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).
Operating profit decreased by 0.3% to £269.8m and Eps increased by 15.1% to 68.6p, excluding exceptionals EPS was 78p up 7.4%, in line with market expectations.
Free cash flow (FCF) was substantially below last year's £252.2m at £33.6m, mainly as a result of increased working capital, higher capex and additional pension scheme funding. The additional pension funding of £87m was part funded by £70m from the £696m proceeds from the sale of the Beverage business, £620m was returned to shareholders in addition to the £97.5m in dividends.
Net debt was reduced by £25.9m to £200m and represented gearing of 39.3%. Net debt was just 0.5x EBITDA, but the weaker operating cash flow was only 52% of net debt.
A final dividend of 24p is being proposed making the full year dividend 37.6p an increase of 6.5%. If we add back the £70m of additional pension scheme funding, that was financed by the Beverage disposal, to the FCF then the resultant £103.6m covered the £97.5m of dividends.
The 3 year average FCF return on capital employed is 20.4%, substantially in excess of the weighted average cost of capital of 11.6% and their current ROCE is 38%.
Management's outlook for 2015 was rather cautious with an implication of flat earnings for the year - "...In 2015, based on current market conditions and excluding the impact of exchange rate movements, we expect the Group to deliver modest organic revenue growth weighted towards the second half with margins slightly lower than in 2014 reflecting the impact of the disposal of Eley and acquisition of Bopp & Reuther by the Critical Engineering division and the ongoing investments we are making in all our businesses as we ready them for accelerated long-term growth..."
Currencies may have a major impact on the 2015 results as they are more heavily exposed to the Euro than the US$. A 1c movement in either currency would affect operating profits by +/- £0.5m for the US$ and +/- £1m for the Euro. Average rates for 2014 were $1.65 = £1 and €1.24 = £1.
Despite the cautious outlook for 2015, management have set a target of doubling operating profits by 2019, which if achieved, will be a considereable performance.
At Friday's close of 1381p they are on an historic P/E of 17.7 and a forward yield of 2.9%.
No comments:
Post a Comment