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UPDATE 2-UK engineer Bodycote's profit rises on buoyant demand
July 31, 2014 / 6:51 AM / 3 years ago

UPDATE 2-UK engineer Bodycote's profit rises on buoyant demand

* H1 pretax profit 52.6 mln stg Vs 48.5 mln stg

* Group revenue falls to 312.3 mln stg from 316.5 mln stg

* Headline operating margin rises 140 basis points

* Sees headline oper profit to be down by about 5 mln pounds - CFO (Adds share movement, CEO, CFO and analyst comments)

By Aashika Jain

July 31 (Reuters) - Bodycote Plc, a provider of thermal processing services, said first-half pretax profit rose 8.5 percent, driven by demand at its largest unit that caters to the automotive and general industrial sector.

Bodycote, which has four greenfield projects in emerging markets, including one in China, said it was looking at expanding in eastern Europe, China and Brazil.

“Lot of people are unenamoured by China right now, but we are in it. We are investing for the long term, and we see it as one of the largest, if not the largest, domestic markets in the future,” Chief Executive Stephen Harris told Reuters.

The company, which provides services to improve the properties of metals via heat treatment, metal joining and hot isostatic pressing, said pretax profit rose to 52.6 million pounds ($88.9 million) for the six months ended June 30 from 48.5 million pounds a year earlier.

Group revenue slipped 1.3 percent to 312.3 million pounds on a reported basis, hurt by a strong pound. Revenue increased 4.6 percent at constant exchange rates.

“Bodycote H1 results show an acceleration in organic growth in Q2 ... This reinforces our view that Bodycote has strong EPS upside potential and it remains a top pick for us in the UK Engineers,” UBS analysts said in a note.

The company said headline operating margin jumped 140 basis points to 18.0 percent in the period, helped by its performance in emerging markets.

The company, however, warned that a stronger pound would have a bigger impact on its organic growth and margin improvement in the second half.

“We anticipate headline operating profit with exchange rates where they are as of today, if they maintain that level for the remainder of the year, will be negative by about 5 million pounds,” Group Finance Director David Landless told Reuters.

Bodycote, which operates in 26 countries and derives 90 percent of its revenue from outside the UK, took a 3 million pound hit due to the strengthening pound in the first half.

The pound has risen 12.4 percent against the dollar in the year to June 30.

The FTSE-250 company, which has 28 facilities in eastern Europe, China, Brazil, India, Singapore and Dubai, raised its interim dividend to 4.6 pence per share from 4.4 pence last year.

Shares in the company, whose services are used in commercial jets, military helicopters and space systems, rose as much as 4.1 percent in early trading. They pared the early gains and were unchanged at 693 pence at 0920 GMT. ($1 = 0.5918 British Pounds) (Reporting by Aashika Jain in Bangalore, additional reporting by Roshni Menon; Editing by Gopakumar Warrier)

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