IMI IMS

IMI is a global engineering group focused on the precise control and movement of fluids in critical applications and comprises five platform businesses - Severe Service, Fluid Power, Indoor Climate, Beverage Dispense & Merchandising. I have a holding in my income portfolio (epic code: IMI)

IMI issued an interim management statement informing the market that trading in the first four months of the year has been in line with management expectations conveyed at the time of their preliminary results. Group revenues though in the first four months to April were down 1% on a reported basis and 3% on an organic basis. A contributor to this decline was commercial vehicle revenues in their Fluid Power division which were down 11% year to date, with European and North American markets weak as customers adjusted stock levels down in the first quarter.

 

They reconfirmed their intention to divest the majority of the Merchandising division and have started the process. This part of the group represents about 8% in terms of turnover, although some beverage activities have been transferred to the Beverage Dispensing division.  I would expect that any sale might generate around £250m; at the December year end they had net debt of £117m and have embarked on a £175m share buy-back programme (not attractive with a P/BV above 6). So I would expect either a special dividend from the proceeds or an increase in the share buy-back programme.

 

Finally, based on current market conditions, the board remains confident that they will deliver progress over the full year in 2013.

 

 

 

Anite is a global provider of hardware and software solutions, systems integration and managed services within its core markets of Wireless and Travel. I have a holding in my growth portfolio (epic code: AIE).

 

Anite issued an interim management statement that probably surprised the market, stating that trading in the final quarter was strong, this was slightly ahead of that predicted at the time of their 3rd quarter IMS.

As a result of this stong performance they expect adjusted profit before tax for the full year will be towards the top end of market expectations. Although revenue will be slightly below market expectations, this is compensated by margins in the final quarter being strong across all their businesses, continuing the positive trends seen in the first half of the year. 

So the third quarter, with weak order intake, was a short-term issue and has not ,as some expected, affected the full year results.

Anite's Wireless businesses operate in the high margin niche sectors of handset and network testing, with strong growth potential. They appear to have technological and market leadership in markets with high barriers to entry. I feel less convinced by the travel systems business which with sales of £20.1m last year represented 16.4% of the group.

Anite clear all the hurdles for my growth screen with the exception of the 1 year relative strength, caused by the cautionary 3rd qtr IMS. Following this statement in March the SP fell by about 25% over the next few weeks. A good example of why one should still keep a watch on companies that fail on the 1 year relative strength filter, for any uplift or reversal in fortunes, or if indeed there is no fundamental reason for the underperformance relative to the market. Markets do tend to over react to both potentially good and bad news.