The market has applauded full-year results from heat treatment specialist Bodycote (BOY), extending a stock rally since, yet there are signs that 2013 could be a tougher year.
The shares have risen 5.4% at 533p on a solid set of 2012 numbers. The Macclesfield firm saw pre-tax profits jump 18.5% year-on-year to almost £90 million – supported by a particularly strong performance from its aerospace-related business. The firm also hiked its dividend by 12.8% to 12.3p.
Sales growth of £17.1 million included a contribution of £22.4 million from acquisitions. Bodycote bought Curtiss-Wright Corp's heat-treatment business for $52 million in April last year as part of its effort to expand in the US aerospace industry. It also picked up Carolina Commercial Heat Treating in October for $68 million.
The market will have been encouraged by the improvement in the operating margin which rose from 22.8% to 27.4%. and the results also revealed progress on long-term financing, the group secured a fresh syndicated £107 million credit facility with a maturity of 1 March 2018.
Updating the market on current trading, chief executive officer Stephen Harris says: 'This year has started slowly and we are mindful of the near term macroeconomic environment. Nevertheless, at this early stage in the year the board expects modest progress in 2013.'
Picking up on this circumspect tone, FinnCap analyst David Buxton, who has a 'hold' rating on the stock, says: 'With the pointer towards modest growth in the current year we will look to reduce our 2013 forecast, and therefore place our estimates under review.'
Investec Securities, which upgraded the stock to 'buy' and raised its target price 140p to 635p, is more positive: 'We have been viewing 2013 and 2014 with caution and this is echoed by the company’s experience in January, in sectors including US auto. Nevertheless, Bodycote has improved its market penetration, including new customers and high-value processes, and progress in margins presents scope to raise estimates.'