IMI to close city factory after fall in orders

BIRMINGHAM-based engineering group IMI is to close one of its factories in the city after a fall in orders.

The decision was revealed in the company’s interim results statement today, however, details are sketchy as the group has made little comment on the move.

The closure of the IMI Components factory in Witton – the group’s base – follows a fall in demand across the nuclear energy sector.

The results statement says: “Order intake in Nuclear was disappointing, down 37% compared to the first half of last year when we secured a number of orders for safety related projects and because of a material drop in demand levels at IMI Components, which supplies non-valve components into the nuclear fuel enrichment market.

“This has resulted in an exceptional impairment charge of £1m being taken in the first half results and the proposed closure of the IMI Components manufacturing site in Birmingham with an anticipated exceptional restructuring charge of up to £10m in the second half.”

Elsewhere, it said exchange rates and the costs of integration following two acquisitions had combined to ensure a bumpy first half.

Nevertheless, the company said it intended to press ahead with an investment programme aimed at self-funding growth.

The company said revenues were down 3% in the six-month period to £809m (2013 restated: £831m).  However, it said that after adjusting for the AFP and NPSL acquisitions in Precision Engineering and for adverse exchange rate movements (estimated at around 6%), organic revenues actually rose 3%.

Segmental operating profit was £137m, a 6% decline on the same period last year (2013 restated: £146m).  On an organic basis operating profit was down 1%. The group segmental operating margin was 60 basis points lower at 17% (2013 restated: 17.6%).  Statutory reported operating profit was down 12% at £113m (2013 restated: £129m).

After adjusting for exceptional items, reported pre-tax profit was £106m (2013 restated: £117m).

Looking ahead, it said the current strength of sterling was expected to continue impacting trading, with the effect on H2 revenues and profits likely to be around 6%.  

Nevertheless, it said that on a constant currency basis, it expected the group to deliver an improved rate of organic revenue growth in the second half.

The aim will be to progressively self-fund organic growth initiatives and in the second half, margins are expected to be slightly lower compared to the same period last year as it invests in a number of areas to prepare the business for accelerated future growth.  

The group completed the disposal of its Beverage Dispense and Merchandising divisions on January 1, 2014 realising an exceptional profit of £478m. Following the disposal, the group returned £620m of cash to shareholders accompanied by a share consolidation. Adjusted basic earnings per share increased by 10% to 34.9p, reflecting the impact of this share consolidation.  

In the meantime, based on first half performance and an expectation of improved revenue momentum in the second half, the board has decided to increase the interim dividend by 6% to 13.6p (2013: 12.8p).
 
Choosing to make no comment on the Components closure, chief executive Mark Selway said: “The first half result is broadly in line with expectations. On a constant currency basis we expect the group 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.  

“IMI has all the ingredients to become a world class business and the leader in its chosen sectors.  Our strategic plan will ensure that this potential is harnessed and fully exploited to deliver sustainable accelerated top and bottom line growth.  The opportunities are significant and that is reflected in our ambition to double the group’s 2014 operating profits over the next five years, while retaining our financial discipline.”