Bodycote Group (LSE:BOY) PLC announced a rise of over 30% in headline profits in 2021 on the back of strong market recovery and predicted further progress in the current year.
The thermal processing services group said it expects cost inflation pressures to persist but that it will continue to manage the impact this has on its business.
Headline operating profits amounted to £94.8mln on a constant currency basis in 2021, compared with £75.3mln the year before, on revenue up 7.1% at £615.8mln.
The operating margin increased to 15.4% from 12.6% as the company benefited from strong recovery in general industrial markets. It predicted strong margin improvement ahead as revenues grow.
The group said inflationary pressure, particularly from energy costs, built through the year, but explained that higher costs are passed on to customers.
The increased energy and labour costs negatively impacted profitability in the final quarter of 2021 and will continue to hit profits until surcharges, price increases and contractual indexation catch up, the company said.
Bodycote completed its restructuring programme last year, which generated permanent cost savings of £20mln. A further £10mln of permanent cost savings are to come in 2022, it added.
"As we moved into 2022, General Industrial continued to perform strongly, and Civil Aerospace growth has accelerated,” commented chief executive Stephen Harris.
He noted that the Automotive business continues to be impacted by supply chain disruption, but said signs of improvement are evident.
Harris said the board “expects further progress in 2022, but remains mindful of the current geo-political and macro-economic landscape”.
Although the group has no direct exposure to Russia, Belarus or Ukraine, it said it will continue to monitor the situation for broader potential impacts.
"Looking further ahead, the outlook for the business remains positive as we benefit from high profit drop through on revenue growth across all our market sectors," Harris concluded.
The company is paying a final dividend of 13.8p, giving a total payout for the year of 20.0p, up from 19.4p.