Bodycote raises guidance after strong first half
By Josh White
Date: Thursday 29 Jul 2021
(Sharecast News) - Heat treatment, metal and coatings company Bodycote reported a 5.9% improvement in revenues at constant currency in its first half on Thursday, to £312.9m, with growth coming in at 2% at actual exchange rates.
The FTSE 250 firm reported a headline operating profit of £48.7m for the six months ended 30 June, up 35% year-on-year, while its headline operating margin improved to 15.6% from 12.3% a year earlier, with automotive and general industrial (AGI) margins above 20% for the first time.
Free cash flow totalled £60m, with free cash conversion standing at 124%, while the company reported £78m of net cash from operating activities.
The board said profits for the period benefited "strongly" from restructuring and efficiency improvements, with its gearing over 70%, as it was on track to deliver £20m of net restructuring cost savings for 2021.
It added that its specialist technologies and emerging market strategies were delivering "strong outperformance" against background markets, as the directors raised the company's full-year guidance to the upper end of market expectations.
"Bodycote's headline operating margin, at 15.6%, has recovered strongly, boosted by good operational performance and net savings from the 2020 restructuring programme," said group chief executive officer Stephen Harris.
"AGI margins are above 20% for the first time, while ADE margins have also improved over the previous half year.
"Revenues in the automotive and general industrial market sectors have shown good recovery, even if end market performance has been held back by the global chip shortage and supply chain constraints more generally."
Harris said civil aerospace revenues were yet to rebound and, while prospects for the recovery continued to improve as civil air traffic returned and original equipment manufacturers (OEMs) increased production rates, no material increase in Bodycote's business there was expected in the current year.
"We expect growth to accelerate once short-term supply chain disruptions are eliminated in the automotive and general industrial markets and civil aerospace begins its upward climb, but none of these effects are expected to be material until 2022," he explained.
"However, the benefits of our 2020 restructuring programme continue to build and Bodycote is well placed to capitalise on increases in revenues as they occur.
"Given the developments in the first half and the anticipated second half performance, we now expect to deliver a result in the upper half of the range of expectations."
At 0902 BST, shares in Bodycote were up 2.77% at 908p.
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