Bodycote restructuring begins to pay dividends
ENGINEERING Bodycote has begun to reap the benefits of a two-year, £100m-plus restructuring programme after generating a pre-tax profit of £19.1m in the first six months of the year, compared with a loss of £53.1m in the same period last year.
The results improved partly due to a rise in revenues, which increased by 8.1% to £227.9m. Sales were buoyed largely by a return in demand in its automotive and general industrial division – up 19.6% to £147.9m. The Macclesfield-based company also reported a 100% leap in income from the US market.
Bodycote also said that the two-year restructuring exercise which led to a £55.3m write down in the value of its asset base and cash costs of £47.7m was now largely complete, with no more charges expected during 2010.
As a result, its operating cash flow improved, with the company generating £22.5m of cash (2009: £14.5m). Net debts also reduced slightly to £87.5m.
“These results demonstrate that the work undertaken so far in reshaping the business and improving management effectiveness is delivering the benefits expected,” said chief executive Stephen Harris.
“The overall environment is less harsh than 12 months ago, but the general economic recovery still appears to be at an early stage. In the near term and in the second half in particular, tight operational control remains key.”
For instance, the firm witnessed a further decline in its aerospace, defence and energy business in the first half, with revenues dropping back 5.6% to £98.4m and said macro demand still “well below historic levels”.
However, Mr Harris said that the group had avoided the temptation to take on lower margin commodity or subcontracted work just to satisfy volumes and added that the firm has continued to see a “steady and broad-based improvement in demand”.
“Against this background, the board is confident that execution of the group’s strategy will deliver superior shareholder returns over the medium term,” he said.
