5th May 2016 07:41
LONDON (Alliance News) - IMI PLC on Thursday said its outlook for the full year remains unchanged as the company reiterated its second half performance is still expected to be stronger than the first.
"Based on year to date performance and current market conditions, we continue to expect organic revenues in the first half to show a similar percentage reduction to that experienced in the full year of 2015 with margins 250 basis points lower than the first half of 2015," said IMI.
"We also continue to expect an improved performance in the second half, reflecting the benefits of business improvement and cost-reduction initiatives," the company added.
The specialist engineering company said economic and market conditions in the first quarter of the year remained "challenging," and said revenue was around 4.0% lower year-on-year once adjusted for the impact of exchange rate movements and acquisitions and disposals.
On a reported basis, revenues were flat for the same period reflecting the favourable impact of exchange rate movements, IMI said.
IMI's Critical Engineering division has seen organic revenue rise 2.0% in the first quarter, but that revenue was down 2.0% on an adjusted basis. IMI said this is because some projects have been delayed into the second quarter, but it stressed it has not been made aware of any intentions for any of those projects to be cancelled.
Oil and gas companies, a prime target customer for the division, have been deferring projects and hoarding cash in light of lower oil prices, which continues to impact IMI's engineering unit, but the company said nuclear and petrochemical industries are "showing an early sign of recovery".
Revenue from Critical Engineering will be lower in the first half than the second, IMI said, and margins also will be squeezed in the first six months of 2016 due to lower volumes of work and an "under-recovery" of overheads, it said.
"In the second half, we continue to expect organic revenues to be higher than in the first half with margins significantly improved on the first half of the year, due to the continuing cost-reduction initiatives and the phasing of the order backlog," said IMI of the Critical Engineering division.
The Precision Engineering division saw revenue fall 3.0% in the first quarter of the year, which was down 7.0% on an adjusted basis.
"Based on the current market environment, we continue to expect revenues in the first half to experience a similar percentage reduction to the second half of 2015 with margins similar to the second half of last year. We continue to expect an improved performance in the second half, reflecting the benefits of cost reduction and business improvement initiatives already underway," said IMI of Precision Engineering.
Lastly, the Hydronic Engineering unit reported a 4.0% rise in revenue in the quarter, but said that revenue was flat on an adjusted basis. Market conditions in Europe continue to be mixed, but new product developments are continuing to have a "notable impact".
"We continue to expect good revenue growth in the year due to the success of new products with operating margins expected to show their normal second-half improvement and reflect the on-going investment for longer-term growth," said IMI.
IMI said it will publish its results for the first half of 2016 on July 29, but said overall results in 2016 will benefit from favourable foreign exchange movements when compared to 2015, particularly the by the strengthening of the dollar and euro against the pound, it said.
IMI shares were trading up 3.9% to 971.50 pence per share on Thursday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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