26th Feb 2015 14:14
LONDON (Alliance News) - Bodycote PLC on Thursday hiked its payout to shareholders for 2014 after reporting a rise in pretax profit in spite of a fall in revenue, as the company improved its margins over the year.
The FTSE 250-listed company, which provides heat treatments, metal joining, hot isostatic pressing and coatings services, said its pretax profit for 2014 was GBP103.7 million, up from GBP98.4 million a year ago.
Revenue fell by 1.7% to GBP609.1 million from GBP619.6 million but the group's profit was pushed higher by an improvement in its margins in the year to 18.2%, from 17.3% in 2013. The headline revenue figure was pulled back by currency headwinds, with revenue rising 4% in constant currencies.
On the back of the profit increase, the group hiked its total dividend for the year to 14.4 pence per share from 13.5 pence per share and doubled its special dividend payout to 20 pence from 10 pence last year.
"The group delivered another good performance in 2014. Revenue, at constant exchange rates, was ahead 4% and we achieved further improvement in margin and return on capital employed, in addition to strong cash generation," said Stephen Harris, chief executive of Bodycote.
"As we begin 2015 a number of macro-economic uncertainties persist. Nevertheless, at this early stage in the year, the board believes that the strength of the group's Specialist Technologies and management's continued focus on business improvement, particularly in the Classical Heat Treatment business, should enable further progress in 2015," Harris added.
Shares in Bodycote were up 0.1% to 765.6458 pence Thursday afternoon.
Civil aerospace revenue fell 1%, as significant manufacturer destocking in the UK offset contract wins and market demand improvement. Defence sector sales dropped 11% on the back of the decline in military budgets and power generation sales fell 7% amid weakening demand over the course of the year.
Its oil and gas business remained strong over the year, boosted by demand for its HIP Product Fabrication product for subsea projects and an end to destocking by onshore oil field service providers. Overall revenue in the oil and gas division rose 7%.
Car and light truck markets revenue fell 1%, hit by adverse currency movements despite an underlying improvement in revenue in Western Europe. In its heavy truck business, revenue in its North American arm was flat year-on-year but the division was dragged back by weakness in Europe, were revenue fell 15%.
Brokers said the results came in ahead of expectations, with Bodycote benefiting from its high-margin businesses and robust cash generation.
Investec downgraded its rating on Bodycote to Add from Buy on its recent outperformance, but hiked its price target on the stock to 825 pence from 735 pence on the back of a sector re-rating.
The broker said targeted investment by the coatings company is pushing strong growth in high-margin businesses without damaging its cash generation.
It said the company's results were ahead of its expectations and reckoned continuing momentum in several market niches looks set to offset any weakness in Bodycote's oil and gas business.
Liberum also said the results were pretty good and slightly ahead of forecasts and noted the contribution of the high-margin specialist technologies business.
The broker says the company's shares have been on a strong run in the lead-up to the results announcement, so some profit-taking may happen on Thursday.
But, it continues to like Bodycote's growth and cash generation story and reiterates its Buy rating and 830 pence price target on the stock.
By Sam Unsted; [email protected]; @SamUAtAlliance
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