Bodycote International yesterday reported hot underlying first half pretax profits up by nearly a third.
And the heat treatment and testing company said it was "optimistic" the remainder of the year would continue the first half trends.
The group, which has extensive Midlands interests, said it plans more bolt-on acquisitions in the second half of the year.
Headquartered at Macclesfield, its Bodycote Heat Treatment arm has outlets at Aldridge, Great Barr, Coventry, Cheltenham, Derby, Walsall and Willenhall.
Its various laboratories, testing, corrosion and associated operations has bases at Hereford, Nuneaton, Burtonon-Trent, Droitwich, Dudley and Wolverhampton.
Pretax profit before exceptionals for the six months to June rose to £29.2 million from £22.3 million a year earlier, beating market forecasts of £27.3 million.
Sales from continuing operations rose eight per cent to £229 million. The first half dividend was raised to 2.35 pence per share from 2.25. Bodycote said a clear focus on costs and return on capital employed had positioned it to reap the benefit of an improvement in demand in the aerospace, power generation, oil & gas and health sciences sectors, along with further outsourcing contract wins.
The group, whose customers include Rolls-Royce, General Electric, Caterpillar and major car manufacturers, said sales in its core heat treatment business rose to £165.2 million from £154.8 million previously while operating profits lifted to £21.1 million from £19.7 million. It said the strongest growth for the division came from northern Europe, with the UK up 11 per cent and the Nordic region increasing ten per cent, which it said reflected improvements in aerospace and power generation as well as general engineering and heavy truck manufacturing.
UK margins came under pressure mainly due to high energy costs which are expected to be fully recovered in the second half.
Chief executive John Hubbard said the significant increase in energy costs had been difficult to absorb.
Nevertheless he had a "high degree of confidence" Bodycote would hit the annual pretax profit of £56.9 million forecast by analysts.
"Whether you look at commercial aviation, power generation or oil and gas, those all have very rosy forecasts going forward," Mr Hubbard said.
He added that long-term outsourcing agreements now represented 20 per cent of group revenues.
Bodycote said that despite concerns about the impact of troubles at some automotive manufacturers in the United States, North American heat treatment sales were seven per cent up at constant exchange rates overall, with improving aerospace and oil and gas demand easily offsetting any softness in the sector.
Sales in another key division, materials testing, lifted to £37 million against £30.5 millionand operating profit rose to £6.5 million from £5.3 million.
Shares closed up 5.75 at 206p.