IMI on track to deliver modest growth as exchange rates impact performance
ENGINEERING group IMI has said it remains on track to deliver modest organic revenue growth in the first half with slightly lower margins compared to the first half of last year and an improved overall performance in the full year.
The Birmingham-based group said in an interim statement that overall trading in the first four months of the year had been in line with expectations with group revenues up 1% on an organic basis and down 4% on a reported basis, reflecting the adverse impact of exchange fluctuations.
It said that if average exchange rates in the four months to the end of April 2014 had been applied to its 2013 results, it is estimated that segmental revenue and segmental operating profit would have both been 4% lower.
In its Service Sector arm, the group said order momentum was positive in most of its important end markets. However, it added that order intake in the first four months of 2014 was lower when compared to the same period last year – although that period did include a very large single order for a Middle Eastern oil and gas customer.
Revenues in the period were down 4% on an organic basis. Which the group said reflected the strong prior year with its backlog of sales.
“We continue to expect a strong performance in the remainder of the half and through 2014 which should deliver revenue and margin growth in both the first half and in the full year,” it said.
Fluid Power revenues increased 5% on an organic basis in the first four months with good progress in the European Industrial Automation market and strong activity levels in the Commercial Vehicle sector.
“We expect Fluid Power to deliver first half revenue growth with margins slightly lower when compared to the first half of 2013 reflecting the sales mix and increased investment to support growth initiatives. Leading indicators and current demand trends support our expectation that the Fluid Power business will make good progress in the second half of the year,” it added.
As expected, Indoor Climate revenues in the first four months of the year were broadly similar on an organic basis to the same period last year.
“We continue to expect first half revenues in Indoor Climate to be broadly flat and margins to be lower compared to the first half of 2013 reflecting the previously announced new product launch costs and the withdrawal from a number of less profitable emerging markets. Margins are expected to return to more normal levels in the second half of the year,” it added.
Following the sale of its Beverage Dispense and Merchandising divisions in January for $1,100m (approximately £690m), £620m has been returned to shareholders and a contribution of £70m is being made to the IMI UK Pension Fund.
“Notwithstanding this return of cash the group retains a robust balance sheet with good cash generation in the year to date. During the period the group bought £40m of shares for the employee benefit trust. Net debt at the end of April was approximately £212m,” it added.
The findings of a review of the business initiated by new CEO Mark Selway are likely to be announced in August when the group publishes its interim results.
