Revenue, operating profit falls amid challenging market for Bodycote

(Sharecast News) - Bodycote reported a mixed first-half performance on Tuesday, amid a challenging market, as organic revenue grew by 1.5% excluding surcharges, while total revenue declined 5% to £399m due to lower surcharges and foreign exchange headwinds. The FTSE 250 company said headline operating profit increased organically by 7% to £66.8m, with an improvement in the headline operating margin to 16.7%, up by 170 basis points.

However, its statutory operating profit fell to £30.8m from £58.7m in the first half of 2023, impacted by a non-cash exceptional charge of £28.3m related to a reduction in the scope of the ongoing ERP programme.

The company's operating cash flow remained stable at £49.2m, though free cash flow reflected higher tax payments.

Key achievements during the period included significant organic growth in aerospace and defence, which saw a 14.9% increase excluding surcharges, and a 7.7% rise in specialist technologies.

Those gains were supported by cost actions and pricing improvements.

Bodycote successfully integrated Lake City, acquired in January, and completed the first £30m tranche of a £60m share buyback programme, with the next tranche set to begin on 30 July.

Looking ahead, Bodycote maintained its outlook from its 2023 results, with plans to optimise its strategy and plant footprint to drive further value.

The company said it was well-positioned to capitalise on strong foundations and future opportunities despite the current market conditions.

"We delivered good overall performance in the first half despite a mixed end market backdrop, with organic topline growth excluding surcharges and strong margin progression," said group chief executive officer Jim Fairbairn.

"This was underpinned by continued outperformance in specialist technologies, as well as margin improvement in our aerospace, defence and energy (ADE) division.

In our automotive and general industrial (AGI) division, where market conditions have been challenging, we have taken a number of decisive actions to balance costs and capacity with near-term demand."

Fairbairn said that, supported by those actions, the firm's outlook for the full year remained unchanged, as it expected to deliver organic revenue growth excluding surcharges and year-over-year margin progression.

"Since joining Bodycote in March and taking over as CEO at the end of May, I have visited a significant number of plants spanning our core geographies, processes and markets.

"The foundations of the business are strong, with passionate people, a market-leading brand, differentiated services, and a unique carbon proposition for our customers.

"The business is well placed to build on these foundations, and I am excited by the considerable opportunities I see to unlock further value."

At 0854 BST, shares in Bodycote were down 3.36% at 691p.

Reporting by Josh White for Sharecast.com.