Excellent 2007 Q1 Performance

BODYCOTE INTERNATIONAL PLC

Trading Update

Bodycote International plc, the specialist thermal processing and testing services company, is pleased to report an excellent performance in the first quarter of 2007.

Highlights

• Revenues (at constant exchange rates) increased by 21.8%
• Organic revenue growth (in local currency) in Testing SBU of 10.2%
• Organic revenue growth (in local currency) in Thermal Processing SBU of 5.9%
• Group Operating Margin up 1 percentage point
• Expansion into emerging markets on track
• Extensive bolt-on acquisition pipeline

Group

At the time of the preliminary results announcement, we reported that sales in 2006, for continuing operations at constant exchange rates, were 19% higher than 2005 at £558.6m and headline operating profit1 was £79.7m compared to £67.8m in 2005, an increase of 18%.

Sales growth for the period to the end of March (at constant exchange rates) was 21.8%, of which 6.8% was organic and 15.0% was from acquisitions. The operating margin in the first quarter was better than in the same period of 2006 by 1 percentage point. Acquisitions completed in 2006 added £48.3m in sales last year and are expected to contribute approximately £100m in 2007.

The execution of the Group’s strategy to significantly expand the Testing business and widen the geographic coverage of Thermal Processing remains firmly on track. Testing now accounts for 26.5% of Group sales.

Cash generation remains strong as a result of continued tight control of capital expenditure, and the ongoing focus on working capital management.

Energy costs continue to be well managed and recovered. Natural gas prices have abated, but electricity costs continue to rise in several regions and are not expected to begin to fall until the latter part of the year.

A number of potential acquisitions are at various stages of evaluation and negotiation, and, as set out in our preliminary results, we expect 2007 acquisition spend to be approximately £60m.

As a result of the impact of exchange rates (primarily the weakness of the US dollar) on currency translation in the first quarter, sales in sterling terms were higher by 15.5% compared with the prior year. If exchange rates remain at the current level, the impact will moderate as the year progresses, with the annual impact on sales and operating profit expected to be c. 3%.

1 excluding impairment of goodwill and equity investments, amortisation of acquired intangibles, major facility closure costs and interest and tax on associates.

Strategic business unit (SBU) overview

Heat Treatment sales in local currency are cumulatively running 13.8% ahead of last year, of which 5.4% is organic, and operating profit is up more than 20%. Turnover has increased in all geographies except the USA, where growth has been temporarily affected by the previously announced closure of two facilities. Aerospace, Power Generation and Oil & Gas demand remains robust in all territories, and automotive sales have strengthened in Continental Europe although North America is flat. Margins and ROCE continue to improve in all markets as we see the benefit of recent facility restructuring and sales increases.

Hot Isostatic Pressing is maintaining its excellent performance, with organic sales growth of 9.9% (in local currency) compared to 2006 and margins maintained, as a result of continued strong demand for aerospace, industrial gas turbine and oil & gas components.

The Testing SBU has maintained its margins and strong ROCE performance, in line with its target, whilst rapidly expanding the business. Sales, at constant exchange rates, cumulatively are 53.1% ahead of 2006. Organic sales growth has improved to 10.2%. The businesses acquired in 2006 are now fully integrated into our network and management continues to focus on winning further outsourcing opportunities.

Outlook

The Board expects all markets in which the Group operates, except for automotive, to remain buoyant. Automotive has improved since the end of 2006 in Europe and especially in France, but North America continues to be muted. The Board remains confident in the prospects for the Group and that it will continue to make further progress in the remainder of the year.

The AGM will be held on 23 May 2007.

For further information, please contact:

Bodycote International plc Tel No: +44 (0)1625 505300
John D. Hubbard, Chief Executive
David Landless, Group Finance Director

Financial Dynamics
Tel No: +44 (0) 20 7831 3113
Jon Simmons
James Ottignon