IMI (IMI) traded largely as expected during what was a "subdued" first half, although growing optimism about the next six months sent the blue-chip engineer's share price up 6 per cent to a record high. However, despite progress on margins at the group's severe service valves division, the valuation looks full.
Organic revenue dropped 3 per cent and underlying operating profit before a £3.6m currency benefit fell slightly. But new products are generating interest and management believes a pick up is under way. Broker Numis Securities agrees. Analysts there expects full-year adjusted pre-tax profit of £378m, giving adjusted EPS of 89p, up from £366m and 84.3p last year.
Clearly, last year's acquisitions helped the severe service business, where profit grew 8 per cent to £49m. But orders were better than expected, too, up 19 per cent during the period, driven by demand from the oil and gas sector, particularly LNG, and a big contract in the Middle East. Shipping more lucrative orders should improve margins again in the months ahead.
Weak demand for commercial vehicles crimped volumes at the fluid power unit, although truck sales should accelerate ahead of new emissions legislation in January, returning the division to growth. A strong start to the year should also guarantee the merchandising business is sold by the year-end.
IMI (IMI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,492p | MARKET VALUE: | £4.72bn | |
| TOUCH: | 1,491-1,493p | 12-MONTH HIGH: | 1,501p | Low: 828p |
| DIVIDEND YIELD: | 2.2% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 211p* | NET DEBT: | 30% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 1.09 | 145 | 32.3 | 11.8 |
| 2013 | 1.09 | 150 | 34.9 | 12.8 |
| % change | - | +4 | +8 | +8 |
Ex-div: 4 Sep Payment: 11 Oct *Includes intangible assets of £490m, or 155p a share | ||||
