More on Bodycote
Bodycote : H1 results
Bodycote said sales for the half year to June 2005 rose by 8% (to £229.3m) while ‘headline’ operating profit (before goodwill, amortisations, restructuring and interest costs) rose by 22% (to £33.1m) and EBITDA rose by 31% (to £29.2m).
Operating profits from continuing operations (after goodwill, amortisations, interest and restructuring costs) was flat at £29.7m (2004 : £29.5m). Gross margins (on continuing operations) weakened slightly to 33.9% from 34.2% a year ago. Distribution costs on continuing operations rose by 12.5% to £7.2m while general administration costs (on continuing operations) rose by 10.5% to £38.8m.
Two businesses, heat treatment and testing account for the bulk of the company’s earnings. Heat treatment made up 72% of turnover and testing made up 16% of turnover for the half year to June 2005.
Sales in the heat treatment business rose by 6.7% to £165.2m while operating profit rose by 7.1% to £21.1m. The company said sales improved in all geographies with the strongest growth seen in northern Europe. Sales in the UK were up 11% and in the Nordic countries up 10%, due to improvements in aerospace/power generation and general engineering/heavy truck respectively. Margins in the UK came under pressure due to high energy costs. Nordic margins improved and margins in Central Europe were maintained.
In the testing business sales grew 21.3% (to £37m) and operating profit grew by 22% to £6.5m. Margins remained stable. Organic sales growth was a healthy 11%, the rest coming from acquisitions.
Bodycote is recovering from a slump in 2002, with a recovery in Bodycote’s customers being the driver. Bodycote sells services to various industries such as the aerospace market, the power generation market and the oil & gas industries amongst others. The recovery of these markets from the end of 2003, and the restructuring by closing or selling loss making plants have helped boost earnings.
Growth has been reasonable but not particularly exciting. The company says they hope to win more outsourcing work, which, together with acquisitions and cost control will be the driver of growth. The company hints of more acquisitions in the second half, particularly in the fast growing testing market.
The share trades at 202.2p, on a prospective PE (2005 earnings) of 15.2x with a yield of 3.1%.
Random picks: Amlin | Aviva | Close Brothers | Computacenter | DSG International | Liberty International | PZ Cussons | Scottish & Southern Energy | Singer & Friedlander | Shaftesbury