IMI plc Drops 6% Despite Reporting “Significant Progress”

IMI plc (LON:IMI) hikes its dividend 9% and will return £620m to shareholders.

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IMIIMI (LSE: IMI) — the global engineering group that focuses on the precise control and movement of fluids in critical applications — has taken a 6% tumble this morning, despite reporting “significant progress on a number of fronts” in its preliminary results for the year to 31 December 2013.

The company announced that pre-tax profit rose 8%, to £297.7m, and operating profit increased 7%, £321.6m, on revenue that was up 3%, at £1,744m.  

Adjusted earnings per share increased by 12% to 72.6p and the Board has recommended a final dividend for 2013 of 22.5p per share, up almost 9% over 2012’s final payout. This makes a total dividend of 35.3p per share for 2013, also up almost 9% over 2012.

IMI also reports that its ‘reshaping’, to become a wholly specialist flow control business, has continued, with the disposal of its beverage dispense and merchandising businesses having completed on 1 January 2014. The businesses were sold to The Marmon Group (a Berkshire Hathaway company) for a total value of £690m. 

As a result of the sale, IMI will be returning £620m to shareholders and making an additional cash contribution of £70m  to the IMI UK Pension Fund, in order to  reduce the fund’s volatility risk and as part of a process of towards self-sufficiency funding levels over the next few years.

Commenting on the results, chief executive Mark Selway said:

As IMI moves into the next phase of its development I have initiated a review of all parts of the Group.  While this review work is ongoing, positive early findings are already emerging.  These findings, together with IMI’s inherent strengths, including its robust balance sheet, indicate that the Group is well positioned to exploit a range of growth opportunities over the medium term.  

 “Looking at the year ahead: in 2014, based on current market conditions and excluding the adverse impact of exchange rates, we expect the Group to deliver modest organic revenue growth in the first half with margins slightly lower than in the first half of last year and an improved overall performance in the year.

At 1,452p, IMI’s share price is barely up on the same time last year, during which time the FTSE 100 has gained 5.5%.  But the story over five years will comfort long-term shareholders, with IMI’s share price rising an impressive 464%, versus the FTSE 100’s 92%.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Jon doesn't own shares in IMI.

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