Bodycote reported a strong set of first-half results for 2026, driven by a surge in aerospace and defense revenue. Adjusted earnings per share rose 18.3% to 25.2 pence, while core organic revenue grew 9.6%, the company said in its interim statement.
Growth in adjusted earnings per share, driven by aerospace and defense gains.
Aerospace and Defense Lead Growth
Aerospace and defense revenue jumped nearly 25% across the group, with the Specialist Technologies division seeing a 37% increase in that sector, now representing 50% of divisional revenue. Chief Financial Officer Ben Fidler attributed the growth to volume-led activity, with pricing at low-to-mid-single-digit levels, and highlighted strong demand from General Electric (GE), including more than 50% growth in LEAP and GEnx blade volumes.
Energy revenue increased 4.7%, with IGT revenue up more than 10%, while oil and gas revenue in Specialist Technologies fell 15%. Medical, consumer and other revenue grew 14.8%, and medical revenue in Specialist Technologies rose 15%. Semiconductor-related revenue grew about 25% in the first half, though it remains a small part of the business at around 2% of group revenue, Fidler noted.
Margins Expand Despite Headwinds
Core operating profit increased 11% organically to £60.4 million, with the core margin rising 30 basis points to 16.2%. Group operating profit came in at £61 million, with the group margin up 110 basis points to 16%. Group revenue rose 6.5% organically to £381.2 million. The core margin faced two headwinds of approximately 100 basis points each from normalized variable pay and ramp-up costs.
Optimise Restructuring Progress
Bodycote's Optimise restructuring program delivered roughly £2 million of additional first-half profit improvement, with 29 of 31 planned site actions expected to be completed by year-end. The company reiterated its target of at least £15 million in annualized benefits by mid-2027. Net cash costs are expected to be £10 million to £15 million following the sale of French sites.
Management is evaluating a further phase of Optimise, likely focused on structurally challenged automotive operations. CEO Jim Fairbairn said the next stage would be more difficult, as "low-hanging fruit" had already been addressed. CFO Ben Fidler added that any additional program could have a cash-cost-to-benefit ratio closer to two to three times, compared with the initial program.
Cash Flow and Balance Sheet
Operating cash flow increased to £41.6 million from a year earlier, with cash conversion stable at 68%. Free cash flow was £14.5 million, down about £3.5 million. Net debt ended the period at £135.2 million, representing leverage of 0.7 times. Capital expenditure reached £33.5 million, with nearly £28 million spent on dividends and nearly £18 million on share repurchases. The company also completed the £5.5 million acquisition of Spectrum Thermal Processing.
Outlook
CEO Jim Fairbairn said the company remains "on track and on plan" and reaffirmed full-year expectations. He expressed confidence in medium-term financial targets. The company expects full-year core organic revenue growth to be led by aerospace and defense, IGT, and medical, with group operating margin improvement anticipated. Full-year capital expenditure is now expected at or toward the lower end of previous guidance of £80 million to £90 million. Finance costs are seen at about £10 million, with the tax rate expected to remain near the first-half level of 23.5%.