So much for the bumper earnings growth last year. Fluid dynamics and precision engineer IMI (IMI) made no such prediction itself but it clearly gave analysts reason for optimism - broker Numis calculated a whopping 66% jump in earnings per share (EPS) might be on the cards for full year 2017.

Granted, that was on a very best case scenario but IMI has fallen well short. What investors got in today’s announcement was a fully diluted declaration of 65.1p of EPS, or about 10% up on 2016.


Looking beneath the headline 6% revenue growth figures also shows a largely flat performance on the top line, once favourable currency moves and business disposals are stripped away.

‘The market had expected 2018’s earnings to start to show the benefits of recent restructuring efforts, however it seems it may be premature to expect a radical uplift in earnings, judging by comments in today’s results,’ says AJ Bell Investment Director Russ Mould.

Adjusted pre-tax profits increased a reasonable 8% to £224m yet this translates to only the barest of dividend increases, up 2% to 39.4p per share. Similarly lacklustre growth this year would imply a still decent 3.6% income yield.

Investors may take heart from an outlook statement that steers towards higher growth in the first part of 2018, where management anticipate ‘organic revenues to be higher than for same period in 2017’.


But arguably the big disappointment today comes in the shape of bleak comments about oil and gas markets, where it earns significant income. IMI effectively reckons the industry remains reluctant to press the investment button on projects with so much uncertainty around, despite the per barrel oil price recovery seen over the past year or more.

‘The oil price has enjoyed a resurgence this year and many observers may have expected the likes of IMI and other engineers and service companies to enjoy an uptick in work,’ says AJ Bell’s Mould.

‘It now looks like IMI may not have a sudden rush of new orders.’

Little wonder then that investors are thinking twice about previous optimism through 2018 that had fired IMI’s share price to recent highs of £14.43, a three-year high. That explains today’s hefty 9%-odd stock slump to £11.25, a level that the market believes better reflects near-term prospects and uncertainties.

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Issue Date: 02 Mar 2018