23rd Apr 2007 07:02
Bodycote International PLC23 April 2007 23 April 2007 BODYCOTE INTERNATIONAL PLC TRADING UPDATE Bodycote International plc, the specialist thermal processing and testingservices company, is pleased to report an excellent performance in the firstquarter of 2007. HIGHLIGHTS • Revenues (at constant exchange rates) increased by 21.8% • Organic revenue growth (in local currency) in Testing SBU of 10.2% • Organic revenue growth (in local currency) in Thermal Processing SBU of 5.9% • Group Operating Margin up 1 percentage point • Expansion into emerging markets on track • Extensive bolt-on acquisition pipeline GROUP At the time of the preliminary results announcement, we reported that sales in2006, for continuing operations at constant exchange rates, were 19% higher than2005 at £558.6m and headline operating profit(1) was £79.7m compared to £67.8m in 2005, an increase of 18%. Sales growth for the period to the end of March (at constant exchange rates) was21.8%, of which 6.8% was organic and 15.0% was from acquisitions. The operatingmargin in the first quarter was better than in the same period of 2006 by 1percentage point. Acquisitions completed in 2006 added £48.3m in sales lastyear and are expected to contribute approximately £100m in 2007. The execution of the Group's strategy to significantly expand the Testingbusiness and widen the geographic coverage of Thermal Processing remains firmlyon track. Testing now accounts for 26.5% of Group sales. Cash generation remains strong as a result of continued tight control of capitalexpenditure, and the ongoing focus on working capital management. Energy costs continue to be well managed and recovered. Natural gas prices haveabated, but electricity costs continue to rise in several regions and are notexpected to begin to fall until the latter part of the year. A number of potential acquisitions are at various stages of evaluation andnegotiation, and, as set out in our preliminary results, we expect 2007acquisition spend to be approximately £60m. As a result of the impact of exchange rates (primarily the weakness of the USdollar) on currency translation in the first quarter, sales in sterling termswere higher by 15.5% compared with the prior year. If exchange rates remain atthe current level, the impact will moderate as the year progresses, with theannual impact on sales and operating profit expected to be c. 3%. (1) excluding impairment of goodwill and equity investments, amortisation ofacquired intangibles, major facility closure costs and interest and tax onassociates. STRATEGIC BUSINESS UNIT (SBU) OVERVIEW Heat Treatment sales in local currency are cumulatively running 13.8% ahead oflast year, of which 5.4% is organic, and operating profit is up more than 20%.Turnover has increased in all geographies except the USA, where growth has beentemporarily affected by the previously announced closure of two facilities.Aerospace, Power Generation and Oil & Gas demand remains robust in allterritories, and automotive sales have strengthened in Continental Europealthough North America is flat. Margins and ROCE continue to improve in allmarkets as we see the benefit of recent facility restructuring and salesincreases. Hot Isostatic Pressing is maintaining its excellent performance, with organicsales growth of 9.9% (in local currency) compared to 2006 and marginsmaintained, as a result of continued strong demand for aerospace, industrial gasturbine and oil & gas components. The Testing SBU has maintained its margins and strong ROCE performance, in linewith its target, whilst rapidly expanding the business. Sales, at constantexchange rates, cumulatively are 53.1% ahead of 2006. Organic sales growth hasimproved to 10.2%. The businesses acquired in 2006 are now fully integrated intoour network and management continues to focus on winning further outsourcingopportunities. OUTLOOK The Board expects all markets in which the Group operates, except forautomotive, to remain buoyant. Automotive has improved since the end of 2006 inEurope and especially in France, but North America continues to be muted. TheBoard remains confident in the prospects for the Group and that it will continueto make further progress in the remainder of the year. The AGM will be held on 23 May 2007. For further information, please contact: Bodycote International plc Tel No: +44 (0)1625 505300John D. Hubbard, Chief ExecutiveDavid Landless, Group Finance DirectorFinancial Dynamics Tel No: +44 (0) 20 7831 3113Jon SimmonsJames Ottignon This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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