IMI Q2 Earnings Call Highlights

IMI LON: IMI reported a strong first-half performance for 2026, with organic revenue rising 5% and organic adjusted operating profit increasing 8%, as growth across its Automation, Life Technology and Transport platforms supported higher earnings and cash generation.

Chief Executive Officer Roy Twite said the company delivered growth across all of its businesses during the period and remained on track to achieve its sixth consecutive year of mid-single-digit organic revenue growth. IMI reaffirmed its full-year adjusted basic earnings-per-share guidance of between £1.36 and £1.42.

“We delivered 5% organic revenue growth in the first half with growth across all of IMI,” Twite said. “Organic adjusted operating profit was 8% higher than the same period last year.”

Profit, margins and shareholder returns

Chief Financial Officer Luke Grant said adjusted operating profit increased to £217 million, while adjusted operating margin rose 50 basis points to 18.7%. The margin improvement reflected operating leverage and continued expansion of the higher-margin aftermarket business, partly offset by previously announced cybersecurity investments.

Adjusted basic EPS rose 13% to 63.4 pence. IMI’s tax rate was 26.2% in the first half, while net interest expense was broadly unchanged from the prior year at £8.4 million.

The company declared a 10% increase in its interim dividend. It also returned more than £300 million to shareholders during the first half, including through its ongoing £500 million share repurchase program. IMI had completed £250 million of the buyback as of June 30.

Grant said the company’s capital-allocation priorities remain organic investment first, followed by targeted bolt-on acquisitions and then shareholder returns where excess capital is available. Net debt stood at £673 million at the end of June, equivalent to 1.2 times adjusted EBITDA and within IMI’s target range of one to two times.

Cash flow improves sharply

IMI reported adjusted operating cash flow of £208 million, up 32% from the comparable period. Free cash flow increased to £171 million from £30 million in the first half of 2025, aided by stronger operating cash flow and the absence of one-off items recorded last year.

Working capital showed an £8 million outflow, an improvement from a £42 million outflow in the prior-year period. Cash conversion reached 96%.

The company spent £38 million on capital expenditures during the half, or 1.2 times depreciation, while also opening three new facilities and investing in its Growth Hub, data and digital capabilities.

Grant said IMI expects cash conversion to remain above 90% over time, while noting that investment in capacity and working capital requirements associated with growth could affect the result in individual periods.

Automation supported by power, nuclear and LNG demand

Automation revenue increased 5% organically. Process Automation orders rose 12% organically, including a £48 million nuclear new-construction order that is expected to generate deliveries over more than a decade. The Process Automation order book at the end of June was 10% higher than a year earlier.

New-construction orders in Process Automation increased 20%, while aftermarket orders rose 7%. Twite said conventional-power orders doubled to £64 million in the first half, supported by electrification and demand for reliable power supply for data centers. He said IMI’s customers in the sector have multi-year order books, though construction capacity could limit the pace of growth.

Twite said aftermarket demand typically begins a few years after valves are installed and can amount to roughly 10% of the original new-construction value on average. IMI has more than 200,000 installed severe-service valves across its markets, supporting a recurring aftermarket revenue stream.

Nuclear aftermarket orders rose 33% organically, while LNG order intake increased 56%, including a 67% gain in new-construction orders and a 36% rise in aftermarket orders. Twite said downstream and petrochemical new-construction markets remained softer, while the company sees opportunities for aftermarket upgrades in those areas.

Industrial Automation revenue also rose 5% organically. Twite said the business faced a softer prior-year comparison following the cybersecurity disruption in 2025, and described its 60-day moving average for orders as roughly 2% higher entering the second half. Europe was broadly flat, with Germany weaker, while the Americas were modestly higher and Asia-Pacific was up closer to double digits, he said.

Life Technology and Transport outlook improves

Life Technology organic revenue rose 5%. Climate Control revenue increased 4%, supported by demand for energy-efficient and smart-connected products. Twite said data-center orders totaled £18 million in the first half, compared with £6 million a year earlier, and said full-year sales related to the market could be slightly above the approximately £30 million previously expected.

Life Science & Fluid Control revenue rose 5%, supported by healthcare demand. IMI raised its outlook for the business and now expects organic revenue to be modestly higher in 2026. Twite characterized the improvement as modest and said demand had not returned to earlier stronger levels in analytical devices.

Transport organic revenue climbed 8% as the heavy-duty truck market began to recover. IMI now expects mid-single-digit organic revenue growth for the business this year. The Transport unit remains under strategic review, although Twite said its operational and cash performance had improved.

Guidance maintained amid external uncertainty

IMI maintained its expectation for adjusted operating margin to be flat to slightly higher in 2026, as operating leverage is expected to offset cybersecurity spending. The company assumes the disposal of Truflo Marine will complete in the third quarter.

Excluding Truflo Marine, IMI expects its usual EPS weighting of about 45% in the first half and 55% in the second half. Reported earnings could be more first-half weighted if the disposal proceeds as expected, because of Truflo Marine’s contribution before completion.

Management said shipments to the Middle East were modestly ahead of the expectations set in its first-quarter update. Twite said there remained a potential £30 million risk related to regional shipments, but described that risk as substantially reduced after July shipments tracked the company’s plan.

Looking longer term, Twite said IMI expects its One IMI operating model, aftermarket expansion and exposure to energy, automation and healthcare trends to support further margin progression. He said the company’s organic business could generate around 30% drop-through over time, which could support a margin trend toward about 22% over a five-year period, subject to investments and acquisitions.

About IMI (LON:IMI)

IMI plc is a specialist engineering company operating in fluid and motion control markets. We combine our deep engineering knowledge with strong applications expertise to develop solutions for the most acute industry problems. We help our customers become safer, more sustainable and more productive. IMI employs around 10,000 people, has manufacturing facilities in 19 countries and operates a global service network. The Company is listed on the London Stock Exchange and is a constituent of the FTSE4Good Index.

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