It's not always enough to simply 'ride out' market difficulties; sometimes a proactive stance is needed to underpin operational performance. IMI (IMI) has booked £46m in exceptional restructuring charges over the past two years as the engineering group tailors its cost base in the face of tight end-markets. Excluding currency effects and acquisitions, group revenue contracted by 5 per cent, hardly a disaster given external factors, but operating profit pulled back sharply on a 200-basis point reduction in the underlying operating margin.
Crude oil pricing has stabilised to an extent, which is favourable given the market represents roughly 13 per cent of group revenue. But capital expenditure budgets don't retrace overnight, so management expects that organic revenue for the first half of 2017 will demonstrate a similar percentage reduction to the first half of the previous year.
The aforementioned oil-linked revenue feeds into the critical engineering division (39 per cent of turnover), which manufactures devices for controlling the flow of steam, gas and liquids. Full-year order intake was 11 per cent down on last year on an adjusted basis, hence a rationalisation programme that has resulted in the planned sale or closure of eight "lower growth, higher cost" sites.
Bank of America Merrill Lynch forecasts adjusted profit of £216m for 2017, giving rise to EPS of 64.1p (from £199m and 59.8p in 2016).
IMI (IMI) | ||||
---|---|---|---|---|
ORD PRICE: | 1,187p | MARKET VALUE: | £3.23bn | |
TOUCH: | 1,186-1,189p | 12-MONTH HIGH: | 1,241p | LOW: 835p |
DIVIDEND YIELD: | 3.3% | PE RATIO: | 25 | |
NET ASSET VALUE: | 200p* | NET DEBT: | 48% |
Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
---|---|---|---|---|
2012 | 1.69 | 230 | 67.9 | 32.5 |
2013 | 1.74 | 249 | 71.0 | 35.3 |
2014 | 1.69 | 246 | 69.2 | 37.6 |
2015 | 1.57 | 163 | 44.7 | 38.4 |
2016 | 1.66 | 165 | 48.3 | 38.7 |
% change | +6 | +2 | +8 | +1 |
Ex-div: 6 Apr Payment: 19 May *Includes intangible assets of £521m, or 192p a share |