26th Feb 2016 13:29
LONDON (Alliance News) - Engineer IMI PLC on Friday guided to a tough first half of 2016 but an improved second as its pretax profit, revenue and margins all weakened after a difficult 2015 hit by slowing industrial markets.
The FTSE 250-listed engineer, which makes flow and fluid control products and heating and cooling systems, said its pretax profit fell 34% to GBP163.0 million in 2015 from GBP246.0 million in 2014, as revenue declined 7.0% to GBP1.58 billion from GBP1.69 billion.
Organic revenue fell 5.0%, the group's operating margin shrank to 15.4% from 17.7%, and it took a hit from currency translation weakness.
In November, IMI said its earnings for 2015 would come at at the low end of expectations, following a continuation of difficult trading conditions in the third quarter.
In that update, IMI said its Critical Engineering unit was hit by lower project work in its power business, offsetting relatively robust aftermarket sales, while its Precision Engineering business continued to suffer from weaker activity in North America and the Brazil, plus the effects of the slowdown in the oil and gas industry.
IMI confirmed the tough year on Friday, noting the economic sluggishness in Brazil and China had hit the Critical and Precision Engineering units through the year, exacerbated by a slowdown in industrial markets worldwide, including a cautious capital spending environment which hit new order opportunities.
IMI said it remains relatively well-positioned to remain resilient against the oil and gas downturn, but the wider softening of activity, amid the collapse in the oil price, hit the petrochemical order book and upstream activities in Critical and Precision.
Precision Engineering did see solid trading in its heavy truck unit in Europe and North America, though the latter region slowed in the fourth quarter, but the Brazilian heavy truck market "suffered terribly", with volumes about halving year-on-year.
IMI expects the tough conditions in its markets to continue in the first half of 2016, with revenue to fall by a similar percentage to the decline seen in the 2015 full year. Reduced sales volumes will mean margins for the first half of 2016 will take a 250 basis point hit against the first half of 2015, the group said, though it expects the benefits of the cost-cutting and restructuring activities it has taken to feed through and improve its second half performance.
On the expectation of improvements on the horizon, the group said it will hike its final dividend slightly to 24.5 pence from 24.0p, taking its total dividend up to 38.4p from 37.6p.
"We made steady progress on a number of fronts despite tough trading conditions in many of our markets. Our financial results were broadly in line with market expectations and we made substantial progress across a range of our strategic initiatives which have improved our operational performance and enhanced our market competitiveness," said Mark Selway, IMI's chief executive.
IMI shares were up 2.6% to 878.50p.
By Sam Unsted; [email protected]; @SamUAtAlliance
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