Bodycote PLC (LON:BOY) has unveiled new restructuring plans after underlying revenues shrank by around a third in April, with its automotive and civil aerospace businesses hit hard by the effects of the coronavirus pandemic.
The engineer, which provides heat treatment, metal joining, surface technology and pressing services, said management has begun a restructuring that will reduce full-time staff numbers by 700, or 13% of the total headcount, and closing plants, to permanently cut around £45mln of annualised costs.
Total group revenue for the first four months of the year was down 12% to £216mln, with April down 30%, or 35% excluding the impact of acquisitions.
The FTSE 250 group said its diversification by market sector and geography has been a benefit, while some facilities have been refocussed to provide support for the production of tooling for personal protective equipment (PPE) or the production of ventilators and other components for medical equipment.
Net debt was £44mln at the end of April, excluding lease liabilities, compared with net cash of £21mln at 31 December 2019, after paying a £94mln part-settlement for the Ellison Surface Technologies acquisition.
Free cash flow of £38mln was generated during the period and there was £170mln of headroom on its banking facility, with cash in hand of over £40mln.
The board said it was continuing to mull whether to pay a final dividend for 2019 and will update on this later in the year.
“Based on what we have seen to date, we are confident that the restructuring and cost reduction actions we are taking should enable us to operate profitably through the downturn and that we will emerge stronger as end markets recover,” the company said.
The shares were up 7% on Thursday morning to 634.5p, still around a third lower since the start of the year.
Analysts at broker Liberum said the 13% decline in organic sales was “in line with other industrials, but is made up of a stronger Q1 and a weaker April”, with it being “too early to tell whether any of this is being driven by customer destocking”.
The restructuring speed “is impressive” with the full £45mln of annualised savings in place within 12 months, they added, with Bodycote remaining their top pick in the UK for its “strong balance sheet and a more flexible cost base than many believe, which should allow them to continue to generate strong levels of FCF despite the pronounced weakness in aero and auto markets”.