Engineer IMI's (IMI) half-year results were more about strategy than numbers. The top line suffered from the usual currency headwinds, but even without them growth would have been underwhelming, at 3 per cent. Margins are also sagging, which reduced constant-currency operating profit by 1 per cent.
But IMI’s shares rose 2 per cent on the day of the announcement as investors latched on to the strategic review unveiled by new chief executive Mark Selway. Having joined IMI from Weir Group (WEIR) at the start of the year, Mr Selway has benchmarked IMI against rivals across its various industries, and concluded with an ambitious vision to double operating profit by 2019.
Over the five years covered in the plan, Mr Selway's goal is for average organic growth rates of 5 to 8 per cent, depending on the division. This will be supplemented with bolt-on acquisitions to expand IMI’s product range. He also wants to rationalise the organisational structure and address "significant underutilised capacity" that has caused margins to be eroded by increasing fixed costs. At the same time he wants to up spending on research and development from 3 per cent of revenues last year to 4-5 per cent.
The immediate outlook is more pedestrian. At constant currencies, organic growth should improve in the second half, but margins will continue to slide, says Mr Selway. Broker Investec expects full-year pre-tax profit of £300m and EPS of 81.5p (from £378m and 89p in 2013).
| IMI (IMI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,429p | MARKET VALUE: | £3.9bn | |
| TOUCH: | 1429 - 1431p | 12-MONTH HIGH: | 1,613p | LOW: 1363p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 157p* | NET DEBT: | 49% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 832 | 117 | 28.0 | 12.8 |
| 2014 | 808 | 106 | 29.7 | 13.6 |
| % change | -3 | -10 | +6 | +6 |
Ex-div: 13 Aug Payment: 19 Sep *Includes intangible assets of £397m, or 146p a share | ||||
