Bodycote’s (BOY) expert handling of the market downturn continues to bear fruit, amid early signs that confidence among its cyclical industrial customer base is finally returning. The specialist coatings engineer upped its guidance earlier this year in anticipation of a good set of results and duly delivered, lifting adjusted operating profit by 24 per cent to £124m.
Self-help measures were key to driving that growth. Ongoing cost discipline, coupled with further investments in specialist technologies and developing regions, helped trigger a 1.4 percentage point widening of the adjusted operating margin to 18 per cent and constant-currency sales growth of 10 per cent, “well above the background market growth rates”.
Highlights included a 14 per cent rise in automotive sales, credited to contract wins gained after years of building relationships with customers, and emerging markets revenue growth of 26 per cent, another key area of investment for Bodycote. Equally encouraging was the progress made in the group’s core general industrials unit. Divisional sales grew by a tenth, reflecting surging popularity of higher-margin specialist technologies.
Increased profitability led to a 37 per cent rise in free cash flow to £83m, enabling management to comfortably finance capital expenditure projects, boost the group’s net cash position, and pay out a fourth special dividend in five years.
UBS expects adjusted EPS of 54.5p in 2018, rising to 59.4p in 2019 (from 53.6p in 2017).
| BODYCOTE (BOY) | ||||
| ORD PRICE: | 934p | MARKET VALUE: | £1.79bn | |
| TOUCH: | 933-935p | 12-MONTH HIGH: | 1,043p | LOW: 729p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 364p* | NET CASH: | £39.6m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2013† | 620 | 98.4 | 38.5 | 13.5 |
| 2014† | 609 | 104 | 41.7 | 14.4 |
| 2015† | 567 | 75.0 | 29.6 | 15.1 |
| 2016 | 601 | 91.9 | 35.2 | 15.8 |
| 2017† | 690 | 117 | 51.0 | 17.4 |
| % change | +15 | +27 | +45 | +10 |
| Ex-div: | 19 Apr | |||
| Payment: | 1 Jun | |||
| *Includes intangible assets of £201m, or 105p a share †Excludes special dividends of 10p in 2013, 20p in 2014, 10p in 2015 and 25p in 2017 (same dates apply) | ||||
