Specialist engineer IMI has pushed back an ambitious target of doubling its operating profit by 2019, as tough conditions in energy and power markets continue to drag on the industrial valvemaker.
The devaluation of sterling massaged full-year financial results at the FTSE 250 company, which supplies power stations, petrochemical plants and oil and gas installations.
It posted a 1 per cent rise in statutory pre-tax profit to £165m in 2016, on a 6 per cent rise in revenue to £1.66bn. However, after stripping out the boost from favourable exchange rates and the effect of disposals and acquisitions, revenue fell by 5 per cent. Pre-tax profit dropped by the same amount after excluding one-off costs.
This reflected “difficult market conditions”, namely the impact of lower oil prices and a decline in outage and maintenance activity in the power generation sector.
Mark Selway, chief executive, said:
Based on current market conditions, we expect organic revenues in the first half of 2017 to reflect a similar percentage reduction to the first half of 2016, with margins slightly lower than the first half of last year. Results for the full year are expected to include a second half bias reflecting the timing of restructuring benefits and normal trading seasonality.
Revenue fell 5 per cent in the first half of last year, on an organic basis. Movement in foreign exchange rates resulted in reported 2016 revenue being 11 per cent higher.
Founded in 1862 as an ammunition factory, IMI repositioned itself to focus on making valves for industrial markets after selling its retail-oriented beverage dispensing and merchandising units in 2013. It also supplies pneumatic components for large trucks and automation in factories.
After taking the helm in 2014, chief executive Mark Selway set a target of doubling operating profit over five years and has focused on making the business leaner and more efficient. But since then it has faced a perfect storm, as customers in the energy and power sectors have put off spending in response to the commodities slump.
The company said:
We move forward with confidence that we will achieve world-class performance by 2019, as envisaged in our original 2014 plan. Our objective to double operating profit by that point also remains our goal, although achieving that will clearly rely upon a more favourable market environment, and will almost certainly be reached beyond the original 2019 timescale.
Even so, Mr Selway said there was an improvement in operational performance and, in a sign of optimism about its prospects, the company recommended a 1 per cent increase in the full-year dividend to 38.7p.
Shares in the company are up 14 per cent so far in 2017, valuing the company at £3.2bn.