SoFi CEO enters prepaid forward contract on 1.5 million shares
Investing.com -- Bodycote ’s (LON:BOY) full-year results for 2024 on Friday posted a decline in total revenue, falling 5.7% year-on-year to £757.1 million from £802.5 million in 2023.
The drop was primarily due to lower industrial demand, weaker automotive markets, and a sharp reduction in energy surcharges.
Despite the revenue decline, the company maintained profitability through strict cost control measures and the continued strong performance of its Specialist Technologies division.
Statutory operating profit saw a significant decline of 68.2% to £37.9 million, compared to £119.2 million in 2023, largely due to one-off charges related to restructuring and impairments.
Adjusted operating profit, however, edged up 1.1% to £129.0 million, reflecting Bodycote’s ability to manage costs effectively.
Jefferies analysts noted that while overall group sales were down 4% in organic constant currency terms, excluding surcharges, the company’s core business delivered stable revenue growth of 1% year-on-year.
They said that the company’s profit margins improved by 110 basis points to 17%, and that the year-end debt position was better than expected, at £68.3 million instead of the estimated £95.8 million.
Specialist Technologies continued to be a bright spot for Bodycote, with revenue increasing 5.6% on an organic basis to £224.2 million.
The division saw a 12.8% increase in adjusted operating profit to £65.0 million, driven by strong demand in Aerospace & Defence and the Energy sector, alongside operational improvements in the HIP (Hot Isostatic Pressing) business. As a result, operating margins for the segment rose by 300 basis points to 29.0%.
Precision Heat Treatment, however, faced a more difficult year, with revenue declining by 8.7% to £488.3 million. This was due to soft demand in both North America and Europe, particularly in the industrial and automotive markets.
Despite the challenging environment, the division managed to keep its operating margins relatively stable at 17%, down just 60 basis points year-on-year.
The company’s ability to control costs and optimize capacity played a key role in limiting the margin decline.
Non-Core businesses saw the most pronounced decline, with revenue dropping 19.2% to £44.6 million. The segment continues to be de-emphasized as part of Bodycote’s restructuring plan, with Jefferies analysts noting that the company is moving towards fully exiting this portion of the business.
Operating cash flow was £115.5 million, up slightly from £112.2 million in 2023, with a strong 90% cash conversion rate.
However, free cash flow dropped to £70.6 million from £95.2 million, largely due to higher tax payments, which surged from £9.0 million to £32.1 million.
Jefferies analysts attributed this to the absence of prior-year tax refunds that had temporarily boosted 2023 results.
The company returned approximately £100 million to shareholders through a combination of £40 million in dividends and £60 million in share buybacks, with an additional £30 million buyback currently underway.
The acquisition of Lake City Heat Treating for £54.9 million also contributed to a shift from a net cash position of £12.6 million in 2023 to a net debt position of £68.3 million in 2024.
Bodycote made strides in its strategic plan, "Optimise," "Perform," and "Grow." Site closures under Optimise are underway, targeting £12-14 million in annual profit by 2026.
The HEAT operational efficiency program, under Perform, is in pilot testing. Grow focused on investing in high-margin Specialist Technologies and selective capacity expansion.
Bodycote expects continued industrial and automotive market challenges, but growth in Aerospace & Defence. Jefferies analysts forecast downward 2025 earnings revisions, predicting flat first-half profits with potential restructuring benefits in the second half.