IMI shares rally after trading update, share buyback By Investing.com

By Samuel Indyk

Investing.com – Shares in FTSE 250 company IMI PLC (LON:IMI) jumped as much as 12% after the company announced a new £200mln share buyback following a strong quarter.

Group revenue was up 2.6% in Q1 versus the same quarter in 2019 to £421mln.

Outlook

Due to the strong performance, the company has increased margin guidance for 2021 and beyond.

“Given the accelerated progress against our strategy, including the identification of further opportunities for profitable growth, we now have confidence that IMI will become a sustainable 18% to 20% margin business over time,” the company said in a statement.

The company has also raised guidance for 2021 full year adjusted EPS to 81p-87p from 75p-82p previously. The guidance is based on current market conditions and includes anticipated currency headwinds due to a stronger GBP in 2021.

Share buyback

Given the improving situation, the board has determined that initiating a share buyback is now appropriate. The programme is to buy back approximately £200mln worth of shares.

The rally in shares suggest that shareholders are confident in the company’s future prospects according to AJ Bell Investment Director Russ Mould.

“The good news in the case of IMI is that the firm generates high operating margins, offers a healthy balance sheet and interest cover is good, so the firm’s finances are robust – and the 2020 figures are pandemic-hit so that is a further good sign,” Mould said.

“Today’s trading statement also suggests that IMI will be funding the buyback out of cash flow rather than borrowing and management makes it clear that investment in growth, either organic or by means of acquisition, still comes first, which is a further positive sign.”