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Half way through a three-year restructuring programme, engineering group IMI is starting to see the benefits, with profit margins improving as it shifts production to lower cost economies such as Mexico, China and the Czech Republic. IMI forked out £10.9m in restructuring costs in the first half, as part of the £60m programme.
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Severe Service, which supplies valves to the petrochemical and nuclear industries, was the best performer, growing operating profit by 60 per cent to £26.1m as energy markets remained buoyant. Restructuring of the group's fluid power business helped mitigate the effects of the US truck market, where new emissions legislation has put the brakes on demand this year. Chief executive Martin Lamb says this trend is expected to reverse in 2008 and 2009.
Mr Lamb says it is too early to say whether IMI will be fined over irregular payments associated with certain trading contracts entered into by Severe Service, although the cost of an investigation into the breaches will reach about £5m in the second half of the year.
Numis Securities expects full-year EPS of 42p (38.3p in 2006), rising to 46.5p in 2008.
IMI (IMI) |
||||
|---|---|---|---|---|
| ORD PRICE: | 571p | MARKET VALUE: | £1,890m | |
| TOUCH: | 570-572p | 12-MONTH HIGH: | 637p | LOW: 484p |
| DIVIDEND YIELD: | 3.4% | PE RATIO: | 26 | |
| NET ASSET VALUE: | 134p* | NET DEBT: | 43% | |
| Half-year to 30 Jun |
Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2006 | 732 | 75.3 | 14.5 | 7.0 |
| 2007 | 781 | 76.8 | 15.4 | 7.5 |
| % change | +7 | +2 | +6 | +7 |
Ex-div:12 Sep Payment:19 Oct *Includes intangible assets of £318m, or 96p a share |
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Click here for a guide to the terms used in IC tables
The restructuring programme is well on track and growth prospects in emerging markets, in particular, are strong. On a prospective earnings multiple of 12 for next year, IMI's shares rate good value.
Last IC view: Good value, 538p,
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-IC-1.6.1b-prod - 17/12/2008 12:46:12 - jonathan.furseftb
