IMI wields the axe in response to falling profits

IMI's headquarters in Birmingham

Birmingham-based engineering group, IMI, is to cut eight of its sites this year as it continues with a cost-cutting programme in response to tougher markets.

The cutbacks were announced in the group’s full year results statement, which showed the group’s reported pre-tax profit declining 5% to £208m (2015: £219m).

It said: “Trading conditions in many of our geographies and markets remained difficult throughout 2016. The cautious industrial investment environment continued to impact new order opportunities as customers tightened spending in the face of economic and political uncertainty.

“In response to the protracted deterioration in several of our most important markets, the group has undertaken a number of restructuring activities that will continue into 2017. These actions include the sale or closure of eight lower growth, higher cost Critical Engineering sites and the reduction of operating costs across the entire group.”

The tough oil & gas market, which represents almost a third of the group’s Critical Engineering’s revenues, continued to be impacted by falling investment, including a significant reduction in liquid natural gas (LNG) projects.

Elsewhere, it said the Power generation sector had been impacted by lower operational spending reflecting delays, particularly in North America, where power providers have extended the time between planned outages.

European and Asia Pacific truck markets remained resilient, however, the US heavy truck market declined significantly which impacted revenues in Precision Engineering.

Meanwhile, Industrial Automation markets globally were broadly flat although there were some signs of recovery in Europe and North America in the final quarter of the year.

In Hydronic Engineering, European construction markets remained subdued with warmer weather impacting the heating season. In addition, North America and China experienced some project delays.

Based on current market conditions, the group said it expected organic revenues in the first half of 2017 to reflect a similar percentage reduction to the first half of 2016, with margins slightly lower than the first half of last year.
Results for the full year are expected to include a second half bias reflecting the timing of restructuring benefits and normal trading seasonality.

As far as 2016 was concerned, reported group revenues were 6% higher at £1,649m (2015: £1,557m). Excluding favourable exchange rate movements and disposals, group revenues on an organic basis were 5% lower due to the continuing difficult end markets.

Lord Smith of Kelvin, IMI chairman, said: “Despite difficult market conditions our results for 2016 were in-line with expectations and the Group continued to deliver against our ambitious strategic objectives.”
 
“The combination of necessary management actions to address the current market difficulties and the continued progress in the execution of our strategy underpin our plans to enhance customer relationships, grow our market shares and further improve working capital.

“The group’s balance sheet is strong and our operations are inherently cash generative which provides the headroom to invest in organic development and appropriate acquisition opportunities as they arise.”

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