Proactiveinvestors United Kingdom Bodycote Group Proactiveinvestors United Kingdom Bodycote Group RSS feed en Sun, 26 May 2019 08:32:21 +0100 Genera CMS (Proactiveinvestors) (Proactiveinvestors) <![CDATA[News - Bodycote reiterates full-year guidance after mixed start to the year ]]> Bodycote PLC (LON:BOY), which specialises in heat treatments that make metals more resilient, has made a mixed start to the year.

In the first four months of 2019, the company said it has seen excellent growth in civil aerospace revenues but this has been offset by anticipated weakness in automotive and general industrial revenues against strong comparatives from the same period last year.

READ Bodycote weak as Berenberg cuts to ‘hold’ from ‘buy’, seeks “better entry point”

The upshot is that the board’s expectations for the full year remain unchanged, assuming macroeconomic conditions do not deteriorate.

Net cash as at 30 April was £31mln compared with £36mln at 31 December 2018.

The company flagged a previously-mentioned state aid investigation being conducted by the European Commission (EC), saying the EC has now decided that certain tax exemptions offered by the UK authorities constituted state aid and, as such, will need to be recovered.

Bodycote has previously estimated that the maximum potential liability from this investigation would be £20mln and it is now in discussion with its tax advisers to understand the implications of the EC’s decision and determine what, if any, exceptional charge may need to be booked.

Fri, 24 May 2019 07:44:00 +0100
<![CDATA[News - Bodycote weak as Berenberg cuts to ‘hold’ from ‘buy’, seeks “better entry point” ]]> Berenberg has cut its rating for Bodycote PLC (LON:BOY) to ‘hold’ from ‘buy’ while modestly raising its target price for the mid-cap engineer following recent 2018 results, citing valuation grounds after recent gains.

The German bank increased its target price to 940p from 915p, with the stock currently trading at 869.50p, down 1% on Wednesday’s close.

READ: Bodycote declares special dividend as 2018 profit rises 12%

In a note to clients, Berenberg’s analysts pointed out that Bodycote has “become a stronger business over the past decade by expanding into higher-value segments and faster-growth regions.”

“However,” they added, “the heat treatment industry is, by its very nature, cyclical, and while Bodycote has become more insulated from a macroeconomic slowdown, it is not immune.”

The analysts pointed out that the firm’s 2018 results were strong and they expect further progress in the coming years.

But they think “there is only limited upside to numbers and we have some concerns about a potentially slower economic recovery.”

“Hence,” the analysts concluded, “with the shares recovering strongly (up 21% ytd, the third-best performer in our industrials coverage) we downgrade our recommendation to Hold in search of a better entry point.”

Thu, 21 Mar 2019 12:49:00 +0000
<![CDATA[News - Bodycote declares special dividend as 2018 profit rises 12% ]]> Bodycote PLC (LON:BOY) shares jumped on Friday after the FTSE 250-listed group announced plans for a special dividend as the metal heat treatment engineer posted a 12% increase in pre-tax profit for 2018.

In the year to 31 December 2018, the company's headline pre-tax profit rose to £136.4mln, up from £121.5mln in 2017, as revenue increased 5.6% to £728.6mln, led by growth in the specialist technologies, emerging markets and civil aviation divisions.  

READ: Bodycote Group confident about full year after strong interims

The group improved its return on sales to 19% from 18% a year ago as it took a disciplined approach to pricing due to cost pressures, including higher input cost inflation, tighter labour markets and an increase in the price of utilities and industrial gases.

Free cash flow edged up 17% to £97.4mln after capital expenditure of £44.1mln as the company invested in expanding capacity.

Bodycote said it is recommending a special dividend of 20p per share along with an ordinary dividend of 19p, up 9% on the previous year.

"While we are conscious of the global macro-economic backdrop, we have entered 2019 well positioned and at this early point in the year, our expectations for 2019 remain unchanged,” said the group's chief executive Stephen Harris.

In a note to clients, analysts at UBS pointed out that Bodycote’s 2018 results were in-line with its estimates, showing resilience in markets adversity.

UBS reiterated a ‘buy’ rating and 814p price target on Bodycote shares, which in late morning trading were 7.4% higher at 837.50p.

 -- Adds analyst comment, share price --

Fri, 08 Mar 2019 07:41:00 +0000
<![CDATA[News - Bodycote downgraded by UBS on fears over prolonged auto and industrials weakness ]]> Bodycote PLC (LON:BOY) has had its target price cut and been downgraded to ‘neutral’ from a ‘buy’ rating by UBS after the Swiss bank said it feared the engineer would continue to be impacted by weakness in the auto and industrials sector.

Market expectations for Bodycote's 2018 growth have been stable, thanks to a strong pick-up in aerospace and defence, which delivered 13-14% growth between July and October – more than offsetting emerging weakness in industrials and energy.

READ: Bodycote and IMI downgraded by Liberum as broker forecasts “sharp correction” in Capital Goods sector

“We are concerned about prolonged weakness in industrial gas turbines (IGT) and a 2019 slowdown in the North American truck market and sUBSea investments,” UBS analysts wrote in a note to clients, adding that they had cut their growth and margin estimates for the non-aero businesses, and now model 1.0-1.8% organic growth in 2019-2020 versus 2.5-3.0% previously.

Autos and general industrials account for 60% of Bodycote’s revenues.

UBS expects Bodycote to see a strong pick-up in aero engine volumes in 2019 and 2020, but see growth on the Rolls-Royce engine starting to slow from 2020.

“At the 10- months update, management flagged a deteriorating outlook for IGT and a lIMIted pick-up in orders for subsea. The UBS Truck Barometer – Oct 2018 shows the backlog at record highs, but net orders in North America have declined for two consecutive months, with a higher level of cancellations. We see a risk of a negative surprise on increasing cancellations in the fourth quarter of 18 and 2019,” UBS’ analysts added.

The bank cut is 12-month price target for the engineering group to 814p from 1,000p.

Shares in Bodycote were 5.4% down in 692.0p in early afternoon trade.

Thu, 06 Dec 2018 13:01:00 +0000
<![CDATA[News - Bodycote and IMI downgraded by Liberum as broker forecasts “sharp correction” in Capital Goods sector ]]> City broker Liberum has downgraded FTSE 250-engineering firms Bodycote PLC (LON:BOY) and IMI PLC (LON:IMI) to ‘hold’ from ‘buy’ and to ‘sell’ from ‘hold’ respectively as its analysts forecast a “sharp correction” in the capital goods sector, leading to destocking and cost inflation.

In a note to clients, Liberum’s analysts said Bodycote’s “unique business model”, in which it holds no inventories, left it better placed than its peers to combat the destocking and cost inflation that was expected to hit the sector.

READ: Bodycote Group confident about full year after strong interims

They added that despite its early cycle indicator (ECI) for the sector indicating a substantial drop in earnings, earnings per share (EPS) forecasts for Bodycote over the next two years were only 4% below consensus on the expectation that margins “should remain resilient” due to continued growth in its specialist technologies division.

However, Liberum was less kind to IMI, saying that an expected destocking in 2019 would compound a hit to margins caused by slower growth in its precision division, adding that margins for the firm were expected to “flatline” from 2018 to 2020.

Analysts also cut their target price for IMI to 1,020p from 1,275p as they felt its other divisions would not be able to offset downgrades in the precision arm of the business.

In its sector valuation, the broker said that its ECI had fallen from a peak above 1.2 to below 1.1, an indicator it said was “a key sector sell signal” as the value of the sector had fallen on six out of the last seven occasions that the ECI had dipped below the 1.1 level.

Liberum added that across the last seven occasions, the average decline in the sector stood at 28%.

In mid-morning trading Thursday, Bodycote shares were down 3.7% at 906p, while IMI shares were down 2.5% at 1,173p.

Thu, 06 Sep 2018 10:38:00 +0100
<![CDATA[News - Bodycote Group confident about full year after strong interims ]]> Metals treatment specialist Bodycote PLC (LON:BOY) posted strong interim numbers as its car and specialist manufacturing arms motored ahead.

Interim revenues rose by 6.4% to £368mln, underpinned by the core rust proofing and galvanising operations, but would have been 8.7% better on an underlying basis without currency movements.

READ: Bodycote shares jump as it expects annual revenue and profit ahead of consensus

Heat treatment contributed 77% of sales and 60% of profits, with revenue 8% higher. 

Profits jumped 14% to £69.1mln, while the interim dividend rises by 8% to 5.7p.

Stephen Harris, chief executive, said the group was still seeing robust growth and expects full year result will be marginally ahead of the current consensus.

Shares rose 1% to 1,036p.

Thu, 26 Jul 2018 10:41:00 +0100
<![CDATA[News - Bodycote shares jump as it expects annual revenue and profit ahead of consensus ]]> Bodycote PLC (LON:BOY) shares jumped on Wednesday morning as the company reported solid growth in revenue for the first four months of the current year and said it expects full-year revenue and profit to be higher than previously expected.

In a trading update, the FTSE 250-listed company said its revenue for the four months ended 30 April 2018 was £243mln, 7% higher than a year ago and 10% higher at constant currency.

READ: Bodycote wins 15-year aero engine contract from Rolls-Royce

The heat treatment services provider said on a divisional basis, ADE revenues were up 5% to £94mln, while AGI revenues rose 9% to £149mln, and Specialist Technologies revenue grew 12% at constant currency rates.

The company said overall growth in energy revenues was 24%, with continued strength in onshore North American revenues, as well as early indications of an upturn in Western Europe oil & gas revenues. 

Bodycote said: “We have seen robust growth in the first four months of the year in spite of the foreign currency headwind.”

The company added: “At this early stage, and notwithstanding the Group's limited visibility, the Board now expects full-year revenue to be higher than previously expected and headline operating profit to be slightly ahead of current analysts' consensus.”

In early morning trading, Bodycote’s shares gained 5.9% to 980.50p. 

Wed, 30 May 2018 08:28:00 +0100
<![CDATA[News - Bodycote wins 15-year aeroengine contract from Rolls-Royce ]]> Bodycote PLC (LON:BOY) has won a 15-year contract to strengthen the metals used in civil aerospace engines by Rolls Royce.

The deal is worth more £160mln and covers thermal processing services such as hot isostatic pressing of engine blades for Rolls'  Trent XWB, Trent 1000, Trent 7000, Trent 700 and Trent 900 programmes.

Bodycote generated sales of £690mln in 2017 and underlying profits of £121mln.


Wed, 18 Apr 2018 08:12:00 +0100
<![CDATA[News - Bodycote pays out special dividend after an almost perfect year ]]> Bodycote PLC (LON:BOY) rewarded shareholders with a 25p special dividend after everything went its way in 2017.

Profits climbed 27% to £117mln on revenue of £690mln, a 15% increase, on helpful currency movements, new car and plane contracts alongside growth in emerging markets.

READ: Bodycote to provide manufacturing services for aerospace technology group Safran

Ordinary dividends rose by 10% to 17p.

Stephen Harris, Bodycote chief executive, said 2018 had started well, but added that foreign currencies were now a head rather than a tailwind.

Harris also said that although inflation was picking up, the company tended to perform well in these situations.

He added: "Our business, by its nature, has limited forward visibility, but we have entered the year with good momentum."

Bodycote shares were up 2% in morning trading Tuesday at 929p.

Tue, 06 Mar 2018 10:10:00 +0000
<![CDATA[News - Bodycote to provide manufacturing services for aerospace technology group Safran ]]> Thermal processing services provider Bodycote PLC (LON:BOY) has entered into a long-term agreement with aerospace technology group Safran SA.

Under the agreement, Bodycote will provide manufacturing services, including thermal spray coatings, electron beam welding, hot isostatic pressing, heat treatment and other services to companies in the Safran group and their key strategic first-tier suppliers.

READ: Bodycote shares pop on raised 2017 outlook

Bodycote's processes and technologies are used to prolong the working life of critical components and provide in-service protection from factors such as abrasion, temperature and wear.

READ: Bodycote reports jump in third-quarter revenue, reaffirms full year outlook

The agreement ensures that manufacturing requirements will be met by a quality-focused supplier to support the growth in Safran's civil aerospace programmes, Bodycote said.

Shares in Bodycote rose 1.1% to 920.5p on the announcement.

Tue, 20 Feb 2018 08:26:00 +0000
<![CDATA[News - Bodycote shares pop on raised 2017 outlook ]]> Shares of Bodycote PLC surged early Monday after the group lifted guidance for the full year on better-than-expected trading in the final quarter.

The metal-treatment specialist's board now expects headline operating profit for the year ended  31 December 2017, to be towards the high end of market expectations.

The company’s compiled analysts' estimates indicate a range between £117mln and £126mln.

READ: Bodycote rallies as it sees full year profits at top end of market forecasts

The stock jumped more than 7% to 1,023p with the revelation.

US tax changes accretive

While the firm said it is still examining the full effects of recent US tax legislation on future results, it expects a significant non-cash tax credit for 2017 as a result of the revaluation of US net deferred tax liabilities that will add about 5p to earnings per share on the year.

Bodycote is scheduled to announce full results March 6.

Mon, 15 Jan 2018 03:28:00 +0000
<![CDATA[News - Bodycote reports jump in third-quarter revenue, reaffirms full year outlook ]]> Bodycote PLC (LON:BOY) saw its shares gain today as the mid-cap engineer reported a jump in third-quarter revenue and reaffirmed its outlook for the year.

In a trading update for the three months to the end of September, the FTSE 250-listed provider of heat treatment and specialist thermal processing services posted a 16.6% rise in group revenue of £169mln, or up 12.9% at constant currency.

READ: Bodycote rallies as it sees full year profits at top end of market forecasts

The firm said the recovery in the North American onshore oil & gas market began during the second quarter and continued over the period, with overall growth of 24.5% in its energy revenues.

The company said it saw 8.3% growth in the car and light truck market, with strong growth in Western Europe and its emerging markets, while North American revenues were down.

It added that general industrial revenues were up 11% in all geographies against a weak comparable, with the strongest growth in Western Europe, but defence revenues continued to decline.

The group concluded: "Bodycote's performance in the period has been in line with the board's expectations and, accordingly, the group's outlook for the year as a whole remains unchanged."

In mid-morning trading, Bodycote’s shares were up 1.8% at 942.5p.

In a note to clients, analysts at Liberum Capital reiterated a ‘buy’ rating on Bodycote shares and placed their 910p target price under review, saying “we see upside potential to consensus estimates given the strong top line and supportive ECI data.”

Thu, 26 Oct 2017 10:01:00 +0100
<![CDATA[News - Bodycote rallies as it sees full year profits at top end of market forecasts ]]> Bodycote plc (LON:BOY) shares shot higher after saying it expects full year profit to be towards the upper end of market forecasts following strong revenue growth in the first half.

The metal treating specialist reported revenue of £345.7mln in the six months to 30 June, up 18.8% on a reported basis or 8.3% at constant currencies.

Chief executive Stephen Harris said the growth was driven by a recovery in its general industrial business, which accounts for 40% of total revenue. The general industrial business returned to growth after three years of declines.

Aerospace and automotive revenues also rose, offsetting a slump in the energy and oil and gas sectors.  

Headline profit before tax gained 26% to £60.56mln. Improved profits, coupled with tight control of working capital, resulted in free cash flow rising to £42.1mln form £20.9mln.

The company had net cash of £17.7mln at the end of the first half, compared to net debt of £5.5mln last year.

Bodycote raised its interim dividend by 6.0% to 5.3p.

“The positive momentum achieved in the first half is expected to continue,” Harris said.

“While our business, by its nature, has limited forward visibility, the board now expects the full year result to be towards the upper end of market expectations*."

Company compiled analysts' estimates of full year headline operating profit range from £106.5mln to £118.9mln.

Headline operating profit in the first half came to £61.7mln, compared to £49.3mln last year. 

Thu, 27 Jul 2017 10:25:00 +0100
<![CDATA[News - Liberum Capital expects UK industrial stocks to “grind higher” helped by global demand, higher pricing ]]> Analysts at Liberum Capital believe that although valuations in the UK capital goods sector look elevated, industrial stocks are likely to “grind higher” helped by global demand and higher pricing.

In a note to clients, the analysts said they have revised their estimates across the sector, taking them to 6% above consensus, and have raised price targets for all the stocks they cover, although ratings are left unchanged.

They pointed out that the broker’s ‘Early Cycle Indicator’, adapted to capture the geographic exposure of UK engineers, is at a six-year high.

The analysts added that that reading is consistent with up to 8% organic sales growth from the second-half  of 2017 for the five UK engineers under its coverage.

Prices recovering …

Furthermore, they said, pricing continues to strengthen with global producer price indexes showing +5%, from -3% a year ago and +1% three months ago.

Therefore, they concluded that cyclicals should continue to outperform defensives such as Halma PLC (LON:HLMA) on which they reiterated a ‘sell’ rating.

The analysts repeated ‘buy’ ratings on Spectris plc (LON:SXS), Bodycote PLC (LON:BOY), Morgan Advanced Materials PLC (LON: MGAM), and TT Electronics PLC (LON:TT.)

They reiterated a ‘hold’ stance on Spirax Sarco PLC (LON:SPX).

CLICK HERE: For a daily round-up of all the Proactive news … ]]>
Wed, 12 Apr 2017 09:17:00 +0100
<![CDATA[News - Bodycote’s revenues cool, but expectations remain unchanged ]]> Metal treating specialist Bodycote PLC (LON:BOY) will meet its full year expectations despite seeing revenues cool during the opening four months of 2016.

Group revenue for the four months to 30 April fell 4.9%, 9.1% at constant exchange rates, to £192.4mln.

“The board’s expectation for results in 2016, at current exchange rates, is unchanged,” said Bodycote in Friday’s trading update.

Like-for-like revenues were 2.7% lower (7% at constant exchange rates), with aerospace, defence and energy business revenues 6.7% (11.1%) lower compared to the same period in 2015.

On a more positive note, automotive & general industrial business revenues increased by 0.5% (3.8% lower at constant exchange rates).

Bodycote specialises in heating metals and alloys to improve their working life, such as making them harder, more durable or resistant to corrosion

Shares were down 10p or 1.6% to 590p.

Fri, 27 May 2016 14:30:00 +0100
<![CDATA[News - Bodycote ticks higher despite revenue dip ]]> Metal treatment specialist Bodycote (LON:BOY) bounced higher as it indicated while subdued trading was not getting any worse.

In the period July to October, revenue fell 7.5% though margins held at the same level seen in the first half of the year.

Operating profit in 2015 should still be in a range between £101m to £106m, even though the company expects no improvement in underlying trading conditions.

Both divisions saw revenues fall in the latest period.

Energy related income tumbled by 41%, though civil aircraft demand picked up.

Growth in car markets was also offset by a slide in heavy trucks and general industrial demand.

Bodycote warned it faces a £2mln increase in start-up costs in the current year due to new plants in China, France, Mexico, the US and Poland.

Broker Investec added the update was typical of Bodycote’s past performances, where it has shown it can protect profitability in difficult conditions while generating significant cash.

That is an attractive combination, it added.

Shares rose 7% to 533p.

Tue, 17 Nov 2015 11:00:00 +0000
<![CDATA[News - Bodycote shares rise as reports four month revenue growth ]]>

Bodycote (LON:BOY) shares rose over five per cent in early deals as it revealed revenue had grown 2.9 per cent in the four months to the end of October compared to the same period the previous year. 

The firm improves the properties of metals, extending their life for a wide range of industries.

Sales in the Aerospace, Defence and Energy business were ahead by 14.4 per cent with organic growth at 10.4 per cent and acquisitions adding 5.5 per cent.

In Western Europe, costant currency rates sales improved by 14.2 per cent while in North America, revenues at constant exchange rates rose 17.5% of which organic growth accounted for 7.1% and acquisitions 10.4%. 

"Although trading remains volatile, the sales momentum we have seen in October and early November offers support for the remainder of 2012 and consequently the board's expectations for the year to December 31, 2012 are unchanged," it said, looking ahead.

Shares rose 5.35 per cent, to change hands at 382.10p.

Fri, 16 Nov 2012 09:16:00 +0000
<![CDATA[News - Heat fading at Bodycote ]]>

A glance at the above chart of the FTSE 100 shows it has been a mixed week for equities, as encouraging corporate earnings offset gloomy macroeconomic news.

The broader message from the US earnings season indicates a gain in both profits and revenues. These second quarter reports are inconsistent with fears of a double-dip recession that the markets have been pricing in and improving revenues signifies a demand driven recovery, rather than just higher profits from further cost cutting.

US housing market data has however continued to offer ammunition to the bears. The number of new homes being built fell 5% last month to 549,000, the lowest level since October 2009 and a recent survey showed confidence in the sector fell to its lowest level in over a year.

The expiration of the governments tax credit program, designed to boost the housing market in April has removed the foundations from the recent recovery and falling confidence in the economy has lead to a vast drop in demand.

Ben Bernanke, Chairman of the Federal Reserve, added to the uncertainty by admitting the economy faces an “unusually uncertain outlook”, although the central bank will continue to keep rates low and enact further stimulus measures to aid growth if needed.

The Vix volatility index, often referred to as Wall Street’s fear gauge, remains around 25, suggesting that near term confidence remains stable. However, the gap between short and long term volatility measures has risen to a record size, indicating that uncertainty about the economy is at its highest level yet.

Technical analysis indicates that the index appears range bound between 4800 and 5335. After the death cross at the end of June, the moving averages appear to be bottoming out and a golden cross looks likely.

The relative strength index (RSI) has been trending higher since May and has traded a fresh peak this week, indicating that buying momentum is steadily building. However, the stochastic and MACD remain in overbought territory and are showing signs of divergence, suggesting that profit taking could be due.

In summary, unexpectedly good second quarter earnings have offered a much needed respite to the elevated discussions of a double dip recession. It must however be remembered that results are historical and often have a time lag from current market conditions.  

Economic data has continued to erode investor’s appetite for risk and this week’s comment from Bernanke raises further questions over where the economy is heading. Once more the health of the housing market and banking system, the epicentre of the financial crisis, are back in the spotlight and with uncertainty increasing, I cannot help but feel that further retracement is inevitable in the short term.

The industrial engineering sector has been the top performing area of the market over the past year, with the sector average more than doubling throughout this period, as a recovery in manufacturing activity feeds through.

However, with economic data slowing and cautious comments from Ben Bernanke I have been focusing on vulnerable stocks within this sector, which may have risen too far.

Bodycote (Epic: BOY) is a world leading supplier of specialist testing and heat treatment services to a range of industries.

As can be seen from the above chart of Bodycote, the shares have gained 150% since the lows in November 2008.

A bullish trading update on the 9th July stated that operating profit will be significantly above the upper end of analyst’s expectations, provided current demand levels are maintained, pushing the shares up a further 25%.

The group is best known for treating steel for the world’s major car markets and new car registrations in Western Europe account for 72% of the division. Recent data does however provide evidence that the pace of recovery is slowing, with new car registrations in Europe declining for the third consecutive month in June, according to the European Automobile Manufacturers Association.

Bodycote is one of the most operationally geared companies in the UK, with exceedingly high fixed costs, making profits very sensitive to fluctuations in demand. Furthermore, only 9% of sales come from the faster growing Emerging Markets, where many of its peers have been benefiting.

At its current elevated price, the shares are trading on 18x earnings, a significant premium to peers, leaving them looking especially vulnerable to any reduction in demand. The dividend is a healthy 3.5%, even though they have little earnings cover to maintain this should growth deteriorate.

Technical analysis shows there is significant historical resistance at 246.5p and the shares are now within close proximity of this level. The oscillators are overbought, with the MACD histogram declining from its peak and the stochastic trading at the upper end of its trading range. The daily momentum indicator is also at a two week low, implying that recent strength has been driven by extremely low volumes.

Bodycote is a cyclical business, with strong recent results that appear to be fully priced into the lofty valuation. There is evidence that the pace of recovery in the global economy is slowing and the risk is skewed to the downside.

At the time of writing the share price is 232.1p and with a tight stop loss marginally above resistance at 248p, I believe the shares are a short, with an attractive risk/reward ratio. Near term targets are seen at 219.5p, 213.75p and 208p

This report was written by Mark Allen – Head of derivatives at Simple Investments Stockbrokers. The writer does not hold a position in Bodycote, but client accounts may. The material in this report has come from Simply Charts and Bodycote’s corporate website.

Sat, 24 Jul 2010 08:21:00 +0100
<![CDATA[News - Bodycote expects full-year operating profit well above top of forecast range ]]> Thermal processing services provider Bodycote PLC (LON:BOY) said it has continued to see a steady and broad based improvement in demand since its interim management statement at the end of April and currently expects its full-year operating profit to come in well above the top end of the forecast range.

Revenue for the group for the six months to 30 June 2010 is expected to be 8 percent above the same period last year, or up 9 percent at constant exchange rates.

Bodycote continues to benefit from the planned reduction in its cost base as a result of the restructuring programme which commenced in late 2008 and is nearing completion.

“Looking ahead, demand levels remain uncertain and possibly uneven. Sales in the second half are expected to be impacted by the usual seasonal pattern of customer requirements and are therefore likely to be lower than in the first half,” the company said in its pre-close trading statement.

Against this backdrop, if current levels of demand are sustained and allowing for normal seasonal differences between the first and second half, the board now expects that headline operating profit for the year will be significantly above the top of the current range of full year forecasts.  Bodycote cited Bloomberg data which puts the analysts' forecasts for full year 2010 EBIT (headline operating profit) at £27.2 million to £34.7 million.

Fri, 09 Jul 2010 07:55:00 +0100
<![CDATA[News - Bodycote: will the general economic recovery push the company back into growth? ]]> When I consider an industrial company that has clients in a diverse range of industries, I tend to expect to see a company that would be making a steady EPS progress and have a comparatively low volatility (due to diversification), while navigating through the current economic climate.

Unfortunately, things are not quite so plain for London-listed Bodycote Plc (BOY), a company that has been bitten, as many others, by the current macro-economy.

The Macclesfield-based Bodycote (£296.3m market cap.) is a world-leading supplier of heat treatment, metal joining and coating services with some 300 facilities in 30 locations around the world. The clients come from such diverse range of industries as power generation, mining, aerospace, automotive and construction. It is the latter two sectors that are causing discomfort; the clients from these, particularly those in Europe, have reduced orders by around 50%.

Bodycote has a very interesting service delivery strategy. The company brings the processing to the customer, by setting up plant in or near the customer’s premises. This provides for much faster service turnaround times, as well as much reduced costs. Quite how effective this strategy is on a comparative basis is hard to determine. Bodycote seems to not have any sizable competition; the company competes in a fragmented market with predominantly small, local companies or in some cases, clients themselves.

The company capital structure is made up of £151.7m worth of debt (£5.8m of this is current) and £431.1 worth of equity. Debt to Capital Ratio is thus 26%. The company has an additional £192.7m worth of debt in committed, as of yet indrawn facilities with the average remaining life of 2.1 years. Currently, the discussions are taking place with company bankers to extend these facilities.

The revenue for the six months to 30th June 2009 has declined 19.4% compared to previous reporting period and came in at £227.9m. Heat Treatment segment receded by 20.4%, with Isostatic Pressing segment declining by 9.9%.

With restructuring now fully underway (started in 2008), £19.8m in facility closure costs have been charged to income statement in six months period to 30th June 2009 (closure of 31 locations and reduction in capacity by 12%). Impairment charges (mainly in goodwill and investments) have taken another £28.6m off the income statement (due to current economic shock), pushing the company well into the red. Loss per Share for six months to end of 30th June 2009 was 23.9 pence (EPS of 8.9 pence in previous reporting period).

Total Assets at 30th June 2009 stood at £817.6m (£1,105m in previous reporting period). The reduction has mainly come from write-downs in goodwill, reductions in inventories and receivables.

Total Liabilities were £386.5m at 30th June 2009 (£587.8m in previous reporting period). The reduction in payables, as well as reduction in borrowings contributed to the result. Current Ratio is 1.3. The company has £63.6m worth of cash (£38.1m in previous reporting period).

Despite a very tangible improvement in the working capital, to the tune of some £20m, cash from operating activities was still negative £2.6m for six months to 30th June 2009 (positive £51.7m in previous reporting period). Capital Expenditure investments were running below depreciation at £21.5m in six months to 30th June 2009 (£38.4m in previous reporting period). Cash from financing activities in the same period was negative £163.7m (positive £12.1m in previous reporting period). The reason was attributable to the repayment of bank loan of £160.1m.

The management has proposed an interim dividend of 2.95 pence a share (unchanged on last reporting period). And although it is un-covered by profits, the CEO believes that the pay out will be “no burden on the company”.

As far as valuation, the company is in a steady growth phase; therefore, using a FCFE valuation model is appropriate. With cost of equity of 13% and steady growth, the intrinsic equity value is £316m. Add to this cash of £63m and take out the deferred tax liability of £71m and you get Bodycote’s real worth. At this valuation there is only a marginal upside on the current market quote.

Positives going forward: a) currently running restructuring programme is to deliver savings of some £40m, b) sales in China have doubled and those in India have trebled, although from a very small base, c) sale of non-core business in October of 2008 is prudent (price sold for - £420m), d) reduction in CapEx planned to conserve cash (for forthcoming year should be around £35m), e) reduction of headcount is being implemented (by some 31% of total, towards end of year 2009), and f) ability to marginally raise prices (to off-set energy price increases).

Negatives: a) high operational leverage, b) susceptible to fluctuations in energy prices (last year energy costs went up by 4%), c) ability of customers to perform Bodycote’s services themselves when there is spare capacity, d) dependency on favourable economic conditions.

Will the general economic recovery push the company back into growth and its stock way back up? This is what the management believes; I’d like to believe so too.

Wed, 26 Aug 2009 10:12:00 +0100
<![CDATA[News - Bodycote reports full year pretax loss as it continues with restructuring ]]> Engineering group Bodycote PLC swung to a pretax loss in the full year as its restructuring continues with the consolidation or closure of 31 locations of its Thermal Processing business, following disposal of its Testing activities last year. The total restructuring will have reduced headcount by 10 percent by the end of 2009.

The focus of the restructuring is to drive down costs and reshape the business to concentrate on those areas that present strong growth opportunities for the future. While automotive markets have softened, demand from aerospace, power generation and oil & gas markets remain steady, the group said.

Of the 31 locations affected by the latest measures, 13 are in North America and 17 in Europe. Actions in North America are expected to be largely completed in the first half of 2009, while in Europe, restructuring will be completed by the end of 2009. In the UK, changes are modest and will be completed during the first quarter of 2009.

The total restructuring programme will generate annualised cost savings of approximately £18 million once it is completed.

The group swung to a pretax loss from continuing operations of £55.3 million in the year to December 31 2008 from a profit of £60.6 million a year earlier, while revenue from continuing operations rose 18.6 percent in the period to £551.8 million. The group is raising the total dividend 3.8 percent to 8.3 pence per share.

“Despite the uncertain economic environment, we remain confident in the medium and long term prospects for the group,” chief executive Stephen Harris said.

Wed, 25 Feb 2009 11:48:00 +0000
<![CDATA[News - Bodycote sees second-half performance ‘modestly‘ below its expectations, to cut payout from disposal of Testing business ]]> Thermal processing and testing group Bodycote PLC said it expects performance in the second half of the current year to the end of December 2008 to be modestly below management's previous expectations, as revenues from its Thermal Processing business are now expected to be similar to 2007 in constant currency terms with organic sales slightly lower. 

This follows reductions in sales and orders during October and November for the business, particularly in continental Europe and expectations of production closures by customers in the automotive and heavy truck sectors during December.
It also said it will cut the return of funds to shareholders from the sale of its Testing business to £130 million from the previously flagged 260 million due to the “unprecedented financial market conditions” since the initial announcement of the sale in late August 2008. The remainder will be used to reduce net debt.
In light of the global economic downtown and trading conditions and the uncertainty as to their duration, the already announced plans to restructure the Thermal Processing business are being developed on a wider basis than originally contemplated. Actions in North America are well underway but are at an earlier stage throughout the rest of the group. The full extent, cost and benefits of this programme are currently being evaluated, Bodycote said in a trading statement covering the period July 1-November 16 2008.
Sales growth in Thermal Processing in the period has been approximately 21 percent (7 percent at constant exchange rates) compared to the same period last year.
Aerospace, power generation and oil & gas markets remain satisfactory. Demand from European automotive and truck customers has declined recently and is expected to remain at depressed levels for some time, whilst North American automotive trading has continued to be weak, it said.
Given the current volatility in customer demand, trading performance in 2009 will depend on the length and depth of the global economic downturn, it added.

Mon, 17 Nov 2008 12:35:00 +0000