I am pleased to be contributing to the annual report for the first time as Bodycote's Chairman, having taken up the position on 1 January 2018.

Overview

The Group delivered a good set of results for 2017 and I am very pleased that the management team, under the leadership of Stephen Harris, has been able to demonstrate the strength and strong market position of Bodycote's business once again.

Dividend

The Board is proposing a final dividend of 12.1p, an increase of 12%, which will be paid on 1 June 2018, subject to shareholder approval at the 2018 Annual General Meeting (AGM). This brings the total ordinary dividend for 2017 to 17.4p (2016: 15.8p) costing £33.1m, which represents a year-on-year increase of 10.1%. This increase in the level of dividend underscores the Board's view of the Group's excellent future earnings and cash flow potential.

Furthermore, recognising the strong net cash position of the Group at year end, the Board is recommending a supplemental distribution by way of a special dividend, also payable on 1 June 2018, amounting to 25.0p per share, costing £47.9m.

Board and governance

My predecessor, Alan Thomson, stepped down as Chairman at the end of 2017. On behalf of the Board, and the Company as a whole, I thank Alan for his significant contribution to Bodycote during his ten years of Chairmanship and previously as a Non-Executive Board member. I think that it is fair to say that Bodycote has undergone a wholesale transformation during Alan's tenure as Chairman and the development of the Group's share price over that period is a testament to the progress that has been made.

One of the key roles of the Chairman is to ensure that the Board members possess a range of complementary skills which are relevant to Bodycote's business. I have spent time with all of my Board colleagues and am confident that I have joined a well-balanced Board that, in terms of governance, is functioning effectively.

The Board has been further strengthened by the appointment of Lili Chahbazi, who joined as a Non-Executive Director on 1 January 2018. Lili is an experienced strategy consultant and, since 2008, a global partner in the London office of Bain & Company. Lili currently heads the oil & gas practice and consults to a range of international clients. Lili brings a wide range of experience in businesses including those in the engineering, aviation and transport industries.

Another one of the key responsibilities of the Chairman is to promote effective governance across the Group, thus ensuring that we remain a successful and sustainable entity with good governance procedures practised across all 23 countries in which the Group operates. We are committed to conducting business responsibly. By maintaining high standards of corporate governance, we enhance performance underpinned by our business model. Our approach to governance is set by the Board, and our Executive Committee ensures that the approach is effectively implemented across the business. Effective and robust governance remains central to the ongoing success of the Group.

People

As part of my induction to the business, I have had the chance to visit a good number of facilities, as well as to engage with much of the Group's senior executive management. I have been impressed by the commitment, knowledge and passion that I have experienced from employees across the business, and at all levels. I can see how the talented workforce creates a clear competitive advantage for Bodycote, which is so vital for the long-term success of the business.

Shareholders

During the year, as usual, meetings were undertaken with a number of Bodycote's shareholders and positive feedback was received from them. I have already had the opportunity to meet some of our shareholders and look forward to meeting more of you during the coming year, as well as at this year's AGM in May 2018.

Summary

The Group is starting to show the results of the increased investment programme that has been ongoing for the last few years. This programme has been designed to generate superior growth in what until recently has been a weak macroeconomic environment. The results of these investments, together with the continued diligence in operational efficiency and a more benign macro environment all combined to deliver another good set of results for the Group in 2017. Bodycote remains well placed to capitalise on the value generating investments available to it and the prospects for the Group are excellent. I am confident that in the coming years Bodycote will deliver an attractive return for our shareholders and commensurate reward for our employees.