August 1, 2014 / 8:11 AM / 3 years ago

UPDATE 2-Valve maker IMI sets five-year plan to double operating profit

* Plans to double full-year 2014 operating profit by 2019

* Acquisitions to drive half of this growth - CEO

* To focus on oil and gas market, N. America

* Raises interim dividend to 13.6 pence from 12.8 pence (Adds CEO, analyst comment, updates share movement)

By Roshni Menon

Aug 1 (Reuters) - IMI Plc, a supplier of valves to power and petrochemical plants, aims to double its full-year 2014 operating profit over the five years that follow, partly through acquisitions.

The company’s shares, among the top gainers on the FTSE-100 in early trading, were flat against a 1.4 decline on the index.

“Acquisitions are on our radar screen,” said Chief Executive Mark Selway, who launched a review of the company when he took the helm on Jan. 1. The result was a five-year plan, unveiled on Friday, to double full-year 2014 operating profit by 2019.

“About 50 percent of that doubling will come out of organic growth and about 50 percent will come through acquisitions,” Selway told Reuters in an interview.

IMI had net debt of 232 million pounds ($390 million) at the end of June. Its ratio of net debt to the last 12 months’ earnings before interest, tax, depreciation and amortisation (EBITDA) was 0.7.

Selway said IMI would be able to be more ambitious in pursuing acquisitions than in the past. Initially, the company would seek bolt-on acquisitions, particularly in the oil and gas business, he said.

“We’ve got a balance sheet at the moment that supports probably a billion (pounds) of firepower,” he said. “But we would look, during the course, to keep net debt-to-EBITDA at about 2 times.”

Analysts at Espirito Santo Investment Bank said acquisitions were likely to be in the company’s precision engineering division, the biggest contributor to revenue in the first half.

The division makes solenoid valves and air preparation and instrumentation equipment for the energy sector, including the upstream oil and gas industry, refineries and petrochemical plants.

Selway, a former chief executive of British engineering firm Weir Group, said IMI aimed to increase the revenue contribution of North America from about 20 percent currently.

Though IMI reported 3 percent organic growth in revenue for the first half of 2014, the company - which generates more than 90 percent of its revenue outside Britain - took a hit from the stronger pound.

Adjusted operating profit fell to 137 million pounds ($231 million) for the six months ended June 30 from 146 million pounds a year earlier.

Including the effects of currency translations, revenue fell 3 percent to 809 million pounds.

The company raised its interim dividend to 13.6 pence per share from 12.8 pence a year earlier.

IMI’s shares were down 0.1 percent at 1416 pence at 1030 GMT. ($1 = 0.5943 British Pounds) (Additional reporting by Aashika Jain in Bangalore; Editing by Robin Paxton)

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