Bodycote (BOY) highlighted the importance of its working capital control at the half-year mark, but the recent launch of its Powdermet technology product – a radical innovation in 3D printing – shows the specialist coatings business is still intent on developing new revenue streams.
The group has had to trim its sails in the face of some challenging end-markets, most notably oil and gas, but action on costs and improving profitability fed through to a doubling in free cash flow to £42m, while net capital expenditure was equivalent to the depreciation rate.
Shareholders will always laud a prudential attitude when their capital is at stake, but they will have also noted the return to growth in the general industrial business in the period under review. After three years of comparable declines, it suggests that the group’s operational gearing may be brought to bear as trading activity accelerates.
There were encouraging signs at the top line, with constant-currency revenue up 8.3 per cent, more than half of which was organic. Understandably, the transition from sales to profitability is hampered by margins at the group’s greenfield start-ups, but Bodycote still edged up the headline operating margin from 16.9 per cent to 17.8 per cent.
Panmure Gordon expects adjusted pre-tax profit of £117m for the year to December 2017, and has raised its EPS estimate from 39.4p to 45.9p, against £97m and 36.9p in 2016.
| BODYCOTE (BOY) | ||||
| ORD PRICE: | 888p | MARKET VALUE: | £1.7bn | |
| TOUCH: | 887-889p | 12-MONTH HIGH: | 907p | LOW: 553p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | 22 | |
| NET ASSET VALUE: | 340p* | NET CASH: | £17.7m | |
| Half-year to | Turnover | Pre-tax | Earnings per | Dividend |
| 30 Jun | (£m) | profit (£m) | share (p) | per share (p) |
| 2016 | 291 | 45.9 | 17.5 | 5.0 |
| 2017 | 346 | 58.2 | 22.9 | 5.3 |
| % change | +19 | +27 | +31 | +6 |
| Ex-div: | 05 Oct | |||
| Payment: | 03 Nov | |||
| *Includes intangible assets of £204m, or 107p a share | ||||
