Last close As at 21/08/2026
GBP9.09
▲ −1.50 (−0.16%)
Market capitalisation
GBP1,547m
Research: Industrials
Bodycote reconfirmed full-year guidance alongside H126 results that met expectations. Core organic revenue rose 9.6%, led by a 24.6% surge in Aerospace & Defence (A&D), while the Optimise programme and a leaner cost base lifted group adjusted operating margins by 110bp to 16.0%. We believe reported margins understate underlying momentum, held back by transitory cost headwinds detailed below. With A&D visibility extending into 2027 and a potential expansion of the restructuring programme under review, we see a clear path to sustained margin expansion.
Bodycote’s two core divisions illustrate the mix shift: higher-margin Specialist Technologies earns almost as much adjusted operating profit as the larger Precision Heat Treatment (£31.6m vs £37.6m) on half the revenue (£121m vs £251m). A&D, now the group’s growth engine, grew 24.6% organically at the core level and 37% within Specialist Technologies, where it accounts for c 50% of divisional revenue. Strong original-equipment and aftermarket demand together with renewed long-term US Tier 1 agreements supported growth. Core organic revenue growth by end market recovered to 9.6% (H225: 3.2%) with industrial gas turbines up 11% (linked to data centres), Medical returning to good growth and healthy semiconductor demand, while Automotive saw a 4% decline. Core adjusted operating margins (+30bp to 16.2%) were held back by c 100bp from variable-pay rebasing and new-site ramp-up costs. We see 2026 as an investment year, with ramp-up costs easing through 2027–28, although the variable-pay reset is permanent.
The Optimise programme (exiting or consolidating weak, low-margin sites) remains on track, with 27 of 31 planned site exits complete and at least £15m run-rate-profit benefit targeted by mid-2027, versus the 2024 baseline. With the Perform initiative (lifting margins at retained sites, targeting ~100bp by 2028) this provides a margin bridge largely within management’s control. Net debt excluding lease liabilities of £135.2m supports a 4.3% dividend increase, the £80m buyback and bolt-on M&A.
Bodycote’s continued pivot towards higher growth end markets (48% of FY25 sales, 35% of FY23) is expected to drive profits through improved mix plus self-help initiatives. The shares trade on FY26e P/E of 14.1x (below their c 15x historical average) and c 7.0x EV/EBITDA. This is a discount to the peer-group averages of c 16.7x and c 10.4x respectively. Delivery on the H2 margin bridge and clarity on the Optimise expansion are the key near-term catalysts.
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Consensus estimates |
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|---|---|---|---|---|---|---|---|---|
| Year end | Revenue (£m) | EBITDA (£m) | PBT (£m) | EPS (£) | DPS (£) | P/E (x) | Yield (%) | EV/EBITDA (x) |
| 12/25 | 727.1 | 184.7 | 105.2 | 0.44 | 0.23 | 15.5 | 3.3 | 7.4 |
| 12/26e | 716.8 | 195.7 | 111.5 | 0.49 | 0.24 | 14.1 | 3.5 | 7.0 |
| 12/27e | 731.8 | 210.3 | 123.4 | 0.55 | 0.25 | 12.6 | 3.6 | 6.5 |
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United Kingdom
Research: Industrials
Severfield has made a positive start to 2027 despite an unchanged market backdrop with FY27 guidance for underlying PBT of £12–15m unchanged from the FY26 results on 23 June 2026. Order books have increased across all three geographies (UK and Europe, and India) providing improved revenue visibility. Recent orders include an increasing proportion of higher margin work in growth end markets such as data centres. We believe this update indicates that management are ticking all the boxes next to their strategic ambitions, which should continue to support the shares.