Investors were hoping for better things from IMI (IMI) during the second half of 2017. Markets, somewhat optimistically, had priced in the effects of rising oil prices and anticipated restructuring benefits that would accrue through the latter months of the year. But, ultimately, news of a middling performance sent the shares down 9 per cent on results day.
An impressive showing from the precision engineering unit, driven by rising demand for industrial automation and commercial vehicle-related products, was offset by weak trading conditions in IMI’s two other divisions. The upshot, after stripping out gains from favourable currency movements and business disposals, was flat underlying revenues and operating profit for the year.
Management claims that “great progress” has been made tailoring critical engineering’s cost base in the face of challenging energy markets. Investors expected the recent oil price recovery to immediately spur demand for the group’s flow control situations. Instead, they were told that the industry is still hesitant to commit to new investment projects. IMI believes organic revenues in both critical engineering and the rest of the business will rise in 2018. Management also stressed once again that the benefits of new products and efforts to improve operational performance will become “increasingly evident” as markets continue to recover.
Numis forecasts adjusted pre-tax profit of £243m for 2018, giving EPS of 69.2p (from £224m and 65.3p in 2017).
| IMI (IMI) | ||||
| ORD PRICE: | 1,141p | MARKET VALUE: | £ 3.10bn | |
| TOUCH: | 1,140-1,141p | 12-MONTH HIGH: | 1,453p | LOW: 1,107p |
| DIVIDEND YIELD: | 3.5% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 223p* | NET DEBT: | 44% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 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 |
| 2017 | 1.75 | 181 | 53.6 | 39.4 |
| % change | +6 | +9 | +11 | +2 |
| Ex-div: | 05 Apr | |||
| Payment: | 18 May | |||
| *Includes intangible assets of £509m, or 187p a share | ||||
