Shares in engineering firm IMI rose more than 13 per cent after it announced a lower-than-expected fall in half-year sales.
The Solihull Parkway-based manufacturer saw revenue for the six months to July drop one per cent, to £900 million.
But investors reacted well to news that underlying levels of demand appeared to have stabilised, sending its shares soaring after the announcement.
The company did, however, see pre-tax profits fall by 23 per cent, to £79.7 million, as demand fell for its drinks dispensers, valves and heating and air conditioning equipment.
Chairman Norman Askew said: “Underlying levels of demand would appear to have stabilised following the very sharp reductions seen in some of our businesses in the early part of the year.
“Our early and comprehensive actions taken to reallocate sales and engineering resource in support of more resilient end markets, to align capacity to lower levels of demand, to defend group margins and to maximise cash conversion have proved highly successful with group operating margins remaining in double digits.
“We are not assuming any improvement in general economic conditions during the second half but, as and when it materialises, we are well placed to benefit given the restructuring already undertaken and the further expansion of our low cost manufacturing capabilities.”
IMI’s shares, which had already gained 47 per cent so far this year, peaked at 458p yesterday – the highest point since September last year.
Chief executive Martin Lamb said the benefits of cost-cutting efforts would come through fully in the second half of the year.
“Since about April, underlying volume levels have stabilised, and while we don’t expect them to deteriorate further, we’re not predicting any sharp recovery in the second half,” he said in an interview with news agency Reuters.
“We’re not dependent on increased volumes to show profit improvement in the second half,”
Analysts said they would be increasing forecasts following the results from the group, which was one of the four founding companies of Imperial Chemical Industries.
Evolution analyst Harry Philips highlighted a strong result from the Indoor Climate division and said the debt performance was good.
Panmure Gordon said it assumed the forecast-beating performance was down to “a more timely reduction in costs”.
“IMI defied its own drop-down guidance, and has delivered much better than expected margins,” Oliver Wynne-James wrote in a note.
The company said it had cut net borrowings by £35 million, to £264 million, and that it would pay an interim dividend of eight pence, unchanged on last year, and reiterated that maintaining its dividend remained a core objective.
Shares in IMI closed at 454.9p on Thursday.
