Bodycote profit soars, ups divi -UPDATE

23rd Feb 2012 09:52

Metals and alloys treatment firm Bodycote said profit surged 68% after strong demand at its aerospace and defence unit and robust sales overseas. The group said despite economic headwinds, particularly in Europe, the business would continue to make progress in the coming year. In a separate announcement Bodycote said it has signed a five-year contract with ZF Lenksysteme, a joint venture between Robert Bosch GmbH and ZF Friedrichshafen to provide heat treatment services in China for heavy truck steering components. Bodycote yesterday announced a £12.75m investment programme in north America as it beefs up business in the aerospace, defence and energy markets. It is also driving growth at its Hot Isostatic Pressing (HIP) division. Revenues at the unit grew by over 60%. Pre-tax profit from continuing operations rose to £75.8m for the year ended 31 December 2011 from £45.2m previously. Revenue from continuing operations increased to £570.7m from £499.8m the year before. Headline operating margin rose to 15% from 10.4% last year and it intends on improving this further. Commenting on the group's progress chief executive Stephen Harris said the group's strategy is aimed at growing the business above and beyond the background growth rate of the global economy. "The pace of execution of this strategy is gaining momentum and we enter 2012 in good shape." He added, "The macroeconomic environment may continue to be challenging, but with nearly half of the group's activity in areas which have long term growth drivers that are less likely to be impacted by economic headwinds." A dividend of 10.9p has been recommended, up from 8.7p the year before. Commenting on the results after their release analysts at Credit Suisse are saying that, "we continue to see a solid investment case in Bodycote as we believe the market is overly pessimistic on the margin outlook for the company."(...)Valuation attractive: Bodycote is trading at a greater than 25% discount to the UK Capital Goods sector on estimated 2012 P/E (price/earnings) of 9.8x and EV/EBIT (enterprise Value/earnings before interest and taxes) of 6.7x. Our reverse-DCF (discounted cash-flow) analysis and estimated 2012E EV/Sales (enterprise value/sales) multiple of 1x suggest the market is currently discounting a through cycle margin of only 10-12% while we expect 14%."