Bodycote (LON:BOY) management used its 2025 full-year results call to emphasize portfolio actions, improving second-half trading momentum, and a greater strategic tilt toward aerospace and other faster-growing markets. CEO Jim Fairbairn and CFO Ben Fidler said end markets were mixed through the year, with notable strength in Aerospace & Defense and continued pressure in industrial, automotive, and parts of energy—particularly oil and gas-related work.
Second-half momentum improved as aerospace accelerated
Fairbairn said revenue momentum improved in the second half, driven primarily by aerospace. Core revenue was flat overall for the year, but increased 3% in the second half. Aerospace & Defense growth “accelerated throughout the year,” rising 14% in the second half, with management citing good growth in aero hot isostatic pressing (HIP) and engine parts.
In energy, management described a significant reduction in available oil and gas work, plus customer-driven project delays, which contributed to roughly a 25% reduction in energy revenues. In contrast, industrial gas turbines (IGT) rose 6%, and executives said they expect “further strong order growth” in 2026.
2025 financial performance: stable revenues, lower margins, strong cash conversion
Fidler reported core revenues declined 0.3% organically in 2025, reflecting lower volumes partly offset by pricing. Core operating profit fell 8.5% to GBP 113 million, and core margin declined 160 basis points to 16.8%, though management noted margins improved in the second half compared to the first.
On a group basis including non-core, revenue was GBP 727 million, down just over 2% organically. Group operating profit was GBP 114.3 million, equating to a 15.7% margin, down 130 basis points. Adjusted EPS fell 8.6% to GBP 0.444, which Fidler attributed to lower operating profit, modestly higher financing costs, and a higher tax rate, partly offset by a lower share count from buybacks.
Cash conversion remained “very healthy” at 78% despite higher capital expenditure. Adjusted operating cash flow was GBP 88.6 million, and free cash flow was GBP 47.5 million. Restructuring spend rose to just over GBP 14 million, reflecting ongoing execution of the group’s “Optimise” program. Year-end net debt was GBP 105 million, with leverage at 0.6x.
The dividend was held at GBP 0.23, which management said extends Bodycote’s “38-year track record” of maintaining or growing the dividend.
Divisional detail: oil and gas weighed on Specialist Technologies; PHT margins pressured
In Specialist Technologies, revenue fell 3.7% to GBP 212 million. Fidler said oil and gas revenues in the division were down 40% due to the end of significant customer project work; excluding oil and gas, underlying Specialist Technologies revenue was up 2%. Aerospace & Defense revenue within Specialist Technologies rose almost 15% for the year, with improved momentum in the second half. Divisional margin was 27.1%, impacted by the decline in “very high gross margin” oil and gas project work.
In Precision Heat Treatment (PHT), organic revenue rose 1.3% to GBP 459 million, supported by growing IGT volumes and accelerating aerospace growth in the second half. However, weak industrial and automotive markets pressured profitability despite cost actions, with PHT margin down 150 basis points to 16%.
Portfolio reshaping and strategy: Optimise, Perform, and Grow
Fairbairn said Bodycote has executed “at pace” on portfolio moves, including selling 10 sites in France, closing a further eight, and completing a “strategic aerospace acquisition on the East Coast of the U.S.” He characterized that acquisition as an early sign of more bolt-on deals to come.
Management highlighted a strategic goal to increase the share of Specialist Technologies from around a quarter to around one-third of the portfolio after Optimise, and to reach 35%-40% by the end of 2028. The company also expects faster-growth markets—Aerospace & Defense, medical, and IGT—to reach 45% post-Optimise and become the majority of the portfolio by 2028.
On Optimise, Fairbairn said overhead reductions are almost complete and the company expects to have exited 85% of 21 targeted sites by the end of 2026. The program delivered around GBP 4 million of cost savings in 2025, and management expects a similar incremental benefit in 2026, with a full run-rate benefit of at least GBP 15 million by mid-2027. Fidler added that most remaining Optimise benefits are expected to be realized within divisions, particularly PHT, through improved “drop-through” when work is transferred from closed plants to other Bodycote sites.
On Perform, management described a multi-year continuous improvement effort aimed at productivity, customer experience, and profitability. Fairbairn said the company is developing four “lighthouse” sites (two in North America and two in Europe) and is “on track” to deliver a 100 basis point margin improvement from Perform by 2028, with more thereafter. He cited a pilot Kaizen event at the Hebron site in Cincinnati that reduced parts travel and lead times, supporting capacity and growth.
Under Grow, Bodycote said it has increased commercial resources and reorganized market-facing business development to reduce internal barriers between divisions. Fairbairn cited prior customer feedback that workflows could result in “two invoices” for a single process flow across divisions, which management said has been addressed. Executives said the aim is to better leverage the network, bundle services, and strengthen differentiation, supporting both growth and pricing.
Capital allocation, buyback, M&A, and 2026 outlook
Bodycote announced a further GBP 80 million share buyback program, expected to complete by the end of 2027. Fidler said the group returned GBP 100 million to shareholders in 2025 through approximately GBP 40 million in dividends and GBP 60 million in buybacks. With leverage at 0.6x and a stated target range of 0.5x to 1.5x, Fidler said the balance sheet provides “more than GBP 200 million of firepower” to support both buybacks and M&A alongside ongoing free cash flow generation.
On acquisitions, Fairbairn highlighted the January acquisition of Spectrum, describing it as a small deal with more than 80% exposure to Aerospace & Defense and access to the Pratt & Whitney supply chain. He also referenced Lake City, acquired before he joined, saying integration has gone “fantastically well.” Management said it is actively working a funnel of “over 50 targets” with a focus on small and medium-sized bolt-ons aligned with its portfolio-quality strategy.
For 2026, management expects a return to core organic revenue growth and margin expansion, led by Aerospace & Defense and IGT, while industrial and automotive are expected to remain challenging. Fidler cautioned that variable pay could create a potential margin headwind of up to 100 basis points as payouts normalize if the company achieves its budget assumptions.
On aerospace growth, management said it is guiding for “high single digit, low double digit” growth in Aerospace & Defense, describing the expected increase as volume-driven. Executives also said the aerospace business is more exposed to OEM build rates, with roughly 60% OE and 40% aftermarket exposure.
About Bodycote (LON:BOY)
The leading provider of heat treatment and specialist thermal processing services worldwide.
Heat treatment encompasses a variety of techniques and specialist engineering processes which improve the properties of metals and alloys and extend the life of components and is a vital part of any manufacturing process.
Bodycote is uniquely placed via our global network and the experience and knowledge of our people to offer high quality, reliable and cost-effective services to manufacturers whatever their size or market sector.
