IMI - Final Results

IMI is a global engineering group focused on the precise control and movement of fluids in critical applications. They work with leading international companies in over 50 countries to deliver innovative engineering solutions to address global trends such as clean energy, energy efficiency, healthcare and increasing automation.

IMI’s products and services are ideally positioned to respond to the key environmental and demographic trends that are shaping the future. Drivers for growth of the business include climate change, population growth and scarcity of natural resources, renovation of existing buildings and infrastructure and finally, healthcare related innovation for an increasingly ageing population.

They are a FTSE 250 company with a market cap currently £2.5bn.

The shares rejoined my ISA portfolio following  results 2 years ago as a replacement for Carillion.

Results

IMI have today issued results for the year to 31st December 2015 (link via Investegate). As with many other companies, results have been impacted by the slowdown in China and Brazil as well as falling oil prices and exchange rates headwinds over the past 18 months. As a result, adjusted profits and earnings are down 20% at £219m and 62.2p respectively.

The full year dividend will however be increased by 2% to 38.4p (2014 37.6p). Dividend cover based on adjusted earnings for the continuing businesses is 1.6x earnings.

Mark Selway, CEO, commented: "We made steady progress on a number of fronts despite tough trading conditions in many of our markets. Our financial results were broadly in line with market expectations and we made substantial progress across a range of our strategic initiatives which have improved our operational performance and enhanced our market competitiveness.

Based on current market conditions, and on an organic constant currency basis, we expect first half revenues to reflect a similar percentage reduction to that experienced in the full year of 2015. Due to reduced sales volumes we expect first half margins to be around 250 basis points lower than the first half of 2015.  In the second half of 2016 the benefits of restructuring activities, combined with normal business phasing, are expected to result in improved revenues and margins when compared to the first half of the year."

It seems to me the results are pretty much in line with expectations. The shares have been marked down quite heavily over the past 12m however the results have been well received and in early trading the share price was up ~4% at £8.90 giving a yield of 4.3%.

Although I am in the process of winding down my shares portfolio, I feel the sell off for IMI has been overdone and I will hold for the time being and hope the SP can recover as quickly as it fell away.

As ever please DYOR.

Temple Bar IT - Final Results

I hold this investment trust in my ISA. It is part of my ‘basket’ of income-focussed investment trusts designed to provide an above inflation rising income and hopefully some increases in capital over the longer term.

TMPL has been managed by Alastair Mundy since 2000. He takes a contrarian view on the timing of buy and sell decisions - buying the shares of companies when sentiment towards them is thought to be near its worst and selling them as fundamental profit improvement and/or re-evaluation of their long-term prospects takes place.

This contrarian approach centers on long-term investment in cheap, out-of-favour companies in the belief that over time, these will be affected by reversion to mean.

This approach has proved very successful over the longer term with the trust outperforming the FTSE All Share index over the past 5 & 10 years. In more recent times, the value approach has underperformed the benchmark.

Results

They have today published full year results for 2015 (link via Investegate). The past 12 months has not been good and unfortunately, the trust has not been able to quite replicate the out-performance of previous years - total return of net assets fell by -1.0% compared to a small gain of  +1.0% for the FTSE All Share index - almost identical to the previous year. The contrarian approach often requires long periods before the benefits for the trust are realised.

Interestingly, the underperformance has not prevented them from hiking the management fee by 3% to £3.35m! Combined with the reduction in net assets, the effect has been to increase total expenses from 0.65% to 0.75% - not something I like to see. The trust does not pay a performance fee.

Income

The trust is committed to paying a rising dividend year on year and has met this commitment for the last 32 years.

The board are recommending a final dividend of 15.87p making 39.66p for the full year - an increase of 2% on 2014. The dividend is covered by earnings of 39.87p.

2 Yr Chart  TMPL -v-  FTSE All Share Index

The share price has lost around 16% over the past 12 months, partly due to a widening of the discount to NAV. At the current price of £9.85 the trust yields 4.0%.

Fortunately, at the height of the markets last May, I reduced my holding in TMPL (also Murray Income and Murray Intl.) and recycled the proceeds into the Vanguard LifeStrategy 60 index fund which has been able to ride out the market volatility much better in recent months.

I will hold the remainder of Temple Bar for the time being and await some recovery in its fortunes - hopefully!

If you hold this investment trust in your portfolio, I would be happy to hear what you think…leave a comment below.

Its a Bear Market!

So, here we have it…no longer a ‘correction’ but we are now in bear market territory. The FTSE has fallen from its high point last Spring of just over 7,100 and now stands at 5,537 - a fall of 22%.

These seemingly dramatic falls seem to come around every 5 or 6 years so investors should be psychologically prepared for them but I suspect few are totally relaxed...lets be honest, its scary seeing 20% of your portfolio value disappear.

The good news is that however much the markets fall, and when you think they have bottomed out…they fall more, in the long run, they always bounce back. This happened in 2008/09 and before that in 2001/02.

I guess its at times like this you can really evaluate you attitude to market risk and volatility and work out the best equity to bond allocation which feels most suited to ride out any storm. My current mix is 60% equities to 40% bonds and this feels about right for me at the present time. My plan is to reduce equities and increase bonds over the coming 5 - 6 yrs until I get to 40:60 mix.

Don’t Panic Mr Mainwaring

Investing is all about the longer term. Those investors who can stick with the process during the stormy periods should reap the benefits over the longer periods.

Of course, we are all ‘buy n hold for the long term’ when markets are positive. It can be a little more tricky when there is a sudden global sell-off. Some investors will get nervous and may well make hasty decisions as they see all the gains of recent years draining away. Fear is a powerful emotion and can get in the way of logical thinking and well prepared investment plans get sidelined.

The Plan

Without a sound investing plan, its easy to get blown away by volatile markets. Of course, whilst it will help to have a good plan from the beginning, no one can know how they will react emotionally to a sharp sell-off in global markets until they actually experience the raw feelings that such a climate of fear can bring about.

Perhaps now is a good time to re-evaluate the plan and to see whether it is still going to keep you in the game and get you where you want to be in 10 or 20 years time. My personal plans and strategy have been revised over the past year and I am glad to have made the move away from individual shares.

I know with my shares portfolio that even in the relatively calm waters of the past couple of years, the volatility and share price movement was becoming a little too much for my personal comfort zone. This has been one of the factors which brought about a change of strategy and a move towards the globally diversified LifeStrategy 60 index fund.

Lets hope the markets can stabilise soon and we can all return to business as usual. For the time being I shall repeat my mantra…the markets always bounce back…eventually!

As ever, take it easy and, having recently experienced a short stay in hospital, remember, your real wealth is your health.