Hot Off The Wires - The Day Ahead

Today's news and views, plus announcements from: NG., AUTO, IMI, BME, TW., BBY, GFRD, RWI, & UOG.

Stock pick: Improved IMI's undervaluation offers comfort in a volatile market

Under the leadership of Roy Twite, IMI has gradually but surely become an improved business. The ingredients include initiatives to drive organic growth, well-thought-out acquisitions, less cyclicality, better margins and, last but not least, a very competent management. However, when we look at the market’s perception of today’s IMI, we sense a valuation gap and believe that IMI deserves a higher valuation. As such, IMI is worth a look at the current price.

Decent first half; revised 2023 outlook confirmed; new reporting structure from H2

IMI posted a good first half result which was slightly above expectations. Revenue growth was positive across all divisions but was particularly strong in Critical Engineering. Adjusted operating profits increased due to margin expansion in all three divisions. CFO and FCF improved due to higher profits and reduced working capital. IMI also declared an interim dividend of 9.1p and unveiled a new reporting structure for future results. Finally, IMI confirmed its revised outlook first provided dur

Hot Off The Wires - The Day Ahead

Today's news and views, plus announcements from: IMI, IAG, RMV, STAN, ITRK, LWDB, WHI, NOG, PAY, SEPL, & OBE.

We like the IMI we see; 2023 will deliver further progress

IMI delivered a decent set of full year results with a marginal beat on profitability versus the consensus. In 2022, the group took another step forward towards its target of a 20% margin across the cycle and delivered restructuring benefits ahead of the plan. Order growth in Critical was encouraging, whereas orders from Growth Hub exceeded expectations. The board will propose a dividend of 25.7p for 2022. The outlook for 2023 points towards another year of revenue and profit growth.

Progressive first half results; Higher interim dividend; 2022 outlook confirmed

IMI posted a decent set of results that were above our expectations. Revenues grew organically despite adverse effects from lockdowns in China and the disposal of the Russian operations. Adjusted operating profits also grew as all divisions saw an expansion in adjusted operating margins. The company also made good progress on its restructuring programme as well as in the Growth Hub. CFO was lower due to working capital build-up. For the 2022 outlook, the company expects adjusted EPS to exceed 10

IMI will continue growing in 2022

IMI reported a good set of results with higher than expected profitability that helped it to reach the ceiling of its adjusted EPS guidance. Revenue growth was driven by attractive demand from most end-markets even as recovery continued in others. CFO was decent and included higher working capital investments. The group completed its £200m buy-back programme and will propose a final dividend of 15.8p per share. Regarding the FY22 outlook, the group expects adjusted EPS to exceed 100p.

Better FY21 outlook, courtesy of a decent Q3

IMI released its revenue figures for Q3 and they were slightly better than expected. All three divisions saw organic growth and are on track to reach their FY21 targets. With this update the group also raised its outlook. Additionally, the group is on track to finish its share buy-back programme of £200m.

Decent Q2 brings an increased dividend and an updated outlook

IMI’s H1 revenues were in line with our expectations but profitability and margins were ahead of them. All three divisions registered growth in revenues and margins. FCF more than doubled. As a result, the company raised its FY21 outlook again. The company also proposed an interim dividend of 7.9p, an increase of 5% and has made good progress in its buy-back programme.

A muted end to FY20

Like other capital goods companies under our coverage, IMI too witnessed a stronger second half. The full-year results were, however, slightly below our expectations. The group’s restructuring efforts bore some fruit but also experienced a delay due to the pandemic. The proposed dividend matched our expectations but the FY21 outlook is rather soft from our point of view.

Resilient and prepared to ride out the crisis

IMI’s H1 figures proved to be resilient in times of crisis, benefiting from management’s actions on the group’s cost structure. The restructuring is on track and management reintroduced new guidance for 2020, assuming no deterioration in H2, and an adjusted EPS of 65p to 70p. Nevertheless, the overall business environment remains under pressure with very limited visibility ahead.

Solid margin improvement

IMI continued on delivering encouraging results in H2, reflecting a solid result from its ongoing restructuring. FY19 was in line with our expectations, while the operating margin came in 3.9% above. Like many corporates, IMI was unable to quantify the ultimate impact of the Coronavirus outbreak on its supply chain and demand. We, however, appreciate the good progress delivered by the company.

Renold - Strong end to FY24: EPS up 11%. Robust FY25: EPS up 27.6%

The FY24 year-end update is very upbeat signalling trading being materially ahead of expectations, with a better-than-expected profit out turn and stronger cash generation. It continues to strengthen margins through efficiencies and investment in modern equipment. The order book remains close to record levels providing a robust view of future forecasts. In FY24E we upgrade EPS by 11% and in FY25E a significant upgrade of 27.6%. It looks capable of declaring a dividend in FY25 as well as manageme

Billington Holdings - Record result boosts dividend; forecasts upgraded

FY23 results show very strong growth over FY22, driven by strong Structural Steel activity, with results slightly ahead of upgraded profit expectations, while stronger than expected cash flow resulted in an unexpectedly generous dividend of 33p (offering a FY23 yield of 7.0%). The group now has net cash of £22.1m and is debt free and is therefore in a strong position for potential M&A activity. Following the recent £90m of new orders to increase the order book to record levels we conservatively

Morning Note – 16 April 2024

Morning Note – 15 April 2024

PROGRESSIVE: Severfield: Targeted acquisition strategy aids growth path

Acquisitions have been an important element of Severfield management’s growth strategy, with the aim of adding new products, sectors and regions to what we have identified as exciting long-term organic opportunities. In this Spotlight report, we focus on the group’s targeted M&A approach, highlighting three significant deals.

Invinity Energy Systems - Update on Strategic Investment

Invinity’s update on discussions with strategic investors reveals interest from multiple parties. While this has slightly delayed finalising an agreement it increases the potential for a better outcome. Although details are unknown at this stage, we think there is enough in the statement to be comfortable that any agreements will be consistent with the company’s strategy of growing market share in core markets and using a licencing and royalty model in other markets.

FY results: strong cash flow

Warns on brine supply costs

SP Angel . Morning View . Copper prices hold higher as China processing fees fall below $0/t amid low feedstock availability

Clean and competitive fertiliser

Hardman & Co Insight: 2023 was an annus horribilis for Quoted UK Infrastructure and Renewable Energy

The focus of Hardman & Co Research is on the nine quoted Infrastructure Investment Companies (IICs) and on the 22 Renewable Energy Infrastructure Funds (REIFs): the stocks analysed are all members of the Association of Investment Companies (AIC). We are updating our publication of January 2023, assessing both the lacklustre share price performances during 2023 and the key issues, including interest rates, inflation and power prices. As a 31-strong group, its combined market capitalisation is no

Windar Photonics - Major order, successful net £4m fund-raise, target fair value price raised

WPHO's announcement last week of a major new contract award with a North American customer represented an encouraging step forward in building the group's presence in this crucial market for wind power; and has been followed by news of the over-subscribed fund-raise which has strengthened the company's balance sheet to the tune of £4m net (£4.4m gross). The company is a pioneer in the field of wind turbine optimisation and continues to grow through innovation based on its unique IP. Following th

LIBERUM: Gattaca: Resilient contract performance, perm tough

Norcros - FY24 trading in line with expectations

FY24 trading underpins Norcros’s compelling investment case, where its new product development initiatives, market positioning and self-help initiatives allow it to take market share in both the UK and South Africa. We believe that Norcros’s key strengths are underappreciated and that legacy issues have been resolved. Its rating is low at 5.6x FY24e P/E, which is attractive, especially when compared to its yield of 5.7% on its well-covered dividend. We retain our estimates and value the shares a

Trading report in-line with sector peers

The results for the six-months to January are robust against a backdrop of declining confidence in both clients and candidates generally. With an improvement in the contract book during early Q3 we think this highlights that the tide is starting to turn and likely to feed through to demand for permanent hires ahead of the CY24 end. With net cash accounting for over 70% of the current market capitalisation, the operating business appears undervalued. H1 results were broadly in line with expectat