News Column

IMI Plans Accelerated Growth Through Revamp, But First-Half Profit Falls

August 1, 2014

Anthony Tshibangu

LONDON (Alliance News) - Engineering business IMI PLC Friday said it has completed its business review and plans to double operating profit by 2019, even as it reported a fall in profit for the first half of this year.

The company said using information gathered through its review process, it has developed a five year plan to "harness its full potential to deliver sustainable accelerated growth and shareholder value."

"The opportunities are significant and that is reflected in our ambition to double the group's 2014 operating profits by 2019," IMI said in a statement Friday.

FTSE100-listed IMI posted pretax profit of GBP105.8 million for the six months ended June 30, down from GBP133.9 million a year earlier, as revenue fell to GBP808 million from GBP832 million, partly due to the strength of sterling.

The company said revenue for its critical engineering division rose 3% on an organic basis, but fell 2% on a reported basis, reflecting the adverse impact of exchange rate movements. Revenue fell to GBP315 million from GBP322 million a year earlier.

IMI said order input for the division was down 12%, as it expected, due to a strong period a year ago which included a very large HIPPS order.

The company's precision engineering division also struggled, with revenue down to GBP355 million from GBP363 million a year earlier. It said North American truck revenue fell 6% as expected, reflecting the end of a large contract during 2013, while the Rest of World revenue fell 18%, impacted by lower truck production in Brazil.

IMI Hydronic Engineering saw revenue dip to GBP139 million, from GBP146 million a year earlier, with revenue in Europe flat and market conditions mixed from country to country. Additionally, the North America business continued to underperform with weather related issues impacting revenues by 13% on an organic basis.

Overall group operating margin fell 60 basis points to 17.0%, from 17.6%.

Looking ahead, IMI said the current strength of sterling is expected to continue to weigh in the second half, impacting both revenues and profits by around 6%. It said on a constant currency basis, it expects to deliver an improved rate of organic revenue growth in the second half.

"While our aim is to progressively self-fund our organic growth initiatives, in the second half margins are expected to be slightly lower compared to the same period last year as we invest in a number of areas to ready our business for accelerated future growth," the company said.

Despite its woes, the company increased its interim dividend 6% to 13.6 pence from 12.8 pence.

IMI shares were quoted down 0.4% at 1,422.00 pence Friday morning.

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Source: Alliance News

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