Bodycote (BOY) H2 2025 earnings summary

Executive summary

• Delivered stable core revenues in 2025, down 0.3% organically, with stronger momentum in the second half, especially in Aerospace & Defense, which grew 14% in H2.

• Achieved return to organic revenue growth in H2 FY25 despite mixed end market conditions, with strong execution of the Optimise, Perform & Grow strategy and improved portfolio quality through non-core closures and disposals.

• Aerospace & Defence growth accelerated, now comprising 34% of core revenues, while Automotive & Industrial markets remained challenging and Oil & Gas demand slowed.

• Completed significant portfolio actions: sold 10 sites in France, closed 8 more, and made a strategic aerospace acquisition in the U.S.

• Announced a new GBP 80 million share buyback to be completed by end of 2027 and continued to build the M&A pipeline.

Financial highlights

• Core revenue declined 0.3% year-over-year; H2 core revenue up 3.2% year-over-year.

• Core operating profit fell 8.5% to GBP 113 million; core margin down 160 bps to 16.8%.

• Adjusted EPS down 8.6% to GBP 0.444, impacted by lower profit and higher tax, partially offset by share buybacks.

• Cash conversion remained strong at 78% despite higher CapEx; free cash flow at GBP 47.5 million.

• Leverage at 0.6x, near the lower end of target range, with GBP 100 million returned to shareholders (GBP 40 million dividends, GBP 60 million buybacks).

Outlook and guidance

• Expect return to core organic revenue growth and margin expansion in 2026, led by Aerospace & Defense and industrial gas turbines.

• Automotive and Industrial Markets to remain challenging; oil and gas headwinds to diminish.

• Variable pay could create up to a 100 bps margin headwind in 2026 as it normalizes.

• CapEx to remain elevated, with 60% for maintenance and 40% for growth; guidance for FY26 is £80–90m.

• Remain confident in delivering medium-term financial targets despite elevated geopolitical uncertainty.