Bodycote profit hurt by oil & gas downturn but shares rise on stable margins

30th Jul 2015 12:00

(ShareCast News) - Bodycote posted a drop in first half pre-tax profit amid declining revenue, as a result of soft demand in the oil and gas industry and adverse currency moves.For the six months ended 30 June, pre-tax profit came in at £30.6m, a 41.8% decline year-on-year, with revenue down 4% at £299.8m.Operating profit for the period came in at £32.1m, a 40.7% drop from the corresponding period in 2014 but the company's headline operating margin was maintained at 18%.Bodycote said the macro-economic environment in the first half of 2015 was challenging, including a significant downturn in the global oil and gas markets, which sharply reduced demand from this sector in the second quarter.This has had a knock-on effect in a number of the general industrial sectors, in particular the agricultural equipment market, and added to the challenge, it said."However, this environment has provided an opportunity to demonstrate Bodycote's resilience. Revenues decreased by only 1.1% at constant exchange rates," it said. The specialty chemicals company raised its interim dividend per share by 4.3% to 4.8p, while basic headline earnings per share were up 4.5% at 21.1p. Investec said that in view of the company's operational gearing, investors should be reassured by the group's stable margins and active management of costs.It reduced its earnings per share estimates to reflect lower volume assumptions but said Bodycote's robust model should remain strongly cash-generative and reiterated its 'buy' recommendation.RBC Capital Markets, which rates the stock at 'sector perform', also highlighted the stable operating margin, saying it was more resilient than the 17% the bank had factored in.At 1125 BST, shares were up 3.9% at 675.50p.