IMI shares hit despite increase

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Shares in IMI, the diverse engineering company, came under pressure yesterday, dropping 15p to 295p despite the group announcing an underlying increase in annual profits from £71.7m to £85.3m, a result that was £3m above the consensus of analysts' forecasts.

After £35m of exceptional costs relating to discontinued operations, the stated pre-tax profit showed a decline from £70.2m to £50.3m, resulting in earnings per share plunging from 13.8p to 6p. Nevertheless, the company underlined its confidence on prospects by increasing the dividend from 10p to 10.5p.

The main concern was a downturn in operating profits from £15.9m to £13.7m in the specialist engineering division. Sir Eric Pountain, the chairman, said this was due to the "continuing severe depression in the aerospace market".

There were other problems in this division. Sir Eric added: "With selling prices the main problem, our titanium activity made further losses and in the UK these were exacerbated by the effects of raw material contamination." IMI Yorkshire alloys and Conax Buffalo also remained in the red.

These problems, however, were offset to some extent by a solid improvement in the minting business and an advance in sales of special-purpose valves. The Eley sporting ammunition operation also lifted profits.

IMI's other three divisions, encompassing building products, drinks dispensing, and fluid power activities, all recorded profit increases.

Building profits raised profits 18 per cent to £32.7m. The fittings activities made the biggest contribution on the back of good gains in Germany, Australia, and the UK.

Profits from drinks dispensing advanced from £30m to a record £36m, helped in particular by further progress in the US. "We strengthened our relationships with the major drinks manufacturers and we also benefited from a growing consumer trend towards greater variety in soft drinks," Sir Eric said.

Growth in volume sales saw the fluid power business return a profit of £23.3m, up from £16.7m. The result, Sir Eric added, points "to a return towards the sort of profitability recorded in the late 1980s".

Overall, the chairman said that IMI was strong financially, which "provides the springboard for future growth through acquisition and for a high level of investment in plant and equipment".