Depressed oil market pushes Bodycote earnings lower

The FTSE 250 firm’s headline operating margin reduced to 16.9%, impacted by oil & gas, though it said its margin was maintained when that effect was excluded.

Headline operating profit was down 8.9% to £49.3m, and headline profit before tax was off 8.6% to £48.1m.

Basic headline earnings per share were 18.3p, a 13.3% decline from the 21.1p figure a year ago.

Specialist technologies now accounted for more than 40% of the group’s operating profit, Bodycote’s board said, and it maintained a continued high rate of capital investment at 1.2 times depreciation.

At period end, the company had net debt of £5.5m, with the board declaring an interim dividend of 5.0p, up 4.2%.

“The group has again demonstrated its ability to deal with challenging market conditions, including delivery of a continued improvement in the AGI margin,” said group chief executive Stephen Harris/

“This has been achieved against a background of subdued demand for industrial machinery and a further substantial decline in oil & gas revenues.”

Harris said looking ahead, and noting the group's lack of visibility, the board expects growth in the aerospace and automotive markets to continue and the sequential decline in oil & gas activity to have largely abated.

“Recent demand in general industrial markets has been softer than expected and improvements are not anticipated in the second half.

“However, if current exchange rates prevail, we expect weakness in overall trading, for the year as a whole, to be offset by the benefit of currency translation,” Harris explained.

Bodycote’s board said it continues to benefit from the flexibility afforded by the strength of its balance sheet, with minimal leverage and continuing strong cash generation.

“We will continue to follow our strategy of investing in areas of robust profit opportunity, notably in Specialist Technologies, and in further enriching the mix towards higher added value services in Classical Heat Treatment,” Harris added.