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Edited Transcript of BOY.L earnings conference call or presentation 12-Mar-20 8:30am GMT

Full Year 2019 Bodycote PLC Earnings Call

Cheshire Mar 19, 2020 (Thomson StreetEvents) -- Edited Transcript of Bodycote PLC earnings conference call or presentation Thursday, March 12, 2020 at 8:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Dominique Robert de Lisle Yates

Bodycote plc - CFO & Executive Director

* Stephen C. Harris

Bodycote plc - Group CEO & Executive Director

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Conference Call Participants

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* Andre Kukhnin

Crédit Suisse AG, Research Division - Mechanical Engineering Capital Goods Analyst

* Andrew Douglas

Jefferies LLC, Research Division - Equity Analyst

* Andrew J. Wilson

JP Morgan Chase & Co, Research Division - Analyst

* Harry Philips

Peel Hunt LLP, Research Division - Analyst

* Michael J. Tyndall

HSBC, Research Division - UK MidCap Equity Analyst

* Robert John Davies

Morgan Stanley, Research Division - Equity Analyst

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Presentation

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [1]

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Good morning, ladies and gentlemen. Welcome to the full year results presentation. I'm Stephen Harris, the Group Chief Executive. And with me here today is Dominique Yates, our Chief Financial Officer.

I think it's fair to say that as we got up this morning, there's no doubt that we live in highly unusual times. So what we're going to do in our presentation today is that we're going to focus on 2019 and the results that are contained there, and the actions that we've been taking to achieve those results. We're then going to take a look forward in -- through the immediate unpredictable stuff that we've got in front of us to more of a medium-term outlook. And at the end of it, then, of course, we'll take questions and answers. So if I just move to the agenda itself, I'll give you some highlights here and a quick intro into the business review, hand over to Dominique, and then come back and finish off the business review and summarize 2019. And then we'll do this look forward into what we see into the future through this near-term uncertainty.

With that, let's go to the highlights and results. So I think it's fair to say we've had a successful year in terms of execution in the business. A resilient margin of 18.7%. I think everybody should agree that that's a pretty good result given the tough market conditions that were out there. Good operational performance, strong control of costs. At the end of the day, that's what this company is known for and what our people do very well. We've had a successful execution of our acquisition strategy. And of course, the Ellison acquisition that we announced at the end of the year, which we expect to close -- complete on at the end of this quarter. Also, important to note, we have a very strong balance sheet. And Dominique will go into more detail on that. Even after the acquisition, one might say, we have a very strong balance sheet. Results in total. Revenue, down 2% at constant currency. But headline operating profit, down 5%. And our return on capital invested, standing at 17.7%. Free cash flow. We have a free cash flow conversion of 91 point per point -- 91%, sorry. And finally, we are going to be recommending a final ordinary dividend of 14p, which brings the total year to 20p. That's up, an increase of 5.3%.

Now let's just move to something that's quite topical at the moment, which is our ESG plan. And just a quick note on it because there's a lot of this in our annual report for people that want to go into it much more -- in much more detail. But suffice it to say that ESG is something that's been embedded in the Bodycote culture for many years. The fact that there's more reporting requirements today is good. It's something though that we have been on a long time. Here are some of our achievements that we're proud of. The one, I think, I would pick out to put into context is our environmental impact. So our carbon footprint is -- has been decreasing since 2015 quite substantially. And if you want to look at Bodycote, which we work in the thermal processing industry and another way of looking that is we're actually managers of energy. That's what we do day in, day out is we manage energy, and we're very good at it. And when we do it, as opposed to our customers, we are a lot more efficient than them, and our own efficiency is growing -- increasing all the time. So Bodycote is in a very strong position to beneficially impact the environment. The other highlights are on there as well. There are a lot of people-related issues, but I don't want to go into them in detail here. Please look in the annual report. And I'll finish up on this slide, just pointing out something. So I think everybody is pretty familiar that our Board of Directors is quite diverse, multiple countries, international representation and the fact we've got 43% women on the Board. What people may be less familiar with is that our executive management team -- it actually represents 6 countries, and we have 36% females on the Board.

With that, let's move on into the detail of the actual presentation here. So number one upfront is our driving of performance. We've been doing this very strongly. It's what we do day in, day out. Ours is a business that we manage on a daily basis as opposed to something that we just come back, check every few months. So we're on this business every day. We manage the cost quite closely, and it's a local issue in terms of what costs move up or down and our systems and processes drive that. Overall, we reduced head count by 6% during 2019 to a year-end number which is just over 5,300. And within that, a further 2 points reduction in the temporary head count. So we are now carrying 8% temporaries. In normal times, we would have 15%. There is some more room to go on the head count, but that number will, of course, never get down to absolute 0 because we do have parts of the business that are growing, and indeed, we have daily fluctuation. So we always have to have a minimum few points of temporary and contract labor anyway. Bottom line, resilient margin 18.7% driven by what we do.

Just looking to our strategic investment priorities. This is something that I will come back to after Dominique's gone through some of the numbers here. But putting them up there in black and white, number one, secular growth markets, investing in civil aerospace, for example. There are some other growth markets that we invest in, such as medical, but they're much, much smaller. And civil aerospace has been a focus, and we will come back to the details on that. Of course, Specialist Technologies, which we have those at high priority. And then emerging markets. And last but not least, we do try and do network infills, either through greenfield or acquisitions for our Classical Heat Treatment business to actually strengthen our position in local markets. And our business is, of course, a local business.

With that, I'll hand over to Dominique.

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Dominique Robert de Lisle Yates, Bodycote plc - CFO & Executive Director [2]

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Thank you, Stephen, and good morning, ladies and gentlemen. Chart 9 summarizes the group's financial results. As Stephen has already highlighted, 2019 has seen some challenges, particularly in the automotive market in Western Europe. Overall, with the help from the strong civil aerospace revenue growth, though revenues were down a couple of percentage points. But again, as has already been highlighted, group margins were very resilient at 18.7%. Cash flow was strong, and I'll come back and talk about that a little later. Our headline earnings per share was down 7%. And in line with our progressive dividend policy, the final dividend increases 5.3% to 14p, bringing the total ordinary dividend for the year up to 20p, up from 19p last year. Following the announcement of the Ellison transaction and in line with our policy, we aren't proposing a special dividend this year as we have a clear and immediate use for our spare net cash.

Chart 10 shows the operating profit bridge. Two points really to bring out on this slide. Firstly, variable pay in the form of the charge for bonuses and long-term incentive awards is lower, reflecting the impact of the challenging year that we faced on our variable remuneration. Secondly, and more generally, and again, as Stephen has already alluded to, we have taken action to reduce our cost base already to align the costs in line with the demand. Accordingly, while it's not shown here on the chart, central costs are lower than they were last year, and you'll see this in the segmental analysis in the press release.

Chart 11 shows the division's performances. ADE margins benefited from the revenue growth in civil aerospace and the positive gearing impact that, that has on the margin. In AGI, we've experienced a margin decline largely down to our Western European AGI business, which constitutes 60% of the total AGI business and where we saw significant declines in the automotive revenues in particular. As you all know, our largest cost is labor and beyond our ability to adjust our temporary and contract labor in some of these markets, it takes time to make more radical adjustments to the workforce. Stephen will talk more about this in his section later.

Chart 12 presents the group's results by major currency. When we compare with last year, you will note that euro lands proportion of the group's profit has reduced, while that of the U.S. dollar-denominated business has increased. In part, this is down to currency movement and the relative strength of the U.S. dollar, but it's mainly due to the lower margins in the Western European AGI business that I described on the previous slide.

On to Chart 13, we've gave guidance for '19 that our tax rate will be 24.5% around that mark. And our headline tax rate has actually come in slightly better than that at 23.8%. Looking forward to 2020 and assuming completion of Ellison in the coming weeks, we are guiding to a headline tax rate of 22.5% reflecting the tax rate benefits resulting from that acquisition. We have a very healthy balance sheet. At the end of last year, we had over GBP 20 million of net cash on the balance sheet. Even looking at the balance sheet, though, on a pro forma basis, taking into account the Ellison transaction, we have a gearing -- our net debt-to-EBITDA ratio of around about 0.6x. So even post Ellison, our balance sheet is very, very strong. And we also have more than 2 run -- years to run on our existing GBP 230 million revolving credit facility.

Chart 14 shows the group's development of free cash flow. So as we've already mentioned a couple of times, another very strong year for cash flow conversion. Free cash flow conversion there, 91%, GBP 123 million of free cash generated there and it's worth just reiterating. That is after we've paid all of our taxes and after we've spent GBP 50 million maintaining our capital equipment as well. So very strong cash generation from the business.

Chart 16 is the usual slide. We have -- sorry, Chart 15 reiterates the capital allocation priorities for the free cash that the group generates.

And Chart 16 then shows how we have used that free cash that I was talking about over the last 5 years. So in that time frame, we've generated over GBP 500 million of free cash. We've invested almost GBP 400 million back into the business to support future profitable growth, and we've returned over GBP 300 million in the same time frame to shareholders.

Finally, from me, on Chart 17. This shows the revenue development of our recent facilities, defined as those opened in the last 5 years. We've spent GBP 48 million of capital on these facilities. And as explained before, we would therefore expect eventual revenue from these facilities of more than GBP 50 million. And you'll see that we're making progress towards that figure.

Now I'll hand you back to Stephen to continue the review of the business.

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [3]

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Thank you, Dominique. Okay. If we move to Slide 19, these are the strategic investment priorities that we have. Like I said, we were going to go into more detail on that.

So if we turn to Slide 20, the first one up on this is aerospace and defense. So 2019 performance in aerospace and defense. This now represents 27% of our group revenues. And we saw growth of 14% in total. 17% of that is civil aerospace. The balance is the defense growth, which is primarily flying assets and that had a growth of 6.5%. So where does the growth come from? So clearly, we have growth in this business that follows the passenger kilometers that that flow and the size of the fleet. So as the fleet grows and as people fly, then we see more replacement parts and that is a large portion of our revenues in aerospace and defense. We've got above-market growth. From the momentum that we've got coming from the wins that we've had -- actually, over the last decade, we've been working on this segment for about 10 years. And we've got good wins, contract wins on LEAP, both LEAP-1A and LEAP-1B and also in other platforms. So quite a number of platforms that we're in. And our business is primarily engines and landing gear. I'd like to point that out too. An interesting point, too, is that we recently been getting quite good market share gains, and that's not about getting on to more print as it were, not into more platforms. That's about the fact that the OEMs have been rationalizing the supply chains over the last year or so. Because they've overbuilt them for the ramp up that they were going for. And as they shaken them down, we've actually been very active in making sure that we're on the right side of the fence and in terms of who are the winners and who the losers were. And that's also given us some market share gains. Just a note to the 737 issue here quickly. What I can tell you is, through January, as yet, we've seen no impact from the 737 halt that was announced just before Christmas.

Moving on to our technologies, so Slide 21. Here, you can see on the pie chart, the share of revenues, the Specialist Technologies actually occupies of the group. I will also highlight gas nitriding. And you might recall from our Capital Markets Day that gas nitriding is one of those technologies that could almost have been in the day as Specialist Technologies -- Technology. It has all the attributes in terms of high margins in the business and a very strong market position. The only one that was missing was growth. And as we highlighted at the Capital Markets Day, this is the process of choice for electric vehicles business. And so we're actually expanding it because we do believe that the EV revolution will come in time, and that's something that one of these days may end up in the Specialist Technology camp.

Then if you look at on the right-hand side of the slide, you can see the growth. But I think it's fair to say that one of the things that we have learned is that when we look at Specialist Technologies, we really need to look at them in relative terms compared to the background. They're not immune from the background economies. And what you can see from our Specialist Technology business is the outperformance against the background Classical Heat Treatment business which is 7%. We would expect to see that the outperformance ongoing and, indeed, in the better times, the good times, increasing. So we've always talked about high single digits and, indeed, over 10% in time, and that we should look at in terms of a relative issue as opposed to an absolute issue. Within Specialist Technologies, we've got strong growth in HIP services and Surface Technology. And don't forget, Surface Technology is actually also the business that we are acquiring with Ellison.

If we then look to Slide 22, moving to the emerging markets. So the emerging markets is 9% of total group revenues. Just to note that's about -- 2% of that is in China. And emerging markets has high exposure to the car and light truck market, something which I'll come back to a little bit later in the presentation. We've seen 5% growth here. And notably, in the second half, in China, we saw 15% growth. The strongest prospects for electric vehicles is actually in emerging markets. We're seeing that day in, day out. The request for proposals that we receive come from the emerging markets and not so much in the western markets. This is primarily, though, a European comment. It's not a North American comment. The north -- the European drive on supply chain has been moving to Eastern Europe. And then, of course, you've got the indigenous electric vehicle issue in China itself. So we're investing in these markets, and we continue to invest.

So if we just look at the GBP 61 million we've invested in 2019 in our strategic priorities. We've got capacity enhancements, and they're up there on the slide. Hot Isostatic Pressing is going apace. We've also been investing in extra heat treatment capacity for aerospace. This is a long-term market. It's not something that one should look at, in my view, is a short-term issue. And we fully believe that in the long term, aerospace is a great place to be. From the emerging markets standpoint, we now have a greenfield facility opened in the Czech Republic, in Prague, which actually is where Dominique and I are talking to you from today, not the facility, we're in our operation center in Prague. And we are constructing a new facility in Hungary, as we speak. From an acquisition standpoint, we did make an acquisition in Slovakia, which is also a gas nitriding specialist and that's a great position, both in terms of emerging market exposure and technology exposure. And a network infill in Sweden, which has got a mining exposure. And then more to come on the Ellison acquisition due at the end of the month.

So just looking at the market sectors in total, you could see the aerospace and defense number of 14%. It was slightly higher at the end of last year. The fact that the civil aerospace dropped a little bit from 21% to 17% is actually an impact of lapping a high number as opposed to any other movements in the trend lines. Energy, 2% down; automotive, 8% down; and general industrial, which, of course, is the capture of everything else was 4% down. And that's on a like-for-like basis because we did rationalize some facilities in general industrial in the year and, indeed, we did have a disposal.

So now if we move to Slide 25, and we'll go through these one at a time, energy. Note, it's 9% of our total revenue these days. Energy covers power generation, such as nuclear and industrial gas turbines. It also covers oil and gas in terms of subsea, which is a large part; and the North American onshore business, which is primarily exposed to the Permian Basin and U.S. fracking. On the first point, subsea revenues. This is a long momentum business. Typically, it doesn't change in the short term. So whilst we've seen some highly volatile moves with the oil price, our view is that we won't see the current contracts that we're working on in subsidy change much in the near term and who knows where the long term goes in terms of the oil price. The onshore business in North America is, as I said, it's a primarily fracking base. And today, it represents less than 2% of group revenues.

Turning to 26 in automotive. So car and light truck is 87% of this business, which, in turn, automotive is 28% of the total revenue, negative 8%. It's worth noting that the big weakness in automotive has been Western Europe, and what we saw in Western Europe was the automotive manufacturers production fell once again. Just putting some numbers on that. I mean Germany, in particular, is a highlight or lowlight as one might look at it. So in 2019, production from our customers in Germany was negative 8%, and that's on top of a 9% decline that happened in 2018. Registrations were actually up. So it shows you the piece that's being impacted here is primarily their export market, not necessarily their local domestic market. So we are seeing some long-term structural changes becoming evident in Western car and light truck and that's particularly associated with the EV supply chains which, as I mentioned, are establishing in emerging markets.

Moving to general industrial. So the -- this is 36% of total revenue. And it comprises a whole host of subsegment from medical through agriculture. This is primarily driven by the background macroeconomic demand, and there have been growth concerns and trade tensions throughout 2019. What we saw initially was a delay in capital investment decisions. And in the second half, there was some destocking going on, which we can tell in our figures without even talking to the customers. We can say after the fact because when you see a customer change their draw off of components from us, and they do it rapidly, it has to be destocking or the fact that their plant has gone down, but if there are a lot of them, it's destocking. And that's something that we saw in the second half of '19. Coming into '20, the global trend so far have been similar with no particular subsectors or territories standing out. And in fact, we'll comment a little bit more to that when we wrap up today.

So in summary, 2019, I think, it's fair to say that we executed very successfully in the year. Strong cost management. Good margin. We've been improving the quality of the business over the years, and we continue to do that, lower volatility and higher returns. And we are continuing to invest in our strategic priorities. We generate cash -- we generate a lot of cash and our approach to life is to invest for the future and the long term. I think we demonstrated, once again, that this business is very robust. And on that note, I think it's worth just talking a little bit about what drives the robustness in total from a business model standpoint. So we have, as I sit here today, 189 facilities. These are small facilities in terms of what people might generally think of as a plant. They have 30 to 35 people in them and they are scattered right around the world. It's very difficult to knock this company over because it's so diverse in terms of geography and customers. We have better than 40,000 customers. And as I said, quite a large array of facilities. If one facility goes down for whatever reason, the neighbors cover for it. So we have an in-built back up into -- in our system. So that's one of the reasons why the business is quite robust, particularly when you have difficult times.

Let's just go to moving -- looking forward. So we expect the business to continue to benefit from the investments we've made over the last 5 years of GBP 400 million. And those results are not yet reflected in the group results. However, we do still have macroeconomic uncertainties. And of course, in the very near term, we've got some other factors in here, which are things like the COVID-19 virus. But overall, those -- the background situation is pretty much in line with what it was last year so far. Long-term structural changes are evident in car and light trucks, particularly in Western Europe. And our belief is that the Western European car and light truck market and supply chain are unlikely to recover to the same position as they were before in terms of size or profile. And it's the combination of these issues that have caused us to move into a restructuring program which we're executing in 2020.

Now is the time, I think, to take advantage of the change that's going on. And so we are consolidating our Western European business, in particular, and our major focus is the consolidation is a pivot away from the internal combustion engine in Western Europe. And on the other side of that coin is a pivot towards the future of electric vehicles that is in the emerging markets. So that's something that we are undergoing at the moment. It's a program which has already started. We expect to have a charge to the P&L of GBP 30 million for this program, including cash cost of GBP 15 million with a payback of 2.5 years.

One of the things, I think, it's worth noting is that when it comes to North America or indeed the U.K., if we move on downsizing or restructuring, it tends to be fairly inexpensive and quick. The restriction we have is moving customers to new facilities. But we can, in fact, react very quickly in those areas. The areas where it's harder to react in short order is Western Europe. And from that perspective, we do have a longer wavelength, if you like, to move on restructuring. So the fact that we're already ongoing with this, we already have had consultations in some areas and are in consultations with employees and unions and others, and plans are in front of the various labor organizations and legal organizations. So we expect this to be moving forward ahead. We may well expand it. We'll have to see. But this is where we're going now.

Moving then on to a quick run through Ellison. It should close at the end of this month. All things being equal, we're just waiting for the final clearances. This is a North American business. It's got 6 locations, and it's 90% aerospace and defense. It has major barriers to entry. It's got significant customer approvals, which you cannot just pick up, they take years to get. And the rationale for this acquisition, it's a perfect strategic fit for us. It's both civil aerospace and Specialist Technologies. It improves the overall business quality, reduces volatility, increases its robustness. It's got strong future growth profits. And what's nice, in some ways, it's actually underpinned by contractual commitments from customers. If we move on to the synergies. The major synergies we'll see with Ellison is primarily its revenue gains. So our existing Surface Technology business will actually be able to provide customer approvals that Ellison can make use of and vice versa. Overall, that should be quite strong, starting from about 2021 onwards. And additionally, we'll have some cost synergies coming in of 2 million annually.

So just in summary, the integration plan is ready to go. That's about the interaction we've been having so far with Ellison management. So we're all ready to go as the whistle blows on this, then -- and we can start. So some numbers on the slide, giving you the 2019 results for Ellison. A good business. But the other thing that we've all agreed, including with the local teams in Ellison, is that we'll be transitioning the business to Bodycote norms in terms of margin over the coming years. So we do expect to see some improvements in this business as we go forward as well as just pure growth. And the consideration, of course, GBP 154 million which GBP 23 million is out of tax benefits.

So moving to 35, Slide 35, what we've done here is overlay Ellison on a pro forma basis from 2019. And here's the impact that you would have seen if this business was part of Bodycote in 2019. Clearly, aerospace and defense now becoming the standout major segment. General industrial is larger, but that's actually a collection of lots of smaller segments. And aerospace and defense is the main leg that we'll be moving to over the years given its long-term nature. On the right-hand side, you can see what Ellison does to our Specialist Technologies. So it's improved the share of the group in terms of Specialist Technologies. And we see Ellison performing very much in the same way that, for example, the Bodycote Specialist Technologies business performed in 2019 with superior growth.

With that, on to Slide 36, on our outlook situation. And I think the issues in terms of outlook, I'd like to just touch on quickly is what we're seeing with COVID-19, or the novel coronavirus. And I'm not going to go into a lot of detail here, if people have got questions, we'll answer them the best we could -- can. Just to note, in the Chinese situation, where we have 4 plants, we are down in Shanghai. We have not seen any plant closures. We did see an impact from not being able to man them fully after the Chinese New Year. We're currently manned at about 80% of the business. The reason why it's not manned is if you live outside the area, the travel ban's stopping you actually getting to work. But at the moment, 80% manning levels are sufficient to meet demand. Having said that, what we are seeing in China is a quick rebound in terms of the business. It is starting to move up quite quickly, and that it's only a small part of our overall group. But that is sort of a positive sign, I think, looking forward.

The other one to touch on is perhaps Italy that people might be looking at. Italy, once again, actually, it represents 2.1% of group revenues. And in Italy, the situation is a little different. So one of our facilities has, in fact, being closed down and is currently being decontaminated, I think, is the term. So in a heat treatment business, you can imagine that it's probably easier than in other [coverage] facilities. So the business is scheduled to be closed for 2 weeks. And the other businesses in the area around Milan are picking up a good deal of the slack. The problem, of course, comes down to -- it's not our facilities that they are the issue particularly. It's what's happened to the customer base. We're local. We serve local market, and it all depends on which customers we're serving as to how the business goes. And in Italy, the situation is, of course, that they've shut the whole country down. So we can't actually do anything if there are no customers around. Hopefully, that will go the same way the Chinese business has gone and recover quickly, but we don't really know. And that is the situation as we can see it today. We're obviously taking as best care we can of our employees and our businesses. But I think we're probably in a better position than many, given the nature of our business model.

With that, we can move to any questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) First question on the line comes from Andrew Wilson from JPMorgan.

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Andrew J. Wilson, JP Morgan Chase & Co, Research Division - Analyst [2]

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Hopefully, you can hear me okay. I just have a few questions. Just starting off on the restructuring in Western Europe. I'm just interested as to sort of what the trigger has been. I mean you obviously provided a lot of detail in terms of kind of transition to EV supply chain. I mean is this, I guess, recognition also of picking the right time in the cycle, perhaps to do that when volumes have been weak. And also, just interested if it's anything customer-specific, or if you think this is -- you probably alluded to kind of a broader Western Europe issue.

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [3]

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Yes, thanks, Andrew. That's a great question, actually. So trigger implies it was a quick move. And I would say it's not a quick move. It's something we've been contemplating and planning for and it's more related to a strategic shift than any specific near-term issue. It has been our growing view that the automotive business in Western Europe is in transition. And Western Europe, in total, you will, of course, recall because you've followed us for a long time, has been one of the weaker parts of our business in terms of our AGI business. So we've been warming up for this. And the best time to do this kind of thing is actually when the background markets start to weaken. So it's something we've been contemplating. We did start in-depth planning at the end of last year. And as you face into the kind of situation we have today, it's -- I mean it's a good thing to actually already be on the case because a lot of the prep work is already done. Does that answer your question?

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Andrew J. Wilson, JP Morgan Chase & Co, Research Division - Analyst [4]

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Yes. I guess -- I don't know. Is there anything customer-specific? I guess it's in...

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [5]

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No, there's not. There's nothing that specific. It's market issue and long-term trends that we're doing. No specific customer issues.

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Andrew J. Wilson, JP Morgan Chase & Co, Research Division - Analyst [6]

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Perfect. And just thinking about the -- and we obviously saw a little bit of this in 2019 and expecting more in 2020 in terms of the way that you're managing the cost base, and you talked about the head count. Kind of, I guess, is the right way for us to think about and think about how to model the benefits in 2020 is, we've obviously got the very specific program we've just been talking about. But assuming actions are being taken as required across the group, which obviously you've done previously. I mean do you -- can you sort of give us any indication of the sort of, I guess, benefit we might model from those actions? Notwithstanding it will be difficult to work out exactly what the outlook is going to be.

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [7]

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Yes. So you used the magic word model, that means Chief Financial Officer is going to answer your question. Dominique?

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Dominique Robert de Lisle Yates, Bodycote plc - CFO & Executive Director [8]

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Look, I think the first thing to say is in terms of the restructuring program itself, it -- for the reasons that Stephen's described it, it takes time to put in place and roll out. Therefore, we're not anticipating a significant positive impact to our cost base from that restructuring this year. It will come through fully in 2021 onwards though because we are expecting to have completed it by the end of this year. I think more generally, I think, you're asking how the action that we've already taken is coming through in terms of cost. Well, you can see, if you look at the second half of last year and the performance of the business and how our margins held up pretty well there that, that is already coming through and positively impacting our business result. So we are already getting the benefit from that, and there is more action that goes on every day as and when -- as Stephen described earlier, it's 180-odd facilities, making decisions every day about costs and what they need to do, and that is happening every day as it always does.

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Andrew J. Wilson, JP Morgan Chase & Co, Research Division - Analyst [9]

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Perfect. And maybe if I can just add, it's probably a short question and maybe difficult to answer, I think...

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [10]

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You have an advantage, Andrew. Your name begins with A because you always get the first question instead of -- carry on.

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Andrew J. Wilson, JP Morgan Chase & Co, Research Division - Analyst [11]

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I'll try to make this quick. The -- you sort of -- a number of times, I think, you mentioned about sort of a similar background situation in a number of the markets. And I guess, just trying to make sure I understand that comment. Is -- are you talking about similar types of decline year-on-year? Or are you talking about a similar kind of run rate? So notwithstanding, obviously, some specific COVID-19, I guess, impacts. But if we take sort of auto volumes, as an example, if we take the exit rate from 2019, is that sort of how that comment's intended?

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [12]

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Yes, I think, in general, the general comment I would make is COVID-19 aside, the run rate coming into 2020 is pretty stable with a lot of this stuff. In '19 -- January, you wouldn't have thought that there was anything happening in the world at all, it was just a complete extension of the run rate. In fact, January held up really well. It was quite a good month. We haven't seen the impact of anything overly negative in January, it's all including what everybody was about questioning about, previously, which was 737. And so we did see coming into 2020 and the first month, which is the only data that we really have buttoned down at this point in time, is a continuation of the prior year. And indeed, in some areas, like North American auto, for example, are flattening out. So not even the continuation of the run rate, but -- or the trend, but actually a continuation of the level where they were. Now undoubtedly, these things are going to be moving around a fair bit in the near term here. But the start of 2020 in our numbers was actually quite good.

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Operator [13]

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The next question on the line comes from Andre Kukhnin from Credit Suisse.

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Andre Kukhnin, Crédit Suisse AG, Research Division - Mechanical Engineering Capital Goods Analyst [14]

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I guess it's another name that starts with A, so we can carry on. I've got a couple of questions and then a follow-up. I just want to talk about margin resilience a bit more broadly. And given what, I think, we're about to start seeing happening, i.e., kind of customer-driven, maybe disruption or volatility of workload for your facilities at least in Western Europe. I just wanted to get you to talk about what are you doing to prepare for that, or that you've done already? Is there a kind of special plan? Or is this the model kind of working as it has done, highly distributed? The guys on the ground know how to react to that. They don't need to kind of go up and seek your decisions on that. And just related to that, that temp head count number, just how low can that go? I'm not sure if you said that on the call, I was kind of getting line interruptions. So that's kind of my first part of the question.

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [15]

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Okay. Sure. So I think it -- maybe it's good to describe what we do anyway as part of the normal course of business. So in our budgeting and planning phase that we do every year, the first thing that we do is every facility around the world has what we call a trigger point plan, where they model downside and upside situations, and they have already got in place. A plan for if revenues go down 5% at the facility or 10% at the facility or 15% at the facility, they have a plan in place where they know what to do. And the reason for that is we try and run this business in a very real-time basis. And there is no time to have, Dominique and I, if we have the capability, even second-guessing the local management team. And so they have a plan and we go through those when there's time to think about them. And when the day comes, when they -- those plans have to be utilized, they don't have to think and they don't have to ask sort of questions up the line. They've got their plan. They know what they're doing, and they run their businesses the way they do every day. So that's normal course of business. That's how we keep on top of things so that we don't actually have this sort of central command and control, do this, do that approach to life. It's very much a decentralized decision-making process with a lot of upfront planning. That's the ordinary course. Overlay that with the restructuring plan that we've got here. Don't forget, we're always restructuring every year, so that's the right term. We're always looking at facilities and [owning them at], some are being shut down.

When we restructure businesses, by the way, the -- what happens is that we move the equipment. The equipment is very movable. So that goes to the territories or markets where we see future growth. So in Western Europe, we'll be moving equipment primarily to emerging markets. But indeed, even in -- within Western Europe, developed markets that we'll be moving into market segments that actually are more attractive than others than the ones the current equipment is in. So we move the equipment. Clearly, we have to have people cost reductions there. Some people move to the -- another facility, some people move out to the group. And then what's left are our properties, our buildings, some of which we own and we sell, some of which we lease. So that's the nature of how that program works. What are we -- this is too much information for you, I'm sure. But what happens in the current environment that we may see at the moment is that we have the ability to expand these plans. The main thing is having got on the radar with the labor offices in some respect. There are limitations. And of course, there's -- one of the things is how did the governments react.

We're already seeing in Germany and -- excuse me, for not being able to pronounce the word, but short-term working being expanded quite significantly. One could take advantage of those kind of things if you wanted to, sometimes there's a drawback because it restricts your ability to actually do restructuring. So we're very wary about taking advantage of government support. Because what we'd like to do is improve the business for the future, not just get through a day-to-day issue. I mean one of the things that we've been saying and Dominique, I think, explained it, it's not as if -- it would have to be an absolute disaster in the world for us to have a cash problem. So it's not as if there's a short-term issue in terms of liquidity or anything. So we'd rather actually move this business through to the medium term rather than be hung up on how do we get through it for the next couple months or so. Does that answer your question, Andre?

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Andre Kukhnin, Crédit Suisse AG, Research Division - Mechanical Engineering Capital Goods Analyst [16]

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Yes, I think that gives good flavor. I just wondered if there was anything kind of any emergency planning going on right now in Europe, given that, I think -- yes, it looks like we're starting to get some...

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [17]

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I think I tried to explain. The emergency planning has already been done. It was done last year. It's what we do every year. That is emergency planning. We're not doing any more emergency planning because we already covered that stuff. So no, I think, we're very, very well prepared. I mean one of the things you asked was how low can the head count go in terms of temporary. A few percent is where it could go, but it's not going to go to 0.

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Andre Kukhnin, Crédit Suisse AG, Research Division - Mechanical Engineering Capital Goods Analyst [18]

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Got it. Got it. And just a couple of others there. Firstly, on the cost-cutting program that you launched, what do you expect in terms of savings for, I guess, 2021?

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Dominique Robert de Lisle Yates, Bodycote plc - CFO & Executive Director [19]

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Well, we -- the cash cost in -- of the program is around about GBP 15 million, and we're expecting a cash payback of 2.5 years. So implicitly, we're expecting GBP 6 million to GBP 7 million worth of benefits from that program next year.

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [20]

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Just one sort of slight follow-up on the temp's point. We're not trying to get to 0 with our temporary labor in any event because we always want that flexibility. So as the temp labor has come down, where we can, we've been looking to replenish that as we might lose some of our permanent staff in the meantime. So our objective is not to drive the temporary and contract labor to 0.

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Andre Kukhnin, Crédit Suisse AG, Research Division - Mechanical Engineering Capital Goods Analyst [21]

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Got it. That's helpful.

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [22]

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Yes, you got to look at the overall head count number.

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Andre Kukhnin, Crédit Suisse AG, Research Division - Mechanical Engineering Capital Goods Analyst [23]

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Yes. And the final one, just looking at AGI in the second half of last year, it sounds like there was some kind of overburden there on cost of maybe from the acquisitions, but -- that you closed maybe some new facilities ramp up, potentially some maybe capacity adjustment measures. Is there any way you could quantify that just for us not to kind of overcook the operational gearing going into 2020, given that there is some kind of already what feels like additional costs there that are not really in the run rate?

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [24]

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Well, so the 2 acquisitions that we made at the end of the first half certainly came with a cost base. So that would have added to the AGI cost base for the second half. So when you're looking at gearing, you would need to take that into account. But I think more generally, I mean, the restructuring program that we've got is focused on Western Europe and our AGI business because that's where it's more difficult to take cost out beyond the initial reduction in temporary and contract labor. So in that regard, it's not that surprising that our gearing in that business was not where we want it to be. That is why we are instituting the restructuring program and taking that cost out.

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Operator [25]

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The next question on the line comes from Andrew Douglas from Jefferies.

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Andrew Douglas, Jefferies LLC, Research Division - Equity Analyst [26]

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Just 2 questions from me, most of mine have been answered already. With regards to the restructuring that you guys have announced today, but have been working on for a while. Can you actually talk about how much capacity you're taking out? Or am I working with solution that you're taking capacity out of internal combustion engines, but putting more into your EV footprint going forward, just so we can figure out both top and bottom line impact? And then my second question is on the U.S. We've had some underperforming assets there, which you've talked about in the past. Can you just give us an update on how they're progressing and whether the restructuring plan includes those as well?

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [27]

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Certainly, Andrew. So the restructuring capacity issue. There -- the way we do it is we move equipment, which is what I was talking about before. The reduction in capacity in Western Europe will actually materialize in other places, predominantly. The equipment will be moved to other places. It's not just in EV. This is exactly the same equipment that you use in aerospace, for example. The equipment is not specific to a market segment. It's generic. So some of those assets will be actually moving into aerospace facilities. In fact, in one situation, for example, we're actually closing an automotive facility, but we're not really closing it. What we're doing is that we're closing the aerospace facility and moving the aerospace business into the automotive facility, if that makes sense to you. So -- and that's one auto business, but it's just been completely turned into an aero business. And so it will be -- the migration of the assets go into the parts of the market that we think have a medium to long-term stronger nature, plus the emerging markets, which includes EVs.

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Andrew Douglas, Jefferies LLC, Research Division - Equity Analyst [28]

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Yes, okay. So no overall change?

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [29]

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No. A little bit, minor, but you wouldn't -- even you wouldn't be able to get as many [debts], of course, from that one. I'll hand it over to Dominique for the...

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Dominique Robert de Lisle Yates, Bodycote plc - CFO & Executive Director [30]

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So on the U.S. question, we've alluded, as you've indicated in the past, the 2 facilities in North America that are weighing on the AGI margins there. One of them we indicated was a structural issue that we would need to fix. And the second one is more just about development and execution. The development and execution is underway, but that was never going to be a short-term fix. That is a business that is making progress, but it's going to take a while. The other one is while the restructuring program is focused on Western Europe -- actually, this one is -- there is one in North America, and this is the one. And it's moving out of our legacy facility that is more difficult and carries a lot of cost with it and moving into a shiny new facility that we are very confident will put the business on to the right track and delivers the margins that we should be getting out of that market.

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Andrew Douglas, Jefferies LLC, Research Division - Equity Analyst [31]

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Okay. Perfect. And just one quick follow-up. On the additional HIP capacity you're putting in North America, you say that's operational in '20. When should we be thinking about that contributing to both sales and profit, please?

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [32]

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As soon as it's operational.

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Andrew Douglas, Jefferies LLC, Research Division - Equity Analyst [33]

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Which is what, first quarter, fourth quarter, third quarter?

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [34]

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For the half year.

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Andrew Douglas, Jefferies LLC, Research Division - Equity Analyst [35]

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Half year. Okay. So half year contribution. Okay.

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [36]

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I wonder if we could just answer some of the questions that have come up on the web at this point in time.

So I just want to take -- answer some questions from Lacie Midgley at Panmure. The first thing she's asked is, how long do you now expect it to take to get Ellison margins in line with the Specialist Technology business?

That's a journey that will take 2 to 3 years, we would expect.

And then can we confirm the full year revenues numbers for Specialist Technology and Classical Heat Treatment?

Dominique will just come back on that in a minute.

Are we able to give any split between OE and aftermarket?

That's a great question. I think the point to understand is that the margins that we make in aftermarket are identical to the margins that we make on the original OE equipment. We don't have any changes on margins. Because actually the parts we're processing are replacement parts, and we don't see what a lot of manufacturers see is different pricing for different part. We do the work. You get our price. And it doesn't matter whether it's aftermarket or OE. Secondly, because it's the same part, we don't actually have new visibility as to, in detail, as to what's aftermarket or what's OE. The only way we find that out is, over time, we see what the OE build rates are each individual one, and we know what the background trends are. So all we know is that the aftermarket is greater than 50%. We don't really like to get into any more detail than that. I think that answers your questions.

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Dominique Robert de Lisle Yates, Bodycote plc - CFO & Executive Director [37]

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So the revenue split between Classical Heat Treatment and Specialist Technologies is 541 million in the year for Classical Heat Treatment and 179 million for Specialist Technologies is taking us up to the total.

I think there was also a question on our revolving credit facility and what the gearing covenant is. It's 3x. So we have, as I alluded to in my presentation, very, very significant headroom above the 0.6x pro forma that we would find ourselves at post the Ellison transaction.

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [38]

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If we could just take Harry Philips next, we get back on to the phone line.

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Operator [39]

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Harry Philips.

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Harry Philips, Peel Hunt LLP, Research Division - Analyst [40]

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It's Harry Philips with Peel Hunt. Obviously, being H I'm lower down the list. Couple of questions, please. First of all, in terms of growth CapEx for 2020, are you still planning to continue invest in, say, circa 30 million to 40 million a year in that segment of the business? And secondly, Stephen sort of gave guidance on LEAP engine deliveries of 1,400 this year. Can you just -- you did on the Ellison call, but can you just sort of remind us of the sort of LEAP exposure and what a complete shutdown might do to profitability over a quarter, please?

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Dominique Robert de Lisle Yates, Bodycote plc - CFO & Executive Director [41]

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Harry, on the growth CapEx, we spent 30 million last year. And I think it will be sensible to pencil in something similar for this year. It's -- the nature of these investments are, it's been like the facility we're building in Hungary. These are not investment that one decides to do from one day to the next. We decide to do them and they take a while to come to full fruition. So we would expect to spend a similar amount of money this year.

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [42]

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I'll take the LEAP exposure question. So I think it's worthwhile explaining how that works with us. So we supply into the supply chains for these platforms and LEAP, in particular, right from the very beginning, the raw materials right to the end of the supply chain in terms of the finished goods that are going into the assembly. The length of time a build from those components going into an engine is something over 2 years, 2.5, maybe even 3 years in some situation. So the front end of the supply chain is components that will be delivered into an engine in 2.5, 3 years' time. So there's quite a span across the supply chain in terms of timing issues. The -- what we're seeing is that the -- that front end of the supply chain, there has been no slowdown at all. In fact, they are, I think, praying to whatever God they pray to, that this is happening because they're eating their backlog. And they had a significant backlog that they were unable to fulfill for a while. It was a real risk to the business in terms of the engine business. And that backlog is being caught up as we speak.

The other end of the supply chain should have been hit quite quickly. But for us, actually, the final, final part is we -- there's some impact there, but it's tiny. These are rounding error. So that's one of the reasons that I've said this several times, where it's quite hard to see the 737 impact coming into us in terms of the LEAP exposure because of this long wavelength it takes to impact. Having said that, when Boeing put their hands up and said, we are stopping production, it did cause a reaction in the supply chain. And we did get phones ring you saying, "Hey, guys, we're going to start doing some destocking." It hasn't come through yet. I think one of the reasons is people are taking advantage of the situation a little bit in order to improve their cash situation, even though they were contractually required to hold certain inventory levels. They say, "Hey, not on our floor, we're going to have to reduce a bit." So that's a long way of saying that it will take time for the business to fall to the full exposure that we've got on, for instance, LEAP.

The number that I had out last time is about approximately right, is if the LEAP-1A and 1B went to 0, it would hit us at about $4 million a quarter. That's revenue, okay? But that would have to assume that the halt goes on for a significant period of time and the build rate schedules that you mentioned, Harry, we have the Boeing schedules. We have the GE schedules. We have the Airbus schedules. Those schedules show a restart in April. But of course, a word of caution, these schedules change all the time. One would never bank on those schedules, at least not in our position. So we plan for all eventuality. Does that answer your question?

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Harry Philips, Peel Hunt LLP, Research Division - Analyst [43]

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Fantastic. It does.

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [44]

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And so it's $4 million, not GBP 4 million, okay? $4 million.

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Harry Philips, Peel Hunt LLP, Research Division - Analyst [45]

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And with revenue, as you said?

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [46]

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Yes.

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Operator [47]

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The next question on the phone lines comes from Robert Davies from Morgan Stanley.

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Robert John Davies, Morgan Stanley, Research Division - Equity Analyst [48]

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One was just on the evolution of the central cost line, perhaps you could just give us some color in terms of the step down there, maybe I missed it. But I saw there was quite a notable change year-on-year. And then maybe what the expectations for that line item would be for 2020? That would be helpful.

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Dominique Robert de Lisle Yates, Bodycote plc - CFO & Executive Director [49]

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Well, as I alluded to in the presentation on the headline operating profit bridge, a chunk of the share-based payments, effectively lower costs compared with previous year and also the bonus come through in central costs. But it's more than that. We have taken action through the year as we have across the business to reduce the cost base. And it's worth noting that the central cost line is not an absolute figure. Central cost line is a cost figure after recharge to the business. So therefore, a proportionate increase or decrease in the central costs overall results in a more significant proportion of increase or decrease in the residual central cost, if that makes sense to you.

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Robert John Davies, Morgan Stanley, Research Division - Equity Analyst [50]

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Okay. And in terms of sort of 2020, should we be thinking of that as a sensible run rate? Because, I mean, it's sort of half of what we've seen for the last 4 or 5 years, I guess, that's the reason I asked the question.

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Dominique Robert de Lisle Yates, Bodycote plc - CFO & Executive Director [51]

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Well, I think, it all depends on what your expectation is for variable pay. Given where the markets have gone, I can't see that there's going to be a significant increase in BIP charges based on where the outlook is today. On the other hand, some of the bonus, all other things being equal, again, depending on how the outturn is for this year, some of the bonus you might expect to come back because that's an annual bonus.

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Robert John Davies, Morgan Stanley, Research Division - Equity Analyst [52]

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Understood. And then maybe just in terms of sort of customer activity and behavior and the overall sort of market trends, do you typically see or have you seen any more in-sourcing of activity from customers at all? Or is that sort of trend for outsourcing continuing in the same way it has been over the last few years? Particularly, I guess, in light of the slowdown in the markets. Is that a more typical phenomenon? Or is that something you've already seen?

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [53]

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Funny enough, the situation you get when there's a slowdown in the market, it depends which country you're in, okay? So if you're in a country where they absolutely try and protect their labor force and the extreme example, I guess, would be Belgium or France. Then what happens with the slowdown is that you will get in-sourcing taking place. We haven't actually seen that at this point in time, but that's the way the trend would go. Whereas elsewhere, what you see in the slowdown is people trying to offload costs and so outsourcing increases. The -- as we came into 2020, we haven't seen notable change in costs in outsourcing trends one way or the other. You could see some activity starting now. It depends on how different companies are affected. But if they think they've got a problem coming up, they're more likely to outsource than otherwise because it does take them -- I mean one of the reasons is it's not just their people that swaps out. We'll often buy their assets as part of the deal, if the assets are in good shape. So there's a temptation for people to look long and hard and should we actually take this opportunity to outsource at this time. Does that answer your question?

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Robert John Davies, Morgan Stanley, Research Division - Equity Analyst [54]

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Yes. And then just a quick final one, if I could, on general industrial. I mean quite interested to see if there's any significant regional differences or developments that you come into the start of the year that's worth highlighting?

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [55]

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So at the moment, no. Ask me again in 6 months' time, okay?

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Operator [56]

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The next question on the phone lines comes from Michael Tyndall from HSBC.

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Michael J. Tyndall, HSBC, Research Division - UK MidCap Equity Analyst [57]

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Yes. It's Michael Tyndall from HSBC. Just one for me. I guess I'm trying to reconcile the fear in the market with what you're actually seeing in real time. And then you mentioned the trigger point plan. I wonder if you could share with us how many of your facilities or if any of your facilities are currently working to that trigger point plan at the moment.

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [58]

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Yes, sure. Well, China has executed on it. But in fact, the funny thing about this situation, so the COVID situation is, in some ways, the trigger point plan is sort of done for us automatically because if the government says you can't go to work, then all of a sudden, they're paying the people to be at home. And so that's what we're seeing in some areas. So one of the main elements of trigger point is who has to go home and who stays at work. But in this current environment, it's almost like the government's -- local government is doing it force. That's certainly the case in Italy. So other than that, we're not seeing the deep cuts, the trigger point as planned for. I mean don't forget, we're only a month and a bit into the year, I think, 2 now. But January, absolutely not. There was no real change other than in Italy and China. And indeed, those places, as I said, that was forced on us rather than anything else, could change going forward, but not yet.

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Operator [59]

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(Operator Instructions) It appear that we've got no further questions from the phone lines. So Stephen, I will hand back to you for any further questions on the webcast then.

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [60]

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Thanks a lot. So the first question, this is Mark Fielding at RBN. What is it?

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Dominique Robert de Lisle Yates, Bodycote plc - CFO & Executive Director [61]

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RBC.

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [62]

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RBC. I get my eyes and it's mixed up here. Alright. Can we talk more about the aerospace aftermarket outlook in 2020 given reduced flying and how could that impact Bodycote?

Yes. So the aftermarket replacement market, which is what we do when we do replacement part. They tend to be scheduled according to flying hours. So it's not like I'm not flying today, therefore, we don't have any usage. You get big change outs, for instance, of turbine blade at 5 years typically, and then at 10 years is another overhaul, and then 15 years is another overhaul. And it's those stages of the planes overhaul that actually drives the aftermarket. So it doesn't, for us, because we aren't in the MRO market per se. We're not doing repair and overhaul, which is very much a case of when the plane lands, just do a quick repair or something. We're in the replacement market. And so it's unlikely, I would suggest, to see the replacement market move on a short-term flexing. So the fact that we've got travel restrictions going on and planes being pulled out of the air, were grounded. In the short term, that may, in fact, drive a bit of -- a bit more demand because people will take the opportunity to do work maybe 2 months ahead of schedule or whatever. So they don't have to ground the plane for overhaul or replacement of parts on the real schedule.

So near term, it quite could. It could drive some uptick in that market. If it persists, how long would it have to persist for? 9 months maybe, a year. And I'm outright guessing because I've never seen this situation before. But seeing the way the dynamics work, 9 months to a year, you could well see the replacement part market starting to decline. But I think our best guess at this point in time is very near term, we don't see that happening, but it could be happening a little bit further into the future. So I hope that answers that question.

The next one is from UBS. I'm afraid I cannot pronounce the name, lots of apologies there. What are your debt covenant constraints, if any, what limits do you have? And how is it calculated? Do you expect refinancing in the near future, Mr. Chief Financial Officer?

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Dominique Robert de Lisle Yates, Bodycote plc - CFO & Executive Director [63]

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So I think I already indicated that the debt covenant, the gearing covenant is at 3x. And it's calculated on -- as you often have in revolving credit facilities, it's on frozen GAAP. So the most important thing is, it excludes the impact of IFRS 16. So our lease liabilities do not count as the liabilities in that calculation. And as I indicated earlier, post Ellison, our current gearing level is at 0.6x. So we have plenty of spare capacity there.

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Stephen C. Harris, Bodycote plc - Group CEO & Executive Director [64]

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That brings us to the end of the questions that are on the web, and we don't have any phone questions left. So I think we'll wrap up at this point. And I'd like to say thank you very much everybody. This has been a new experience for Dominique and I. We've not done this live as a webcast. We normally are in person. And I do hope that we'll be in person next time we see you. With that, stay safe, and talk to you soon.