vital services for manufacturing efﬁciency
annual report 2002 Bodycote Heat Treatments
PROCESSES:
Controlled atmosphere, Electron beam welding, Fluidised bed, Laser and induction heat treatments, Plasma
and carbo nitriding, Salt-bath, Surface and cryogenic treatments, Vacuum and meshbelt brazing services,
Vacuum heat treatment. 
Bodycote has an unrivalled reputation for total reliability and unmatched expertise in all
signiﬁcant heat treatment processes. International locations, with leading edge fully computerised
heat treatment centres, are complemented by sophisticated metal joining facilities, all with 
24/7 availability. 
Bodycote Hot Isostatic Pressing
APPLICATIONS:
Alloy steel castings, Bi-metallic materials, Ceramics, Complex PM assemblies, Densal
®
& Densal
®
II, Diamond tools,
Diffusion bonding, Glass, HIP brazing, Infra-red windows, Medical implants, Consolidation of powder metal into
near net shape components, Novel materials, Powder metal high speed steel/cold work steel, Sputtering targets,
Superalloy castings, Titanium castings, Tungsten carbide.
The Bodycote name is synonymous with world class metallurgical services to industry
guaranteeing high quality, cost effective hot isostatic pressing, which uses very high pressure
inert gas at elevated temperatures in order to eliminate porosity and improve the properties of
metal and ceramic materials.
Bodycote Materials Testing
SERVICES:
Chemical analysis, Civil engineering, Coatings, Contaminated land, Corrosion, Environmental, Fatigue, 
Food and household, High temperature, Mechanical, Metallurgical, Microbiology, Non-destructive testing, 
Non-metallic materials, Pharmaceuticals, Pipeline polymer testing, Positive materials identiﬁcation and Site services,
Testing of fracture toughness, Automotive engine and Exposure testing.
Materials testing is a vital activity for many manufacturing industries, providing the means to
control quality, validate products and determine speciﬁcation compliance. Subcontracting to
Bodycote gives access to state of the art technology with a skilled experienced workforce. 
Bodycote Metallurgical Coatings
PROCESSES:
Anodising, Ceramic coatings, CVD coatings, Delta Tone 9000, Duplex coatings, Diamond-like coatings,
Electroless nickel, Mechanical plating, Organic coatings, Phosphating, Physical vapour deposition (PVD) coatings,
Sheraplex, Sherardizing, Zinc electroplating, Delta Protekt, Gold and hard chrome plating, Zinc-iron and 
Zinc-cobalt plating.
Bodycote Metallurgical Coatings offers indispensable coatings systems for anti-corrosion,
wear resistance, metal cutting and forming, tribological and decorative applications. Modern
computerised control systems, unparalleled coatings expertise and total quality commitment
from a strategic network of coating centres keeps Bodycote at the forefront of technological
and market developments.
1998
1999
2000
2001
2002
202
216
232
341
306
1998
1999
2000
2001
2002
32
33
37
32
28
1998
1999
2000
2001
2002
31
39
44
52
57
1998
1999
2000
2001
2002
21
35
46
54
49
At a glance
Sales
£ Million
Sales
£ Million
Sales
£ Million
Sales
£ Million Bodycote annual report 2002 1
CONTENTS
1 Financial Highlights
2 Chairman’s Statement
3 Chief Executive’s Review
8 Finance Director’s Report
10 Directors’ Report
13 Corporate Governance
14 Board Report on Remuneration
18 Board of Directors and Advisers
19 Independent Auditors’ Report
20 Consolidated Proﬁt and 
Loss Account
21 Balance Sheets
22 Consolidated Cash Flow Statement
23 Consolidated Statement of Total
Recognised Gains and Losses
23 Reconciliation of Movements
in Group Shareholders’ Funds
24 Accounting Policies
26 Notes to the Financial Statements
47 Five Year Summary
48 Principal Subsidiary Undertakings
51 Financial Calendar 
and Supplementary Information
2002 2001
Turnover £440.1m £479.4m
Headline Operating Proﬁt
1
£49.4m £80.2m
Operating Proﬁt £22.4m £72.1m
Headline Proﬁt Before Taxation
1
£38.2m £66.3m
Proﬁt before Taxation £11.2m £55.5m
Headline Earnings Per Share
1,2
10.6p 18.2p
Basic Earnings Per Share 2.4p 14.6p
Dividend Per Share 6.1p 6.1p
1
Headline Operating proﬁt and proﬁt before taxation are stated before exceptional items and amortisation of goodwill.
2
A reconciliation of headline EPS is given on page 30.
1998
1999
2000
2001
2002
320.0
355.4
371.1
479.4
440.1
Turnover
£ Million
1998
1999
2000
2001
2002
4.8
5.5
6.0
6.1
6.1
Dividend Per Share
Pence
1998
1999
2000
2001
2002
21.3
22.5
22.6
18.2
10.6
Headline Earnings
Per Share
Pence Introduction
It has been a tough year. As reported in
November, the encouraging signs mid-year
proved to be a false dawn. We have never
previously experienced such a widespread
downturn in our markets. Commercial
aerospace, power generation, oil and gas all
experienced demand weakness. The Board
have been active in addressing these changing
market conditions and we are now much
better placed to deal with the market wide
issues than we were twelve months ago.
Trading
Turnover and proﬁts this year have fallen in
well over half of our plants. As announced at
the half year, corrective action has been taken
to reduce our cost base and we have incurred
exceptional operating costs of £18.3m. 
The cost savings from these actions are 
in line with our expectations but have been
largely offset by the decline in turnover 
and increases in other costs such as energy 
and insurance. Before these exceptional costs 
and amortisation of goodwill our pre-tax proﬁt
for the year was £38.2m (2001: £66.3m) 
on turnover of £440.1m (2001: £479.4m).
Materials Testing was the most successful
of our Strategic Business Units (SBUs),
achieving organic growth in sales and proﬁts.
The most disappointing was Metallurgical
Coatings, where business levels in electronics
and telecommunications are still signiﬁcantly
down and we have not yet seen the full
beneﬁts of our rationalisation efforts in
Scandinavia and the UK. Heat Treatment sales
and margins were affected in all regions by the
general downturn in the Western Hemisphere
and the downturn in aerospace and power
generation, in particular, had a major impact
on our USA and UK businesses. HIPping
was similarly affected as this SBU has the
greatest exposure to these two markets.
Dividend
The Directors are recommending an unchanged
final dividend of 3.85p per share which
maintains the total dividend for the year at
6.1p, the same level as 2001. This dividend
is covered 1.7 times before the exceptional
operating costs. The ﬁnal dividend will be paid
on 1 July 2003 to shareholders on the register
at the close of business on 6 June 2003.
Acquisitions
The focus of management in 2002 has 
been to reduce the cost base, instil stricter
capital expenditure disciplines and improve
efﬁciencies in our existing businesses 
rather than to strengthen the Group by
acquisitions. We have, however, made some
bolt-on acquisitions at a total cost of £11.2m
including assumed debt.
Board Changes and Structure
I am pleased to report that our plans to
reshape the Board are complete. It now
comprises of a majority of non-executive
directors. Our new non-executive directors,
Hans Vogelsang and Laurent Bermejo, were
appointed with effect from 2 January 2003.
They bring a wide range of international
business experience to Bodycote and have
settled in well.
Martyn Wilton and Mike Hallas have
relinquished main board responsibilities to focus
on wider executive responsibilities. They are
both members of the Senior Operating Board
which has established itself well during the year.
Bernie Rickinson will retire from the Main
Board at the annual general meeting in 
order to concentrate on his new duties 
as non-executive chairman of our HIPping
business, as we switch towards a global
management approach for this SBU.
I would like to thank all the retiring directors
for the valuable contribution they have made,
at Main Board level, in this and previous years
and for facilitating these changes.
Going forward we have a Board which has a
balance of experience and a strong commercial
background appropriate for the Group and
our shareholders in these challenging times.
Employees
We are fortunate to have, at all levels, 
such a strong, dedicated and professional
workforce. They continue to show a 
high level of commitment coupled with 
a determination to succeed. I thank them 
for their continued support.
Safety, Health and Environment
Our internal reporting on these issues has
improved in the year as has our record and
the resources applied. We now have 15 plants
that are certiﬁed to ISO 14001 on environmental
management and more plants are expected
to achieve this status in 2003.
Current Trading and Prospects
Trading in 2003 has started at a marginally
lower level than that of 2002. As detailed by
John Hubbard in his Chief Executive's review,
we continue to focus on operational excellence,
cost efﬁciency and capital expenditure discipline.
To this end internal reporting measures have
been strengthened across the Group, which
facilitates improved benchmarking between
plants and best in class technology sharing.
The escalating threat of war with Iraq brings
increased uncertainty and it is not possible
to comment with any accuracy on the likely
impact on our business. Nevertheless we
remain conﬁdent of our business model and
will continue to provide leading quality and
service to our customers at good value. 
We aim to be the market leader in all the
countries where we operate and although
we are not actively seeking acquisitions we
will explore bolt on opportunities that arise
to ensure a continuation of our market
leadership and geographic expansion at a
sensible cost. We will also sell some plants
whose operations do not ﬁt in with the long
term plans of Bodycote. 
We will continue our drive to improve
operating and net cash ﬂows and the return
on capital employed.
James Wallace
18 March 2003 
Chairman’s Statement
2 Bodycote annual report 2002 Even though the year ended on a high note
with December delivering the only month of
organic sales growth during the year, I was
more than delighted to put the new 2003
calendar on my wall. Although likely to be
tough, the prospects for 2003 are brighter if
for no other reason than the actions we took
in 2002 to reduce costs and strengthen our
operations are now in place. 
2002 was not a kind year for businesses in the
engineering sector. Bodycote turned in its
lowest ever margins, yet they were respectable
in comparison to our peers. The large drop 
in demand from the Commercial Aerospace,
Power Generation and Oil & Gas sectors was
greater than expected and is well reported.
Automotive demand was ﬁrm but margins
were difﬁcult due to cost and price pressures.
Our sales decreased by 8%, however
information from trade associations indicates
our market share remained constant or
improved. We focused our efforts on optimising
yield and utilisation and improved cash ﬂow
from our existing facilities. We re-emphasised
the basic operational model that historically
delivered superior margins by running facilities
at high utilisation, selling at competitive yield
rates in productive reliable equipment.
Benchmarking of Key Performance Indicators
(KPIs) is increasingly being applied and the
replication of best in class methods around
the Group is improving efﬁciency.
Our operational structure was modiﬁed to
merge Heat Treatment, HIP and Metallurgical
Coatings under geographical responsibility to
gain market synergy and institute shared
services. A Senior Operating Board was
created to align our efforts in a common
direction. The plc Board was restructured to
broaden the experience base and advance
compliance with guidelines for strong corporate
governance. Communications both internally
and externally have been upgraded to provide
transparency of company actions.
By the year-end we had reduced the number
of facilities with negative Operating Proﬁts.
Over the past 18 months we combined 20
facilities and brought about a reduction of
about 800 jobs to better match capacity to
demand. We exited one joint venture in
China and will exit a second in early 2003.
Our principal challenge was to manage our
number one cost – people. We had greater
success in North America and the United
Kingdom, where labour markets are relatively
ﬂexible. The full beneﬁt of the European staff
reductions will not be felt until later in 2003.
Merging facilities is a difﬁcult and delicate task;
given our high customer retention rate in
markets with overcapacity we are pleased
with our success. We made two small bolt-on
acquisitions in Italy toward the end of the year.
Italy is the third largest manufacturing market
in Europe; these acquisitions strengthen our
operations and provide growth potential. 
Despite around £18m of previously authorised
projects we introduced stringent capital
expenditure discipline which reduced capital
investments in 2002 to £54m against a budget
of £60m. We have relocated equipment around
the Group to meet regional demand shifts.
In addition, working capital controls have
been strengthened.
Our PVD coating business is now organised
with improved technology transfer and
coordinated marketing. We won several
signiﬁcant new contracts and anticipate this
will be a continuing growth business.
Our wet coating business underwent major
rationalisation with seven facilities closed
and one signiﬁcantly downsized. The new
Gothenburg facility came on stream late in
the year and we are working hard to attract
work to this large state of the art facility. 
Advances in sharing knowledge and technology
within the group via our ‘Extranet’ are gaining
momentum and will deliver value to our
customers and employees while making us
more efﬁcient in our operations. Information
Services now have a strategy that will see us
migrate over the coming years to a common
ERP solution, which will reduce our IS cost
and provide faster and better information.
We captured outsourcing business in all SBUs
and are seeing market growth opportunities
developing from our technology transfer
initiatives and the co-ordination of our
services within each geographical region. 
HEAT TREATMENT
North America
Part of the strategy for integrating the Lindberg
acquisition (January 2001) was to consolidate
overlapping facilities. With the downturn in
demand this programme was accelerated
and broadened. 
Full time employees have been reduced by 260
with more scheduled in 2003. In addition
various group purchase contracts have been
negotiated delivering cost savings. 
As our operations become more streamlined
we are fortunate to have the right people
and systems in place to maintain both the
efﬁciency and the high quality standards
expected of us. Optimised production software
is being rolled out, together with a new
standardised Bodycote Quality System.
These systems differentiate us from competition
and provide our customers with value. 
Continuous training of our employees in
technical matters as well as safety, health
and environmental has been a high priority.
We have a number of well-qualiﬁed,
experienced employees whose expertise 
is respected in the industry and even in the
depressed market conditions these recognised
experts have provided a number of new
opportunities for 2003.
As we move forward into 2003 and beyond
it is with more conﬁdence than a year ago.
We are still highly dependent on the markets
we serve and the manufacturing economy as
a whole but assuming we see no worsening
of the current conditions we will beneﬁt from
the extensive groundwork carried out in 2002.
Central European Group 
(Germany, Netherlands, Austria, Switzerland,
Czech Republic, Hungary and Liechtenstein)
Against an uncertain background caused by
the introduction of the Euro, general elections
in Germany and economic deterioration,
2002 was a challenging year for the CEG
and our historic growth pattern has been
temporarily arrested. 
All six plants in the Czech Republic, however,
had a good year with increasing sales and
proﬁts. With the relocation of the Liberec plant,
we are ready for the growing economies in
Eastern Europe with a wide range of heat
treatment facilities, including vacuum heat
treatment, plasma nitriding and physical
vapour deposition (PVD) coating.
Bodycote’s technical ability secured a strategic
partnership outsourcing project for the heat
treatment of automotive brake pistons in
Germany and production started early in 2002.
This success resulted in an agreement for 
a second production facility with the same
customer, which will open in 2003. 
Chief Executive’s Review
Bodycote annual report 2002 3 France, Belgium and Italy (FBI)
Production facilities are being rationalised 
by the closure of four plants and transfer
and closure of non-proﬁtable processes.
This, together with the implementation of
yield and utilisation management controls,
will give us better margins. 
Staff numbers have been reduced by a total
of 98, with a further circa 100 redundancies
planned in 2003. Further improvements are also
anticipated in working capital management,
margin, and general administrative efﬁciencies. 
The improvement in our Nitrocarburising
technology stabilised our sales and produced
good development potential in that technology.
A steady increase in enquiries, trials and
contract proposals is in evidence for low-
pressure carburising, for which we should
obtain signiﬁcant sales in 2003. 
A signiﬁcant outsourcing contract for heat
treatment of gear and transmissions has
been obtained with a Japanese company
which took over a gear and transmission
manufacturing plant in France.
In aerospace, despite an overall slowdown,
we have captured new programmes for the
Euroﬁghter and Airbus 380 projects.
In September 2002 we acquired Gamma in
Italy with 3 plants located in the Brescia 
and East Milan area, to add to the existing
Gorgonzola location. Bodycote now plays 
a signiﬁcant role in this market (the third
largest heat treatment market in Europe).
We expect to use our Italian foothold to
develop PVD and Kolsterising technologies
in the important Italian tooling, component
and stainless steel markets.
United Kingdom
With a large portion of our sales coming
from the Commercial Aerospace and Power
Generation sectors we saw a large drop 
in demand.
Vacuum brazing and electron beam welding
however continued to show growth in a
difﬁcult market. Complex aerospace and
power generation assemblies can only be
manufactured cost effectively by metal
joining and Bodycote's world-class skills in
this differentiates us in this market segment.
Outsourcing activity gathered pace with four
contracts completed by negotiated closure
of in-house facilities. 
The highlight of the year was the new strategic
partnership agreement with Delphi Diesel
Systems. A new Bodycote Heat Treatment
Centre will open in March 2003 at Gillingham
to support Delphi’s operations and provide
us with geographical expansion into the
important market in the south east of England.
Rationalisation resulted in the closure of one
facility and the transfer of its equipment and
markets to other facilities. This improved
utilisation within the UK and reduced the
number of employees by 29. Geographic
transfer of work is still ongoing to maintain
efﬁcient use of furnace capacity.
With the actions taken in 2002, we are
encouraged about the outlook for our UK
operations in 2003. 
Nordic (Sweden, Denmark and Finland)
Sweden stabilised in 2002 with a focus on cost
control and reductions in investment to combat
the lower market volumes. One Strategic
Partnership facility was sold to the customer.
Corr-I-Dur, a process we developed in Germany
to provide wear and corrosion resistance
with no distortion, was introduced into the
market and is being very well received for
difﬁcult corrosion applications.
The re-organisation of Malmo (Sweden) and
Copenhagen (Denmark) continued, combining
all vacuum operations in Copenhagen and
induction activities at Malmo. This will improve
efﬁciency and reduce costs. 
Sales for 2003 will continue at a low level
until the second half, when improvement 
is forecast in the traditional diesel and
marine engine industries and in respect 
of parts for wind turbines, rock drilling 
and rock breaking machines.
Reduced activity level in Danish industry and
a new competitor started by a customer led
to a sharp decline in proﬁt at our Arhus plant.
The customer has already sold his interest in
this start up and returned to us but the new
competitor continues to disrupt market balance.
Cost reductions were implemented and 
the number of employees reduced by 12%. 
The focus on costs and quality will continue
in 2003 as we defend our market position.
2003 will be a demanding year for Nordic
Heat Treatment, although there are signs
that traditional markets will improve. 
HOT ISOSTATIC PRESSING
North America
The decline in the aerospace and power
generation markets in North America made
2002 a difﬁcult year for the HIP Group, 
as these areas represent over 60% of the
markets we serve. While a few key customers
experienced good growth, most saw a fall in
activity resulting in staff reductions. Our London,
Ohio plant was hardest hit, with a substantial
decline in HIP and related heat treatment
work directly resulting from the downturn in
power generation. Overall sales for the group
were off 7% from our performance in 2001.
In spite of the decline in worldwide HIP
markets, there were several positive
occurrences in 2002. This was the ﬁrst full
year of operation of the Densal
®
II unit in our
London, Ohio facility and sales were over 50%
in excess of budget and almost four times
sales in 2001. In our Andover, Massachusetts
plant we installed equipment necessary to
commence production of ceramic glass (ALON)
for bulletproof windscreens on military vehicles.
In addition, product sales in Andover exceeded
budget by 35% as some signiﬁcant powdered
metal billet, cladding and sputtering target
projects expanded. In 2003 we anticipate
further growth in these areas as well as the
ﬁrst ALON production components.
In Camas WA and London OH staff reductions
totaled 10%. Actions have already been
undertaken, a change in management and
other staff reductions, to underpin current
performance and ensure that customers
continue to be happy with our service.
Revival in the aerospace and power generation
markets is not expected until 2004.
Accordingly, we are focusing our attention on
opportunities for expansion of the products
area. In addition, we are actively pursuing
enquiries and test components that utilise
our Densal
®
II process. Several of these
projects are showing signiﬁcant growth. 
We have developed and are preparing for
commercialisation a new process we call
Densal
®
II + T-6 which is a combined cycle
for HIP and Heat Treatment of aluminium.
This process offers the prospects of reducing
the cost of the two separate cycles by
combining them.
Chief Executive’s Review
4 Bodycote annual report 2002 Europe
2002 was a challenging year for the European
HIP group; in particular the demand for power
generation gas turbines fell in the ﬁrst months
of 2002 and continues to affect the demand
for new components into 2003. When this
market does recover, Bodycote HIP vessels,
including new ultra high-pressure capability
for the next generation of materials, are now
in place in multiple locations to satisfy the
resurgent market demand.
HIP for the aerospace sector held up reasonably
well, with jet engine turbine blades for Rolls-
Royce and investment cast airframe parts for
Airbus being among the products processed. 
The German HIP operation has been
rationalised with the closure at the end of 2002
of one plant and the transfer of its operations
to other Bodycote HIP sites. The European
HIP operation reduced its workforce by 10%.
The German operation has specialised in
wear-resistant industrial extrusion equipment
for plastics and other materials – 2002 started
slowly in this ﬁeld, but was running ahead of
expectation by the end of the year and into
2003, with a positive outlook. 
The Densal
®
II processes are already well
established for turbo impellers and competition
car castings. 2002 saw the ﬁrst volumes of
engine castings for a production road model.
The ﬁrst German Densal
®
II HIP unit is at
capacity and plans are being made to
accommodate increased schedules in 2004.
In Sweden the production of NNS (near net
shape) parts for the new large CERN
accelerator supported the introduction of
automatic welding machines and paves the
way for further volume production of NNS
components for petro-chemical, industrial or
scientiﬁc applications. The level of enquiries
for offshore petro-chemical components has
been good and the outlook for business with
our Scandinavian NNS partner Metso is positive.
Extra large parts HIPped for the paper and
mineral extraction industries are continuing
to perform well, with repeat business due 
to pick up in 2003.
The market for HIPped powder metal billet
preforms in tool, high speed steels and other
specialist materials has held up well during 2002.
The global market for medical replacement
joints continues to grow. 
Continuing involvement in a number of European
funded joint research programmes not only
promotes the application of HIP to new
materials such as metal matrix composites,
but also strengthens relationships with prime
contractors in ﬁelds such as aerospace and
medical equipment.
METALLURGICAL COATINGS
This SBU produced a loss after a very
disappointing 2001. The wet coating section
of this SBU was the main under performer.
The severe overcapacity in wet coating has
resulted in numerous competitors making
desperate efforts to survive the downturn 
by slashing prices.
To improve our performance we have carved
out three technologically focused strategic
development units (SDUs) from the activities
of the Metallurgical Coatings SBU – Ceramic,
PVD and Advanced Anodising.
Ceramic Coatings
Ceramic coatings improve the productivity of
manufacturing equipment by increasing the
wear life of components. This year we
increased cross-selling and support in several
core industries, including the oil exploration,
galvanising, and the circular knitting and
textile equipment manufacturing sectors. 
We now have a long-term agreement with
the largest manufacturer of plastic injection
moulding equipment for use of our coating
and densiﬁcation processes on the high wear
and corrosion areas of their equipment. Life
improvements have been dramatic – in excess
of tenfold. Additional market penetration was
made in 2002 into the high-pressure chemical
injection pump industry, where we are now
the premier coating supplier.
Physical Vapour Deposition
We restructured existing PVD operations in a
new SDU under focused leadership, creating
a structure that will increase our market
visibility and service efﬁciency in this important
technology and help us move up from third
place in the ﬁeld. Our objective involves
establishment of centres of excellence in
North America and Europe, by a combination
of relocation of existing plant and the addition
of latest technology equipment. A number 
of investments have been completed or are
nearing completion that will expand sales,
increase productivity and efﬁciency and
reduce costs.
In September we moved our Conover, North
Carolina facility to Greensboro, a larger plant,
with the most advanced PVD coating units.
It will become a leading supplier of tribological,
decorative and functional coatings for North
America. Demand for decorative coatings
continues to grow.
The plant at Venlo in the Netherlands has also
been expanded by the installation of two new
units to serve tribological coatings for the
automotive markets. As part of our ongoing
restructuring programme productivity
improvements have been achieved in France,
by the merger of eight small satellite
departments into two strategic sites. 
In the future, Bodycote will open new facilities
both as a strategic geographic growth objective
and as production requirements increase.
The outlook for growth of PVD internationally
in new markets and geographical locations is
very promising. 
Advanced Anodising
2002 was a difﬁcult year for the Kaufbeuren,
Germany, anodising business because of a
general decline in demand, especially in our
main automotive and mechanical engineering
markets. There are opportunities, however,
in the automotive sector with common rail
diesel and brake systems for the major
subcontractors.
Kaufbeuren’s proprietary CompCote process,
which offers signiﬁcant improvements in wear
and corrosion resistance, found increasing
acceptance with new high volume contracts.
CompCote is being evaluated for roll out to
other Bodycote facilities. 
In Finland Bodycote anodises aluminium
proﬁles, plates and castings for the
construction, marine, vehicle and paper
industries, and has important contracts 
for customers in the electronics, machine, 
food, medicine and sports equipment
sectors. The electronics industry in Finland,
led by Nokia and its subcontractors, will provide
a useful source of new business, when business
trends upwards again. Production started in
September 2002 at the new anodising plant
at Alajärvi, Finland for Mäkelä-Alu, a leading
manufacturer of decorative aluminium proﬁles
for the marine and construction sectors. 
This strategic partnership has the capability
of signiﬁcant third party inload from the
customer’s supply chain.
Bodycote annual report 2002 5 Electroplating
Nordic 
The coating market in Nordic countries is
greatly dependent on the telecoms industry.
There was further dramatic reduction in the
market in 2002 and, accordingly, a restructuring
programme was implemented to reduce the
costs. The plants at Järfälla and Kungsör,
Sweden have been closed. In addition, 
to combat soft markets, a new marketing
effort has been launched to improve our
market penetration. With efﬁcient production
resources and technical expertise, there is a
great opportunity to increase market share,
even in a downturn.
The rate of growth in the telecoms industry
is partially dependent on how fast ‘3-G’
systems grow. We opened Europe’s most
modern and largest silver coating plant in
Gothenburg, Sweden, offering technically
advanced plating on aluminium. The most
important processes are silver plating, 
nickel-tin, electroless-nickel and satin nickel.
In the same facility we developed a new
palladium-ruthenium process for our Strategic
Partner Hasselblad, and their unique H1 camera
system, recently introduced at the Cologne
Photo-Kina. 
During 2003 this SDU will concentrate on
increasing market share, especially in the
telecoms and automotive sectors. Cost control
will also be intensiﬁed. With the beneﬁt of
new efﬁcient production, marketing efforts,
unique processes and co-operation with
other group companies, Bodycote Coatings
in Sweden will strengthen our performance.
United Kingdom 
During 2002 many markets changed drastically
and our resultant rationalisation programme
was a major effort. Due to decline in the
telecoms sector and reduced volumes for
automotive and construction industries, 
we had to close seven coatings facilities 
at Caerphilly, Dudley, Knowsley, Poole and
Rotherham. Their proﬁtable sales were merged
within existing plants and equipment was
transferred to match market requirements
and improve efﬁciencies. 
Two sites focus on the aerospace industry
with a variety of processes, and four large and
efﬁcient plants concentrate on large volume
Sherardizing, organic ﬁnishes and zinc
electroplating. All have excellent equipment
and staff to challenge our competitors and
meet customer requirements.
All coatings plants have upgraded to meet
new management and quality standards.
Several sites have ISO14001 with all others on
schedule to meet these requirements. Our
fast delivery and quality systems will assist
us in differentiating us from our competitors.
In-house (captive) closures, due to
environmental and commercial challenges and
market co-operation with Bodycote’s heat
treatment operations, are providing many
outsourcing opportunities. 
In the more traditional coatings, niche expertise
was developed in zinc electroplating for the
automotive industry and in copper electroplating
for the oil and gas sector for a major French
customer. Sherardizing, a proprietary process,
continues to win speciﬁcation acceptance with
automotive and construction subcontractors and
is under review to be rolled out internationally. 
MATERIALS TESTING
A robust performance was produced by
Materials Testing across all geographic market
segments, despite continued economic
uncertainty and ﬂat end-user markets. 
The demand for materials testing services
continues to grow as new technologies,
material advances and product liability issues
create a ﬁtness for purpose culture. This factor,
allied to the closure of in-house laboratories,
provides substantial opportunities for our
extensive service portfolio, market coverage
and reputation for quick and reliable response.
The winning of increased market share has
been the key to achieving increased operating
proﬁt and raising operating margins in price
competitive markets. During 2002 signiﬁcant
effort was expended in increasing our cash
ﬂow by improving our working capital
management. As part of the corporate drive
to improve our operating performance a
number of key performance indicators (KPIs)
were selected for management. This approach
made our decisions more proactive as we
were able to respond more expeditiously 
to difﬁculties. 
Our core materials testing laboratories in the
UK beneﬁted from a particularly resilient oil
and gas market. Our specialist corrosion facility
was a major contributor as international projects
rely on our expertise. The radiographic business
unit suffered as a result of general weakness
in aerospace and power generation and we
will consolidate our capacity through the closure
of our Halesowen facility in March 2003. A
number of additional OEM approvals for our
engineering laboratory group enabled
signiﬁcant penetration into European
aerospace suppliers, resulting in proﬁt growth.
The acquisition of Pipeline Developments
Limited, Salford UK expands our plastic pipe
testing capability and creates opportunities in
the important European water utility market.
Our Norwegian laboratory which, with its
specialist fatigue facility, was able to target
simulation studies on oil platform umbilicals.
Our presence in the important North Italian
metals market was strengthened by the
acquisition of CTR Srl, Padua. This facility
complements our existing Crema laboratory
and enhances our skills portfolio available in
this important market.
The establishment of an additional road
materials laboratory in Abu Dhabi further
extended our capability in the Emirates,
allowing increased market penetration and
solid sales and proﬁt growth. 
The Canadian group advanced strongly on
the back of substantial success in their TOP
(Total Outsourcing Programme) initiative.
Major projects were undertaken for US
automotive and pharmaceutical companies
utilising the division’s unique quality approvals
and innovative technical solutions. A number
of outsourcing deals in the Health Science
division in Ontario opened up new markets.
Similarly in Quebec we were able to obtain
signiﬁcant quality approvals from the public
health authorities for a number of specialist
toxicology and biological tests, which
stimulated sales.
Excellent performance from our businesses
in Houston TX and Portland OR offset the
downturn in aerospace and powergen markets,
allowing the US business to achieve proﬁt
growth. We were also able to take advantage
of cross-selling with our heat treatment and
HIP operations to widen our market exposure
and create exciting service offerings for our
combined client base. The US markets remain
fragile and subject to volatility, therefore,
further growth in sales relies on our ability 
to expand our approval portfolio and service
provision and this will be the focus in 2003.
Organisationally, we focused efforts on
leveraging our technological expertise,
coordinating our sales/marketing strategy
and increasing investment in human capital.
A number of programmes have been initiated
with a group business development model.
Chief Executive’s Review
6 Bodycote annual report 2002 Senior executives from each geographical
region are tasked with generating outsourcing
opportunities for the group. Success has been
achieved with a laboratory being set up in
the Czech Republic in early 2003 to service 
a major aerospace supplier. We continue to
invest in improved Information Systems and
have rolled out enhanced LIMS (Laboratory
Information Management Systems) via our
global network. Our electronic certiﬁcate
initiative has been extremely well received
by clients who beneﬁt from desktop access
to their test results. Further integration of
our back ofﬁce systems followed investment
in bespoke e-purchasing packages. 
LOOKING FORWARD
Markets are anticipated to remain tough
throughout 2003. With excess processing
capacity in the market we anticipate pricing
pressures will remain high. Cost pressures
will continue to present challenges. Capital
expenditures will be aggressively managed
and are expected to be below depreciation.
We continue taking costs out, selling to
improve our utilisation and ﬁnding ways to
be more efﬁcient. Although we already hold
the required and desirable quality certiﬁcations
we will continue our capability improvement
by adopting new ISO, NADCAP and other
registrations as appropriate. The few
acquisitions we are likely to do will be focused
on Materials Testing, high value added services,
niche technical providers and or speciﬁc
market strengthening bolt-ons. The Materials
Testing Group looks forward with optimism
and conﬁdence that further improvements 
in performance can be achieved.
Knowledge transfer and the development 
of employees are critical for our long-term
performance. We constantly provide continuing
education, apprenticeships, internships, and
mentoring. The annual Bodycote Prize Paper
Competition provides a wide-ranging opportunity
to interest young people in Metallurgy and
Materials technology. We have attracted
several participants into careers with the
company and are beneﬁting not only from
their skills but also the enhanced recognition
which our encouragement of technology
development brings.
Despite the challenges presented this year,
the Bodycote team never reduced their efforts.
I am very proud of the commitment they
showed to delivering the best results possible
and our ability to make tough decisions in such
difﬁcult conditions. Our number one asset
remains our people.
In conclusion, with the cost actions taken 
in 2002, Bodycote is well positioned to be 
a major beneﬁciary of any upturn in market
demand as we have eager people and
productive capacity available for providing
superior quality and service.
John D. Hubbard
18 March 2003
Bodycote annual report 2002 7 Sales and Operating Proﬁt
The Group recorded sales of £440.1m,
compared to £479.4m in 2001, reﬂecting
very difﬁcult trading conditions in essentially
all of the Group's end markets. Existing
operations accounted for £437.2m, whilst
acquisitions added £2.9m.
The year began with sales softening in almost
all parts of the Group and this continued
through the year although the rate of decline
slowed in the second half and by year-end
appeared to have levelled out. The lower level
of sales has resulted in a marked reduction in
proﬁt because Bodycote, as a service provider
with few bought in materials, has a relatively
high level of ﬁxed cost.
Heat Treatment
The UK heat treatment division saw year 
on year sales fall by 13%, reﬂecting the 
high proportion (typically in excess of 50%
of sales) of business in the aerospace and
power generation markets, both of which
have suffered signiﬁcantly lower demand. 
Sales in the Central European region held 
up well in the early part of the year, although
margins were impacted by cost increases 
in labour, transport and utilities. However,
the second half saw a decline in demand 
as the German economy as a whole slowed.
The France/Belgium/Italy group also saw
sales decline in the second half with the
northern area (including Belgium) seeing a
much larger impact than the south (including
Italy). Demand in the Nordic area was soft
throughout the year. The largest decline 
was in the USA at 17%, although regional
differences have been marked. The East 
and West Coasts, where aerospace activity
predominates and the South West, where 
oil and petrochemicals are the major markets,
saw the greatest declines. Conversely, 
the Great Lakes and Mid West, where
automotive is the driver, held up well.
Hot Isostatic Pressing
UK/European HIP had to contend with a
signiﬁcant reduction in demand from its
precision casting customers who serve
aerospace and land turbine markets, which
resulted in a year on year sales decline of
12%, despite an increase in Densal II sales
of 20%. The situation was mirrored in the
USA, with sales down 11% in weak markets
and only modest mitigation from growing areas
such as powder densiﬁcation for specialist
products and Densal
®
II for automotive.
Materials Testing
The Group's laboratory based business proved
remarkably strong given that it is trading largely
in the same markets as other parts of the
Group. Sales increased by 8%, with three
quarters of this organic, based largely on new
outsourced contracts. At the same time
margins were up slightly at 19.3%. The UK
continued its excellent record, with proﬁts
ahead 14% and margins maintained. Increased
engine testing work saw Canada improve its
proﬁts by 21%. Continental Europe and the
USA were at similar levels to 2001.
Metallurgical Coatings
Metallurgical Coatings proved to be
particularly problematic. Aerospace demand
has been poor in both the UK and France.
Even more signiﬁcant, however, has been
the continued extremely low demand for
telecoms and electronics components in the
UK and Sweden and in the case of the latter,
this has also coincided with an increase in
capacity, which was sanctioned at the height
of the telecoms boom in 2000. PVD sales
increased 3% and capacity was added in
both US and the Netherlands as the Group
positioned itself to beneﬁt from the growth
in tribological applications.
Finance Director‘s Report
8 Bodycote annual report 2002
Sales Operating Proﬁt* Operating Margin*
2002 2001 2002 2001 2002 2001
£m £m £m £m % %
Continuing Business
Heat Treatment 306.5 340.8 37.1 60.9 12.1 17.8
Hot Isostatic Pressing 28.5 32.0 4.5 7.3 15.8 22.8
Materials Testing 56.6 52.3 10.9 9.9 19.3 18.9
Metallurgical Coatings 48.5 54.3 (1.8) 3.7 (3.7) 6.8
Head Ofﬁce – – (1.3) (1.6) – –
440.1 479.4 49.4 80.2 11.2 16.7
98 99 00 01 02
Sales
£ Million
* Operating Proﬁt
£ Million
500
450
400
350
300
250
200
150
100
50
0
100
90
80
70
60
50
40
30
20
10
0
* Operating proﬁt and margin are stated before the amortisation of goodwill and exceptional items.
< Proﬁt Before Tax
Proﬁt before tax, goodwill amortisation and
exceptional items was £38.2m compared 
to £66.3m last year. In 2001 there were 
non-operating exceptional losses of £2.7m,
of which £1.9m arose from unanticipated
costs related to the Hauzer disposal. In 2002
the Group recorded operating exceptional
charges of £18.3m relating to reorganisation
of the Group, designed to bring capacity more
into line with reduced demand levels. 
The initiative has included the closure of 
20 facilities spread throughout the network.
Pre-goodwill operating proﬁt from the
continuing businesses declined by £30.8m
before exceptional items and the Group’s
net interest charge was reduced from
£13.9m to £11.2m reﬂecting reduced interest
rates. Goodwill amortisation has increased
by £0.6m to £8.7m.
Taxation
The effective tax rate was 43% (2001: 32%)
a ﬁgure which is distorted by the low levels
of proﬁt relative to goodwill charges which
are not generally allowable for tax. Excluding
goodwill and exceptional items the effective
rate is 29% a decrease from 30% in 2001. 
Earnings per share
Headline earnings per share were 
10.6p (2001: 18.2p), with basic diluted earnings
being 2.4p (2001: 14.6p). The Board is
recommending a full year dividend of 
6.1p (2001: 6.1p) per share. The dividend was
covered 1.7 (2001: 3.0) times by headline
earnings. Interest was covered 4.4 times by
proﬁt before goodwill and exceptional items.
Capital Expenditure
Capital expenditure for the year was £54.0m
compared to £62.7m in 2001. The multiple of
depreciation has continued to fall, being 1.3
times in 2002 compared to 1.6 times in 2001.
Major projects with expenditure during the year,
several of which were approved in 2000,
included the completion of a new facility for
electroplating in Gothenburg, installation of
additional PVD equipment in Greensboro,
USA, addition of engine testing capacity in
St Catherines, Canada, an anodizing plant in
Alajärvi, Finland, and a heat treatment plant
in Sömmerda, Germany and installation of 
a new large HIP vessel in Hereford, UK.
Cash Flow and Borrowings
Cash ﬂow from operations decreased from
£110.5m to £94.2m. However, the Group’s
working capital requirements were reduced
by £11.7m. There has been continued focus
on cash collection, which has seen average
debtor days reduce from 73 to 66. After
allowing for capital expenditure, interest and
tax there was free cash ﬂow of £22.0m
compared to £9.8m in 2001. Acquisitions
resulted in cash payments of £10.1m, and in
addition the Group assumed debt of £1.1m.
Net borrowings ended the year at £234.2m a
reduction in the year of £7.8m. Gearing was
reduced from 62% to 60%.
Pensions 
The Group has elected to adopt the transitional
provisions of FRS 17 (Retirement Beneﬁts) and
consequently there is no impact on the 2002
figures. If FRS 17 had been fully adopted in 2002,
the Group would have recorded an additional
liability in its balance sheet of £17.0m relating
to deﬁned beneﬁt schemes in the UK, France
and USA. The US plans were inherited with the
acquisition of Lindberg, and the largest plan,
with an asset value of £11.1m is in the process
of being wound-up. The Group's actuaries have
advised that the UK plan, which is closed to new
members, will require employer's contributions
to be increased by £0.3m per annum from 2003.
Treasury
Treasury is managed centrally covering
borrowings and its components, including
source, maturity, interest rate and currency.
The objective is to minimise risk through a
balanced approach. Funds are obtained via
privately placed bonds and from banks. 
The Group aims to have a range of maturities
both committed and uncommitted currently
ranging from 364 day facilities to the seven
years remaining on the private placement
senior notes. 
The Group also aims to have a mix of ﬁxed
and ﬂoating rate debt to achieve the desired
proﬁle and to manage interest rate volatility.
During 2002 the balance has been weighted
towards ﬂoating allowing the Group to beneﬁt
from historically low rates. Funding of overseas
activities is generally via local currency
borrowings so as to provide a partial hedge
against the impact of exchange rate volatility
on asset values as translated into sterling on
consolidation. 
David Landless
18 March 2003
Bodycote annual report 2002 9
98 99 00 01 02
Capital Expenditure
£ Million
Depreciation
Ratio
100
90
80
70
60
50
40
30
20
10
0
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
98 99 00 01 02
Gearing
Debt / Equity %
70
63
56
49
42
35
28
21
14
7
0
<
< 10 Bodycote annual report 2002
Directors’ Report
The Directors are pleased to submit their report and the audited
ﬁnancial statements for the year ended 31 December 2002.
PRINCIPAL ACTIVITIES
The Company is a holding company with subsidiaries carrying on business
in the ﬁelds of materials technology and metal processing. The activities
and locations of the principal subsidiary undertakings are set out on
pages 48 to 50. The Chief Executive’s Review contains a survey of the
Group’s activities during the year together with future developments.
TRADING RESULTS
After operating exceptional charges of £18.3m (2001: £nil) in relation
to Group reorganisation, the proﬁt of the Group before taxation was
£11.2m (2001: £55.5m). Proﬁt attributable to shareholders amounted
to £6.3m (2001: £37.4m) and, after transfers of £9.3m from reserves
(2001: £21.8m transferred to reserves), £15.6m is accounted for by
dividends, both paid and proposed (2001: £15.6m).
DIVIDENDS
The Board is recommending a ﬁnal dividend of 3.85p per share making 
a total for the year of 6.1p per share (2001: 6.1p). The ﬁnal dividend, 
if approved, will be paid on 1 July 2003 to shareholders on the register
at the close of business on 6 June 2003.
SHARE CAPITAL
The Company’s issued share capital as at 31 December 2002 was £25.6m
and during the year the issued ordinary share capital of the Company
was increased by the issue of 86,904 shares of 10p each between 
21 January and 27 May 2002 for a total consideration of £96,413 pursuant
to options granted under the Company’s executive share option schemes.
The shareholders have authorised the Company to purchase up to
25,638,398 of its own shares, although no purchases have been made.
This authority expires at the conclusion of the forthcoming annual
general meeting to be held on 28 May 2003, at which time a further
authority will be sought from shareholders.
ACQUISITIONS
During the year the Group made three signiﬁcant acquisitions at a cost
of £9.0m, namely:
On 6 September 2002 Bodycote acquired the entire issued share capital
of Gamma Trattamenti Termici SPA, operating from three sites in North
East Italy;
On 1 October 2002 Bodycote Materials Testing Limited purchased the
entire share capital of Centro Triveneto Ricerche SrL of Padua; and
On 1 November Bodycote Materials Testing Limited also acquired the
entire share capital of Pipeline Developments Limited of Salford UK.
Note 23 on page 39 provides the necessary ﬁnancial disclosures.
DIRECTORS
The present Directors are listed on page 18 and, with the exception of
Messrs J. Vogelsang and L.P . Bermejo, who were appointed by directors
on 2 January 2003, all served throughout the year. Both Messrs 
M. Hallas and M.A. Wilton retired as directors on 31 December 2002 
to concentrate on their wider responsibilities at the operating level. 
Mr T. Bell remains a Director until his period of contractual garden leave
expires in accordance with his service agreement on 27 March 2003.
In accordance with the articles of association and both being eligible,
Messrs Vogelsang and Bermejo will seek re-election as Directors at the
forthcoming annual general meeting. Messrs J.A.S. Wallace and D.R.
Sleight are retiring by rotation and, in accordance with the articles of
association and each being eligible, offer themselves for re-election 
at the forthcoming annual general meeting. The service agreement
for Mr Sleight is terminable by one year’s notice. Messrs Wallace,
Vogelsang and Bermejo do not have a formal service contract with
the Company. Dr B.A. Rickinson is also retiring by rotation, and is not
seeking re-election as a Director.
DIRECTORS’ INTERESTS
The interests of the Directors in the shares of the Company at 
31 December 2002 and 31 December 2001 are set out below:
2002 2001
Beneﬁcial
J.A.S. Wallace 45,830 20,830
J.D. Hubbard 900,000 900,000
M. Hallas 126,975 124,532
D.R. Sleight 70,000 50,000
M.A. Wilton 50,000 40,000
B.A. Rickinson 55,503 55,503
R.T. Scholes 15,000 10,000
D.F. Landless 5,500 3,500
T. Bell – 2,702
Each Executive Director was also technically interested as a potential
beneﬁciary, pursuant to the terms of the Bodycote International Employee
Beneﬁt Trust, in 400,000 shares (2001: 150,000) held as trustee by
Hill Samuel Offshore Trust Company Limited, but otherwise no Director
has had any dealings in any shares or options in the Company.
An analysis of Directors’ share options is given in the Board Report 
on Remuneration on page 17. 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. Bodycote annual report 2002 11
BOARD COMMITTEES
The nomination, remuneration and audit committees of the Board are
all formally constituted with written terms of reference. The duties of
the audit committee include the review of the Group’s published results
for the half year and the full year, the internal audit programme and
the response of management, and monitoring the effectiveness of the
Group’s system of internal control. The committee met three times
during 2002 and the members were Messrs Scholes (Chairman) and
Wallace, who recorded 100% attendance.
The remuneration committee met formally three times during 2002.
The committee comprised Messrs Wallace (Chairman) and Scholes and
Dr Rickinson. The Board Report on Remuneration is given on pages 14
to 17. The nomination committee, which was chaired by Mr Wallace and
comprised Messrs Hubbard, Scholes and Dr Rickinson, advises the
Board on new appointments. The committee met formally three
times during 2002 and, with the assistance of search consultants,
following public advertisements and interviews, recommended the
appointment of Messrs J. Vogelsang and L.P. Bermejo as Directors.
SHAREHOLDERS
As at the date of this report the following interests of 3% or more in the
issued share capital of the Company appeared in the register maintained
under the provisions of Section 211 of the Companies Act 1985:
Number % of
of shares Share capital
Sprucegrove Investment 
Management Limited 18,250,893 7.1
Fidelity International Limited 
(and Edward C. Johnson III) 12,441,512 4.9
LD Pensions 11,682,990 4.6
HBOS plc 9,011,782 3.5
Legal & General Investment 
Management Limited 8,055,396 3.1
An analysis of the Company’s shareholders and the shares in issue at
24 February 2003, numbering 3,523 and 256,470,884 respectively is
given on page 51.
CORPORATE SOCIAL RESPONSIBILITY
As part of the general programme of risk management and review 
of internal controls, Bodycote regularly keeps under review the risks
associated with its corporate and social engagement. Where there is
signiﬁcant beneﬁt in terms of shareholder value and or business risk,
Bodycote has already developed appropriate policies and procedures
for each strategic business unit. The accreditable elements are the
subject of both internal and external audit procedures. In areas where
Bodycote does not perceive either shareholder value and or business
risk, the aim is to develop and implement appropriate policies over
time. The areas of signiﬁcance are safety, health and the environment
and the Group’s employees.
SAFETY, HEALTH AND ENVIRONMENTAL
The Group has a positive approach to safety, health and environmental
matters and is committed to the achievement of the highest practicable
standards of safety and health at work for all employees and to the
minimisation of adverse effects on the environment. Appropriate safety
and health policies and procedures are in force at all strategic business
units. During 2003 the Group will be collating further data in order better
to benchmark performance in subsequent years. Where appropriate
the Group will develop and implement environmental management
systems consistent with international standards. The Group continues
to seek ways to reduce reliance on the use of solvent cleaners. In 2001
the Group began an assessment of the steps required to improve its
environmental performance and started seeking environmental
accreditation. In 2002 all strategic business units were mandated to
obtain ISO14001 accreditation. By the end of 2002 one site in North
America, 3 sites in Sweden, 1 in Denmark, and a further 9 sites in the
UK have been accredited by ISO14001. 15 UK sites are in the course of
seeking approval during 2003. All the Group’s 42 materials testing sites,
which have a low environmental proﬁle, all operate to the ISO17025
standard and this incorporates environmental management requirements.
EMPLOYMENT
The Group recognises the value that can be added to its future proﬁtability
and strength by the efforts of employees. The involvement of employees
at all levels is key to the Group’s continued success. Through their
attendance at, or participation in, production, safety and health meetings
at site level, employees are kept up to date with the performance and
progress of the Group, and the contribution to the Group made by their
site and are advised of safety and health issues.
During 2002 each of the Group’s employees received copies of
“EveryBody”, a twice-yearly magazine published in nine languages,
detailing the Group’s activities, performance and some of its personalities.
Approximately 900 Bodycote managers are connected to the Bodycote
extranet, which will improve knowledge of Group activities, and assist
greatly with technology exchange and co-ordination. This facility will
become multi-lingual during 2003. Directors’ Report
12 Bodycote annual report 2002
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.
It is also Group policy that all heat treatment facilities in the United
Kingdom should upgrade their business management accreditation
from ISO:9000:1994 to ISO:9001:2000 in 2003. This will improve
Bodycote’s human resource management in the assessment and
training of employees.
RESEARCH AND DEVELOPMENT
Product development and quality improvement at all Group companies
is a continuous process. The Group has a policy of deploying the best
technology available and actively seeking improvements. It also conducts
research programmes with its customers. Costs of research and
development are written off in the year in which they are incurred.
DONATIONS
Charitable donations during the year net of income tax amounted to
£2,000. There were no political contributions.
CREDITORS’ POLICY
Group operating companies are responsible for agreeing the terms and
conditions under which business transactions are conducted. It is Group
policy that payments to suppliers are made in accordance with the
terms agreed, provided that these suppliers have also complied with
applicable terms and conditions. Creditor days at the year end for the
Company were 45 days (2001: 45 days).
AUDITORS
Arthur Andersen resigned as auditors to the company on 31 July 2002.
The Board appointed Deloitte & Touche who have expressed their
willingness to continue in ofﬁce. In accordance with the provisions of
section 384 of the Companies Act, a resolution for their re-appointment,
special notice of which has been given to the Company, is to be
proposed at the forthcoming annual general meeting.
DIRECTORS’ RESPONSIBILITIES
The Directors are required by company law to prepare ﬁnancial statements
for each ﬁnancial year which give a true and fair view of the state of
affairs of the Company and the Group and of the proﬁt for that year.
In preparing the ﬁnancial statements the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and estimates that are reasonable and prudent;
• state whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in the
ﬁnancial statements; and
• prepare the ﬁnancial statements on the going concern basis unless
it is inappropriate to presume that the Group will continue in business.
The Directors are responsible for keeping proper accounting records
which disclose, with reasonable accuracy at any time, the ﬁnancial
position of the Company and enable them to ensure that the ﬁnancial
statements comply with the Companies Act 1985.
They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company
and Group and to prevent and detect fraud and other irregularities.
ANNUAL GENERAL MEETING
The 2003 annual general meeting will be held on 28 May 2003 in
accordance with the notice being sent to shareholders with this report.
By order of the Board
Hulley Road
Hurdsﬁeld
J.R. Grime Macclesﬁeld
Secretary Cheshire
18 March 2003 SK10 2SG Bodycote annual report 2002 13
GENERAL
The Group’s mission is to provide world class metallurgical services
to respected and innovative engineering companies by the efﬁcient
deployment of advanced technology. The Group’s aim in terms of
corporate governance, therefore, must be to sustain and support 
this objective over the longer term.
Many of the recommendations of the Code of Best Practice prescribed
by the Listing Rules of the Financial Services Authority have been a
feature at Bodycote for some years. Taken together with the Board
Report on Remuneration on pages 14 to 17, this statement explains
how Bodycote has applied the principles of good corporate governance
set out in Section 1 of the Combined Code.
INDEPENDENCE
Bodycote asserts that its current Non-Executive Directors all have more
than sufﬁcient character to exhibit the necessary independence to
fulﬁl their duties individually and collectively as Directors. Accordingly,
Bodycote considers all its Non-Executive Directors to be independent
for the purposes of the Combined Code.
DIRECTORS AND BOARD COMMITTEES
The Board currently comprises nine Directors, but after the annual general
meeting, this number will fall to seven, of whom four will be non-executive
led by the Chairman, Mr J.A.S. Wallace. The nominated senior independent
Non-Executive Director is Mr R.T. Scholes. Brief biographies of all the
Directors are given on page 18. The Group’s Chief Executive Ofﬁcer is
Mr J.D. Hubbard, who is responsible for all the Group’s trading operations.
The Board meets at least nine times a year and will combine meetings with
visits to overseas facilities. Save for the absence of Mr T. Bell, directors
recorded 100% meeting attendance. In advance of these meetings
Directors are supplied with up-to-date information about the trading
performance of each operating location, the Group’s overall ﬁnancial
position and its achievement against budget. It is also supplied with
the latest information on health and safety and risk management issues.
Where required, a Director may seek independent professional advice
at the expense of the Company and all Directors have access to the
company secretary, and may also address speciﬁc issues to the senior
independent Non-Executive Director.
In accordance with the articles of association all newly appointed Directors
and any who have not stood for re-election at the two previous annual
general meetings, if eligible, submit themselves each year for re-election.
Non-executive Directors, including the Chairman, are appointed for ﬁxed
terms not exceeding three years, after which the appointment may
be extended by mutual agreement. A statement of the Directors’
responsibilities is set out on page 12.
The Board also operates three committees. These are the nomination
committee, the remuneration committee, which recommends policy
and procedure on Directors’ and senior executives’ compensation, and
the audit committee, which amongst other matters, reviews the Group’s
published results and meets and discusses issues with the auditors.
Fuller details of the composition of the committees and their activities
are given in the Directors’ report on page 11.
INTERNAL CONTROL
The Board has applied Principle D.2 of the Combined Code by establishing
a continuous process for identifying, evaluating and managing the Group’s
signiﬁcant risks, including risks arising out of Bodycote’s corporate and
social engagement. The Board continuously and regularly reviews the
process, which has been in place from the start of 2000 to the date
of approval of this report and which is in accordance with Internal Control:
Guidance for Directors on the Combined Code published in September
1999. The Board is responsible for the Group's system of internal control
and for reviewing its effectiveness.
Such a system is designed to manage rather than eliminate the risk of
failure to achieve business objectives, and can only provide reasonable
and not absolute assurance against material misstatement or loss.
The Board's monitoring covers all controls, including ﬁnancial, operational
and compliance controls and risk management. It is based principally on
reviewing reports from management and from internal audit to consider
whether any signiﬁcant weaknesses are promptly remedied and
indicate a need for more extensive monitoring. The audit committee
assists the Board in discharging these review responsibilities.
During 2002, in compliance with provision D.2.1, the Board also performed
a speciﬁc assessment for the purpose of this annual report.
The assessment considered all signiﬁcant aspects of internal control
arising during the period covered by the report including the work of
internal audit. In addition, the managing director of each of the Group’s
strategic business units was asked to report on the existing internal
control procedure and any failings or weaknesses. They were asked to
identify and make an assessment of the risks affecting the businesses
they control, in each case with the assistance of input from those
reporting directly to them. Such risks were measured against their own
stated divisional objectives. Following the risk management review by
each participant at divisional level, a Group level review was prepared
for the Directors to assess. No signiﬁcant previously unidentiﬁed risks
were uncovered as part of the process.
PROSPECTS
The Board’s view on the Group’s position and prospects is given by the
Chairman, Chief Executive and Finance Director in their respective
statements on pages 2 to 9 of this report.
Following a review of the Group’s results for 2002 and its budgets for
2003, the Directors consider that the Company and the Group have
adequate resources to ﬁnance their activities for the foreseeable future,
and therefore it is appropriate to adopt the going concern basis in
preparing the ﬁnancial statements.
INVESTOR RELATIONS
The Chief Executive and Finance Director regularly talk with and meet
institutional investors, both individually and collectively, and this has
enabled institutional investors to increase their understanding of the
Group’s strategy. The business of the annual general meeting now
comprises a review of the Group’s operations for the beneﬁt of
shareholders attending. In addition, since 1998, internet users have been
able to view up-to-date news on the Company and its share price via the
Bodycote website at http://www.bodycote.com. Users of the website
can also now enrol free for a service that automatically notiﬁes them
of results announcements and recent signiﬁcant Company events.
CORPORATE GOVERNANCE COMPLIANCE
The Company complied with the Combined Code throughout the
period, save in respect of Code Provision D.3.1, which requires not
less than three non-executive directors to sit on the Board’s audit
committee, when in fact only two served on the audit committee
during the whole of 2002. This is due to the several months required
to recruit new non-executive directors following the resignation of 
Dr Farmer at the end of 2001. This issue was addressed by the
appointment, announced on 20 November 2002, of two new non-
executive directors to take ofﬁce and join the audit committee from 
2 January 2003.
Corporate Governance 14 Bodycote annual report 2002
Board Report on Remuneration
The members of the remuneration committee during 2002 were Messrs
J.A.S. Wallace (Chairman), R.T. Scholes and B.A. Rickinson. J. Vogelsang
and L.P . Bermejo joined the committee with effect from 2 January 2003.
All members are Non-Executive Directors of the Company and have no
personal ﬁnancial interest, other than as shareholders, in the matters
to be decided, no potential conﬂicts of interest arising from cross
directorships and no day to day involvement in running the business.
This report and the recommendations of the remuneration committee
have been approved in full by the Board for submission to shareholders.
In accordance with the requirements of the revised Companies Act, 
an ordinary resolution seeking shareholders’ approval for the remuneration
report will be proposed at the annual general meeting. The tables
attached to this report disclosing directors’ emoluments, pensions and
share options on pages 16 and 17 have been audited, together with
information on the performance criteria.
POLICY FOR EXECUTIVE DIRECTORS
The committee makes recommendations to the Board concerning the
policy on remuneration for senior executives and the remuneration
package for each Executive Director. In determining the remuneration
policy the committee has given full consideration to the provisions on
the design of remuneration policies contained in the Combined Code.
During 2002 the committee appointed New Bridge Street Consultants
to provide independent market information and remuneration advice
(including advice covering the proposal to adopt a new share option
scheme). In addition the Company receives actuarial and other pensions
advice from JLT Beneﬁt Consultants Limited in relation to the pension
scheme, of which ﬁve executive directors are members. Neither
organisation provides any other services to the Company. The committee
also consults with the Chief Executive, other than on matters concerning
his own remuneration.
The committee aims to provide a remuneration policy consistent with
the Group’s overall objectives and thereby attract and retain high calibre
directors, align executive rewards with the creation of shareholder
value, motivate executives to achieve and maintain challenging levels
of performance, all in the light of Company and individual performance.
The committee has used the remuneration practices of UK engineering
businesses and other FTSE 250 companies, as well as other North
American and European companies in similar trades, as comparables.
Basic salaries are generally aimed to be within 10% of median relative
to similar businesses. In order to ensure that a substantial proportion
of the overall remuneration package can be linked to performance,
there is an annual bonus scheme and an executive share option scheme.
Only basic salaries are pensionable.
SALARY AND BONUSES
The basic salary of each Executive Director is reviewed annually and is
determined by taking into account the responsibilities and performance of
the individual, having regard to current market practice. However, for 2003,
after consultation with the Chief Executive, it was decided to leave basic
salaries unchanged and to put more emphasis on the variable elements.
A performance related annual bonus is payable to all Executive Directors
and selected senior executives, based on the Group’s earnings before
interest and tax, the Group’s return on invested capital and other qualitative
measurements. For those senior executives with divisional responsibilities,
part of the performance related bonus is based on their relevant sphere
of responsibility. 
The committee recommended an increase in the total potential bonus
for 2003 to 60% (2002: 40%) of basic salary, if all targets are met and
assuming that one-third of the bonus (i.e. up to 20% of salary) is paid
in the form of shares in the Company. The shares will be held in trust
for three years and will normally be forfeited if executives leave or are
dismissed. Executives may request that all their annual bonus is paid in cash,
in which case the maximum bonus would be 50% of salary. This illustrates
the increasing importance attached by the committee to the variable elements
of remuneration and encouraging long-term shareholding by executives.
Beneﬁts in kind, which comprise the provision of a company car,
private medical insurance for the Director and family and long-term
disability insurance, are consistent with industry standards. An analysis
of Directors’ emoluments is given on page 16.
The same overall policy on salary, bonus and incentives is applied 
to determine the remuneration of the managing directors and senior
executives of the strategic business units.
SHARE OPTION SCHEMES
The Group believes that participation in a share option scheme by
Executive Directors and other executives of the Group is important
and that it strengthens the link between executives’ personal interests
and shareholders’ interests. Bodycote’s Board will encourage Directors
to build up a reasonable shareholding in the Company over a period
of time. However, it will not be prescriptive since the Directors’ ability
to do so will depend on a number of factors not least being their own
personal commitments. The remuneration committee governs the
granting of share options to Directors and senior executives. An analysis
of Directors’ share options is given on page 17.
Under the rules of the existing 1994 and 1996 schemes the exercise
cost of all options over unissued shares awarded to a Director cannot
exceed four times that Director’s salary and bonus. Operation of the
1994 and 1996 schemes has been extended by using the employee share
ownership trust, so as to allow share options to be granted over a
greater number of shares. This has allowed greater incentives to be
made available to Directors and executives without further dilution of
the interests of shareholders. Share options granted under these schemes
are only exercisable if, over a period of three years from the date of the
award, the growth in the Group’s earnings per share exceeds United
Kingdom retail inﬂation by 6% (10% in respect of those options granted
in September 2002). No awards can be made at a discount to the market
price. Following adoption of the new scheme outlined below, no further
options will be granted under the 1994 and 1996 schemes.  Bodycote annual report 2002 15
Following a review and advice from New Bridge Street Consultants
the committee has recommended the setting up of a new executive
share option scheme to replace the 1994 and 1996 schemes, which
the committee decided were unduly restrictive in terms of individual
and company limits and which did not reﬂect investors’ current views
on limits and performance conditions. The elements of this new scheme,
which will be proposed for shareholder approval at the forthcoming
annual general meeting, are:
• The value of shares under options granted to an executive in any
year will not normally exceed 1.5 times basic salary. 
• No more than 10% of new issue ordinary share capital may 
be allocated under all of the Company’s share schemes over 
a ten-year period.
• The exercise of options will be based on the Company’s pre-tax
earnings per share growth relative to inﬂation. 
• The performance targets will be challenging since they will be
measured only over three or ﬁve years and the following targets
will apply for options granted in 2003.
The committee believes that, in relation to the 1994 and 1996 schemes
and the proposed new share option scheme, use of growth in earnings
per share is the most appropriate measure of the Company’s ﬁnancial
performance and is consistent with market practice and, because 
the performance test relies on publicly available data, is transparent.
The chairman of the remuneration committee assesses whether the
tests have been met. 
Directors made no gains on the exercise of share options during 2001 or
2002. The market price of Bodycote’s ordinary shares at 31 December
2002 was 81.0p, the range during 2002 was 81.0p to 251.5p and the
average was 171.2p. The performance conditions attached to the options
granted before 1999 and still outstanding at 31 December 2002 have
been achieved. 
SERVICE CONTRACTS
It is the Group’s policy that executive directors have service contracts
with a one-year notice period. All the Executive Directors currently have
service agreements which are terminable by one year’s notice by either
party at any time, and by one year’s remuneration in lieu of notice by
the employer, and by one year’s remuneration in the event of termination
following a change in control of the Company. Legally appropriate factors
would be taken into account to mitigate any compensation payment,
covering basic salary, annual and long term incentives and beneﬁts,
which may arise on the termination of employment of any Executive
Director, other than payments made on a change in control or for
payments in lieu of notice. Mr Hubbard’s contract is dated 5 February
2002 and those for Messrs Landless and Sleight are each dated 
26 September 2001.
PENSIONS
Pensions for Executive Directors are, as far as allowable, provided for
under the Group’s UK contributory ﬁnal salary pension scheme which
has a normal retirement age of 65.
The main features, in respect of Executive Directors, are:
(a) Pensions from age 65 of 1/60th highest average of any consecutive
years three out of last ten years prior to retirement (restricted to the
earnings cap where it applies) for each year of pensionable service;
(b) A cash death-in-service beneﬁt (restricted as before) of four times
basic salary at date of death;
(c) Spouse or dependant’s pension on member’s death equal to half
member’s prospective retirement pension at 65 on death-in-service,
or half member’s pension entitlement on death in retirement;
(d) Members’ contributions are 6% of basic salary (restricted as before).
An analysis of accrued pension entitlements for the ﬁve Directors with
accruing beneﬁts under the scheme during 2002 is given on page 16.
Mr Hubbard, the Chief Executive, is a member of the Group’s US 401K
retirement plan to which the Group contributed £8,834 (2001: £955).
Contributions for Mr Landless’ salary above the earnings cap amounted
to £5,684 (2001: £4,049).
EXTERNAL APPOINTMENTS
The Group believes that there are beneﬁts to the individual and the
Group for Executive Directors holding one non-executive directorship
in other organisations, provided that they do not conﬂict with the
Group’s interests. 
NON-EXECUTIVE DIRECTORS
The remuneration of Non-Executive Directors is determined by the
Executive Directors. Non-Executive Directors do not have formal service
agreements and are not entitled to any pension or other employment
beneﬁts or to participate in any incentive scheme.
TSR PERFORMANCE
The graph on page 16 illustrates the Company’s Total Shareholder
Return (TSR) performance since 1997, in accordance with paragraph 4
of the Directors’ Remuneration Report Regulations 2002, relative to
the FTSE Engineering & Machinery Index. The Company is a member
of the FTSE Engineering and Machinery Sector and, accordingly, 
this sector is considered to be the most appropriate comparator
group for this purpose.
Approved by the Board
J. A. S. Wallace
Chairman of the Remuneration Committee
18 March 2003
Portion of Option Grant Applicable Performance Target 
(average annual growth in pre-tax EPS)
Up to 0.5 x salary RPI + 3% pa
0.5 - 1 x salary RPI + 3% - 5% pa
1 - 1.5 x salary RPI + 5% - 10% pa Board Report on Remuneration
16 Bodycote annual report 2002
Directors’ emoluments
2002 2001
Salary Annual
and fees Beneﬁts bonus Total Total
£000 £000 £000 £000 £000
Executive
J. D. Hubbard 250 18 – 268 55
M. Hallas 138 14 – 152 140
D. R. Sleight 145 12 – 157 159
M. A. Wilton 166 29 – 195 209
D. F. Landless 170 19 – 189 153
T. Bell 151 10 – 161 161
1,020 102 – 1,122 877
Non-executive
J. A. S. Wallace 80 – – 80 26
B. A. Rickinson 24 – – 24 23
R. T. Scholes 28 – – 28 23
1,152 102 – 1,254 949
Directors’ pensions
TSR Performance Graph
47 335 4 2 6 22 50 8 53 293
38 257 4 1 5 15 40 8 43 225
67 455 1 2 3 (4) 96 10 70 369
4242 –21466 26
33 134 7 1 8 24 12 9 41 131
Accrued
Annual
pension at
1 January
2002
£000
Transfer
value at
1 January
2002
£000
Real increase
in accrued
annual
pension
£000
Inﬂation
£000
Increase in
accrued
annual
pension
£000
Transfer
value of real
increase in
accrued
annual
pension (less
members’
contributions)
£000
Decrease 
in transfer
value less
members’
contributions
£000
Members’
contributions
£000
Accrued
annual
pension at
31/12/02
£000
Transfer
value at
31/12/02
£000 Director
M Hallas
D R Sleight
M A Wilton*
D F Landless
T Bell
* The disclosures given above for Mr Wilton have been adjusted following retrospective adjustment to the notional UK equivalent salary
used for the actuarial valuation of his accrued pension beneﬁts.
Source: Datastream
0
20
40
60
80
100
120
31-Dec-97 31-Dec-98 31-Dec-99 31-Dec-00 31-Dec-01 31-Dec-02
This graph looks at the value, by 31/12/02, of £100 invested in Bodycote International plc on 31/12/97 compared with that of £100
invested in the FTSE Engineering & Machinery Index. The other points plotted are the values at financial year-ends.
Value
(£)
Bodycote International plc FTSE Engineering & Machinery Index Bodycote annual report 2002 17
Directors’ share options
Dates from
1 January Options 31 December Option price which Expiry
Director 2002 granted 2002 (pence) exercisable dates
J. D. Hubbard 41,307 – 41,307 337.35 03/12/2000 03/12/2007
37,500 – 37,500 396.00 26/04/2002 26/04/2009
25,000 – 25,000 312.50 14/12/2002 14/12/2009
12,000 – 12,000 247.50 02/05/2003 02/05/2010
15,000 – 15,000 217.50 24/04/2001 24/04/2011
– 60,000 60,000 134.50 16/09/2005 16/09/2012 *
M. Hallas 87,845 – 87,845 105.53 28/11/1997 28/11/2004
73,202 – 73,202 190.57 18/06/1999 18/06/2003
55,075 – 55,075 258.73 20/05/2000 20/05/2004
37,500 – 37,500 396.00 26/04/2002 26/04/2006
15,000 – 15,000 312.50 14/12/2002 14/12/2006
20,000 – 20,000 217.50 24/04/2004 24/04/2008
– 40,000 40,000 134.50 16/09/2005 16/09/2009 *
D. R. Sleight 73,202 – 73,202 190.57 18/06/1999 18/06/2003
55,075 – 55,075 258.73 20/05/2000 20/05/2004
37,500 – 37,500 396.00 26/04/2002 26/04/2009
30,000 – 30,000 312.50 14/12/2002 14/12/2006
15,000 – 15,000 247.50 02/05/2003 02/05/2007
20,000 – 20,000 217.50 24/04/2004 24/04/2008
– 40,000 40,000 134.50 16/09/2005 16/09/2009 *
M. A. Wilton 87,845 – 87,845 105.53 28/11/1997 28/11/2004
73,202 – 73,202 190.57 18/06/1999 18/06/2006
55,075 – 55,075 258.73 20/05/2000 20/05/2007
37,500 – 37,500 396.00 26/04/2002 26/04/2009
30,000 – 30,000 312.50 14/12/2002 14/12/2009
20,000 – 20,000 217.50 24/04/2004 24/04/2011
– 40,000 40,000 134.50 16/09/2005 16/09/2012 *
D. F. Landless 50,000 – 50,000 396.00 26/04/2002 26/04/2009
50,000 – 50,000 312.50 14/12/2002 14/12/2006
15,000 – 15,000 247.50 02/05/2003 02/05/2007
20,000 – 20,000 217.50 24/04/2004 24/04/2008
– 40,000 40,000 134.50 16/09/2005 16/09/2009 *
T. Bell 41,307 – 41,307 258.73 20/05/2000 20/05/2004
37,500 – 37,500 396.00 26/04/2002 26/04/2009
12,000 – 12,000 247.50 02/05/2003 02/05/2007
20,000 – 20,000 217.50 24/04/2004 24/04/2008
Shares under option marked * are subject to the increased performance conditions described in the Remuneration Report. 18 Bodycote annual report 2002
EXECUTIVE DIRECTORS
J. D. Hubbard Chief Executive (55) United States
Appointed Chief Executive in January 2002 following elevation to the Board in 2001. Previously served as President of Bodycote’s North American
Heat Treatment operations from 1996 to 2001. A licensed professional Metallurgical Engineer.
D. R. Sleight Corporate Development Director (53)
Appointed Corporate Development Director in 2002 having joined the Board in 1996, and served previously as ﬁnance director (1990 to 1995) and
joint managing director (1995 to 2001) of Bodycote’s Materials Testing operations. A Chartered Accountant.
D. F. Landless Finance Director (43)
Appointed Finance Director and joined the Group in 1999. From 1989 to 1997 served as ﬁnance director in UK and US divisions of Courtaulds Plc.
Finance director of Courtaulds Coatings (Holdings) Limited from 1997 to 1999. A Chartered Management Accountant.
NON-EXECUTIVE DIRECTORS
J. A. S. Wallace Non-executive Chairman (59)
Appointed a director in 1994. Non-executive chairman of The Lowry Centre Limited (2002) and non-executive director of Holidaybreak plc (2002).
Deputy Chairman of Pifco Holdings plc (1994 to 2001). Chairman of the remuneration and nomination committees and member of the audit
committee. A Chartered Accountant.
R. T. Scholes Senior Non-executive Director (57)
Appointed a director in 1998. Non-executive Director of British Vita PLC (1993) The Keller Group PLC (2002) and Chaucer Holdings PLC (2003). 
Investment banker with Dresdner Kleinwort Wasserstein (1986 to 2001). Chairman of the audit committee and member of the remuneration 
and nomination committees. A Chartered Accountant.
Dr. B. A. Rickinson (53)
Appointed a director in 1998. Chief Executive of the Institute of Materials, Minerals and Mining from 1997. Member of the remuneration and
nomination committees. A Metallurgist, previously served as a Bodycote executive from 1990 until 1997.
J. Vogelsang (60) Netherlands
Appointed a director 2 January 2003. President of Technology at Basell Polyoleﬁns (2001 to 2002), President of Montell Polyoleﬁns Europe (1999 to 2001),
Vice-President Shell Chemicals Europe and Africa (1994 to 1999) and Chief Executive of the Shell Companies in Sweden (1992-1994). Member of
audit, remuneration and nomination committees. A Chemical Engineer.
L.P . Bermejo (43) France
Appointed a director 2 January 2003. Chief Executive Dalkia Plc (UK and Ireland subsidiary of Vivendi Environment) from 1999 having previously
been Chief Executive of Dalkia in the Czech and Slovak Republics (1995 to 1999) and DEKRA-Veritas Automobile (1993 to 1995). Member of
audit, remuneration and nomination committees. A Structural Engineer.
SECRETARY AND REGISTERED OFFICE
J. R. Grime
Hulley Road, Hurdsﬁeld, Macclesﬁeld, Cheshire SK10 2SG. Tel: 01625 505300 Fax: 01625 505313. Registered Number 519057 England.
Advisers 
AUDITORS Deloitte & Touche
PRINCIPAL BANKERS Barclays Bank PLC, HSBC Bank plc and The Royal Bank of Scotland plc
FINANCIAL ADVISERS Dresdner Kleinwort Wasserstein Limited
SOLICITORS Eversheds
BROKERS Dresdner Kleinwort Wasserstein Securities Limited
REGISTRARS Northern Registrars Limited
Board of Directors Bodycote annual report 2002 19
We have audited the ﬁnancial statements of Bodycote International Plc for
the year ended 31 December 2002 which comprise the proﬁt and loss
account, the balance sheets, the cash ﬂow statement, the statement of
total recognised gains and losses and the related notes 1 to 26 together
with the reconciliation of net cash ﬂow to movement in net debt, the
reconciliation of movements in shareholders’ funds and the accounting policies.
These ﬁnancial statements have been prepared under the accounting
policies set out therein. We have also audited the information in the part of
the directors’ remuneration report that is described as having been audited.
This report is made solely to the company's members, as a body, in
accordance with section 235 of the Companies Act 1985. Our audit work
has been undertaken so that we might state to the company's members
those matters we are required to state to them in an auditors' report and
for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone, other than the company and
the company's members as a body, for our audit work, for this report,
or for the opinions we have formed.
Respective responsibilities of directors and auditors
As described in the statement of directors’ responsibilities, the company’s
directors are responsible for the preparation of the ﬁnancial statements
in accordance with applicable United Kingdom law and accounting
standards. They are also responsible for the preparation of the other
information contained in the annual report including the directors’
remuneration report. Our responsibility is to audit the ﬁnancial statements
and the part of the directors’ remuneration report described as having
been audited in accordance with relevant United Kingdom legal and
regulatory requirements and auditing standards.
We report to you our opinion as to whether the ﬁnancial statements
give a true and fair view and whether the ﬁnancial statements and the
part of the directors’ remuneration report described as having been
audited have been properly prepared in accordance with the Companies
Act 1985. We also report to you if, in our opinion, the directors’ report
is not consistent with the ﬁnancial statements, if the company has not
kept proper accounting records, if we have not received all the information
and explanations we require for our audit, or if information speciﬁed by
law regarding directors’ remuneration and transactions with the company
and other members of the group is not disclosed.
We review whether the corporate governance statement reﬂects the
company's compliance with the seven provisions of the Combined Code
speciﬁed for our review by the Listing Rules of the Financial Services
Authority, and we report if it does not. We are not required to consider
whether the board's statements on internal control cover all risks and
controls, or form an opinion on the effectiveness of the group's corporate
governance procedures or its risk and control procedures.
We read the directors’ report and the other information contained in the
annual report for the above year as described in the contents section
including the unaudited part of the directors’ remuneration report and
consider the implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the ﬁnancial statements.
Basis of audit opinion
We conducted our audit in accordance with United Kingdom auditing
standards issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the ﬁnancial statements and the part of the directors’
remuneration report described as having been audited. It also includes
an assessment of the signiﬁcant estimates and judgments made by the
directors in the preparation of the ﬁnancial statements and of whether
the accounting policies are appropriate to the circumstances of the
company and the group, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information
and explanations which we considered necessary in order to provide us
with sufﬁcient evidence to give reasonable assurance that the ﬁnancial
statements and the part of the directors’ remuneration report described
as having been audited are free from material misstatement, whether
caused by fraud or other irregularity or error. In forming our opinion, we
also evaluated the overall adequacy of the presentation of information
in the ﬁnancial statements and the part of the directors’ remuneration
report described as having been audited.
Opinion
In our opinion: 
• the ﬁnancial statements give a true and fair view of the state of affairs
of the company and the group as at 31 December 2002 and of the
proﬁt and cash ﬂows of the group for the year then ended; and
• the ﬁnancial statements and part of the directors’ remuneration report
described as having been audited have been properly prepared in
accordance with the Companies Act 1985.
Deloitte & Touche
Chartered Accountants Manchester
Registered Auditors 18 March 2003
Independent Auditors’ Report 
to the Members of Bodycote International plc 20 Bodycote annual report 2002 20 Bodycote annual report 2002
Consolidated Proﬁt and Loss Account
for the year ended 31 December 2002 
2002 2001 Note
£m £m
Turnover 1
Existing operations 437.2 479.4
Acquisitions 2.9 –
Continuing operations 440.1 479.4
Operating proﬁt 2
Existing operations 22.0 72.1
Acquisitions 0.4 –
Continuing operations 22.4 72.1
Total operations:
Trading 49.4 80.2
Operating exceptional items arising from restructuring and asset write downs (18.3) –2
Goodwill amortisation (8.7) (8.1)
Operating proﬁt 22.4 72.1
Exceptional items 3
Loss on disposal of discontinued operations – (1.9)
Loss on disposal of tangible ﬁxed assets of continuing operations – (0.8)
Proﬁt on ordinary activities before interest and taxation 22.4 69.4
Net interest payable (11.2) (13.9) 4
Proﬁt on ordinary activities before taxation 11.2 55.5 1
Tax on proﬁt on ordinary activities (4.8) (18.0) 6
Proﬁt on ordinary activities after taxation 6.4 37.5
Minority interests - equity (0.1) (0.1) 18
Proﬁt for the ﬁnancial year 6.3 37.4
Dividends - paid and proposed (15.6) (15.6) 8
Retained (loss)/proﬁt for the ﬁnancial year (9.3) 21.8 17
Earnings per share 9
Headline 10.6p 18.2p
Headline - diluted 10.6p 18.1p
Basic 2.4p 14.6p
Basic - diluted 2.4p 14.6p
The accompanying notes are an integral part of these ﬁnancial statements. Bodycote annual report 2002 21 Bodycote annual report 2002 21
Balance Sheets 
as at 31 December 2002 
Group Company Note
2002 2001 2002 2001
£m £m £m £m
Fixed assets
Intangible assets - goodwill 155.5 154.4 – –10
Tangible assets 498.4 496.6 0.2 0.1 11
Investments 1.7 2.3 831.6 595.6 12
655.6 653.3 831.8 595.7
Current assets
Stocks 17.7 17.7 – –13
Debtors 111.6 118.2 28.3 37.9 14
Cash at bank and in hand 43.5 52.3 6.3 11.2
172.8 188.2 34.6 49.1
Creditors
Amounts falling due within one year (202.8) (197.2) (99.3) (108.0) 15
Net current liabilities (30.0) (9.0) (64.7) (58.9)
Total assets less current liabilities 625.6 644.3 767.1 536.8
Creditors
Amounts falling due after more than one year (190.8) (212.4) (426.1) (191.4) 15
Provisions for liabilities and charges (44.6) (41.0) – –16
Net assets 390.2 390.9 341.0 345.4 1
Capital and reserves 17
Called-up share capital 25.6 25.6 25.6 25.6
Share premium account 244.2 244.2 244.2 244.2
Currency and other reserves 0.6 (7.4) 1.4 (5.8)
Proﬁt and loss account 119.6 127.8 69.8 81.4
Shareholders’ funds - equity 390.0 390.2 341.0 345.4
Minority interests - equity 0.2 0.7 – –18
390.2 390.9 341.0 345.4
Approved by the Board of Directors on 18 March 2003 and signed on its behalf by:
J. D. Hubbard   
}
Directors
D. F. Landless
The accompanying notes are an integral part of these ﬁnancial statements. 22 Bodycote annual report 2002 22 Bodycote annual report 2002
2002 2001 Note
£m £m
Net cash inﬂow from operating activities 94.2 110.5 20
Returns on investments and servicing of ﬁnance (11.0) (13.9) 21
Taxation (7.2) (24.1)
Capital expenditure and ﬁnancial investment (54.0) (62.7) 21
Acquisitions and disposals (10.1) (105.5) 21
Equity dividends paid (15.6) (9.9)
Cash outﬂow before management of liquid resources and ﬁnancing (3.7) (105.6)
Management of liquid resources 7.8 37.6 21
Financing 3.6 58.8 21
Increase/(decrease) in cash in the year 7.7 (9.2)
Reconciliation of net cash ﬂow to movement in net debt 
Increase/(decrease) in cash in the year 7.7 (9.2)
Cash inﬂow from increase in debt and lease ﬁnancing (3.6) (58.6)
Cash inﬂow from movement in liquid resources (7.8) (37.6)
Change in net debt resulting from cash ﬂows (3.7) (105.4)
Debt acquired with subsidiaries (1.1) (38.9)
Currency adjustments 12.6 (4.2)
Movement in net debt in the year 7.8 (148.5)
Net debt at 1 January (242.0) (93.5)
Net debt at 31 December (234.2) (242.0) 22
The accompanying notes are an integral part of these ﬁnancial statements.
Consolidated Cash Flow Statement
for the year ended 31 December 2002  Bodycote annual report 2002 23 Bodycote annual report 2002 23
Consolidated Statement of Total Recognised Gains and Losses
for the year ended 31 December 2002 
2002 2001
£m £m
Proﬁt for the ﬁnancial year 6.3 37.4
Dividends paid and proposed (15.6) (15.6)
Retained (loss)/proﬁt for the ﬁnancial year (9.3) 21.8
Disposal of revalued property (0.6) –
Currency adjustments 9.7 0.4
New shares issued – 0.3
Net movement in shareholders’ funds (0.2) 22.5
Shareholders’ funds at 1 January 390.2 367.7
Shareholders’ funds at 31 December 390.0 390.2
The accompanying notes are an integral part of these ﬁnancial statements.
Reconciliation of Movements in Group Shareholders’ Funds
2002 2001
£m £m
Proﬁt for the ﬁnancial year 6.3 37.4
Disposal of revalued property (0.6) –
Currency adjustments 9.7 0.4
Total recognised gains and losses relating to the year 15.4 37.8 ACCOUNTING CONVENTION
The ﬁnancial statements have been prepared under the historical cost
convention and in accordance with applicable accounting standards.
The accounting policies have been applied consistently throughout the
year and the preceding year in dealing with items that are considered
material in relation to the Group’s ﬁnancial statements.
BASIS OF CONSOLIDATION
The Group ﬁnancial statements consolidate the accounts of the Company
and its subsidiary undertakings, all of which are drawn up to 31 December
each year. The acquisition method of accounting has been adopted.
The results of subsidiaries acquired or sold during the year are
consolidated from or to the date on which control passed.
In accordance with Section 230 of the Companies Act 1985 a separate
proﬁt and loss account dealing with the results of the Company has
not been presented.
GOODWILL
Purchased goodwill arising on the acquisitions of subsidiary undertakings
before 1 January 1998, when FRS 10 Goodwill and Intangible Assets
was adopted, was written off to reserves in the year of acquisition and,
as allowed by this Standard, has not been reinstated in the balance sheet.
Purchased goodwill arising on acquisitions since 31 December 1997
has been capitalised and is being amortised in equal instalments over
its estimated useful life up to a maximum of twenty years. Provision
is made for any impairment.
TURNOVER
Turnover represents amounts receivable for goods and services sold
to outside customers, excluding value added tax.
INVESTMENTS
Investments are held at cost less provision for impairment.
STOCK
Stock is valued at the lower of cost and net realisable value. In the case
of manufactured products, cost includes the attributable proportion of
manufacturing overhead costs. Net realisable value comprises the
estimated selling price less all further costs to completion and all costs
to be incurred in selling and distribution.
PENSION COSTS
For deﬁned beneﬁt schemes the amount charged to the proﬁt and loss
account in respect of pension costs is the estimated regular cost of
providing the beneﬁts accrued in the year, adjusted to reﬂect variations
from that cost.  For deﬁned contribution schemes the amounts charged
are the contributions payable in the year.
LEASES
Assets held under ﬁnance leases are capitalised as tangible ﬁxed assets
at fair value and the corresponding rentals liability is shown net of interest
under ﬁnance leases within creditors. The capitalised values are written
off over the shorter of the period of the lease and the useful life of the
asset concerned and ﬁnance charges are written off over the period
of the lease.
Rental costs under operating leases are charged to the proﬁt and loss
account over the period of the lease.
TANGIBLE FIXED ASSETS
Tangible ﬁxed assets are stated at cost or valuation. Depreciation is
provided on a straight line basis, to reduce the carrying value to the
estimated residual value at the point of sale, at the following annual rates:
Land nil
Fixtures and ﬁttings 10% to 20%
Plant and machinery 5% to 20%
Leasehold property over the period of the lease
Buildings 2%
Motor vehicles 25%
Accounting Policies
24 Bodycote annual report 2002 Bodycote annual report 2002 25 Bodycote annual report 2002 25
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 timing differences that have
originated but not reversed at the balance sheet date where transactions
or events that result in an obligation to pay more tax in the future or a
right to pay less tax in the future have occurred at the balance sheet
date. Timing differences are differences between the Group'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 timing differences can
be deducted.
Deferred tax is recognised in respect of the retained earnings of overseas
subsidiaries only to the extent that, at the balance sheet date, dividends
have been accrued as receivable or a binding agreement to distribute
past earnings in future has been entered into by the subsidiary.
Deferred tax is measured at the average tax rates that are expected
to apply in the periods in which the timing differences are expected
to reverse, based on tax rates and laws that have been enacted or
substantively enacted by the balance sheet date. Deferred tax is measured
on a discounted basis to reﬂect the time value of money over the period
between the balance sheet date and the dates on which it is estimated
that the underlying timing differences will reverse. The discount rates
used reﬂect the post-tax yields to maturity that can be obtained on
government bonds with similar maturity dates and currencies to
those of the deferred tax assets or liabilities.
FOREIGN CURRENCIES
The results of overseas subsidiaries are translated into sterling using
average rates of exchange during the year. Assets and liabilities of
overseas subsidiaries are translated at the rates of exchange ruling at
the balance sheet date. Exchange differences arising from the translation
of investments in subsidiary undertakings at closing rates are taken to
reserves, together with exchange differences on foreign currency
borrowings which ﬁnance a proportion of foreign currency investments.
GOVERNMENT GRANTS
Capital based government grants are included within accruals and
deferred income in the balance sheet and credited to the proﬁt and loss
account over the estimated useful economic lives of the assets to
which they relate. Revenue based government grants are credited to
the proﬁt and loss account in the period in which they are receivable.
DEBT
Debt is initially stated at the amount of the net proceeds after deduction
of issue costs. The carrying amount is increased by the ﬁnance cost
in respect of the accounting period and reduced by payments made
in the period. Finance costs of debt are recognised in the proﬁt and
loss account over the term of such instruments at a constant rate on
the carrying amount.
DERIVATIVES AND FINANCIAL INSTRUMENTS
The Group uses derivatives and ﬁnancial instruments to reduce
exposure to foreign exchange risk. The Group does not hold or issue
derivatives or ﬁnancial instruments for speculative purposes.
For a forward foreign exchange contract to be treated as a hedge, the
instrument must be related to actual foreign currency assets or liabilities
or to a probable commitment. It must involve the same currency or
similar currencies as the hedged item and must also reduce the risk
of foreign currency exchange movements on the Group’s operations.
Gains and losses arising on these contracts are deferred and recognised
in the proﬁt and loss account, or as adjustments to the carrying amount
of ﬁxed assets, only when the hedged transaction has itself been
reﬂected in the Group’s accounts. If an instrument ceases to be
accounted for as a hedge, for example, because the underlying hedged
position is eliminated, the instrument is marked to market and any
resulting proﬁt or loss recognised at that time. 26 Bodycote annual report 2002 26 Bodycote annual report 2002
Notes to the Financial Statements
31 December 2002 
1. Segmental analysis
By activity Turnover Proﬁt Net assets
2002 2001 2002 2001 2002 2001 
£m £m £m £m £m £m
Heat treatment 306.5 340.8 37.1 60.9 289.2 287.2
Hot isostatic pressing 28.5 32.0 4.5 7.3 64.9 64.5
Materials testing 56.6 52.3 10.9 9.9 25.3 20.6
Metallurgical coatings 48.5 54.3 (1.8) 3.7 10.8 18.6
440.1 479.4 50.7 81.8 390.2 390.9
Head ofﬁce expenses (1.3) (1.6)
Operating proﬁt before amortisation of goodwill and exceptional items 49.4 80.2
Net interest payable (11.2) (13.9)
Proﬁt on ordinary activities before amortisation of 
goodwill and exceptional items 38.2 66.3
Amortisation of goodwill (8.7) (8.1)
Proﬁt on ordinary activities before exceptional items 29.5 58.2
Operating exceptional item arising from restructuring 
and asset write downs (18.3) –
Exceptional items – (2.7)
Proﬁt on ordinary activities before taxation 11.2 55.5
By geographical origin Turnover Proﬁt before tax Net assets
2002 2001 2002 2001 2002 2001
£m £m £m £m £m £m
United Kingdom 62.2 68.9 4.5 12.2 33.0 51.3
Mainland Europe 201.0 208.8 5.3 31.8 261.8 259.2
North America 174.6 199.5 12.0 24.8 91.2 76.2
Rest of World 2.3 2.2 0.6 0.6 4.2 4.2
440.1 479.4 22.4 69.4 390.2 390.9
Net interest payable (11.2) (13.9)
Proﬁt on ordinary activities before taxation 11.2 55.5
By geographical destination Turnover
2002 2001
£m £m
United Kingdom 62.5 68.7
Mainland Europe 199.5 206.9
North America 174.5 199.7
Rest of World 3.6 4.1
440.1 479.4
The segmental disclosure by activity for 2001 has been restated to reﬂect the transfer of certain business from the heat treatment to the
metallurgical coatings division. Bodycote annual report 2002 27 Bodycote annual report 2002 27
2. Operating proﬁt
2002 2002 2002 2001
Existing Acquisitions Total Continuing
Operations Operations
£m £m £m £m
Turnover 437.2 2.9 440.1 479.4
Cost of sales (301.3) (2.1) (303.4) (304.7)
Gross proﬁt 135.9 0.8 136.7 174.7
Distribution costs (16.3) (0.1) (16.4) (16.3)
Administrative expenses
- Other (70.7) (0.2) (70.9) (78.2)
- Goodwill amortisation (8.6) (0.1) (8.7) (8.1)
- Operating exceptional items arising from restructuring
and asset write downs (18.3) – (18.3) –
Operating proﬁt 22.0 0.4 22.4 72.1
2002 2001
£m £m
Operating proﬁt is stated after charging/(crediting):
Depreciation 43.0 39.5
Amortisation of goodwill 8.7 8.1
Operating lease rentals, plant and machinery 5.6 5.0
Operating lease rentals, other 3.3 2.4
Audit fees 0.3 0.3
Fees to auditors in respect of tax planning and compliance 0.7 –
Fees to auditors and former auditors in respect of other non-audit services 0.1 0.3
Fees to former auditors in respect of tax planning, compliance and due diligence – 0.6
Government grants receivable (0.4) (0.1)
Rents receivable (0.6) (0.7)
Operating exceptional item (see below) 18.3 –
Operating exceptional item:
A restructuring provision of £18.3m has been created to cover the costs of plant closures, asset write offs and reorganisation. 
Of this £13.2m has been utilised during the year, and £5.1m remains as a provision at 31 December 2002. 
Asset Redundancy Plant
write off costs closures Total
£m £m £m £m
Heat treatment 5.3 2.9 3.7 11.9
Hot isostatic pressing – 0.2 0.2 0.4
Materials testing 0.2 – 0.1 0.3
Metallurgical coatings 2.9 1.2 1.6 5.7
Total 8.4 4.3 5.6 18.3
3. Exceptional items reported after operating proﬁt
2002 2001
£m £m
Loss on disposal of discontinued operations – (1.9)
Loss on disposal of tangible ﬁxed assets of continuing operations – (0.8)
– (2.7) Notes to the Financial Statements
28 Bodycote annual report 2002 28 Bodycote annual report 2002
4. Net interest payable
2002 2001
£m £m
Interest payable and similar charges (14.4) (18.1)
Bank interest receivable 3.2 4.2
(11.2) (13.9)
5. Employees
2002 2001
Number Number
The number of persons employed by the Group at the year end
(including Executive Directors) was:
Heat treatment 5,239 5,524
Hot isostatic pressing 266 269
Materials testing 1,266 1,068
Metallurgical coatings 875 965
7,646 7,826
2002 2001
£m £m
Total employee costs (including Executive Directors) were:
Wages and salaries 142.6 148.3
Social security costs 34.7 36.2
Other pension costs (see note 24) 5.5 4.2
182.8 188.7
The disclosure of employee numbers for 2001 has been restated to include temporary workers. Details of Directors’ emoluments 
are given on page 16.
6. Tax on proﬁt on ordinary activities
2002 2001
£m £m
The charge for tax comprises:
Current tax:
UK corporation tax 3.5 6.7
Overseas tax 6.3 9.2
Adjustments in respect of prior years
- UK corporation tax (0.5) (0.2)
- Overseas tax (2.5) (1.8)
Total current tax 6.8 13.9
Deferred tax:
Origination and reversal of timing differences (3.7) 5.8
Decrease/(increase) in discount 1.7 (1.7)
Total deferred tax (see note 16) (2.0) 4.1
Total tax on proﬁt on ordinary activities 4.8 18.0
The tax charge on exceptional items comprises:
Proﬁt on disposal of discontinued operations - overseas – (1.7)
Operating exceptional restructuring charges (6.2) –
(6.2) (1.7) Bodycote annual report 2002 29 Bodycote annual report 2002 29
6. Tax on proﬁt on ordinary activities continued
The difference between the total current tax shown above and the amount calculated by applying the standard rate of UK corporation 
tax to the proﬁt before tax is as follows.
2002 2001
£m £m
Group proﬁt on ordinary activities before tax 11.2 55.5
Tax on Group proﬁt on ordinary activities at standard UK corporation tax rate of 30% (2001 - 30%) 3.4 16.6
Effects of:
Goodwill amortisation not deductible for tax purposes 2.6 2.4
Other expenses not deductible for tax purposes 0.1 0.3
Loss on disposal of discontinued operations not taxable – 0.4
Loss on disposal of tangible ﬁxed assets – 0.2
Higher tax rates on overseas earnings – 1.8
Adjustments to tax charge in respect of previous periods (3.0) (2.0)
Origination and reversal of timing differences 3.7 (5.8)
Group current tax charge for the year 6.8 13.9
The Group’s overseas tax charge is higher than that in the UK, primarily because the proﬁts earned in mainland Europe and North America
are generally taxed at higher rates.
7. Proﬁt for the ﬁnancial year
Proﬁt for the ﬁnancial year dealt with in the ﬁnancial statements of the parent company amounted to £4.0m (2001: £9.6m).
8. Dividends - paid and proposed
2002 2001
£m £m
Interim - 2.25p per share (2001: 2.25p) on 256,470,884 (2001: 256,383,980) shares paid 2 January 2003 5.8 5.8
Final - 3.85p per share (2001: 3.85p) proposed on 256,470,884 (2001: 256,383,980) shares 9.8 9.8
15.6 15.6 Notes to the Financial Statements
30 Bodycote annual report 2002 30 Bodycote annual report 2002
9. Earnings per share
2002 2001
£m £m
Proﬁt for the ﬁnancial year 6.3 37.4
Goodwill amortisation charge 8.7 8.1
Exceptional items after tax 12.1 1.0
Headline earnings 27.1 46.5
Weighted average number of ordinary shares in issue - basic 256,052,197 256,194,136
Adjustment in respect of share options 327,984 344,923
Weighted average number of ordinary shares in issue - diluted 256,380,181 256,539,059
Headline 10.6p 18.2p
Headline - diluted 10.6p 18.1p
Basic 2.4p 14.6p
Basic - diluted 2.4p 14.6p
The Directors consider that the headline earnings per share ﬁgures more accurately reﬂect the underlying performance of the Group.
The ﬁgures for basic and diluted weighted average share capital exclude 400,000 (2001: 150,000) shares in respect of which dividend
entitlement has been waived on behalf of the Bodycote International Employee Beneﬁt Trust.
10. Intangible ﬁxed assets - Goodwill
Group
Cost £m
1 January 2002 170.8
Arising on acquisitions during the year 9.8
31 December 2002 180.6
Amortisation
1 January 2002 16.4
Charge for the year 8.7
31 December 2002 25.1
Net book value
31 December 2001 154.4
31 December 2002 155.5 Bodycote annual report 2002 31 Bodycote annual report 2002 31
11. Tangible ﬁxed assets
Land and buildings Plant Fixtures
Long Short and and
Freehold leasehold leasehold machinery ﬁttings Total
£m £m £m £m £m £m
Group
Cost
1 January 2002 165.2 5.6 2.3 522.2 23.5 718.8
Currency adjustments (0.3) 0.1 (0.1) (0.8) 0.2 (0.9)
Recategorisation (5.2) 6.5 3.1 (16.6) 12.2 –
Subsidiaries acquired 1.6 – – 6.4 1.3 9.3
Revaluation (0.6) –––– (0.6)
Additions 7.2 0.4 0.7 47.4 3.4 59.1
Disposals (4.5) (0.2) – (32.0) (1.7) (38.4)
31 December 2002 163.4 12.4 6.0 526.6 38.9 747.3
Depreciation
1 January 2002 17.5 0.7 0.9 190.6 12.5 222.2
Currency adjustments 0.3 – (0.1) 3.6 0.3 4.1
Recategorisation (1.9) 5.0 0.4 (12.3) 8.8 –
Subsidiaries acquired 0.3 – – 3.6 1.1 5.0
Charge for the year 3.5 0.7 0.2 34.1 4.5 43.0
Disposals (0.9) (0.1) – (23.0) (1.4) (25.4)
31 December 2002 18.8 6.3 1.4 196.6 25.8 248.9
Net book value
31 December 2002 144.6 6.1 4.6 330.0 13.1 498.4
31 December 2001 147.7 4.9 1.4 331.6 11.0 496.6
Included in the net book value of ﬁxed assets of £498.4m (2001: £496.6m) is £13.1m (2001: £13.1m) which relates to freehold land not depreciated.
During the year the Group recategorised some of its ﬁxed assets. 
In the Directors’ opinion the net book value of leased assets is not material. Notes to the Financial Statements
32 Bodycote annual report 2002 32 Bodycote annual report 2002
11. Tangible ﬁxed assets continued
Fixtures
and
ﬁttings
£m
Company
Cost
1 January 2002 0.2
Additions 0.1
31 December 2002 0.3
Depreciation
31 December 2002 and 2001 0.1
Net book value
31 December 2002 0.2
31 December 2001 0.1
12. Investments
Group Company
Other
Shares investments Total Shares Loans Total
£m £m £m £m £m £m
Cost
1 January 2002 1.4 1.1 2.5 397.9 199.7 597.6
Acquisitions and advances – 0.4 0.4 0.7 291.4 292.1
Disposals and repayments – (0.9) (0.9) (0.3) (102.6) (102.9)
Currency adjustments – (0.1) (0.1) – 46.8 46.8
31 December 2002 1.4 0.5 1.9 398.3 435.3 833.6
Provision
31 December 2002 and 2001 0.2 – 0.2 2.0 – 2.0
Net book value
31 December 2002 1.2 0.5 1.7 396.3 435.3 831.6
31 December 2001 1.2 1.1 2.3 395.9 199.7 595.6
Group investments comprise:
Name of company Nature of Country of % Holding of
business incorporation ordinary shares
Traitement Compression Services SA Hot Isostatic Pressing France 49
International Heat Treatment Limited Heat Treatment Hong Kong 40
Details of principal subsidiary undertakings are given on pages 48 to 50. Bodycote annual report 2002 33 Bodycote annual report 2002 33
13. Stocks
Group
2002 2001
£m £m
Raw materials and consumables 12.1 13.0
Work in progress 4.9 4.3
Finished goods and goods for resale 0.7 0.4
17.7 17.7
There is no material difference between the balance sheet value of stocks and their replacement cost.
14. Debtors
Group Company
2002 2001 2002 2001
£m £m £m £m
Amounts falling due within one year:
Trade debtors 86.3 88.4 – –
Amounts owed by subsidiary undertakings – – 15.4 20.4
Other debtors 10.1 14.5 8.3 9.2
Prepayments and accrued income 7.0 7.5 0.1 0.1
103.4 110.4 23.8 29.7
Amounts falling due after more than one year:
Other debtors 8.2 7.8 4.5 8.2
111.6 118.2 28.3 37.9
15. Creditors
Group Company
2002 2001 2002 2001
£m £m £m £m
Amounts falling due within one year:
Bank loans 87.3 74.0 80.1 66.9
Obligations under ﬁnance leases 1.5 1.0 – –
Bank overdrafts 6.5 14.5 0.5 22.4
Trade creditors 34.9 32.9 0.7 0.4
Amounts owed to subsidiary undertakings – – 0.3 0.1
Corporation tax 1.4 3.4 – –
Proposed dividends 15.6 15.6 15.6 15.6
Other taxes and social security 16.1 16.6 – –
Other creditors 9.4 11.3 0.3 1.3
Accruals and deferred income 30.1 27.9 1.8 1.3
202.8 197.2 99.3 108.0
Amounts falling due after more than one year:
Bank loans 177.8 200.3 163.2 184.4
Obligations under ﬁnance leases 4.6 4.5 – –
Amounts owed to subsidiary undertakings – – 262.9 7.0
Other creditors 8.4 7.6 – –
190.8 212.4 426.1 191.4 Notes to the Financial Statements
34 Bodycote annual report 2002 34 Bodycote annual report 2002
15. Creditors continued
Group Company
2002 2001 2002 2001
£m £m £m £m
Bank loans are repayable:
After 5 years 56.8 64.6 49.7 55.3
Between 2 and 5 years 114.4 89.3 109.9 86.0
Between 1 and 2 years 6.6 46.4 3.6 43.1
177.8 200.3 163.2 184.4
On demand or within 12 months 87.3 74.0 80.1 66.9
265.1 274.3 243.3 251.3
Finance leases are repayable:
After 5 years 0.8 1.5 – –
Between 2 and 5 years 2.6 2.1 – –
Between 1 and 2 years 1.2 0.9 – –
4.6 4.5 – –
On demand or within 12 months 1.5 1.0 – –
6.1 5.5 – –
Bank loans are secured by interlocking intra Group guarantees with principal UK subsidiaries. The bank loans falling due after 5 years bear
interest at a weighted average rate of 7.79% (2001: 7.79%).
16. Provisions for liabilities and charges
Deferred Restructuring
tax provision Total
£m £m £m
Group
1 January 2002 41.0 – 41.0
Proﬁt and loss account (credit)/charge (2.0) 18.3 16.3
Currency adjustments (0.8) – (0.8)
Subsidiaries acquired 1.3 – 1.3
Utilised in the year – (13.2) (13.2)
31 December 2002 39.5 5.1 44.6
Deferred tax
Deferred tax is provided as follows: Group
2002 2001
£m £m
Details of the liability:
Accelerated capital allowances 61.8 59.9
Other timing differences (5.4) –
Undiscounted provision for deferred tax 56.4 59.9
Discount (16.9) (18.9)
Discounted provision for deferred tax 39.5 41.0 Bodycote annual report 2002 35 Bodycote annual report 2002 35
17. Capital and reserves
Share capital:
2002 2001
£m £m
Authorised 347,060,000 (2001: 347,060,000) ordinary shares of 10p each 34.7 34.7
Allotted, called-up and fully paid 256,470,884 (2001: 256,383,980) ordinary shares of 10p each 25.6 25.6
An analysis of the shares that were issued is given in the Directors’ report on page 10.
Share options:
During the year options covering 965,000 ordinary shares were granted to 84 employees pursuant to the rules of the Bodycote
International Executive Share Option Schemes 1994 and 1996. Options covering 86,904 ordinary shares were exercised and 717,456
options lapsed.
At 31 December 2002 options under the schemes were outstanding in respect of 8,890,931 ordinary shares granted to 512 employees at
prices ranging from 105.53p to 509p per share and which expire at dates between 9 January 2003 and 16 September 2012.
Outstanding options Option price Exercise Number of options
Date of grant pence period 2002 2001
November 1994 105.53 1997-2004 313,909 384,466
May 1995 113.73 1998-2005 46,411 51,048
October 1995 142.42 1998-2005 19,027 30,737
June 1996 190.57 1999-2006 219,606 219,606
November 1996 253.58 1999-2003 43,920 43,920
November 1996 251.47 1999-2003 16,423 16,423
December 1996 271.08 1999-2006 404,790 451,602
May 1997 258.73 2000-2007 2,490,679 2,804,599
December 1997 337.35 2000-2007 605,791 681,515
January 1998 377.60 2001-2008 247,500 252,500
May 1998 509.00 2001-2008 63,750 63,750
October 1998 305.00 2001-2008 326,250 353,750
April 1999 396.00 2002-2009 539,875 597,375
May 1999 352.00 2002-2009 15,000 15,000
December 1999 312.50 2002-2009 185,000 185,000
December 1999 311.50 2002-2009 – 10,000
May 2000 247.50 2003-2010 1,105,500 1,194,000
April 2001 217.50 2004-2011 1,239,558 1,332,058
April* 2001 217.50 2004-2008 42,942 42,942
September 2002 134.50 2005-2012 880,700 –
September* 2002 134.50 2005-2009 84,300 –
8,890,931 8,730,291
Shares under option marked * have been purchased in the market from previously issued share capital and are held by the trustees
of the Bodycote International Employee Beneﬁt Trust Notes to the Financial Statements
36 Bodycote annual report 2002 36 Bodycote annual report 2002
17. Capital and reserves continued
Reserves:
Share Currency Proﬁt
premium and other and loss
account reserve account Total
£m £m £m £m
Group
1 January 2002 244.2 (7.4) 127.8 364.6
Currency adjustments – 9.7 – 9.7
Retained loss for the year – – (9.3) (9.3)
Disposal of revalued property – (1.7) 1.1 (0.6)
31 December 2002 244.2 0.6 119.6 364.4
Company
1 January 2002 244.2 (5.8) 81.4 319.8
Currency adjustments – 7.2 – 7.2
Retained loss for the year – – (11.6) (11.6)
31 December 2002 244.2 1.4 69.8 315.4
Cumulative goodwill written off to reserves at 31 December 2002 and 2001 amounted to £122.1m.
18. Minority interests - equity
Group
2002 2001
£m £m
Equity interest at 1 January 0.7 0.2
Currency adjustments – (0.1)
Share of proﬁts for the period 0.1 0.1
Acquisition of subsidiary undertaking – 0.5
Purchase of minority‘s equity (0.5) –
Dividend payable (0.1) –
Equity interest at 31 December 0.2 0.7 Bodycote annual report 2002 37 Bodycote annual report 2002 37
19. Capital and leasing commitments
Group
2002 2001
£m £m
Contracted capital expenditure not provided for in the ﬁnancial statements: 11.7 20.7
The annual commitment for payments in respect of operating leases is:
Land and buildings Other
2002 2001 2002 2001
£m £m £m £m
Expiring:
Within 12 months 0.3 0.5 0.7 0.7
Between 1 and 5 years 1.7 2.5 2.9 1.6
After 5 years 1.3 0.3 – –
3.3 3.3 3.6 2.3
The amount disclosed as capital commitments at 31 December 2001 has been increased by £8.5m to reﬂect capital purchase commitments
arising from the disposal of the Group’s equipment manufacturing businesses in 1999 and 2000.
20. Reconciliation of operating proﬁt to operating cash ﬂows
2002 2001
£m £m
Operating proﬁt 22.4 72.1
Depreciation charges 43.0 39.5
Amortisation of goodwill 8.7 8.1
Proﬁt on sale of tangible ﬁxed assets – (1.4)
Fixed assets written off on restructuring 8.4 –
Decrease/(increase) in stocks 0.6 (4.3)
Decrease in debtors 8.7 10.3
Increase/(decrease) in creditors and provisions 2.4 (13.8)
Net cash inﬂow from operating activities 94.2 110.5
21. Analysis of cash ﬂows
2002 2001
£m £m
Returns on investments and servicing of ﬁnance:
Interest received 3.2 4.5
Interest paid (14.1) (18.4)
Dividend paid to minority shareholder (0.1) –
Net cash outﬂow from returns on investments and servicing of ﬁnance (11.0) (13.9)
Capital expenditure and ﬁnancial investment:
Purchase of tangible ﬁxed assets (59.1) (67.7)
Sale of tangible ﬁxed assets 4.6 5.4
Sale/(purchase) of investments 0.5 (0.4)
Net cash outﬂow from capital expenditure and ﬁnancial investment (54.0) (62.7) Notes to the Financial Statements
38 Bodycote annual report 2002 38 Bodycote annual report 2002
21. Analysis of cash ﬂows continued
2002 2001
£m £m
Acquisitions and disposals:
Net (overdrafts)/cash acquired with subsidiaries (0.2) 2.1
Purchase of subsidiary undertakings (note 23) (9.4) (105.7)
Purchase of minority interests (0.5) –
Sale of discontinued operations – (1.9)
Net cash outﬂow from acquisitions and disposals (10.1) (105.5)
Management of liquid resources:
Cash withdrawn from short term deposits 86.1 169.6
Cash placed on short term deposits (78.3) (132.0)
Net cash inﬂow from management of liquid resources 7.8 37.6
Financing:
Issue of ordinary share capital – 0.3
Repayment of bank loans (30.9) (111.7)
Additional bank loans 34.2 171.2
Repayment of ﬁnance leases (0.9) (1.5)
Additional ﬁnance leases 1.2 0.5
Net cash inﬂow from ﬁnancing 3.6 58.8
22. Analysis of changes in net debt
1 Jan Non-cash Currency 31 Dec
2002 Cash ﬂow Acquisitions changes adjustments 2002
£m £m £m £m £m £m
Cash at bank and in hand 37.1 (1.0) – – – 36.1
Short term deposits 15.2 (7.8) – – – 7.4
52.3 (8.8) – – – 43.5
Bank overdrafts (14.5) 8.7 – – (0.7) (6.5)
Bank loans due within one year (74.0) 10.1 (0.1) (23.1) (0.2) (87.3)
Bank loans due after one year (200.3) (13.4) (1.0) 23.1 13.8 (177.8)
Finance leases due within one year (1.0) 0.5 – (0.8) (0.2) (1.5)
Finance leases due after one year (4.5) (0.8) – 0.8 (0.1) (4.6)
(242.0) (3.7) (1.1) – 12.6 (234.2) Bodycote annual report 2002 39 Bodycote annual report 2002 39
23. Acquisition of subsidiary undertakings
Acquisitions were made at a cost of £9.0m. The signiﬁcant acquisitions in the year are given on page 10 of the Directors’ Report.
The following table analyses the acquisitions made in the year and adjustments made in respect of acquisitions in the year ended 31
December 2002. Except as indicated below, no fair value adjustments were required to be made to the amounts at which the assets and
liabilities were recorded in the books of the acquired entities.
2002 2001 Total
£m £m £m
Tangible ﬁxed assets
Book value on acquisition 3.4 – 3.4
Revaluation – (2.1) (2.1)
Accounting policy alignment 3.0 – 3.0
Fair value to the Group 6.4 (2.1) 4.3
Stocks 0.7 – 0.7
Debtors 3.6 (0.4) 3.2
Cash 0.3 – 0.3
Creditors (2.4) (1.8) (4.2)
Bank overdraft (0.5) – (0.5)
Bank loans (1.1) – (1.1)
Provision for deferred taxation
Book value on acquisition (0.1) – (0.1)
Accounting policy alignment (1.2) – (1.2)
Fair value to the Group (1.3) – (1.3)
Provisions for liabilities and charges (0.4) (1.4) (1.8)
Total net assets acquired 5.3 (5.7) (0.4)
Book value on acquisition 3.5 (3.6) (0.1)
Revaluation – (2.1) (2.1)
Accounting policy alignment 1.8 – 1.8
Fair value to the Group 5.3 (5.7) (0.4)
Goodwill 3.7 6.1 9.8
Cash paid 9.0 0.4 9.4
Of the goodwill arising on the acquisition of subsidiary undertakings, £9.8m was capitalised in the year in accordance with FRS 10. 
This then resulted in an amortisation charge of £0.1m.
The subsidiary undertakings acquired during the year contributed £1.3m to the Group’s net operating cash ﬂow, paid £0.1m in respect 
of net returns on investments and servicing of ﬁnance and utilised £0.1m for capital expenditure. Notes to the Financial Statements
40 Bodycote annual report 2002 40 Bodycote annual report 2002
24. Pension schemes
The Group operated a number of pension schemes during the year. The cost to the Group of these schemes was £5.5m (2001: £4.2m)
of which £4.1m (2001: £3.2m) related to overseas arrangements.
UK Schemes
The Group operates a funded deﬁned beneﬁt arrangement for UK employees in which the assets are held in separate trustee administered
funds. The pension cost relating to the UK arrangement is assessed in accordance with the advice of qualiﬁed actuaries using the projected
unit method. The last actuarial assessment of the scheme was performed on 6 April 2001. The assumptions that have the most signiﬁcant
effect on the results of each of the actuarial assessments are those relating to the rate of return on the investments (6.25%), the rate of
increase in salaries (4.25%) and the allowance (2.75%) made for pension payment increases of 5% or retail price inﬂation if less. 
At the last actuarial valuation of the scheme, the market value of the assets totalled £26.0m. The actuarial value of these assets
represented 90% of the beneﬁts that had accrued to members after allowing for expected future increases in earnings.
At 6 April 2001, there was a shortfall of £3.0m on the basis of the minimum funding requirement of the Pensions Act 1995. This is being
addressed by payment of contributions aimed at removing this shortfall by 6 April 2007 at the latest.
The contributions made by the employer over the ﬁnancial year have been £1,325,000, equivalent to 14.8% of pensionable pay (after allowing
for National Insurance rebates). This contribution rate is to continue until reviewed following the triennial valuation of the scheme due as
at 6 April 2002. As the scheme is closed to new entrants, the current service cost as a percentage of pensionable payroll is likely to increase
as the membership ages, although it will be applied to a decreasing pensionable payroll.
The transitional arrangements of the new accounting standard FRS 17 require disclosure of assets and liabilities as at 31 December 2002
calculated in accordance with the requirements of FRS 17. They also require disclosure of the items which would appear in the proﬁt and
loss account and in the statement of total recognised gains and losses were the full requirements of FRS 17 in place. For the purpose of
these ﬁnancial statements, all of these ﬁgures are illustrative only and do not impact on the actual 31 December 2002 balance sheet or
on this year’s performance statements.
Assumptions 
The assets of the scheme have been taken at market value and the liabilities have been calculated using the following principal 
actuarial assumptions:
2002 2001
% p.a. % p.a.
Inﬂation 2.50 2.50
Salary increases 3.75 3.75
Rate of discount 5.50 5.75
Allowance for pension increases of 5% 
per annum or RPI if less in payment or if deferred 2.50 2.50
The fair value of the assets in the scheme, the present value of the liabilities in the scheme and the expected rate of return at each
balance sheet date were:
2002 2002 2001 2001
%£m %£m
Equities 7.0 14.8 7.0 20.0
Bonds 5.4 2.5 5.4 1.6
Cash 4.0 0.8 ––
With proﬁts insured policy 5.2 4.6 5.4 4.3
Total fair value of assets 22.7 25.9
Present value of scheme liabilities (36.1) (30.9)
Deﬁcit in the scheme (13.4) (5.0)
Related deferred tax asset 4.0 1.5
Net pension liability (9.4) (3.5) Bodycote annual report 2002 41 Bodycote annual report 2002 41
24. Pension schemes continued
Charge to the proﬁt and loss account over the ﬁnancial year 2002
£m
Current service cost (charge to operating proﬁt) 0.7
Interest on pension scheme liabilities (charge to net ﬁnance costs) 1.8
Expected return on pension scheme assets (credit to net ﬁnance costs) (1.8)
Total charge 0.7
Amounts which would be included within the statement of total recognised gains and losses 
Percentage of 
£m scheme assets
Difference between expected and actual return on assets 6.4 28.3
Experience gains and losses arising on the scheme liabilities 0.6 2.5
Effects of changes in the demographic and ﬁnancial 
assumptions underlying the present value of the scheme liabilities 2.0 9.0
Total charge 9.0
Analysis of movements during the year
£m
Deﬁcit at 1 January 2002 5.0
Movement in the year:
Current service cost 0.7
Contributions (1.3)
Actuarial loss 9.0
Deﬁcit at 31 December 2002 13.4
Overseas Schemes
The Group operates an unfunded scheme for employees in France. The total liability in respect of beneﬁts is €3.1m (£2.0m) of which
€2.4m (£1.5m) has been provided. 
The company also sponsors six deﬁned beneﬁt pension arrangements in the USA. These are Lindberg Corporation, Metallurgical Inc.
Pension Plan, Lakeside Heat Treating, Lansing (UAW), St Louis Hourly and Supplemental Retirement Plans.The disclosures required under
the transitional arrangements of FRS 17 in respect of these pension schemes are set out below.
The contributions made by the employer over the ﬁnancial year have been $272,000 (£181,000) equivalent to 4.19% of pensionable pay.
The next actuarial valuation for funding purposes is due as at 31 December 2002.
Assumptions 
The assets of the scheme have been taken at market value and the liabilities have been calculated using a discount rate of 5% per
annum (6% at 31 December 2001). Notes to the Financial Statements
42 Bodycote annual report 2002 42 Bodycote annual report 2002
24. Pension schemes continued
The fair value of the assets in the scheme, the present value of the liabilities in the scheme and the expected rate of return at each
balance sheet date were:
2002 2002 2002 2001 2001 2001
%£m$m %£m$m
Equities 7.00 0.8 1.3 7.00 1.1 1.8
Bonds 5.00 0.6 0.9 6.00 0.6 1.0
Cash 1.25 11.6 18.6 1.75 11.9 19.1
Total fair value of assets 13.0 20.8 13.6 21.9
Present value of scheme liabilities (16.0) (25.8) (13.4) (21.6)
(Deﬁcit)/surplus in the scheme (3.0) (5.0) 0.2 0.3
Related deferred tax asset/(liability) 1.3 2.3 (0.1) (0.1)
Net pension (liability)/asset (1.7) (2.7) 0.1 0.2
Charge to the proﬁt and loss account over the ﬁnancial year 
2002 2002
£m $m
Current service cost (charge to operating proﬁt) 0.1 0.2
Interest on pension scheme liabilities (charge to net ﬁnance costs) 0.9 1.3
Expected return on pension scheme assets (credit to net ﬁnance costs) (0.3) (0.5)
Total charge 0.7 1.0
Amounts which would be included within the statement of total recognised gains and losses 
Percentage of
£m $m scheme assets
Difference between expected and actual return on assets 0.3 0.5 3.1
Experience gains and losses arising on the scheme liabilities – – 0.3
Effects of changes in the demographic and ﬁnancial 
assumptions underlying the present value of the scheme liabilities 2.7 4.0 21.5
Total charge 3.0 4.5
Analysis of movements during the year
£m $m
Surplus at 1 January 2002 0.2 0.3
Movement in the year:
Current service cost (0.1) (0.2)
Contributions 0.2 0.2
Other ﬁnance charges (0.5) (0.8)
Actuarial loss (2.8) (4.5)
Deﬁcit at 31 December 2002 (3.0) (5.0) Bodycote annual report 2002 43 Bodycote annual report 2002 43
25. Contingent liabilities
The Company has guaranteed bank overdrafts and loans of certain subsidiary undertakings amounting to £3.7m (2001: £3.6m).
26. Derivatives and other ﬁnancial instruments
The Finance Director’s Report on page 9 summarises the objectives and policies for holding or issuing ﬁnancial instruments and similar
contracts, and the strategies for achieving those objectives that have been followed during the period.
The numerical disclosures in this note deal with ﬁnancial assets and ﬁnancial liabilities as deﬁned in FRS 13 Derivatives and Other
Financial Instruments: Disclosures. Certain ﬁnancial assets such as investments in subsidiary and associated companies are excluded
from the scope of these disclosures.
As permitted by FRS 13, short term debtors and creditors have also been excluded from the disclosures, other than the currency
disclosures.
Interest rate proﬁle
Financial assets:
The Group’s ﬁnancial assets are made up of cash deposits which are part of the ﬁnancing arrangements of the Group. These deposits
comprise amounts placed on money market for various durations from call up to one week and are detailed as follows:
2002 2001
£m £m
Currency
Sterling 8.0 19.7
US Dollar 11.6 7.4
Swedish Krona – 6.2
Norwegian Krone 0.3 0.2
Danish Krone 0.1 0.4
Euro 18.6 14.4
Canadian Dollar 0.9 1.0
UAE Dirham 1.7 0.8
Swiss Franc 0.9 0.7
Czech Koruna 1.4 1.3
Chinese Renminbi – 0.1
Mexican Peso – 0.1
Total 43.5 52.3
Financial liabilities: 
After taking into account forward foreign currency contracts entered into by the Group, the interest rate proﬁle of the Group’s ﬁnancial
liabilities at 31 December 2002 and 31 December 2001 was as follows:
Floating Fixed Interest Floating Fixed Interest
Total rate rate free Total rate rate free
2002 2002 2002 2002 2001 2001 2001 2001
£m £m £m £m £m £m £m £m
Currency
Sterling 0.5 0.3 0.2 – 1.8 1.5 0.3 –
US Dollar 158.1 107.4 50.7 – 182.2 126.2 56.0 –
Swedish Krona 14.3 14.3 – – 20.1 20.1 – –
Danish Krone 1.1 1.1 – – ––––
Euro 82.7 73.2 9.2 0.3 70.0 50.5 16.3 3.2
Canadian Dollar 1.9 1.6 0.3 – 3.7 3.4 0.3 –
Swiss Franc 16.1 14.5 1.6 – 15.0 13.0 2.0 –
Czech Koruna 3.0 2.5 0.5 – 1.5 1.4 0.1 –
Total 277.7 214.9 62.5 0.3 294.3 216.1 75.0 3.2 Notes to the Financial Statements
44 Bodycote annual report 2002 44 Bodycote annual report 2002
26. Derivatives and other ﬁnancial instruments continued
Further analysis of the interest rate proﬁle at 31 December 2002 and at 31 December 2001 is as follows:
2002 2002 2002
Fixed rate Fixed rate Interest free
Weighted average Weighted average Weighted average
interest rate period for which period to maturity
rate is ﬁxed
%Years Years
Currency:
Sterling 12.29 1.3 –
US Dollar 7.72 6.9 –
Czech Koruna 20.00 1.7 –
Euro 5.14 2.7 3.6
Swiss Franc 3.71 0.6 –
Canadian Dollar 7.06 1.7 –
2001 2001 2001
Fixed rate Fixed rate Interest free
Weighted average Weighted average Weighted average
interest rate period for which period to maturity
rate is ﬁxed
%Years Years
Currency:
Sterling 11.37 1.6 1.0
US Dollar 7.79 8.0 –
Czech Koruna 20.00 2.7 –
Euro 4.96 2.8 3.8
Swiss Franc 3.35 0.4 –
Canadian Dollar 7.81 0.4 –
The interest on ﬂoating rate ﬁnancial liabilities is based on the relevant national inter-bank rate and is ﬁxed in advance for periods normally
between 3 and 12 months.
Currency exposures
The Group’s objectives in managing the currency exposures arising from its net investment overseas (in other words, its structural currency
exposures) are to maintain a low cost of borrowings and to retain some potential for currency-related appreciation while partially hedging
against currency depreciation. Gains and losses arising from these structural currency exposures are recognised in the statement of total
recognised gains and losses.
The table on page 45 shows the Group’s currency exposures; in other words, those transactional (or non-structural) exposures that give
rise to the net currency gains and losses recognised in the proﬁt and loss account. Such exposures comprise the monetary assets and
monetary liabilities of the Group that are not denominated in the operating (or “functional”) currency of the operating unit involved, 
other than certain non-sterling borrowings treated as hedges of net investments in overseas operations. Bodycote annual report 2002 45 Bodycote annual report 2002 45
26. Derivatives and other ﬁnancial instruments continued
Currency exposures continued
The exposures as at 31 December 2002 were as follows:
Net foreign currency monetary assets/(liabilities)
US $ Euro SEK Total
£m £m £m £m
Functional currency of Group operation
Sterling 0.2 0.5 – 0.7
Czech Koruna – 0.1 – 0.1
Swedish Krona – 0.3 – 0.3
Total 0.2 0.9 – 1.1
The exposures at 31 December 2001 for comparison purposes were as follows:
Net foreign currency monetary assets/(liabilities)
US $ Euro SEK Total
£m £m £m £m
Functional currency of Group operation
Sterling 2.3 0.4 – 2.7
Euro 1.1 (3.2) 0.2 (1.9)
Total 3.4 (2.8) 0.2 0.8
The amounts shown in the tables above take into account the effect of any forward contracts and other derivatives entered into to
manage these currency exposures.
Maturity of ﬁnancial liabilities
The maturity proﬁle of the Group’s ﬁnancial liabilities at 31 December 2002 and 31 December 2001 was as follows:
2002 2001
£m £m
In one year or less 95.3 89.5
In more than one year but not more than two years 7.8 47.3
In more than two years but not more than ﬁve years 117.0 91.4
In more than ﬁve years 57.6 66.1
Total 277.7 294.3
Borrowing facilities
The Group had undrawn committed borrowing facilities at 31 December 2002 and 31 December 2001, in respect of which all conditions
precedent had been met, as follows:
2002 2001
£m £m
Expiring in one year or less 3.9 20.5
Expiring in more than one year but not more than two years – 10.5
Expiring in more than two years 3.5 1.0
Total 7.4 32.0 Notes to the Financial Statements
46 Bodycote annual report 2002 46 Bodycote annual report 2002
26. Derivatives and other ﬁnancial instruments continued
Fair values
Set out below is a comparison by category of book values and fair values of the Group’s ﬁnancial assets and liabilities at
31 December 2002 and 31 December 2001.
2002 2002 2001 2001
Book Fair Book Fair
value value value value
£m £m £m £m
Primary ﬁnancial instruments held or issued
to ﬁnance the Group’s operations
Financial assets 43.5 43.5 52.3 52.3
Long-term borrowings (182.4) (186.8) (204.8) (204.8)
Short-term ﬁnancial liabilities and current portion of long-term borrowings (95.3) (95.3) (89.5) (89.5)
Derivative ﬁnancial instruments held to manage
the currency proﬁle
Forward foreign currency contracts –– 0.4 0.4
The fair value of forward foreign currency contracts and US Dollar denominated long-term ﬁxed rate debt with a carrying amount of
£53.9m (2001: £58.1m) have been calculated by discounting cash ﬂows at prevailing interest rates. All the other fair values shown 
above have been determined by reference to prices available from the markets on which the instruments involved are traded.
Gains and losses on hedges
The Group enters into forward foreign currency contracts to eliminate the currency exposures that arise on sales and purchases
denominated in foreign currencies when those sales or purchases are transacted. Changes in the fair value of instruments used
as hedges are not recognised in the ﬁnancial statements until the hedged position matures. The unrecognised gains and losses
were not material either in 2002 or 2001. Bodycote annual report 2002 47 Bodycote annual report 2002 47
2002 2001 2000 1999 1998
£m £m £m £m £m
Turnover
Metal technology 440.1 479.4 359.4 322.8 285.8
Discontinued operations – – 11.7 32.6 34.2
440.1 479.4 371.1 355.4 320.0
Proﬁts
Operating proﬁt 22.4 72.1 82.8 81.1 73.9
(Loss)/proﬁt on disposal of discontinued operations – (1.9) 9.5 11.8 0.6
Restructuring costs – –– (5.2) –
(Loss)/proﬁt on disposal of ﬁxed assets – (0.8) – 0.8 –
Net interest (payable)/receivable (11.2) (13.9) (6.9) (3.3) 1.7
Proﬁt before taxation 11.2 55.5 85.4 85.2 76.2
Taxation (4.8) (18.0) (21.0) (27.3) (22.9)
Proﬁt after taxation 6.4 37.5 64.4 57.9 53.3
Minority interests (0.1) (0.1) – 0.1 –
Proﬁt for the ﬁnancial year 6.3 37.4 64.4 58.0 53.3
Headline earnings per share (pence) 10.6 18.2 22.6 22.5 21.3
Dividend per share (pence) 6.1 6.1 6.0 5.5 4.8
Assets employed
Intangible ﬁxed assets 155.5 154.4 81.6 64.1 41.7
Tangible ﬁxed assets 498.4 496.6 410.5 357.4 299.2
Other current assets and liabilities (29.5) (18.1) (30.7) (21.9) (16.9)
624.4 632.9 461.4 399.6 324.0
Financed by
Share capital 25.6 25.6 25.6 25.8 25.7
Reserves 364.4 364.6 342.1 295.2 262.9
Shareholders’ funds 390.0 390.2 367.7 321.0 288.6
Minority interests 0.2 0.7 0.2 0.2 0.4
Net borrowings 234.2 242.0 93.5 78.4 35.0
624.4 632.9 461.4 399.6 324.0
Cumulative goodwill written off 122.1 122.1 122.1 122.1 123.9
746.5 755.0 583.5 521.7 447.9
Net assets per share (pence) 152.1 152.2 143.5 124.7 112.3
Return on capital employed before tax (%) 3.0 9.8 15.0 16.7 19.4
Return on capital employed after tax (%) 1.5 7.2 11.0 12.0 13.5
Five Year Summary 48 Bodycote annual report 2002 48 Bodycote annual report 2002
Metal Technology
Heat Treatment
Country of incorporation
or registration
*Bodycote Heat Treatments Limited Aldridge, Broxburn, Cambridge, Chard, Cheltenham, Coventry,
Derby, Gillingham, Great Barr, Hazel Grove, Macclesﬁeld,
Rotherham, Skelmersdale, Walsall, Willenhall and Woodford England
Bodycote Wärmebehandlung GmbH Ebersbach, Eching, Essen, Esslingen, Karben, Köln, Korntal,
Landsberg, Langenselbold, Lüdenscheid, Menden, Nürnberg,
Remscheid, Sömmerda, Sprockhövel and Wehingen Germany
Bodycote Hardingscentrum BV Diemen, Hengelo, Tilburg and Venlo Netherlands
Bodycote Hardiff BV Apeldoorn Netherlands
Bodycote Rheintal Wärmebehandlung AG Schaan Liechtenstein
Bodycote Austria Wärmebehandlung GmbH Kapfenberg, Marchtrenck and Vienna Austria
Bodycote Switzerland Wärmebehandlung AG Fallenden and Urdorf Switzerland
Bodycote Czech Republic Heat Treatment S.r.o. Modrice, Pilzen, Prague and Pribram Czech Republic
HT Progres S.r.o. Brno and Liberec Czech Republic
Bodycote Hokezelo KFT Budapest Hungary
Vide Express Romania (83% owned) Brasov Romania
Bodycote IMT Inc. London OH and Camas WA USA
Bodycote Thermal Processing, Inc. Boaz AL, Fremont, San Diego, Santa Fe Springs, Santa Ana, Gardena,
Huntington Park, Los Angeles, Paramount, Rancho Dominguez, 
Vernon, Walnut, Westminster and Tarzana CA, Berlin, 
Waterbury and South Windsor CT, Ipswich and Worcester MA, Cadillac, 
Canton, Lansing and Grand Rapids MI, Cincinnati and Cleveland OH, 
Oklahoma City and Tulsa OK, Dallas, Houston and Fort Worth TX, 
Laconia NH, Melrose Park IL, Indianapolis IN, Eden Prairie
and Minneapolis MN, St Louis MO, Rochester NY , Reading PA, 
Lexington TN, Clintonville, Sturtevant and New Berlin WI USA
Bodycote Thermal Processing Newmarket, Inc. Newmarket ON Canada
Bodycote Kitchener Thermal Processing Limited Kitchener ON Canada
Bodycote HIT Ambazac, Amiens, Aureil, Beaugency, Brétigny sur Orge,
Billy-Berclau, Cernay, Chanteloup les Vignes,
Charleville Mézières, Chassieu, Cluses, Condé sur Noireau,
Gemenos, Gennevilliers, La Chauvetière, Lagny sur Marne,
La Monnerie Le Montel, La Talaudière, Le Subdray,
Neuilly sur Marne, Neuilly en Thelle, Nogent, Pusignan,
Serres Castet, St Aubin les Elbeuf, St Dié, St Nicholas d’Aliermont,
St Rémy en Mauges, Thyez and Voreppe France
Bodycote Italia Srl (90% owned) Gorgonzola Italy
Gamma Trattamenti Termici SPA Flero, Madone and Rodengo Italy
Le Traitement Thermique Belge Brussels, Marchienne au Pont and Nivelles Belgium
Bodycote Värmebehandling AB Anderstorp, Göteborg, Karlskoga, Linköping, Malmö,
Mora, Stockholm, Värnamo and Västerås Sweden
Bodycote Lämpökäsittely Oy Pieksämäki, Tampere, Vaasa and Vantaa Finland
Bodycote Värmebehandling A/S Århus and Herlev Denmark
Vacuum and sealed quench and induction heat treatment, carburising, carbonitriding, plasma nitriding, copper, silver and gold brazing,
hardening, tempering, kolsterising, electron beam welding and laser processing.
Principal Subsidiary Undertakings Bodycote annual report 2002 49 Bodycote annual report 2002 49
Metal Technology continued
Hot Isostatic Pressing
*Bodycote H.I.P . Limited Chesterﬁeld and Hereford England
Bodycote IMT Inc. Andover MA, London OH, Princeton KT and Camas WA USA
Bodycote Heiss-Isostatisches Pressen GmbH Haag Germany
Bodycote IMT NV Sint-Niklaas Belgium
Bodycote Hot Isostatic Pressing AB Surahammar Sweden
Application of the hot isostatic process and the manufacture of specialist steels and products using hot isostatic pressing technology.
Materials Testing
Bodycote Materials Testing Limited Bridgwater, Brierley Hill, Burton-on-Trent, Daventry,
Droitwich, Dudley, Glasgow, Lancaster, Manchester,
Middlesbrough, Newcastle, Newbridge, Nuneaton,
Poole, Salford, Shefﬁeld and Shotton Scotland
Bodycote Materials Testing BV Emmen, Spijkenisse and Zaandam Netherlands
Bodycote Materials Testing A/S Sandnes Norway
Bodycote Materials Testing Srl Milan Italy
Bodycote CTR Srl Padua Italy
Bodycote Materials Testing Services Limited Abu Dhabi Guernsey
Bodycote Taussig Inc. Chicago IL USA
Bodycote Materials Testing Inc. Chicago IL USA
Bodycote Broutman Inc. Chicago IL USA
Bodycote Omnitest Inc. Houston TX USA
Bodycote Metal Analysis Inc. Los Angeles CA USA
Bodycote Met-Chem Inc. Detroit MI USA
Bodycote Materials Testing Portland Inc. Portland OR USA
Bodycote Technitrol Inc. Montreal and Quebec City Canada
Bodycote Materials Testing Canada Inc. Burlington, Cambridge, Mississauga and Niagara Falls ON Canada
Bodycote Polymer AB Nyköping Sweden
Bodycote CMK AB Karlskoga Sweden
Bodycote Materials Testing s.r.o. Pilzen Czech Republic
Testing services for producers and users. Mechanical, corrosion, physical, radiographic and chemical testing of ferrous and non-ferrous
alloys, building products, ceramics, composites and plastics and lifetime assessment of polymers. Healthcare testing, microbiological
assessment, water analysis, ﬁre, drug, pharmaceutical and food product testing. Automotive engine structural and environmental
exposure testing. Principal Subsidiary Undertakings
50 Bodycote annual report 2002 50 Bodycote annual report 2002
Metal Technology continued
Metallurgical Coatings
Country of incorporation
or registration
*Bodycote Metallurgical Coatings Limited Darlington, Liverpool, Macclesﬁeld,
Poole, Rochdale, Uxbridge and Wolverhampton England
*Bodycote SHU Coatings Limited Shefﬁeld England
Bodycote Coating Centrum BV Venlo Netherlands
Bodycote Metallurgical Coatings, Inc. Greensboro NC USA
Bodycote K-Tech, Inc Hot Springs AR USA
Bodycote de Mexico SA de CV Tecate Mexico
Bodycote Ytbehandling AB Anderstorp, Göteborg, Gnosjö, Katrineholm,
Karlstad, Mullsjö, Solna, Vansbro and Västra Frölunda Sweden
Bodycote Pintakäsittely Oy Alajärvi and Espoo Finland
Bodycote Nussbaum GmbH & Co KG. Kaufbeuren Germany
Bodycote HIT Chassieu, Pau, and St Dié France
Procolor Auterive France
Europeenne de Chromage St. Dizier France
Anti-corrosion processing including sherardizing, mechanical plating, zinc electroplating, organic and metal ﬁnishing, vacuum and 
ceramic coating and physical vapour deposition.
Property and General
*Thomas Cook & Son Insurance
Brokers Limited (75% owned) Burnley England
Insurance broking, industrial and commercial risk management, independent ﬁnancial advisers.
Bodycote Property Holdings Inc. Mississauga ON Canada
Bodycote MAS Redevelopment Corporation St Louis MO USA
Managers of the Group’s property interests.
Except where stated, these companies are wholly owned subsidiaries and have only one class of issued shares. Subsidiaries marked
with an asterisk* are held directly by Bodycote International plc. Bodycote annual report 2002 51 Bodycote annual report 2002 51
Annual general meeting 28 May 2003
Final dividend for 2002 1 July 2003
Interim results for 2003 August 2003
Interim dividend for 2003 January 2004
Results for 2003 March 2004
Shareholder Enquiries
Enquiries on the following administrative matters can be addressed to the Company’s registrars, Northern Registrars Limited, Northern
House, Woodsome Park, Fenay Bridge, Huddersﬁeld HD8 0LA. Telephone: 01484-600900; Fax: 01484-600911; and
email: info@northernregistrars.co.uk
- Change of address
- Lost share certiﬁcates or dividend cheques
- Dividend mandates
- Amalgamation of holdings
Forms for these matters can be downloaded from the registrars’ website at www.northernregistrars.co.uk, where shareholders can also
check their holdings and details.
Shareholder Information
Analysis of share register as at 24 February 2003
Number of Number of
Holding range: shareholders % Shares %
1 to 999 1,002 28.44 459,515 0.18
1,000 to 9,999 1,780 50.52 5,857,161 2.28
10,000 to 99,999 524 14.87 14,364,457 5.60
100,000 to 249,999 77 2.19 11,687,849 4.56
250,000 to 499,999 45 1.28 16,222,221 6.32
500,000 to 999,999 34 0.97 24,360,471 9.50
1,000,000 and over 61 1.73 183,519,210 71.56
3,523 100.00 256,470,884 100.00
Types of shareholders: % of shareholders % of total shares
Directors’ interests 0.1 0.7
Major institutional and corporate holdings 6.5 90.4
Other shareholdings 93.4 8.9
100.0 100.0
Financial Calendar BODYCOTE INTERNATIONAL PLC 
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HULLEY ROAD 
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MACCLESFIELD 
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CHESHIRE 
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SK10 2SG
TEL: +44 (0)1625 505300 
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FAX: +44 (0)1625 505313 
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EMAIL: info@bodycote.co.uk 
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ONLINE: www.bodycote.com
Designed and produced by ID 
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www.interactivedimension.com
Printed by County Offset  Bodycote International plc
annual report 2002
www.bodycote.com