IMI drips lower as fluid market challenges continue

31st Jul 2015 10:25

(ShareCast News) - Sales at IMI, the fluid control engineer, declined more than expected in the first six months of the year, as its markets continued to provide a challenging backdrop, with a tentative warning about full year orders.While the order book remained resilient year-on-year with no significant cancellations, management expressed caution that "some projects which are scheduled to ship this year could still shift into 2016, which may impact full year performance".First-half sales fell 5% to £765m, down 2% on an 'organic' basis adjusting for forex movements and excluding exceptional issues, short of consensus forecasts of £793m.Chief executive Mark Selway said organic revenue in the remainder of the year is expected fall by a "comparable percentage" but second half margins will stay roughly as they are, supported by improved results in critical engineering (CE) together with second-half seasonality and new product sales in hydronic.By division, CE declined 6%, precision engineering fell 1% due to weakness at Brazil and China, while hydronic engineering rose 1%.Operating profits fell 15% to £116m, down 9% organic and 3% short of consensus, as margins contracted by 180 basis points to 15.2%. Earnings shrank 13% to 30.3p per share.The FTSE 250 group enjoyed strong cash generation of £82m in the half and increased the interim dividend 2% to 13.9p.CE order intake slipped 6% on a reported basis, with aftermarket orders up 5% organically and oil & gas orders up 8%. Nuclear, power and petrochemical orders all declined more than expected, reflecting the slowdown in China.Selway said: "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."Analysts at Societe Generale said the guidance was in line with current consensus. "Critical Engineering is still expected to show a significant improvement in margins H2 over H1."Subject to more information, SocGen said it expected consensus EPS for 2015 to be reduced by circa 2-3% on the back of the results.