Bodycote incurs annual loss but maintains its dividend record

Stephen Harris

Macclesfield-based Bodycote reported reduced revenues for the year to December 31, 2020, today and a pre-tax loss, but said it is sticking with its record of more than 30 years in growing or maintaining the dividend.

Revenues of £598m were a 16.6% fall on the previous year’s £719.7m figure, and a pre-tax profit of £123.9m in 2019 became a £1.5m loss this time around.

Bodycote, a provider of heat treatment and specialist thermal processing services, incurred an exceptional charge for the year of £58.4m, including £35.7m of restructuring cash costs, most of which will be paid during 2021.

The group also completed an assessment of its software during the year which has resulted in an impairment of £6.2m.

However, the board is proposing a final dividend of 13.4p, which brings the total ordinary dividend for 2020 to 19.4p.

It said this reflects the board’s confidence in the group’s future earnings and cash flow potential.

Bodycote, which operates more than 165 facilities around the world, has been impacted by the coronavirus pandemic. In a trading update last November it revealed it would have to axe 100 jobs, with more to follow this year.

This followed a first half restructuring due to the impact of the coronavirus which resulted in a reduction of 951 jobs, mainly in its AGI division, taking Bodycote’s overall headcount, then, to 4,813.

However, chief executive, Stephen Harris, said today the group has weathered the adversity of 2020, and paid tribute to its workforce.

“This year has been hugely challenging for our people. Not only have they been confronted with the impact on their personal lives from the COVID-19 pandemic and all its consequences, but they have also had to deal with significant changes in the working environment and organisation. I am immensely proud of the fortitude and resilience shown by our employees as they continued to deliver first-class service to our customers under the most trying of conditions.”

He said during the year the group took advantage of a number of ‘megatrends’ which led to expansion in Eastern Europe to support the electric vehicle supply chains that are establishing themselves there.

“The change in focus of our civil aerospace business addresses the structural shift within the industry towards point-to-point air travel and narrow body aircraft. Additionally, the repurposing of some of our North American facilities aligns our business with the diminishing importance of fossil fuels.”

He added: “The restructuring programme we have been executing in 2020 represents an acceleration of our strategy and is exactly aligned with these secular trends.”

Looking ahead, he said: “Markets are recovering, though the uncertain timeline for recovery in the civil aerospace market clouds the short-term outlook for this part of the business.

“Nonetheless, our restructuring programme is now largely complete, resulting in a higher quality business aligned to the growth opportunities we are seeing.

“The board is confident that Bodycote is well placed to drive growth and take advantage of the upturn in activity across all of its markets as they strengthen.”