As interim results for heat treatment specialist Bodycote (BOY) show, a low oil price hasn't just been bad news for energy companies. A sharp fall in demand from oil and gas clients in the second quarter meant energy sector revenues were down 13.6 per cent year on year in the first six months of 2015.
Unfortunately, sales to these customers tend to be more profitable work for Bodycote. As a result, underlying profits for the aerospace, defence and energy division fell by 14.3 per cent to £31.5m, although this was partially offset by favourable foreign currency movements. There were also knock-on effects for the company's agriculture clients, which reduced their orders of specialist coatings and heat treatment services as a result of weak commodity prices.
Bodycote is taking action by restructuring several operations in Europe to account for the weaker demand caused by low energy prices, and "widespread soft economic conditions" on the continent. This, together with the closure of the Brazil business - following a "prolonged and substantial reduction in demand" in the region - resulted in £20m of exceptional costs, leading to a big drop in statutory pre-tax profits.
Analysts at Numis are forecasting underlying pre-tax profits of £103.5m and EPS of 41p, down from £107.8m and 43.8p in the year to December 2014.
BODYCOTE (BOY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 675p | MARKET VALUE: | £1.29bn | |
| TOUCH: | 674-675p | 12-MONTH HIGH: | 777p | LOW: 528p |
| DIVIDEND YIELD: | 2.2%** | PE RATIO: | 22 | |
| NET ASSET VALUE: | 265p* | NET DEBT: | 1.4% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 312 | 52.6 | 21.1 | 4.6 |
| 2015 | 300 | 30.6 | 10.6 | 4.8 |
| % change | -4 | -42 | -50 | +4 |
Ex-div: 1 Oct Payment: 6 Nov *Includes intangible assets of £170m, or 89p a share. **Excludes special dividend of 20p in 2014 | ||||
