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Chief executive John Hubbard and financial director David Landless of Bodycote
Bodycote shares plunge as investor payout is halved
Kevin Feddy17/11/2008
SHARES in Macclesfield-based engineering giant Bodycote plunged 24 per cent today after the company halved a planned 80p-a-share payout to investors following the sale of its testing division.
It also warned that trading in the second half of the year would be modestly below expectations as it grapples with weakening demand from car and truck makers.
The shares dived 24 per cent, or 24.5p, to 93.75p after the announcement, wiping £95m off its market value of £396m.
Bodycote said it would not be in the best interests of shareholders or the company to return all of the £260m indicated when the sale was announced in August.
It blamed unprecedented financial market conditions since the deal and said it would use £130m of the proceeds to reduce its debts to 'negligible' levels.
In a stock market statement, Bodycote said the board believed that returning 40p a share and keeping the remainder would leave the company in a stronger financial position.
Bodycote offloaded its testing division to American private equity firm Clayton, Dubilier and Rice for £417m - the deal was completed last month - to focus on its heat treatment operations.
Today the company said heat treatment revenues had grown 21 per cent between July and yesterday, although operating margins were two per cent lower.
While aerospace, power generation and oil and gas markets remain satisfactory, Bodycote said demand from car and truck makers in Europe has slumped recently and north America remains weak.
It is now restructuring the business in the light of the global downturn, it said, adding that its trading performance next year will depend on the length and depth of the economic crisis.
One shareholder gave a cautious welcome to the payout reduction, saying: "The company going forward is more important than the short-term cash receipt.
"In today's credit markets they are better keeping their money for the protection and future development of the business."
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