Bodycote's (BOY) substantial City-based fan club was in buying mood after the heat-treatment specialist revealed that underlying pre-tax profit jumped by a tenth in 2013 to £104m. In a falling market, its shares rose over 8 per cent to levels last seen in 1998. Margins are accelerating and a fourth year of strong cash conversion encouraged management to announce a special dividend of 10p a share.
Clearly, the second half was much better than the first, when organic sales, which exclude foreign exchange and acquisition benefits, fell 5 per cent. They slipped just 1 per cent in the final six months, and finance chief David Landless tells us sales had moved into "modest positive territory" in early 2014. Margins improved significantly last year, too. A 70 basis point increase to 17.3 per cent explains why organic profit fell just £0.4m, even though the form lost almost £15m of sales.
Crucial to Bodycote's success is its impressive pricing power. Customers prefer not to change suppliers and they'll pay good money for critical services. Margins at the automotive and general industrial division jumped 130 basis points, driven in part by high value stainless steel processes. Broker Credit Suisse expects more in 2014 and forecasts an increase in adjusted pre-tax profit to £113m, giving adjusted EPS of 44.1p (from 41.3p in 2013).
BODYCOTE (BOY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 749p | MARKET VALUE: | £1.4bn | |
| TOUCH: | 748-749p | 12-MONTH HIGH: | 761p | LOW: 460p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | 19 | |
| NET ASSET VALUE | 286p* | NET CASH: | £15m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 435 | -54.5 | -27.0 | 8.3 |
| 2010 | 500 | 45.2 | 18.0 | 8.7 |
| 2011 | 571 | 75.8 | 30.0 | 10.9 |
| 2012 | 588 | 90.0 | 35.9 | 12.3 |
| 2013† | 620 | 98.4 | 38.5 | 13.5 |
| % change | +5 | +9 | +7 | +10 |
Ex-div: 9 Apr Payment: 2 May *Includes intangible assets of £168m, or 88p a share †Excludes special dividend of 10p | ||||
