Any appraisal of Bodycote 's (BOY) half-year figures needs to be set in context against the prolonged slump in oil and gas capital budgets. Sales to the sector were down 48 per cent on the prior comparable period, pulling overall turnover in the aerospace, defence and energy segment down by a tenth (at constant currencies) to £122m. Profitability at the operating level was constrained by a 110 basis point reduction in the margin to 16.9 per cent. But headline earnings were flattered by a £19.9m charge on reorganisation costs in the corresponding period in 2015.
The industrial heat treatment specialist is rejigging its business mix in favour of its more profitable technologies, but this isn't achievable overnight. Aside from a moribund energy market, trading activity is being held in check through "continued widespread softness in industrial production" here in western Europe and across the pond. Bodycote's business model is highly attuned to the general business cycle, so the fall-away in demand for heavy duty capital equipment is undermining sales. But there are some bright spots, most notably the civil aviation and automotive sectors, and there’s reason to think that global defence spending is back on the rise.
Prior to these figures, Panmure Gordon was predicting adjusted pre-tax profits of £91.5m for the December year-end, leading to EPS of 36.5p, against £99.2m and 39.5p in 2015.
| BODYCOTE (BOY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 581p | MARKET VALUE: | £1.11bn | |
| TOUCH: | 580p-582p | 12-MONTH HIGH: | 683p | LOW: 482p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 310p* | NET DEBT: | 1% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 300 | 30.6 | 10.6 | 4.8 |
| 2016 | 291 | 45.9 | 17.5 | 5.0 |
| % change | -3 | +50 | +65 | +4 |
Ex-div: 6 Oct Payment: 4 Nov *Includes intangible assets of £184m, or 96p a share. | ||||
