Bodycote begins £60m share buyback programme after strong financial year

Loading a furnace at Bodycote

Full year revenues and profits have jumped at Bodycote, the Macclesfield-based provider of heat treatment and specialist thermal processing services.

Turnover in the year to December 31, 2023, rose from £743.6m in the prior year to £802.5m, while pre-tax profits rose from £95.3m to £111.7m. Free cash flow improved by £38.5m to £122.5m.

The full year dividend has been increased by seven per cent to 22.7p per share.

The business said revenue growth was led by Specialist Technologies, up 12% excluding surcharges.

During the year it achieved a strong performance in aerospace, oil & gas and medical markets. There was a four per cent reduction in absolute energy consumption, notwithstanding eight per cent revenue growth.

Significant margin improvement was also achieved, with the group on track to achieve margins in excess of 20% over the medium term.

Bodycote also returned to historical levels of free cash flow conversion of more than 90%.

And it said a disciplined capital allocation resulted in the £52m acquisition of Lake City in January 2024 and a £60m buyback, commencing today (March 15), which will take place over two tranches.

Chief executive, Stephen Harris, said: “In 2023 we once again delivered strong revenue growth and improved financial performance, as well as making progress against our strategic focus areas.

“We delivered significant headline operating profit margin improvement, notably in the ADE business, helping to drive group margins to 17.3%, excluding surcharge revenue. Headline EPS increased by 13% to 48.4p. Bodycote returned to the strong levels of cash conversion which are more typical for the business, with free cash flow of £123m, up 46%, reflecting improved working capital management.

“We will continue to deliver on our strategic focus areas in 2024, including driving growth in Specialist Technologies, capitalising on the growth opportunities from delivering carbon reductions for our customers, and integrating the newly acquired Lake City business.”

He added: “Despite macroeconomic uncertainty we expect to deliver further progress in 2024. We anticipate a reduction in the level of energy surcharges, reflecting further normalisation of energy prices.

“2024 should see us take another step towards our medium term margin target of more than 20%. The board remains confident in the group’s prospects for continued profitable growth.”

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