Currency concerns haunt IMI
The Investment Column
Wednesday 03 September 1997
IMI is one of the host of companies that have been affected by the negative sentiment. Its shares had fallen by 15 per cent since the start of the year, underperforming the stock market by more than a quarter before yesterday's interim results announcement.
At first glance it is easy to see why. Every time IMI makes an announcement, the group increases its forecast of the impact currency will have on profits this year. First it was pounds 10m, then pounds 15m, and now it is pounds 20m.
The worry is that half of this hit relates to falling export margins, as the group has been forced to lower prices to maintain volumes in the face of the soaring pound.
However the concerns mask IMI's encouraging underlying performance. It managed to confound its critics yesterday with first-half figures well ahead of expectations, causing the shares to jump 18p to 358.5p. Operating profits before exceptionals rose to pounds 70.4m from pounds 67.2m before and underlying profits, ignoring the currency hit, rose an encouraging 13 per cent.
IMI has successfully restructured its portfolio over the past few years, selling poor performers such as its titanium business and closing down its troubled alloys division. And a recent string of acquisitions are beginning to pay off, accounting for a third of the profit growth.
The best of the bunch is Heimeier, a German plumbing fittings maker, which has shrugged off the economic problems in its domestic market to produce good growth.
Tour & Andersson Hydronics, a Swedish heating parts manufacturer, looks another decent buy.
Its US businesses are also going well, thanks to a buoyant economy and a pleasing habit of being able to continue to pick up market share over there.
As always, however, IMI is a mixed picture. Its drinks dispenser business, for example, which sells dispensers to fast-food outlets through the likes of Pepsi and Coca-Cola, is doing well in the US but faces stiff competition in the fast-growing Far Eastern markets.
And currency worries are still likely to haunt the share price.
There is a concern among analysts that IMI has not yet felt the full effect of a rising tide of cheap imports from the Continent.
Even so, Panmure Gordon is forecasting full-year profits of pounds 147m, putting the shares on a prospective p/e ratio of 12.
IMI is slowly shrugging off its Midlands metal basher image and is now sitting on an unjustified 20 per cent discount to the market. Good value.
- 1 California man brutally beat 82-year-old Sikh grandfather he mistook for 'one of those people'
- 2 Charles Kennedy 'had better judgement drunk than many sober politicians' says Ian Hislop
- 5 We have six months to save the world, says leading economist
California man brutally beat 82-year-old Sikh grandfather he mistook for 'one of those people'
Sepp Blatter resigns: FBI are investigating outgoing Fifa president, claims report
Alton Towers crash: Four guests seriously injured as Smiler ride carriages collide
Charles Kennedy 'had better judgement drunk than many sober politicians' says Ian Hislop
Gay teenager 'forced to have sex with his own mother' to 'cure' his homosexuality, campaigners in India say
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination
Migrants in Kos: Photos show real tragedy after Brits abroad complain of 'awkward' holidays
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
Michael Gove determined to scrap the Human Rights Act – even if Scotland retains it
Threat to scrap Human Rights Act could see UK follow Nazi example, warns UN official
Church of England 'one generation away from extinction' after dramatic loss of followers
iJobs Money & Business
£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...
£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...
£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...
£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...