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Bodycote puts its cash to work

Bodycote, the acquisitive metal treatment specialists, has made impressive use of the pounds 117m it raised in last November's rights issue. Turnover in the first half was 63 per cent up on last year at pounds 100m, and profit before tax grew by 82 per cent to pounds 23m. It could have been even better, but for exchange rates which reduced profits by almost pounds 2m.

Ongoing businesses contributed pounds 16m, an increase of 30 per cent, but last year's acquisitions made pounds 6m, recording impressive improvements in profits and margins within months of being snapped up.

Margins in most of the group's businesses lie between 20 per cent and 30 per cent thanks to a combination of tight cost control and pounds 120m of capital investment in new technology over the past eight years. The City has been wondering when the company will reach the limits of its growth.

But Bodycote has only just scratched the surface of potential markets according to John Chesworth, chief executive. The company is the biggest of its kind in the world but it has less than 5 per cent of the global market for sub-contracted work and much less of long-term contract work, which accounts for less than 15 per cent of its existing business.

The group is well spread between the UK, US, Scandinavia and western Europe and between the automotive, aerospace and power generating industries. The fact that Bodycote now has more than 100 operating units in 13 countries poses no problems over controlling the beast, Mr Chesworth claims. The company still has pounds 21m worth of cash from last year's rights issue, which could fund a sizeable acquisition.

Several brokers upgraded full-year forecasts yesterday from around pounds 48m to pounds 50m. Williams de Broe is looking for pounds 54.7m pre-tax. Bodycote's share price has doubled in the past year and rose a further 35p to 942.5p yesterday. However, a prospective rating of 20-21 times looks high enough for now.