Bodycote expects one-off US tax benefit, FY operating profit seen at top end of views

FTSE 250 heat treatment supplier Bodycote said on Monday that it now expects full year 2017 headline operating profit to be towards the upper end of market expectations as it announced that US tax changes should have a positive one-off impact.

Following better-than-expected trading in the final quarter of last year, the group now sees headline operating profit at the top end of market estimates of between £117m and £126m.

Bodycote also said that changes to the US tax system which will see the corporate rate cut to 21% from 35% are expected to give rise to a “significant” non-cash tax credit for the group in the year ended 31 December 2017 as a result of the revaluation of US net deferred tax liabilities.

Subject to final audit and confirmation of final tax computations, the effect of this one-off revaluation is expected to add around 5p to earnings per share for 2017.

Numis, which rates the stock at ‘hold’, has upped its 2017 and 2018 estimates to reflect the stronger trading. It has not included the US tax benefit for 2017, seeing this as a one-off, but has reduced the 2018 rate by 2%, which is the very least impact it would expect.

The brokerage lifted its 2017 pre-tax profit estimate to £123m from £117.5m and its 2018 forecast to £132.5m from £127m.

At 0805 GMT, the shares were up 7.8% to 1,026p.