IMI plc 2015 Interim Results 31 July 2015 IMI plc Interim Results - - PowerPoint PPT Presentation

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IMI plc 2015 Interim Results 31 July 2015 IMI plc Interim Results - - PowerPoint PPT Presentation

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IMI plc Interim Results Presentation IMI plc 2015 Interim Results 31 July 2015 IMI plc Interim Results Presentation Agenda Highlights: Mark Selway Chief Executive Financial review: Daniel Shook Finance Director

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IMI plc Interim Results Presentation

IMI plc 2015 Interim Results – 31 July 2015

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IMI plc Interim Results Presentation

Agenda

  • Highlights:

Mark Selway – Chief Executive

  • Financial review:

Daniel Shook – Finance Director

  • Operational review and Outlook:

Mark Selway

  • Q&A:

IMI Executive Team

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IMI plc Interim Results Presentation

Highlights

  • Results in line with expectations in challenging external environments
  • Strong cash generation and good net debt position
  • Strategic initiatives on track and delivering early benefits

1. Change is presented on an organic basis; i.e. on a constant currency basis and excluding the effect of acquisitions and disposals

Revenue

£765m Down 2%1

Segmental operating profit

£116m Down 9%1

Operating margins

15.2% Down 180bps

Adjusted earnings per share

30.3p Down 13%

Cash generation

£82m Up 26%

Dividend per share

13.9p Up 2%

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IMI plc Interim Results Presentation

Financial review

Daniel Shook – Finance Director

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IMI plc Interim Results Presentation

Revenue

£m H1 2014 Exch Disp H1 2014 Organic H1 2015 Acqs H1 2015 Organic Critical Engineering 315 (10) (10) 295 295 (17) 278 Precision Engineering 355 (10) (1) 344 342

  • 342

Hydronic Engineering 139 (11) (1) 127 128

  • 128

Segmental revenue 809 (31) (12) 766 765 (17) 748 % Change on 2014

  • 4%
  • 5%
  • 2%
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IMI plc Interim Results Presentation

Operating profit

£m H1 2014 Exch Disp H1 2014 Organic H1 2015 Acqs H1 2015 Organic Critical Engineering 56.1 (2.3) (3.2) 50.6 39.8 1.0 40.8 Precision Engineering 69.4 (1.5) 1.2 69.1 63.7

  • 63.7

Hydronic Engineering 25.8 (2.3)

  • 23.5

23.0

  • 23.0

Corporate Costs (14.1)

  • (14.1)

(10.3)

  • (10.3)

Segmental operating profit 137.2 (6.1) (2.0) 129.1 116.2 1.0 117.2 % change on 2014

  • 4%
  • 9%

Segmental operating margin 17.0% 16.9% 15.2% 15.7%

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IMI plc Interim Results Presentation

Income statement

£m H1 2015 H1 2014 Segmental operating profit 116.2 137.2 Restructuring costs - not exceptional (1.1) (1.5) Loss on disposal of subsidiaries - not exceptional (0.4)

  • Net interest expense

(8.0) (7.3) Net pension finance income/(charge) 0.1 (1.6) Profit before tax and exceptional items 106.8 126.8 IAS39 adjustment 4.4 (0.2) Restructuring costs - exceptional (6.7)

  • Gain on special pension events

3.2

  • Impairment charges
  • (11.9)

Acquisition/disposal costs

  • (0.4)

Acquired intangible amortisation (20.6) (8.5) Profit before tax 87.1 105.8 Taxation (16.8) (21.4) Profit from continuing operations after tax 70.3 84.4 Profit from discontinued operations (net of tax) 7.9 477.6 Total profit for the half year 78.2 562.0

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IMI plc Interim Results Presentation

Operating cash flow summary

£m H1 2015 H1 2014 EBITDA* 137.6 155.0 Inventory (32.1) (39.5) Debtors 2.0 (26.2) Creditors 7.7 20.5 Working capital (22.4) (45.2) Capital expenditure (29.4) (22.9) Provisions and employee benefits (3.3) (12.5) Asset sales/other (0.6) 2.3 Operating cash flow 81.9 76.7 Interest and derivatives 16.0 15.9 Tax (16.4) (27.7) Cash generation 81.5 64.9

* After exceptional items

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Balance sheet

£m Jun Dec Jun 2015 2014 2014 Shareholders' funds 523 509 425 Net debt 289 200 232 Gearing 55% 39% 55% Continuing businesses: EBITDA* 134 334 155 Interest costs 8.0 14.3 7.3 Net debt / EBITDA** 0.9x 0.6x 0.7x EBITDA / interest 17x 23x 21x

* Before exceptional items ** Based on rolling 12 month position, before exceptional items

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Pensions

  • UK surplus increased by £10m mainly due to actuarial gains
  • Reduced overseas defined benefit obligations despite acquisition of Bopp & Reuther (£4m).

Further scheme closures or buy-outs are expected in H2

£m UK O'seas Total UK O'seas Total UK O'seas Total Assets 1,311 147 1,458 1,324 152 1,476 1,233 145 1,378 Liabilities (1,241) (235) (1,476) (1,264) (247) (1,511) (1,243) (240) (1,483) Accounting deficit 70 (88) (18) 60 (95) (35) (10) (95) (105) Jun 2015 Jun 2014 Dec 2014

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IMI plc Interim Results Presentation

Foreign exchange sensitivities 2014 and 2015

H1 2015 H1 2014 Change Average rates Euro 1.37 1.22

  • 12%

US$ 1.52 1.67 +9% Closing rates Euro 1.41 1.25

  • 13%

US$ 1.57 1.71 +8% Impact on H1 2015: Revenue

  • 4%

Operating profit

  • 4%
  • If the average rates in July remained constant for the remainder of the year, it would

adversely impact both revenues and segmental operating profit by 4-5%

Sensitivity to +/- 1 cent move in: Revenue Operating Profit US $ +/- £2.3m +/- £0.5m Euro € +/- £4.9m +/- £0.8m Ready reckoner for translation impact of movement in FX rates on 2015 FY performance

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Operational Review & Strategic Update

Mark Selway – Chief Executive

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IMI plc Interim Results Presentation

2015 First half order intake (organic)

£292m down 6% organically

Aftermarket up 5% £134m Oil & Gas up 8% £72m Fossil Power down 6% £46m Petrochemical down 32% £17m Nuclear down 79% £5m Other down 3% £18m

Revenue by geography

14% 23% 50% 7% 6% Western Europe North America Emerging Markets UK RoW

£ m

2014 Foreign Exchange Disposals 2014 Organic 2015 Acquisitions 2015 Organic

Revenue 315 (10) (10) 295 295 (17) 278 Growth %

  • 6%
  • 6%

Operating Profit 56.1 (2.3) (3.2) 50.6 39.8 1.0 40.8 Operating Margin % 17.8% 17.2% 13.5% 14.7%

  • Aftermarket orders up 5% when

compared to H1 2014

  • Good project wins in LNG and Oil &

Gas

  • Expect to deliver organic revenue

and profit growth in H2

  • New Korean plant and Chinese

service centre

IMI Critical Engineering

IMI plc Interim Results Presentation

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Controls Isolation Actuation Silencers

IMI Critical Engineering

Continue to invest to support addressable growth markets - £7bn… … and organic technology transfer to new locations

Power Generation Petrochemical Oil & Gas

IMI plc Interim Results Presentation

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IMI Critical Engineering

  • New Project

Management process piloted at IMI CCI USA

  • Obeya rooms now in

place at IMI CCI Czech Republic and IMI CCI Korea

  • Roll out programme in

place for all IMI CCI sites

  • IMI Critical divisional

intranet launched

  • IMI Critical global website

launched

Continue to invest in infrastructure, enhanced systems and processes

  • ERP system launched on

time and on budget in the Czech Republic

  • Two further sites planned

to go live in Q4 2015

www.imi-critical.com

IMI plc Interim Results Presentation

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IMI Critical Engineering

IMI CCI Brno IMI CCI Korea IMI CCI RSM IMI CCI Sweden IMI Truflo Marine IMI InterAtiva IMI CCI Japan IMI Orton IMI Fluid Kinetics IMI CCI Sri City IMI NH IMI Remosa IMI Z&J Germany IMI Truflo Rona Belgium IMI SSF IMI Z&J Houston IMI CCI SPEC JV IMI STI IMI Z&J China IMI Bopp & Reuther * IMI TH Jansen **

3rd round target % 56 58 59 52 53 52 50 50 56 50 44 55 51 51 41 45 41 57 40 35 3rd round score % 56 59 55 48 50 50 52 49 50 51 43 49 47 44 40 46 40 54 41 29 27

  • Third round of Lean

assessments now complete

  • Improvements

evident at all sites

  • Action plans in place

for further improvement over the next six months

  • World-class by 2018

10 20 30 40 50 60 70 80 90 100

* IMI Bopp & Reuther has had two assessments ** IMI TH Jansen has had one assessment

IMI plc Interim Results Presentation

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The acquisition of Bopp & Reuther

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Acquired for €153m – deal completion 2 January 2015

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Closely aligned:

  • Enhanced presence in the growing power sector
  • Product range extension
  • Access to new higher margin aftermarket
  • pportunities
  • Significant synergies including rationalisation of

European nuclear assets

Safety Valves Control Valves Shut-Off Valves

IMI Critical Engineering

£ m

H1 2015 H1 2014* Variance

Order intake 24.3 27.7 (3.4) Revenue 17 27 (10) Operating Profit (1.0) 2.2 (3.2)

IMI plc Interim Results Presentation

* Pro forma unaudited comparative financials

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The acquisition of Bopp & Reuther

IMI Critical Engineering

  • In the balance of the year, on a constant

currency basis, organic revenue performance is expected to deliver a comparable percentage reduction to the first half of this year

  • Given current order book phasing, both second

half revenues and margins will show significant improvements on the first half of the year

  • Due to the second half phasing of the order

book, we expect Bopp & Reuther to significantly improve revenues and profits when compared to the first half of the year

IMI plc Interim Results Presentation

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IMI plc Interim Results Presentation

  • Good growth in CV, Life Sciences and

Rail offset by tough markets in Industrial Automation, Oil & Gas and Food & Beverage

  • New Phoenix valve offers substantial
  • pportunities for the future
  • Reorganisation in Brazil to respond to

market declines

  • Review of NPSL to realign to market

realities

Revenue by geography

43% 28% 18% 7%4% Western Europe North America Emerging Markets UK RoW

2015 First half revenue

£342m down 1% organically

Industrial Automation down 3% £156m Commercial Vehicle up 4% £83m Oil & Gas down 5% £32m Food & Beverage down 11% £32m Life Sciences up 9% £26m Rail up 20% £13m

£ m

2014 Foreign Exchange Disposals 2014 Organic 2015 Acquisitions 2015 Organic

Revenue 355 (10) (1) 344 342 (-) 342 Growth %

  • 4%
  • 1%

Operating Profit 69.4 (1.5) 1.2 69.1 63.7 (-) 63.7 Operating Margin % 19.5% 20.1% 18.6% 18.6%

IMI Precision Engineering

IMI plc Interim Results Presentation

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IMI Precision Engineering

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Strategic plans being developed to accelerate growth in every IMI Precision business

▸

Regional plans nearing completion and product roadmaps being developed

  • Product portfolio

rationalisation well underway

  • 290,000 SKUs

eliminated from European portfolio

  • Global Quality system now

developed

  • Pilot reviews completed in

all regions

  • Division-wide roll out

planned for H2 2015

✓ ✓ ✓

Regional growth plans Product portfolio Quality systems

IMI plc Interim Results Presentation

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IMI Precision Engineering

Fix the basics in the next two years

  • JD Edwards system

installed in Brazil

  • Project plan on track for

roll out at 5 American sites

  • Regional IT strategies

developed for global roll

  • ut

✓

  • New sales and financial

forecasting model developed

  • Pilot reviews completed

in all regions

  • Division-wide roll out

planned for H2 2015

✓

New Products Improved sales forecasting

✓

New ERP system

  • New responsive

Application Engineering function established

  • New Product

Development procedures and systems piloted

IMI plc Interim Results Presentation

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IMI plc Interim Results Presentation

  • Third round of Lean

assessments now complete

  • Improvements

evident at all sites

  • Action plans in place

for further improvement over the next six months

  • World-class by 2018

22

IMI Precision Engineering

IMI Norgren Brno IMI FAS Switzerland IMI Norgren Seattle IMI Webber IMI EDC Warehouse Alpen IMI Norgren Queretaro IMI Norgren India IMI Watson Smith IMI Norgren China IMI Norgren Farmington IMI Buschjost IMI Norgren Germany Fellbach IMI Norgren Kloehn IMI Norgren Germany Alpen IMI Norgren Littleton IMI Norgren Singapore IMI Norgren Brazil IMI Norgren Brookville IMI Norgren Switzerland IMI Norgren Australia IMI Herion Systemtechnik IMI Thompson Valves IMI Norgren Detroit IMI IMF IMI Norgren Denmark IMI Norgren Fradley IMI Norgren Warehouse Louisville IMI Norgren Belgium

3rd round target % 75 65 60 55 60 65 65 55 60 58 54 61 54 61 52 60 48 45 45 60 48 52 55 42 40 48 45 35 3rd round score % 66 66 59 56 56 57 61 54 60 54 54 59 43 54 47 61 44 44 51 61 42 51 47 51 45 50 46 34

10 20 30 40 50 60 70 80 90 100

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IMI Precision Engineering

  • PMIs are generally positive in Europe and North

America with an offsetting softness in China and Brazil

  • Commercial vehicle volumes are expected to be

generally good in Europe and North America but weaker in Brazil

  • In the second half, on a constant currency basis,
  • rganic revenues are expected to be marginally lower

than the second half of last year

  • Profits are expected to be similar to the first half of this

year

IMI plc Interim Results Presentation

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IMI plc Interim Results Presentation

  • Delivered organic growth, despite

challenging markets

  • Margins slightly lower in H1 reflecting the
  • ngoing investment for longer-term

growth

  • Launched 6 new products in the first half
  • Expect organic revenue growth in H2

with usual seasonal improvement in margins

Revenue by geography

71% 6% 19% 3% 1% Western Europe North America Emerging Markets UK RoW

2015 First half revenue

£128m up 1% organically

IMI TA up 2% £58m IMI Heimeier up 2% £37m IMI Pneumatex up 3% £18m Other down 6% £15m

IMI Hydronic Engineering

£ m

2014 Foreign Exchange Disposals 2014 Organic 2015 Acquisitions 2015 Organic

Revenue 139 (11) (1) 127 128 (-) 128 Growth %

  • 8%

1% Operating Profit 25.8 (2.3) (-) 23.5 23.0 (-) 23.0 Operating Margin % 18.6% 18.5% 18.0% 18.0%

IMI plc Interim Results Presentation

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Invest in New Product Development to capitalise on European leadership position

IMI Hydronic Engineering

  • 20 new products

launched, 6 in H1 2015

  • New Product

Development increases to 4% of revenue

  • Eclipse

IMI plc Interim Results Presentation

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IMI plc Interim Results Presentation

IMI Hydronic Engineering

  • JD Edwards global system

being developed

  • On time, on budget plan fully

resourced for first launch H1 2016

  • Core processes introduced
  • Advanced Quality management

systems

  • New Product Development

procedures

  • Reduced complexity
  • Promotes

competitiveness and growth prospects of the division Global ERP Global business procedures Organisation & structure

✓ ✓ ✓

IMI plc Interim Results Presentation

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10 20 30 40 50 60 70 80 90 100 IMI Hydronic Slovenia IMI Hydronic Poland IMI Hydronic Poland - Warehouse IMI Hydronic Sweden - Warehouse IMI Hydronic Germany

  • Warehouse

IMI Hydronic Germany IMI Hydronic Switzerland IMI Hydronic Sweden IMI Hydronic North America

IMI Hydronic Engineering

IMI Hydronic Slovenia IMI Hydronic Poland IMI Hydronic Poland Warehouse IMI Hydronic Sweden Warehouse IMI Hydronic Germany Warehouse IMI Hydronic Germany IMI Hydronic Switzerland IMI Hydronic Sweden IMI Hydronic North America

3rd round target % 72 78 73 53 60 65 60 60 56 3rd round score % 73 81 81 61 62 62 54 61 56

  • Third round of Lean

assessments now complete

  • Improvements evident at

all sites

  • Action plans in place for

further improvement

  • ver the next six months
  • World-class by 2018

IMI plc Interim Results Presentation

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IMI plc Interim Results Presentation

IMI Hydronic Engineering

  • Due to the continued success of new product sales,

during the balance of the year, we expect organic revenues to show good growth when compared to the second half of 2014

  • Margins are expected to be broadly similar to the

second half of 2014, despite the increased costs associated with New Product Development and other investments for growth

IMI plc Interim Results Presentation

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IMI plc Interim Results Presentation

Strategic Achievements

✓ ✓ ✓ ✓ ✓

Strategic initiatives continued at pace and all businesses made good progress to adopt best practice in operations, project management and IT Application of Lean continues and robust improvement plans in place for the next phase of development Critical Engineering’s on time, on budget completion of new plant in Korea and Service Centre in China Precision product rationalisation program – 290,000 reduction in H1 2015 Hydronic Engineering launch 20 new products in past two years representing 8% of first half revenues

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IMI plc Interim Results Presentation

  • Despite continuing challenging economic and market conditions in a number of key sectors, we delivered

results broadly in line with expectations and continued to execute our growth plan.

  • Revenue is expected to have a comparable percentage reduction to the first half
  • Second half revenues and margins will both show a significant improvement on the first half of the year
  • Revenues are expected to be marginally lower than the second half of last year
  • Profits are expected to be similar to the first half of the year
  • Due to the continued success of new product sales during the balance of the year, we expect revenues to

show good growth when compared to the second half of 2014

  • Margins are expected to be broadly similar to the second half of 2014
  • Second half revenue is expected to have a comparable percentage reduction to the first half result
  • Second half margins, supported by improved results in Critical, and Hydronic, are expected to be broadly

equivalent to the second half of 2014

Outlook

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IMI plc Interim Results Presentation

Strategy execution timeline

“The hard work begins” “Increased investment” “Benefits starting to show” “Nearly firing on all cylinders”

Year 2014 Year 1 2015 Year 2 2016 Year 3 2017 Year 4 2018

“Up to full speed”

  • Assess our markets

and drivers for growth

  • Benchmark

performance and plan for improvement

  • Invest in products and

capital for growth

  • Foundations established

and benchmark improvements evident

  • Sorting the basics in

Precision Engineering complexities and structure

  • Accelerated growth

evident in results

  • Working capital

benefits visible in results

  • Emerging markets

ready for local full technology supply

  • Growth outruns peers

in every division

  • Benchmark

performance nearing world class standards

  • Precision supply

chain and capacity issues resolved

  • Ambitions for

growth fully realised

  • Achievement of

world class performance evident in results

✓

Year 5 2019

“Double

  • perati

ng profits”

  • All divisions in

attractive, high growth markets

Supported by value enhancing acquisitions

Organic initiatives

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IMI plc Interim Results Presentation

Q&A

The Executive Team

IMI plc Interim Results Presentation

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