The directors are pleased to submit their report and the audited financial statements for the year ended 31 December 2013.
The Chairman's statement, the Chief Executive's review, the Strategic report, and all the information contained in the Governance sections of this online report, comprise the Directors' report for the year ended 31 December 2013.
The Strategic report of this Annual Report is a review of the development of the businesses of the Group, the financial performance during the year ended 31 December 2013, key performance indicators, a description of the principal risks and uncertainties facing the Group and information about the use of financial instruments. The Strategic review has been prepared solely to assist the shareholders in assessing the Group's strategies and the potential of those strategies. It should not be relied on by any other party for any other purpose. Forward-looking statements have been made by the directors in good faith using information available up to the date of this report and such statements should be regarded with caution because of the inherent uncertainties in economic trends and business risks. Since the end of the financial year no important events affecting the business of the Group have occurred.
The Board has recommended a final ordinary dividend of 9.1p (2012: 8.3p) bringing the total ordinary dividend to 13.5p per share (2012: 12.3p). The Board has also recommended a supplemental distribution, by way of a special dividend, amounting to 10.0p per share. If approved by shareholders, the final ordinary dividend of 9.1p per share for 2013 and the supplemental distribution of 10.0p per share for 2013 will be paid on 2 May 2014 to all shareholders on the register at the close of business on 11 April 2014.
The Company's issued ordinary share capital as at 31 December 2013 was £33.1m and during the year was increased by the issue of 32,084 ordinary shares between 21 March and 9 September 2013 for a total consideration of £47,250.11, in connection with the Company's executive share incentive schemes. At the Annual General Meeting on 24 April 2013 the shareholders authorised the Company to purchase up to 19,142,409 of its own shares. This authority expires at the conclusion of the forthcoming Annual General Meeting to be held on 29 April 2014, at which time a further authority will be sought from shareholders.
Details of the issued share capital are shown in note 23. 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 26 and shares held by the Bodycote Employee Benefit Trust abstain from voting and waive dividend rights. No person has any special rights of control over the Company's share capital and all issued shares are fully paid. The appointment and replacement of Directors is governed by the Company's Articles of Association, the UK Corporate Governance Code, the Companies Act and related legislation. The Articles of Association may be amended by a special resolution of shareholders. The powers of the directors are described in the Corporate governance statement. Under the Articles of Association the Company has authority to issue ordinary shares with a nominal value of £11,023,234.
There are also a number of other agreements that take effect, alter, crystallise or terminate upon a change of control of the Company following a takeover bid such as commercial contracts, bank loan agreements, property lease agreements, employment contracts and employee share plans. None of these are considered to be significant in terms of their likely impact on the business of the Group as a whole, and the directors are not aware of any agreements between the Company and themselves or employees that provide for compensation for loss of office or employment that occurs because of a takeover bid except where specifically mentioned in this report.
The current directors and their biographical details are listed in the Board of Directors and all served throughout the year. Under the Articles of Association of the Company each director must retire from office and stand for re-election by shareholders as a minimum at every third Annual General Meeting in order to continue to serve as a director. However in line with the UK Corporate Governance Code and to further increase accountability, all directors retired at the Annual General Meeting in 2013 and stood for re-election by the shareholders. Going forward all directors will retire at the Annual General Meeting and will stand for re-election by the shareholders, if they wish to continue to serve as directors of the Company. Accordingly, those directors retiring and offering themselves for re-election at the 2014 Annual General Meeting are Messrs A.M. Thomson, S.C. Harris, D.F. Landless, J.A. Biles, Dr K. Rajagopal and E.Lindqvist. The service agreements for Messrs Harris and Landless are terminable by twelve months' notice. The remaining directors do not have a service agreement with the Company and their appointments are terminable by six months' notice.
Directors' interests in contracts and shares
Details of the Executive Directors' service contracts and details of the directors' interests in the Company's shares and share incentive plans are shown in the Board report on remuneration. No director has had any dealings in any shares or options in the Company since 31 December 2013. Qualifying third party indemnity provision (as defined by section 234 of the Companies Act 2006) has remained in force for the directors for the year ended 31 December 2013 and, as at the date of this report, remains 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
During 2008 the duties owed by directors to a Company were codified and extended by the Companies Act 2006 so that directors not only had to declare actual conflicts of interests in transactions as they arose, but also had a duty to avoid such conflicts whether real or potential. Potential conflicts of interest could arise where a single director owes a fiduciary duty to more than one organisation (a 'Situational Conflict') which typically will be the case where a director holds directorships in more than one Company. In order to ensure that each director was complying with the new duties, each director provided the Company with a formal declaration to disclose what Situational Conflicts affected him or her. The Board reviewed the declarations and approved the existence of each declared Situational Conflict until September 2014 and permitted each affected director to attend and vote at Bodycote directors' meetings, on the basis that each such director continued to keep Bodycote's information confidential, and provided overall that such authorisation remained appropriate and in the interests of shareholders. Where such authorisation becomes inappropriate or not in the interests of Bodycote shareholders, the Chairman or the Nomination Committee can revoke an authorisation. No such revocations have been made.
The Group recognises the value that can be added to its future profitability and strength by the efforts of employees. The commitment of employees to excel is key to the Group's continued success. Through their attendance at, or participation in strategy, production, safety and health meetings at site level, employees are kept up to date with the performance and progress of the Group, the contribution to the Group made by their site and are advised of safety and health issues. The Group publishes in 11 languages, via the Group intranet, an electronic magazine for all staff detailing the Group's activities, performance and some of its personalities. Under the Group's Open Door Line employees' concerns can be voiced over the phone on an anonymous basis in the local language. Approximately 3,600 Bodycote employees are connected to the Bodycote intranet, which improves knowledge of Group activities, and assists greatly with technology exchange and coordination. It is the Group's policy to give full and fair consideration to applications for employment from disabled persons, having regard to their particular aptitudes and abilities, and to encourage the training and career development of all personnel employed by the Group, including disabled persons. Should an employee become disabled, the Group, where practicable, will seek to continue the employment and arrange appropriate training. An equal opportunities policy is in operation in the Group.
Greenhouse gas emissions
Details of greenhouse gas emissions are included within the Corporate responsibility and sustainability section of this report.
There were no political contributions in 2012 or 2013.
An analysis of the Company's shareholders and the shares in issue at 17 February 2014 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 in the Shareholder enquiries.
In accordance with the provisions of section 489 of the Companies Act 2006, a resolution for the reappointment of Deloitte LLP as Auditor is to be proposed at the forthcoming Annual General Meeting. Each person who is a director at the date of approval of this Annual Report confirms that:
- so far as each director is aware, there is no relevant audit information of which the Company's Auditor is unaware; and
- each director has taken all the steps that he ought to have taken as a director to make himself aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.
This statement is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.
Annual General Meeting
The 2014 Annual General Meeting will be held on 29 April 2014 in accordance with the notice being sent to shareholders with this report.
By order of the Board:
27 February 2014
Tytherington Business Park