Investors awaited IMI’s (IMI) latest update hopeful that the engineer’s four-year old restructuring programme would finally deliver on its hype and muster up a whole lot more than the middling performances of 2017. They weren’t left disappointed.
Equipped with a leaner cost base, IMI took full advantage of confidence returning to key oil and gas and industrial equipment markets. Greater efficiency and value engineering – a process that involves substituting materials with less expensive alternatives without hindering functionality – culminated in the group’s adjusted operating margin widening 60 basis points to 13.1 per cent and overall adjusted operating profits climbing 13 per cent to £120m.
Management expects profits to fatten further in the second half of the year, noting that the underperforming Hydronic Engineering unit is now in a much better shape to recover after receiving an aggressive dose of the group’s self-help action earlier in 2018. Upgraded full-year guidance was well received by markets, even if the higher working capital costs to support growth led operating cash flow, without a repeat of the comparative period’s higher advanced payments, to fall 21 per cent. Weaker cash generation, coupled with the £138m forked out on Bimba and a £9m currency hit, saw net debt widen 44 per cent to £459m.
Bloomberg consensus gives adjusted net income of £192m for the December year-end, leading to EPS of 70.4p, rising to £192m and 77.7p in 2019.
| IMI (IMI) | ||||
| ORD PRICE: | 1,260p | MARKET VALUE: | £3.43bn | |
| TOUCH: | 1,259-1,260p | 12-MONTH HIGH: | 1,453p | LOW: 1,004p |
| DIVIDEND YIELD: | 3.2% | PE RATIO: | 23 | |
| NET ASSET VALUE: | 228p* | NET DEBT: | 74% | |
| Half-year to 30 June | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 848 | 88.6 | 27.2 | 14.2 |
| 2018 | 914 | 92.9 | 27.4 | 14.6 |
| % change | +8 | +5 | +1 | +3 |
| Ex-div: | 09 Aug | |||
| Payment: | 14 Sep | |||
| *Includes intangible assets of £603m, or 222p a share | ||||
