Better than expected full-year results added fresh steam to Bodycote’s recovery, driving shares in the heat treatment firm up 18 per cent to their highest level since last May. But the earnings momentum means that rise looks justified.
Worries about heavy exposure to Europe – 62 per cent of group sales – have proved misplaced, and record margins proved a catalyst for earnings upgrades. Free cash flow of £70.5m also means the business is debt free.
Sales were up over 20 per cent in France and 11 per cent in Germany. And, as chief executive Stephen Harris points out, almost half the business enjoys long-term growth drivers "less likely to be impacted by economic headwinds". Indeed, aerospace & defence revenue increased by 12 per cent, while 'fracking' activity in North America helped drive oil & gas sales up 27 per cent. There was also a sharp increase in sales for heavy trucks, although that is beginning to moderate.
Bodycote's 'killer' technologies contributed, too. A 60 per cent surge in revenues at the HIP PF business “moved the needle”. The performance enhancing bonding process is used on sub-sea well-heads and nuclear parts – low volume, high value stuff. Specialist stainless steel products also aided group margins which rose from 10.4 to 15 per cent.
Numis upgraded 2012 adjusted EPS estimates by 6 per cent to 35.6p (32.7p in 2011).
BODYCOTE (BOY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 398p | MARKET VALUE: | £ 761m | |
| TOUCH: | 397-398p | 12-MONTH HIGH: | 404p | LOW: 223p |
| DIVIDEND YIELD: | 2.7% | PE RATIO: | 13 | |
| NET ASSET VALUE | 252p* | NET CASH: | £0.1m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 641 | 68.5 | 16.6 | 8.0 |
| 2008 | 552 | -55.3 | -12.5 | 8.3 |
| 2009 | 435 | -54.5 | -27.0 | 8.3 |
| 2010 | 500 | 45.2 | 18.0 | 8.7 |
| 2011 | 571 | 75.8 | 30.0 | 10.9 |
| % change | +14 | +68 | +67 | +25 |
Ex-div: 08 Apr Payment: 04 May *Includes intangible assets of £111.5m, or 58p per share | ||||
