Bodycote lays out new strategy, maintains expectations

(Sharecast News) - Heat treatment and specialist thermal processing specialist Bodycote unveiled a strategy to drive growth, operational performance and sustainability on Thursday. The FTSE 250 company, which was holding a capital markets event, said it had restructured its operations into two core divisions - specialist technologies, which includes differentiated offerings like hot isostatic pressing (HIP) and surface technologies; and precision heat treatment, focused on optimising global plant operations.

Reporting under the new framework would start in 2025.

Bodycote said it had identified three strategic levers - 'optimise', 'perform', and 'grow' - to enhance efficiency, elevate service quality, and accelerate growth.

The board said the initiatives included streamlining its plant network, implementing a performance improvement programme, and expanding into structural growth markets and faster-growing geographies.

It also highlighted its role in enabling customers to reduce carbon emissions, aligning with broader sustainability goals.

New financial targets included mid-single-digit percentage annual revenue growth, increasing specialist Technologies' share of revenue to between 35% and 40% by 2028, and achieving operating margins above 20% by the same year.

Bodycote said it was also aiming for operating cash conversion of 80% to 90% and a return on capital employed of 15% to 20% through the cycle.

The company also announced a £30m extension to its existing £60m share buyback programme.

Net debt stood at £70m as of 31 October, equating to a leverage ratio of about 0.45x net debt-to-EBITDA.

The company said sustainability remained central to its strategy, noting that it had committed to reducing absolute scope one and two greenhouse gas emissions by 46% by 2030 compared to 2019 levels, aligning with science-based targets.

It also aimed to increase revenue from sustainable end-use markets to 20% by 2035, up from 7% in 2023.

Optimisation efforts were expected to deliver an annual operating profit uplift of £12m to £14m by the end of 2026, though they would incur exceptional costs of about £60m.

Despite the one-off expenses, Bodycote reaffirmed its confidence in achieving its long-term objectives.

The board said current trading remained consistent with the company's November update, with full-year expectations unchanged.

"Today we are presenting a clear vision to create an optimised, efficient and high-performance Bodycote, which will deliver sustainably stronger growth with improved profitability and resilience through the cycle," said chief executive officer Jim Fairbairn.

"We are establishing a set of compelling and achievable financial targets.

"We are confident in our ability to achieve these ambitions and have a clear plan to deliver on our targets."

Fairbairn said that would benefit both shareholders as well as Bodycote's people, customers and partners.

"We are building a company that can fully realise its potential, and ensure that Bodycote's excellence endures long into the future."

At 0900 GMT, shares in Bodycote were up 0.15% at 665p.

Reporting by Josh White for Sharecast.com.