7th Nov 2019 09:40
(Alliance News) - Engineering firm IMI PLC on Thursday said third-quarter trading in all divisions has continued "largely" as expected, and the company is making good progress in its business improvement and cost-reduction initiatives.
IMI shares were up 7.3% at 1,138.56 pence each in London.
The Birmingham-based company said organic revenue for the three months to September 30 were 2% lower year-on-year and, before adjusting for the impact of foreign exchange movements, flat on an adjusted basis.
Despite the lower sales, the company achieved higher margins in the third quarter, IMI said, adding that its units have "acted decisively" to reduce costs and protect margins.
IMI's Precision Engineering business suffered a 4% year-on-year fall in organic revenue in the third quarter, while the Critical Engineering unit saw just a 1% drop in organic revenue despite 10% lower order intake. Hydronic Engineering's organic revenue growth in the three months was 2% year-on-year.
For the second half, the FTSE 250 listed company expects organic revenue to experience a similar decline as in the first half. Profit for the second half is expected to be similar to the year-ago period, supported by the company's ongoing business improvement programme.
IMI said it has now completed a full review of its business operations which confirms significant value-creation opportunities.
Under the business improvement and cost reduction programme, IMI intends to establish a new organisational structure, pursue opportunities in increasing prices, and create a customer-driven culture.
The company also has commenced a process to remove significant structural costs with Precision Engineering business targeting a further GBP35 million annualised savings, Critical Engineering reviewing lower-margin businesses and Hydronic division progressing on improving margins.
"By executing on these key strategic areas, we believe IMI will be a fundamentally stronger business that will deliver significant improvement in returns over the next few years," IMI said.
IMI plans to maintain its capital spend at similar levels to the last five years and hopes to continue to pay a progressive dividend whilst improving dividend cover through profit and margin growth, it said.
The company is scheduled to release its 2019 results on February 28.
By Tapan Panchal; [email protected]
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