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Bodycote accelerates turnaround in tough markets

The damage done to the aerospace industry is expected to take time to work its way through the supply chain
July 23, 2020

Bodycote (BOY) has increased its savings target as part of a restructuring effort that will see the thermal processing services provider close 18 plants, 13 of which are part of its automotive outfit. Bodycote now hopes to make annualised savings of £58m, up from a previous target of around £45m.

IC TIP: Sell at 602p

Bodycote announced in March that it was seeking to lower its exposure to legacy combustion engines and reposition for the new electric vehicle era. The restructure meant Bodycote fell to a half-year pre-tax loss, as the group recorded £32.1m in exceptional restructuring costs, while return on sales pulled back six percentage points to 12.3 per cent. The deterioration on the income statement stands in contrast to free cash flow, which, at £69.7m, was 56 per cent up on the 2019 half year.

The rationalisation of the business is being undertaken while automotive, aerospace, and general industrial markets are being ravaged by Covid-19. Bodycote has observed a recovery in demand for new vehicles, but it warned of further degeneration in civil aerospace.

Broker Investec forecasts full-year pre-tax profit of £73.5m and EPS of 29.8p, rising to £115m and 46.6p in 2021.

BODYCOTE (BOY)   
ORD PRICE:602pMARKET VALUE:£1.15bn
TOUCH:599-602p12-MONTH HIGH:975pLOW: 378p
DIVIDEND YIELD:NILPE RATIO:26
NET ASSET VALUE:382p*NET DEBT:15% **
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201936762.224.76.00
2020307-3.80-1.3nil
% change-16---
Ex-div:na   
Payment:na   
*Includes intangible assets of £352m, or 184p a share, ** Includes lease liabilities of £83m.