Investment: Bodycote can take the heat

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Investment: Bodycote can take the heat

IS THERE life after Joe Dwek? The chairman of Bodycote yesterday announced his retirement after 26 years during which, through a string of acquisitions, he transformed the heat processing group from a small regional player into a truly international company.

The benefits of the strategy were on display yesterday as Bodycote unveiled half-year figures. In the six months to 30 June profits from ongoing businesses rose by 26 per cent to pounds 28m, while last year's acquisitions brought in a similar increase. Add in a lower interest bill and profits before tax were up by 61 per cent to pounds 38.1m.

HIT, the French business bought in January for pounds 60m, increased its profits by 40 per cent. Thermal Processing, bought a month later, is already contributing to growth.

But the real secret is in Bodycote's 161 plants serving 17 countries and trading in 17 currencies, and in its six different divisions from heat treatment and brazing to materials testing and metallurgical coatings. Only 24 per cent of profit is generated in the UK, which allows Mr Dwek to be relatively relaxed about a hard landing in the UK economy.

Capital expenditure is expected to grow by 50 per cent to pounds 70m in the current year, of which almost half has already been spent. Almost all of the pounds 99m raised by the rights issue in January has been committed, but the company is currently ungeared and, says managing director John Chesworth, several more small acquisitions are likely this year, especially in North America.

Investors shrugged off the news of Mr Dwek's departure, pushing the shares up 50p to 985p as analysts upgraded profit forecasts to pounds 77m for the full year and pounds 90m for 1999. The shares, which are still 25 per cent below their recent peak, now trade on a forward earnings multiple of 16. Given Bodycote's track record, the shares are good value.