Bodycote raises £64m for bolt on acquisitions

Bodycote International yesterday announced plans to raise £64m by issuing new shares, to hasten the recovery of the metal-coatings maker after it was hit by the global slump in manufacturing.

Bodycote International yesterday announced plans to raise £64m by issuing new shares, to hasten the recovery of the metal-coatings maker after it was hit by the global slump in manufacturing.

The company said it would use the money to finance bolt-on acquisitions in its materials testing arm, which investigates how metals and other substances behave under conditions such as extreme heat.

The British company, which coats, welds and tests metals for aerospace and car manufacturers and power generators, posted a 16 per cent fall in underlying pre-tax profit to £32m in the year to the end of December, in line with forecasts. It made a net loss of £17.4m.

The one-for-four rights issue at 100p each is being fully underwritten by Dresdner Bank.

David Landless, the finance director of Bodycote, said: "We will not use the rights issue money to splurge on a big acquisition, but to fund bolt-on deals in the next two years. We are interested in adding plants in areas where our customers want us to be, such as Eastern Europe."

Bodycote has been on a drive to reinvigorate itself in the past two years under its chief executive, John Hubbard. The company has merged 30 plants and cut the workforce by 1,000 in two years to weather a slump in demand. It is also trying to reduce costs in its struggling wet coating business.

Despite reporting difficult trading conditions, Bodycote's sales rose 2 per cent to £448.4m. It proposed to maintain its full-year dividend at 6.1p a share.

"With the operating improvements that have already been implemented and the actions we are taking on wet coatings, we are confident in the financial and trading prospects for the group in the current year," Mr Hubbard said.

He said he had a "high degree of confidence" that its 2004 underlying pre-tax profit would be in the range of analyst forecasts of £36.5m to £43m. He added that the company's markets, with the exception of France because of its sluggish automotive sector, had passed the bottom of the cycle and were slowly growing again.