IMI reports drop in first half profit amid challenging market conditions

Engineering firm IMI on Friday reported a 19% drop in pre-tax profit in the first half as revenue fell in a challenging market.

Pre-tax profit on a reported basis came to £86m in the six months to 30 June 2016, down from £107m the same period a year ago as the manufacturing sector continued to struggle. Revenue fell 1% to £759m from £765m, including the £38m benefit of favourable exchange rates.

"Despite continuing challenging economic and market conditions in a number of key sectors, we delivered results in line with expectations and continued to make good progress against our strategic plan,” said chief executive Mark Selway.

“In particular, the various initiatives to drive growth including improving operational efficiency, enhancing processes and launching new products are making a difference and our market competitiveness is improving.”

Basic earnings per share dipped 19% to 24.4p from 30.3p. Operating profit dropped 18% to £96m from £116m while the operating margin declined 260 basis points to12.6% from 15.2%.

Net debt stood at £334m, up from £289m the previous year, in part due to an adverse currency impact of £70m.

The dividend per share was lifted 1% to 14p.

“Whilst continued volatility is expected, the second half results will benefit from a normal seasonal bias as well as some escalation of benefits accruing from previous reorganisation initiatives,” Selway said.

“With a broad international manufacturing footprint and less than 6% of sales in the UK, the transactional impact of Brexit is expected to be modest, with the greatest business sensitivities likely to stem from any general shift in business confidence and investment.”

Based on current market conditions, IMI expects full year 2016 results will be in line with current market expectations on a constant currency basis. Organic revenue is expected to have a” comparable percentage reduction to the first half result” in the remainder of the year.

Shares rose 3.57% to 1,072p at 0919 BST.