IMI
Revenue £809m
Pre-tax profit £127m
Here is another of those FTSE 100 companies you probably have never heard of but should have, one that in the past 13 years or so has turned itself from a West Midlands-based metal-basher and smelter into a high tech engineering and specialist “flow control” group.
Under Martin Lamb, its previous boss, and Mark Selway, its present no-nonsense Australian chief executive, IMI has become a company that does everything from making valves for lorry brakes to providing technology used by the oil, gas, nuclear, power, construction and pharmaceutical industries, among others.
Mr Selway, who used to lead Weir Group, joined in January and in fairly short order carried out a “bottom-up review” before laying out to the market exactly what he hoped to do in the next five years. This included doubling operating profits by 2019, ensuring maximum operating efficiency in all its facilities and driving growth through strategic acquisitions. Yesterday, Mr Selway showed he was on track with a third-quarter trading statement that was better than expected and a £120 million takeover of Bopp & Reuther, a German expert in providing “critical engineering” services to large power generation companies with a strong presence in China and South Korea. IMI has a strong exposure to North and South America and Mr Selway said that he had identified $9 million-worth of “synergies” already.
IMI, which has about £1 billion of firepower for further mergers and acquisitions, is also investing heavily in new products, particularly in its hydronic business, which provides large heating and cooling systems to commercial and residential developers, among others.
This is a company that has found trading tough in some areas, Europe mainly, and its sales growth in the past four months has been affected by warmer weather, which hit its hydronic business, and customer delays in its engineering division. However, it is still on track to meet its full-year targets.
Although IMI shares have retreated nearly 30 per cent peak-to-trough between the end of May and mid-October, that came after a more than 450 per cent rise in the past five years and a modest recovery is under way again.
My Advice: Buy
Why: Tap into the growth phase of a skilled engineer with a strong balance sheet
CPP
Countries 14
Products 7
CPP Group has been a car crash of an investment for anyone who bought shares. Listed in March 2010 for 235p, shares in CPP were changing hands yesterday for barely 5½p and investors were contemplating a move from the main market to AIM, a desperately needed injection of £9 million of equity capital and the hoisting of a “for sale” sign over the company.
CPP remains in negotiations with its creditors about restructuring its balance sheet but, while it is making good progress, it is making no promises about the success of talks.
So much has happened to CPP, essentially a provider of protection services for credit card and identity theft, selling its products directly and through a network of banks. Only 12 months after the listing, the regulator, then the Financial Conduct Authority, objected to an insurance component in its policies, and began an investigation. Consumer groups, meanwhile, complained loudly that CPP was selling protection that customers didn’t need, arguing that they could already claim compensation for lost funds from their bank if their cards were stolen.
Two and a half years later and CPP, which says it offers much more than that, agreed to shell out £32 million in compensation to millions who were missold policies, in a redress scheme that completed in August and ended up costing a total of £65 million. Management believe there is still plenty of value, and even growth, in CPP, as long as it secures the new funds and agrees the deal with creditors.
My Advice: Hold
Why: If you bought along the way, wait to see if they deliver. Otherwise, avoid.
