION
Board of Directors
70
Chair’s introduction
72
Corporate governance statement
73
Directors’ report
82
Report of the Nomination Committee
84
Report of the Audit Committee
87
Directors’ report on remuneration
94
Directors’ responsibilities statement
118
GOVERNANCE.
03
Company overview
Strategic report
Governance
Financial statements
69
Bodycote plc Annual Report 2024
Additional information
Board of Directors
JIM FAIRBAIRN
Chief Executive Officer
Appointed
March 2024 and Chief
Executive Officer from May 2024
External roles
None.
Past roles
Began his career as a design engineer
with John Wood Group plc, a multinational
engineering and consulting business.
Joined Clyde Bergemann in 2000 as
Managing Director, and subsequently
became CEO of Clyde Process Solutions.
Subsequently held several executive
management roles with Howden Group,
latterly as Divisional CEO of the Power,
Environmental and Process Division.
He then went on to become Group CEO of
Megger Group, a leader in electrical test
and measurement products and systems,
from 2017 to 2024.
Qualifications
Graduated from the University of
Strathclyde with a degree in Mechanical
Engineering and has an MBA from
Loughborough University. Chartered
Engineer and Fellow of the Royal Academy
of Engineering. Honorary Doctor of
Science from City University. Officer of
the Order of the British Empire (OBE).
BEN FIDLER
Chief Financial Officer
Appointed
February 2023
External roles
None.
Past roles
Began his career in strategy consulting
working for the LEK Partnership. He moved
to investment banking in 1997, as an equity
research analyst covering the Aerospace
& Defence sector at Kleinwort Benson and
then Deutsche Bank. Joined Rolls-Royce
Holdings plc in 2017 where he held a
number of senior management positions
including Director of Group FP&A, Vice
President Business Performance and
Deputy Group CFO. Was a Non-Executive
director of ITP Aero engines in Spain and
Rolls-Royce SMR.
Qualifications
Masters degree in Biochemistry from
the University of Oxford.
DANIEL DAYAN
Non-Executive Chair
Appointed
January 2022
External roles
Non-executive Chair of CellMark AB
(not listed). Non-executive Chair of
Aquaspersions group (not listed).
Non-executive Chair of Trend Networks
group (not listed). Director Washington
Acquisition Co UK Limited (JSM Group).
Past roles
Chair of Portals International from 2020
to 2022. Chair of Low & Bonar plc from
2018 to 2020, Non-Executive Director and
Chair of the Remuneration Committee of
Chemring Group plc from 2016 to 2018
and Chair of Nonwovens Innovation &
Research Institute from 2014 to 2015. CEO
of Linpac Group and Klöckner Pentaplast
Group from 2015 to 2019 and CEO of
Fiberweb plc from 2006 to 2013. Daniel
spent his early career at Novar plc until
2005 and prior to that worked at ICI and
management consultant, Arthur D Little.
Qualifications
Bachelor’s degree in Engineering from the
University of Cambridge. Member of
the Institution of Mechanical Engineers.
KEVIN BOYD
Non-Executive Director
Appointed
September 2020
External roles
Non-Executive Chair of Genuit Group plc.
Senior Independent Director and Audit
Committee Chair of Galliford Try Holdings
plc.
Past roles
Held the positions of Chief Financial
Officer at Oxford Instruments plc,
Radstone Technology plc and at Spirax-
Sarco Engineering plc (stepped down in
September 2020). He was Non-Executive
Director of EMIS Group plc from 2014,
Chair of the Audit Committee from 2019
and Senior Independent Director from
2022 until October 2023.
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.
LILI CHAHBAZI
Non-Executive Director
Appointed
January 2018
External roles
Senior partner at Bain & Company
focused on Industrials and Energy &
Natural Resources sectors; member
of Bain’s Global Compensation and
Promotions Committee.
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.
A N R
N
E
E
A N R
Company overview
Strategic report
Governance
Financial statements
70
Bodycote plc Annual Report 2024
Additional information
Board of Directors continued
CYNTHIA GORDON
Non-Executive Director
Appointed
June 2022
External roles
Chair and Non-Executive Director of
Global Fashion Group, Non-Executive
Director of Severfield plc from October
2024 and will become a Non-Executive
Director of Airtel Africa plc from April
2025. Senior adviser for Tillman Global
Holdings.
Past roles
Began her career at Unilever before
moving to Lloyds Bank. Held the
positions of VP Business Marketing and
VP Partnerships & Emerging Markets at
Orange – France Telecom, was Group
Chief Commercial Officer at Ooredoo
Group and former CEO of Millicom
Cellular, Africa. Was a non-executive
director of Kinnevik AB, BIMA Mobile,
Tele 2 AB, Bayport Financial Services and
Eutelsat Communications SA.
Qualifications
Graduated with a BA from the University
of Brighton in Business Studies.
BEATRIZ GARCÍA-COS
MUNTAÑOLA
Non-Executive Director
Appointed
September 2023
External roles
Chief Financial Officer of Ferroglobe PLC
(NASDAQ) and director of a number of
its subsidiaries.
Past roles
Began her career at Audigest, Spain,
before moving to PPG Industries.
She spent several years at Vestas Wind
Systems in Spain and then at Trafigura
in Switzerland. She was Chief Financial
Officer at Bekaert in Belgium, before being
appointed as Chief Financial Officer of
Ferroglobe plc in 2019, based in the UK.
She was also a Non-Executive Director
of Bridon-Bekaert Ropes Group in the UK
from 2016 to 2018.
Qualifications
Graduated with a Master’s degree in
Economics and Business Administration
from the University of Barcelona.
ALISON BROUGHTON
Group Company Secretary
Appointed
January 2024
External roles
None.
Past roles
Began her company secretarial career
with Enterprise Oil plc, before joining
Shell Exploration & Production Limited,
part of the Royal Dutch Shell group,
following a takeover in 2002. She spent
eight years with Wolseley plc (now
Ferguson plc) as Deputy Company
Secretary, before joining Petrofac Limited
in 2011, where she was latterly the Head of
Company Secretariat and Secretary
to the Board.
Qualifications
A fellow of the Chartered
Governance Institute.
A
Audit
E
Executive
N
Nomination
R
Remuneration
Committee Chair
PATRICK LARMON
Senior Independent Director
Appointed
September 2016
External roles
Non-Executive Director of Handgards Inc.,
Box Partners LLC, DFS Inc. and Fresh Edge
LLC, none of which are listed companies.
Past roles
Was 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 in
December 2018 and retired from Huttig
Building Products Inc. in 2022.
Qualifications
Graduated from Illinois Benedictine
University (major Economics & Business
Economics), is a Certified Public
Accountant, completed an MBA from
Loyola University of Chicago and a
Master of International Business from
St. Louis University.
Board composition
Board diversity
Executive Directors
2
Independent Non-executive
Directors
5
Independent Chairman
1
Male
5
Female
3
White
6
BAME
2
A N R
A N R
A N R
Company overview
Strategic report
Governance
Financial statements
71
Bodycote plc Annual Report 2024
Additional information
Chair’s introduction
Dear Shareholders
On behalf of the Board, I am pleased to present Bodycote’s
Corporate Governance Statement for 2024.
Like other businesses in our sector, Bodycote has been faced
with a number of macro-economic headwinds during the year,
including weak industrial demand and temporary supply chain
disruption in the aerospace sector. Despite this challenging
backdrop, the business has remained resilient and has made
good operational progress, with ongoing focus on cost control
initiatives and improved operating margins. Throughout the year,
the Board, with management, has assessed the risks and
opportunities presented by these events to ensure we remain
best-placed to manage their impact.
Board changes
In March 2024, we welcomed Jim Fairbairn to the Board as our
new Group Chief Executive designate. With considerable
experience in managing engineering businesses, and an
impressive track record in leading and developing specialist
global industrial businesses, the Board believes he is well-placed
to build on the foundations laid by Stephen Harris over many
years. We look forward to working with Jim over the coming
years to drive our continuing development and growth.
Stephen Harris stepped down from the Board at the end of May
2024. During his tenure with Bodycote he reshaped the business
and significantly improved its quality and financial performance.
Further changes to our Board will take place later in 2025, when
Patrick Larmon steps down as Non-executive Director having
reached his nine years on the Board. The recruitment process for
this position has commenced, with candidates identified
reflecting a diverse range of relevant experience and diversity
characteristics, which we believe will maximise continued
Board effectiveness.
Stakeholder engagement
Regular, open and constructive dialogue with shareholders
continued throughout 2024. I met with several significant
shareholders, including at our Capital Markets Event, to discuss
shareholder views in relation to governance matters. The Group’s
key stakeholders and their various perspectives are taken into
account as part of the Board’s annual strategy and corporate
planning discussions. This ensures the Board is able to focus on
delivering value for shareholders, while addressing the impact of
decisions and strategies on all stakeholders.
During 2024, the Board collectively had the opportunity to
visit four sites in the US and Germany, giving Directors the
opportunity to speak first-hand with colleagues, listen to their
questions, and better understand their views and those of the
organisation. Two virtual meetings were held with our Employee
Engagement Groups in North America and Europe. The feedback
from these forums was reported to the Board, with management
charged with addressing particular areas of development.
Further details are set out on page 76.
Governance
The Group’s long-term sustainable success is contingent on
our commitment to good governance standards. The Board
continues to be guided in its approach by the application of the
UK Corporate Governance Code 2018 (the ‘2018 Code’) as we
believe good corporate governance is about effective oversight,
including how we provide assurance on our performance to
stakeholders and in how we report on that performance.
Board evaluation
The Board understands the benefits of annual performance
evaluations, both for Directors on an individual basis, as well as
for the Board as a whole. In accordance with the 2018 Code, an
externally facilitated effectiveness evaluation was undertaken in
2024. This provided an objective view of our performance and
proposed areas for focus as we continue to update our approach.
Sustainability
Good progress has been made on sustainability, which the Board
regards as an important initiative both commercially and for our
position with investors and other stakeholders. As a result of the
Company being on track to deliver against its SBTi target ahead
of schedule, the target to reduce our Scope 1 and 2 emissions
was increased to 46% by 2030, up from 28%. Our Sustainability
report sets out the activities undertaken throughout 2024.
AGM
All Directors plan to attend this year’s AGM, which will provide
an opportunity for shareholders to ask questions of the Board.
I look forward to meeting any shareholders who can join us.
I would like to extend my thanks to all our stakeholders for their
continued support over the year.
Daniel Dayan
Chair
13 March 2025
2024 was a significant year with
a new Chief Executive appointed
and the launch of an ambitious
strategy to deliver improved
growth and performance, building
on our strong foundations.”
Daniel Dayan
Chair
Company overview
Strategic report
Governance
Financial statements
72
Bodycote plc Annual Report 2024
Additional information
Code principles – Board areas of focus
Corporate governance statement
Compliance with the 2018 UK Corporate
Governance Code
Bodycote is required to prepare a corporate governance
statement with reference to the UK Corporate Governance Code,
as issued by the FRC in July 2018 (‘the 2018 Code’). The 2018
Code underpins the corporate governance framework for listed
companies and sets out the principles and provisions of good
governance, with compliance with the 2018 Code resting with the
Board. In respect of the 2024 financial year, the Board considers
that it has complied with all provisions of the 2018 Code.
The table below sets out where shareholders can find further
information on how the Company has applied the principles of
the 2018 Code within this Annual Report.
In January 2024, the FRC published a revised Corporate
Governance Code (the ‘2024 Code’) which will apply from
financial years beginning on or after 1 January 2025. In light of
this new code, an internal review of our governance framework
was undertaken during 2024 to determine what process
improvements or refinements would be required to ensure
the recommendations set out in Provision 29 of the 2024 Code
could be addressed to enable the Company to report on a
‘comply or explain’ basis against the revised 2024 Code in our
2025 Annual Report. Copies of the 2018 Code and 2024 Code are
available at www.frc.org.uk.
For the year ended 31 December 2024, Bodycote also complied
with the relevant requirements of the DTR, the UK Listing Rules
and narrative reporting requirements.
Board leadership and company purpose
– Regularly discussing strategy at Board meetings
during the year
– Receiving presentations from operational
management on performance against the strategy
– Approving the Group’s strategy, budget, tax policy
and dividend
– Considering and approving strategic opportunities,
including potential acquisitions
See more
on pages
14 to 27
Division of responsibilities
– Review of Board roles and responsibilities
– Review of Group policies
– Review of schedule of matters reserved for the Board
– Review of terms of reference of all committees
– Review of environmental, health and safety updates
at each meeting
– Overview of stakeholder relationships and
workforce engagement
– Convening the AGM, approval of shareholder materials
– Review of corporate governance code and guidelines
– Determining/maintaining the Group’s values and
ensuring that these are reflected in business practice
– Implementation of sustainability strategy
See more on
pages 37 to
39, 41, and
72 to 81
Composition, succession and evaluation
– Considering proposals on succession planning
for the Board
– Reviewing the size, composition and diversity
of both the Board and its Committees
– Ongoing Board training
– Completion of annual Board evaluation/
effectiveness reviews
– Tailored induction, when required
– Reviewing proposals on senior executive
succession planning
– Considering talent management programmes and
the need to develop managers and executives for
the future
– Approving further terms for the Non-Executive
Directors
See more
on pages 79,
and 84 to 86
Audit, risk and internal control
– Approval of 2023 year end and 2024 half-year results
– Recommending the final and interim dividends
– Annual review of principal and emerging risks, risk
management and control systems
– Reviewing future scenarios and other factors in
relation to audit, risk and internal control
– Review of viability statement
– Consideration as to whether the Annual Report and
Accounts are fair, balanced and understandable
See more
on pages
87 to 93
Remuneration
– Remuneration policy review and approval
(including Executive Directors’ and Senior
Management remuneration)
– Review of Chair and Non-Executive Directors’ fees
See more
on pages
94 to 117
Company overview
Strategic report
Governance
Financial statements
73
Bodycote plc Annual Report 2024
Additional information
Corporate governance statement continued
Board leadership and Company purpose
Board and Board Committees meeting attendance
Each year the Board has a full programme of scheduled meetings,
which are supplemented with ad hoc meetings, as required.
During 2024, the Board met on eight occasions and Director
attendance for those meetings held during 2024 is set out below.
All Directors are encouraged to engage actively and effectively
during meetings, with scrutiny and constructive debate
encouraged. Non-executive Directors are able to seek clarification
on any key points from management when required.
Senior Management from across the Group and advisers are
routinely invited to attend and present at meetings to provide
updates and context. This exposure allows specific matters to be
brought to the attention of the Board, and for the Board to gain
awareness of nuances that may not always be obvious in written
reports. 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. It is also
felt this provides the Directors with the opportunity to meet and
assess key individuals who have been identified through the
succession planning process.
The Chair and Executive Directors also attended, by invitation,
some parts of the Audit, Nomination and Remuneration
Committees meetings, when relevant.
Board
meetings
Audit
Committee
Nomination
Committee
Remuneration
Committee
Meetings held during the year
8
5
3
6
Directors
Jim Fairbairn1
7
–
–
–
Ben Fidler
8
–
–
–
Daniel Dayan
8
–
3
–
Patrick Larmon
8
5
3
6
Kevin Boyd
8
5
3
6
Lili Chahbazi
8
5
3
6
Cynthia Gordon
8
5
3
6
Beatriz García-Cos Muntañola
8
5
3
6
Former Director
Stephen Harris2
2
–
–
–
1 Jim Fairbairn was formally appointed to the Board with effect from 11 March 2024. He was invited to attend all meetings held during 2024, including meetings held prior to
his formal appointment. He was unable to attend one meeting during the year as a result of a family bereavement.
2 Stephen Harris stepped down from the Board on 30 May 2024.
BOARD SITE VISITS
During 2024, the Directors held two full off-site Board
meetings. The first was in Los Angeles, California which
included visiting three plants (Huntington Park, Vernon and
Rancho). The second, which coincided with a visit by the
Executive Management team, was held in Haag-Winden
in Germany.
These visits included presentations from the plant managers,
enabling the Board to engage with local management, hear
about business performance, current opportunities and
challenges, and updates on customer engagement. Each visit
also enabled the Directors to experience first-hand the
environment within each of the plants with the aim of better
understanding our operations.
During the visits Directors were also able to interact directly
with employees, which provided them with the opportunity
to hear their views, see examples of best practice that could
be shared more widely, and to answer questions
about Bodycote.
Overall, the visits provide Directors with the opportunity to
see the differences at various plant locations, highlighting
the scale and variety of our operations and the skills of our
employees, while providing an overview of the extent of
our business offering. With this deeper and broader
understanding of Bodycote’s operations, the Directors are
able to apply relevant context to boardroom decision-making
in relation to future operational matters.
Company overview
Strategic report
Governance
Financial statements
74
Bodycote plc Annual Report 2024
Additional information
Corporate governance statement continued
Business ethics and 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. The Board is responsible for assessing, monitoring
and promoting our culture and understands the importance of
setting the right tone from the top. Corporate culture is guided by
the principles against which the Board monitors how the culture
exists and is viewed by employees. These include our values,
attitudes and behaviours.
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 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’s Committees support this role and
the Board recognises that this continues to be an evolving area.
Purpose and values
The Board recognises that having a defined purpose and an
agreed set of values that are embedded within the organisation,
helps to create a culture that optimises performance and delivers
long-term results. During the year, we established a new purpose
for the Group, to deliver performance metallurgy that powers
sustainable global progress. Our refreshed values also articulate
the qualities we wish all employees to demonstrate, and we aim
for these to be embedded within all our operational practices.
During the year, the Board was satisfied that the overarching
practices and behaviours were aligned with the Company’s
purpose, values and strategy.
Board governance
In determining the Group’s strategic direction the Board is
conscious of its collective responsibilities to all stakeholders and
seeks to ensure that the necessary corporate and management
structures are in place to ensure our strategy is implemented
effectively. The Board seeks to ensure there is an effective
governance framework across the Group and recognises that the
Group’s long-term success depends on a commitment to good
governance standards, with governance an element that should
be ingrained in our behaviours, in the way we make decisions
and run our business, rather than simply a compliance metric.
A review of our governance framework was undertaken during
2024 to determine what process improvements or refinements
would be required to enable compliance with the new principles
and provisions set out in the revised 2024 Corporate
Governance Code.
Matters reserved for the Board
The Board is responsible for promoting the Group’s long-term
success for the benefit of all its stakeholders and maintains a
formal schedule of matters reserved for its decision-making and
approval. These matters include responsibility for the overall
management and performance of the Group, the approval of
strategy and long-term objectives, and the financial statements,
budgets, material contracts, capital commitments/investments
and acquisitions and disposals. They also include matters
relating to internal controls, risk management and determining
risk appetite, approval of viability statements, environmental,
social and governance topics, employee incentive arrangements,
and key policies. The matters reserved for decision by the Board
are regularly reviewed by the Board and are updated where
required. The latest review took place in October 2024. A copy of
the Matters Reserved for the Board is available on the website.
Board activities and key focus areas
The main priorities of the Board are to provide leadership and
guidance in support of the Group’s strategic priorities, with
consideration to the Group’s financial performance. The Board
also focuses on good governance and risk management
procedures and processes to ensure they are fully embedded
across the Group. The views and differing perspectives of the
Group’s stakeholders are also taken into account as part of Board
discussions. During the year, the Board and its Committees
spent time considering a number of wide-ranging topics.
These included development of the Group’s strategic plan,
reviewing updated strategic initiatives, business performance,
budgets and financial planning, stakeholder feedback, talent
development, and regulatory and governance matters.
The Board’s areas of focus in 2025 are expected to include:
– Execution of updated strategic priorities;
– Reviewing and embedding Group culture;
– Continued monitoring of financial and
operational performance;
– Continued strong focus on safety improvements;
– Increased emphasis on the challenges and opportunities
arising from climate change, and sustainability and ESG
matters more broadly; and
– Reviewing principal and emerging risks.
The key activities of the Board during 2024 are set out in the
following chart:
Operational and leadership updates
21%
Financial matters, including year-end matters and share buyback
21%
Strategic matters
19%
Governance, reporting and training
17%
Board evaluation
8%
Risk management, internal controls, safety and IT matters
7%
Sustainability
7%
Company overview
Strategic report
Governance
Financial statements
75
Bodycote plc Annual Report 2024
Additional information
Corporate governance statement continued
Employee engagement
There were two Employee Engagement Group meetings held
virtually during 2024, one for North America employees and one
for European employees. The Groups were chaired by Patrick
Larmon, the designated Non-Executive Director, with meetings
supported by the Divisional Presidents, the Chief Human
Resources Officer and the Group Company Secretary.
Representatives from across the business participated at each
meeting, with nominated attendees encouraged to share their
views, escalating issues and challenges for further discussion
and resolution, as well as sharing best practice initiatives and
recommended improvements. These Employee Engagement
Groups continue to develop and the Board feels that they are a
beneficial source for Directors, assisting them in understanding
the views of employees across the business and acting as a
conduit of information from employees directly to the Board.
The minutes of each Employee Engagement Group meeting are
presented to the Board by the designated Non-Executive Director,
with actions arising shared with the business.
In addition, the Board and the Executive Committee take every
opportunity to meet with local employees when visiting different
business locations. During 2024, the Board visited three sites in
Los Angeles, California, and the Board and Executive Committee
both visited the Haag-Winden site in Germany. Further details are
set out on page 74.
Stakeholder engagement
The Board places significant importance on listening to,
establishing, and maintaining good relationships with its
stakeholders. This engagement allows the Board to better
understand what matters to each stakeholder group and the
impact of decisions taken on those stakeholders, as recognising
their differing interests is integral to Board discussions.
Good engagement ensures Directors are kept informed of
significant changes in the operating environment as well as the
broader market, including the identification of emerging risks and
trends, which in turn can be factored into strategic discussions.
Constructive engagement with major shareholders and other
investors throughout the year is considered a critical activity.
Our Investor Relations team acts as the principal focal point, with
an annual programme of meetings and presentations arranged
with existing and prospective shareholders and other investors.
The Chief Executive Officer and Chief Financial Officer regularly
meet institutional investors, both individually and collectively,
enabling institutional investors to increase their understanding of
the Group’s strategy and operating performance.
Additional sessions are also held with stakeholders following
the publication of our full-year and half-year financial results.
We have communicated with existing and potential shareholders
in a number of different ways during the year:
January 2024
– US investor roadshow
March 2024
– Full-year results announcement and
results presentations
– UK investor roadshow
– Annual Report and Accounts and
Notice of AGM posted to shareholders
and placed on the website
May 2024
– Trading Update
– Annual General Meeting
June 2024
– Investor visit to our site in
Derby, UK
August 2024
– Half-year results announcement and
results presentation
– UK and US shareholder roadshows
September 2024
– Investor visit to our site in
Gebze, Turkey
November 2024
– Trading Update
December 2024
– Capital Markets Day
Analyst research notes are regularly circulated to all Directors,
with brokers’ reports submitted with Board packs. In addition,
up-to-date news on the Group and its share price, including
copies of recent announcements and results presentations,
are available to all stakeholders at www.bodycote.com. 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 visits and meetings with the Chief Executive Officer
and Chief Financial Officer, enabling them to better understand
investor sentiment. The Chair and Senior Independent Director
(SID) are also available to discuss any issues not able to be
resolved by the Chief Executive Officer and Chief
Financial Officer.
During the year, engagement with the top ten shareholders also
took place with our Chair, Daniel Dayan, in relation to general
governance matters and with our Remuneration Committee
Chair, Cynthia Gordon, to highlight the Committee’s intentions
in relation to our 2025 Remuneration Policy.
CAPITAL MARKETS EVENT
On 12 December 2024, a Capital Markets Event was held.
This set out the Company’s plans and actions to deliver
sustainable improvements in the quality, performance
and growth outlook for the business, as well as setting
new financial targets. At this event, two new, redefined
global divisions were established – Specialist
Technologies and Precision Heat Treatment; three levers
of strategic execution were announced – Optimise,
Perform and Grow; along with compelling financial
targets to underpin our strategic actions and three new
sustainability targets.
In total, we were joined by c.70 external attendees,
with representation from a range of investors, analysts
and advisers. Feedback was positive, with investors
noting the clarity of the new reporting structure
and strategy.
For those unable to attend, we issued a detailed
announcement to the market on the morning of the event,
and published further information on our website,
at www.bodycote.com/investors/capital-markets-
event-2024/.
Company overview
Strategic report
Governance
Financial statements
76
Bodycote plc Annual Report 2024
Additional information
Corporate governance statement continued
Governance framework
We believe our corporate governance framework underpins good governance practices and enables the Board and senior management to provide effective strategic leadership and stewardship of the Group.
Chair
Provides leadership of the Board
and is responsible for ensuring
effective Board governance,
including overseeing the Board
evaluation process. Ensures
effective communication
flows between Directors, and
that Board members receive
accurate, timely and clear
information on Board issues.
Ensures effective
communication with stake-
holders, enabling their interests
to be represented at Board
meetings.
Senior Independent Director
Works closely with the Chair,
acting as a sounding board.
Provides support and acts as
an intermediary for other
independent Directors.
Meets annually with other
Directors to appraise the
hair’s performance, and on
such other occasions as is
deemed appropriate.
Is available to meet stakeholders
if they have concerns which they
have not been able to resolve
through the normal channels.
Non-Executive Directors
Support executive management
while providing constructive
challenge and rigour.
Monitor strategy and bring
sound judgement and
objectivity to the Board’s
decision-making processes.
Review the integrity of the risk
management framework,
financial systems and controls
to ensure they are robust.
Scrutinise the performance of
management and share the
skills, experience and
knowledge from other industries
and environments. Have prime
roles in Board composition and
succession planning processes.
Chief Executive Officer
Has overall responsibility
for Group performance.
Implements and executes
agreed strategy, setting
priorities to deliver agreed
objectives. Develops proposals
to present to the Board on all
areas reserved for its judgement
and ensures the Board is fully
informed of all key matters.
Supported by the leadership
team, has responsibility for
driving execution of the Group’s
strategic aims. Maintains a
close working relationship with
the Chair, ensuring effective
dialogue with investors and
stakeholders. Has overall
responsibility for the Group’s
sustainability programme.
Chief Financial Officer
Responsible for all aspects of
the Group’s finance functions,
financial planning and
budget management.
Implements effective financial
controls and provides financial
and commercial decision
leadership and support.
Ensures the appropriateness of
risk management systems and
oversees all aspects of
accounting and finance
operations.
Maintains relationships with key
external stakeholders, including
investors, lenders, banks, and
credit rating agencies.
Group Company Secretary
Advises the Board on all
governance, legislation, and
regulatory requirements,
as well as best practice
corporate governance
developments.
Responsible for implementing
the processes designed to
ensure compliance with Board
procedures and efficient
information flows. Facilitates
the Board evaluation, induction
and development processes.
Available to individual Directors
in respect of Board procedures
to provide general support
and advice.
The Board
Provides leadership and direction to ensure long-term success by setting a sustainable strategy and overseeing its implementation. Responsible for the financial performance and overall corporate
governance of Bodycote, delegating certain matters to its principal committees. Provides rigorous challenge to ensure appropriate processes are in place to monitor and manage risk and internal controls.
Audit
Committee
Reviews and monitors the
integrity and effectiveness of
the Group’s financial reporting
and performance of audits and
assesses and monitors
financial risks.
Nomination
Committee
Ensures an effective Board
that consists of individuals with
the right balance of skills,
knowledge and experience.
Remuneration
Committee
Sets remuneration policy and
determines compensation levels
for Executive Directors, the
Chair, and members of senior
management. Oversees the
remuneration framework for
the Group.
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.
Finance
Committee
Implementation of treasury and
tax policies and, within limits
defined by the Board, authorises
capital expenditure and other
financial activities.
Risk and Sustainability
Committee
Monitors and provides insight
on risk and sustainability issues,
in particular, climate change.
Board Committees
The Board delegates specific areas of focus to its Committees,
which generally comprise only Non-Executive Directors.
Management Committees
Committees and sub-committees responsible for day-to-day operational management
and implementation of strategic decisions. Authorised by the Board to make decisions and ensure
necessary actions can be taken promptly, as required, within defined limits.
Committee report on page 87
Committee report on page 84
Committee report on page 94
Company overview
Strategic report
Governance
Financial statements
77
Bodycote plc Annual Report 2024
Additional information
Corporate governance statement continued
Division of Responsibilities
Board roles and responsibilities
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 roles and responsibilities of our
Directors are set out on page 77. All Directors are encouraged to
be open and forthright in their approach as we believe this helps
to develop strong working relationships, enabling them to make
their best possible contribution, with Non-Executive Directors
encouraged to share their experiences, whilst providing
constructive challenge.
Regular meetings between the Chair and Chief Executive Officer
are held throughout the year, allowing general matters to be
discussed and enabling them to reach an understanding of each
other’s views. The Chair and SID also maintain regular contact
between scheduled Board meetings, with time also set aside at
meetings for the Chair to meet with Non-Executive Directors
without the presence of management. The relationships between
these roles are important, as these individuals represent the
views of both management and Directors, respectively.
The combination of these meetings ensures that the Chair is fully
informed of all views, which assists in setting agendas and
ensures all Directors can contribute effectively through their
individual and collective experiences.
Board information
In advance of each Board meeting, Directors are supplied with
up-to-date information regarding the operational and trading
performance of the business, 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 environmental,
health and safety and risk management issues and details of
both the Group’s and each division’s health and safety
performance, in terms of severity and frequency rates. The Board
also receives regular briefings from operational and functional
management about Group-specific matters, with reports
provided by the Chief Executive Officer and Chief Financial
Officer. Cybersecurity is covered by annual briefings and ad hoc
updates are provided by the Chief Information Officer. 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.
Board support
All Directors have access to Executive Management and to
additional information, as is needed, to discharge their duties and
responsibilities fully and effectively. In addition, the Group also
has procedures in place for Directors to seek independent
professional advice, the cost of which is reimbursed by the
Group, where they judge it necessary to discharge their
responsibilities. All Directors have access to the Group Company
Secretary, and they may also address specific issues with the
Senior Independent Director. A statement of the Directors’
responsibilities is set out on page 118.
Composition/succession and evaluation
Board composition
At the date of this report, the Board comprised eight members,
comprising the Chair, five independent Non-Executive Directors
and two Executive Directors. Biographical details of all Directors
in office at 31 December 2024 and at the date of this report are set
out on pages 70 and 71. All Board appointments are subject to
formal and rigorous procedures led by the Nominations
Committee and details of the work undertaken by this Committee
during 2024 are set out on pages 84 to 86.
Service contracts and letters of appointment
Executive Directors are employed under service contracts of employment, the principal terms of these service contracts are set
out below:
Name
Position
Effective date
of contract
Notice period
From Company/From Director
Termination
Jim Fairbairn
Chief Executive Officer
17 October 2023
12 months/12 months
Company has right to
terminate on payment of
a termination payment
Ben Fidler
Chief Financial Officer
28 October 2022
12 months/12 months
Company has right to
terminate on payment of
a termination payment
The Chair and Non-Executive Directors have letters of appointment that set out their duties and responsibilities.
They do not have service contracts. The key terms of the appointments are set out below:
Name
Position
Date of original
appointment
Date of last
(re)appointment at AGM
Notice period
Daniel Dayan
Chair
1 January 2022
2024
6 months
Patrick Larmon
Senior Independent
Director
13 September 2016
2024
6 months
Kevin Boyd
Non-Executive Director
1 September 2020
2024
6 months
Lili Chahbazi
Non-Executive Director
1 January 2018
2024
6 months
Cynthia Gordon
Non-Executive Director
1 June 2022
2024
6 months
Beatriz García-Cos
Muntañola
Non-Executive Director
1 September 2023
2024
6 months
Service contracts and letters of appointment are available for inspection at the Company’s registered office during normal business
hours. In line with the Code, all Directors will seek re-appointment by shareholders at the 2025 AGM, with service contracts and letters
of appointment, also available for inspection in the 30 minutes prior to the start of the AGM.
Company overview
Strategic report
Governance
Financial statements
78
Bodycote plc Annual Report 2024
Additional information
Corporate governance statement continued
Skills and experience
An effective Board requires the right mix of skills and
experience, complemented by individual styles and outlooks.
As demonstrated by their biographies on pages 70 and 71,
each of our Directors has a varied career history, and
considerable effort has been taken to ensure that the Board
retains the right balance of skills, capabilities, knowledge and
industry expertise to form a diverse and effective team focused
on promoting the long-term success of the Group and ensuring
we are able to deliver sustainable growth.
The skills matrix below details some of the key skills and
experience that our Board has identified as necessary for the
effective oversight of the Group and the effective execution of our
strategy, and indicates which Directors bring those particular
skills to the boardroom. The skills matrix is reviewed annually to
ensure it continues to meet business needs.
Training
Training is provided to our employees where and when required.
The Board believes it is also important for Directors to regularly
refresh and update their skills and knowledge with both external
and internal training. Members of the Board individually attend
seminars, conferences and training events to keep up-to-date on
developments in key areas. Board meetings also include
presentations from Group experts to ensure the Directors have
access to the wealth of knowledge within the Group, as well as
presentations and briefings from external providers and subject
matter experts to provide in-depth updates. We also believe it is
important that Directors continue to develop and refresh their
understanding of the Group’s activities. Accordingly, every year
the Board, as part of the organised site visits, meets local
operational management, which allows Directors to familiarise
themselves with the technologies used, business dynamics,
logistics, health and safety standards and customers served.
Plant visits to Los Angeles in California and Haag-Winden in
Germany were undertaken during 2024.
Proposals for re-election
The Board has decided, in line with the 2018 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-appointment at each AGM. In accordance
with the Articles of Association, all newly appointed Directors
must also submit themselves for election at the AGM following
their appointment to the Board. Non-Executive Directors,
including the Chair, are appointed for fixed terms not exceeding
three years from the date of first election by shareholders
(for a maximum of two three-year terms), after which their
appointment may be extended by mutual agreement on an
annual basis.
In line with the findings of our externally facilitated Board
effectiveness review, and supported by their biographies,
the Board remains satisfied that it continues to operate effectively
and, following an assessment of their performance through
individual reviews, the Chair also confirms in respect of each
Director that their performance continues to be effective and
that each continues to demonstrate commitment to his or
her respective role. The Board therefore recommends to
shareholders that they re-elect all Directors at the 2025 AGM.
Daniel
Dayan
Jim
Fairbairn
Ben
Fidler
Patrick
Larmon
Lili
Chahbazi
Kevin
Boyd
Cynthia
Gordon
Beatriz.
García-Cos
Muntañola
Strategy
M&A
International
Recent and relevant financial experience
Corporate finance/treasury
Accounting
Customer
Sales and marketing
Service industry
Environmental, including climate change
Governance
Engineering
Leadership
Emerging markets
Manufacturing
Capital-intensive industries
Company overview
Strategic report
Governance
Financial statements
79
Bodycote plc Annual Report 2024
Additional information
Corporate governance statement continued
Board evaluation
The Board understands the benefits of annual performance
evaluations, both for Directors on an individual basis, as well as
for the Board as a whole. It continually strives to improve its
effectiveness and believes these evaluations can provide a
valuable opportunity to highlight strengths, identify any areas
of weakness and therefore drive continuous improvements.
The 2018 Code requires the Board to undertake a formal and
rigorous annual evaluation of its performance and that of its
Committees, with a provision requiring that this be externally
facilitated every three years. The evaluation process provides
the Board with an opportunity to consider and reflect on how it
operates and the quality and effectiveness of its decision-making,
the range and level of discussion, and for each Director to
consider their own contribution and performance. During 2023,
the Chair and the Group Company Secretary led an internally
facilitated review of the Board’s effectiveness. The results of this
review were presented to the Directors in December 2023, with
the areas of focus identified as succession planning, reviewing
longer-term strategy and developing a wider approach to ESG.
These areas were discussed and reviewed by the Board
throughout the year.
Progress following 2023 Board evaluation
Key area for recommended
improvement
Progress
Succession planning
and Board induction
Significant focus was given to
succession planning, not least due to
the change in Group Chief Executive.
Comprehensive induction plans were
further developed to ensure new
Directors were given the opportunity to
gain a thorough understanding of the
Group, in addition to understanding the
governance requirements.
Improve divisional
strategy sessions
More time was allocated on the
Board agenda to discuss strategic
developments and opportunities,
which encouraged richer discussions
by Directors. Each President was invited
to attend a meeting to provide a deep
dive on the current status and future
initiatives for their respective divisions.
To develop the
sustainability strategy
and ESG roadmap
Significant work was undertaken, driven
by the appointment of a new Chief
Sustainability Officer at the end of 2023.
A five-year sustainability plan was
developed, which details the Group’s
ESG roadmap, and enabled the Board
to review the areas which will assist in
driving continuous progress and drive
the Group’s sustainable journey.
Year 2
Internal
evaluation
Year 1
External
evaluation
Year 3
Internal
evaluation
Board
performance
evaluation
cycle
In consideration of the FRC’s Guidance on Board Effectiveness
and in accordance with the Code and our three-year cycle, the
Chair engaged the services of Dr Sabine Dembkowski of Better
Boards, who has no other connection to the Group, to conduct
an externally facilitated evaluation in 2024. This robust process
involved a review of the year’s Board and Committee papers,
completion of an online survey, followed by one-on-one
interviews with each Director. In addition, Dr Dembkowski
observed the scheduled Board and Committee meetings held
during July 2024. Feedback from the evaluation was contained
in a report setting out her observations and recommendations
and this was presented to, and discussed by, the Board in
September 2024, with Dr Dembkowski in attendance to facilitate
the discussion.
The external review recognised that the evaluation process was
being undertaken at a pivotal moment in the Company’s history,
following the recent change in Chief Executive, resulting in an
adjustment to board dynamics. It was perceived that the
development of a more open environment conducive to
constructive discussions was being fostered, with this transition
met with much optimism. The review observed that each Director
brought a range of complementary skills and experience to the
boardroom, with a broad range of industry and functional
expertise. It was noted that the Directors displayed high
professionalism throughout the interview and observation
process, with these attributes seen as providing the opportunity
to create an even higher-performing Board. The atmosphere
between the Executive Directors and independent Non-Executive
Directors was found to be open, positive, and respectful,
with the Executive Directors open to sharing information and
their perspectives on all issues.
Company overview
Strategic report
Governance
Financial statements
80
Bodycote plc Annual Report 2024
Additional information
Corporate governance statement continued
A number of key issues emerged from the evaluation process,
as set out below. The Board intends to work through these
proposed suggestions over the coming year, with some changes
already being implemented.
Action plan following 2024 Board evaluation
Area for recommended
improvement
Initial progress
Better alignment
around Company
purpose
Work has commenced to embed a
clearer and more compelling purpose
for the Group to enable greater
collaboration throughout the
organisation.
Allow more time to
discuss the
development of
strategic initiatives
Board meeting formats are being
reviewed to ensure sufficient time is set
aside for key discussion items, while
creating sufficient space for reflection
and feedback. Work is underway to
strengthen the understanding and
confidence in the new strategy, with
further deep-dive presentations
planned throughout the year, to enable
the business to fully deliver on the
strategy.
Board and
Committee papers
The structure of papers has been
amended, with new templates
developed that better articulate key
information and actions. Directors will
continue to be presented with high-
quality and relevant information, but the
simplification of papers will aim to
facilitate improved discussions during
meetings. Clear guidelines have been
developed for contributors, with
meeting agendas adjusted to allow
additional time for more strategic
value-add discussions.
Board dynamics
Further strengthening the relationships
between management and the
Non-Executive Directors to ensure
constructive relationships are
maintained, while better utilising
their skills and experience.
Succession planning
and talent
management
Focus to be given to ensuring
succession plans are in place across
the Group and to further developing
leadership and talent development
initiatives across the organisation.
Following completion of the external evaluation, the Board
remains satisfied that it continues to operate effectively and
believes the Directors are performing well and as would be
expected within their relevant roles.
Audit, risk and internal control
Internal control and risk management
The Board is responsible for setting the Group’s risk appetite and
for ensuring that procedures are in place to oversee the Group’s
internal control and risk management systems and for reviewing
their effectiveness. Processes are in place across the business to
identify, evaluate and manage the Group’s significant risks.
Further information on the Group’s approach to risk management
is contained on pages 28 to 33.
The Audit Committee assists the Board in the effective discharge
of its responsibilities as it is well-placed to challenge the
performance of the Group‘s financial reporting, risk management
and internal control systems in order to safeguard the interests
of shareholders. Information on the policies and procedures the
Group has in place to oversee the internal control and risk
management frameworks, to monitor the effectiveness of the
Group’s internal and external audit functions and the integrity
of the Group’s financial statements is contained in the Audit
Committee report on pages 87 to 93.
Remuneration
Remuneration Report
The Directors’ Remuneration Report is set out on pages 94 to 117.
This report details the Group’s remuneration policy, which will be
submitted for shareholder approval at the 2025 AGM. The report
also describes the work of the Remuneration Committee in
determining Director and senior management remuneration and
reviewing workforce remuneration and related policies. Each of
our Non-Executive Directors are members of the Remuneration
Committee, which enables them to ensure the Group’s
remuneration policy and remuneration arrangements remain
fully aligned with the Group’s strategic objectives.
Annual General Meeting
The 2025 AGM will be held on 21 May 2025 in accordance with
the Notice being sent to shareholders under separate cover.
All resolutions to be considered during the AGM will be
conducted on a poll, with the results announced to the market
as soon as practicable after the meeting.
By order of the Board:
Alison Broughton
Group Company Secretary
13 March 2025
Company overview
Strategic report
Governance
Financial statements
81
Bodycote plc Annual Report 2024
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 2024.
The Chair’s statement, the Chief Executive Officer’s review on
pages 11 to 15, the Chief Financial Officer’s report and all the
information contained on pages 25 to 27, together comprise
the Directors’ report for the year ended 31 December 2024.
For going concern, please see the Chief Financial Officer’s report
on page 27 and pages 133 and 134 of the consolidated
financial statements.
Strategic report
The Strategic report is provided on pages 11 to 68 of this
Annual Report. That report incorporates a review of the
development of the Group’s businesses, the financial
performance during the year ended 31 December 2024, 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. Such statements should
be regarded with caution due to the inherent uncertainties in
economic trends and business risks. Since the end of the financial
year, no significant events affecting the business of the Group
have occurred.
Dividends
The Board has recommended a final dividend of 16.1p per share
(2023: 16.0p) bringing the full-year dividend to 23.0p per share
(2023: 22.7p). If approved by shareholders, the final dividend of
16.1p per share will be paid on 5 June 2025 to all shareholders
on the register at the close of business on 25 April 2025.
Share capital
The Company’s issued ordinary share capital as at 31 December
2024 was £31.6m. No shares were issued during the year.
Details of the issued share capital are shown in note 20 of the
consolidated financial statements.
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 25 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.
Authority to purchase own shares
Under the Articles of Association, the Company has authority
to issue ordinary shares with a nominal value of £11,023,234,
representing one third of the issued ordinary share capital.
At the Annual General Meeting held on 30 May 2024, the
shareholders authorised the Company to make market purchases
of up to 19,145,617 of its own shares, representing 10% of the
Company’s issued ordinary share capital as at the latest
practicable date prior to the publication of the Notice of AGM.
In light of a lower than anticipated acquisition spend during 2023
and consistent with its balanced approach to capital allocation
to return surplus cash to shareholders, the Company announced
on 15 March 2024, the commencement of a share buyback
programme of up to £60 million (the ‘Programme’) to end no later
than 14 March 2025. The sole purpose of this Programme was to
reduce the Company’s share capital, with the ordinary shares
purchased pursuant to the Programme being cancelled.
From 15 March 2024 to the end of the financial year on
31 December 2024, the Company purchased 8,558,676 ordinary
shares of 17 3/11th pence each, representing a nominal value
of £1,478,316 and 4.7% of the Company’s issued share capital.
All of these ordinary shares had been cancelled by 31 December
2024. The cost of the shares purchased during 2024 was
£57.3 million excluding transaction costs. The Company
subsequently announced in December 2024 a £30 million
extension of this Programme. This Extended Programme
commenced on 15 January 2025, following the completion of
the Programme. This is expected to conclude no later than
14 July 2025.
A further 2,254,407 shares, representing a nominal value of
£389,398 and 1.3% of the Company’s issued share capital, have
been purchased between 2 January and 7 March 2025 at a cost
of £11.9 million, excluding transaction costs. The average cost
of shares purchased under both the Programme and Extended
Programme to date is £6.64 per share.
The authority to allow the Company to purchase its own shares
will expire at the conclusion of the Annual General Meeting to
be held on 21 May 2025, at which time a further authority will be
sought from shareholders.
Change of Control provisions
There are a number of 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 appointment and replacement of Directors is governed by
the Company’s Articles of Association, the UK Corporate
Governance Code, the Companies Act 2006, 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 Governance Statement on pages 75 to 77.
The Directors in office as at 31 December 2024 and their
biographies are listed on pages 70 and 71 and all apart from
Jim Fairbairn served throughout the year. In line with the UK
Corporate Governance Code, all Directors retired at the Annual
General Meeting (AGM) held in 2024 and, save for Stephen Harris,
stood for election and re-election by the shareholders.
Stephen Harris retired from the Company and stepped down
from the Board as Group Chief Executive on 30 May 2024.
All Directors who were in office at the year-end will retire at
the AGM to be held in 2025 and will stand for re-election by
the shareholders.
Company overview
Strategic report
Governance
Financial statements
82
Bodycote plc Annual Report 2024
Additional information
Directors’ interests in contracts and shares
Details of the Executive Directors’ service contracts are shown
on page 78 and details of the Directors’ interests in the
Company’s shares and share incentive plans are shown on page
112. No Director has had any dealings in any shares or options in
the Company since 31 December 2024. 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.
Qualifying third-party indemnity provisions (as defined by
section 234 of the Companies Act 2006) have remained in force
for the Directors for the year ended 31 December 2024 and, as at
the date of this report, remain in force for the benefit of the
current Directors in relation to certain losses and liabilities which
they may incur (or have incurred) to third parties in the course of
their duties. Apart from these exceptions, 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
Directors are required to declare actual conflicts of interest in
transactions as they arise, and have 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. To ensure all Directors have complied with these
duties, each Director provided the Company with a formal
declaration disclosing what, if any, Situational Conflicts affected
him or her. The Board reviewed these declarations and approved
the existence of each declared Situational Conflict and permitted
each affected Director to attend and vote at Bodycote Directors’
meetings up to end 2025, on the basis that each Director
continues to ensure Bodycote’s information remains confidential,
and provided overall that such authorisation remained
appropriate and in the interests of shareholders. Where such
authorisation becomes inappropriate or is no longer in the
interests of Bodycote’s shareholders, either 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 on the performance and progress
of the Group, the contribution to the Group made by their site,
and are advised of any safety and health issues. Employees can
voice any concerns through the Group’s anonymous and
confidential Open Door Whistleblowing Helpline, a phone line
that can also be accessed in local languages.
Over 3,000 Bodycote employees are connected to the Bodycote
intranet, which aims to improve knowledge of Group activities,
and assists greatly with technology exchange and coordination.
An equality, diversity and inclusion policy is in operation across
the Group and 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. Should an employee become
disabled, the Group will endeavour to seek to continue the
employment, arranging appropriate retraining and adjusting
the employee’s work environment where practical.
Employee and stakeholder engagement
Information relating to engagement with employees and other
stakeholders, including customers and suppliers, can be found
in the Strategic report on pages 37 to 39 and in the Corporate
Governance Statement on page 76.
Greenhouse gas emissions
Details of greenhouse gas emissions and Streamlined Energy
and Carbon Reporting are included within the Sustainability
section of this Annual Report on pages 59 and 60.
Donations
There were no political contributions made during 2023 or 2024.
Directors’ report continued
Shareholders
An analysis of the Company’s shareholders and the shares in
issue as at 28 February 2025 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 182.
External auditors
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:
– as 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 auditors are 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 2025 Annual General Meeting will be held on 21 May 2025
in accordance with the Notice being sent to shareholders under
separate cover.
By order of the Board:
Alison Broughton
Group Company Secretary
13 March 2025
Springwood Court
Springwood Close
Tytherington Business Park
Macclesfield
Cheshire
SK10 2XF
Company overview
Strategic report
Governance
Financial statements
83
Bodycote plc Annual Report 2024
Additional information
Report of the Nomination Committee
The Committee is dedicated to
selecting the best candidates
to join the Board, who
strengthen its capabilities
with complementary skills,
experience, and background
to address the Board’s needs.”
Daniel Dayan
Chair
Dear Shareholders
I am pleased to introduce the Nomination Committee report
for 2024. This report provides an overview of the work of the
Committee and details its activities during the year.
During 2024, the Committee met to review the composition
and skills of the Board, considering the current and future
competences required to ensure that the Board maintains the
optimum mix of skills and experience, and overseeing the plans
for senior management succession to direct the Company in
the successful execution of its strategy.
Board changes
In March 2024, we welcomed Jim Fairbairn to the Board as
Group Chief Executive designate. Jim joined from Megger Group,
where he had been Group CEO since 2017. Jim formally
succeeded Stephen Harris on 31 May 2024, following the
conclusion of a comprehensive handover process. Stephen Harris
retired from the Group as Group Chief Executive following the
conclusion of the 2024 AGM. The Board acknowledges the
valuable contribution made by Stephen over the 16 years of his
stewardship and for his strong leadership of the Group.
The search process to identify Stephen’s successor was led
by the Chair, and advised by international search consultancy,
Egon Zehnder, who have no connections to Bodycote plc that
extends beyond senior executive searches. This process focused
on candidates with the skills, experience and leadership
behaviours required for an organisation of the scale, complexity
and global nature of Bodycote and capable of delivering focus on
driving the continuing development and growth of the business.
The profile and requirements necessary to fill the role were
determined by the Committee, taking into consideration the
current and future needs of the Group. In addition to operational
and commercial expertise, soft skills were included as part of
the required criteria, including critical assessment, judgement,
and the ability to develop trust and forge new relationships.
Egon Zehnder were also briefed on our equality, diversity and
inclusion policy and were required to reflect this in the long list
submitted to the Committee, recognising that the Committee
remains committed to ensuring that the best available candidate
fills any Board appointment, with complementary skills,
capabilities, experience and background to address the Board’s
needs, irrespective of any other consideration.
Director performance
38%
Board composition and succession planning
30%
Diversity and inclusion
11%
Governance and reporting
21%
Committee membership
Attendance
Chair
Daniel Dayan
3/3
Members
Kevin Boyd
3/3
Lili Chahbazi
3/3
Beatriz García-Cos Muntañola
3/3
Cynthia Gordon
3/3
Patrick Larmon
3/3
Role and responsibilities
– Regularly review the structure, size and composition
(including the skills, knowledge, experience, and diversity)
of the Board and make recommendations to the Board
regarding any changes.
– Give full consideration to succession planning for Directors
and other senior executives.
– Be responsible for identifying and nominating for the approval
of the Board, candidates to fill Board vacancies as and when
they arise.
Terms of reference
– The Committee reviewed its terms of reference during the year.
Copies are available on our website at www.bodycote.com.
How the Committee spent its time during 2024
Company overview
Strategic report
Governance
Financial statements
84
Bodycote plc Annual Report 2024
Additional information
Report of the Nomination Committee continued
Following completion of interviews conducted by the Chair and
all Non-Executive Directors, the Committee unanimously agreed
to recommend Jim’s appointment. His track record in leading and
developing specialist global industrial businesses and teams,
coupled with his understanding of our processes, customers,
and the nature of our highly varied markets were all taken into
consideration during the interview process, and it was agreed by
the Committee that he would be a strong addition to the Board.
Board composition
Towards the end of the year, the Committee reviewed the Board’s
size and composition, with a focus on planning for the transition
of our longstanding Non-Executive Directors. The intention is to
ensure that the composition of the Board remains well balanced
with the appropriate skills, experience and capabilities, while
ensuring all relevant UK Corporate Governance Code (the UK
Code) and UK Listing Authority requirements are met.
In light of this review, it was agreed that Patrick Larmon would
step down from the Board in September 2025, when his tenure
on the Board will reach nine years. Lili Chahbazi, Non-Executive
Director, will succeed Patrick as Senior Independent Director with
effect from the AGM to be held on 21 May 2025. A process to
replace Patrick on the Board commenced in early 2025.
The Committee, having reviewed its independence and
contribution to Board matters, confirms that the performance
of each of the Directors standing for re-election at this year’s
AGM continues to be effective and each demonstrates
commitment to their roles, including independence of judgement
and time commitment for meetings. Accordingly, the Committee
has recommended to the Board that all Directors be proposed for
re-election at the forthcoming AGM. The biographical details of
the Directors in office at 31 December 2024 can be found on
pages 70 and 71.
Board effectiveness
In accordance with our three-year cycle, an external Board
effectiveness exercise was conducted during the year, following
the internal evaluation undertaken in 2023. Further details on this
review and the actions arising can be found on pages 80 and 81.
Succession planning
Succession planning for senior management remains a key focus
for the Committee. Significant interest is taken in the
development of the Group’s future leaders, with the aim of
promoting a strong, resilient and diverse pipeline for the future.
During 2024, with primary input from Jim, consideration was
given to senior management succession, with significant work
carried out by management to ensure the overall structure
remained appropriate to expedite the strategy changes
being introduced.
The Committee was satisfied that the process was sufficiently
robust to enable vacancies to be filled, while taking account of
the continuing need to consider diversity in its widest form.
The Committee also acknowledged that in a business the size of
Bodycote, it is not always possible to identify internal successors
for all roles and accordingly recognised the need to recruit new
members to the Senior Management team. The Committee will
continue to work with management to ensure that a strong
pipeline of talented individuals is available to support the Group
in meeting its business objectives and fulfil its strategic goals.
The Committee has developed a formal rigorous and transparent
procedure for the appointment of new Directors. This process
was put into effect with the recruitment and appointment of Jim
Fairbairn and will be implemented in the appointment of a new
Non-Executive Director to replace Patrick Larmon during 2025.
Induction
On appointment to the Board, all Directors undertake a tailored
and comprehensive induction programme, which is intended
to account for each individual’s differing requirements and
concentrating on key focus areas. This ensures Directors are
fully prepared for their new role, taking their background and
experience into consideration. Each programme also considers
existing expertise and any prospective Board or Committee roles.
Jim Fairbairn’s induction programme started in late 2023, in
advance of his appointment to the Board in March 2024.
Having considered his key strengths, the focus areas for his
induction were determined, to enable him to gain an in-depth
understanding of the Group. The key elements of this induction
programme included meetings with the Chair and each of the
Non-Executive Directors; the outgoing Group Chief Executive to
ensure a comprehensive and thorough handover; and with
Executive Committee members and their direct reports.
Ongoing meetings have also been held throughout the year
with the Chief Financial Officer, and all members of the Executive
team, as well as investors and shareholders. Jim has also
visited over 45 plants and sites across North America and Europe,
as well as visiting administrative service centres. Meetings with
key advisers, including brokers, corporate lawyers, financial and
PR consultants were also undertaken throughout the year.
Training
The Board believes that continuous training and development
supports good Board effectiveness. The Company is therefore
committed to offering tailored training to provide each Director
with the necessary resources to refresh, update and enhance
their skills, knowledge, and capabilities. As part of the mandatory
training programme, all Directors are required to complete online
courses which address areas most pertinent to Bodycote.
This covers both statutory obligations and ethical considerations
and includes topics such as the legal duties of a director,
competition law, anti-bribery and corruption, anti-tax evasion,
share dealing, data protection, IT/cyber security, sexual
harassment, and anti-slavery regulations.
The Group Company Secretary also regularly updates the Board
on the governance, legislative and regulatory matters that may
impact the Group and, where relevant, briefings from external
advisers on strategic, governance, or any other significant topics
are provided as part of the annual Board programme.
Committee governance
As recommended by the UK Code, the Chair acts as the Chair of
the Committee, whose members comprise all Non-Executive
Directors. Only members of the Committee have the right to
attend Committee meetings, with other individuals and external
advisers invited to attend for all or part of any meeting when
deemed appropriate.
During the year, 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 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.
Company overview
Strategic report
Governance
Financial statements
85
Bodycote plc Annual Report 2024
Additional information
Report of the Nomination Committee continued
Diversity and inclusion
Diversity and inclusion continue to be focal points for the
Committee, recognising that diversity is not just about improving
the levels of female representation throughout the Group or
addressing gender imbalance, but in developing a diverse
workforce across many dimensions and creating an inclusive
working environment, irrespective of differences in social
identities, to create a workplace that celebrates all employees
and stakeholders.
The Committee and Board believe an inclusive and diverse
workforce can promote productivity, and underpin our ability
operate successfully in our diverse markets and geographies.
As a global business with operations in over 20 countries,
diversity is an integral part of our culture and how we do
business. While improvements are being seen in improving our
gender diversity, we accept that there is more to be done across
the organisation. Notwithstanding that engineering is still a
predominately male-dominated profession, we are determined
that further progress can be made over the coming years.
In relation to Board appointments, the benefits of diversity in
its broadest sense are acknowledged by the Committee,
with Directors appointed on the basis of their relevant skills,
background, experiences, personal strengths, diversity of
thought and ability to contribute to the Company’s delivery of
its long-term strategy. The Committee also recognises that Board
appointments will continue to be made based on merit and on the
individual’s ability to contribute to the effectiveness and diversity
of the Board as a whole, while remaining compliant with the
requirements of the UK Listing Rules.
During the year, and in accordance with Provision 23 of the
UK Code, a new Board Diversity and Inclusion policy was
adopted setting out the Board’s commitments and aspirations
with regards to diversity. A copy of this Policy is available on
our website.
In accordance with LR 6.6.6(10) of the FCA’s Listing Rules, the following tables detail the diversity profile of the Board and
Executive management:
Gender categories
ONS gender category
No. of
Board members
% of Board
No. of senior positions
on the Board (CEO,
CFO, SID or Chair)
No. in executive
management
% of executive
management
Men (including those
self-identifying as men)
5
62.5%
4
9
69.2%
Women (including those
self-identifying as women)
3
37.5%
0
4
30.8%
Non-binary
0
n/a
0
0
0
Not specified/prefer not to say
0
n/a
0
0
0
Ethnicity categories
ONS gender category
No. of
Board members
% of Board
No. of senior positions
on the Board (CEO,
CFO, SID or Chair)
No. in executive
management
% of executive
management
White British or White Other
6
75.0%
4
12
92%
Mixed/Multiple ethnic groups
1
12.5%
0
1
8%
Asian/Asian British
1
12.5%
0
0
0
Black/African/Caribbean/Black British
0
0
0
0
0
Other ethnic group
0
0
0
0
0
Not specified/prefer not to say
0
0
0
0
0
This data was collected directly from the individuals concerned. The reference date used was 31 October 2024, which is in line with the
reference date used for completion of the FTSE Women Leaders Review submission.
Annual Statement on Board Diversity Targets
The Committee acknowledges the requirements of the UK Listing
Rules (LR 6.6.6R(9)), which relate to enhanced disclosures in
gender and ethnic diversity at board level and increased targets,
which are required to be met by the end of 2025. As of
31 December 2024, the Group had not yet met the gender
diversity targets, with female representation on the Board at
37.5%, although it had achieved the target relating to having at
least one individual on the Board from a minority ethnic
background. The Committee confirms that the requirement to
have at least one of the senior board positions held by a woman
will be met following the 2025 AGM, when Lili Chahbazi will
succeed Patrick Larmon as Senior Independent Director.
Further details of female representation at senior management
level and across the workforce as a whole are provided in the
Sustainability Report on page 65, where we also disclose further
details about the Group’s approach to diversity, equity and
inclusion. Our Equality, Diversity and Inclusion Policy is available
on our website.
As Chair of the Committee, I will be available at the Annual
General Meeting on 21 May 2025, to answer any question relating
to the work of the Committee. Questions can also be submitted in
advance of the meeting, either to our registered office address or
to agm@bodycote.com.
On behalf of the Nomination Committee:
Daniel Dayan
Chair
13 March 2025
Company overview
Strategic report
Governance
Financial statements
86
Bodycote plc Annual Report 2024
Additional information
Report of the Audit Committee
Committee membership
Attendance
Chair
Kevin Boyd
5/5
Members
Patrick Larmon
5/5
Lili Chahbazi
5/5
Cynthia Gordon
5/5
Beatriz García-Cos Muntañola
5/5
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 financial performance.
Review and report 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.
– 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 auditors: approve
the remuneration, audit scoping and terms of engagement,
review outcomes of the external audits, ensure compliance
with the policy for the provision of non-audit services, conduct
the tender process and make recommendations to the Board,
subject to the approval by shareholders, on the appointment,
re-appointment or removal of the external auditors.
– 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 they 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.
– Review and monitor the external auditors’ independence,
effectiveness and objectivity.
The full terms of reference for the Committee, which were
reviewed during the year, can be found on the Group’s website.
Chair’s introduction
I am pleased to present the Audit Committee report for the year
end 31 December 2024. This report provides an overview of the
Committee’s key activities and focus areas during the year and
the framework within which it operates.
The Committee fulfils an important oversight role providing
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, the performance of Internal Audit and the
evaluation of the external auditors’ including their appointment
and re-appointment. 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 and will continue to keep its
activities under review as the regulatory environment changes.
Kevin Boyd
Chair of the Audit Committee
13 March 2025
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.”
Kevin Boyd
Chair of the Audit Committee
Company overview
Strategic report
Governance
Financial statements
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Bodycote plc Annual Report 2024
Additional information
Report of the Audit Committee continued
Committee membership and meetings
The Committee is comprised entirely of independent
Non-Executive Directors. Their biographical details are shown on
pages 70 and 71, and their remuneration on page 110. The Group
Company Secretary is the secretary to the Audit Committee.
Kevin Boyd is Chair of the Committee. Mr Boyd is a Chartered
Accountant and a Chartered Engineer with substantial
experience in senior finance roles. The Board considers that
Mr Boyd has extensive recent and relevant financial, accounting
and sector experience required to chair the Committee.
All Committee members have significant and widespread
experience in executive and non-executive capacities from
either multinational or industrial companies and are considered
to have competencies relevant to their duties. The expertise the
Committee utilises, together with their independence, provides
good challenge to management as well as the internal and
external auditors.
The Committee met five times during 2024 and in January
and March 2025 and all members attended all meetings.
The Committee Chairman also invited the Board Chair, Chief
Executive Officer, Chief Financial Officer, Group Financial
Controller and Group Head of Internal Audit and Risk to attend all
of the Committee’s 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 auditors, PricewaterhouseCoopers LLP (PwC),
attended every meeting. BDO LLP, which provides internal audit
services, attended one meeting. As part of the process of working
with the Board to carry out its responsibilities and to maximise
effectiveness, regular meetings of the Committee generally take
place shortly before Board meetings.
Mr Boyd also held preparatory meetings separately with the
external auditor, the Chief Financial Officer, the Group Financial
Controller and the Group Head of Internal Audit and Risk before
regular Committee meetings to review their reports and discuss
issues in detail. PwC, the Group Head of Internal Audit and Risk
and the co-sourced Internal Auditors, BDO LLP, also met with the
Committee without executive management present.
Main activities of the Committee during the year
The Committee supports the Board in fulfilling its responsibilities
regarding financial reporting and assessing the effectiveness
of the Group‘s financial risk management and internal control
systems. The Committee is also 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 Annual
Report and financial statements for the year and the interim
results for the half-year concentrating on, amongst other matters:
– the quality and acceptability of accounting policies and
practices including the 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;
– compliance with regulatory and governance requirements;
– the clarity of disclosures and compliance with the relevant
accounting standards for the consolidated financial statements;
– the key points of disclosure and presentation to ensure the
adequacy, clarity and completeness in the Annual Report and
financial statements;
– the appropriateness of the alternative performance measures
used in the Annual Report and their disclosure;
– the classification of certain income and costs as exceptional in
the 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;
– the appropriateness of the external audit scoping and whether
the external auditor had applied the necessary level of
professional scepticism in performing their work;
– 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;
and
– considering the Group’s readiness for the revised UK Corporate
Governance Code requirement for an annual declaration on
the effectiveness of material internal controls. The Committee
reviewed a gap analysis and management’s plans to address
any areas of potential non-compliance over the coming
12 months.
Additionally, the Committee considered the Group’s
preparedness for potential future reporting under the EU CSRD
and made recommendations to the Board.
Reports from management were reviewed on significant
matters, including outstanding litigation and claims, accounting
judgements and issues, UK pension reports, business
combinations, 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
2024 consolidated financial statements is set out in the table on
pages 89 to 91.
Going concern, viability statement and financial resilience
The Committee receives regular updates from management on
the underlying performance of the business, the strength of the
Group’s liquidity and its operational and financial resilience.
The Committee has reviewed the 2024 going concern and
viability statements and challenged the assumptions, risk
assessments, forecasts for profits and cash generation, liquidity,
available borrowing facilities and covenant compliance that were
modelled as part of the scenarios and stress testing undertaken.
The Committee challenged assumptions related to the effect
of current and future inflation and the effects of the strategic
optimisation initiatives on cash flows ensuring that these cash
flows include the cost of actions to be undertaken within the time
frame under review consistent with the carbon reduction
initiatives agreed with the Science Based Targets initiative.
Sensitivity analyses were undertaken to understand the impact
of changes to key variables and included severe but plausible
downside scenarios and stress testing. The Committee was
satisfied that these represented accurate assessments of the
Group’s financial position at the date of the consolidated financial
statements. Further detail on the going concern and viability
assessments are set out on pages 27 and 34, respectively.
Company overview
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Governance
Financial statements
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Bodycote plc Annual Report 2024
Additional information
Fair, balanced and understandable
The Committee reviewed a paper prepared by management
setting out the approach taken to the preparation of the Annual
Report as well as the form and content of the report. The review
included consideration of the oversight provided throughout the
year based on the regular review of financial results and reports
from both Senior Management and PwC, consideration of the
regulatory and governance requirements for reporting, and
consideration of the process of planning and preparing the
Report of the Audit Committee continued
Annual Report. In reviewing that process, the Committee
considered the collaborative approach between all parties
required to contribute to the report to ensure it contains
complete, accurate and balanced information, and the 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 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 performs an
impairment test over the carrying amounts of goodwill at least
annually, whilst tangible and other intangible assets are
considered for impairment indicators. Further details are set out
in notes 7 and 9 of the consolidated financial statements.
The Committee considered reports from management describing potential impairment indicators for tangible and intangible assets
and the outcome of impairment tests performed at the year-end. Annual impairment tests were performed for all cash generating units
with a goodwill balance as required by accounting standards. The Committee also received reports from management detailing the
calculation and disclosure of the £28.4m impairment recorded in respect of the ERP Operations module asset.
Details of the key assumptions used in the impairment tests and the sensitivity analysis applied as well as the conclusions reached are
set out in note 7 to the consolidated financial statements. In respect of the ERP impairment, the key judgement was how the cost of the
ERP project should be split between the Operations and Finance and Procurement modules.
The Committee reviewed management’s reports and challenged the assumptions used including the future forecasts and business
improvements underlying the calculations of recoverable amounts, the discount rates used, the effect of future inflationary impacts
and the growth factors used in the discounted cash flow calculations for each cash generating unit. The Committee reviewed reports
describing the split of the ERP asset into its component parts. In addition, the Committee challenged the results obtained and the
sensitivity analysis applied to each calculation.
Based on those reviews, the Committee was satisfied with the calculation and disclosure of the £28.4m impairment recorded in
respect of the ERP Operations module and the £18.0m impairment recorded in respect of goodwill in the North American Automotive
and General Industrial markets’ cash generating unit. The Committee was satisfied with the carrying value of assets and goodwill in the
annual report and that no further impairment was required to be recorded as of 31 December 2024.
The Committee considered the adequacy of the disclosures including the classification of asset impairments as exceptional provided
in respect of the Group’s goodwill impairment test and ERP Operations module impairment. The Committee was satisfied that the
disclosure provided was appropriate.
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Financial statements
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Bodycote plc Annual Report 2024
Additional information
Report of the Audit Committee continued
Area of focus
Actions
Strategic Optimisation – Restructuring
During the course of 2024, the Group announced that it had
undertaken a strategic review. As a result of that review,
it announced a number of portfolio and footprint optimisation
actions resulting in an exceptional charge of £31.9m being
recorded in the year largely comprising £8.5m of restructuring
provisions and £18.8m of asset write-downs.
Assumptions and judgement are exercised in the development of
restructuring, reorganisation, legal and environmental provisions
and in the measurement of recoverable amounts when assessing
whether asset values at affected sites have become impaired.
Further details of the exceptional charge are included in note 3 to
the Consolidated Financial Statements. Movements in the
Group’s provisions in the year are set out in note 19 to the
Consolidated financial statements and movements in property,
plant and equipment are set out in note 9.
The Committee received a paper from management summarising the accounting for the strategic actions as well as the basis for
treating the associated costs as exceptional. The Committee challenged the principles applied in determining the timing and
measurement of the accounting for the associated actions and the presentation of the related costs.
The Committee received reports summarising the status of the optimisation actions at the year-end.
In respect of restructuring provisions, the Committee considered the status of announcements at the year-end and challenged
management’s judgements as to whether a constructive or legal obligation had been created at affected sites. The Committee was
satisfied that appropriate restructuring provisions had been recorded.
The Committee discussed and challenged management’s judgements behind the provisions recorded in the year as well as those that
already existed, taking note of the range of possible outcomes. The Committee was satisfied with the accounting treatment applied.
The Committee received a paper summarising the asset write-downs recorded as a result of the strategic restructure. It challenged the
basis on which write-downs had been calculated and was satisfied with the level of impairment recorded.
The Committee considered the adequacy of the disclosures provided in respect of the Group’s strategic actions including the
classification of costs as exceptional and the associated accounting effects. The Committee was satisfied that the disclosure provided
was appropriate.
Taxation
The Group operates in a number of tax jurisdictions and is subject
to increasing reviews by different tax authorities across the
Group in the ordinary course of business.
A number of judgements are involved in calculating tax
provisions and the level of deferred tax assets/liabilities to
be recognised.
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 and other tax assets is dependent on
future profitability and performance of the underlying business.
Further details are included in notes 5 and 17 of the consolidated
financial statements.
The Committee received regular reports from management about the Group’s most significant tax exposures, including ongoing tax
audits and related tax provisions recognised by management; new legislative developments that may impact the Group’s tax positions
and the results of both internal and external reviews.
The Committee focused on reviewing, understanding and challenging the Group’s critical tax risks and management’s assessment
of and accounting for these risks.
The Committee has supported transparency over the Group’s tax risks and strategy in external reporting. Key risks, notably in the
internal cross-border funding arrangements, have been reviewed and challenged including management’s views on the future
profitability of the relevant businesses.
The Committee has received and challenged reports about the impact of the introduction of the global minimum tax rate on the
Group and the work on assessing the impact for the current and future years..
The Committee was satisfied with the Group’s tax approach and with the accounting treatment and disclosure of tax exposures.
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Governance
Financial statements
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Bodycote plc Annual Report 2024
Additional information
Report of the Audit Committee continued
Area of focus
Actions
Acquisitions
During the year, the Group completed the acquisition of Lake City
Heat Treating for cash consideration of £52.2m giving rise to
goodwill of £3.8m and intangible assets of £39.9m.
There is a high level of judgement and estimation involved in
the valuation of acquired intangible assets in relation to major
acquisitions, including customer relationships. The associated
valuation models contain judgements relating to future business
performance and underlying economic conditions.
The Committee received reports from management outlining the details of the acquisition accounting including details of the key
assumptions used in the valuation of the intangible assets acquired and the associated goodwill calculation.
The Committee reviewed management’s reports and challenged the assumptions used in the valuation and the appropriateness of the
final values assigned to the assets acquired.
Based on this review and its consideration of the valuation methods and key assumptions applied, the Committee was comfortable that
the key assumptions and the resulting intangible assets recognised were appropriate.
The Committee also reviewed the disclosure provided of the acquisition in the annual report and was satisfied that it was appropriate.
Retirement benefits schemes
Determining pension liabilities in relation to the Group’s defined
benefit schemes requires significant judgement and estimation
including in respect of discount rates, mortality and inflation
(see note 26 to the consolidated financial statements).
These variables can have a material impact in calculating the
quantum of any defined benefit pension liability recorded by
the Group.
Management obtained independent external specialist advice to assist in determining the Group’s pension liabilities. The Committee
reviewed reports prepared by management and external experts and challenged the key assumptions used based on the advice
received from external advisers.
The Committee reviewed the disclosures about the Group’s pension schemes provided in note 26 to the consolidated financial
statements and was satisfied with the judgements and estimations taken and the disclosure provided.
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Financial statements
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Bodycote plc Annual Report 2024
Additional information
build up the necessary knowledge and business familiarity to
ensure the delivery of an effective audit and consequently any
plans to tender the external audit should allow time for an
orderly transition.
During 2024, 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.
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 quality, technical skills and experience of the
engagement partners and the audit team;
– audit approach and scope, including identification of risk areas;
– quality of reporting to the Committee, the level of challenge
and professional scepticism and the understanding
demonstrated by PwC of the business of the Group;
– execution of the audit;
– interaction with management;
– communication with, and support to, the Committee;
– insights, management letter points, added value and reports;
and
– independence and objectivity.
An assessment questionnaire was completed by each member
of the Committee, the Chief Financial Officer, the Group Financial
Controller and other senior personnel involved in the audit at
both the corporate and divisional levels. Senior management
received answers and comments from all questionnaires and
consolidated them into a report. The Committee used this report
to assist in its assessment of the level of external audit
effectiveness. Feedback from the process was discussed and
considered by the Committee and provided to the external
auditor and management. The key outputs of this
assessment were:
– No issues were raised concerning the quality of either the audit
partner or the team in the feedback received.
– The audit had been well planned and delivered, with work
completed and management comfortable that any key findings
had been raised appropriately, there was active engagement
on misstatements and appropriate judgements on materiality.
– PwC’s reporting to the Committee was clear and included
explanations supporting its conclusions.
– There was an appropriate level of challenge of management’s
judgements and assertions, including critical accounting
judgements and key sources of estimation uncertainty,
during the audit.
– PwC demonstrated a good understanding of the Group and
identified and focused on areas of greatest financial
reporting risk.
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 UK Financial Reporting Council’s
(FRC) 2022/23 report on Audit Quality Inspections which included
a review of audits carried out by PwC. If the Bodycote audit is
selected for quality review, the Committee understands that any
resulting reports will be sent to the Committee by the FRC.
No such review occurred in 2024.
After considering all of the relevant matters, the Committee
concluded that the external audit had been effective
and objective.
Safe-guarding independence and objectivity
The Committee recognises that the independence of the external
auditor is an essential part of the audit framework.
The independence of the external auditor was formally confirmed
by PwC at the March 2024 Audit Committee and was confirmed
again in March 2025. The Committee considered PwC’s
presentation and confirmed that it considered the auditor to
be independent.
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 re-appointment 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 re-appointment. 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, replacing
Deloitte LLP.
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. As the 2023 audit was Mr Simon Morley’s
fifth year as the lead audit partner, he rotated off the Bodycote
audit at the conclusion of the 2023 audit in line with rotation
requirements. He was replaced by Mr Tim McAllister.
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 gave particular focus
to considering the scope in respect of smaller, more remote, and
emerging market locations and noted that the majority of the
Group’s local audits are performed by PwC. Audit fees for the
year were agreed at £2.4m.
The other significant matters that PwC drew to the Committee’s
attention, key audit areas and the audit approach to these areas
are discussed in the Independent Auditors’ Report (pages 120
to 128).
In order to comply with UK legal requirements regarding the
auditor’s tenure and audit tendering, the external audit must be
put out to tender before the 2029 financial year. The Committee
reviews the performance of PwC as the external auditor on an
annual basis and may choose to commence a tender earlier if it
deems this to be in the best interests of the
Company’s shareholders.
The Committee is cognisant of the geographical spread of the
Group and does not believe that tendering the audit would be in
the best interests of shareholders at this time. A sufficiently long
transition period would be required to ensure a new auditor to
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Governance
Financial statements
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Additional information
The Group Head of Internal Audit and Risk provides independent
assurance over the key financial processes and controls in
operation across the Group. The Group continued to engage
BDO LLP to provide co-sourced internal audit services.
Internal Audit has provided additional financial control assurance
through a number of control self-assessments. Internal auditors
have received self-certification from every plant that internal
controls have been complied with, or noting any non-compliance.
The accuracy of returns was monitored by Internal Audit by
verification visits to a sample of sites. A control self-assessment
has also been obtained from each of the divisional finance teams,
financial shared services, Group IT services and Group finance
team. Internal Audit performed audits over a sample of returns
to confirm their accuracy.
The effectiveness of Internal Audit is reviewed and discussed
annually with the Group Head of Internal Audit and Risk and the
BDO LLP engagement partner. Audit quality is assured through
a detailed review of each report being carried out by the Group
Head of Internal Audit and 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.
In November 2024, a new Group Head of Internal Audit and Risk
was appointed to lead the next stage of development of the
Group’s Risk Management and Internal Audit
Assurance activities.
Risk management
The Group Head of Internal Audit and Risk has responsibility for
monitoring the Group’s risk management and internal controls
framework . The Executive Committee is responsible for
developing the risk framework. The Committee reviewed the
Group’s financial risk management and internal control systems’
effectiveness through regular updates from the Group Head of
Internal Audit and Risk.
The Committee reviewed changes to the principal financial risks
and mitigating actions identified by management and also
monitored the emerging risk identification process and provided
its support to the Board in concluding that a robust assessment
of the principal and emerging risks has been undertaken in 2024.
Further details are set out in the Principal Risks and Uncertainties
report on pages 28 to 33.
Internal control
The Board has overall responsibility for the effectiveness of the
Group’s internal controls framework and is satisfied that the
Group maintains an effective system of internal controls in
relation to the financial reporting process, and that there were
no significant failings or weaknesses in controls during the year.
At each regular 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 remains satisfied that
management places a strong focus on closing out internal audit
actions and ensuring their timely completion. The Committee
has concluded the internal control 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). Further information is set out on
page 28.
Committee evaluation
The Committee’s activities formed part of the external Board
effectiveness evaluation which was undertaken during the year
(see pages 80 and 81). The Committee considered it had operated
effectively during the year. Based on this, and as a result of the
work undertaken throughout 2024, 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:
Kevin Boyd
Chair of the Audit Committee
13 March 2025
Report of the Audit Committee continued
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, and where it is work that the
statutory auditor must, or is clearly best suited to, perform.
Non-audit services, regardless of scope, cannot be awarded to
the external auditor without prior approval from the Committee
Chairman, on behalf of the Committee. In addition to the Group’s
policy, the auditor runs its own independence and compliance
checks, prior to accepting any engagement, to ensure that all
non-audit work is compliant with the FRC’s Ethical Standard and
that there is no conflict of interest. The only non-audit fees paid
to the auditor in 2024 were for the half-year interim review,
a liquidation filing required in one country, and a subscription to
a generic accounting and reporting website and are shown in
note 28 of the consolidated financial statements representing
5% (2023: 5%) of the audit fee.
Internal audit
The internal audit plan for 2024 was presented to the Committee
in October 2023. The plan took into account the Group’s strategic
objectives and risks and provided the degree of coverage deemed
appropriate by the Committee. The Committee reviewed and
accepted the plan following discussion and challenge as to its
scope and areas of focus. The internal audit approach for 2024
was focused on providing assurance over the Group’s principal
risks and key financial and operational controls and included
audits of HR systems in the US and Canada, contract review
processes, cyber security, compliance with US labour laws,
a selection of Plant audits globally reviewing key controls
including health and safety and an audit of key controls in the
Group’s operations in Turkey. An internal audit and risk update
was provided at each meeting during the year.
At each regular meeting, the Group Head of Internal Audit and
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 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
of which had a material financial impact on the Group.
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Bodycote plc Annual Report 2024
Additional information
Directors’ report on remuneration
The Committee believes that
the balance of performance
metrics reflects Bodycote’s
strategic priorities and
continued focus on delivering
value to shareholders,
together with our commitment
to sustainability.”
Cynthia Gordon
Chair of the Remuneration Committee
Director remuneration arrangements, including review
of performance conditions/metrics
38%
Remuneration policy review
24%
Governance and reporting
14%
Review of external environment
12%
Wider workforce remuneration considerations
12%
Committee membership
Attendance
Chair
Cynthia Gordon
6/6
Members
Kevin Boyd
6/6
Lili Chahbazi
6/6
Beatriz García-Cos Muntañola
6/6
Patrick Larmon
6/6
Role and responsibilities
– Responsibility for setting and reviewing the remuneration
policy for Executive Directors, Senior Management and the
Company’s Chair.
– Recommend and monitor the level and structure of
remuneration for Senior Management.
– Oversight of workforce remuneration and related policies and
the alignment of incentives and rewards with culture, taking
these into account when setting the policy for Executive
Directors’ remuneration.
– Approve the design of, and determine targets for, Executive
Directors’ and other senior executives’ long-term
incentive arrangements.
Terms of reference
– The Committee reviewed its terms of reference during the year.
Copies are available on our website at www.bodycote.com.
How the Committee spent its time during 2024
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 Directors’ report on remuneration for 2024.
The report has the following sections:
– This letter, which provides an overview of the key decisions
made on Directors’ remuneration during the year (pages 94
to 96)
– An ‘at a glance’ of remuneration (page 96)
– The Directors’ Remuneration Policy, which outlines the
remuneration framework that will apply from 2025 for which
we will be seeking shareholder approval at the 2025 Annual
General Meeting (pages 99 to 105)
– The Annual Report on Remuneration, which describes the
remuneration outcomes for 2024 and explains how our
Remuneration Policy was applied during 2024 (pages 106
to 117)
Review of the Directors’ Remuneration Policy
Our current Policy was approved by shareholders at our 2022
Annual General Meeting. As our current Policy is approaching
the end of its three-year term, a new Policy will be put to
shareholders for approval at our 2025 Annual General Meeting.
During 2024, the Committee undertook a comprehensive review
of the current Policy and our executive remuneration framework,
including incentive structures, measures and targets. A range
of incentive frameworks were considered, however it was
concluded that overall, the current approach comprising an
annual bonus and the performance-based long-term incentive
plan remains aligned to Bodycote’s strategy and performance-
driven culture. Furthermore, it was agreed that the maximum
annual bonus opportunity (200% of base salary for the Chief
Executive Officer and 150% of base salary for the Chief Financial
Officer) and maximum BIP opportunity (200% of salary for
Executive Directors) remain appropriate to provide flexibility
within the Policy over the next three years to provide competitive
remuneration packages. It was therefore concluded that the
Policy remains relevant, appropriate, and sufficiently flexible to
support the execution of our strategy to meet the needs of the
business, so that no changes are being proposed in 2025.
Company overview
Strategic report
Governance
Financial statements
94
Bodycote plc Annual Report 2024
Additional information
Directors’ report on remuneration continued
Performance metrics
While there are no proposed changes to the current Policy, the
Committee is proposing changes to the performance metrics for
the bonus and BIP for 2025 to reflect the Group’s strategic levers,
to deliver sustainable improvements in the performance and
growth outlook for the business.
Driving accelerated growth and margin improvements, delivering
attractive returns on capital employed, and maintaining strong
cash conversion are key measures of success in terms of strategy
execution and ultimately creating value for shareholders, and the
business has announced an ambitious set of targets for these
measures. Playing a meaningful role in the transition to a low
carbon future is also a key accelerator to our strategy.
To provide greater alignment to the Group’s strategic levers and
key measures of success, the following changes are proposed to
the annual bonus and BIP metrics for 2025:
– Introduction of a Return On Sales performance metric (a key
measure of profit margin performance for the business) within
the annual bonus
– Replacing the Adjusted Operating Cash flow performance
metric with Adjusted Operating Cash Conversion within the
annual bonus
– Removal of the ESG performance metric from the annual
bonus and inclusion of a greenhouse gas emissions reduction
performance metric within the BIP, in alignment with our
long-term sustainability targets and ambition to be known
as a sustainability leader
A comparison of the 2024 and proposed 2025 performance
metrics for the annual bonus and BIP awards is set out below:
2024
2025
Bonus
Adjusted Operating
Profit (65%)
Adjusted Operating Profit (40%)
–
Return on Sales (20%)
Adjusted Operating
Cash flow (10%)
Adjusted Cash flow Conversion
(20%)
ESG (5%)
–
Personal Objectives
(20%)
Personal Objectives (20%)
2024
2025
BIP
Adjusted EPS (50%)
Adjusted EPS (40%)
ROCE (50%)
ROCE (40%)
–
Greenhouse gas emissions
(20%)
The Committee considered a 20% weighting for the greenhouse
gas emissions reduction performance metric to be appropriate
in order to provide a meaningful level of incentive to Executive
Directors to deliver Bodycote’s sustainability ambitions. This
weighting is also reflective of market practice when compared to
industrial peers listed on the London Stock Exchange.
The Committee believes that the balance of performance metrics
reflects Bodycote’s strategic levers and continued focus on
delivering value to shareholders, together with our commitments
to sustainability. The targets for the 2025 BIP awards are
disclosed on page 109. Targets for the 2025 annual bonus are
considered commercially sensitive and will be fully disclosed in
the 2025 Directors’ Remuneration Report.
Chief Executive Officer’s annual bonus and BIP opportunity
Following his appointment as Chief Executive Officer, Jim
Fairbairn was granted an annual bonus award with a maximum
opportunity equal to 175% of base salary (set below the level
granted to his predecessor and the maximum policy opportunity
of 200% of salary) and a 2024 BIP award with a maximum
opportunity equal to 175% of base salary (also set below the
maximum policy opportunity of 200% of salary), both pro-rated
for time served during the year.
The Committee considered the positioning of the Chief Executive
Officer’s annual bonus and BIP opportunities as part of the
broader Policy review. After careful consideration, it was
concluded that Jim Fairbairn’s maximum annual bonus and BIP
opportunities will each remain at 175% of salary for 2025.
The Committee will continue to evaluate executive packages to
ensure they are motivating, appropriately benchmarked, and
reflect performance.
Executive Director changes
It was announced in May 2023 that Stephen Harris would step
down from the Board at the end of May 2024. The treatment of
Stephen Harris’ remuneration arrangements were fully disclosed
in the 2023 Directors’ Remuneration Report and a summary
is provided on page 111. He remains subject to the post-
employment shareholding guidelines and will retain shares to
the value of 200% of his final salary for a period of two years
following his departure. Jim Fairbairn was appointed as Chief
Executive Officer with effect from 31 May 2024. As disclosed in
the 2023 Directors’ Remuneration Report, the Committee agreed
to buy-out Jim’s long-term incentive awards forfeited by him on
leaving his previous employer. The buy-out awards were granted
on 22 March 2024 and details are disclosed on page 110.
Business performance and incentive outcomes for 2024
Despite a challenging market, the Group delivered a resilient
performance in 2024. Further growth was seen in Specialist
Technologies, supported by rising adoption for these newer
processes, as well as market share gains and strong demand in
the Aerospace and Energy markets. This was partly offset by a
modest decline in Precision Heat Treatment, which was impacted
by challenging conditions in global Automotive and Industrial
Markets. Significant operating profit margin improvement was
delivered in the year, with adjusted Group operating margins of
17.0%, up from 15.9% in 2023. Adjusted operating profit increased
to £129.0m in the year (from £127.6m in 2023).
We believe that the incentive-based payouts made this year are
aligned with the overall performance of the Company. As such,
the Committee determined that no discretionary adjustments
(either upward or downward) would be required from the
formulaic outcomes of the annual bonus or BIP.
Annual bonus
The 2024 annual bonus award was based on adjusted operating
profit (65%), adjusted operating cash flow (10%), ESG (5%), and
personal scorecard objectives (20%). Adjusted operating profit at
constant currency, excluding the Lake City acquisition, increased
to £130.9m and adjusted operating cash flow at constant
currency, excluding the Lake City acquisition was £114.9m. The
ESG measure, which was introduced in 2024, is based on the
year-on-year reduction of absolute energy consumption (KwH).
The personal objectives primarily reflect how Executive Directors
have delivered on our strategic goals.
Jim Fairbairn, Ben Fidler and Stephen Harris earned a bonus
equal to 53.3%, 52.9% and 45.7% of the maximum respectively.
Jim Fairbairn’s and Stephen Harris’ bonuses were pro-rated for
time served as Group Chief Executive (including as Group Chief
Executive designate) during 2024. See page 106 for the
application of bonus deferral.
Company overview
Strategic report
Governance
Financial statements
95
Bodycote plc Annual Report 2024
Additional information
Bodycote Incentive Plan (BIP)
The 2022 BIP awards were based on performance against return
on capital employed (ROCE) (50%) and adjusted earnings per
share (EPS) (50%) targets over a three-year period ended
31 December 2024. This award vested at 36.1% of the maximum.
Further details are set out on page 109.
Conclusion
I hope you find this report clear and informative and I trust
that the information presented will enable our shareholders to
understand how we have operated our Directors’ Remuneration
Policy over the year and the rationale for our decision-making.
The Committee believes 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.
I hope the Committee has your support for the Directors’ report
on remuneration, including the Remuneration Policy and the
Annual Report on Remuneration, which will be submitted to
shareholders at our Annual General Meeting to be held on
21 May 2025. At this meeting, I will also be pleased to answer
any questions you may have in relation to this report, our Policy
or to any of the Committee’s activities.
Cynthia Gordon
Chair of the Remuneration Committee
13 March 2025
Directors’ report on remuneration continued
Remuneration at a glance for Executive Directors in office at the date of this report
Total single figure table
Fixed Pay
Variable Pay
Financial
year
Salary/fees
(£000)
Pension
(£000)
Taxable
benefits3
(£000)
Subtotal
(£000)
Annual
bonus
(£000)
Buy-out
award
(£000)
BIP
(£000)
Subtotal
(£000)
Total
(£000)
Executive Directors1
Jim Fairbairn2
2024
502
50
45
597
469
930
–
1,399
1,996
Ben Fidler
2024
523
52
16
591
415
–
–
415
1,006
1 The figures reported relate only to the Executive Directors in office at the date of this report. Figures relating to Stephen Harris, who stepped down from the Board on
30 May 2024 are set out on page 106.
2 Jim Fairbairn was appointed as Group Chief Executive designate and as a member of the Board on 11 March 2024. He became Chief Executive Officer on 31 May 2024.
The figures presented reflect the period from 11 March to 31 December 2024.
3 Taxable benefits consist of company car (or allowance), family level private medical insurance, life assurance cover and sick pay. Jim Fairbairn also received a one-off
relocation allowance of £30,000 following his appointment.
Annual bonus
Jim Fairbairn and Ben Fidler earned a bonus equal to 53.3% and 52.9% of maximum respectively. For Jim Fairbairn, this bonus was
pro-rated from 11 March 2024, the date he joined the Board.
Outcome
Jim Fairbairn
Ben Fidler
Measure
% of award
Actual
performance
achieved1
% of max
% of salary
% of max
% of salary
Adjusted operating profit
65%
£130.9m
31.9%
36.3%
31.9%
31.1%
Adjusted operating cash flow
10%
£114.9m
100%
17.5%
100%
15%
ESG
5%
8.4%
100%
8.8%
100%
7.5%
Personal score card
20%
n/a
88%
30.8%
86%
25.8%
Total
53.3%
93.4%
52.9%
79.4%
1 Figures quoted for adjusted operating profit and adjusted operating cash flow are at constant currency rates, excluding the Lake City acquisition.
Time horizons for each remuneration element
Year 1
Year 2
Year 3
Year 4
Year 5
Fixed pay
Variable pay: Bonus
Variable pay: BIP
Salary, taxable
benefits and pension
65% in cash
35% in deferred shares
Performance period
Holding period
Company overview
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Financial statements
96
Bodycote plc Annual Report 2024
Additional information
Directors’ report on remuneration continued
Implementation of the Remuneration Policy
The table below is a summary of the key components of the Remuneration Policy for Executive Directors, including why each are used, how they are operated in practice and the maximum opportunities
available. The table also sets out how the Policy was implemented in 2024 and how it is intended to be implemented during 2025.
Key features
Implementation in the year ended 31 December 2024
Implementation planned for year ending 31 December 2025
Salary and fees
Core element of remuneration.
To be market competitive and
attract and retain appropriate talent
required to execute and deliver
the strategy.
Base salaries are reviewed annually.
Salary reviews are based on role,
experience, performance, internal
increases and the external market.
The new Chief Executive Officer was appointed to the Board
on 11 March 2024 on a salary of £620,000. The Chief Financial
Officer received a salary of £522,500, with effect from
1 January 2024, which was an increase of 4.5% on the prior
year. This increase was in line with the average increases
awarded to employees in the UK, the jurisdiction in which
the Chief Financial Officer is based.
The former Group Chief Executive received a salary of
£695,181, with effect from 1 January 2024, which was an
increase of 4.5% on the prior year. This increase was in line
with the average increases awarded to employees in the
Czech Republic, the jurisdiction where the former
Group Chief Executive was based.
The fees payable to the Non-Executive Chair and
Non-Executive Directors were reviewed in March 2024,
with increases of 4.5% awarded with effect from
January 2024. This resulted in a base fee for the Chair of
£301,744 and £65,477 for the Non-Executive Directors.
With effect from 1 January 2025, the Chief Executive Officer
receives a salary of £640,460, an increase of 3.3% on the prior
year. The Chief Financial Officer will receive a salary of £537,130,
an increase of 2.8% on the prior year.
These salary increases were determined taking into account
the budgeted salary increases for UK employees (3.3%),
the positioning of the Executive Director’s salaries against the
market, and internal pay differentials.
Non-Executive Director fees will next be reviewed at the March
2025 meeting, with the outcome disclosed in the 2025 Directors’
Remuneration Report.
Benefits
Provides market competitive
benefits at an appropriate cost.
Supports the attraction and
retention of talent.
A range of cash benefits and
benefits-in-kind.
Benefits include car allowance, medical insurance and
life assurance.
The Chief Executive Officer received a one-off relocation
allowance of £30,000 following his appointment.
In line with benefits provided in 2024.
Pension
Provides an appropriate level of
provision for post-retirement
income and assists with
retirement planning.
Contribution to the Company’s
defined contribution scheme,
or cash equivalent.
The Chief Executive Officer and Chief Financial Officer each
received a cash equivalent amount equal to 10% of base
salary, which is aligned with the Company pension
contribution opportunity for the UK workforce, the
jurisdiction where they each live and work.
The former Group Chief Executive received a cash equivalent
amount equal to 23.5% of base salary, which was aligned with
the Company pension contributions of the Czech Republic
workforce, where he lived and worked.
Pension allowances are unchanged from the prior year,
with the current Executive Directors receiving a cash equivalent
allowance equal to 10% of base salary.
Company overview
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Financial statements
97
Bodycote plc Annual Report 2024
Additional information
Directors’ report on remuneration continued
Key features
Implementation in the year ended 31 December 2024
Implementation planned for year ending 31 December 2025
Annual Bonus
To incentivise delivery of the
business plan on an annual basis
and to reward performance against
key performance indicators which
are critical to the delivery
of strategy.
The maximum annual bonus
opportunity in the policy is 200%
of salary. The Committee set
stretching targets, based on
financial performance, ESG
strategic metrics, and
personal objectives.
Maximum opportunity of 175% of base salary for Jim
Fairbairn, pro-rated for the time served as Chief Executive
Officer (including as Group Chief Executive designate) during
the year. Maximum opportunity of 150% of base salary for
Ben Fidler. Maximum opportunity of 200% of base salary for
Stephen Harris, pro-rated for the time served as Group Chief
Executive during the year.
The annual bonus is split 65% in respect of adjusted
operating profit, 10% in respect of adjusted operating
cash flow, 5% in respect of ESG targets and 20% on
personal objectives.
35% of any bonus earned is deferred into shares for three
years. Performance targets and outcomes are set out on
page 107. It was agreed that any bonus payable to Stephen
Harris in respect of 2024 would be paid fully in cash on
provision that he continue to hold shares equivalent to at
least 200% of salary for two years following him stepping
down from the Board.
Maximum opportunity of 175% and 150% of base salary for the
Chief Executive Officer and Chief Financial Officer, respectively.
The annual bonus will be split 40% in respect of adjusted
operating profit, 20% in respect of adjusted operating cash
conversion, 20% in respect of return on sales and 20% on
personal objectives.
35% of any bonus earned is deferred into shares for three years.
Performance targets are considered commercially sensitive and
will be fully disclosed in the 2025 Directors’
Remuneration Report.
Bodycote Incentive Plan (BIP)
Rewards the delivery of targets
linked to the delivery of long-term
strategic goals, and incentives
performance. Assists the creation
of shareholder value over the
longer-term.
Annual grants up to 200% of base
salary, subject to a three-year
performance period and two-year
holding period post vesting.
Maximum opportunity of 175% of salary for both Executive
Directors. The awards granted to Stephen Harris and Jim
Fairbairn were pro-rated for time served as Group Chief
Executive (including as designate) during the vesting period.
Awards are based on performance against ROCE (50%) and
adjusted EPS (50%) targets over a three-year period ending
31 December 2026. The Performance targets are set out on
page 109.
Maximum opportunity of 175% of salary for both Executive
Directors. Awards will be based on performance against ROCE
(40%), adjusted EPS (40%) and greenhouse gas emissions
reduction targets (20%) over a three-year period ending
31 December 2027.
Performance targets are set out on page 101. The Committee
reviewed the performance targets during the year to ensure
alignment with internal budgets and the strategic levers.
These targets are considered stretching yet achievable, and are
designed to appropriately incentivise participants while driving
successful strategy execution.
Shareholding requirement
To provide alignment of interest
between Executive Directors
and shareholders.
Executive Directors are required to
build up a holding of 200% of base
salary over five years.
Post-employment shareholding
requirements also apply.
Jim Fairbairn and Ben Fidler having joined the Company
in March 2024 and February 2023 respectively are working
towards building their shareholdings.
Stephen Harris, the former Group Chief Executive met this
shareholding requirement.
Jim Fairbairn and Ben Fidler having joined the Company in
March 2024 and February 2023 respectively will continue to
work towards building their shareholdings.
Company overview
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Financial statements
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Bodycote plc Annual Report 2024
Additional information
Directors’ report on remuneration continued
Directors’ Remuneration Policy
Remuneration Policy and summary of the decision-making process
During 2024, the Remuneration Committee (Committee) conducted a review of the Remuneration Policy and concluded that the Policy continues to support the delivery of business strategy and the creation
of shareholder value. Accordingly, no changes are being proposed to the Policy, other than minor wording changes to improve clarity. The Remuneration Policy review involved the Committee following a
robust process which included discussions at the July 2024 and October 2024 Committee meetings on the content of the Policy, with input from management and independent advisers, and engagement
with major shareholders (representing over 60% of the Company’s issued share capital). No Executive Director is a member of the Remuneration Committee.
Executive Remuneration Policy
The table below sets out the key components of Executive Directors’ pay packages, including why they are used and how they are operated in practice.
Executive Directors – Fixed Remuneration
Element/purpose and link to strategy
Operation and key features
Maximum opportunity
Performance measures
Base Salary
Core element of remuneration.
To be market competitive and
attract and retain the talent required
to execute and deliver the strategy.
Base salaries are typically reviewed annually (or more frequently if
specific circumstances necessitate this), with salary reviews based
on role, experience, performance, internal increases and the external
market, with the competitiveness of total remuneration assessed
against companies of comparable size and complexity, as appropriate.
Whilst the Committee has not set a maximum level of salary,
ordinarily, salary increases will be determined considering the
average increases awarded to: (1) employees in the country in which
the Executive Director lives and/or works; and (2) Group employees
across Western Europe, including the UK. Higher increases may be
awarded in exceptional circumstances, which may, for example,
include an increase in scope or responsibility, or a new Executive
Director who is being moved to market positioning over time.
None
Benefits
Provides market competitive
benefits at an appropriate cost.
Supports the attraction and
retention of appropriate talent.
A range of cash benefits and benefits in kind are provided in line
with market practice.
These may include the provision of a company car (or allowance),
private medical insurance, short- and long-term sick pay and death
in service cover. The Company may also meet certain mobility costs,
such as relocation support, expatriate allowances, temporary living
and travel and subsistence expenses. Benefits provision will also
extend to the reimbursement of taxable work-related expenses,
such as travel. In the case of non-UK executives, the Committee
may consider providing additional allowances in line with relevant
market practice, including expatriate benefits.
The Committee has not set a maximum level of benefit, given that
the cost of certain benefits will depend on the individual’s particular
circumstances. However, benefits will be set at an appropriate level
considering market practice and the needs for specific roles and
individual circumstances.
None
Pension
Provides an appropriate level
of provision for post-retirement
income and assists with
retirement planning.
The Group operates a defined contribution scheme.
Executive Directors are provided with a contribution to this scheme,
or cash allowance equivalent value. Base salary is the only
pensionable element of remuneration.
Company contributions (or cash equivalents) are aligned with the
contributions available to the wider workforce in the country where
the Executive Director lives and/or works.
None
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Additional information
Directors’ report on remuneration continued
Executive Directors – Variable Remuneration
Element/purpose and link to strategy
Operation and key features
Maximum opportunity
Performance measures
Annual Bonus
To incentivise delivery of the
business plan on an annual basis
and to reward performance against
key performance indicators that are
critical to the delivery of strategy.
The level of bonus is determined by the Committee after
the year-end based on performance against targets.
65% of the bonus earned is paid in cash shortly after the
financial year-end, with the remaining 35% deferred into
shares which vest after three years subject to continued
employment and the rules of the Deferred Bonus Plan.
Dividend equivalents are payable in respect of the shares
which vest. Malus and clawback provisions also apply.
The maximum opportunity is 200%
of base salary for the CEO and 150%
of base salary for the CFO. Up to
30% of maximum may be earned for
threshold performance. Awards are
earned progressively between
threshold and maximum performance.
At least 70% of the bonus will be based on Group financial
metrics with the remainder based on non-financial strategic
and/or personal metrics. The metrics, their weightings and
specific targets are reviewed on an annual basis to ensure
alignment to strategy, with financial targets set by reference
to budget. Details of the metrics, weightings and targets will
be fully disclosed on a retrospective basis in the relevant
year’s Annual Report on Remuneration. Discretion may be
exercised in cases where the Committee believe that the
bonus outcome is not a fair and accurate reflection of
business performance, the performance of the individual
and/or the experience of shareholders or other stakeholders
over the performance period. The exercise of this discretion
may result in a downward or upward movement in the
amount of bonus earned.
Bodycote Incentive Plan (BIP)
Rewards the delivery of targets
linked to the delivery of long-term
strategic goals, and incentives
performance. Assists the creation
of shareholder value over the
longer-term.
Awards will normally be granted annually and be subject
to the rules of the Bodycote Incentive Plan. These awards
are subject to a three-year performance period and the
achievement of stretching performance metrics and
continued employment. Awards are subject to a two-year
post-vesting holding period.
Dividend equivalents are payable in respect of the shares
which vest, with such amounts normally paid in shares.
Malus and clawback provisions also apply.
A maximum opportunity of up to 200%
of base salary may be awarded in
respect of a financial year.
For 2024 and 2025 the maximum
opportunity was equal to 175% of
base salary.
Up to 25% of the maximum may vest
for threshold performance. Awards will
vest progressively between threshold
and maximum performance.
Performance metrics and their weightings are determined
annually reflecting the Group’s strategic levers and key
performance indicators. Details of the performance metrics
for the 2025 awards are set out on page 101.
Discretion may be exercised in cases where the Committee
believe that the vesting outcome is not a fair and accurate
reflection of business performance, the performance of the
individual and/or the experience of shareholders or other
stakeholders over the performance period. The exercise
of this discretion may result in a downward or upward
movement in the vesting outcome resulting from the
application of the performance metrics.
Shareholding requirement
To provide alignment of interest
between Executive Directors
and shareholders.
Executive Directors are expected to build up and retain a
holding in shares equal to 200% of base salary within five
years from appointment.
None
None
Post-cessation
shareholding guidelines
To provide continued alignment
with shareholders post departure
from the Company.
Executive Directors are required to maintain their full
within-employment shareholding guideline (or their actual
holding if lower) for two years following them stepping
down from the Board.
None
None
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Bodycote plc Annual Report 2024
Additional information
Directors’ report on remuneration continued
Non-Executive Director (NED) Fee Policy
The Policy on Non-Executive Chair and Non-Executive Director (NED) fees is set out below:
Element/purpose and link to strategy
Operation and key features
Maximum opportunity under the element
Performance measures
Fees for Non-Executive Directors
To attract NEDs who have a broad
range of experience and skills to
oversee the implementation of
our strategy.
The fees for the NEDs are determined by the Non-Executive Chair
and the Chief Executive Officer. The fee for the Non-Executive Chair
is set by the Remuneration Committee. The Non-Executive Chair
and NED fees are reviewed on an annual basis.
When reviewing fees, the primary source of comparative market data
is companies of similar size, market value, and complexity. The fees
for the Non-Executive Chair and NEDs are set at a level that will attract
individuals with the necessary experience and ability to make a
significant contribution to the Group’s affairs. The fees reflect the time
commitment and responsibilities of the roles. The Non-Executive
Chair and NEDs are not entitled to any pension or other employment
benefits and do not participate in any incentive plan. The Company
will pay reasonable expenses incurred by the Non-Executive Chair and
NEDs and may settle any tax incurred in relation to these.
Fees for the Non-Executive Chair and NEDs for the following
year are set out in the statement of implementation of Policy
on page 97. The Company’s Policy is that the Non-Executive
Chair and NEDs receive a fixed fee for their services as
members of the Board and its Committees. The fee structure
may also include additional fees for chairing a Board
Committee and/or further responsibilities (for example,
Senior Independent Directorship).
None
Choice of performance metrics
Annual bonus performance metrics are selected to incentivise
delivery of the Group’s annual performance targets and provide a
balance between generating profit and cash to enable the Group
to pay a dividend, reward its employees and make investments in
the future of the business; and achieve other strategic goals to
drive long-term sustainable return.
The 2025 BIP awards will be based on ROCE (40%), Adjusted EPS
(40%) and a new Greenhouse gas emissions reduction target
(20%). Due to the nature of the Company’s activities, the
Committee considers ROCE to provide shareholders with an
appropriate measure of how well the Company is performing and
is being managed, while adjusted EPS provides a measure of the
level of value created for shareholders. The introduction of a
greenhouse gas emission measure to the BIP reflects the
importance of our focus on energy transition and reducing our
carbon intensity and the Committee’s aim to achieve alignment to
the Group’s strategic levers. ROCE and adjusted EPS are our top
two KPIs as shown on page 19.
The Committee retains the discretion to adjust or set different
performance metrics, weightings and/or targets if there is a
material event (such as a change in strategy, a material
acquisition and/or divestment of a Group business or a change in
prevailing market conditions) which causes the Committee to
determine that the original performance metrics, weightings
and/or targets are no longer appropriate and the amendment is
required so that they achieve their original purpose. Should there
be an adjustment to targets, the Committee will ensure that they
are not materially less challenging than originally intended.
Share awards may be adjusted in the event of a variation of share
capital or a demerger, delisting, special dividend or other event
that may affect the Company’s share price. If the Committee were
to make such adjustments, an explanation would be provided at
the time of the event and/or in the following year’s Annual Report
on Remuneration.
Legacy arrangements
The Committee reserves the right to make any remuneration
payments and payments for loss of office outside the Policy set
out on pages 99 to 105 where the terms of the payment were
agreed: (i) before the Policy came into effect (provided that the
terms were consistent with any shareholder-approved
Remuneration Policy in force at the time they were agreed); or
(ii) at a time when the relevant individual was not a Director of the
Company and, in the opinion of the Committee, the payment was
not in consideration for the individual becoming a Director of the
Company. For these purposes, payments include the Committee
satisfying awards of variable remuneration and, in relation to an
award over shares, the terms of the payment being agreed at the
time the award is granted.
Application of malus and clawback
The annual bonus, deferred bonus and BIP each contain robust
malus and clawback provisions, which provide the Committee
with the authority, in certain circumstances, to request the
repayment of amounts received, or to reduce or cancel awards or
require repayment of amounts already paid. The provisions apply
as follows:
Malus
Clawback
Annual bonus
To such time as
payment is made.
Up to three years
following payment.
Deferred bonus
To such time as the
award vests.
No clawback provisions
apply (as malus
provisions apply for
three years from the
date of award).
BIP
To such time as the
award vests.
Up to two years
following vesting.
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Additional information
Directors’ report on remuneration continued
A clawback period of three years following payment of an
annual bonus and two years following vesting of BIP awards is
considered appropriate on the basis that:
– It is reasonable to assume that the circumstances in which
clawback may apply would be discovered within the proposed
clawback periods.
– The periods are considered reasonable to support the
enforceability of clawback.
– The periods are broadly aligned with market practice in the
FTSE 250.
The Committee has full discretion to adjust outcomes up or
down where:
– They do not reflect the underlying financial or non-financial
performance of the participant or the Group over the relevant
period, including for example: discovery of a material
misstatement of financial results, a material failure of risk
management, a material breach of any relevant health and
safety or environmental regulation, a breach of the Code of
Conduct, an action which results in serious reputational
damage to the Group, a material corporate failure, are not
appropriate in the context of circumstances that were
unexpected or unforeseen at the award date; or
– There exists any other reason why an adjustment
is appropriate.
Fees retained for External Non-Executive Directorships
To broaden their experience, Executive Directors are permitted
to hold non-executive appointments in other companies
provided that permission is sought from the Board in advance.
Any fees received may be retained by the Director. Any external
appointment must not conflict with the Directors’ duties and
commitments to the Company.
Illustration of application of remuneration policy for 2025
The remuneration arrangements for the Executive Directors are
designed to provide an appropriate balance between fixed and
variable performance-related components and to ensure that a
significant proportion of pay is dependent on the delivery of
stretching short- and long-term performance targets, which are
aligned with the creation of sustainable shareholder value.
The Committee is satisfied that the composition and structure of
the remuneration package remains appropriate, clearly supports
the Group’s strategic ambitions and does not incentivise
inappropriate risk-taking.
The table below provides illustrative values of each Executive
Director’s remuneration package in 2025, under four assumed
performance scenarios:
Assumed performance
Clawback
Minimum performance
– Fixed remuneration1 only
On-target performance
– Fixed remuneration
– 60% of maximum annual bonus
is earned
– 50% of maximum BIP vests
Maximum performance
– Fixed remuneration
– 100% of maximum annual bonus
is earned
– 100% of maximum BIP vests
Maximum performance
+50% share price growth
– 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 2025, benefits
received in 2024 (for Jim Fairbairn, this is calculated on a FTE basis, excluding
the one-off relocation allowance received) and the pension opportunity applying
from 1 January 2025.
These charts provide illustrative values of the remuneration
packages for each Executive Director in 2025. Actual outcomes
may differ from those shown:
Base Salary
Bonus
BIP
Jim Fairbairn
100%
37%
34%
29%
24%
38%
38%
20%
32%
48%
£723,506
£1,956,392
£2,965,116
£3,525,519
Minimum
On-target
Maximum
Maximum plus 50% share price growth
Ben Fidler
31%
30%
34%
40%
29%
50%
£617,843
£1,588,999
£2,396,016
£2,874,754
Minimum
On-target
Maximum
Maximum plus 50% share price growth
100%
39%
26%
21%
Company overview
Strategic report
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Financial statements
102
Bodycote plc Annual Report 2024
Additional information
Directors’ report on remuneration continued
In reviewing our approach to Directors’ remuneration and in
considering our Remuneration Policy for 2025 and beyond,
the Committee engaged with the Company’s major shareholders,
taking their views into account. The Committee continues to
monitor shareholder views when evaluating and setting our
remuneration strategy and is committed to consulting with
major shareholders prior to any significant changes to our
Remuneration Policy to ensure it continues to meet the
expectations of our shareholders.
How the Committee addressed the factors in Provision 40
of the UK Corporate Governance Code (Code)
Our Remuneration Policy is designed to support an effective
pay-for-performance culture that enables the Company to attract,
retain and motivate Executive Directors who have the necessary
experience and expertise to execute our strategy and deliver
shareholder value. Below is an explanation of how the Committee
has addressed the principles prescribed in Provision 40 of
the Code:
Principle
How the Committee has addressed the principle
Clarity and
simplicity
Our remuneration framework has been
established to support both the financial and
strategic priorities of the Company, aligning
with shareholder interests. The Committee
ensures that remuneration arrangements are
transparent, comprising fixed pay elements,
short-term and long-term variable pay.
These elements provide a clear line of sight
for both executives and shareholders with the
variable pay elements providing stretching
targets to drive the success of the business.
Risk
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, with all executive
variable pay awarded on a discretionary
basis and subject to malus and
clawback provisions.
Principle
How the Committee has addressed the principle
Predictability
The illustration of application of remuneration
policy chart indicates the potential maximum
values for each component of executive
remuneration that may be earned through
our remuneration arrangements.
Proportionality
The Committee believes that the
Remuneration Policy table clearly sets out
how each element of remuneration links to
the delivery of strategy and the alignment
between Group performance and the rewards
available to Executive Directors.
All executive performance measures are
disclosed where awards are made, providing
the link between the performance achieved
and the shareholder value created.
The Committee retains the discretion to
adjust incentive outcomes up or down,
so that they fairly reflect Group performance
over the relevant performance period.
Alignment to
culture
The Committee believes that the balance of
financial and non-financial measures used
for both short-term and long-term incentives
arrangements is designed to support the
values and expected behaviours for long-
term sustainable growth.
Statement of considerations of employment conditions
elsewhere in the Group
The remuneration policy for our Executive Directors is designed
in line with the remuneration principles that underpin
remuneration for the wider Group. The Company adopts a policy
of positioning fixed pay for its employees at a level which is
competitive to the market, reflective of the size, complexity and
scope of the business, promoting long-term success and
supporting our strategic objectives.
The remuneration for senior and high-performing individuals
at all levels and across all functions within the organisation is
set through a balance of fixed and variable pay, similar to the
Executive Directors, with the intent of creating a competitive
total remuneration package to attract and retain, while creating
an appropriate alignment between incentivising performance
and the interests of shareholders. The reward strategy is
calibrated to provide substantive reward only on achievement
of superior performance.
We operate Employee Engagement Groups (see page 76 of
the Corporate Governance Statement), where a range of topics
are actively discussed with employees, including employment
conditions of all employees and, when relevant, executive
remuneration. Feedback from the Employee Engagement
Groups, alongside information provided by management and
the Human Resources function, on pay and conditions across the
Group, is considered by the Committee as part of its discussions
and decision-making on executive remuneration.
Statement of consideration of Shareholders’ views
The Company places significant emphasis on strong
relationships with shareholders, and recognises the importance
of clear consultation on all aspects of governance and
remuneration. The Committee also welcomes the views of
shareholders in respect of pay policy, including those views
expressed on behalf of shareholders by their respective proxy
advisers. The Committee documents all remuneration-related
comments received at the Company’s AGM along with any
comments received during shareholder engagement throughout
the year. All feedback received is reviewed and considered by
the Committee.
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Financial statements
103
Bodycote plc Annual Report 2024
Additional information
Directors’ report on remuneration continued
Approach to recruitment remuneration
When recruiting new Executive Directors and determining remuneration arrangements, the Company’s policy is to ensure that remuneration packages are generally aligned with the same structure and
elements as described in the Remuneration Policy table on pages 99 and 100, paying what is necessary to attract individuals with the skills and experience appropriate to the role to be filled.
Component
Policy
Notice period
The initial notice period may be longer than the Company’s one-year policy (up to a maximum of two years). However, this will reduce by one month for every month served,
until the Company’s one-year policy position is reached.
Base salary
Base salary levels will be set at an appropriate level to recruit the best candidate in consideration of the individual’s existing salary, location, skills and experience and expected
contribution to the role, the current salaries of other Executive Directors and current market levels for the role.
If considered appropriate, the base salary for a new Executive Director may be set at a level to allow future progression to reflect performance and continued development in
the role. This base salary may then be increased to market level by way of above wider workforce salary increases over two to three years.
Pension and benefits
Pension contribution levels will be aligned with the contributions available to the wider workforce in the country where the new Executive Director lives and works, in line with
the Remuneration Policy.
Benefits will be considered in line with the Remuneration Policy. If the new Executive Director is required to relocate, reasonable relocation, travel and subsistence payments
may be provided, either via a one-off or ongoing payments and benefits.
Annual bonus and
long-term incentives
Annual bonus and BIP awards will ordinarily be granted in line with the Remuneration Policy. The new Executive Director may be invited to participate in the bonus on a
pro-rated basis in the first year of appointment and to participate in ‘in flight’ BIP awards on a pro-rated basis when appointed.
The Committee may alter the performance metrics, performance period, vesting and holding period and deferral period of annual bonus and BIP awards, subject to the plan
rules, if the Committee determines that the circumstances of the recruitment merit such alteration. An explanation would be provided at the time of recruitment and/or in the
following year’s Annual Report on Remuneration.
Maximum level of
variable pay
The Committee has set the maximum amount of variable pay which could be paid to a new Executive Director in respect of his/her recruitment at 400% of base salary,
which covers the maximum annual bonus and the maximum face value of any long-term incentive awards. For the avoidance of doubt, this 400% variable pay limit excludes
the value of any ‘buyout’ awards.
Buyout awards
The Committee retains the discretion to make awards on hiring an individual to ‘buyout’ awards which will be forfeited on leaving their previous employer.
Our approach is to conduct a detailed review of the awards that the individual will forfeit and calculate their estimated value. In doing so, we will consider the vesting period,
the option exercise period if applicable, whether the awards are cash or share based, or performance-related, the Company’s recent performance and payout levels and any
other factors considered appropriate. If a ‘buyout’ award is to be granted, the structure and level will be carefully designed and will generally reflect and replicate the previous
awards as accurately as possible. Where considered appropriate, the award will be subject to forfeiture and malus and clawback provisions in the event of early departure.
An explanation as to why a buyout award has been granted would be provided at the time of recruitment and/or in the following year’s Annual Report on Remuneration.
Internal promotions
The overall approach outlined above would also apply to internal appointments, with the proviso that any commitments made prior to the appointment or promotion that are
inconsistent with the Policy will continue to be honoured as the individual is transitioned to the new remuneration arrangements.
Other elements of
remuneration
Other elements may be included in the following circumstances:
– An interim appointment being made to fill an Executive Director role on a short-term basis.
– If exceptional circumstances require that the Non-Executive Chair or a Non-Executive Director is required to assume an executive function on a short-term basis.
– If an Executive Director is recruited at a time in the year when it would be inappropriate to provide an annual bonus or BIP award for that year, subject to the limit on
variable pay set out above, the quantum in respect of the period employed during the year may be transferred to the subsequent year.
Any share award referred to in this section will be granted as far as possible under the Company’s share plans. To the extent that this is not possible, share awards may be granted outside of these plans
as permitted under the Listing Rules. Shareholders will be informed of any Director appointment and the individual’s remuneration arrangements as soon as practicable following the appointment.
Fee levels for new Non-Executive Directors will be determined in accordance with the Remuneration Policy set out on page 101.
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Bodycote plc Annual Report 2024
Additional information
Directors’ report on remuneration continued
Termination Policy
The Committee takes a number of factors into account when determining leaving arrangements for Executive Directors, including the nature and circumstances of the intended departure. The Committee
will honour any contractual entitlements agreed with Executive Directors. Individuals may be eligible to receive an annual bonus on a time pro-rated basis, subject to business and individual performance in
the same manner as for continuing Executive Directors and paid at the usual time. Other payments such as legal fees and outplacement fees may be paid if it is considered appropriate. If a contract is to be
terminated, the Committee will determine such mitigation as it considers fair and reasonable in each case. There are no contractual arrangements that would guarantee a pension with limited or no
abatement on severance or early retirement. There is no agreement between the Company and its Executive Directors or employees, providing for compensation for loss of office or employment that
occurs because of a takeover bid. Service contracts do not contain liquidated damages clauses.
Component
Policy
Compensation for loss of
office in service contracts
Under the terms of the Executive Directors’ contracts, the Company may in its absolute discretion, in lieu of giving notice, terminate the service contracts by making a
payment equivalent to one year’s annual base salary and other fixed benefits.
Treatment of cash element
of the annual bonus
On cessation of employment, and at the absolute discretion of the Committee, the level of bonus will be measured at the bonus measurement date. Bonus will normally be
pro-rated for the period worked during the financial year and subject to the achievement of the original performance metrics. The Committee retains the absolute discretion
not to pro-rate the bonus and/or to pay the bonus at the time of cessation of employment (with performance measured at the time of payment). Under all other circumstances
no bonus will be earned on cessation of employment. Any bonus earned for the year of departure and, if relevant, for the prior year may be paid wholly in cash at the discretion
of the Committee.
Treatment of unvested
deferred bonus awards
under Plan rules
On cessation of employment, the Committee may in its absolute discretion, enable deferred shares to be released to the participant at the normal vesting date. The Committee
retains the absolute discretion not to pro-rate the deferred shares to time and/or to vest deferred shares at the date of cessation of employment. Under all other circumstances
unvested awards will lapse on cessation of employment.
Treatment of unvested
BIP awards
On cessation of employment during the vesting period, awards under the BIP will lapse in full, unless the Committee exercises its discretion, which is absolute. In such
instances where the Committee determines that awards should not lapse in full, awards will normally vest at the normal vesting date, pro-rated for time served between the
date of grant and date of cessation of employment and subject to the achievement of the original performance metrics. To the extent that awards vest, a two-year holding
period will apply. The Committee retains the absolute discretion to not pro-rate awards for time; to vest and release awards at the date of cessation of employment (with
performance measured at the time of vesting); and/or to reduce or not to apply the two-year holding period. On cessation of employment during the two-year holding period,
awards under the BIP will normally remain subject to the holding period. The Committee retains the discretion to reduce or not to apply the remainder of the holding period.
Exercise of discretion
In the event that an Executive Director leaves the Company, the Committee’s policy for exit payments is to consider the reasons for cessation and consequently whether any
exit payments other than those contractually required are warranted. In the event of a compromise or settlement agreement, the Committee may agree payments it considers
reasonable in settlement of any legal claims. This may include an entitlement to compensation in respect of their statutory rights under employment protection legislation in
the UK or any other jurisdiction. The Committee may also include in such payments reasonable reimbursement of professional fees in connection with such agreements.
Change of control
On a change of control, awards under the Company’s incentive plans will generally vest subject to performance and time apportionment as determined by the Committee
and in accordance with the rules of the relevant plan.
Other payments
In appropriate circumstances, payments may also be made in respect of accrued holiday, outplacement and legal fees.
The discretions noted in the table above will only be used in circumstances where there is an appropriate business case. If the Committee were to use such discretion, an explanation would be provided
at the time of cessation of employment and/or in the following year’s Annual Report on Remuneration.
Minor amendments
The Committee may make minor amendments to the Remuneration Policy set out above (for regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation)
without obtaining shareholder approval for that amendment.
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Financial statements
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Bodycote plc Annual Report 2024
Additional information
Directors’ report on remuneration continued
Annual Report on Remuneration
Auditable section
The information presented within this section provides details of remuneration outcomes for Directors who served during the financial year ended 31 December 2024.
Single total figure of remuneration
The following table sets out the total remuneration for Executive Directors for the year ended 31 December 2024, with prior year figures also shown.
Fixed remuneration
Variable remuneration
Salary
(£000)
Pension
(£000)
Taxable benefits4
(£000)
Total fixed pay
(£000)
Annual bonus5
(£000)
BIP
(£000)
Buy-out award
(£000)
Total variable pay
(£000)
Total remuneration
(£000)
2024
2023
2024
2023
2024
2023
2024
2023
2024
2023
2024
2023
2024
2023
2024
2023
2024
2023
Executive Directors
Jim Fairbairn1
502
–
50
–
45
–
597
–
469
–
–
–
9308
–
1,399
–
1,996
–
Ben Fidler2
523
422
52
42
16
14
591
478
415
630
–
–
–
1,0369
415
1,666
1,006
2,144
Former Director
Stephen Harris3
290
665
68
156
18
41
376
862
265
1,306
2966
2687
–
–
561
1,574
937
2,436
Notes to the table
1 Jim Fairbairn was appointed as Group Chief Executive designate and as a member of the Board on 11 March 2024. He became Chief Executive Officer on 31 May 2024. The figures presented reflect the period from 11 March to 31 December 2024.
2 Ben Fidler was appointed to the Board on 24 February 2023. The 2023 figures reflect the period from 24 February to 31 December 2023.
3 Stephen Harris stepped down as Group Chief Executive on 30 May 2024. The figures presented reflect the period from 1 January to 30 May 2024.
Further notes to the table – methodology
4 Taxable benefits consist of company car (or allowance), family level private medical insurance, life insurance cover and sick pay. Jim Fairbairn also received a one-off relocation allowance of £30,000 following his appointment.
5 See page 107 for the application of bonus deferral.
6 The BIP award granted to Stephen Harris on 28 March 2022 with a performance period ending on 31 December 2024 will vest in March 2025 at 36.1% based on the outcome of the performance targets, as set out on page 109. The estimated value at vesting is
based on the average share price from 1 October 2024 to 31 December 2024 of £5.97 pence per share. Dividend equivalents of £28,848 are included in the estimated value at vesting. This award was pro-rated for time served as Group Chief Executive during the
relevant vesting period.
7 The value relating to the BIP award granted to Stephen Harris on 15 April 2021 and which vested on 30 April 2024 has been revised from the figure included in the 2023 report from £231,106 to £268,288, as this is now based on the mid-market closing share price
on the vesting date of £6.96. The share price at the grant date was £7.97, reflecting a share price decrease of £1.012 between the grant date and vesting date. As none of the value of the vesting is attributable to share price appreciation, the Committee did not
exercise discretion to adjust the vesting outcome in respect of the share price.
8 As disclosed on page 80 of the 2023 Directors’ Remuneration Report, the Committee agreed to buy out the in-flight long-term incentive awards which were forfeited by Jim Fairbairn on leaving his previous employer. The face value of his buy-out award was
£930,000 and was granted as nil cost options that would vest between March 2025 and March 2027, subject to continued employment.
9 As disclosed on page 85 of the 2023 Directors’ Remuneration Report, the Committee agreed to buy out the deferred portion of Ben Fidler’s 2022 annual bonus and in-flight share incentives which were forfeited by him on leaving his previous employer.
The value of his buy-out award was based on the number of shares subject to the buy-out award (162,417) multiplied by the three-day volume weighted average share price for 22, 23 and 24 February 2023 of £6.376. These shares will vest between March 2023
and March 2025.
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Financial statements
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Bodycote plc Annual Report 2024
Additional information
Directors’ report on remuneration continued
Taxable benefits
The Group provides other cash benefits and benefits-in-kind to
Executive Directors, in addition to sick pay and life insurance,
as set out below:
Executive Directors
Car/car
allowance
Fuel
Healthcare
Relocation
Jim Fairbairn
£11,019
£1,945
£2,445
£30,000
Ben Fidler
£12,000
£1,200
£2,970
–
Stephen Harris
£5,667
£1,000
£10,970
–
Pension
Aligned with the Company pension contributions for the UK
workforce, Jim Fairbairn received a pension contribution of
£10,000, with the balance of his 10% base salary entitlement
paid in cash. Ben Fidler received a cash contribution in lieu of
pension of 10% of base salary. Stephen Harris received a cash
contribution in lieu of pension at a rate of 23.5% of base salary.
This was aligned with the Company pension contribution of the
Czech Republic workforce where he worked and lived.
Incentive outcomes for 2024
Annual bonus
The maximum annual bonus opportunity for Jim Fairbairn,
Ben Fidler and Stephen Harris was 175% of salary, 150% of salary
and 200% of salary, respectively. As disclosed in the 2023
Directors’ Remuneration Report, Jim Fairbairn’s bonus was
pro-rated for time served during the year. Stephen Harris was
also eligible to receive a bonus pro-rated for the time served as
Group Chief Executive during 2024.
The annual bonus for 2024 was split 65% in respect of adjusted
operating profit, 10% in respect of adjusted operating cash flow,
5% for ESG metrics (which were based on year-on-year reduction
of absolute energy consumption (KwH)) and 20% on personal
strategic objectives. These performance conditions and their
respective weightings reflected the Committee’s belief that any
incentive compensation should be linked both to the overall
performance of the Group and to those areas of the business that
the relevant individual can directly influence.
Stretching targets were set in the context of challenging market
conditions. As a result of a resilient performance in a challenging
market through 2024, Jim Fairbairn, Ben Fidler and Stephen
Harris earned bonus equal to 53.3%, 52.9% and 45.7% of
maximum, respectively.
For Jim Fairbairn and Ben Fidler, 35% of the amount earned will
be deferred into shares, which will vest in three years subject to
continued employment. Stephen Harris stepped down as Group
Chief Executive and retired from the Board on 30 May 2024.
The Committee agreed to pay any bonus earned by him fully in
cash at the usual time in 2025.
The performance targets and actual performance are set out below:
Jim Fairbairn3
Ben Fidler
Stephen Harris3
% of award
Threshold1
Target1
Maximum1
Actual
performance
achieved2
% of max
% of salary
% of max
% of salary
% of max
% of salary
Adjusted operating profit4
65%
£128.6m
£140.5m
£148m
£130.9m
31.9%
36.3%
31.9%
31.1%
31.9%
41.5%
Adjusted operating cash flow
10%
£84.7m
£109.7m
£109.7m
£114.9m
100%
17.5%
100%
15%
100%
20%
ESG metrics
5%
1%
2%
3%
8.4%
100%
8.8%
100%
7.5%
100%
10%
Personal scorecard
20%
See page 108
88%
30.8%
86%
25.8%
50%
20%
Total
53.3%
93.4%
52.9%
79.4%
45.7%
91.5%
1 Payout is pro-rated between threshold, target and maximum as follows: Adjusted operating profit: threshold (25%), target (60%) and maximum (100%); Adjusted operating cash flow threshold (0%), target and maximum (100%); and ESG metrics threshold (30%),
target (60%) and maximum (100%).
2 Figures quoted for adjusted operating profit and adjusted operating cash flow are at constant exchange rates, excluding the Lake City acquisition.
3 Payout has been pro-rated for time served during the year.
4 The Lake City Heat Treating acquisition has been excluded from the targets and the actual performance achieved.
Company overview
Strategic report
Governance
Financial statements
107
Bodycote plc Annual Report 2024
Additional information
Directors’ report on remuneration continued
2024 Personal Scorecards
Jim Fairbairn
Overview
The Chief Executive Officer’s objectives were set with focus
on improving safety performance through better behaviours
and reporting; creating a plan to consistently deliver >20%
adjusted operating profit from 2026 onwards and a strategic
review to strengthen and grow the business. He was also
charged with reviewing the organisation structure,
strenghening the team to improve effectiveness, while
transforming the market perception of the Company.
Key achievements in the year
Following his appointment, significant improvements in
safety approach were introduced, including improved
observational expertise and greater employee engagement.
Strategic activities were developed with actionable initiatives
introduced in relation to culture, plant utilisation and margin
improvement. The senior team has been strengthened, with a
new people strategy currently underway. Improvements were
made to sustainability plans and external reporting, reflected
in a successful Capital Markets Event held in December 2024.
Rating
After reviewing his scorecard performance taking into
consideration the achievements completed during the year,
the Chairman and the Committee agreed with an overall
rating, which equated to a bonus outcome of 88%
of maximum.
Link to strategy
1 2 3 4 5
Ben Fidler
Overview
The Chief Financial Officer’s objectives included a review of
the portfolio; the delivery of a revised divisional structure
with refined reporting structures; the development of a
revised reporting framework to drive efficiencies; continued
delivery of improvements in Group cash conversion year-on-
year and working capital management; the strengthening of
the Group Finance function; and the development of the
investor base, including delivery of a Capital Markets event.
Key achievements in the year
Detailed analyses on the portfolio was completed on
improving performance, with new high-level plans
implemented and rolled-out. New monthly reporting packs
were designed and issued, with new divisional reporting lines
introduced. Adjusted cash flow and cash conversion
improvements continued. The strength and capabilities of the
Group Finance function was improved. A successful Capital
Markets Event was held in December 2024, with two US
investor roadshows held in 2024 and one in January 2025.
Rating
Mr Fidler’s detailed scorecard was reviewed by the Chief
Executive Officer and the Committee, assessing the
achievement of each scorecard objective. Following this
review, the Committee agreed with the rating proposed,
which equated to a bonus outcome of 86% of maximum.
Link to strategy
2 4 5
Stephen Harris
Overview
For 2024, prior to his departure, objectives set were for the
Group Chief Executive relating to the onboarding of his
successor, to ensure a comprehensive and successful
transition. He was also charged with defining and
implementing a restructuring project in North America
and for ensuring that the Lake City Heat Treating acquisition
integration was successfully completed.
Key achievements in the year
The new Group Chief Executive designate joined the
Company in March 2024 and, following a comprehensive
and thorough induction, formally took over the role on
31 May 2024. Neither the North American restructuring
project nor the Lake City Heat Treating acquisition integration
were fully completed at the time of Mr Harris’ departure from
the Company.
Rating
The Committee and Chair assessed achievement for the
personal scorecard objectives. Following this review,
an overall rating was proposed, which equated to a bonus
outcome of 50% of maximum.
Link to strategy
4 5 6
5
Driving operational
improvement
1
Safety and Climate Change
2
Capitalising on and investing
in our Specialist Technologies
3
Investing in Emerging Markets
4
Investing in structural
growth opportunities
6
Acquisitions
Company overview
Strategic report
Governance
Financial statements
108
Bodycote plc Annual Report 2024
Additional information
Bodycote Incentive Plan (BIP)
Awards vesting during the financial year
BIP awards granted on 28 March 2022 had a three-year performance period ended 31 December 2024, with 50% of the award subject to ROCE targets and 50% subject to adjusted EPS targets.
Furthermore, if adjusted EPS at the end of the performance period was below 39.0p, then no awards would vest. The underpin target of 39.0p together with the ROCE threshold target were achieved.
The threshold and maximum targets along with performance achieved and the vesting outcome are set out in the table below:
Performance measure
Threshold performance
(25% of maximum)
Target performance
(57.1% of maximum)
Maximum performance
(100% of maximum)
Performance achieved
(out-turn)
Vesting %
(actual)
Vesting %
(of maximum)2
ROCE1
13.5%
17.5%
20.0%
15.7%
35.9%
41.1%
Adjusted EPS in 2024
46.0p
59.5p
63.9p
48.6p
27.3%
31.2%
1 For the purposes of the BIP, pre-tax ROCE is calculated using actual exchange rates. Capital employed includes the acquired goodwill existing as at the start of the performance period (1 January 2022) only.
2 Figures have been rounded to one decimal place.
The table below sets out the 2022 BIP outcome for Stephen Harris:
Number of
shares granted
End of
performance
period
% award
vesting
Number
of shares
vesting
Number
of shares
lapsed
Dividend
equivalents
Total estimated
value of awards
on vesting
Vesting
date
End of
holding period
Stephen Harris
153,1971
31 Dec 2024
36.1%
44,588
108,609
£28,848
£296,3612
March 2025
March 2027
1 Stephen Harris was granted a BIP award of 153,197 shares equivalent to 175% of his salary in 2022. He stepped down as Group Chief Executive on 30 May 2024 and the award was subsequently pro-rated for time served during the vesting period. The number of
shares available to vest after the application of the time pro-rating was 123,408, with a total of 29,789 awards lapsing due to the time pro-rating.
2 The estimated value at vesting is based on the average share price from 1 October 2024 to 31 December 2024 (£5.97). The share price at the grant date was £6.959. None of the value of the vesting is attributable to share price appreciation, accordingly the
Committee did not exercise discretion to adjust the vesting outcome.
Awards granted during the financial year
Awards consisting of nil cost options were granted to Jim Fairbairn, Ben Fidler and Stephen Harris on 20 March 2024 equivalent in value to 175% of their base salaries. The performance period will end on
31 December 2026. As disclosed in the 2023 Directors’ Remuneration Report, Stephen Harris’ award will be pro-rated for the time served as Group Chief Executive during the vesting period.
Awards are subject to continued employment and the achievement of ROCE and Adjusted 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 continued level of uncertainty faced by the business over the next
three years.
Performance measure
Threshold performance
(25% of maximum)
Target performance
(57.1% of maximum)
Maximum performance
(100% of maximum)
Vesting of element
(% of maximum)
ROCE for 20261
15.0%
19.0%
21.0%
100%
Adjusted EPS for 2026
61.0p
65.0p
69.0p
100%
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 2024) only.
Directors’ report on remuneration continued
Company overview
Strategic report
Governance
Financial statements
109
Bodycote plc Annual Report 2024
Additional information
Directors’ report on remuneration continued
If Adjusted EPS at the end of the performance period is below
51.8p, 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.
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:
Grant date
Number
of shares
granted
Market
price at
grant date1
Face
value at
grant date
Jim Fairbairn2
20 March
2024
156,445
£6.55
£1,024,715
Ben Fidler
20 March
2024
133,586
£6.55
£874,988
Stephen Harris3
20 March
2024
177,737
£6.55
£1,164,177
1 The three-day volume weighted average share price following the announcement
of results for financial year 2023 (15, 18 and 19 March 2024).
2 Jim Fairbairn joined as Group Chief Executive Designate on 11 March 2024.
He was granted a 2024 BIP award equivalent to 175% of his base salary, with the
award pro-rated from the date of joining.
3 Stephen Harris stepped down as Group Chief Executive on 30 May 2024. He was
granted a 2024 BIP award of 177,737 shares equivalent to 175% of his salary in
March 2024. This award was subsequently pro-rated for time served as Group
Chief Executive. The number of shares granted after the application of the time
pro-rating was 24,685, which will remain subject to the achievement of
performance conditions.
Buy-out awards granted to Jim Fairbairn
during the financial year
As disclosed in the 2023 Directors’ Remuneration Report, the
Committee agreed to buy out Jim Fairbairn’s in-flight long-term
incentive awards which had been forfeited by him on leaving his
previous employer. The buy-out awards were granted as nil cost
options on 22 March 2024 and have been structured on a
like-for-like basis to reflect the value and the remainder of the
vesting periods for incentives which were forfeited, in accordance
with the terms of the Directors’ Remuneration Policy.
The Committee carried out a detailed review of the incentives
which had been forfeited, including obtaining award certificates
and confirmation of values forfeited. Details of the buy-out are
as follows:
Grant date
Number
of shares
granted
Market
price at
grant date1
Face
value at
grant date
Jim Fairbairn
22 March
2024
141,209
£6.59
£930,000
1 The five-day volume weighted average share price following the announcement
of results for financial year 2023 (15-21 March 2024).
Number
of shares
granted
Face value
of award
Vesting date
of award
Tranche 1
94,139
£620,000
22 March 2025
(first anniversary
of appointment)
Tranche 2
23,535
£155,000
22 March 2026
(second anniversary
of appointment)
Tranche 3
23,535
£155,000
22 March 2027
(third anniversary
of appointment)
Total
141,209
£930,000
Jim Fairbairn will be expected to retain the shares following
vesting (net of tax) to support the build-up of his shareholding
towards achievement of the Company’s shareholding
requirement. The vesting of awards will be subject to his
continued employment and no dividend equivalents will be
payable in respect of those shares that vest.
Single total figure of remuneration for the Chair
and Non-Executive Directors
The following table sets out the total remuneration for the Chair
and Non-Executive Directors for the year ended 31 December
2024, with the prior year figures also shown:
Fees (£000)
Non-Executive Directors
2024
2023
Daniel Dayan
302
289
Patrick Larmon
91
83
Kevin Boyd
83
79
Lili Chahbazi
68
65
Cynthia Gordon
83
73
Beatriz García-Cos Muntañola1
68
22
1 Beatriz García-Cos Muntañola was appointed to the Board on 1 September 2023.
The 2023 figures reflect the period from 1 September to 31 December 2023.
Chair and Non-Executive Directors’ fees
At 31 December 2024, the aggregate annual fees for all Non-
Executive Directors, including the Chair, was £694,972, which is
below the maximum aggregate fee allowed by the Company’s
Articles of Association of £1,000,000 pa. The base fees payable
to the Chair and other Non-Executive Directors are set out
as follows:
Fee for 2024
Fee for 2023
% increase
Base fee for
Non-Executive Chair
£301,744
£288,750
4.5%
Base fee for
Non-Executive Directors
£68,423
£65,477
4.5%
Remuneration Committee
Chair/Audit Committee Chair
£14,264
£13,650
4.5%
Senior Independent Director
£11,291
£10,805
4.5%
Chair of Employee
Engagement Groups
£11,291
£10,805
4.5%
Company overview
Strategic report
Governance
Financial statements
110
Bodycote plc Annual Report 2024
Additional information
Share interests – share plan awards
The interests of the Executive Directors in the Company’s share plans as at 31 December 2024 (or date of stepping down from the Board if earlier) are as follows:
Director
Plan
Interests as at
1 January 2024
Granted in year
Vested in year
Lapsed in year
Interests as at
31 December 2024
Jim Fairbairn1
BIP
–
156,445
–
–
156,445
Buy-out awards
–
141,209
–
–
141,209
Ben Fidler2
BIP
140,179
133,586
–
–
273,765
Buy-out awards
158,274
–
(94,368)
–
63,906
Deferred bonus shares
–
33,6585
–
–
33,6585
Stephen Harris3
BIP
461,929
177,7373
(35,297)
(372,398)3
231,9713,4
Deferred bonus shares
102,036
69,8005
(171,836)
–
–
1 Jim Fairbairn was appointed as Group Chief Executive designate and as a member of the Board on 11 March 2024 and became Chief Executive Officer on 31 May 2024.
2 Ben Fidler was appointed as Chief Financial Officer designate and as a member of the Board on 24 February 2023 and became Chief Financial Officer on 1 May 2023. The first elements of his buyout award was exercised on 24 April 2024.
The remaining shares will vest on 31 March 2025.
3 Stephen Harris stepped down as Group Chief Executive on 30 May 2024. All outstanding BIP awards have been pro-rated for time served during the relevant vesting periods. The number of shares lapsed in the year included in the table is after the application
of time pro-rating. The deferral period in relation to all awards granted under the Deferred Bonus Plan ended on 30 May 2024. All of these shares vested on his departure from the Company and were exercised and sold at £6.96 per share on 31 July 2024.
4 The BIP awards granted on 28 March 2022 will vest at 36.1% of maximum in March 2025.
5 The grant date face value of the deferred bonus shares granted on 20 March 2024 is £457,190 for Stephen Harris and £220,460 for Ben Fidler. This is based on a share price of £6.55, being the three-day volume weighted average share price following the
announcement of the 2023 year-end results (15, 18 and 19 March 2024).
Loss of office
Stephen Harris stepped down as Group Chief Executive and
retired from the Board and the Company on 30 May 2024.
The treatment of his remuneration arrangements were fully
disclosed in the 2023 Directors’ Remuneration Report.
As set out on page 110, Stephen Harris was granted a BIP award
in March 2024 of 177,737 shares equivalent to 175% of his salary.
This award was subsequently pro-rated for time served as
Group Chief Executive during 2024. The number of shares
granted after the application of the time pro-rating was 24,685
shares, which will remain subject to the achievement of
performance conditions.
All outstanding BIP awards granted to Stephen Harris between
2022 and May 2024, when he stepped down from the Board,
remain capable of vesting, pro-rated for time, and subject to
performance. Any shares that vest in 2025, 2026 and 2027 will be
subject to a two-year post-vesting holding period. Details of the
vesting outcome of the 2022 BIP awards are disclosed on
page 109.
The Committee agreed that the bonus payable to Stephen Harris
in respect of 2024 would be paid fully in cash, with all outstanding
deferred shares vesting on his date of retirement, on the
provision that he continue to hold shares equivalent to at least
200% of salary for two years following him stepping down as
Group Chief Executive.
Payments to past Directors
There were no payments to past Directors during the year ended
31 December 2024. However, as disclosed in the 2022 Directors’
Remuneration Report, Dominique Yates was treated as a good
leaver following his retirement from the Company and the Board
on 30 April 2023. As a result, it was determined that his unvested
BIP awards would continue to vest in accordance with their
normal vesting timetable, subject to the achievement of the
relevant performance metrics and be pro-rated for time served as
Chief Financial Officer during the relevant vesting periods.
Based on performance and time prorating, 18,938 shares vested
at £7.972 under the BIP in 2024.
Directors’ report on remuneration continued
Company overview
Strategic report
Governance
Financial statements
111
Bodycote plc Annual Report 2024
Additional information
Directors’ report on remuneration continued
Directors’ shareholdings and scheme interests
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 unvested share awards, which are not subject to 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 of 31 December 2024 (or the date of stepping down from the Board if earlier), including any interests awarded under the annual
bonus or BIP or buy-out awards, are presented below along with whether Executive Directors have met the shareholding guidelines.
Counted towards the
shareholding requirement
Not counted towards the
shareholding requirement
Executive Directors
Beneficially owned
at 31 December 2024
(or at the date of leaving)
Deferred shares granted
under the annual bonus3
Unvested
buy-out awards3
Shares subject to
performance conditions (BIP)7
Shareholding
requirement met
Jim Fairbairn (200% of salary min. holding requirement)1
–
–
141,2095
156,445
No
Ben Fidler (200% of salary min. holding requirement)
53,566
33,658
63,9066
273,765
No
Non-Executive Directors
Daniel Dayan
97,500
–
–
–
n/a
Patrick Larmon
15,000
–
–
–
n/a
Lili Chahbazi
–
–
–
–
n/a
Kevin Boyd
11,800
–
–
–
n/a
Cynthia Gordon
1,708
–
–
–
n/a
Beatriz García-Cos Muntañola
–
–
–
–
n/a
Former Directors
Stephen Harris (200% of salary min. holding requirement)2
466,871
112,7884
–
231,971
Yes
1 Jim Fairbairn was appointed as Group Chief Executive designate and as a member of the Board on 11 March 2024 and became Chief Executive Officer on 31 May 2024.
2 Stephen Harris stepped down as Group Chief Executive on 30 May 2024. In accordance with the post-cessation shareholding guidelines, Stephen Harris is required to hold shares equivalent to at least 200% of salary for two years from stepping down as
Group Chief Executive. Vesting of the deferred shares granted under the annual bonus and unvested buy-out awards are subject to continued employment only.
4 Figures relate to deferred shares granted in 2023 and 2024.
5 Jim Fairbairn was granted 141,209 shares under a buy-out award on appointment (see page 110). All shares remain unvested.
6 Ben Fidler was granted 162,417 shares under a buy-out award on appointment to the Board in February 2023. The first elements of this award were exercised on 24 April 2024. The remaining shares will vest on 31 March 2025.
7 Figures relate to unvested awards granted under the BIP in 2022, 2023 and 2024. For Stephen Harris, the outstanding awards have been pro-rated to his date of leaving. The BIP awards granted on 28 March 2022 will vest at 36.1% of maximum in March 2025.
As at 13 March 2025, 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.
This represents the end of the audited section of the report.
Company overview
Strategic report
Governance
Financial statements
112
Bodycote plc Annual Report 2024
Additional information
Directors’ report on remuneration continued
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 10 years
Dec 14
Dec 15
Dec 16
Dec 17
Dec 18
Dec 19
Dec 20
Dec 21
Dec 22
Dec 23
Bodycote TSR
FTSE All Share
Industrial Index
Dec 24
£300
£250
£200
£150
£100
£50
£0
The table below shows how total remuneration for the Group Chief Executive has developed over the last 10 years. This role was held by Stephen Harris until 30 May 2024 when he stepped down from the
Board. He was succeeded by Jim Fairbairn, who joined the Company as Group Chief Executive designate on 11 March 2024. Jim Fairbairn was appointed as Chief Executive Officer from 31 May 2024.
The total pay set out in the table below is reflective of the remuneration received by each during 2024.
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
SCH
2024
JF
Single figure of remuneration (£000)
771
875
2,280
2,728
1,862
783
1,969
1,608
2,399
937
1,996
Annual bonus payout (% of maximum)
20%
19%
98%
68%
50%
0%
96%
61%
98%
46%
53%
Long-term incentive vesting outturn (% of maximum)
0%
0%
48%
89%
84%
0%
0%
1%
27%
36%
–
Company overview
Strategic report
Governance
Financial statements
113
Bodycote plc Annual Report 2024
Additional information
Directors’ report on remuneration continued
Percentage change in remuneration
The table below sets out the annual percentage change in remuneration for each of the Directors compared to that for an average employee.
% change in salary/fees
% change in benefits10
% change in annual bonus
2019/20
2020/21
2021/22
2022/23
2023/24
2019/20
2020/21
2021/22
2022/23
2023/24
2019/2011
2020/2111
2021/22
2022/23
2023/24
Executive Directors
Jim Fairbairn1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Ben Fidler2
–
–
–
–
4.5%
–
–
–
–
3.3%
–
–
–
–
(34.1)%
Non-Executive Directors
Daniel Dayan3
–
–
–
5.0%
4.5%
–
–
–
–
–
–
–
–
–
–
Patrick Larmon4
3.0%
2.0%
3.0%
14.0%
4.5%
(83.2%)
1,935%
(100%)
–
–
–
–
–
–
–
Lili Chahbazi
3.0%
2.0%
3.0%
5.0%
4.5%
(70.6%)
19%
(100%)
–
–
–
–
–
–
–
Kevin Boyd5
–
2.0%
17.3%
11.0%
4.5%
(8.3%)
(100%)
–
–
–
–
–
–
–
Cynthia Gordon6
–
–
–
5.0%
4.5%
–
–
–
–
–
–
–
–
–
–
Beatriz García-Cos Muntañola7
–
–
–
–
4.5%
–
–
–
–
–
–
–
–
–
–
Former Directors
Stephen Harris8
7.0%
2.0%
4.0%
5.0%
4.5%
2.8%
0.1%
1.6%
3.9%
4.5%
(100%)
100%
(35%)
70.4%
(79.7)%
Average employee9
4.1%
2.9%
5.7%
6.9%
5.2%
2.4%
10%
9.8%
10.8%
9.7%
(100%)
100%
(9.2%)
6.9%
(5.6)%
1 Jim Fairbairn was appointed as Group Chief Executive designate and as a member of the Board on 11 March 2024 and became Chief Executive Officer on 31 May 2024.
2 Ben Fidler was appointed as Chief Financial Officer designate and as a member of the Board on 24 February 2023 and became Chief Financial Officer on 1 May 2023.
3 Daniel Dayan was appointed as Chair to the Board on 1 January 2022.
4 Patrick Larmon was appointed as Senior Independent Director on 31 May 2023.
5 Kevin Boyd was appointed as Chair of the Audit Committee on 25 May 2022.
6 Cynthia Gordon was appointed to the Board on 1 June 2022. She was appointed as Chair of the Remuneration Committee on 31 May 2023.
7 Beatriz García-Cos Muntañola was appointed to the Board on 1 September 2023.
8 Stephen Harris stepped down from the Board on 30 May 2024.
9 The annual percentage change of the average remuneration of the listed parent entity employees (excluding Directors), calculated on a full-time equivalent basis.
10 Percentage change in Benefits is calculated on unrounded figures.
11 No bonuses were paid to Executive Directors or the Company’s employees in respect of 2020.
Company overview
Strategic report
Governance
Financial statements
114
Bodycote plc Annual Report 2024
Additional information
Directors’ report on remuneration continued
Pay ratio of Chief Executive Officer to
UK employees
The table below sets out the Chief Executive Officer’s
remuneration, in office as at the date of this report, as a ratio
against the full-time equivalent remuneration of the 25th,
50th (median) and 75th percentile UK employees.
Year
Method
25th
percentile
pay ratio
Median
pay ratio
75th
percentile
pay ratio
20241
Option A
66:1
53:1
36:1
2023
Option A
71:1
56:1
39:1
2022
Option A
52:1
41:1
28:1
2021
Option A
69:1
52:1
36:1
2020
Option A
28:1
21:1
15:1
2019
Option A
70:1
55:1
40:1
1 The Chief Executive Officer joined the Company on 11 March 2024. The total
remuneration as provided in the single figure table on page 106 and used in the
calculation of the 2024 ratios has therefore been annualised to provide a full
year comparison.
A substantial proportion of the Chief Executive Officer’s total
remuneration is performance-related and delivered in shares.
The ratios will therefore depend significantly on the Chief
Executive Officer’s annual bonus and BIP outcomes, which may
fluctuate year-to-year. The calculations for the representative
employees were performed as at the final day of the relevant
financial year. Option A methodology, which is calculated using
the pay and benefits of all UK employees for the relevant financial
year, was selected on the basis that it is considered to be a robust
approach and is aligned with best practice and investor
expectations.
2024 pay ratios have decreased from 2023, reflecting the change
in Chief Executive Officer in the year and the overall remuneration
paid. In 2024 the proportion of the Chief Executive Officer’s bonus
and BIP (on an annualised basis) was 67% of total remuneration,
in 2023 the Chief Executive Officer’s bonus and BIP remuneration
equated to 64% 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.
Financial year ended
Element of pay
Chief Executive Officer
remuneration1 (£)
25th percentile2,3 (£)
Median2,3 (£)
75th percentile2,3 (£)
31 December 2024
Total pay and benefits
2,246,217
34,059
42,172
61,563
Salary component
622,925
32,237
39,942
56,123
1 The Chief Executive Officer joined the Company on 11 March 2024. The total remuneration as provided in the single figure table on page 106 has therefore been annualised
to provide a full year comparison.
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 Chief Executive Officer’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 2023
and 2024.
2024 (£m)
20231 (£m)
% change
Staff and employee costs
280.6
290.2
(3.3)%
Distribution to shareholders
42.8
40.6
5.4%
1 The 2023 average employee numbers have been restated to exclude 419 temporary contractors and the related wages and salaries of £17.3m
Company overview
Strategic report
Governance
Financial statements
115
Bodycote plc Annual Report 2024
Additional information
Directors’ report on remuneration continued
Committee activities
During 2024 the Committee met six times to consider, amongst
other matters:
Theme
Agenda items
Executive Directors’
and senior
executives’
remuneration
– Approved the remuneration
arrangements for the Executive
Directors, including base
salary increases
– Approved the leaving arrangements
for Stephen Harris
– Reviewed, and where required
approved, the remuneration
arrangements for new senior hires
below the main Board
– Reviewed and approved the
Global Bonus Scheme outcome for
the Executive Directors and
wider workforce
– Reviewed and approved the annual
bonus and BIP awards for Executive
Directors, including setting of
stretching and incentivising targets
and ensuring performance measures
continue to align with strategy
– Assessment of annual bonus and
BIP outcomes, including the
monitoring of performance for
inflight BIP awards
– Reviewed shareholdings
against share ownership
guideline requirements
Theme
Agenda items
Wider workforce
remuneration
considerations
– Reviewed remuneration and
related policies relating to the
wider workforce
– Reviewed the annual bonus and
Bodycote Senior Management
Incentive Plan awards for the wider
workforce, with oversight of targets
and ensuring performance measures
align with strategy
Remuneration policy
– Reviewed and approved the
Remuneration Policy to be presented
to shareholders at the 2025 AGM
– Consulted with major shareholders
as part of the Policy renewal process
Best practice
– Consideration of feedback from
shareholders and proxy agencies
following the 2024 AGM
– Reviewed market practice and
corporate governance updates,
including proxy advisory
agency reports
Governance and
reporting
– Considered and approved the
Directors’ Remuneration Report
– Reviewed and updated the
Committee’s terms of reference
Advisers to the Committee
During the year, the Committee received independent advice on
executive remuneration matters from Deloitte LLP (Deloitte),
which was formally appointed as Committee adviser from
1 January 2020, following a competitive tender process.
Deloitte 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 has reviewed the advice provided by Deloitte on
executive remuneration and is satisfied that it has been objective
and independent, and that no conflict of interest arises as a result
of these services. The fees paid to Deloitte for its services to the
Committee during the year, based on time and expenses,
amounted to £29,200 excluding VAT. Deloitte also provided
employee share plan advisory services, business tax services
and financial advisory services to the Company during the year.
The Company Secretary acts as Secretary to the Committee.
During the year, the Chief Executive Officer, Chief Financial
Officer and Chief Human Resources Officer attended meetings
on an ad hoc basis at the invitation of the Committee, to provide
information and support as requested. However, no individual
was present when their own remuneration was being discussed.
The Committee consulted with the Chief Executive Officer
and received recommendations from him in respect of his
direct reports.
Company overview
Strategic report
Governance
Financial statements
116
Bodycote plc Annual Report 2024
Additional information
Directors’ report on remuneration continued
Statement of shareholder voting and shareholder engagement
At the 2024 AGM, the 2023 Directors’ remuneration report was submitted to shareholders for approval. The Directors’ remuneration
policy was last approved by shareholders at the 2022 AGM. The votes received for each of these resolutions at the relevant meetings
are set out below:
2024 AGM held on
30 May 2024
Nature of vote
Total number of
votes cast
(excluding abstentions)
For (%)
Against (%)
Abstentions
Approve the
2023 Directors’
Remuneration Report
Advisory
163,963,356
96.2%
3.8%
5,332
2022 AGM held on
25 May 2022
Nature of vote
Total number of
votes cast
(excluding abstentions)
For (%)
Against (%)
Abstentions
Approve the Directors’
Remuneration Policy
Binding
157,982,504
76.6%
23.4%
11,802,612
The Committee recognises that more than 20% of votes were cast against this resolution at the AGM held in 2022. As a result,
and in accordance with Provision 4 of the UK Corporate Governance Code, engagement with key investors and proxy advisers was
undertaken to better understand the views expressed. These views have been noted as part of the remuneration policy review which
was undertaken during 2024. The Remuneration Policy will be subject to shareholder review at the upcoming AGM to be held on
21 May 2025.
Governance
The Board and the Committee consider that, throughout 2024
and up to the date of this report, the Company has complied
with the provisions set out in the UK Corporate Governance Code
relating to Directors’ remuneration. In addition, relevant
guidelines issued by prominent investor bodies and proxy
voting agencies have been presented to and considered by the
Committee throughout the year. The Committee endeavours
to consider executive remuneration matters in the context of
alignment with risk management and, during the year, had
oversight of any related factors to be taken into consideration.
The Committee believes that the remuneration arrangements in
place do not raise any health and safety, environmental, social or
ethical issues, nor inadvertently motivate irresponsible behaviour.
Annual General Meeting
As set out in my statement on page 94, the Directors’ Report on
Remuneration, including the Annual Report on Remuneration,
and the Remuneration Policy will be subject to shareholder votes
at the AGM to be held on 21 May 2025.
On behalf of the Board:
Cynthia Gordon
Chair of the Remuneration Committee
13 March 2025
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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
UK-adopted international accounting standards and the 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 UK-adopted international accounting
standards 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 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 also 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 UK-adopted international accounting
standards, give a true and fair view of the assets, liabilities,
financial position and profit 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 and financial position 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
04
IN THIS SECTION
Independent auditors’ report
120
Consolidated income statement
129
Consolidated statement of comprehensive income
129
Consolidated balance sheet
130
Consolidated cash flow statement
131
Consolidated statement of changes in equity
132
Group accounting policies
133
Notes to the consolidated financial statements
141
Company balance sheet
166
Company statement of changes in equity
167
Company accounting policies
168
Notes to the Company financial statements
170
FINANCIAL
STATEMENTS.
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Additional information
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 2024 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 UK-adopted
international accounting standards as applied in accordance with the provisions 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,
including 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 2024 (the “Annual
Report”), which comprise: the Consolidated and the Company balance sheets as at 31 December
2024; the Consolidated income statement and the Consolidated statement of comprehensive
income, the Consolidated cash flow statement, and the Consolidated and the Company statements
of changes in equity for the year then ended; the Group and the Company accounting policies; and
the notes to the Consolidated and Company financial statements.
Our opinion is consistent with our reporting to the Audit Committee.
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.
Other than those disclosed in Note 28 to the consolidated financial statements, we have provided
no non-audit services to the Company or its controlled undertakings in the period under audit.
Our audit approach
Overview
Audit scope
– Our audit included full scope audits of twenty-one components (two of which are financially
significant due to their relative size); audit procedures over certain financial statement line items
were also performed at six further components as well as other Group level audit procedures.
This gave us coverage of 75% of the Group’s revenue and 71% of the Group’s absolute adjusted
profit before taxation. There were no significant changes to the Group’s operations during the year.
Key audit matters
– Accounting for the Optimisation programme (Group and Company)
– Valuation of other intangible assets – Lake City Heat Treating acquisition (Group)
– Valuation of goodwill (Group)
– Valuation of the ERP intangible asset (Group and Company)
– Valuation of uncertain tax positions (Group)
– Valuation of the defined benefit obligations of the UK scheme (Group and Company)
Materiality
– Overall Group materiality: £6,000,000 (2023: £6,200,000) based on approximately 5% of
adjusted profit before tax.
– Overall Company materiality: £7,000,000 (2023: £4,300,000) based on approximately 1% of total
assets but capped at £3,500,000 (2023: £2,500,000) for the purposes of the Group audit.
– Performance materiality: £4,500,000 (2023: £4,650,000) (Group) and £5,250,000 (2023: £3,200,000)
but capped at £2,625,000 (2023: £1,875,000) for the purposes of the Group audit (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.
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.
Accounting for the Optimisation programme (Group and Company), Valuation of other intangible
assets – Lake City Heat Treating acquisition (Group) and Valuation of the ERP intangible asset
(Group and Company) are new key audit matters this year. Otherwise, the key audit matters below
are consistent with last year.
Independent auditors’ report to the members of Bodycote plc
Report on the audit of the financial statements
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Additional information
Key audit matter
How our audit addressed the key audit matter
Accounting for the Optimisation programme (Group and Company)
Refer to Note 3 (Exceptional items), Note 9 (Property, plant and equipment) and Note 19
(Provisions) of the consolidated financial statements and the areas of focus in the
Report of the Audit Committee.
In December 2024 the Group announced an Optimisation programme (“the
Programme”), which has resulted in the closure, or planned closure, of a number of
sites across the Group, a revised strategy and operational focus and the removal of
certain non-core operational lines which will no longer be used. The Programme has
resulted in additional costs associated with severance and redundancy and site
closures, including the impairment of property, plant and equipment no longer planned
for use in the business.
Management has presented the associated costs as exceptional items. There is
judgement as to whether the costs are exceptional, as well as over the point at which
the associated costs of the Programme should be recognised. The provisions for
redundancies and site closures, and the recognition of impairments, include estimation
where the final costs are not yet known, or judgement as to whether assets have
further use to the business in the short term.
Certain costs recognised were recorded in the Company financial statements and
therefore the key audit matter is relevant for both the Group and the Company.
We identified a significant risk over the valuation of provisions recognised and assets
impaired, given the estimation and judgement involved in the associated accounting
treatment. Given the level of audit effort and judgements involved, this was a key
audit matter.
With respect to the accounting for the optimisation programme, we performed the following audit procedures:
We reviewed management’s accounting policies and presentation of the items recorded as exceptional.
We challenged the judgements and estimates made by management; our audit work in this area was supported
by our component teams.
For provisions recognised our audit work included verifying the internal announcements made to impacted
plants and/or employees and testing the accuracy of the amounts recorded. In particular, we focused on
whether constructive obligations existed for these events at the year end.
For the impairment of assets, we tested that the charges recognised represented a full impairment of the
carrying value of the assets that are no longer to be used or sold. Where assets had not been fully impaired,
we tested that the assets will continue to be used in the short term, and that the residual value retained after
recognition of an impairment charge is supported by the remaining expected useful economic lives.
Where plant closures or equipment scrappage was significant, we also obtained the relevant approval from
executive management to proceed with that capital initiative.
We considered whether the presentation of these items as exceptional was in accordance with the Group’s
accounting policy and other guidance in this area.
We considered the appropriateness of the disclosures in the consolidated financial statements.
Based on the audit procedures performed, we noted no material issues.
Valuation of other intangible assets – Lake City Heat Treating acquisition (Group)
Refer to Note 7 (Goodwill), Note 8 (Other intangible assets) and Note 22 (Acquisition of
business) of the consolidated financial statements and the areas of focus in the Report
of the Audit Committee.
In January 2024 the Group completed the acquisition of Lake City Heat Treating,
recognising £39.9m of other intangible assets, mainly relating to customer
relationships (£39.4m). The valuation of the other intangible assets is complex and
subject to a number of judgements.
Given the complexity involved and the material quantum of the accounting estimate,
we identified the valuation of the other intangible assets recognised as a significant
risk. The nature of the risk and the related audit effort resulted in this being a key
audit matter.
With respect to the valuation of the other intangible assets recognised on the Lake City Heat Treating acquisition,
we performed the following audit procedures:
– We engaged our internal valuation experts to support us in our assessment of the completeness of the
intangible assets identified and the appropriateness of the methodology adopted by management to value
the intangible assets identified as part of the acquisition.
– With our internal valuation experts, we evaluated the appropriateness of the key assumptions used to value
the intangible assets. In particular, our work focused on customer relationships given the value attributed to
this intangible asset. Our procedures assessed the appropriateness of assumptions around forecast cash
flows for the business, the customers identified, the discount rate and the attrition rates applied.
– We challenged the forecast cash flows by considering the historical performance and growth of the acquired
business, the relative performance of parts of the existing business of the Group as well as external market
data for the relevant sectors.
We considered the appropriateness of the disclosures in the consolidated financial statements.
Based on the audit procedures performed, we noted no material issues.
Independent auditors’ report to the members of Bodycote plc continued
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Additional information
Key audit matter
How our audit addressed the key audit matter
Valuation of goodwill (Group)
Refer to Note 3 (Exceptional items) and Note 7 (Goodwill) of the consolidated financial
statements, as well as the areas of focus in the Report of the Audit Committee.
The Group has recognised £207.0m (2023: £221.5m) of goodwill in the consolidated
balance sheet as at 31 December 2024. Management recorded an impairment charge
against goodwill of £18.0m in respect of the NA AGI CGU during the year.
For the cash generating units (“CGUs”) to which goodwill relates (which require an
annual impairment test), the determination of the recoverable amount, being the higher
of value in use 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 volumes and pricing trends in those industries in
which its customers operate, which impacts future cash flows, and the determination
of the most appropriate discount rate. Where a FVLCD approach was applied, this
assessment also considered the forecast cash flows from the Optimisation programme.
We identified the North America Automotive & General Industrial (“NA AGI”) and
North America Surface Technologies (“NA ST”) goodwill balances as significant audit
risks due to the lower level of headroom relative to the carrying value of these CGUs
and the material goodwill balances held in these CGUs.
The nature of the risk and the related audit effort resulted in this being a key
audit matter.
With respect to the valuation of goodwill, we performed audit procedures as set out below.
Our audit procedures were focused on the significant risk CGUs – NA AGI and NA ST:
– We tested the integrity of management’s impairment calculation and its mathematical accuracy,
and corroborated the forecasts used to the Board approved budget and High-Level Plan.
– We performed lookback reviews to understand how accurate management has been in its forecasting
historically and to verify historic growth rates achieved.
– We challenged management’s key assumptions for revenue, profit and cash flow forecasts by comparing
them with third party industry market data, where available, and considered the allocation of central costs and
central assets to the CGUs. In particular, we challenged management on the growth projections for the NA AGI
and NA ST business.
– We utilised internal valuation experts to assess the long-term growth assumptions beyond year 5, by
comparing this to economic forecasts, and discount rates, by independently calculating a range for this rate.
– For NA AGI and NA ST, in light of the FVLCD approach adopted, we evaluated the appropriateness of
management’s expected improvements for the business under the Group’s Optimisation programme.
We also assessed the FVLCD against comparable market multiples for similar businesses.
– We agreed the underlying carrying values of the CGUs to audited financial information.
– We reviewed management’s sensitivity analyses to assess whether they were appropriate and also tested
their mathematical accuracy. We supplemented this with our own sensitivity analyses to determine if any
further impairment risks existed. We considered additional specific factors, including management’s
self-identified impacts of climate change, and were satisfied that the level of management’s sensitivity took
these factors into account.
– We recalculated the impairment charge recognised for NA AGI.
We considered the appropriateness of the disclosures in the consolidated financial statements,
which included an assessment of the presentation of the impairment charge recorded as an exceptional item.
Based on the audit procedures performed, we noted no material issues.
Independent auditors’ report to the members of Bodycote plc continued
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Additional information
Independent auditors’ report to the members of Bodycote plc continued
Key audit matter
How our audit addressed the key audit matter
Valuation of the ERP intangible asset (Group and Company)
Refer to Note 3 (Exceptional items) and Note 8 (Other intangible assets) of the
consolidated financial statements, and Note 3 (Intangible assets) of the Company
financial statements, as well as the areas of focus in the Report of the Audit Committee.
During the year the Group reassessed the planned roll-out of the ERP, which is
recognised as an intangible asset on the Consolidated and Company Balance Sheets.
During the year the Group abandoned the operations module which was under
development and recognised an impairment of £28.4m (2023: £nil). The finance and
procurement module has been retained and has not been impaired.
The impairment charge recognised in respect of the operations module has been
determined based on an allocation of the total external and internal costs incurred
in the overall ERP development. The allocation is an estimate and is therefore subject
to management judgement.
Given the material nature of the charge and the judgement involved, we identified an
elevated risk over the valuation of the ERP. The nature of the risk and the related audit
effort resulted in this being a key audit matter.
With respect to the valuation of the ERP we performed the following audit procedures:
– We verified the Board’s decision to abandon the operations module of the ERP and the appropriateness
of an impairment charge being recognised in the year under IAS 36.
– We obtained management’s assessment of the total ERP costs to be allocated between the operational
module and the finance and procurement module, and tested the allocation as set out below.
– For external costs that had been capitalised, we audited the allocation of costs to each ERP module based
on an analysis provided by management’s third-party service provider. We met with, and challenged the
service provider directly, to verify the cost allocation.
– For internal costs that had been capitalised, which were largely employee costs, we tested a sample of costs
to payslips to verify the accuracy of the amounts capitalised, and held corroborative discussions with a sample
of individual employees to verify that the allocation of their time was in line with management’s analysis
supporting the impairment charge.
– We performed sensitivity analysis to assess the impact of reasonably possible changes to management’s
assumptions, noting no material variances.
We considered the appropriateness of the disclosures in the consolidated financial statements and the Company
financial statements. We also assessed the presentation of the impairment charges recorded as exceptional
items. Based on the audit procedures performed, we noted no material issues.
Valuation of uncertain tax positions (Group)
Refer to Note 5 (Taxation Charge) and Note 17 (Deferred Tax) of the consolidated
financial statements and the areas of focus in the Report of the Audit Committee.
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 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 of £24.9m
(2023: £26.4m). The nature of the risk and the related audit effort resulted in this being
a 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 audit procedures 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.
– Reviewing 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.
– Understanding management’s rationale based on internal analysis and other supporting information.
– Assessing significant transactions to identify uncertain tax positions that may arise from those transactions.
– Determining whether the tax provisions were recognised and measured in accordance with the relevant
accounting standards.
In addition, we considered the appropriateness of the disclosures in the consolidated financial statements.
Based on the audit procedures performed, we noted no material issues.
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Additional information
Independent auditors’ report to the members of Bodycote plc continued
Key audit matter
How our audit addressed the key audit matter
Valuation of the defined benefit obligations of the UK scheme (Group and Company)
Refer to the Group’s accounting policies, Note 26 (Retirement benefit schemes)
and the areas of focus in the Report of the Audit Committee.
The Group operates a number of defined benefit pension schemes across
different territories. The Group’s most significant scheme, which is held by the
Company and therefore relevant to the Company also, is the Bodycote UK Pension
Scheme (the “UK scheme”). The UK scheme had a defined benefit obligation of
£54.8m (2023: £62.7m) at 31 December 2024.
Accounting for the UK scheme is complex and necessitates a higher level of
audit effort.
The Group relies on management’s experts to determine the valuation of the
UK scheme’s defined benefit obligation, and the valuation involves estimation
and judgement in selecting appropriate actuarial assumptions.
On this basis we identified the valuation of the defined benefit obligation for the
UK scheme as an elevated risk for the audit. Given the heightened risk and greater
audit effort required, we have included it as a Key Audit Matter for both the Group
and the Company.
With respect to the UK scheme, the following procedures were performed:
– We assessed the pension assumptions used to derive the scheme obligations, including discount rates,
inflation and mortality, using our internal actuarial experts where necessary. We also considered and
challenged the appropriateness of the actuarial assumptions against our internally developed benchmark
ranges. In order to evaluate the reasonableness of management’s estimate, our experts also compared
their independent estimate to management’s estimate.
– We performed testing to verify that the obligations were consistent with the most recent funding
valuations and that the movement in the obligations during the year was reasonable.
We considered the appropriateness of the related disclosures in the consolidated and Company financial
statements. Based on the audit procedures performed, we noted no material issues.
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Additional information
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.
The financial statements are a consolidation of components, comprising the Group’s operating
businesses and centralised functions. 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 of other PwC network firms operating under our
instruction. Our audit included full scope audits of twenty-one components (two of which are
financially significant due to their relative size). The significant components were based in the USA,
audited by the Group audit team, and France. Audit procedures over certain financial statement
line items were also performed at six further components and central testing was performed on
selected items, such as goodwill, uncertain tax positions and the consolidation, primarily to ensure
appropriate audit coverage. This gave us coverage of 75% of the Group’s revenue and 71% of the
Group’s absolute adjusted profit before taxation.
Where the 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 whether sufficient
appropriate audit evidence had been obtained as a basis for our opinion on the 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. These instructions covered the significant areas that
should be addressed by the component auditors (which included the relevant risks of material
misstatement) and set out the information required to be reported back to the Group audit team.
We spent time with our material component teams during the interim and execution phases of the
audit, and we attended all their local clearance meetings. Throughout the audit, we also visited
our Czech Republic team at the Group’s Prague Shared Services Centre, given the extent of testing
they perform which supports the financial accounting for the majority of the Group’s European
businesses. In addition, we maintained our oversight of all component audit teams through regular
meetings and other forms of communication as considered necessary. We received reporting from
all our component teams, and supplemented this with remote and in-person working paper reviews
to satisfy ourselves as to the appropriateness of the audit work performed by each component team.
This, together with the additional procedures performed centrally at the Group level, gave us the
evidence we needed for our opinion on the financial statements as a whole.
Independent auditors’ report to the members of Bodycote plc continued
The impact of climate risk on our audit
In planning our work, including identifying areas of audit risk and determining an appropriate
response, we were mindful of the continued focus on the impact of climate change risk on
companies and their financial reporting, and also that the Group has identified climate change as
a principal risk. Climate change risk is expected to have an impact on the Group’s business as the
operations and strategy of the Group evolve to address the potential physical and transition risks
that could arise and the opportunities associated with climate change, including from its customer
base. Climate change-related initiatives and commitments impact the Group in a variety of ways,
as described within the Annual Report. We challenged the completeness of management’s climate
risk assessment by considering the appropriateness of extending the cash flows as modelled in the
Group’s impairment assessment into perpetuity and assessing how management had considered
the impact of the Group’s sustainability initiatives on the cash flows included in this assessment.
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:
Financial statements – Group
Financial statements – Company
Overall materiality
£6,000,000 (2023: £6,200,000).
£7,000,000 (2023: £4,300,000)
but capped at £3,500,000
(2023: £2,500,000) for the
purposes of the Group audit.
How we determined it
Approximately 5% of adjusted
profit before tax
Approximately 1% of total assets
Rationale for
benchmark applied
Adjusted profit before tax is
the primary benchmark used
by management and other
stakeholders in monitoring the
performance of the Group.
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 the purpose
of the Group audit, the allocated
component overall materiality
was capped at £3,500,000.
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Additional information
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 between
£500,000 and £4,500,000. Certain components were audited to a local statutory audit materiality
that was also less than our overall group materiality.
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% (2023: 75%) of overall materiality, amounting to
£4,500,000 (2023: £4,650,000) for the Group financial statements and £5,250,000 (2023: £3,200,000)
for the Company financial statements, capped at £2,625,000 (2023: £1,875,000) for the purposes of
the Group audit.
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 £300,000 (Group audit) (2023: £310,000) and £300,000 (Company audit)
(2023: £215,000) 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 downside scenario, including verifying the modelling
performed and compliance with the Group’s covenants on its borrowing facilities throughout
the going concern period;
– Agreeing the budget and forecasts used in the base case scenario to the Board approved
forecasts and evaluating the appropriateness of key assumptions used in determining these cash
flows, including considering these in the context of wider market data and the Group’s historical
performance; and
– Challenging the appropriateness of the severe but plausible downside scenario adopted by
management, including considering the relevant downside risks that the Group may face over
the going concern period.
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 Directors’ 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 2024 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’ report on Remuneration
In our opinion, the part of the Directors’ report on remuneration to be audited has been properly
prepared in accordance with the Companies Act 2006.
Independent auditors’ report to the members of Bodycote plc continued
Company overview
Strategic report
Governance
Financial statements
126
Bodycote plc Annual Report 2024
Additional information
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 and
Company 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 Statement of Directors’ responsibilities in respect of the financial
statements, 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations.
We design procedures in line with our responsibilities, outlined above, 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 taxation and employment law, including
legislation relating to pensions, 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 financial statements such as the Companies Act 2006. 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 meeting our defined risk criteria 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:
Independent auditors’ report to the members of Bodycote plc continued
Company overview
Strategic report
Governance
Financial statements
127
Bodycote plc Annual Report 2024
Additional information
– Discussions with management, Internal Audit, the Audit Committee and the Group’s internal
legal counsel, including consideration of potential instances of non-compliance with laws and
regulation and fraud;
– Reviewing minutes of meetings of those charged with governance including the Board,
Audit Committee and Remuneration Committee;
– Incorporating unpredictability into the audit procedures we performed;
– Substantive testing of journal entries which met a defined risk criteria; and
– Challenging assumptions and judgements made by management in their critical accounting
estimates and judgements, including the key audit matters described above.
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.
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.
Independent auditors’ report to the members of Bodycote plc continued
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 Directors’ report on remuneration to
be audited are not in agreement with the accounting records and returns.
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 six years, covering the years
ended 31 December 2019 to 31 December 2024.
Other matter
The Company is required by the Financial Conduct Authority Disclosure Guidance and Transparency
Rules to include these financial statements in an annual financial report prepared under the
structured digital format required by DTR 4.1.15R–4.1.18R and filed on the National Storage
Mechanism of the Financial Conduct Authority. This auditors’ report provides no assurance over
whether the structured digital format annual financial report has been prepared in accordance with
those requirements.
Timothy McAllister (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
13 March 2025
Company overview
Strategic report
Governance
Financial statements
128
Bodycote plc Annual Report 2024
Additional information
Consolidated income statement
For the year ended 31 December 2024
Note
2024
£m
2023
£m
Revenue
1
757.1
802.5
Cost of sales and overheads1
2
(647.8)
(694.4)
Other operating income
2
9.7
12.6
Other operating expenses1
2
(0.4)
(1.3)
Net impairment losses on financial assets
12,16
(2.4)
(0.2)
Operating profit before exceptional items
1,2
116.2
119.2
Exceptional items
3
(78.3)
–
Operating profit
2
37.9
119.2
Finance income
4
0.8
0.8
Finance charges
4
(10.3)
(8.3)
Profit before taxation
28.4
111.7
Taxation charge
5
(7.7)
(24.9)
Profit for the year
20.7
86.8
Attributable to:
Equity holders of the Parent
20.0
85.6
Non-controlling interests
0.7
1.2
20.7
86.8
Earnings per share
6
Pence
Pence
Basic
10.8
45.1
Diluted
10.7
44.8
1 Excludes exceptional items. Total cost of sales and overheads, including exceptional items are £648.5m (2023: £694.4m),
net impairment losses on financial assets are £2.7m (2023: £0.2m) and total other operating expenses including exceptional
items are £77.7m (2023: £1.3m).
The notes to the consolidated financial statements on pages 141 to 165 form an integral part of the
consolidated financial statements.
All activities have arisen from continuing operations.
Consolidated statement of comprehensive income
For the year ended 31 December 2024
Note
2024
£m
2023
£m
Profit for the year
20.7
86.8
Items that will not be reclassified to profit or loss:
Actuarial losses on defined benefit pension schemes
26
(0.3)
(0.1)
Tax on retirement benefit obligations that will not
be reclassified
17
(0.1)
–
Total items that will not be reclassified to profit or loss
(0.4)
(0.1)
Items that may be reclassified subsequently to
profit or loss:
Exchange losses on translation of overseas operations
(13.8)
(29.7)
Movements on hedges of net investments
16
4.1
1.5
Movements on cash flow hedges
(0.1)
0.4
Total items that may be reclassified subsequently
to profit or loss
(9.8)
(27.8)
Total other comprehensive expense for the year
(10.2)
(27.9)
Total comprehensive income for the year
10.5
58.9
Attributable to:
Equity holders of the parent
10.1
58.5
Non-controlling interests
0.4
0.4
10.5
58.9
The notes to the consolidated financial statements on pages 141 to 165 form an integral part of the
consolidated financial statements.
Company overview
Strategic report
Governance
Financial statements
129
Bodycote plc Annual Report 2024
Additional information
Consolidated balance sheet
At 31 December 2024
Note
2024
£m
2023
£m
Non-current assets
Goodwill
7
207.0
221.5
Other intangible assets
8
114.4
111.2
Property, plant and equipment
9
481.2
504.9
Right-of-use assets
10
56.4
58.5
Deferred tax assets
17
7.0
2.6
Trade and other receivables
12
2.8
1.3
868.8
900.0
Current assets
Inventories
11
28.1
29.5
Current tax assets
10.1
13.1
Trade and other receivables
12
141.3
148.4
Cash and bank balances
13
19.1
45.2
Assets held for sale
14
–
0.5
198.6
236.7
Total assets
1,067.4
1,136.7
Current liabilities
Trade and other payables
18
146.7
122.7
Current tax liabilities
5
32.2
46.0
Borrowings
15
87.4
32.6
Lease liabilities
10
13.1
11.8
Provisions
19
11.9
12.0
291.3
225.1
Net current (liabilities)/assets
(92.7)
11.6
Note
2024
£m
2023
£m
Non-current liabilities
Lease liabilities
10
50.4
52.5
Retirement benefit obligations
26
11.3
11.1
Deferred tax liabilities
17
41.2
51.8
Provisions
19
2.5
3.0
Other payables
18
0.8
0.9
106.2
119.3
Total liabilities
397.5
344.4
Net assets
669.9
792.3
Equity
Share capital
20
31.6
33.1
Share premium account
177.1
177.1
Own shares
(11.1)
(15.6)
Capital redemption reserve
131.3
129.8
Other reserves
10.0
10.1
Translation reserves
38.8
52.3
Retained earnings
290.4
404.0
Equity attributable to equity holders of the parent
668.1
790.8
Non-controlling interests
1.8
1.5
Total equity
669.9
792.3
The notes to the consolidated financial statements on pages 141 to 165 form an integral part of the
consolidated financial statements.
The financial statements of Bodycote plc, registered number 519057, were approved by the
Board of Directors and authorised for issue on 13 March 2025. They were signed on its behalf by:
Jim Fairbairn
Ben Fidler
Director
Director
Company overview
Strategic report
Governance
Financial statements
130
Bodycote plc Annual Report 2024
Additional information
Consolidated cash flow statement
For the year ended 31 December 2024
Note
2024
£m
2023
£m
Net cash from operating activities
23
152.6
191.6
Investing activities
Purchases of property, plant and equipment
9,18
(70.1)
(74.1)
Proceeds on disposal of property, plant and equipment
13.4
10.4
Purchases of other intangible assets
8
(4.1)
(8.3)
Acquisition of businesses, net of cash acquired
22
(52.2)
–
Net proceeds on disposal of business
3
0.4
–
Loans issued
(1.0)
–
Interest received
0.8
0.8
Net cash used in investing activities
(112.8)
(71.2)
Financing activities
Interest paid
(9.7)
(7.2)
Dividends paid
21
(42.9)
(40.6)
Principal elements of lease payments
(13.5)
(13.1)
Drawdown of bank loans
75.2
25.7
Repayments of bank loans
(19.0)
(61.8)
Ordinary shares purchased for share buyback
(57.7)
–
Own shares purchased to be held as treasury shares
–
(13.2)
Net cash used in financing activities
(67.6)
(110.2)
Net (decrease)/increase in cash and cash equivalents
(27.8)
10.2
Cash and cash equivalents at beginning of year
44.7
36.2
Effect of foreign exchange rate changes
(0.9)
(1.7)
Cash and cash equivalents at end of year
23
16.0
44.7
The notes to the consolidated financial statements on pages 141 to 165 form an integral part of the consolidated financial statements.
Company overview
Strategic report
Governance
Financial statements
131
Bodycote plc Annual Report 2024
Additional information
Consolidated statement of changes in equity
For the year ended 31 December 2024
Share
capital
£m
Share
premium
account
£m
Own
shares
£m
Capital
redemption
reserve
£m
Other
reserves
£m
Translation
reserves
£m
Retained
earnings
£m
Equity attributable
to equity holders
of the parent
£m
Non-
controlling
interests
£m
Total
equity
£m
1 January 2023
33.1
177.1
(5.2)
129.8
5.1
81.2
359.8
780.9
1.1
782.0
Profit for the year
–
–
–
–
–
–
85.6
85.6
1.2
86.8
Exchange differences on translation of
overseas operations
–
–
–
–
–
(28.9)
–
(28.9)
(0.8)
(29.7)
Movements on hedges of net investments
–
–
–
–
1.5
–
–
1.5
–
1.5
Movements on cash flow hedges
–
–
–
–
0.4
–
–
0.4
–
0.4
Actuarial gains on defined benefit pension
schemes net of deferred tax
–
–
–
–
–
–
(0.1)
(0.1)
–
(0.1)
Total comprehensive income for the year
–
–
–
–
1.9
(28.9)
85.5
58.5
0.4
58.9
Ordinary shares acquired
–
–
(13.2)
–
–
–
–
(13.2)
–
(13.2)
Settlement of share awards
–
–
2.8
–
(2.0)
–
(0.8)
–
–
–
Share-based payments
–
–
–
–
5.1
–
–
5.1
–
5.1
Deferred tax on share-based payment transactions
–
–
–
–
–
–
0.1
0.1
–
0.1
Dividends
–
–
–
–
–
–
(40.6)
(40.6)
–
(40.6)
31 December 2023
33.1
177.1
(15.6)
129.8
10.1
52.3
404.0
790.8
1.5
792.3
Profit for the year
–
–
–
–
–
–
20.0
20.0
0.7
20.7
Exchange differences on translation of
overseas operations
–
–
–
–
–
(13.5)
–
(13.5)
(0.3)
(13.8)
Movements on hedges of net investments
–
–
–
–
4.1
–
–
4.1
–
4.1
Movements on cash flow hedges
–
–
–
–
(0.1)
–
–
(0.1)
–
(0.1)
Actuarial losses on defined benefit pension
schemes net of deferred tax
–
–
–
–
–
–
(0.4)
(0.4)
–
(0.4)
Total comprehensive income for the year
–
–
–
–
4.0
(13.5)
19.6
10.1
0.4
10.5
Ordinary shares acquired
(1.5)
–
–
1.5
–
–
(90.6)
(90.6)
–
(90.6)
Settlement of share awards
–
–
4.5
–
(4.7)
–
0.2
–
–
–
Share-based payments
–
–
–
–
0.6
–
–
0.6
–
0.6
Dividends
–
–
–
–
–
–
(42.8)
(42.8)
(0.1)
(42.9)
31 December 2024
31.6
177.1
(11.1)
131.3
10.0
38.8
290.4
668.1
1.8
669.9
Notes to the consolidated financial statements on pages 141 to 165 form an integral part of the
consolidated financial statements.
Other reserves include a share-based payments reserve of £5.5m (31 December 2023: £9.7m).
The capital redemption reserve of £131.3m consists of £129.8m transferred from retained earnings
on the conversion of B shares into deferred shares in 2008 and 2009 and £1.5m arising on the share
buyback programmes announced in January 2024 and December 2024. As at 31 December 2024
8,558,676 shares with a nominal value of 173/11p had been repurchased under the share buyback
programmes which were announced in January 2024 (commenced March 2024) and December 2024
(to commence in 2025), for a total consideration of £57.7m (including costs £0.4m). A liability of
£32.9m has been recognised relating to the Group’s remaining contractual commitment to buy
shares under the share buyback programmes as at 31 December 2024. Refer to note 20 for
more information.
The own shares reserve represents the cost of shares in Bodycote plc purchased in the market and
held by the Bodycote International Employee Benefit Trust to satisfy share-based payments under
the Group’s incentive schemes. As at 31 December 2024, 1,627,781 (31 December 2023: 2,292,243)
ordinary shares of 173/11p each were held by the Bodycote International Employee Benefit Trust.
Company overview
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Governance
Financial statements
132
Bodycote plc Annual Report 2024
Additional information
Group accounting policies
Year ended 31 December 2024
Basis of preparation
The financial statements of the Group have been prepared in accordance with UK-adopted
international accounting standards as applied in accordance with the provisions of the Companies
Act 2006. The financial 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.
The accounting policies have been applied consistently throughout the current and preceding year.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of Bodycote plc
(‘the Company’) and entities controlled by the Company (its subsidiaries and together, ‘the Group’)
made up to 31 December 2024. A subsidiary is an entity controlled, directly or indirectly, by the
Company. Control exists when the Company has power to direct the activities of an entity that most
significantly affect its returns, exposure or rights to the variable returns of the entity and the ability
to use its power to affect its returns.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated
income statement from the date that the Company obtains control of the subsidiary until the date
that its control ceases. Where necessary, adjustments are made to subsidiary financial statements
to bring their accounting policies 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 equity attributable to
shareholders of the parent. Non-controlling interests that represent current ownership interests
entitling their holders to a proportionate share of net assets upon liquidation are initially measured
at fair value. Subsequent to acquisition, the carrying amount are adjusted for the non-controlling
interests’ share of subsequent profits and losses less any distributions made to the non-controlling
interest holders.
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 both 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 adjustment to a non-controlling interest 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 consolidated 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 Directors have considered the current and plausible impact of macroeconomic factors in
preparing their going concern assessment, including ongoing conflicts, energy price instability,
global manufacturing trends and other factors and risks on the Group’s activities, performance
and revenue. The Group has modelled a base case, which reflects the Directors’ current
expectations of future trading in addition to potential severe but plausible impacts on revenue,
profits and cash flows in a downside scenario.
In preparing the scenarios, the assessment has considered both liquidity and compliance with the
Group’s covenants. 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 a one-time
acquisition spike at 3.5x) and the minimum interest cover ratio permitted is 4.0x. In both the base
case and the severe but plausible downside scenario modelled, the Group continues to maintain
sufficient liquidity and meet its gearing and interest cover covenants under the Revolving Credit
Facility with substantial headroom.
Management’s base case scenario is built upon the budgeting and forecasting processes for 2025
and extended up to June 2026. It includes the £30m share buyback extension that was announced
in December 2024. This model shows an improvement in performance in both revenue and profits
compared to 2024. The Group’s recent record of cash conversion was used to estimate the cash
generation and level of net debt over that period.
The severe but plausible downside scenario assumes a significant decline in revenue of around
16% below the base case modelled through to the end of June 2026, giving a 13% year on year
decline in 2025. This downside takes account of short-term negative shock events specific to
the Group’s end-markets which are intentionally more severe that those used in the impairment
analysis. In mitigation to this severe sales decline, a 5% reduction in maintenance capital
expenditure and a 50% reduction in other capital expenditure compared to the base case has been
assumed, together with an assumption that there is no growth in dividends from 2024 to 2025.
Management also performed a reverse stress test. This indicated that 2025 revenue would
need to decline by over 21% compared to 2024 levels with no growth in 2026 before the Group’s
loan covenants were breached at the June 2026 test date. In this scenario, minimum liquidity
was over £50m throughout the entire period. This scenario included the same mitigations as the
downside scenario.
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 predominantly the Group’s Revolving Credit Facility.
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The Group has access to a £251.0m Revolving Credit Facility maturing in September 2029.
The Group’s committed facilities as at 31 December 2024 totalled £259.7m while uncommitted
facilities totalled £62.3m. At 31 December 2024, the Group’s committed facilities had drawings
of £84.3m (2023: £32.2m) and the Group’s net debt (excluding lease liabilities) was £68.3m
(2023: net cash (excluding lease liabilities) of £12.6m). The liquidity headroom was £194.4m as at
31 December 2024 (2023: £273.5m), excluding uncommitted facilities.
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 from the approval date of the
consolidated financial statements. For this reason, the Directors continue to adopt the going
concern basis in preparing the consolidated financial statements.
Revenue recognition
The Group predominantly has one revenue stream relating to thermal processing services with
either identifiable customer contracts or specific terms and conditions that constitute a contract.
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 time frame. Revenue is recognised on completion of the
service rendered as any spreading of revenue over a short time frame during which some services
are performed 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.
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
recognising the related revenue on a gross basis, with related costs included in cost of sales and
overheads in the consolidated income statement. In circumstances where the Group involvement
with the third party is considered to be an agency activity the revenue and direct costs of sale are
recorded on a net basis in revenue in the consolidated income statement.
Other operating income
Other operating income represents asset sales, government support, scrap sales and other items
of operating income not generated in the normal course of business.
Other operating expenses
Other operating expenses are generated from activities outside of the Group’s normal course of
business, which includes redundancy and severance payments, impairments of assets and other
items of operating expenses not generated in the normal course of business.
Group accounting policies continued
Year ended 31 December 2024
Foreign currencies
Transactions in currencies other than an entity’s 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 denominated in foreign currencies are retranslated at the rates prevailing on the
balance sheet date, with gains and losses arising on retranslation included in net profit or loss for
the period. Non-monetary items that are measured in terms of historical cost in a foreign currency
are not retranslated.
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 page 155); 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 exchange differences 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. Where exchange
differences arise they are classified as equity and transferred to the Group’s translation reserve.
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 grants
Economic support provided to the Group as part of government and state initiatives to support local
economies is recorded in the consolidated 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.
General economic support is presented within other operating income in the consolidated income
statement or, where appropriate, net against the applicable costs within cost of sales and overheads.
Operating profit
Operating profit is stated after charging restructuring costs, goodwill impairment, impairment of
tangible and intangible assets, amortisation of acquired intangible assets, support from government
assistance, but before finance income and finance costs.
Dividends
Interim dividend distributions to Bodycote plc’s ordinary shareholders are recognised when paid.
Final dividends are accrued when approved by the ordinary shareholders at the Group’s Annual
General Meeting.
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Group accounting policies continued
Year ended 31 December 2024
Borrowing costs
Borrowing costs are recognised as finance costs in the consolidated income statement in the period
in which they are incurred. Borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets which 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 when 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 collective 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, costs associated with significant restructuring and reorganisations
and directly related actions, impairment charges, significant profits and losses on disposal of
subsidiaries and other one-off items which meet this definition. Subsequent adjustments to items
previously recognised as exceptional will normally also be reflected as exceptional items in
future periods.
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 net fair value of the identifiable assets, liabilities and contingent liabilities of a subsidiary at the
date of acquisition. If 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 consolidated income statement.
Goodwill is not amortised but is allocated to cash generating units (CGU’s) and tested annually for
impairment or more frequently when there is an indication that the unit may be impaired. If the
recoverable amount of the CGU is less than its carrying amount, the impairment loss is allocated
first to reduce the carrying amount of any goodwill allocated to the CGU and then to assets of the
CGU on a pro-rata basis. Any impairment loss recognised for goodwill cannot be reversed in a
subsequent period.
On disposal of an operation, the attributable amount of goodwill is calculated based on the relative
value of the operation disposed of and the portion of the CGU/Group of CGUs retained, and included
in the determination of the profit or loss on disposal.
Other intangible assets
Intangible assets with finite useful lives acquired separately are carried at cost less accumulated
amortisation and 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 are initially recognised at fair value at the acquisition date (regarded as their
cost) and subsequently reported at cost less accumulated amortisation and impairment losses.
Costs associated with maintaining software programmes are recognised in the consolidated income
statement within cost of sales and overheads. Development costs directly attributable to the design
and testing of identifiable and unique software products controlled by the Group are recognised as
intangible assets and include third-party costs and employee costs. These assets are amortised
from the month in which the asset is available for its intended use.
Annual licence agreements to use Cloud software are treated as a service agreement and
recognised in the consolidated income statement within cost of sales and overheads.
Perpetual licences to use Cloud software are capitalised if the Group has both a contractual
right to the software and the ability to run the software independently of the host vendor.
Customisation and configuration costs related to the implementation of a Cloud-based solution
are expensed unless they create an asset that is separate and identifiable from the software.
Amortisation of intangible assets is recognised in the consolidated income statement within cost of
sales and overheads on a straight-line basis over their estimated useful lives, on the following bases:
Software
7%–33%
Non-compete agreements
20%–33%
Customer relationships
7%–10%
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised
impairment loss.
Depreciation is charged to the income statement within cost of sales and overheads and on a
straight-line basis to write down the value of assets over their estimated useful lives at the
depreciation rates below. Land is not depreciated.
The principal rates for depreciation are as follows:
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 recognised within other
operating 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 and depreciated when the assets are ready for their intended use and
have been transferred to their appropriate asset class.
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Group accounting policies continued
Year ended 31 December 2024
Right-of-use assets and lease liabilities
Costs in respect of lease arrangements that are short-term in nature or relate to low value assets
are charged directly to the consolidated income on a straight line basis over the term of the lease.
Short-term leases are leases with a lease term of 12 months or less. Low value assets are those with
a value of less than £1,000.
A lease liability is recorded in respect of all other leases. The liability is measured at the present
value of the future lease payments, including fixed payments, any amounts expected to be payable
by the Group under residual value guarantees and the exercise price of purchase options where
it is reasonably certain that the option will be exercised, less any lease incentives receivable.
The liability is generally discounted using the lessee’s incremental borrowing rate except in the rare
circumstances in which the interest rate implicit in the lease is easily determinable. Finance charges
are recognised within finance charges in the consolidated income statement over the term of the
lease. A related right-of-use asset is recognised, which is measured on initial recognition at cost.
Cost is determined based on the amount initially recognised in respect of the lease liability plus
advance lease payments, direct costs incurred, and an estimate of the dismantling, removal and
restoration costs required by the terms and conditions of the lease. Right-of-use assets are
subsequently measured at cost less accumulated depreciation and impairment losses.
Depreciation is charged to the consolidated income statement from the lease commencement
over the shorter of the useful economic life of the leased asset and the lease term unless the lease
contains a purchase option which is reasonably certain to be exercised, in which case the asset is
depreciated over the useful economic life of the asset.
If a lease contains an option to extend, then the lease term is determined by taking into account any
extension periods for which it is reasonably certain that the Group will exercise its option to extend.
Contracts may contain both lease and non lease components. The Group allocates the consideration
in the contract to the lease and non-lease components based on their relative stand-alone prices.
If a leased asset is sub-let to a third party then the Group assesses whether the sub-lease is a finance
or operating lease. If it is an operating lease then the rentals receivable are recorded in the income
statement as they are earned. If it is a finance lease then a receivable is recorded representing the
rental income receivable under the sub-let and the right of use asset under the lease is
derecognised. Interest income is recognised in respect of the lease receivable.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its tangible, right-of-use and
intangible assets to determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, or an asset is not in use and therefore requires an
annual test, the recoverable amount of the asset is estimated in order to determine the extent of any
impairment loss.
Recoverable amount is the higher of fair value less costs to dispose and value-in-use. In assessing
value-in-use, the estimated future nominal cash flows are discounted to their present value using a
nominal 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 the asset is estimated to be less than its carrying amount, the carrying
amount of the asset is reduced to its recoverable amount and an impairment loss is recognised in
the consolidated income statement.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to
the lower of the asset’s revised recoverable amount and 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 in the consolidated income statement.
Assets held for sale
Assets are classified and presented as held for sale at the lower of their 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 in its current condition.
Assets categorised as held for sale are not depreciated.
Business combinations
Acquisitions of subsidiaries and businesses are accounted for under IFRS 3. The consideration for
each acquisition is measured at the aggregate of the fair values at the acquisition date of the 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 the consolidated income
statement as incurred.
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 for:
– Deferred tax assets or liabilities, liabilities or assets related to employee benefit arrangements,
are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 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.
Subsequent changes in fair values are adjusted against the cost of the 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 IFRS standards.
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Group accounting policies continued
Year ended 31 December 2024
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 is calculated in accordance with a
qualified actuarial evaluation and spread over the period during which the benefit is expected to be
derived from the employees’ services. The Group’s net obligation or surplus in respect of defined
benefit pension schemes is calculated separately for each scheme by a qualified actuary using the
projected unit method by estimating the amount of future benefit that employees have earned in
return for their service in the current and prior periods less the fair value of the scheme’s assets.
Past service costs resulting from scheme amendments or curtailments and gains or losses on
settlements are charged to the consolidated income statement. If the calculation results in a surplus,
the recognised asset is limited to the present value of benefits available in the form of future refunds
from the plan or reductions in future contributions.
The average discount rate for the schemes’ liabilities is based on investment grade rated corporate
bonds or similar government bonds of suitable duration and currency. Scheme 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 consolidated 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.
On plan settlement, a gain or loss on settlement is calculated as the difference between the present
value of the defined benefit obligation being settled as determined on the date of the settlement and
the settlement price including any plan assets transferred, and any payments made directly by the
Group in connection with the settlement. This gain or loss is recognised in the income statement or
other comprehensive income at the time of settlement, depending on the nature of how the gain
or loss arises.
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 it is deemed more appropriate for the
respective business. For finished goods and work-in-progress the cost comprises of direct materials
and where applicable, direct labour costs and 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 based on
their fair value 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. With the exception of the Group’s borrowings, and certain tax
provisions, financial liabilities are not generally interest-bearing.
Trade Receivables
Trade receivables and other receivables that have fixed or determinable payments that are not
quoted in an active market are classified as ‘receivables’. Trade receivables are measured at original
invoice amount (which is considered fair value) and subsequently held at amortised cost using the
effective interest method, less any impairment allowances for estimated irrevocable amounts.
Trade receivables do not carry any interest and are therefore stated at their nominal value less
allowances for expected credit losses (ECL) and estimated irrecoverable amounts.
A simplified lifetime (ECL) model is used to assess trade receivables for impairment where the 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 within costs of sales and overheads 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. Overdrafts are presented as gross or offset against cash and
bank balances depending on whether the Group has the right and intention to settle the balances
as net.
Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at fair value, net of transaction costs.
Finance charges, including premiums payable on settlement or redemption, and direct issue costs,
are accounted for on an accruals 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.
Derivative financial instruments
The use of financial derivatives is governed by the Group’s policies approved by the Board of
Directors, which provide written principles for the use of derivative financial instruments. The Group
uses derivative financial instruments, in particular foreign currency swaps, forward exchange
contracts and cross-currency interest rate swaps 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.
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 2024
Net investment hedge
The Group uses foreign currency denominated borrowings to hedge its exposure to changes in the
underlying value of net assets (translation exposure) in certain of its 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
nominal value 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 other reserves. The gain or loss relating to any ineffective portion is recognised
immediately in the consolidated income statement and is included in other operating income
or expenses.
Cash flow hedge
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 of the 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 other reserves. Any gain or loss relating to any ineffective portion is recognised
immediately in the consolidated income statement and is included in other operating income or
expenses. If the hedged item results in the recognition of a non-financial asset, the accumulated
gains or losses are included within the initial cost of the asset at the time that the asset is recognised.
Hedge accounting is discontinued when the instrument expires or is sold, exercised or if it no longer
meets the criteria for hedge accounting. If a forecasted transaction subject to hedge accounting is
no longer expected to occur, the accumulated gain or loss in the hedging and translation reserve
is recognised immediately in the consolidated income statement.
Trade and other payables
Trade and other payables are recognised at fair value which is the amounts expected to be paid to
counterparties. They are 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 the initial recognition of 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.
Current and deferred tax assets and liabilities are offset when they relate to income taxes levied by
the same taxation authority and the Group is able to, and intends to, settle its current tax assets and
liabilities on a net basis.
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Group accounting policies continued
Year ended 31 December 2024
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a
result of a past event, it is probable that the Group will be required to settle that obligation and
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 are 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 share-based payments reserve.
Critical accounting judgements and significant accounting estimates
Preparing the consolidated financial statements and applying the Group’s accounting policies
requires management to make estimates and judgements that affect 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 critical accounting judgements made in applying the Group’s accounting policies are set
out below:
– 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 that 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 assessments. There can also be estimation involved in determining
the quantum of any provision recognised in respect of uncertain tax positions. In the event that
future assessments differ to the amounts provided, a subsequent tax charge or credit may arise.
Further detail is included in notes 5, 17 and 27.
– In line with previous years the Group has not recognised an asset in relation to the surplus on the
UK defined benefit pension scheme on the basis that the Group has concluded that it does not
have an unconditional right to a refund from the scheme. Determining whether the Group has a
right to a refund is a legal matter that requires significant judgement. Further detail on the Group’s
pensions is included, in note 26.
– During 2024 the Group recognised an impairment of £28.4m in relation to the operations
module of the Group’s ERP following a decision to cease its development and deployment.
Management performed an analysis of the amounts capitalised in respect of the wider ERP
programme to determine how much of the costs related to the operations module and how
much related to the finance and procurement modules which continue to be deployed across
the business. Undertaking that analysis required significant judgement, particularly in respect
of certain items of historical cost that support both modules.
– The Group has separately disclosed exceptional costs of £78.3m in the consolidated income
statement during the year relating to the impairments of the Group’s ERP operations module,
the impairment of goodwill in our North American AGI CGU and the costs of the Group’s strategic
restructuring programme announced in December 2024. Determining which costs meet the
definition of exceptional items involves significant judgement. Further detail of the amounts
reported as exceptional items in included in note 3.
Significant accounting estimates
The critical estimates made in applying the Group’s policies are summarised below:
– During the year the Group has recognised an impairment of £18.0m in respect of the goodwill
contained within the NA AGI CGU. Determining the recoverable amount of a CGU involves
significant estimation including estimates of future revenue and profit growth, discount rates
and long term growth rates. In the event that those estimates are not reflected in future trading,
further impairments could arise. Further detail of the estimates taken and the sensitivity of the
goodwill balance to changes in those estimates is included in note 7.
Other areas of judgement and accounting estimates
– The economy in Turkey is subject to high inflation and has qualified as a hyperinflationary
economy since 2022. The Group has concluded that applying IAS 29 (Financial Reporting in
Hyperinflationary Economies) would not have a material effect on the Group’s financial
statements and on that basis has not applied IAS 29. The Group will continue to assess this
judgement in future years.
– The valuation of intangible assets arising on the acquisition of Lake City Heat Treating requires
an assessment of the fair value of those assets. Refer to note 22 for further information.
That assessment requires the business to determine the future benefits that a market participant
would expect to obtain from those assets as well as a discount rate and so is subject to significant
estimation. If different estimates were used, the valuation of goodwill and intangible assets
arising on the acquisition would change with no effect on profit.
Company overview
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Bodycote plc Annual Report 2024
Additional information
Group accounting policies continued
Year ended 31 December 2024
– The Group recognises climate change as a principal risk. In preparing the consolidated financial
statements, the Directors have considered the impact of climate change as summarised in the
disclosures included in the Sustainability section on pages 48 to 56 of the Strategic report.
These considerations did not have a material impact on the financial reporting judgements and
estimates, consistent with the conclusion that climate change is not expected to have a significant
impact on the Group’s cash flows, including those considered in the going concern and viability
assessments. The Group’s view is that climate change does not create any further key source of
estimation uncertainty at this time and that growing awareness of climate change and customer
sustainability targets will provide opportunities for growth as we provide services and solutions
that increase efficiency and reduce energy use.
Adoption of new, revised standards and interpretations applied
in the current year
The following amendments to standards became effective for annual reporting periods
commencing on or after 1 January 2024. The amendments did not have a material effect on the
Group’s financial statements and the Group did not have to change its accounting policies or make
retrospective adjustments as a result of adopting these amendments.
– Non-current Liabilities with Covenants (amendments to IAS 1). The amendments modify the
requirements for the classification of debt and other financial liabilities as current or non-current
in particular circumstances.
– Amendments to IFRS 16 (leases). The amendments require a seller-lessee to subsequently
measure lease liabilities arising from a leaseback in a way that it does not recognise any amount
of the gain or loss that relates to the right of use that it retains.
– Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7). The amendments details
what constitutes a supplier finance arrangement and introduces disclosure requirements in
respect of such arrangements.
New standards and interpretations not yet applied
At the date of authorisation of these consolidated financial statements, the Group has not applied
the following new and revised IFRS Standards and amendments that have been issued by the
International Accounting Standards Board (IASB) but which but are not yet effective. With the
exception of the amendments to IAS 21 in respect of a “lack of exchangeability” they have not yet
been endorsed for use in the UK. Other than the potential disclosure and presentation changes
required by IFRS 18, the amendments are not expected to have a material impact on the Group.
– IFRS 18 Presentation and disclosure in Financial Statements: On 9 April 2024 the IASB issued
IFRS 18 to replace IAS 1 Presentation of Financial Statements with an effective date of
1 January 2027. IFRS 18 sets out the requirements for the presentation and disclosure of
information in financial statements. This standard introduces a number of new mandatory
categories, subtotals and totals to the income statement, gives further guidance on aggregation
and disaggregation of items, and introduces further requirements in respect of Management-
defined Performance measures. The Group is reviewing its potential effect on the presentation
of the financial statements.
– Amendments to IFRS 9 and IFRS 7: Contracts referencing nature-dependent electricity
arrangements. These amendments introduce requirements for the treatment of certain contracts
that expose an entity to variability in the underlying amount of electricity because the source of
electricity generation depends on uncontrollable natural conditions (for example, the weather).
They are not expected to have a material effect on the Group.
– Amendments to the Classification and Measurement of Financial Instruments.
These amendments make various changes to the treatment of certain financial instruments but
are not expected to have a material effect on the Group.
– Annual Improvements to IFRS Accounting Standards – Vol. 11. Volume 11 of the IASB’s annual
improvements includes a number of changes that affect hedge accounting on first time adoption,
disclosures about financial instruments, the derecognition of lease liabilities, de-facto agents,
and the use of the cost method. They are not expected to have a material effect on the Group.
– Amendments to IAS 21: Lack of exchangeability. These amendments set out how an entity
determines whether a currency is exchangeable and how to determine an appropriate exchange
rate when there is a lack of exchangeability. It is effective for reporting periods beginning on
or after 1 January 2025. The Group has reviewed the currencies of the countries in which it
operates and does not believe that any are subject to a lack of exchangeability. On that basis,
the amendments are not expected to have a material effect on the Group.
In addition the International Sustainability Standards Board (ISSB) has issued amendments to the
Sustainability Accounting Standards Board (SASB) standards effective for annual reporting periods
beginning on or after 1 January 2025:
– IFRS S1 (General requirements for disclosure of sustainability-related financial disclosure
– IFRS S2 (Climate related disclosures)
Throughout 2024 Bodycote has undertaken changes to its sustainability reporting and processes.
A gap analysis will be undertaken through 2025 to highlight any improvements needed and actions
undertaken to address all the requirements of the new sustainability disclosure standards.
Company overview
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Financial statements
140
Bodycote plc Annual Report 2024
Additional information
Notes to the consolidated financial statements
Year ended 31 December 2024
General information
Bodycote plc is a company incorporated in the United Kingdom under the Companies Act 2006.
The address of the registered office is given on page 83.
The nature of the Group’s operations and its principal activities, and information on the Group’s
objectives, are included within the Group’s Strategic report on page 17.
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 Parent Company. Foreign operations are included in accordance with the policies
set out in the Foreign Currencies accounting policy set out on page 134.
1. Business and geographical segments
The Group has 153 operational locations across the world providing a range of market sectors with
thermal processing services. After the completion of a strategic review during 2024, the Group has
reorganised its plants into three divisions:
– Specialist Technologies: This division includes the Group’s Hot Isostatic Pressing (‘HIP’) business;
its Speciality Stainless Steel Processes (S3P) business and its Surface Technology business.
– Precision Heat Treatment: This division includes the Group’s business centred on the controlled
heating and cooling of metals to obtain the desired mechanical, chemical and metallurgical
properties for the end process. It also includes the Group’s Low Pressure Carburising and
Corr-I-Dur processes.
– Non-core: As a result of its strategic review carried out in 2024, the business identified a number
of plants that form part of its strategic optimisation programme and are considered non-core.
These plants typically provide heat treatments services using older, less efficient and more
carbon intensive technologies. The Group is managing these sites with a view to merging them
with other plants in the portfolio, closing plants, or selling them over the coming 24 months.
The Group’s Chief Executive Officer is considered to be the Chief Operating Decision Maker
(‘CODM’) of the Group and reviews the results of each of the divisions on a monthly basis
focusing on adjusted operating profit which is defined as operating profit before acquisition costs,
amortisation of acquired intangibles and exceptional items. Accordingly, the three divisions
outlined above are considered to be the Group’s Operating and Reportable segments as defined
in IFRS 8 Operating Segments.
In determining the segments’ adjusted operating profit, the Group makes certain allocations of
costs that are incurred centrally to benefit each of the segments. To the extent that these costs are
of a nature that will continue to be incurred after the Group’s optimisation programme has been
completed, they have not been allocated to the non-core segment.
Prior to the strategic review in 2024, the business presented its results split into six Operating
Segments which were determined based on the geography of its plants and the preponderance of
markets that they served. The prior year segmental analysis has been restated to present it on a
consistent basis with the current year.
Specialist
Technologies
2024
£m
Precision
Heat
Treatment
2024
£m
Central
costs and
elimination
2024
£m
Total core
2024
£m
Non-core
2024
£m
Total
Group
2024
£m
Revenue
224.2
488.3
–
712.5
44.6
757.1
Result
Adjusted operating
profit/(loss)
65.0
83.0
(20.4)
127.6
1.4
129.0
Amortisation of
acquired intangible
assets
(8.7)
(1.3)
–
(10.0)
(0.4)
(10.4)
Acquisition costs
(2.4)
–
–
(2.4)
–
(2.4)
Operating
profit/(loss) before
exceptional items
53.9
81.7
(20.4)
115.2
1.0
116.2
Exceptional items
(2.1)
(21.7)
(30.7)
(54.5)
(23.8)
(78.3)
Operating
profit/(loss)
51.8
60.0
(51.1)
60.7
(22.8)
37.9
Finance income
0.8
Finance charges
(10.3)
Profit before taxation
28.4
Taxation
(7.7)
Profit for the year
20.7
Company overview
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Financial statements
141
Bodycote plc Annual Report 2024
Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
1. Business and geographical segments continued
Specialist
Technologies
2023
£m
Precision
Heat
Treatment
2023
£m
Central
costs and
elimination
2023
£m
Total core
2023
£m
Non-core
2023
£m
Total
Group
2023
£m
Revenue
212.4
534.9
–
747.3
55.2
802.5
Result
–
Adjusted operating
profit/(loss)
55.2
94.4
(24.8)
124.8
2.8
127.6
Amortisation of
acquired intangible
assets
(6.4)
(1.3)
–
(7.7)
(0.4)
(8.1)
Acquisition costs
–
–
(0.3)
(0.3)
–
(0.3)
Operating profit/(loss)
48.8
93.1
(25.1)
116.8
2.4
119.2
Finance income
0.8
Finance charges
(8.3)
Profit before taxation
111.7
Taxation
(24.9)
Profit for the year
86.8
Inter-segment revenues are not material in either year.
The Group does not have any one customer that contributes more than 10% of revenue in
either year.
Revenue
Specialist
Technologies
2024
£m
Precision
Heat
Treatment
2024
£m
Total core
2024
£m
Non-core
2024
£m
Total
Group
2024
£m
Western Europe
121.0
239.3
360.3
20.8
381.1
North America
95.7
165.0
260.7
23.8
284.5
Emerging Markets
7.5
84.0
91.5
–
91.5
Group
224.2
488.3
712.5
44.6
757.1
Revenue
Specialist
Technologies
2023
£m
Precision
Heat
Treatment
2023
£m
Total core
2023
£m
Non-core
2023
£m
Total
Group
2023
£m
Western Europe
120.9
271.7
392.6
24.9
417.5
North America
83.9
173.2
257.1
30.3
287.4
Emerging Markets
7.6
90.0
97.6
–
97.6
Group
212.4
534.9
747.3
55.2
802.5
Other information
Specialist
Technologies
2024
£m
Precision
Heat
Treatment
2024
£m
Central
costs and
eliminations
2024
£m
Total core
2024
£m
Non-core
2024
£m
Total
Group
2024
£m
Gross capital
additions
18.9
61.4
5.2
85.5
4.5
90.0
Depreciation and
amortisation
24.2
51.3
3.8
79.3
6.4
85.7
Impairments
1.5
20.7
28.4
50.6
14.7
65.3
Specialist
Technologies
2023
£m
Precision
Heat
Treatment
2023
£m
Central
costs and
eliminations
2023
£m
Total core
2023
£m
Non-core
2023
£m
Total
Group
2023
£m
Gross capital
additions
19.9
59.9
10.0
89.8
4.7
94.5
Depreciation and
amortisation
21.5
50.7
3.1
75.3
6.8
82.1
Impairments
0.3
0.5
–
0.8
0.1
0.9
Geographical information
The Group’s revenue from external customers analysed by country in which the service is delivered
is detailed below:
2024
£m
2023
£m
USA
271.2
271.7
France
104.2
116.9
Germany
72.3
82.3
UK
68.5
66.3
Sweden
50.3
50.9
Netherlands
29.5
34.9
Others
161.1
179.5
Group
757.1
802.5
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Financial statements
142
Bodycote plc Annual Report 2024
Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
2. Operating profit
2024
£m
2023
£m
Revenue
757.1
802.5
Cost of sales
(460.4)
(500.6)
Gross profit
296.7
301.9
Selling costs
(22.3)
(21.8)
Administration expenses
(165.1)
(172.0)
Other operating income
9.7
12.6
Other operating expenses
(0.4)
(1.3)
Net impairment losses on financial assets
(2.4)
(0.2)
Operating profit prior to exceptional items
116.2
119.2
Exceptional items (see note 3)
(78.3)
–
Operating profit
37.9
119.2
Operating profit for the year has been arrived at after charging/(crediting):
2024
£m
2023
£m
Net foreign exchange (gain)/loss
(0.4)
0.2
Employee costs1 (see note 24)
297.3
307.5
Pension scheme administration expenses (see note 26)
0.6
0.5
Inventory expensed
70.5
76.8
Utility costs
68.8
98.3
Consumables and gases
52.6
55.3
Transport and carriage costs
12.4
12.8
Depreciation of property, plant and equipment
59.7
59.4
Depreciation of right-of-use assets
13.6
12.9
Amortisation of other intangible assets
12.4
9.8
Gain on disposal of property, plant and equipment recognised in
operating profit (see note 9)
(5.5)
(3.4)
Loss on disposal of property, plant and equipment recognised in
exceptional items (see notes 3 & 9)
0.1
–
Gain on disposal of right-of-use assets
(0.2)
(0.2)
Impairment loss on trade receivables (see note 12)
2.4
0.2
Impairment of other intangible assets recognised in exceptional items
(see notes 3 & 8)
29.2
–
Impairment of goodwill recognised in exceptional items (see notes 3 & 7)
18.0
–
Impairment of property, plant and equipment recognised in exceptional
items (see notes 3 & 9)
16.9
–
Impairment of property, plant and equipment – recognised in operating
profit (see note 9)
0.1
0.9
Impairment of right-of-use assets recognised in exceptional items
(see notes 3 & 10)
1.1
–
Repairs and maintenance
25.5
27.2
Government assistance support received2
(1.0)
(6.4)
Acquisition costs
2.4
0.3
1 Employee cost include costs of temporary agency contractors of £16.7m (2023: £17.3m).
2 Government assistance consists of support towards R&D of £0.4m (2023: £0.2m); local regional economic support of
£0.4m (2023: £nil); energy support programmes £0.1m (2023: £6.1m); and £0.1m in respect of other support programmes.
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Financial statements
143
Bodycote plc Annual Report 2024
Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
3. Exceptional items
The following items were charged to exceptional items:
2024
£m
2023
£m
Impairment of ERP intangible asset
28.4
–
Impairment of goodwill
18.0
–
Strategic optimisation programme
31.9
–
Impairment of assets
18.8
Severance and redundancy cost
4.1
–
Site closure and associated closure costs
5.2
–
Losses on sale of business and property, plant and equipment
2.8
–
Other
1.0
–
Total exceptional items
78.3
–
Impairment of ERP intangible asset
Included within intangible assets at 31 December 2023 were £32.2m of internally developed
software costs relating to the development of an ERP solution that had been in development since
2020 and was not yet available for use. Development of the ERP solution progressed through H1
2024 with a further £3.1m capitalised. During this period, as part of the development process, a pilot
programme continued at a small number of sites across the Group. The ERP solution includes two
components: an Operations module and a Finance and Procurement module.
During the first half of 2024 the Directors were regularly updated on the programme, including the
initial results of the pilot programme. Having considered these results, management ultimately
concluded that the future benefits of the Operations module of the system did not outweigh the
likely future costs. Consideration was also given to the business interruption challenges of rolling
out the Operations module across the Group’s multiple sites. As a result, the decision was reached
to cease further development and roll-out of the Operations module and abandon its use, resulting
in an exceptional impairment charge of £28.4m being booked in June 2024.
The roll-out of the Finance and Procurement module across the Group continues and is expected to
complete in the first half of 2026. The remaining intangible asset of £7.0m relating to the Finance and
Procurement modules is being amortised over its useful life of 15 years beginning 1 July 2024.
Impairment of goodwill
The Group recognised a goodwill impairment charge of £18.0m within exceptional costs in the year
in relation to the Group’s North American Automotive and General Industrial CGU (‘NA AGI’).
The impairment follows a prolonged period in which the CGU has faced challenging market
conditions which meant that it was no longer able to support its high level of goodwill related to
historic acquisitions. Further details are set out in note 7.
Strategic optimisation programme
During 2024, the Group undertook a strategic review as a result of which it announced its intention
to undertake a number of optimisation actions to drive step changes and improvements across the
business, primarily centered on sites utilising older, more commoditised technologies, with higher
carbon footprints. Implementation of the programme commenced in 2024 and the Group announced
a number of site closures during the year as a result of which it has recognised an exceptional
charge of £31.9m.
Impairments of £18.8m have been charged to exceptional items relating to the planned site closures
and operational lines that will no longer be used. These impairments comprise of £16.9m for
property, plant and equipment, £1.1m for right-of-use assets, and £0.8m of acquired intangibles
for customer relationships.
Provisions of £5.2m have been charged for site closure and associated environmental costs where
the closures have been announced before 31 December 2024 and £3.3m for redundancy and
severance costs, of which £0.3m was utilised in 2024, related to employees impacted by the
announced closures and related reductions in overhead positions. An additional £0.8m of
redundancy and severance costs were charged directly to the consolidated income statement in
the year.
In December 2024 the business sold its Metz Tessy business for cash proceeds of £0.8m less costs of
disposal of £0.4m. The business consisted of a single plant and was not considered a core part of the
business. As part of the agreement of the sale a loan was issued to the purchaser for £0.6m against
which an expected credit loss provision of £0.3m has been recognised. Net assets disposed were
£1.8m with other costs associated with the closure of £1.0m. The total net loss on disposal of the
business was £2.7m. A loss of £0.1m was charged to exceptional costs related to the sale of property,
plant and equipment from affected sites.
See also the strategic review on pages 14 to 15 for further details of the optimisation programme.
Company overview
Strategic report
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Financial statements
144
Bodycote plc Annual Report 2024
Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
4. Finance income and charges
2024
£m
2023
£m
Interest on bank loans and overdrafts
3.9
2.7
Interest on lease liabilities
2.6
2.3
Total interest expense
6.5
5.0
Net interest on the defined benefit pension liability
0.4
0.4
Other finance charges
3.4
2.9
Total finance charge
10.3
8.3
Less:
Interest received on bank deposits
(0.7)
(0.5)
Other interest receivable
(0.1)
(0.3)
Total finance income
(0.8)
(0.8)
Net finance charge
9.5
7.5
5. Taxation charge
2024
£m
2023
£m
Current taxation – charge for the year
20.7
26.0
Current taxation – adjustments in respect of previous years
1.5
(2.7)
Deferred tax – charge for the year (see note 17)
(13.2)
1.5
Deferred tax – adjustments in respect of previous years (see note 17)
(1.3)
0.1
Total taxation charge
7.7
24.9
The Group uses a weighted average country tax rate, rather than the UK tax rate, for the
reconciliation of the charge for the year to the profit before taxation per the consolidated income
statement. The Group operates in several jurisdictions, many of which have a tax rate in excess of
the UK tax rate. As such, a weighted average country tax rate is believed to provide the most
meaningful information to the users of the financial statements. This is therefore the appropriate tax
rate for comparison being 25.1% in 2024 (2023: 25.4%).
With effect from 1 January 2024 the Group was subject to the OECD Pillar II GloBE Rules. The Group
has performed an overall assessment of the impact and determined that the adoption of the Pillar II
GloBE Rules by jurisdictions where Bodycote operates does not have a material impact on the
Group’s current tax charge. The Group has applied the exception provided for by the Pillar II GloBE
Rules (amendments to IAS 12) and has not recognised, or disclosed, information about deferred tax
assets and liabilities related to these Pillar II GloBE rules.
The charge for the year can be reconciled to the profit before taxation per the consolidated income
statement as follows:
2024
£m
2023
£m
Profit before taxation
28.4
111.7
Tax at the weighted average country tax rate of 25.1% (2023: 25.4%)
7.2
28.4
Tax effect of expenses not deductible in determining taxable profit1
1.6
1.1
Impact of recognition or derecognition of deferred tax balances
0.8
0.5
Tax effect of other adjustments in respect of previous years:
Current tax2
1.5
(2.7)
Deferred tax2
(1.3)
0.1
Effect of financing activities between jurisdictions3
(2.5)
0.3
Impact of trade and minimum corporate taxes
0.2
0.3
Effect of changes in statutory tax rates on deferred
tax assets and liabilities
(0.2)
0.3
Other tax risk provision movements4
0.4
(3.4)
Tax expense for the year
7.7
24.9
1 Those costs in various jurisdictions that are not deductible in calculating taxable profits.
2 2024 and 2023 adjustments in current and deferred tax in respect of previous years relate mainly to changes in assumptions
and outcomes in UK and overseas tax positions.
3 The Group is externally financed by a mix of cash flows from operations and short-term borrowings. Internally, operating
subsidiaries are predominantly financed via intercompany loans. The effect is net of provisions including a credit relating to a
provision release of £2.5m (2023: £nil) based on management’s estimation of the tax risk relating to the potential disallowance
of interest.
4 Includes provisions for local tax risks and cross-border transactions. 2024 includes a credit of £2.2m (2023: £4.3m) for the
release of provisions for tax risks which are no longer within an audit period.
Tax on retirement benefit obligations taken directly to equity was a charge of £0.1m
(2023: credit of £0.1m).
As part of the calculation of the tax charge, the Group recognises a number of tax risk provisions in
respect of ongoing tax enquiries and in recognition of the multinational tax environment in which
Bodycote operates where the nature of the tax positions that are taken is often complex and subject
to change. Included within current tax liabilities of £32.2m (2023: £46.0m) on the consolidated
balance sheet as at 31 December 2024 are tax provisions totalling £24.9m (2023: £26.4m), £4.2m
(2023: £4.2m) of which are out of the period of tax audit within 2025. The provisions are based
on an assessment of a range of possible outcomes to determine reasonable estimates of the
consequences of tax authority audits in the various tax jurisdictions in which the Group operates.
The material provisions relate to the financing of the Group’s operations where management’s
judgement is exercised to determine the quantum of the tax risk provisions based on an
understanding of the appropriate local tax legislation, taking into consideration the differences
of interpretation that can arise on a wide variety of issues including the nature of ongoing tax audits
and the experience from earlier enquiries, and determining whether any possible liability is
probable. The Group’s individual provisions by country vary in quantum from £1.9m to £8.8m.
Company overview
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Financial statements
145
Bodycote plc Annual Report 2024
Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
6. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
2024
£m
2023
£m
Earnings
Earnings for the purpose of basic earnings per share being
net profit attributable to equity holders of the parent
20.0
85.6
Number
Number
Number of shares
Weighted average number of ordinary shares for the purpose
of basic earnings per share
186,012,493
189,877,099
Effect of dilutive potential ordinary shares:
Shares subject to performance conditions
418,728
661,721
Shares subject to vesting conditions
448,614
344,050
Weighted average number of ordinary shares for the purpose
of diluted earnings per share
186,879,835
190,882,870
Pence
Pence
Earnings per share:
Basic
10.8
45.1
Diluted
10.7
44.8
2024
£m
2023
£m
Adjusted earnings
Net profit attributable to equity holders of the parent
20.0
85.6
Add back:
Amortisation of acquired intangible assets (net of tax)
8.3
6.1
Acquisition costs (net of tax)
1.8
0.2
Exceptional items (net of tax)
60.3
–
Adjusted earnings
90.4
91.9
Pence
Pence
Adjusted earnings per share:
Basic
48.6
48.4
Diluted
48.4
48.1
As at 31 December 2024, the performance conditions for a number of open plans have been met
resulting in a 0.1p dilution of earnings per share (2023: 0.3p) and 0.2p dilution of adjusted earnings
per share (2023: 0.3p).
7. Goodwill
2024
£m
2023
£m
Cost
At 1 January
282.3
288.9
Exchange differences
(0.2)
(6.6)
Recognised on acquisition of businesses
3.8
–
Total cost
285.9
282.3
Accumulated impairment
At 1 January
60.8
61.1
Impairment
18.0
–
Exchange differences
0.1
(0.3)
Total accumulated impairment
78.9
60.8
Carrying amount
207.0
221.5
Goodwill acquired through a business combination is allocated to the cash generating units (CGUs)
that are expected to benefit from the synergies of the combination. Goodwill is tested for
impairment at least annually or more frequently if there are indications that its carrying value may
not be recoverable. To test the goodwill for impairment, the carrying value of the CGUs containing
goodwill are compared to their recoverable amounts, calculated as the higher of their fair value less
costs to dispose and value-in-use.
The Group has determined its CGUs based on geography, customer groupings, and processes.
The CGUs reflect the lowest level at which the Group’s operations generate cash inflows that are
largely separate to each other. They are also the lowest level at which the Group has monitored
goodwill during the year. The Group continues to review its CGUs in the light of the changes to the
Group’s strategy, operational structure and internal reporting that were introduced during the
second half of 2024. To the extent that these future changes affect how CGUs are identified in the
Group, they will be reflected in future years. Consistent with the change to the Group’s reporting
structure in 2024, the Group’s North America Surface Technology (NA ST) business that previously
formed part of the North America Aerospace, Defence and Energy (NA ADE) CGU has been
separated out and now forms a separate CGU. All other CGUs are consistent with the prior year.
In assessing value-in-use, estimated post-tax future cash flows for each CGU are discounted to their
present value using a post-tax discount rate which reflects current market assessments of the time
value of money and the risks specific to the CGU, including country risk premium.
Fair value less costs to dispose is determined in a similar manner but takes into account the benefits
of actions that a rational buyer would take during the forecast period. Those actions include those
that form part of the Group’s strategic optimisation programme that the business had not
announced to the affected plants as at 31 December 2024 as well as other capital expenditure and
growth initatives as planned. Such actions are not permitted to be reflected in the value in use
calculations as at 31 December 2024. Because the majority of the inputs into the fair value
calculations are not observable, they are categorised as level 3 in the fair value hierarchy.
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Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
In 2024, the recoverable amounts of all of the Group’s CGUs were determined using value in use with
the exception of the North American Automotive and General Industrial CGU (NA AGI) and NA ST,
for which the recoverable amount has been determined using fair value less costs to dispose.
The fair value less costs to dispose of NA AGI and NA ST are in excess of their value in use since
most of the benefits referred to above had not been announced prior to the year end.
The cash flows of each CGU have been based on the 2025 budget, and the five-year financial plan up
to and including 2029, both of which have been approved by the Board. A long-term growth rate has
been applied into perpetuity from 2030 onwards.
The key assumptions applied in determining the recoverable amount of each CGU were as follows:
– Revenue: Revenue for 2025–2029 was projected based on management’s growth expectations of
the underlying market sectors served by each CGU. These were benchmarked against external
projections for each market. Pricing expectations were based on recent experience in the market
and forecast inflation expectations.
– Operational margin: Operational margin represents the CGU’s operating profit as a percentage
of revenue. The margin levels assumed reflect management’s expectations of future business
performance and are informed by past performance.
– Capital expenditure: The future cash flows include estimates of capital expenditure required
to maintain the existing asset base of each CGU and are based on historical experience.
In determining the estimates of capital expenditure, management has assumed that capital
expenditure will at least equal depreciation in the long term.
– Long-term growth rate: Long-term growth rates have been applied into perpetuity based on
the long-term average GDP growth projections of the geographies relevant to each CGU.
Growth rates are in the range of 2.0% to 2.2% (2023: 2.0% to 2.2%).
– Discount rate: The discount rates have been derived from a weighted average cost of capital,
adjusted for the geographies in which each CGU operates. The post-tax discount rates range from
9.4% to 10.1% (2023: 9.6% to 10.4%). The pre-tax discount rates are the rates which, when applied
to the pre-tax cash flows, result in the same NPV as calculated by the post-tax discount rate
applied to the post-tax cash flows. The pre-tax discount rates range from 11.6% to 12.7%
(2023: 11.9% to 13.0%).
Goodwill is allocated to the Group’s operating segments as set out below:
2024
£m
2023
£m
Specialist Technologies
47.2
66.3
Precision Heat Treatment
159.8
155.2
207.0
221.5
No goodwill was allocated to the Group’s non-core segment on the basis that the value of that
segment was minimal compared to the Group’s core segments.
A summary of the goodwill allocated to each of the Group’s CGUs with goodwill in excess of
10% of the Group’s total goodwill, along with the long term growth rates and discount rates used
to determine their recoverable amount, is set out below:
Cash generating units
Goodwill
carrying
value
2024
£m
Long-term
growth
rate
2024
%
Post-tax
discount
rate
2024
%
Pre-tax
discount
rate
2024
%
Specialist Technology:
North American Surface Technology
28.5
2.2
9.4
11.7
European Surface Technology
12.6
2.0
9.6
12.2
Other smaller Specialist Technology CGUs
6.1
2.0–2.2
9.4–9.6
11.8–12.3
Precision Heat Treatment:
North America Aerospace, Defence
and Energy
69.7
2.2
9.4
11.7
North America Automotive and
General Industrial
39.4
2.2
9.4
11.6
European Automotive and General Industrial
26.9
2.0
9.6
12.3
Other smaller Precision Heat Treatment CGUs
23.8
2.0–2.2
9.6–10.1
12.3-12.7
With the exception of NA AGI, recoverable amount was higher than book value for all CGUs.
Accordingly, the Directors have concluded that no impairment charge is required as at
31 December 2024, except as described below with respect to NA AGI.
Expected future cash flows are inherently uncertain and could change materially over time.
They are affected by several factors, including market and production estimates, together with
economic factors such as prices, discount rates, currency exchange rates, operational costs,
and future capital expenditure.
The Group has conducted sensitivity analysis by considering reasonably possible changes to the
key assumptions applied in the recoverable amount calculations for each CGU. The sensitivity
analysis considered downside scenarios including an increase in discount rates, a reduction in sales
growth throughout the forecast period, and a persistent reduction in operating margin. In respect
of NA ST, the sensitivity analysis indicated that in the unlikely event that operating margins in the
forecast period fell to a level equivalent to that achieved in 2023 (which is below that achieved in
2024), an immaterial impairment of goodwill could arise. With the exception of NA AGI and NA ST,
no reasonably possible downside reductions to any of the assumptions resulted in an impairment
for any of the Group’s CGUs.
7. Goodwill continued
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Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
During the year, the Group recognised an impairment of £18.0m in respect of NA AGI.
The impairment arose following a prolonged and extended period of challenging trading conditions
in the North American Industrial markets that continued through 2024 and is expected to persist.
As a result the CGU is no longer able to support its elevated level of goodwill arising from historic
acquisitions. In response to the downturn, management has taken a number of actions, including
those announced as part of the strategic optimisation programme, to improve the CGU’s
profitability. However, even after considering the actions taken and the further actions that the
Group intends to implement, its recoverable amount has fallen below its carrying value.
Further impairments of NA AGI may arise in subsequent years if the CGU does not perform in line
with its forecasts. Management have modelled downside scenarios to illustrate the effect of a
reasonably possible downside variation in each of the key assumptions. A summary of the potential
effects of these reasonably possible downside scenarios is set out below:
Key Assumption
Value assigned
to assumption
2024
%
Sensitivity
2024
bps change
Additional
impairment
2024
£m
Post-tax discount rate
9.4
100
19.0
Terminal growth rate
2.1
(50)
5.9
The forecasts include assumptions about revenue and profit growth, both from ongoing activities
and the effects of initiatives that the Group has implemented as part of its optimisation programme
which, by 2029, result in a cumulative increase in the level of adjusted operating profit before
non-cash depreciation of 62% over 2024. If this profit growth was reduced by 10% over the five year
period then the impairment would be increased by £6.5m. The forecasts also include capital
expenditure of circa £63m over the course of the 5 year forecast period. A 10% increase in capital
expenditure in the forecast period would result in an increase to the impairment of £4.7m.
The sensitivities modelled are intended to reflect an unlikely but reasonably possible downturn in
key assumptions that persists in the long term. None of the potential additional impairments reflect
mitigating actions that management would take in the event that such a situation developed.
In determining the sensitivities to apply, consideration was given to the impact that climate
change risks and opportunities may have on the Group’s businesses. Specific scenarios relating
to the potential risks of climate change, as set out in the TCFD section of the Annual Report,
were considered to determine if these should be included in the modelling performed and it
was determined that none of these scenarios would have a material impact on the outcome.
Furthermore, the impact of the above sensitivities was deemed sufficiently severe to cover a
range of potential risks, some of which could relate to these potential climate change risks.
8. Other intangible assets
Software
£m
Customer
relationships
£m
Non-
compete
agreements
£m
Total
£m
Cost
At 1 January 2023
53.6
154.5
3.8
211.9
Exchange differences
(0.3)
(7.6)
–
(7.9)
Additions
8.3
–
–
8.3
Eliminated on disposals
(0.7)
–
–
(0.7)
At 1 January 2024
60.9
146.9
3.8
211.6
Exchange differences
(0.3)
1.3
–
1.0
Additions
4.1
–
–
4.1
Acquired on acquisition of businesses
(see note 22)
–
39.6
0.3
39.9
Impairment of cost
(28.4)
–
–
(28.4)
Eliminated on disposals
(0.6)
–
–
(0.6)
At 31 December 2024
35.7
187.8
4.1
227.6
Amortisation
At 1 January 2023
24.2
67.6
3.2
95.0
Exchange differences
(0.1)
(3.6)
–
(3.7)
Charge for the year
1.7
7.8
0.3
9.8
Eliminated on disposals
(0.7)
–
–
(0.7)
At 1 January 2024
25.1
71.8
3.5
100.4
Exchange differences
(0.1)
0.3
–
0.2
Charge for the year
2.0
10.2
0.2
12.4
Impairment losses incurred
–
0.8
–
0.8
Eliminated on disposals
(0.6)
–
–
(0.6)
At 31 December 2024
26.4
83.1
3.7
113.2
Carrying amount
At 31 December 2024
9.3
104.7
0.4
114.4
At 31 December 2023
35.8
75.1
0.3
111.2
As described in note 3, a decision was made to stop development of the ERP Operations module
during the year resulting in an exceptional impairment charge of £28.4m. The Group is continuing
the roll out of the ERP Finance and Procurement module and during the year £1.0m was capitalised
in respect of this module.
7. Goodwill continued
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Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
9. Property, plant and equipment
Land and buildings
Freehold
£m
Long leasehold
improvements
£m
Short leasehold
improvements
£m
Plant
and machinery
£m
Fixtures
and fittings
£m
Assets
under construction
£m
Total
£m
Cost or valuation
At 1 January 2023
272.5
9.4
21.4
1,087.8
30.0
59.1
1,480.2
Additions1
0.1
1.3
0.3
3.3
0.6
66.1
71.7
Exchange differences
(7.4)
(0.3)
(0.9)
(31.3)
(0.9)
(2.4)
(43.2)
Transfer to assets held for sale
(1.4)
–
–
–
–
–
(1.4)
Recategorisation
(1.6)
7.0
0.3
52.1
(5.7)
(52.1)
–
Eliminated on disposal within operating business
(10.4)
(0.6)
(0.1)
(29.8)
(2.8)
(0.2)
(43.9)
At 1 January 2024
251.8
16.8
21.0
1,082.1
21.2
70.5
1,463.4
Additions1
0.1
–
0.4
6.3
1.2
60.0
68.0
Acquired on acquisition of businesses (see note 22)
1.3
–
–
6.4
–
–
7.7
Exchange differences
(7.1)
(0.6)
(0.7)
(30.0)
(0.5)
(1.2)
(40.1)
Recategorisation
5.2
0.1
0.5
38.7
1.4
(45.9)
–
Eliminated on disposal on sale of business ( see note 3)
(2.9)
–
–
(5.2)
(0.2)
–
(8.3)
Eliminated on disposal within operating business
(4.7)
–
–
(20.8)
(1.1)
(0.2)
(26.8)
At 31 December 2024
243.7
16.3
21.2
1,077.5
22.0
83.2
1,463.9
Accumulated depreciation and impairment
At 1 January 2023
133.3
6.9
11.4
788.2
24.0
0.1
963.9
Charge for the year
6.8
0.9
1.4
48.6
1.7
–
59.4
Impairment losses incurred
0.1
–
–
0.8
–
–
0.9
Exchange differences
(3.4)
(0.3)
(0.4)
(22.5)
(0.7)
(0.1)
(27.4)
Transfer to assets held for sale
(0.9)
–
–
–
–
–
(0.9)
Recategorisation
(5.7)
5.9
(1.2)
6.3
(5.3)
–
–
Eliminated on disposal within operating business
(4.1)
(0.6)
(0.1)
(29.9)
(2.7)
–
(37.4)
At 1 January 2024
126.1
12.8
11.1
791.5
17.0
–
958.5
Charge for the year
7.2
0.9
1.3
48.3
2.0
–
59.7
Impairment losses incurred (see notes 2 and 3)
1.8
–
0.5
14.6
0.1
–
17.0
Exchange differences
(3.9)
(0.5)
(0.4)
(21.3)
(0.4)
–
(26.5)
Recategorisation
–
–
–
(0.1)
0.1
–
–
Eliminated on disposal on sale of business (see note 3)
(2.4)
–
–
(4.2)
(0.1)
–
(6.7)
Eliminated on disposal within operating business
(2.0)
–
–
(16.2)
(1.1)
–
(19.3)
At 31 December 2024
126.8
13.2
12.5
812.6
17.6
–
982.7
Carrying amount
At 31 December 2024
116.9
3.1
8.7
264.9
4.4
83.2
481.2
At 31 December 2023
125.7
4.0
9.9
290.6
4.2
70.5
504.9
1 For further information on capital payables and accruals see note 18.
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Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
9. Property, plant and equipment continued
At 31 December 2024 the Group had entered into contractual commitments for the acquisition of
property, plant and equipment amounting to £24.2m (2023: £21.1m).
Gains on sale of property, plant and equipment of £5.5m (2023: £3.4m) were recorded within
operating profit in the consolidated income statement. These related to £4.7m (2023: £3.6m) of
gains on sale of property assets and £0.8m gains (2023: loss of £0.2m) on sale of plant and
equipment. Losses on plant and equipment of £0.1m (2023: £nil) have been charged to exceptional
costs relating to the strategic optimisation programme. Cash proceeds from property sales
amounted to £12.4m (2023: £9.4m).
Property, plant and equipment impairments of £17.0m (2023: £0.9m) were incurred in the year of
which £16.9m related to the strategic optimisation programme and were charged to exceptional
costs in the consolidated income statement for the year ended 31 December 2024. See note 3 for
further details. The value of impairments is analysed by business segment below:
2024
£m
2023
£m
Specialist Technologies
1.5
0.3
Precision Heat Treatment
2.7
0.5
Non-core
12.8
0.1
Group
17.0
0.9
10. Right-of-use assets
Land,
buildings,
fixtures and
fittings
£m
Plant and
machinery
£m
Vehicles
£m
Total
£m
Cost or valuation
At 1 January 2023
142.4
22.6
19.1
184.1
Additions
9.2
1.9
3.4
14.5
Eliminated on disposal within
operating business
(10.0)
(2.7)
(3.4)
(16.1)
Exchange differences
(3.7)
(0.7)
(0.8)
(5.2)
At 1 January 2024
137.9
21.1
18.3
177.3
Additions
12.7
2.3
2.9
17.9
Eliminated on disposal on sale of business
(see note 3)
(0.8)
(0.1)
–
(0.9)
Eliminated on disposal within
operating business
(12.1)
(1.5)
(3.7)
(17.3)
Exchange differences
(4.9)
(0.7)
(0.5)
(6.1)
At 31 December 2024
132.8
21.1
17.0
170.9
Accumulated depreciation and impairment
At 1 January 2023
89.8
18.9
15.8
124.5
Charge for the year
9.0
1.7
2.2
12.9
Eliminated on disposal within
operating business
(9.4)
(2.7)
(3.2)
(15.3)
Exchange differences
(2.2)
(0.5)
(0.6)
(3.3)
At 1 January 2024
87.2
17.4
14.2
118.8
Charge for the year
9.5
1.7
2.4
13.6
Impairment losses incurred (see notes 2 and 3)
1.1
–
–
1.1
Eliminated on disposal on sale of business
(see note 3)
(0.8)
(0.1)
–
(0.9)
Eliminated on disposal within
operating business
(8.8)
(1.5)
(3.5)
(13.8)
Exchange differences
(3.6)
(0.5)
(0.2)
(4.3)
At 31 December 2024
84.6
17.0
12.9
114.5
Carrying amount
At 31 December 2024
48.2
4.1
4.1
56.4
At 31 December 2023
50.7
3.7
4.1
58.5
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Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
11. Inventories
2024
£m
2023
£m
Raw materials
25.6
26.7
Work-in-progress
2.9
2.6
Finished goods and goods for resale
0.9
0.9
Less: obsolescence provision
(1.3)
(0.7)
28.1
29.5
Inventory expensed in the years ended 31 December 2024 and 2023 is disclosed in note 2.
12. Trade and other receivables
2024
£m
2023
£m
Amounts falling due within one year:
Amounts receivable for the supply of services
125.2
130.8
Allowance for expected credit loss
(3.3)
(2.8)
Net trade receivables
121.9
128.0
Other receivables
8.1
10.3
Prepayments
11.3
10.1
141.3
148.4
Amounts falling due after more than one year:
Trade and other receivables
3.1
1.3
Allowance for expected credit loss
(0.3)
–
Net trade receivables
2.8
1.3
The average credit period of customers for the supply of services as at 31 December 2024 was
64 days (2023: 63 days). An allowance has been made for estimated irrecoverable amounts
determined by reference to expected credit losses as set out in the Group’s accounting policies.
The carrying amount of trade and other receivables approximates their fair value.
10. Right-of-use assets continued
Lease liabilities
2024
£m
2023
£m
At 1 January
64.3
66.0
Additions
17.8
14.6
Disposals
(3.7)
(0.8)
Principal and interest repayments
(13.5)
(13.1)
Exchange differences
(1.4)
(2.4)
At 31 December
63.5
64.3
Current
13.1
11.8
Non-current
50.4
52.5
Maturity analysis – contractual undiscounted cash flows
2024
£m
2023
£m
Less than one year
15.5
12.3
One to five years
38.0
33.4
More than five years
21.6
53.4
Total undiscounted cash flows
75.1
99.1
Amounts recognised in the consolidated income statement
2024
£m
2023
£m
Depreciation charge
13.6
12.9
Interest on lease liabilities
2.6
2.3
Expenses relating to short-term leases
0.9
0.9
Expenses relating to leases of low value assets
0.8
0.8
Gain on disposal of right-of-use assets
(0.2)
(0.2)
Right-of-use asset impairment charge
1.1
–
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
over the leased assets that are held by the lessor.
As a lessor
The Group occasionally sub-leases property which it no longer uses. Rental income for leased
property in the year ended 31 December 2024 was £0.1m (2023: £nil).
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Notes to the consolidated financial statements continued
Year ended 31 December 2024
12. Trade and other receivables continued
Ageing analysis of net trade receivables:
2024
£m
2023
£m
Trade receivables within terms
90.1
97.9
Ageing of past due but not impaired receivables:
31–60 days
15.2
15.1
61–90 days
11.9
11.5
91–120 days
2.4
2.3
Greater than 120 days
2.3
1.2
121.9
128.0
Movement in the allowance for expected credit loss:
2024
£m
2023
£m
At 1 January
2.8
2.9
Impairment losses recognised
3.0
1.0
Allowance eliminated on disposal
(0.1)
–
Amounts written off as uncollectable
(1.6)
(0.2)
Impairment losses reversed
(0.6)
(0.8)
Allowance for expected credit loss on loans issued1
0.3
–
Exchange differences
(0.2)
(0.1)
At 31 December
3.6
2.8
1 The allowance for excepted credit loss of £0.3m (2023: £nil) on loans issued forms part of the loss on the sale of the Metz Tessy
business and has been charged to exceptional costs. See note 3 for further details.
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 recent 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 impaired trade receivables with a gross
balance of £5.4m (2023: £5.8m). Impairments recognised represent the difference between the
carrying amount of the 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:
2024
£m
2023
£m
Less than 3 months
0.3
0.2
3–12 months
3.4
1.8
Over 12 months
1.7
3.8
5.4
5.8
13. Cash and bank balances
Cash and bank balances comprise cash held by the Group. A breakdown of significant cash and bank
balances by currency is as follows:
2024
£m
2023
£m
US dollar
–
24.4
Euro
1.6
3.5
Sterling
3.5
3.7
Chinese yuan
11.5
11.0
Other
2.5
2.6
Total cash and bank balances1
19.1
45.2
1 An analysis of overdrafts by currency is included in note 15.
14. Assets held for sale
There were no assets for sale as at 31 December 2024. During the year assets of £0.5m that were
classified as held for sale as at 31 December 2023 were sold. Assets classified as held for sale are
recorded at the lower of their carrying amount at the date at which they are classified as held for
sale and fair value less costs to sell.
Company overview
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Financial statements
152
Bodycote plc Annual Report 2024
Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
15. Borrowings
2024
£m
2023
£m
Revolving Credit Facility
84.3
32.1
Bank overdrafts
3.1
0.5
Total borrowings
87.4
32.6
Weighted average interest rate paid
3.9%
5.3%
Analysis of Revolving Credit Facility drawdowns by currency:
Euro
84.3
32.1
84.3
32.1
Analysis of bank overdrafts by currency:
US dollar
1.5
–
Euro
1.3
0.2
Canadian dollar
0.2
–
Swiss Franc
–
0.3
Other
0.1
–
3.1
0.5
The majority of bank overdrafts are repayable on demand. No overdrafts are secured.
During the year the Group has completed an amend and extend of its Revolving Credit Facility of
£251.0m (2023: £250.9m). The maturity of the facility has been extended to 19 September 2029
with two options to extend by a further one year respectively, executable by the first and second
anniversary of the renewal date. As at 31 December 2024 the Group had total drawings on the
revolving credit facility of £84.3m (2023: £32.1m) which was drawn in euros only.
Other borrowings comprise bank loans and overdrafts of which £3.1m (2023: £0.5m) was drawn
as at 31 December 2024. The overdrafts are predominantly repayable on demand and some are
part of pooling arrangements, which also include offsetting cash balances.
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.
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 or has the intention to pay.
The table includes both interest and principal cash flows.
Less than
1 year
2024
£m
1–2 years
2024
£m
2–5 years
2024
£m
5+ years
2024
£m
Total
2024
£m
Non-interest bearing financial
liabilities1
97.1
–
–
–
97.1
Bank loans and overdrafts
87.4
–
–
–
87.4
Lease liabilities
15.5
12.8
25.2
21.6
75.1
200.0
12.8
25.2
21.6
259.6
Less than
1 year
2023
£m
1-2 years
2023
£m
2-5 years
2023
£m
5+ years
2023
£m
Total
2023
£m
Non-interest-bearing financial
liabilities1
65.8
0.1
–
–
65.9
Bank loans and overdrafts
32.6
–
–
–
32.6
Lease liabilities
12.3
10.6
22.8
53.4
99.1
110.7
10.7
22.8
53.4
197.6
1 Excludes payroll related accruals of £30.5m (2023: £37.0m) which are financial instruments held at amortised cost but are paid
immediately after year end.
16. Financial instruments
(a) Financial instruments by category
In accordance with IFRS 9, the Group categorises its financial instruments into those
measured at ‘amortised cost’, ‘fair value through profit or loss’ and ‘fair value through other
comprehensive Income’.
Financial assets at amortised cost
2024
£m
2023
£m
Trade and other receivables
126.5
133.9
Loan receivable
0.8
–
Cash and bank balances
19.1
45.2
146.4
179.1
Financial liabilities at amortised cost
2024
£m
2023
£m
Borrowings – loans and overdrafts
87.4
32.6
Lease liabilities
63.5
64.3
Trade and other payables1
61.2
62.2
212.1
159.1
1 Excludes payroll related accruals of £30.5m (2023: £37.0m) which are financial instruments held at amortised cost but are paid
immediately after year end.
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Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
(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 may be exposed to foreign currency risk, interest rate risk, liquidity risk and
credit risk. Financial risk management and treasury 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
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 according to
treasury policy, 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 and through the annual budget process agreed by
the Board each year including re-forecasts undertaken during the financial year. To mitigate the risk,
the resulting forecast net (debt)/cash is measured against the liquidity headroom policy which
requires a minimum liquidity headroom of £75m.
As at 31 December 2024, the Group had £166.7m (2023: £218.8m) available on the committed
Revolving Credit Facility of £251.0m which together with cash and cash equivalents of £19.1m
(2023: £45.2m), and available committed overdraft facilities of £8.7m (2023: £9.5m), resulted in
available liquidity headroom of £194.5m (2023: £273.5m). The Group also has available
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.
During 2024 the facility was extended to 19 September 2029, with two options to extend by a
further one year respectively, executable by the first and second anniversary of the date of
extension. As at 31 December 2024 the Group’s principal committed bank facility of £251.0m
had drawings of £84.3m (2023: £32.1m). Cash management pooling, netting and concentration
techniques are used to minimise borrowings.
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. 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 12.
Counterparty risk encompasses settlement risk on derivative financial instruments and credit risk
on cash and term deposits. 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 with a preference for counterparties with an investment grade rating.
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. As at 31 December
2024 the major interest rate risk is in Europe as borrowings were predominantly in euros (£85.6m out
of £87.4m).
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.
16. Financial instruments continued
Company overview
Strategic report
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Financial statements
154
Bodycote plc Annual Report 2024
Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
The interest rate sensitivity analysis is based on the following assumptions:
– changes in market interest rates affect the interest income or charges 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 2024 would
increase or reduce profit before tax by approximately £0.7m (2023: £0.1m). There is no significant
impact on equity in the current or previous year.
Currency risk
Bodycote has operations in 22 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’s
financial statements.
Ninety-one per cent of the Group’s revenues are in currencies other than sterling (EUR 34%, USD
36% and SEK 7%, and others at or below 3% individually, total 14%). Cumulatively over the year,
sterling rates moved such that the revenue for the year was £24.3m lower than it would have been
had the revenue been translated at the rates prevailing in 2023.
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 but where
appropriate the Group will still match centrally held currency borrowings to the net assets.
The Group generally borrows in sterling, US dollars and euros, consistent with the locations where
the majority of the Group’s investments are held. 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 material exposure to cash transactions in foreign currencies when a
commitment arises, usually through the use of vanilla foreign exchange forward contracts.
Currency sensitivity
Taking the 2024 revenue by currency, a 10% weakening/strengthening in the 2024 cumulative
average rates for all currencies versus sterling would have given rise to a +£62.6m/-£76.5m
movement in revenue respectively. The impact on adjusted operating profit is affected by the mix
of losses and profits in the various currencies. However, taking the 2024 operating profit mix,
a 10% weakening/strengthening in 2024 cumulative average rates for all currencies would have
given rise to a +8.3m/-£12.2m movement in adjusted operating profit.
(d) Derivative financial instruments
The Group’s derivative financial instruments were considered to be classified as level 2 instruments
with fair value measurements derived from inputs that are observable for the asset or liabilities,
either directly (i.e. as prices) or indirectly (i.e. derived from prices).
In accordance with IFRS 7 Financial Instruments, fair value is determined using quoted forward
exchange rates and yield curves derived from quoted interest rates matching maturities of
the contracts.
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. At the balance sheet date, the Group has no
outstanding interest rate derivatives.
(e) Net investment hedge
During the year the Group’s outstanding Revolving Credit Facility drawings were denominated in
EUR and USD. Certain EUR and USD amounts were designated as a net investment hedge through
the year to the Group’s subsidiaries with a matching functional currency on a 1:1 ratio. As at
31 December 2024 the Revolving Credit Facility was drawn in EUR. The effects and performance
of the EUR net investment hedge as at 31 December 2024 are set out as follows:
EUR Net investment hedge
2024
£m
2024
€m
2023
£m
2023
€m
Carrying amount of the hedging instruments
90.1
109.0
32.1
37.0
Carrying amount of the hedged items
(net assets of subsidiaries) and denominations
90.1
109.0
32.1
37.0
Hedge Ratio
1:1
–
1:1
–
Change in hedging instruments carrying
amount as a result of foreign currency
movements from 1 January 2024
4.1
–
0.9
–
Change in value of hedged item used to
determine hedge effectiveness
(4.1)
–
(0.9)
–
The gain on net investment hedges of £4.1m (2023: £1.5m) has been recognised in other
comprehensive income and accumulated in other reserves in shareholders’ equity. There was no
material ineffectiveness to be recorded from the net investment hedges.
16. Financial instruments continued
Company overview
Strategic report
Governance
Financial statements
155
Bodycote plc Annual Report 2024
Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
17. 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:
Accelerated
tax
depreciation
£m
Tax losses
£m
Retirement
benefit
obligations
£m
Other
£m
Total
£m
At 1 January 2023
57.5
(3.7)
(3.0)
(1.3)
49.5
Charge/(credit) to the
consolidated income statement
5.9
0.3
0.2
(5.1)
1.3
Credit to equity
–
–
–
(0.1)
(0.1)
Exchange differences
(2.3)
0.1
–
0.4
(1.8)
Effect of change in tax rate
in the income statement
0.3
–
–
–
0.3
At 1 January 2024
61.4
(3.3)
(2.8)
(6.1)
49.2
Credit to the consolidated
income statement
(11.1)
(2.0)
(0.2)
(1.0)
(14.3)
Debit to equity
–
–
0.1
–
0.1
Transfers
0.3
–
–
(0.3)
–
Disposal of business
–
–
–
0.1
0.1
Exchange differences
(0.7)
–
0.1
(0.1)
(0.7)
Effect of change in tax rate
in the income statement
–
–
–
(0.2)
(0.2)
At 31 December 2024
49.9
(5.3)
(2.8)
(7.6)
34.2
The following is the analysis of the deferred tax balances for financial reporting purposes:
2024
£m
2023
£m
Deferred tax liabilities
41.2
51.8
Deferred tax assets
(7.0)
(2.6)
34.2
49.2
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset 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 £40.9m (2023: £33.1m) available for
offset against future profits. A deferred tax asset of £5.3m has been recognised in respect of £21.2m
(2023: £13.6m) of such losses, based on existing taxable temporary differences generating 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 £19.7m (2023: £19.5m) of the losses where
the likelihood that sufficient taxable profits of the appropriate type is not probable. The majority of
losses may be carried forward indefinitely.
The Group has capital losses of £53.3m (2023: £53.3m) which are not recognised for deferred tax
as future suitable profits against which the losses could be utilised are not probable. A deferred tax
liability of £4.7m (2023: £3.9m) 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, and deferred tax asset, are expected to reverse in over
12 months.
Company overview
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Financial statements
156
Bodycote plc Annual Report 2024
Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
18. Trade and other payables
2024
£m
2023
£m
Working capital amounts falling due within one year:
Trade payables
19.4
20.8
Other taxes and social security
17.1
19.8
Other payables
8.0
6.1
Trade accruals1
57.1
64.6
101.6
111.3
Other amounts falling due within one year:
Share buyback accrual
32.9
–
Interest payable
3.7
2.7
Deferred income
2.0
0.1
Capital payables
2.3
4.6
Capital accruals
4.2
4.0
45.1
11.4
Total amounts falling due within one year:
146.7
122.7
Working capital amounts falling due after more than one year:
Other payables
0.8
0.9
1 Trade accruals include £30.5m (2023: £37.0m) of payroll-related accruals.
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 2024 is
24 days (2023: 22 days). The Directors consider the carrying value of trade payables to approximate
to their fair value.
The share buyback accrual of £32.9m (2023: £nil) is a non-cash financing liability.
19. Provisions
Restructuring
2024
£m
Environmental
2024
£m
Legal
2024
£m
Total
2024
£m
At 1 January 2024
0.5
9.2
5.3
15.0
Additions
9.0
1.4
1.7
12.1
Released
–
(0.1)
(0.9)
(1.0)
Utlisation
(1.1)
(6.5)
(3.9)
(11.5)
Exchange difference
–
(0.1)
(0.1)
(0.2)
At 31 December 2024
8.4
3.9
2.1
14.4
Included in current liabilities
11.9
Included in non-current liabilities
2.5
14.4
During 2024, the Group undertook a strategic review as a result of which it announced its
intention to undertake a number of optimisation actions to drive step changes and improvements
across the business, primarily centred on sites utilising older, more commoditised technologies
with higher carbon footprints. Refer to the strategic review on pages 13 to 15 and note 3 for
further information.
Restructuring
Included in restructuring provision additions in the year are £8.5m (2023: £nil) which have been
charged to exceptional items in the consolidated income statement in respect of provisions made
as a result of the strategic optimisation programme. These changes related to redundancy and
severance of employees at affected sites at which announcements of closure have been made,
along with site closure costs and consequential reductions in management overheads announced in
the year. The majority of cash outflows in respect of these provisions are expected to occur within
2 years.
Environmental Provisions
The Group provides for the costs of environmental remediation if there is a probable outflow of
economic resources that has been identified at the time of plant closure, as part of acquisition due
diligence or in other circumstances where remediation by the Group is required. This provision is
reviewed annually to determine the best estimate of expenditure required to settle the identified
obligations and where applicable, external confirmations are obtained to determine the best
estimate of future liabilities. During the year, environmental provisions of £1.0m were created as
part of the Group’s strategic optimsation programme (see note 3 for details).
The Group remains exposed to contingent liabilities in respect of environmental remediation
liabilities. In particular, the Group could be subjected to regulatory or legislative requirements
to remediate sites in the future. However, it is not possible at this time to determine whether,
and to what extent, any liabilities exist, other than for those recognised above. Therefore no
provision is recognised in relation to these items.
Legal and operational provisions
Legal provisions include, but are not limited to, alleged breach of contract and alleged breach of
environmental legislation. While the Group cannot predict the outcome of individual legal actions,
where the exposure can be reliably measured and an outflow of economic benefits is considered
probable, provisions are recognised following legal advice. There were no individually material
provisions as at 31 December 2024.
Company overview
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Bodycote plc Annual Report 2024
Additional information
20. Share capital
Ordinary Shares
Share Capital1
2024
Number
2023
Number
2024
£m
2023
£m
At 1 January
191,456,172 191,456,172
33.1
33.1
Share buyback programmes
(8,558,676)
–
(1.5)
–
Total
182,897,496 191,456,172
31.6
33.1
1 Nominal value of shares held is 173/11 p each.
In the year the Group announced share buyback programmes totalling £90.0m. The first programme
commenced on 15 March 2024 and the second, announced on 12 December 2024, commenced on
15 January 2025 and is due to complete by no later than the 14 July 2025.
As at 31 December 2024, a total of 8,558,676 shares have been repurchased for a total price,
including transactional costs, of £60.4m, of which £57.7m was paid in cash in the year. The nominal
value of the shares purchased is £1.5m, which was transferred to the capital redemption reserve
and the difference between the nominal value and the purchase price was recorded within
retained earnings.
As at 31 December 2024 a liability of £32.7m, plus £0.2m transactional costs, remained for shares
contracted to be repurchased but for which the repurchases were still outstanding.
21. Dividends
2024
Per share
2023
Per share
2024
£m
2023
£m
Interim dividend for the year ended
31 December
6.9
6.7
12.7
12.7
Proposed final/Final dividend for the year
ended 31 December
16.1
16.0
29.2
30.1
Total dividend
23.0
22.7
41.9
42.8
The 2023 final dividend of 16.0p per share was paid on 6 June 2024. The 2024 interim dividend of
6.9p per share was paid on 7 November 2024. The proposed final dividend for 2024 of 16.1p to be
paid on 5 June 2025 to shareholders on the register at close of business on 25 April 2025, is subject
to approval at the AGM on 21 May 2025 and therefore is not included as a liability in these
consolidated financial statements.
For the year ended 31 December 2024 unclaimed dividends which are fortified after a period of
6 years from the date for payment and reverted back to the Group amounted to £nil (2023: £0.6m).
22. Acquisition of business
Acquisition of Lake City Heat Treating LLC
On 19 January 2024 the Group acquired 100% of the ordinary share capital of Lake City Heat Treating
(‘Lake City’) in North America for a total gross consideration of £52.2m ($66.5m) on a cash and debt
free basis which was settled through the Group’s existing cash and borrowing facilities.
Lake City is a leading hot isostatic pressing (HIP) and vacuum heat treatment business primarily
supplying the orthopaedic medical implant market as well as civil aerospace. The acquisition was
made to strengthen the Group’s network and service offering in the medical market, complementing
the Specialist Technologies divisions strategy in North America. The business has been integrated
into the Group’s Specialist Technology division.
The transaction has been accounted for as a business combination under IFRS 3. The assets and
liabilities recognised as a result of the acquisition are as follows:
2024
£m
Fair value of net assets acquired:
Goodwill
3.8
Other intangible assets
39.9
Property, plant and equipment
7.7
Trade and other receivables
1.2
Trade and other payables
(0.4)
Fair value of net assets acquired
52.2
Total consideration transferred
52.2
Net cash outflow arising on acquisition:
Cash consideration
52.2
The goodwill arising on the acquisition is expected to be deductible for tax purposes and is
attributable to the assembled workforce and anticipated synergies that can be achieved in the
business. Intangible assets recognised on acquisition relate to customer relationships of £39.4m,
non-compete agreements of £0.3m and trade names of £0.2m and will be amortised in line with
the Group accounting policies which can be found on page 135.
Related acquisition costs totalling £2.7m were included in the consolidated cash flow statement
within net cash from operating activities of £2.4m in 2024 and £0.3m in 2023. The gross contractual
value of the trade and other receivables was £1.2m and the best estimate at the acquisition date of
the contractual cash flows not expected to be collected was £nil. Net deferred tax recognised on the
acquisition is £nil.
The business has contributed £9.5m to revenue and £3.5m to operating profit, for the period
between the date of acquisition and 31 December 2024. There would be no significant difference if
the acquisition had been completed on the first day of the financial year due to the proximity of the
acquisition date to the start of the year.
Notes to the consolidated financial statements continued
Year ended 31 December 2024
Company overview
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Financial statements
158
Bodycote plc Annual Report 2024
Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
23. Notes to the cash flow statement
2024
£m
2023
£m
Profit for the year
20.7
86.8
Adjustments for:
Finance income
(0.8)
(0.8)
Finance charges
10.3
8.3
Taxation charge
7.7
24.9
Operating profit
37.9
119.2
Adjustments for:
Depreciation of property, plant and equipment
59.7
59.4
Depreciation of right-of-use assets
13.6
12.9
Amortisation of other intangible assets
12.4
9.8
Profit on disposal of property, plant and equipment
(5.5)
(3.4)
Loss on disposal of property, plant and equipment recognised
in exceptional items
0.1
–
Profit on disposal of right-of-use assets
(0.2)
(0.2)
Disposal of business
2.6
–
Impairment of goodwill – recognised in exceptional items
18.0
–
Impairment of acquired intangibles – recognised in exceptional items
0.8
–
Impairment of fixed assets – recognised in exceptional items
46.4
–
Impairment of property, plant and equipment and other assets
recognised in operating profit
0.1
0.9
EBITDA
185.9
198.6
Share-based payments
0.6
5.1
Decrease/(increase) in inventories
1.3
(1.7)
Decrease in receivables
7.2
6.2
Decrease in payables
(7.6)
(1.0)
Decrease in provisions
(0.6)
(3.1)
Cash generated by operations
186.8
204.1
Net income taxes paid
(32.1)
(9.0)
Settlement of derivatives
–
(0.3)
Net exchange differences
(2.1)
(3.2)
Net cash from operating activities
152.6
191.6
2024
£m
2023
£m
Cash and cash equivalents comprise:
Cash and bank balances
19.1
45.2
Bank overdrafts (included in borrowings)
(3.1)
(0.5)
16.0
44.7
Cash and cash equivalents include £1.1m (2023: £1.3m) held in the USA relating to the refund of a
pension surplus which the Group intends to use to fund future pension contributions for its USA
employees to avoid the full amount becoming subject to regulatory restrictions in the USA.
Restricted cash of £0.8m that was held in escrow as at 31 December 2023 related to environmental
provisions has been used to settle the related liability in the year.
24. Employees
The average number of employees (including Executive Directors) is shown below.
2024
Number
20231
Number
Total average employees
4,439
4,525
2024
£m
20231
£m
Their aggregate remuneration comprised:
Wages and salaries
235.6
245.5
Social security costs
36.0
36.1
Pension costs
9.0
8.6
280.6
290.2
1 2023 average employee numbers have been restated to exclude 419 temporary contractors and the related wages and salaries
of £17.3m.
Included in pension costs are £8.7m (2023: £8.3m) relating to defined contribution schemes and
a £0.3m (2023: £0.3m) charge relating to defined benefit schemes. Pension costs not included of
£1.0m (2023: £0.9m) relate to administrative costs of £0.6m (2023: £0.5m) and net interest costs
of £0.4m (2023: £0.4m). Refer also to notes 2 and 26.
Disclosure of individual Directors’ remuneration, share interests, share awards, long-term incentive
schemes, pension contributions and pension entitlements are shown in the tables in the Directors
remuneration report on pages 94 to 117.
See note 25 for information on share-based payments and note 26 for information on retirement
benefit schemes.
Company overview
Strategic report
Governance
Financial statements
159
Bodycote plc Annual Report 2024
Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
25. Share-based payments
The Company operates the Bodycote Incentive Plan (BIP) under which Executive Directors and
Senior Executives receive a conditional award of Bodycote shares up to a maximum of 175% of base
salary. Vesting of awards are based upon two performance measures, over a three-year period.
BIP
2024
BIP
2023
Other Plans
2024
Other Plans
2023
At 1 January
6,001,991
5,337,784
624,905
484,211
Granted during the year
2,923,641
2,867,954
373,275
298,682
Exercised during the year
(390,579)
(206,935)
(273,882)
(139,947)
Expired during the year
(2,294,425)
(1,996,812)
(77,354)
(18,041)
At 31 December
6,240,628
6,001,991
646,944
624,905
Average fair value of share awards granted
during the year at date of grant (pence)
544.7
555.1
608.2
608.3
Fair value of awards granted during
the year (£)
15,925,445
15,919,411
2,270,119
1,816,981
Fifty percent of the award is subject to a return on capital employed (ROCE) performance condition
and 50% of the award is subject to adjusted operating profit or adjusted earnings per share (EPS)
performance conditions assigned to the individual. In the event that the adjusted EPS underpin is
not achieved, no awards will vest.
Other plans include buy-out awards, a targeted employee retention share programme and a
deferred bonus plan whereby 35% of any bonus earned is deferred into shares. Buy-out award
shares issued vest between 12 and 36 months from the grant date, with the remaining vesting
after three years from the grant date. All plans are conditional on continued employment.
More information on the BIP and the buy-out awards for Executive Directors can be found in
the Directors report on remuneration on pages 94 to 117.
The exercise price of shares exercised was £nil. As at 31 December 2024 of 174,212 exercisable
shares outstanding 48,983 were related to BIP and 125,229 related to other plans. The inputs to the
Black-Scholes simulation model, used to determine the charge to the income statement for BIP,
are as follows:
BIP
2024
BIP
2023
Other Plans
2024
Other Plans
2023
Weighted average share price (pence)
604.1
608.3
646.4
634.3
Weighted average exercise price (pence)
nil
nil
nil
nil
Expected life (years)
3.0
3.0
1.0-3.0
0.1-3.0
Expected dividend yields (%)
3.4
3.0
3.4
3.0
Weighted average remaining contractual life of
shares outstanding (years)
1.1
1.2
0.9
1.1
Average fair value of share awards granted
during the year at date of grant (pence)
544.7
555.1
608.2
608.3
Fair value of awards granted during
the year (£)
15,925,445
15,919,411
2,270,119
1,816,981
The Group recognised a total charge to the consolidated income statement of £0.6m (2023: £5.1m)
related to equity-settled share-based payment transactions, excluding social charges.
Company overview
Strategic report
Governance
Financial statements
160
Bodycote plc Annual Report 2024
Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
26. Retirement benefit schemes
Defined contribution schemes
The Group operates defined contribution retirement benefit schemes for employees in the UK,
US, France, Belgium and Canada. The assets of the schemes are held separately from those of
the Group in funds under the control of trustees. Where employees leave the schemes prior to the
contributions vesting fully, the contributions payable by the Group are reduced by the amount of
forfeited contributions.
The Group’s employees in Denmark, Finland, Sweden, Italy, Mexico, 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 Group also contributes to private pension schemes of the employees as part of employee
benefits in the Czech Republic.
The total cost charged to the consolidated income statement of £8.7m (2023: £8.3m) represents
contributions payable to these schemes by the Group at rates specified in the rules of the plans.
As at 31 December 2024 contributions of £0.5m (2023: £0.3m) 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:
Defined benefit obligation less fair value of assets
2024
£m
2023
£m
UK Scheme
–
–
Non-UK Schemes
11.3
11.1
11.3
11.1
Total expense recognised in the income statement
2024
£m
2023
£m
UK Scheme1
0.6
0.4
Non-UK Schemes1
0.7
0.8
1.3
1.2
1 The UK Scheme is closed to new members and the accrual of benefits and the costs represent administrative and past service
credits and costs. Costs associated with the non-UK schemes relate to employee service and related costs (see note 24) and
administrative costs (see note 2).
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 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, comprised 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 below. Funding requirements are formally set out in
the Statement of Funding Principles, Schedule of Contributions and agreed between the Trustees
and the Group in respect of the 6 April 2023 valuation, which was completed by a qualified actuary.
The next actuarial valuation is due with an effective date of 6 April 2026.
The Scheme’s current strategic target is to allocate 19% of the investment to non-matching asset
classes, predominantly longer-term credit based investments and 81% 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. LDIs are held in pooled investment vehicles and include over the counter derivatives
and quoted equities designated to move in line with the defined benefit liability.
The key assumptions used in determining the values of the UK Scheme assets and liabilities are
set out below.
Assumptions for 2024 (UK Scheme)
2024
% per annum
2023
% per annum
RPI inflation
3.35
3.20
CPI inflation
3.05
2.90
Salary increases
n/a
n/a
Rate of discount
5.35
4.50
Allowance for pension in payment increases of RPI or 3% p.a. if less
2.30
2.18
Allowance for revaluation of deferred pensions
3.05
2.90
Mortality – current pensioners (UK Scheme)
Actuarial tables used
2024
S3PxA YoB
CMI 2023
1.0%
long‑term
trend
2023
S3PxA YoB
CMI 2022
1.5%
long‑term
trend
Life expectancy for members currently aged 65
19.8
19.8
Company overview
Strategic report
Governance
Financial statements
161
Bodycote plc Annual Report 2024
Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
Mortality – future pensioners (UK Scheme)
Actuarial tables used
2024
S3PxA YoB
CMI 2023
1.0%
long‑term
trend
2023
S3PxA YoB
CMI 2022
1.5%
long‑term
trend
Life expectancy at age 65 for members currently aged 45
20.7
20.7
The weighted average duration of the defined benefit obligation at 31 December 2024 is
approximately 12 years (2023: 12 years).
The maximum permitted cash commutation is 75% (2023: 75%).
The scheme asset values are sensitive to market conditions and the scheme liabilities are sensitive
to actuarial assumptions used to determine the scheme obligations, the main assumptions of which
are the discount rate, the rate of price inflation and the life expectancy rate. The following table
provides an estimate of the potential impact on the pension scheme of changing these assumptions.
2024
2023
Increase
£m
Decrease
£m
Increase
£m
Decrease
£m
0.5% change in discount rate
(3.0)
3.3
(3.6)
4.0
0.5% change in price inflation
(and associated assumptions)
1.1
1.1
1.4
(1.3)
One year change in life expectancy at age 65
2.1
(2.1)
2.6
(2.6)
The sensitivity analysis was performed by recalculating the defined benefit obligation with the
relevant assumptions modified as disclosed. The sensitivity table is based on an illustrative 0.5%
change, although the assumptions may vary by greater amounts.
It is the policy of the Group to recognise all actuarial gains and losses in the year in which they occur
outside of the consolidated income statement and in the consolidated statement of comprehensive
income. The UK Scheme was closed to new entrants and future accrual in 2019.
In June 2023, the High Court judged that amendments made to the Virgin Media scheme were
invalid because the scheme’s actuary did not provide the associated S37 certificate necessary.
The case was subsequently reviewed by the Court of Appeal in July 2024 which upheld the High
Court’s decision.
The High Court’s decision has wide ranging implications, affecting other schemes (such as the
Bodycote UK Pension Scheme) that were contracted-out on a salary-related basis, and made
amendments between April 1997 and April 2016. Historic scheme amendments without the
appropriate certification might now be considered invalid, leading to additional,
unforeseen liabilities.
The Scheme was contracted out during this period, and the Company’s legal advisors are carrying
out a detailed investigation into historic Scheme amendments. This remains ongoing and is at an
early stage and as such the Company and the Trustee of the Bodycote UK Pension Scheme are
not in a position to assess if there are any potential implications.
The Company and the Trustee of the Scheme will continue to seek legal advice on the matter
and act accordingly.
The Group acknowledges that the recognition of a 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 any
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 2024
a restriction has been applied to the balance sheet, and the net surplus recognised on the balance
sheet has been restricted to £nil.
Reconciliation of opening and closing balances of the present value of the defined benefit
obligation (UK Scheme)
2024
£m
2023
£m
Defined benefit obligation at start of year
62.7
64.4
Interest expense
2.8
2.9
Actuarial gains arising from changes in demographic assumptions
(1.2)
(3.2)
Actuarial (gains)/losses arising from changes in financial assumptions
(5.5)
1.5
Experience (gains)/losses
(0.3)
0.3
Benefits paid, death in service insurance premiums and expenses
(3.7)
(3.1)
Past service credit
–
(0.1)
Defined benefit obligation at end of year
54.8
62.7
Reconciliation of opening and closing balances of the fair value of the assets (UK Scheme)
2024
£m
2023
£m
Fair value of assets at start of year
67.6
67.4
Interest income
3.0
3.1
Return on scheme assets excluding interest income
(6.1)
0.3
Scheme administration expenses
(0.6)
(0.5)
Contributions by employer
0.4
0.4
Benefits paid, death in service insurance premiums and expenses
(3.7)
(3.1)
Fair value of assets at end of year
60.6
67.6
26. Retirement benefit schemes continued
Company overview
Strategic report
Governance
Financial statements
162
Bodycote plc Annual Report 2024
Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
Total expense recognised in the income statement (UK Scheme)
2024
£m
2023
£m
Past service credit
–
(0.1)
Scheme administration expenses
0.6
0.5
0.6
0.4
Assets (UK Scheme)
2024
Quoted1
£m
2024
Unquoted
£m
2023
Quoted1
£m
2023
Unquoted
£m
Bonds
12.8
2.2
13.6
2.9
Liability Driven Investment
16.2
–
21.9
–
Diversified credit funds
16.6
3.8
15.4
3.7
Cash and cash equivalents
9.0
–
10.1
–
54.6
6.0
61.0
6.6
1 The quoted category includes funds which invest primarily in quoted securities and bonds however the funds themselves
do not have a quoted price on an active market.
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 defined benefit obligation at 31 December 2024 can be approximately attributed to the scheme
members as follows:
– Active members:
0% (2023: 0%)
– Deferred members:
40% (2023: 41%)
– Pensioner members:
60% (2023: 59%)
All benefits are vested at 31 December 2024 (unchanged from 2023).
Present value of defined benefit obligations, fair value of assets and deficit (UK Scheme)
2024
£m
2023
£m
Present value of defined benefit obligation
54.8
62.7
Fair value of plan assets
(60.6)
(67.6)
Scheme surplus
(5.8)
(4.9)
Adjustment relating to asset ceilings and minimum
funding requirements
5.8
4.9
Net defined benefit asset before deferred tax
–
–
Reconciliation of asset ceiling (UK Scheme)
2024
£m
2023
£m
Restriction due to asset ceiling at beginning of period
4.9
3.0
Interest on asset restriction
0.2
0.2
Other changes in asset restriction
0.7
1.7
Restriction due to asset ceiling at end of period
5.8
4.9
The best estimate of contributions to be paid into the plan for the year ending 31 December 2025
is £0.4m.
Amounts recognised in other comprehensive income (UK Scheme)
2024
£m
2023
£m
Return on scheme assets excluding interest income
(6.1)
0.3
Actuarial gains/(losses) arising from changes in financial assumptions
5.5
(1.5)
Actuarial gains arising from changes in demographic assumptions
1.2
3.2
Experience gains/(losses) on liabilities
0.3
(0.3)
Gain due to change in asset restriction
(0.7)
(1.7)
Total gain recognised in other comprehensive income
0.2
–
26. Retirement benefit schemes continued
Company overview
Strategic report
Governance
Financial statements
163
Bodycote plc Annual Report 2024
Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
Combined non-UK disclosures
The Group operates defined benefit schemes in 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 (non-UK schemes)
2024
£m
2023
£m
Defined benefit obligation at start of year
17.3
16.2
Current service cost
0.3
0.4
Interest expense
0.5
0.5
Actuarial losses arising from changes in financial assumptions
0.7
0.1
Experience (gains)/losses on liabilities
(0.1)
0.4
Benefits paid, death in service insurance premiums and expenses
(1.1)
(0.6)
Employee contributions
0.2
0.1
Exchange rate (gain)/loss
(0.8)
0.2
Defined benefit obligation at end of year
17.0
17.3
Reconciliation of opening and closing balances of the fair value of plan assets (non-UK schemes)
2024
£m
2023
£m
Fair value of assets at start of year
6.2
5.3
Interest income
0.1
0.1
Return on scheme assets excluding interest income
0.1
0.4
Contributions by employer
0.1
0.2
Contributions by employees
0.2
0.1
Benefits paid, death in service insurance premiums and expenses
(0.6)
–
Exchange rate (loss)/gain
(0.4)
0.1
Fair value of assets at end of year
5.7
6.2
Total expense recognised in the income statement (non-UK schemes)
2024
£m
2023
£m
Current service cost
0.3
0.4
Net interest on the defined benefit liability
0.4
0.4
Total expense
0.7
0.8
26. Retirement benefit schemes continued
Assets (non-UK schemes)
2024
Unquoted
£m
2023
Unquoted
£m
Collective Foundation receivables
5.7
6.2
No assets held are quoted assets or assets which have a quoted market price in active markets held
within investment trusts. 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 2024 (non-UK schemes)
Salary
increases
% per annum
Rate of
discount
% per annum
Inflation
% per annum
Pension
increases
% per annum
USA
n/a
n/a
n/a
n/a
France
3.0
3.3
2.0
1.0
Germany
2.5
3.5
n/a
2.0
Italy
2.5
3.3
1.8-2.0
n/a
Turkey
25.3
29.0
25.3
n/a
Liechtenstein
2.5
1.0
n/a
n/a
Switzerland
n/a
2.3
n/a
n/a
There were no significant movements compared to the prior year with the exception of Turkey where
the discount rate per annum was increased by 4.5 ppts to 29.0% compared with 2023 and inflation
changed by 4.3 ppts to 25.3%, both due to the country’s current and forecasted high inflation period.
The assumption for the inflation rate % per annum for Italy increases by 0.1 ppts from 1.8% in 2024 to
2027, rising 0.1 ppts in 2028 to 1.9% and a further 0.1 ppts to 2.0% from the year 2029 onwards.
Duration
The weighted average durations of the defined benefit obligations of the overseas schemes at
31 December 2024 range from 9 years to 19 years (2023: 9 years to 18 years).
Present value of defined benefit obligations, fair value of assets and deficit (non-UK schemes)
2024
£m
2023
£m
Present value of defined benefit obligation
17.0
17.3
Fair value of plan assets
(5.7)
(6.2)
Net defined benefit liability, before deferred tax
11.3
11.1
As all actuarial gains and losses are recognised, the deficit shown above at 31 December 2024 is that
recognised in the balance sheet.
Company overview
Strategic report
Governance
Financial statements
164
Bodycote plc Annual Report 2024
Additional information
Notes to the consolidated financial statements continued
Year ended 31 December 2024
Amounts recognised in other comprehensive income (non-UK schemes)
2024
£m
2023
£m
Return on scheme assets excluding interest income
0.1
0.4
Actuarial losses arising from changes in financial assumptions
(0.7)
(0.1)
Experience gains/(losses) on liabilities
0.1
(0.4)
Total gain recognised in other comprehensive income
(0.5)
(0.1)
The only funded plans are those operated in France, Switzerland and Liechtenstein. The best
estimate of contributions to be paid into the plans for the year ending 31 December 2025 is £0.1m.
Sensitivities (changes to total defined benefit obligations) (non-UK schemes)
2024
2023
Increase
£m
Decrease
£m
Increase
£m
Decrease
£m
0.25% change in discount rate
(0.5)
0.5
(0.5)
0.6
0.25% change in price inflation
(and associated assumptions)
0.3
(0.3)
0.3
(0.3)
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.
27. Contingent liabilities
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, claims, 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.
28. Statutory and other information
Auditors remuneration
2024
£m
2023
£m
Fees payable to the auditor for the audit of the annual accounts
1.3
1.2
Fees payable to the auditor and its associates for other services:
The audit of the Group's subsidiaries
1.1
1.2
Total audit fees
2.4
2.4
Audit related assurance services1
0.1
0.1
Total fees payable to the auditor
2.5
2.5
1 This includes £0.1m (2023: £0.1m) for the interim review of the half year report and a nominal fee for a statutory liquidation
filing in Belgium. Non-audit fees in both years also include a nominal amount for a subscription to a generic accounting
and reporting website.
The audit fees disclosed for 2024 include £0.1m of fees in connection with the 2023 audit.
Certain subsidiaries in the UK have taken an exemption to be audited. Refer to page 171 for
further information.
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. For information on defined benefit
retirement pension schemes that the Group operates see note 26.
Key management personnel compensation
The remuneration of the Board of Directors, who are considered key management personnel of
the Group, was as follows:
2024
£m
2023
£m
Short-term employee benefits
2.8
3.5
Share based payments
1.8
1.8
Pensions
0.2
0.2
4.8
5.5
Further information about the remuneration of the individual Directors is provided in the Director’s
remuneration report on pages 94 to 117.
26. Retirement benefit schemes continued
Company overview
Strategic report
Governance
Financial statements
165
Bodycote plc Annual Report 2024
Additional information
Company balance sheet
At 31 December 2024
Note
2024
£m
2023
£m
Non-current assets
Intangible assets
3
8.5
34.1
Property, plant and equipment
0.2
0.2
Right-of-use assets
1.1
1.3
Investments in subsidiaries
4
388.9
388.9
Deferred tax assets
7
3.9
–
Trade and other receivables
5
295.8
6.2
698.4
430.7
Current assets
Trade and other receivables
5
10.4
5.1
10.4
5.1
Total assets
708.8
435.8
Current liabilities
Trade and other payables
6
41.6
10.4
Lease liabilities
0.2
0.2
41.8
10.6
Net current liabilities
(31.4)
(5.5)
Non-current liabilities
Trade and other payables
6
–
6.5
Deferred tax liabilities
7
–
2.3
Lease liabilities
1.0
1.3
1.0
10.1
Total liabilities
42.8
20.7
Net assets
666.0
415.1
Note
2024
£m
2023
£m
Equity
Share capital
8
31.6
33.1
Share premium account
177.1
177.1
Own shares
(11.1)
(15.7)
Capital redemption reserve
131.3
129.8
Other reserves
6.2
10.0
Profit for year
383.6
3.8
Retained earnings
(52.7)
77.0
Total equity
666.0
415.1
The notes to the Company financial statements on pages 170 to 172 form an integral part
of the Company financial statements.
The financial statements of Bodycote plc, registered number 519057, were approved by the
Board of Directors and authorised for issue on 13 March 2025.
They were signed on its behalf by:
Jim Fairbairn
Ben Fidler
Director
Director
Company overview
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Financial statements
166
Bodycote plc Annual Report 2024
Additional information
Company statement of changes in equity
Year ended 31 December 2024
Share
capital
£m
Share
premium
account
£m
Own
shares
£m
Capital
redemption
reserve
£m
Other
reserves
£m
Retained
earnings
£m
Total
£m
1 January 2023
33.1
177.1
(5.2)
129.8
6.8
117.9
459.5
Profit for the year
–
–
–
–
–
3.8
3.8
Exchange differences on translation of overseas operations
–
–
–
–
0.2
–
0.2
Actuarial gain on defined benefit pension schemes net of deferred tax
–
–
–
–
–
0.1
0.1
Total comprehensive (expense)/income for the year
–
–
–
–
0.2
3.9
4.1
Dividends paid
–
–
–
–
–
(40.6)
(40.6)
Shares acquired
–
–
(13.2)
–
–
–
(13.2)
Share-based payments
–
–
–
–
5.1
–
5.1
Settlement of share awards
–
–
2.7
–
(2.1)
(0.4)
0.2
31 December 2023
33.1
177.1
(15.7)
129.8
10.0
80.8
415.1
Profit for the year
–
–
–
–
–
383.6
383.6
Exchange differences on translation of overseas operations
–
–
–
–
0.3
–
0.3
Total comprehensive income for the year
–
–
–
–
0.3
383.6
383.9
Dividends paid
–
–
–
–
–
(42.8)
(42.8)
Shares acquired
(1.5)
–
–
1.5
–
(90.6)
(90.6)
Share-based payments
–
–
–
–
0.6
–
0.6
Settlement of share awards
–
–
4.6
–
(4.7)
(0.1)
(0.2)
31 December 2024
31.6
177.1
(11.1)
131.3
6.2
330.9
666.0
The notes to the Company financial statements on pages 170 to 172 form an integral part of the
Company financial statements.
As at 31 December 2024 8,558,676 shares with a nominal value of 173/11p had been repurchased
under the share buyback programmes which were announced in January 2024 (commenced
March 2024) and December 2024 (to commence in 2025), for a total consideration of £57.7m
(including costs £0.4m). A contractual obligation has been recognised of £32.9m relating to the
contractual commitment to repurchase the remainder of these share buyback programmes.
Own shares comprise Bodycote Plc shares held in the Bodycote International Employee Benefit
Trust (the ‘Trust’). The Trust buys Bodycote plc shares and uses them to satisfy awards made under
various employee incentive schemes when the issuance of new shares is not appropriate.
At 31 December 2024, 1,627,781 (2023: 2,292,243) ordinary shares of 173/11p each were held by the
Trust. The market value of these shares was £10.3m (2023: £13.6m).
The capital redemption reserve of £131.3m (2023: £129.8m) comprises £129.8m which was
transferred from retained earnings on the conversion of B shares into deferred shares in 2008 and
2009, and £1.5m arising on the repurchase of 8,558,676 shares during 2024 at a nominal value of
173/11p for a total costs of £57.7m. Refer to note 20 of the Group consolidated financial statements
for further information.
Included in other reserves is £5.5m (2023: £9.6m) relating to a share-based payments reserve.
Details of share-based payment transactions are set out in note 25 of the Group consolidated
financial statements.
Details of dividends paid are set out in note 21 of the Group consolidated financial statements.
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167
Bodycote plc Annual Report 2024
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.
The Company has taken advantage of the disclosure exemptions available in FRS 101 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 provided in the Group consolidated financial statements,
which are publicly available.
Interim accounts for the period ending 31 May 2024, signed on 24 July, were filed with Companies
House on 25 July 2024.
The accounting policies have been applied consistently throughout the current and preceding year.
Dividends
Interim dividend distributions (ordinary and special) to Bodycote plc’s ordinary shareholders are
recognised when paid and final dividends are accrued when approved by the ordinary shareholders
at the Group’s Annual General Meeting. Further detail is contained in note 21 of the Group
consolidated financial statements.
Going concern
Having made appropriate enquiries, 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 at least the next 12 months. For that reason they have continued to
adopt the going concern basis of accounting in preparing the Company’s financial statements.
Further detail is contained in the Group going concern statement in the Group’s accounting policies
in the Group consolidated financial statements.
Investments
Investments are held at cost less provision for impairment. An impairment review is carried out
when an indication of impairment is identified in respect of any of the investments and impairment
recognised to the extent that the carrying value of the investment is not supported by the net assets
of the investment or discounted future cash flows that it is expected to generate in the form of
dividend income.
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 are not retranslated. Gains and losses arising
on retranslation are included in net profit or loss for the year.
Pension costs
The Company is the sponsoring entity of 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. Whilst the scheme shares risks between the Group’s subsidiaries, there is no contractual
arrangement or policy for charging the net benefit cost between the entities who participate in this
scheme. The Company therefore recognises the net defined benefit cost of the scheme as described
in the accounting policies applied in the Group consolidated financial statements.
The Company also participates in a number of defined contribution schemes. The amount charged
to the profit and loss account in respect of these schemes reflects the contributions payable in
the year.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated 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 following annual rates:
Fixtures and fittings 10% to 20%.
Intangible assets
Intangible assets are stated at cost less accumulated amortisation and any provision for impairment.
Amortisation is provided to reduce their carrying value to nil on a straight-line basis over their
estimated useful lives, at the following annual rates:
Software 7% to 33%.
Impairment of tangible and intangible assets
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 may be impaired. If any such
indication exists or the asset is not in use and therefore requires an annual test, the recoverable
amount of the asset is estimated as the higher of fair value less costs to dispose and value in use.
If the recoverable amount of an asset is less than its carrying amount, then its carrying amount is
reduced to its recoverable amount.
Impairment losses are reversed to the extent that a subsequent event results in the recoverable
amount of the asset becoming more than its carrying value provided that the carrying value of the
asset does not exceed the value as it would have been if no impairment loss had been previously.
Impairment losses and gains on reversal of impairments are recognised in the income statement.
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Financial statements
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Bodycote plc Annual Report 2024
Additional information
Company accounting policies continued
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.
In accordance with IFRS 9, a simplified 12-month Expected Credit Loss (ECL) model is used to
assess receivables for impairment.
Amounts that the Group does not expect to receive within 12 months based on the agreements
in date at the balance sheet date are classified as falling due after more than one year.
Payables
Trade and other payables are initially recognised at their fair value. Subsequent to initial recognition,
they are held at their amortised cost using the effective interest rate method.
The Company derecognises financial liabilities when, and only when, the Company’s obligations
are discharged, cancelled or they expire.
Amounts which are contractually not required to be paid in the coming 12 months are classified
as falling due after more than one year.
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. 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.
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 grant date fair value
determined is expensed on a straight-line basis over the vesting period with a corresponding
adjustment recorded in the share-based payments reserve. 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.
The Company recognises the share-based payment reserve for all eligible Group employees.
The cost of share-based payments of non-Company employees are passed on to other Group
companies at the weighted average cost to purchase shares exercised. The difference between
the grant date fair value of shares exercised by non-Company employees and the weighted average
cost to purchase shares exercised is recognised within retained earnings.
Critical judgements in applying the Company’s accounting policies and
key sources of estimation uncertainty
Preparing the Company’s financial statements requires an assessment of the future benefits payable
under the Group’s UK defined benefit pension plan in accordance with actuarial assumptions.
The discount rate and the mortality rates applied in the calculation of scheme liabilities are a key
source of estimation uncertainty for the Company. Details of the accounting policies applied in
respect of retirement benefit schemes are set out in note 26 of the Group consolidated
financial statements.
In line with previous years, the Company does not recognise an asset in relation to the surplus
on the defined benefit pension scheme. The recognition of the pension scheme surplus is an
area of accounting judgement, which depends on the wording of the scheme rules and IFRIC 14.
The pension surplus not recognised at 31 December 2024 was £5.7m (2023: £4.9m). Full disclosures
concerning the scheme as required by IAS 19 are set out in note 26 of the Group consolidated
financial statements and full disclosure concerning IFRIC 14 is set out in note 26 of the Group
consolidated financial statements.
During 2024 the Company recognised an impairment in relation to the Operations module
of the Group’s ERP following a decision to cease its development and deployment.
Management performed an analysis of the amounts capitalised in respect of the wider ERP
programme to determine how much of the costs related to the Operations module and how
much related to the development of the Finance and Procurement modules which continue to
be deployed across the business. Undertaking that analysis required significant judgement,
particularly in respect of certain items of historical cost that support both modules.
Company overview
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Financial statements
169
Bodycote plc Annual Report 2024
Additional information
Notes to the company financial statements
Year ended 31 December 2024
1. Profit for the year
The Company 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 2024 of £383.6m
(2023: £3.8m) reflecting the receipt of £400m (2023: £7.3m) of dividends from subsidiaries in the year.
The auditors’ remuneration for audit and other services is disclosed in note 28 of the Group
consolidated financial statements.
2. Employees
2024
Number
2023
Number
Average monthly number of employees
47
46
£m
£m
Their aggregate remuneration comprised:
Wages and salaries
10.2
10.3
Social security costs
1.6
1.1
Pension costs
0.4
0.5
12.2
11.9
Included in wages and salaries are share-based payment charges (excluding social charges) of
£2.4m (2023: £0.7m).
All Directors of the Group are remunerated through the Company. Disclosure of individual Directors’
remuneration, share interests, share awards, long-term incentive schemes, pension contributions
and pension entitlements required by the Companies Act 2006 are disclosed in the tables in the
Directors’ report on remuneration on pages 94 to 117.
3. Intangible assets
Software
£m
Cost
At 1 January 2024
53.5
Additions
4.6
Impairment of ERP costs
(28.4)
At 31 December 2024
29.7
Amortisation
At 1 January 2024
19.4
Charge for the year
1.8
At 31 December 2024
21.2
Net book value
At 31 December 2024
8.5
At 31 December 2023
34.1
Included in software assets are ongoing development costs related to the Group’s ERP solution that
was partially impaired during the year. The retained asset was put in use on 1 July 2024 and is being
amortised over 15 years in accordance with the Group’s accounting policy. As at 31 December 2023,
£31.4m of costs had been capitalised in respect of the ERP solution and were not being amortised
because the asset was not available for use at that time. Information on the impairment recognised
by the Company are set out in note 3 of the Group consolidated financial statements.
Additions are for the ongoing ERP development which include £3.1m (2023: £4.3m) charged from
other Group companies.
Company overview
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Financial statements
170
Bodycote plc Annual Report 2024
Additional information
Notes to the company financial statements continued
Year ended 31 December 2024
4. Investments in subsidiaries
£m
Cost
At 1 January 2024 and 31 December 2024
395.5
Provision for impairment
At 1 January 2024 and 31 December 2024
6.6
Net book value
At 1 January 2024 and 31 December 2024
388.9
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 company Bodycote plc, has provided a
statutory guarantee for any outstanding liabilities of these businesses. These subsidiaries have been
included in the Group consolidated financial statements of Bodycote plc as at 31 December 2024.
Bodycote America Capital Limited
Bodycote HIP Germany Limited
Bodycote America Finance Limited
Bodycote International Limited
Bodycote America Treasury Limited
Bodycote Investments
Bodycote Finance Limited
Bodycote Nominees No. 1 Limited
Bodycote Finance UK Limited
Bodycote Pension Trustees Limited
Bodycote Heat Treatments Limited
Bodycote Surface Technology Limited
Bodycote H.I.P. Limited
Bodycote Thermal Processing Mexico Limited
A full list of directly and indirectly owned subsidiary undertakings can be found on pages 179 to 180.
5. Trade and other receivables
2024
£m
2023
£m
Amounts falling due within one year:
Amounts owed by subsidiary undertakings1
6.0
3.5
Corporation tax
2.4
0.5
Other receivables and prepayments
2.0
1.1
10.4
5.1
Amounts falling due after more than one year:
Amounts owed by subsidiary undertakings1
294.8
5.8
Other receivables
1.0
0.4
295.8
6.2
306.2
11.3
1 Amounts due to subsidiary undertakings have been classified as falling due within a year based on the Company’s
expectations of collections based on the terms and conditions of the loan agreement that is in place until 19 September 2029.
Loans owed from subsidiaries have a defined maturity date which is broadly in line with the Group’s Revolving Credit Facility,
however parties have the ability to repay earlier. The interest rate for such loans was SONIA plus 1.95% in 2024 (2023: SONIA
plus 1.95%). Expected credit losses (ECL) from these amounts have been assessed and no allowance recognised on the basis
that the loans do not exceed the borrower’s liquid assets and there is no history of default or forward-looking indication of
future default.
6. Trade and other payables
2024
£m
2023
£m
Amounts falling due within one year:
Trade payables
0.7
0.3
Amounts owed to subsidiary undertakings1
0.3
0.2
Other taxes and social security
1.2
0.7
Other payables2
36.1
4.9
Accruals
3.3
4.3
41.6
10.4
Amounts falling due after more than one year:
Amounts owed to subsidiary undertakings1
–
6.5
–
6.5
1 The portion of the ‘Amounts owed to subsidiary undertakings’ balance that is due to be settled within 12 months according to
the loan agreement in place until 19 September 2029 is classified as current. The interest rate on those loans was SONIA plus
1.2% margin in 2024 (2023: SONIA plus 1.2%). Loans owed to subsidiaries have a defined maturity date being predominantly in
line with the Group’s Revolving Credit Facility, however the Company has the ability to repay earlier.
2 2024 Other payables balance includes £32.9m related to the Company’s share repurchase programme.
Company overview
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Financial statements
171
Bodycote plc Annual Report 2024
Additional information
Notes to the company financial statements continued
Year ended 31 December 2024
7. Deferred tax
The following are the deferred tax assets and liabilities recognised by the Company and movements
thereon during the current and prior year.
Accelerated
tax
depreciation
£m
Retirement
benefit
obligations
£m
Other timing
differences
£m
Total
£m
At 1 January 2023
(1.5)
–
0.2
(1.3)
Credit/(Charge) to profit or loss
(1.0)
–
–
(1.0)
At 1 January 2024
(2.5)
–
0.2
(2.3)
Credit/(Charge) to profit or loss
5.7
0.1
0.5
6.3
Charge to other comprehensive income
–
(0.1)
–
(0.1)
At 31 December 2024
3.2
–
0.7
3.9
Deferred tax assets and liabilities are offset where the Company has a legally enforceable right to
do so.
8. Share capital
Number
of shares
£m
At 1 January 2024
191,456,172
33.1
Share buyback programmes
(8,558,676)
(1.5)
At 31 December 2024
182,897,496
31.6
Details of share awards in issue on the Company’s share capital and share-based payments are set
out in notes 20 and note 25 respectively of the Group consolidated financial statements.
9. Contingent liabilities
The Company has guaranteed bank overdrafts, loans and letters of credit of certain subsidiary
undertakings amounting to £91.1m (2023: £37.0m). It is considered unlikely that these guarantees
will be called and therefore no liability has been recorded in respect of them (2023: £nil).
10. Pension commitments
The Company is the sponsoring entity of 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 (see note 26 to the Group consolidated financial statements). Whilst the scheme shares risks
between the Group’s subsidiaries, there is no contractual arrangement or policy for charging the net
benefit cost between the entities who participate in this scheme. The Company therefore recognises
the net defined benefit cost of the scheme as described in the accounting policies applied in the
Group consolidated financial statements. As at 31 December 2024, a net pension asset of £nil
(2023: £nil) was reflected on the Company’s balance sheet. See note 26 of the Group consolidated
financial statements for further details.
The Company also participates in a number of defined contribution schemes. The contributions
made by the Company over the financial year to the defined contribution scheme amounted to
£0.4m (2023: £0.5m). As at 31 December 2024, contributions of £nil (2023: £nil) were due in respect
of the current year had not been paid over to the scheme.
11. Related party transactions
Information on the retirement benefit schemes operated by the Company are set out in note 26
of the Group consolidated financial statements. The remuneration of the Directors is set out in
note 28 of the Group consolidated financial statements and in the Directors’ report on remuneration
on pages 94 to 117. The Company has taken the exemption available under FRS 101 not to disclose
transactions with wholly-owned subsidiary companies.
Company overview
Strategic report
Governance
Financial statements
172
Bodycote plc Annual Report 2024
Additional information
ADDITIONAL
INFORMATION.
IN THIS SECTION
Five-year summary (unaudited)
174
Alternative performance measures (APMs) (unaudited)
175
Subsidiary undertakings
179
Shareholder enquiries
181
Company information
182
05
173
Bodycote plc Annual Report 2024
Company overview
Strategic report
Governance
Financial statements
Additional information
Five-year summary (unaudited)
2024
£m
2023
£m
2022
£m
2021
£m
2020
£m
Revenue
757.1
802.5
743.6
615.8
598.0
Profit:
Adjusted operating profit
129.0
127.6
112.2
94.8
75.3
Amortisation of acquired intangible assets
(10.4)
(8.1)
(9.3)
(10.3)
(9.8)
Acquisition costs
(2.4)
(0.3)
(0.9)
(0.7)
(2.1)
Operating profit before exceptional items
116.2
119.2
102.0
83.8
63.4
Exceptional items
(78.3)
–
–
–
(58.4)
Operating profit
37.9
119.2
102.0
83.8
5.0
Net finance charge
(9.5)
(7.5)
(6.7)
(6.3)
(6.5)
Profit/(loss) before taxation
28.4
111.7
95.3
77.5
(1.5)
Taxation
(7.7)
(24.9)
(21.0)
(17.5)
2.3
Profit after taxation
20.7
86.8
74.3
60.0
0.8
Non-controlling interests
(0.7)
(1.2)
(0.6)
(0.5)
(0.4)
Profit attributable to the equity holders of the parent
20.0
85.6
73.7
59.5
0.4
Adjusted earnings per share (pence)
48.6
48.4
42.7
35.8
27.8
Full year dividend per share (pence)
23.0
22.7
21.3
20.0
19.4
Assets employed
Intangible assets
321.4
332.7
344.7
322.0
323.5
Property, plant and equipment
481.2
504.9
516.3
489.3
522.6
Other assets/(liabilities)
(0.9)
6.4
20.4
(9.5)
(66.6)
801.7
844.0
881.4
801.8
779.5
Financed by
Share capital
31.6
33.1
33.1
33.1
33.1
Reserves
636.5
757.7
747.8
651.6
647.4
Shareholders’ funds
668.1
790.8
780.9
684.7
680.5
Non-controlling interests
1.8
1.5
1.1
0.7
0.9
Net debt
131.8
51.7
99.4
116.4
98.1
Capital employed
801.7
844.0
881.4
801.8
779.5
Net assets per share (pence)
365.3
413.0
407.9
357.6
355.4
Average capital employed1
822.9
862.8
841.6
789.9
770.5
Return on capital employed1 (%):
15.7
14.8
13.3
12.0
9.8
1 Adjusted operating profit divided by the average of opening and closing capital employed.
174
Bodycote plc Annual Report 2024
Company overview
Strategic report
Governance
Financial statements
Additional information
Alternative performance measures (APMs) (unaudited)
The Group’s Financial Statements are prepared using the basis of preparation and accounting
policies described on pages 133 to 140 of this annual report. To provide additional information and
analysis and to enable a full understanding of the Group’s results, management also makes use of a
number of APMs in its internal management of the business and as part of its internal and external
reporting. These APMs are prepared and presented as described below:
– Revenue excluding surcharges presents the revenue of the Group as it would be excluding the
effect of energy surcharges that were introduced in 2022 to pass on increased fuel and energy
costs to customers.
– Adjusted results (including adjusted operating profit; adjusted profit before tax; adjusted EBITDA;
and adjusted tax charge) are defined as being the respective GAAP measure excluding the effect
of exceptional items, acquisition costs and amortisation of acquired intangibles. These measures
form the basis of the Group’s internal reporting and are presented to give greater insight into the
ongoing trading performance of the Group excluding the effects of acquisitions and one-off items.
– Constant currency results (including constant currency revenue and constant currency adjusted
operating profit) present the 2024 results translated into GBP using the same exchange rates as
were used in 2023. Constant currency results are intended to provide further insight into the
trading performance of the business excluding the effects of foreign exchange movements that
are beyond its control.
– Organic results (including organic revenue and organic adjusted operating profit) present the
results of the business stated at constant currency excluding the results of any businesses
acquired or disposed of in either the current or prior year. Organic results are provided to give
greater insight into the trading performance of the Group excluding the effects of changes to
the Group. In 2024, the only business excluded from the organic results is Lake City which was
acquired in January 2024. No businesses have been excluded from 2023.
– EBITDA (Earnings before interest, taxation, depreciation and amortisation) is used by
management to provide further information about the ability of its businesses to generate cash
before working capital and other movements. EBITDA is stated before profits and losses on
disposal of assets and impairment charges in respect of assets. A similar measure is used for the
Group’s covenant calculation. A reconciliation of EBITDA to operating profit and cash generated
by activities is included in note 23 to the financial statements.
– Core measures reflect the results of the Group’s two segments based on its technology based
platforms. Those segments include the parts of the business that are expected to continue to
exist once the Group’s strategic optimisation programme is complete and so give an indication
of performance of the ongoing part of the Group.
– Net Debt is defined as the Group’s borrowings (including finance lease liabilities) net of
the Group’s cash and overdrafts balance. It is used to provide an overall picture of the net
indebtedness of the Group.
– Free cash flow is defined as the movement in the Group’s net debt excluding payments made
to the Group’s shareholders in respect of dividends and share purchases, spend in relation to
acquisitions of businesses and movements in net debt due to lease liability additions and
disposals. It is presented to give an indication of the businesses’ ability to generate cash to
support acquisitive growth and return to shareholders.
– Adjusted operating cashflow is defined as free cash flow adjusted to exclude the effects of
payments in respect of exceptional items (typically restructuring payments), finance costs and net
tax. Adjusted operating cashflow forms part of the basis of the Group’s internal reporting and is
presented to give greater insight into the ongoing cash generation of the Group before financing
costs and excluding the effects of acquisitions and one-off items. The definition of adjusted
operating cashflow is consistent with the definition of the equivalent adjusted profit measures.
– Return on capital employed is defined as adjusted operating profit divided by capital employed,
which is defined as the average of opening and closing net assets adjusted for net (debt)/cash.
Return on capital employed provides a measure of how well the business has deployed capital
to generate profit.
During the year the Group has renamed a number of its APMs from headline to adjusted with
no change to their definition other than where explained.
A reconciliation of each of the APMs to its nearest GAAP measure is set out below. Whilst broadly
consistent with the treatment adopted by both the Group’s business sector peers and by other
businesses outside of the Group’s business sector, these APMs are not necessarily directly
comparable with those used by other companies.
175
Bodycote plc Annual Report 2024
Company overview
Strategic report
Governance
Financial statements
Additional information
Alternative performance measures (APMs) (unaudited) continued
Revenue excluding surcharges
2024
Specialist
Technologies
£m
Precision
Heat
Treatment
£m
Total core
£m
Non-core
£m
Consolidated
£m
Total revenue
224.2
488.3
712.5
44.6
757.1
Less energy surcharges
(4.0)
(28.9)
(32.9)
(2.7)
(35.6)
Total revenue
excluding surcharges
220.2
459.4
679.6
41.9
721.5
2023
Specialist
Technologies
£m
Precision
Heat
Treatment
£m
Total core
£m
Non-core
£m
Consolidated
£m
Total revenue
212.4
534.9
747.3
55.2
802.5
Less energy surcharges
(7.4)
(54.4)
(61.8)
(5.0)
(66.8)
Total revenue
excluding surcharges
205.0
480.5
685.5
50.2
735.7
Adjusted operating profit
Adjusted operating profit is reconciled to Operating Profit in note 1 to the financial statements.
Adjusted operating margin
2024
Specialist
Technologies
£m
Precision
Heat
Treatment
£m
Central cost
and
eliminations
£m
Total core
£m
Non-core
£m
Consolidated
£m
Adjusted
Operating Profit
65.0
83.0
(20.4)
127.6
1.4
129.0
Revenue
224.2
488.3
–
712.5
44.6
757.1
Adjusted operating
margin (%)
29.0%
17.0%
n/a
17.9%
3.1%
17.0%
2023
Specialist
Technologies
£m
Precision
Heat
Treatment
£m
Central cost
and
eliminations
£m
Total core
£m
Non-core
£m
Consolidated
£m
Adjusted
Operating Profit
55.2
94.4
(24.8)
124.8
2.8
127.6
Revenue
212.4
534.9
–
747.3
55.2
802.5
Adjusted operating
margin (%)
26.0%
17.6%
n/a
16.7%
5.1%
15.9%
Adjusted profit before taxation
2024
£m
2023
£m
Profit before taxation
28.4
111.7
Add back:
Amortisation of acquired intangibles
10.4
8.1
Acquisition costs
2.4
0.3
Exceptional items
78.3
–
Adjusted profit before taxation
119.5
120.1
Revenue, organic revenue and adjusted operating profit at constant currency
Reconciled to revenue and adjusted operating profit in the table below:
2024
Specialist
Technologies
£m
Precision
Heat
Treatment
£m
Central cost
and
eliminations
£m
Total core
£m
Non-core
£m
Consolidated
£m
Revenue
224.2
488.3
–
712.5
44.6
757.1
Constant exchange
rates adjustment
5.0
18.1
–
23.1
1.2
24.3
Revenue at
constant currency
229.2
506.4
–
735.6
45.8
781.4
Less adjustments for
revenue from acquisitions
completed in the current
or prior year
(9.8)
–
–
(9.8)
–
(9.8)
Organic revenue at
constant currency
219.4
506.4
–
725.8
45.8
771.6
Adjusted operating profit
65.0
83.0
(20.4)
127.6
1.4
129.0
Constant exchange
rates adjustment
1.4
3.5
–
4.9
–
4.9
Adjusted operating profit
at constant currency
66.4
86.5
(20.4)
132.5
1.4
133.9
Less adjustments for
adjusted operating profit
from acquisitions
completed in the current
or prior year
(4.1)
–
–
(4.1)
–
(4.1)
Adjusted operating profit
at constant currency
62.3
86.5
(20.4)
128.4
1.4
129.8
176
Bodycote plc Annual Report 2024
Company overview
Strategic report
Governance
Financial statements
Additional information
Alternative performance measures (APMs) (unaudited) continued
Adjusted EBITDA (earnings before interest, taxation, depreciation and amortisation)
2024
£m
2023
£m
EBITDA
185.9
198.6
Acquisition costs
2.4
0.3
Exceptional items, excluding impairments and disposal of business
10.4
–
Adjusted EBITDA
198.7
198.9
Adjusted EBITDA Margin
26.2%
24.8%
Adjusted operating cash flow1
2024
£m
2023
£m
Adjusted EBITDA
198.7
198.9
Less:
Net capital expenditure
(60.5)
(72.0)
Principal elements of lease payments
(13.5)
(13.0)
Provisions movement
(7.3)
(0.9)
Working capital movement
(1.9)
(0.8)
Adjusted operating cash flow
115.5
112.2
Add back:
Maintenance principal elements of lease payments
12.4
10.1
Expansionary capital expenditure including ROU additions/disposals
20.4
27.8
Lease additions and disposals relating to maintenance
capital expenditure
(13.2)
(10.6)
Adjusted operating cash flow as previously stated1
135.1
139.5
Free cash flow1
2024
£m
2023
£m
Adjusted operating cash flow
115.5
112.2
Less:
Restructuring cash flows
(3.9)
(1.6)
Net income taxes paid
(32.1)
(9.0)
Net Interest paid
(8.9)
(6.4)
Free cash flow
70.6
95.2
Add back:
Maintenance principal elements of lease payments
12.4
10.1
Expansionary capital expenditure including ROU additions/disposals
20.4
27.8
Lease additions and disposals relating to maintenance
capital expenditure
(13.2)
(10.6)
Free cash flow as previously stated1
90.2
122.5
Adjusted operating cash conversion
2024
£m
2023
£m
Adjusted operating cash flow
115.5
112.2
Adjusted operating profit
129.0
127.6
Adjusted operating cash conversion
89.5%
87.9%
Free cash flow conversion
2024
£m
2023
£m
Free cash flow
70.6
95.2
Adjusted operating profit
129.0
127.6
Free cash flow conversion
54.7%
74.6%
1 In 2024 the definition of adjusted operating cash flow and free cash flow has been updated to include expansionary capital expenditure, which was previously recorded outside of both adjusted operating cash flow and free cash flow. In addition, they have also
both been restated to include the principal element of lease payments and exclude non-cash movements in net debt arising from lease liability asset additions and disposals. The restatement results in a net reduction of £19.6m (31 December 2023: £27.3m)
in adjusted operating cash flow and free cash flow and the prior period comparatives have been changed to reflect this. The Group considers that the revised definition more appropriately reflects the cash flows of the business.
177
Bodycote plc Annual Report 2024
Company overview
Strategic report
Governance
Financial statements
Additional information
Company overview
Strategic report
Governance
Financial statements
Additional information
Alternative performance measures (APMs) (unaudited) continued
Adjusted tax charge
2024
£m
2023
£m
Tax charge
7.7
24.9
Tax on amortisation of acquired intangibles
2.1
2.0
Tax on acquisition costs
0.6
0.1
Tax on exceptional items
18.0
–
Adjusted tax charge
28.4
27.0
Adjusted tax rate
2024
£m
2023
£m
Adjusted tax charge
28.4
27.0
Adjusted profit before taxation
119.5
120.1
Adjusted tax rate
23.8%
22.5%
Adjusted earnings and adjusted earnings per share
A detailed reconciliation is provided in note 6 of the consolidated financial statements.
Net (debt)/cash excluding lease liabilities and net debt
2024
£m
2023
£m
Cash and bank balances
19.1
45.2
Bank overdrafts (included in borrowings)
(3.1)
(0.5)
Bank loans (included in borrowings)
(84.3)
(32.1)
Net (debt)/cash excluding lease liabilities
(68.3)
12.6
Lease liabilities
(63.5)
(64.3)
Net debt
(131.8)
(51.7)
Return on capital employed (%)
Year to 31 December 2024
Specialist
Technologies
£m
Precision
Heat
Treatment
£m
Central cost
and
eliminations
£m
Total core
£m
Non-core
£m
Consolidated
£m
Adjusted
operating profit
65.0
83.0
(20.4)
127.6
1.4
129.0
Average capital
employed1
311.9
543.1
(57.0)
798.0
24.9
822.9
Return on capital
employed (%)
20.8%
15.3%
n/a
16.0%
5.6%
15.7%
Year to 31 December 2023
Specialist
Technologies
£m
Precision
Heat
Treatment
£m
Central cost
and
eliminations
£m
Total core
£m
Non-core
£m
Consolidated
£m
Adjusted
operating profit
55.2
94.4
(24.8)
124.8
2.8
127.6
Average capital
employed1
310.5
545.8
(31.6)
824.7
38.1
862.8
Return on capital
employed (%)
17.8%
17.3%
n/a
15.1%
7.3%
14.8%
1 Average capital employed is defined as the average opening and closing net assets adjusted for net debt.
178
Bodycote plc Annual Report 2024
Company overview
Strategic report
Governance
Financial statements
Additional information
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 Limited3
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
Expert Heat Treatments Limited2,4
Taylor & Hartley Fabrics Limited2
Incorporated in Belgium
Font Saint Landry 11, 1120 Brussels, Belgium
Bodycote Belgium SA1 – dissolved 17 December 2024
Industrie Park Noord 7, 9100 Sint-Niklaas, Belgium
Bodycote Hot Isostatic Pressing NV1
Incorporated in Canada
4211 Mainway, Burlington, Ontario, L7L 5N9, Canada
Bodycote Heat Treatment Canada, Inc.1
Bodycote Thermal Processing Canada, Inc.1
1100–1959 ST Upper Water Halifax Nova Scotia B3J 3N2, Canada
Bodycote Surface Technology Canada Ltd.1
30 de l’Aeroport Boulevard, Bromont Québec JSL 1S6, Canada
Bodycote Surface Technology Canada Property, Inc.4
Incorporated in China
No.2 Factory Building of LeKai Industrial Park, No. 180 Meihua
Road, Zhonglou District, Changzhou Jiangsu Province, China
Bodycote (Changzhou) Heat Treatment Co., Ltd.1
No. 68 Ningbo East Road, Taicang Economic Development Area,
Taicang City, Jiangsu, China
Bodycote Heat Treatments Technology (Taicang) Co., Limited1
Building 4 in International Innovation Park Phase Two,
No. 1188 Feng Hua Road, Jiaxing City, Zhejiang Province, China
Bodycote (Jiaxing) Heat Treat Co., Ltd.1
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.o.1
Rohanske nabrezi 671/15, Karlin, 186 00, Praha 8, Czech Republic
Bodycote SSC s.r.o.6
Incorporated in France
Parc Mail – Bâtiment A, 6 allée Irène Joliot-Curie,
69800 Saint Priest, France
Bodycote SAS1
Bodycote Bourgogne SAS1
Ilena Park – Bât. B2, Parc Technologique de Lyon, 117,
allée des Parcs, 69800 Saint Priest, France
Bodycote France Holdings SA3
Bodycote Haute-Savoie SAS2
Bodycote Lyon SNC6
Bodycote Metz-Tessy SAS1 – sold 17 December 2024
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 Schmerbach GmbH1
Bodycote Specialist Technologies GmbH1
Bodycote Specialist Technologies Deutschland GmbH1
Bodycote Wärmebehandlung GmbH1
Incorporated in Ireland
12 Merrion Square North, Dublin 2, Ireland
Bodycote Ireland Finance DAC6
Incorporated in Jersey
50 La Colomberie, St Helier, JE2 4QB, Jersey
Bodycote Jersey Holdings Limited3
Incorporated in Mexico
Avenida Conquistadores, Exterior No.: 105 Interior No.: PA 07,
Calle Rio Lys and Calle Rios Mosa, Col. Mirasierra, San Pedro
Garza Garcia, Nuevo León 66240, México
Bodycote de SLP, S. de R.L. de C.V.1
Carretera Monterrey-Saltillo #3279 B, Privada de Santa Catarina,
Nuevo León 66367, México
Bodycote Testing de Mexico, S. de R.L. de C.V.2
Avenida Olmo, No. 100, Parque Industrial y de Negocios Las
Colinas, Silao, Guanajuato 36270, México
Bodycote Thermal Processing de Mexico, S. de R.L. de C.V.1
Avenida Industriales del Poniente Km. 19, Colonia Centro,
Santa Catarina, Nuevo León 66350, México
Bodycote Thermal Processing de Mexico Servicios,
S. de R.L. de C.V.6
179
Bodycote plc Annual Report 2024
Company overview
Strategic report
Governance
Financial statements
Additional information
Subsidiary undertakings continued
Incorporated in Sweden
Box 209, 735 23, Surahammar, Sweden
Bodycote Hot Isostatic Pressing AB1
Box 124, 424 23, Angered, Sweden
Bodycote Sweden AB3
Bodycote Thermotreat AB2
Bodycote Värmebehandling AB1
Bodycote Ytbehandling AB1
Incorporated in Switzerland
Chemin du Pavillon 2, 1218 Le Grand-Saconnex, Switzerland
Bodycote (Suisse) SA6
BDC Enterprises SA3,6
Jurastraße 59, 2503 Biel, Canton de Berne, Switzerland
HTM Biel GmbH1
Incorporated in USA
12750 Merit Drive, Suite 1400, Dallas, TX 75251, USA
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
1237 Knoxville Hwy, Wartburg TN 37887, USA
Bodycote Surface Technology Wartburg, Inc.1
2427 N Boeing Road, Warsaw IN 46582, USA
Lake City Heat Treating LLC1 – acquired 18 January 2024
Incorporated in other European countries
Böhlerdurplatz 1, 8605 Kapfenberg, Austria
Bodycote Austria GmbH1
Groethofstraat 27, 5916PA Venlo, Netherlands
Bodycote Hardingscentrum BV1
Bodycote Hardingscentrum No.2 BV3
ÁTI-Sziget Ipari Park, 23. Épület, 2310 Szigetszentmiklós,
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
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 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.
180
Bodycote plc Annual Report 2024
Company overview
Strategic report
Governance
Financial statements
Additional information
Shareholder enquiries
Registrar
The Company’s Registrar is Equiniti Limited. Equiniti provide
a range of services to shareholders. Extensive information,
including answers to frequently answered questions can be
found online at www.shareview.co.uk. Equiniti’s registered
address is: Aspect House, Spencer Road, Lancing,
West Sussex BN99 6DA.
Use the QR code to register for FREE at
www.shareview.co.uk
Telephone +44 (0)333 207 5951. Please note that
lines are open 8:30am to 5:30pm (UK time)
Monday to Friday excluding public holidays in
England and Wales.
For deaf and speech impaired customers, Equiniti welcomes
calls via Relay UK. Please see www.relayuk.bt.com for
more information.
Share dealing service
For information on the share dealing service offered by Equiniti
Limited, telephone +44 (0)345 603 7037. Please ensure the
country code is used 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 check online at www.shareview.co.uk for up-to-date
commission rates.
Dividend reinvestment plan (DRIP)
Equiniti’s DRIP offers a convenient way for shareholders to build
up their shareholding by using dividend payments to purchase
additional shares. The DRIP is provided by Equiniti Financial
Services Limited, part of Equiniti Group, which is authorised and
regulated by the Financial Conduct Authority. 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.
For more information and an application pack, please go to
shareview.co.uk/info/drip. Alternatively, call +44 (0)333 207 5951.
Lines open 8.30am to 5.30pm (UK time), Monday to Friday
excluding public holidays in England and Wales.
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 for answers to any queries you
may have, as well as the full terms and conditions of the service.
Alternatively, please call +44 (0)333 207 5951. Lines open 8.30am
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 annual 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 your accounts into one single entry.
Please contact Equiniti, who will be pleased to carry out
your instructions.
Shareholder warning
Shareholders should be very wary of any unsolicited advice,
offers to buy shares at a discount or offers of free company
reports on the Company. Fraudsters use persuasive and high-
pressure tactics to lure investors into scams and they may offer
to sell shares that often turn out to be worthless, overpriced or
even non-existent. Whilst high returns are promised, those who
invest usually end up losing their money.
Please keep in mind that firms authorised by the Financial
Conduct Authority (FCA) are unlikely to contact you out of the
blue. If you receive any unsolicited investment advice:
– Make sure you get the correct name of the person and
organisation and make a record of any other information they
give you, e.g. telephone number, address, and ask for their
‘firm reference number’ (FRN)
– Check that they are properly authorised by the FCA before
getting involved. You can check the FCA register at
https://register.fca.org.uk or call +44 (0)800 111 6768
– Report approaches to the FCA – a list of unauthorised firms
who are targeting, or have targeted, UK investors is
maintained. Reporting such organisations means the list can
be kept up to date and appropriate action be considered
– Inform Equiniti Limited, our Registrars. They are not able to
investigate such incidents themselves, but will record the
details and pass them on to the Company and liaise with the
FCA on your behalf
– Consider that if you deal with an unauthorised firm, you would
not be eligible to receive payment under the Financial Services
Compensation Scheme If you suspect you have been
approached by fraudsters, please contact the FCA using the
share fraud reporting form at fca.org.uk/scams
You can also call the FCA Helpline on: 0800 111 6768 (UK
freephone) or 0300 500 8082 (UK), or +44 207 066 1000
(from outside UK).
If you have already paid money to share fraudsters,
you should contact Action Fraud on 0300 123 2040 or online
at actionfraud.police.uk.
181
Bodycote plc Annual Report 2024
Company overview
Strategic report
Governance
Financial statements
Additional information
Shareholder enquiries continued
Company information
Shareholder analysis
Analysis of share register as at 4 March 2025:
Holding range
Number of
shareholders
%
Number of
shares
%
1 to 1,000
612
42.38
246,848
0.14
1,001 to 10,000
508
35.18
1,634,782
0.90
10,001 to 100,000
188
13.02
6,654,012
3.68
100,001 to 500,000
76
5.26
18,268,546
10.09
500,001 and over
60
4.16
154,194,931
85.19
1,444
100.00
180,999,119
100.00
Type of shareholders
% of
shareholders
% of total
shares
Directors’ interests
0.3
0.1
Major institutional and corporate holdings
31.1
98.6
Other shareholdings
68.6
1.3
100.0
100.0
As at 28 February 2025 the following voting rights in the Company had been notified in accordance
with the Disclosure and Transparency Rules:
Name of shareholders
Number of
shares
%
Goldman Sachs Asset Management
14,052,890
7.74
Artemis Investment Management
11,759,804
6.46
Blackrock Investment Management (UK) Ltd.
11,273,671
6.20
Fidelity Management & Research Company LLC
10,917,609
6.00
Martin Currie Investment Management Ltd.
10,244,521
5.64
The Vanguard Group, Inc.
9,492,770
5.23
Baillie Gifford & Co.
8,282,033
4.56
Columbia Threadneedle Investments (UK)
6,621,855
3.64
Advisers
Auditors
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.
Brokers
HSBC Bank plc and Jefferies International Limited
Solicitors
Herbert Smith Freehills LLP and DLA Piper UK LLP
Financial calendar
Annual General Meeting
21 May 2025
Final dividend for 2024
5 June 2025
Half Year results for 2025
July 2025
Interim dividend for 2025
November 2025
Full Year Results for 2025
March 2026
182
Bodycote plc Annual Report 2024
Company overview
Strategic report
Governance
Financial statements
Additional information
Company overview
Strategic report
Governance
Financial statements
Additional information
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Bodycote plc
Springwood Court
Springwood Close
Tytherington Business Park
Macclesfield
Cheshire
United Kingdom
SK10 2XF
Tel: +44 (0)1625 505300
Email: info@bodycote.com
© Bodycote plc 2025