IMI warns of flat H2 as first half revenue and profits dip
BIRMINGHAM-based engineering group, IMI, has warned shareholders that the second half of the year is likely to be tough with performance broadly flat on that of a year ago.
In its latest set of interims the company announced that revenues had dropped 5% to £765m (2014: £809m), with operating profit down 15% to £116m (2014: £137m).
Chief executive Mark Selway said the performance had broadly been in line with expectations.
Looking ahead to the second half, he said: “In the remainder of the year organic revenue is expected to have a comparable percentage reduction to the first half result. Second half margins, supported by improved results in Critical together with second half seasonality and new product sales in Hydronic, are expected to be broadly equivalent to the second half of 2014.”
The company has been impacted by the volatility of the nuclear sector and a decline in the economy of Brazil, where a commercial vehicle operation has been badly affected.
It was at this stage of the year last year that the company announced it was shutting its IMI Components factory in Witton following a fall in demand across the nuclear energy sector.
The restructuring of the firm’s nuclear business is continuing and it said today this would see the closure of the division’s Swiss-based nuclear manufacturing operation, a decision which will result in a £3m annual cost benefit from 2016.
In Brazil, it said the weak market conditions in the domestic commercial vehicle sector and the wider Brazilian economy had had seen the business take a £2.5m hit.
In response, Precision Engineering has reduced its Brazilian workforce by one third and placed the remaining employees on a four day working week until market conditions improve. It is expected that these actions will bring the business to a cash and profit neutral position from August 2015 and the associated costs (£0.4m) have been recognised within the underlying first half results.
Selway added: “Despite continuing challenging economic and market conditions in a number of our key sectors, we delivered results broadly in line with expectations and continued to execute our strategic plan.
“At our February presentation the various initiatives to drive growth including improving operational efficiency, enhancing processes and launching new products, were already making a difference. Progress has continued and is gaining momentum.”
Despite the tough six months, the company has been able to recommend an increased dividend – up 2% to 13.9p – and has benefited from strong cash generation at £82m (2014: £65m), the latter coming despite an increase in capital spending of £7m.
