Half Yearly Report

RNS Number : 0004N

IMI PLC

25 August 2011

 



25 August 2011

IMI plc Interim Financial Report

IMI plc, the global engineering group, today announces its interim results for the six months ended 30 June 2011.

	Six months ended 30 June
Continuing operations:	2011		2010		change
Revenue	£1,032m		£925m		+12%
Segmental operating profit1	£176.4m		£145.6m		+21%
Segmental operating margin	17.0%		15.7%
Adjusted profit before tax2	£171.3m		£136.4m		+26%
As reported:
Operating profit	£148.3m		£136.6m		+9%
Profit before tax	£144.3m		£133.5m		+8%
Adjusted basic earnings per share3	37.9p		29.8p		+27%
Basic earnings per share	31.9p		29.4p		+9%
Interim dividend	11.0p		9.0p		+22%
Net borrowings	£168m		£157m

Norman Askew, Chairman of IMI commented:

"The Group has delivered a strong set of first half results with good organic growth of 8% and further margin improvement.  We are pleased to increase the interim dividend by 22%.

Macroeconomic indicators have weakened over recent weeks.  Whilst noting some slowdown in industrial demand in Southern Europe and the UK, we have, more generally, not yet seen any material change in underlying order trends since the end of June, with most customers remaining positive about their future investment plans.  The Company retains a full array of operational measures to quickly reduce cost and underpin operating margins in the event that demand does weaken appreciably.  However, based on current order trends, we still expect to make further good progress in the second half of this year.

Longer term IMI is well placed to deliver sustainable growth through an acceleration of its new product activity and to deliver further margin improvement through optimised pricing and extensive supply chain cost reduction initiatives."

1     before exceptional items (restructuring, acquired intangible amortisation and the reversal of net economic hedge contract gains) totalling £28.1m (2010: £9.0m). 2     before exceptional items (restructuring, acquired intangible amortisation and financial instruments) totalling £27.0m (2010: £2.9m) and including economic hedge contract gains and losses totalling £0.8m (2010: £2.1m).

3     before the after tax net cost of exceptional items totalling £19.0m (2010: £1.5m).

INTERIM FINANCIAL REPORT

Overview

In the first half of the year IMI has delivered both good organic growth and further margin improvement.  Group revenues grew by 12%, on a reported basis, reflecting continued improvement in trading conditions in most of our end markets.  On an organic basis, after adjusting for the acquisition of Zimmermann & Jansen ('Z&J') at the end of last year and for exchange rate movements, revenues were up 8%.  Segmental operating profit was £176.4m, an increase of 21% on a reported basis and 15% on an organic basis.   Adjusted basic earnings per share increased by 27% to 37.9p.

As a result of the strong first half performance and as a reflection of its confidence in the long term prospects of the Group the Board has decided to increase the interim dividend by 22% to 11.0p (2010: 9.0p).  This includes an element of rebalancing following the 29% increase in the final dividend for 2010. 

Macroeconomic uncertainty has increased over recent weeks, with ISM and OECD lead indicators in both the US and Europe pointing to lower expectations of growth into 2012.  Whilst noting some slowdown in industrial demand from a number of southern European markets and the UK (which collectively account for around 10% of IMI Group revenues), and a post Fukushima weakening in demand for some of our nuclear products (less than 5% of IMI Group revenues) we have yet to see any material change in underlying order trends since the end of June, with most customers remaining positive about their future investment plans.

Whilst taking careful note of these weakening macroeconomic indicators, our business plan has for some time assumed an extended period of slow GDP growth in most western markets.  Our own growth ambitions are fuelled by an acceleration in new product activity through leveraging our market leading fluids technologies; a growing exposure to attractive end market sectors such as clean energy, energy efficiency, environmental control, and life sciences; and a focus on increasing our exposure to faster growing emerging markets.  We continued to invest in these 'sweetspot' areas during the first half, recruiting over 135 additional key account managers and engineers, with over two thirds of them located in emerging markets.

The other consistent focus of our business plan has been to maintain the margin momentum of recent years, ensuring we secure full value for our bespoke and differentiated products, whilst driving down the cost of our supply chain through low cost sourcing and manufacturing.  For five years now we have consistently delivered price and value benefits comfortably in excess of any supply chain inflation, irrespective of macroeconomic circumstances, and this pattern continued in the first half of 2011.

This combination of a progressively greater exposure to attractive end markets, coupled with a proven ability to more than offset supply chain cost pressures through optimised pricing, should support further progress in spite of a low growth macroeconomic environment.  Should end market demand deteriorate significantly, through our greater operational flexibility, we retain a full array of measures to reduce our cost base in a timely manner and mitigate the impact on levels of profitability. 

We have a very strong balance sheet, and remain committed to delivering a number of earnings enhancing acquisitions in our targeted fields of operation.  Following the Z&J acquisition completed at the end of last year, a number of new opportunities have been identified and the acquisitions pipeline has been strengthened.

Review of results

Segmental revenues increased by 12% to £1,035m (2010: £927m).  On an organic basis, after adjusting for the acquisition of Z&J at the end of last year and for exchange rate movements, segmental revenues were up 8%.  Segmental operating profit was £176.4m, a 21% increase on the prior period (2010: £145.6m).  At constant exchange rates segmental operating profit increased by 20%.  The segmental operating margin was 17.0%, up from 15.7% in the first half last year.  Reported operating profit was up 9% at £148.3m (2010: £136.6m).

Net interest costs, before interest cost capitalised, of £8.3m (2010: £8.5m) were covered 23 times by earnings before interest, tax, depreciation and amortisation (EBITDA) of £187m (2010: £168m) on continuing operations.  The IAS19 pension net financing credit was £3.1m (2010: charge of £0.9m).  The net IAS39 credit of £1.1m (2010: £6.1m) reflects the increase in the value of outstanding derivatives offset by net settlement costs during the period.  The total net financing costs were £4.0m (2010: £3.1m).

Adjusted profit before tax (before exceptional items) was £171.3m, an increase of 26% (2010: £136.4m).

Restructuring costs were £9.9m (2010: £3.3m) and principally reflected costs associated with the moves to low cost manufacturing centres in our Severe Service and Indoor Climate businesses.  Restructuring costs for the full year are expected to be around £20m. Amortisation of acquired intangibles was £17.4m (2010: £3.6m) with the increase arising mainly from amortisation of the Z&J order book and customer relationships.  After restructuring costs, amortisation of acquired intangibles, the reversal of net economic hedge contract gains of £0.8m (2010: £2.1m) and net exceptional financial instrument gains of £1.1m (2010: £6.1m), reported profit before tax was up 8% at £144.3m (2010: £133.5m). 

The estimated effective tax rate on profit before exceptional items for 2011 is 29%, which compares to an effective rate of 30% that applied for both the first half and the full year in 2010.  The total profit for the period after taxation was £102.6m and, after non-controlling interests, the profit attributable to the equity shareholders of the Company was £100.9m.  The average number of shares in issue during the period was 316.2m, giving basic earnings per share from continuing operations of 31.9p, up 9% (2010: 29.4p).  Adjusted basic earnings per share from continuing operations were 37.9p, compared to 29.8p in the first half of 2010, an increase of 27%.

Cash flow

The cash inflow generated from the operations was £116.4m, compared to £134.1m in the corresponding period last year. This included a working capital outflow of £64.4m against an outflow of £26.4m in the prior period.  Whilst trade and other receivables increased by £51.0m, the Group has reduced the percentage of overdue receivables in each of the five platform businesses during the first half.  There was an increase in inventories of £31.9m, much of which has been built up in Severe Service to help support the growing order book and to manage the moves to lower cost manufacturing facilities.  Capital expenditure on property, plant and equipment amounted to £19.0m and was 1.0 times the depreciation charge for the period of £19.1m.  The other major cash outflows in the period were £40.6m of tax, dividends of £53.9m, £13.9m on restructuring and £21.5m on the settlement of balance sheet hedging derivatives.  The total cash outflow for the period was £32.5m, compared with an inflow in the first half of last year of £33.0m.

Balance sheet

The balance sheet remains strong with the ratio of net debt to the last twelve months EBITDA being 0.4 at the end of June (December 2010: 0.4).  Net debt increased slightly during the period to £168m (December 2010: £145m) following payment of the final dividend and the cash outflows highlighted above as well as an adverse currency impact of £11m.   

The Group maintains an appropriate mixture of cash and short, medium and long term debt arrangements which provide sufficient headroom for both ongoing activities and appropriate bolt-on acquisitions.  Following some undrawn bank facilities maturing during the period, a total of £152m was available at the end of June (December 2010: £213m).

Shareholders' equity at the end of June was £581.5m, an increase of £55.8m since the end of last year, which includes the attributable profit for the period of £100.9m, plus an after-tax actuarial gain on the defined benefit pension plans of £4.1m and the 2010 final dividend of £53.9m paid in May.

Pensions update

The IAS19 net pension deficit was £188m which compares to the deficits of £329m at June 2010 and £199m at December 2010.  Of this amount, £97m related to the UK Fund which is the most significant of the Group's defined benefit obligations.  The movement mainly comprised a gain from changes in actuarial assumptions of £5m and a gain from investment performance of £7m. The next triennial actuarial valuation of the UK Fund is currently being undertaken as at the end of March 2011.

Operations review

The following review of our business areas for the six months to 30 June 2011 compares the performance of our operations with the six month period to 30 June 2010.  This section also comments on the current market conditions in each of our businesses.

Severe Service

		2011	2010
	Segmental Revenue	£258m	£217m
	Segmental Operating Profit	£41.3m	£38.4m
	Segmental Operating Margin	16.0%	17.7%

After a weaker first four months, Severe Service had a strong finish to the period with revenues for the first half recovering to just 1% down on last year on an organic basis, after adjusting for movements in exchange rates and for Z&J which was acquired at the end of 2010.  Z&J performed well in the period with a segmental operating profit of £6.2m on revenue of £39m.  On a reported basis, including Z&J, revenues were up 19% at £258m.  As expected, shipments were stronger in both Oil & Gas and Nuclear which offset lower Fossil Power and Aftermarket shipments reflecting the order intake trends seen in 2010.

The Severe Service order book, excluding Z&J, has increased by 13% since the end of 2010 driven primarily by the ongoing recovery in investment in the liquefied natural gas ('LNG') sector and the continuing recovery in overall demand which has seen order intake exceed shipments for the past twelve months.  Overall order intake was up 2% in the first half, excluding Z&J, with lower new construction order intake especially in the Nuclear sector offset by a strong recovery in Aftermarket bookings. In the second half we expect a continuing strong recovery in order intake from the new construction Fossil Power market reflecting both the weaker 2010 comparator and the stronger quotation activity in the first half.  However, we expect the order intake from the Nuclear sector to be impacted by the nuclear incident in Japan earlier in the year.

Z&J performed well in the first half with revenue in line with our expectations and ahead of the same period last year.  Bookings in the first half were ahead of plan, with the Iron & Steel sector notably strong, which should support continued progress in the second half of the year.

As expected, operating margins were impacted in the first half by lower margin shipments to the Nuclear and Oil & Gas sectors and the less favourable mix of Aftermarket business in comparison with the prior year.  Margins, excluding Z&J, were 16.0% (2010: 17.7%) whilst Z&J achieved similar operating margins of 15.9%.  Margins in the second half are expected to recover closer to the levels achieved in the same period last year as shipment volumes increase in line with the growing order book and at more attractive margins.

      Fluid Power

		2011	2010
	Segmental Revenue	£387m	£333m
	Segmental Operating Profit	£74.6m	£49.8m
	Segmental Operating Margin	19.3%	15.0%

We have continued to see strong growth in our Fluid Power business with revenues up 16% on an organic basis compared to the first half of last year.

During the half we have continued to focus on growing the sector business where we are engineering bespoke solutions for key OEM customers.  Overall the sector business grew 18% on an organic basis and now represents over 42% of Fluid Power's revenue.  The Commercial Vehicle sector, in particular, continued to recover strongly with revenues up 39% and we were successful in winning a number of major new projects in the area of emissions control.  The Rail and Energy sectors also performed well, up 14% and 20% respectively.

The business continues to benefit from good operational leverage and other product margin initiatives including value engineering and supplier rationalisation.  In addition we continue to build our capacity and capabilities at our lower cost manufacturing centres, notably in China and the Czech Republic.  This has resulted in another strong uplift in margins in the first half to 19.3% compared to 15.0% in the first half of last year.

We continue to monitor our end markets closely and maintain a regular dialogue with our major customers around the world.   Whilst we have seen some slowdown in industrial demand in Southern Europe and the UK, collectively accounting for around 10% of Fluid Power's revenues, overall the customers continue to be positive on future demand levels. We expect year on year growth in the second half to slow to more normal levels following the strong recovery witnessed in the second half of last year. 

Indoor Climate

		2011	2010
	Segmental Revenue	£150m	£142m
	Segmental Operating Profit	£30.2m	£30.8m
	Segmental Operating Margin	20.1%	21.7%

Indoor Climate revenues were up 3% on an organic basis despite the new commercial construction market remaining subdued during the first half.  We continue to see good levels of refurbishment activity, which amounted to some 70% of our revenues during the half, and is benefiting from the global move towards more energy efficient buildings.

In line with IMI's aim to accelerate future growth, we have increased investment in a number of key areas during the first half.  We have achieved a 27% increase in customers attending our Hydronic seminars during the period to over 44,000, including a significant uplift in North America and China.  We have significantly increased the number of centres designed to demonstrate Hydronic control to our customers in emerging markets and recruited over 40 more Hydronic sales engineers.  All of this investment helps to educate the market more widely in Hydronics and drive the successful "pull model", whereby end customers specify our products and solutions in their designs.

Operating margins in the first half were 20.1% compared to 21.7% in the first half of 2010.  Margins were impacted by around two percentage points from the transactional impact of exchange rate movements on our businesses in Sweden and Switzerland.  We expect margins to improve in the second half, which is normally seasonally stronger, closer to the underlying level achieved in the second half of last year.

Looking forward, the traditional heating season between September and November will again be important and we expect the business to continue to make good progress supported by positive trends on energy efficiency particularly in the refurbishment markets.

Beverage Dispense

		2011	2010
	Segmental Revenue	£161m	£159m
	Segmental Operating Profit	£20.0m	£16.9m
	Segmental Operating Margin	12.4%	10.6%

Beverage Dispense performed well in the first half with organic revenue growth of 5%.  We are continuing to implement our segmentation strategy and to exit a number of older, more commoditised low margin product lines. This accounted for around nearly 5% of revenue in the first half, indicating an underlying organic growth rate for the period of closer to 10%. 

The best performing markets have been in the Americas where we have seen very strong demand with a number of major project successes.  Elsewhere revenues were down in China where the major global brand owners paused some of their capital programmes and the UK remained very challenging.  Markets in continental Europe stabilised after a difficult year in 2010.

We remain focused on improving the quality of the overall sales mix in the business, accelerating the growth of higher margin new products in areas such as smoothies, water, juice and frozen drinks whilst continuing the product exits noted above.  This focus has continued to improve margins with first half operating margins of 12.4% up from 10.6% in the first half of last year.

Overall, we expect beverage markets to be stable in the remainder of the year and for the business to continue to make good progress.

Merchandising

		2011	2010
	Segmental Revenue	£79m	£76m
	Segmental Operating Profit	£10.3m	£9.7m
	Segmental Operating Margin	13.0%	12.8%

Merchandising revenues were up 10% on an organic basis compared to the first half of last year.  This positive performance has been driven by good growth in both the automotive and beverage sectors.

During the half we opened the In-Vision retail science laboratory in Milwaukee, US.  This enables us to demonstrate to customers how we can deliver a sales uplift on their most profitable product lines in a state of the art facility using the latest immersive 3D technology.  Initial feedback following the first customer visits has been very positive.

We remain focused on improving the quality of this business by targeting higher margin project opportunities where we can add more value for customers.  Operating margins in the first half improved to 13.0% compared to 12.8% in the first half of last year when we benefited from a property disposal and insurance claim which, collectively benefited last year's first half margin by around two percentage points.

We expect this positive performance to continue in the second half with Merchandising revenues similar to the second half of 2010 which benefited from a large automotive order.

Board and management changes

Effective 1 September 2011, Ian Whiting is appointed Executive Director responsible for Corporate Development with a remit to oversee the acceleration of our M&A activity and of our IMI wide investments in emerging markets.  Roy Twite will take over the responsibility for the Severe Service business.  He retains responsibility for the Fluid Power Group, with Paul Cleaver who was recently appointed as Business Unit President reporting directly to him.  Executive responsibility for the two Retail Dispense businesses will revert to Martin Lamb.

As announced in May 2011, Roberto Quarta was appointed to the Board as a Non-Executive Director with effect from 1 June 2011.  He will take over as Chairman with effect from 1 November 2011 when Norman Askew retires.  Sean Toomes, President of Indoor Climate, was also appointed to the Board as an Executive Director on 1 June 2011.

Outlook

The Group has delivered a strong set of first half results with good organic growth of 8% and further margin improvement.  We are pleased to increase the interim dividend by 22%.

Macroeconomic indicators have weakened over recent weeks.  Whilst noting some slowdown in industrial demand in Southern Europe and the UK, we have, more generally, not yet seen any material change in underlying order trends since the end of June, with most customers remaining positive about their future investment plans.  The Company retains a full array of operational measures to quickly reduce cost and underpin operating margins in the event that demand does weaken appreciably.  However, based on current order trends, we still expect to make further good progress in the second half of this year.

Longer term IMI is well placed to deliver sustainable growth through an acceleration of its new product activity and to deliver further margin improvement through optimised pricing and extensive supply chain cost reduction initiatives.

Going concern

The Group has considerable financial resources together with long-standing relationships with a number of customers, suppliers and funding providers across different geographic areas and industries.  The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group is able to operate within the level of its current bank facilities without needing to renew facilities expiring in the next 12 months.  As a consequence, the directors believe that the Group is well placed to manage its business risks successfully despite the uncertainties inherent in the current economic outlook.  Additionally, as part of the Group's normal ongoing funding review, the Group has received indicative offers of additional funding facilities and confirmation of the lenders' intention to agree to the renewal or extension of a number of existing facilities.

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future.  Accordingly, they continue to adopt the going concern basis in preparing the interim financial report.

Principal Risks and Uncertainties

The Group has in place a risk management structure and internal controls which are designed to identify, manage and mitigate business risk.

In common with all businesses, IMI faces a number of risks and uncertainties which could have a material impact on the Group's long-term performance.

On pages 34 to 35 of its 2010 Annual Report (a copy of which is available at IMI's website at www.imiplc.com), the Company sets out what the Directors regarded as being the principal risks and uncertainties facing the Group and which could have a material impact on the Group's long-term performance.  These include: legal and regulatory; compliance and internal controls; health, safety and environmental; pension funding; products and technology; economic and market environment; key customers; supply chain; competitive markets; M&A activity; and talent acquisition and retention.  These risks remain valid and have the potential to impact the Group during the remainder of the second half of 2011.  The impact of the economic and end-market environments in which the Group's businesses operate are considered in the operations review and outlook sections of this Interim Financial Report above, together with an indication if management is aware of any likely change in this situation.

Cautionary Statement

This Interim Financial Report contains forward-looking statements which are made in good faith based on the information available at the time of its approval.  It is believed that the expectations reflected in these statements are reasonable but they may be affected by a number of risks and uncertainties that are inherent in any forward-looking statement which could cause actual results to differ materially from those currently anticipated.

Responsibility statement of the directors in respect of the Interim Financial Report

We confirm that to the best of our knowledge:

·	the condensed set of interim financial statements has been prepared in accordance with IAS34 'Interim Financial Reporting' as adopted by the EU;
·	the Interim Financial Report includes a fair review of the information required by DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year;
·	there were no related party transactions or changes in the related party transactions described in the 2010 Annual Report that materially affected the Group's results or financial position during the six months ended 30 June 2011.

The Directors of IMI plc are listed in the IMI Annual Report for the year ended 31 December 2010, with the exception of the Board and management changes discussed above.

Approved by the Board of IMI plc and signed on its behalf by:

Norman B M Askew

Chairman

24 August 2011

INDEPENDENT REVIEW REPORT TO IMI plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 which comprises the Condensed Consolidated Interim Income Statement, the Condensed Consolidated Interim Statement of Comprehensive Income, the Condensed Consolidated Interim Balance Sheet, the Condensed Consolidated Interim Statement of Changes in Equity, the Condensed Consolidated Interim Statement of Cash Flows and the related notes.  We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 12, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Ernst & Young LLP

Birmingham

24 August 2011

CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT
												Restated (note 1)
		Notes		6 months to 30 June 2011 (unaudited)								6 months to 30 June 2010 (unaudited)								Year to 31 Dec 2010
					Before except- ional items		Except- ional items		Total			Before except- ional items			Except- ional items		Total			Before except- ional items			Except- ional items		Total
					£m		£m		£m			£m			£m		£m			£m			£m		£m
Revenue			2		1,035		(3)		1,032			927			(2)		925			1,917			(6)		1,911
Segmental operating profit			2		176.4				176.4			145.6					145.6			319.7					319.7
Restructuring costs							(9.9)		(9.9)						(3.3)		(3.3)						(16.0)		(16.0)
Employee benefit curtailment
	- UK scheme						-		-						-		-						15.1		15.1
Acquired intangible amortisation							(17.4)		(17.4)						(3.6)		(3.6)						(7.0)		(7.0)
Reversal of net economic hedge
	contract gains						(0.8)		(0.8)						(2.1)		(2.1)						(2.7)		(2.7)
Operating profit			2		176.4		(28.1)		148.3			145.6			(9.0)		136.6			319.7			(10.6)		309.1
Financial income			5		1.2		12.9		14.1			2.3			11.7		14.0			5.2			20.5		25.7
Financial expense			5		(9.4)		(11.8)		(21.2)			(10.6)			(5.6)		(16.2)			(20.5)			(8.2)		(28.7)
Net finance income/(expense)
	relating to defined benefit
	pension schemes		5		3.1				3.1			(0.9)					(0.9)			-					-
Net financial (expense)/income			5		(5.1)		1.1		(4.0)			(9.2)			6.1		(3.1)			(15.3)			12.3		(3.0)
Profit before tax					171.3		(27.0)		144.3			136.4			(2.9)		133.5			304.4			1.7		306.1
Taxation			6		(49.7)		8.0		(41.7)			(40.9)			1.4		(39.5)			(91.3)			(1.2)		(92.5)
Profit from continuing operations					121.6		(19.0)		102.6			95.5			(1.5)		94.0			213.1			0.5		213.6
Profit from operations discontinued
	in prior periods		4				-		-						5.4		5.4						12.8		12.8
Total profit for the period					121.6		(19.0)		102.6			95.5			3.9		99.4			213.1			13.3		226.4
Attributable to:
	Owners of the parent								100.9								99.3								224.7
	Non-controlling interests								1.7								0.1								1.7
Profit for the period									102.6								99.4								226.4
Earnings per share			7
	Basic - from profit for the period								31.9p								31.1p								70.4p
	Diluted - from profit for the period								31.4p								30.7p								69.4p
	Basic - from continuing operations								31.9p								29.4p								66.4p
	Diluted - from continuing operations								31.4p								29.0p								65.4p
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
											6 months to 30 June 2011 (unaudited)						6 months to 30 June 2010 (unaudited)					Year to 31 Dec 2010
											£m			£m			£m		£m			£m			£m
Profit for the period														102.6					99.4						226.4
Other comprehensive income
Change in fair value of effective net investment hedge derivatives											(2.0)						(4.6)					(6.5)
Income tax effect on above											0.5						1.3					1.8
Exchange differences on translation of foreign operations net of
hedge settlements and funding revaluations											6.8						4.5					16.9
Income tax effect on above											(1.4)						(0.6)					(0.9)
														3.9					0.6						11.3
Fair value gain/(loss) on available for sale financial assets														1.0					1.8						(2.5)
Actuarial gain/(loss) on defined benefit plans											7.6						(123.1)					(22.2)
Income tax effect											(3.5)						34.6					3.4
														4.1					(88.5)						(18.8)
Other comprehensive income for the period, net of tax														9.0					(86.1)						(10.0)
Total comprehensive income for the period, net of tax														111.6					13.3						216.4
Attributable to:
Owners of the parent														110.0					12.9						214.4
Non-controlling interests														1.6					0.4						2.0
Total comprehensive income for the period, net of tax														111.6					13.3						216.4
CONDENSED CONSOLIDATED INTERIM BALANCE SHEET
																	Restated (note 1)					Restated (note 1)
											30 June 2011						30 June 2010					31 Dec 2010
											(unaudited)						(unaudited)
											£m						£m					£m
Assets
Intangible assets											510.0						391.6					519.3
Property, plant and equipment											247.0						222.8					241.3
Employee benefit assets											1.4						-					1.6
Deferred tax assets											55.2						114.0					56.3
Other receivables											4.9						4.7					4.9
Other financial assets											6.5						6.8					7.0
Total non-current assets											825.0						739.9					830.4
Inventories											329.9						265.3					288.0
Trade and other receivables											408.2						342.2					345.2
Other current financial assets											8.2						12.7					12.3
Current tax											5.1						3.9					4.8
Investments											19.6						18.3					19.2
Cash and cash equivalents											84.5						132.6					122.9
Total current assets											855.5						775.0					792.4
Total assets											1,680.5						1,514.9					1,622.8
Liabilities
Bank overdraft											(4.6)						(0.8)					(2.5)
Interest-bearing loans and borrowings											(1.0)						(2.9)					(13.2)
Provisions											(8.3)						(14.5)					(13.9)
Current tax											(39.4)						(25.0)					(36.8)
Trade and other payables											(457.4)						(359.1)					(422.8)
Other current financial liabilities											(7.9)						(4.7)					(4.6)
Total current liabilities											(518.6)						(407.0)					(493.8)
Interest-bearing loans and borrowings											(246.6)						(285.8)					(252.6)
Employee benefit obligations											(188.9)						(329.3)					(201.0)
Provisions											(45.2)						(44.3)					(47.4)
Deferred tax liabilities											(20.7)						(15.2)					(20.5)
Other payables											(29.6)						(19.5)					(31.7)
Total non-current liabilities											(531.0)						(694.1)					(553.2)
Total liabilities											(1,049.6)						(1,101.1)					(1,047.0)
Net assets											630.9						413.8					575.8
Equity
Share capital											85.0						84.9					85.0
Share premium											168.9						167.4					168.1
Other reserves											71.4						56.7					67.4
Retained earnings											256.2						55.8					205.2
Equity attributable to owners of the parent											581.5						364.8					525.7
Non-controlling interests											49.4						49.0					50.1
Total equity											630.9						413.8					575.8
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
			Share capital			Share premium account		Capital redemption reserve		Hedging reserve			Translation reserve			Retained earnings		Total parent equity			Non-controlling interests			Total equity
			£m			£m		£m		£m			£m			£m		£m			£m			£m
As at 1 January 2011			85.0			168.1		7.9		2.7			56.8			205.2		525.7			50.1			575.8
Profit for the period																100.9		100.9			1.7			102.6
Other comprehensive income										(1.5)			5.5			5.1		9.1			(0.1)			9.0
Total comprehensive income										(1.5)			5.5			106.0		110.0			1.6			111.6
Issue of share capital						0.8												0.8						0.8
Dividends paid																(53.9)		(53.9)						(53.9)
Non-controlling interest payable
	within one year																				(2.3)			(2.3)
Share based payments (net
	of tax)															6.8		6.8						6.8
Shares acquired for employee
	share scheme trust															(7.9)		(7.9)						(7.9)
At 30 June 2011			85.0			168.9		7.9		1.2			62.3			256.2		581.5			49.4			630.9
As at 1 January 2010			84.9			166.6		7.9		7.4			41.1			91.9		399.8			2.2			402.0
Profit for the period																99.3		99.3			0.1			99.4
Other comprehensive income										(3.3)			3.6			(86.7)		(86.4)			0.3			(86.1)
Total comprehensive income										(3.3)			3.6			12.6		12.9			0.4			13.3
Issue of share capital						0.8												0.8						0.8
Dividends paid																(42.2)		(42.2)						(42.2)
Share based payments (net
	of tax)															4.0		4.0						4.0
Shares acquired for employee
	share scheme trust															(10.5)		(10.5)						(10.5)
Investment in partnership
	by UK Pension Fund																				46.4			46.4
At 30 June 2010			84.9			167.4		7.9		4.1			44.7			55.8		364.8			49.0			413.8
As at 1 January 2010			84.9			166.6		7.9		7.4			41.1			91.9		399.8			2.2			402.0
Profit for the year																224.7		224.7			1.7			226.4
Other comprehensive income										(4.7)			15.7			(21.3)		(10.3)			0.3			(10.0)
Total comprehensive income										(4.7)			15.7			203.4		214.4			2.0			216.4
Issue of share capital			0.1			1.5												1.6						1.6
Dividends paid																(70.9)		(70.9)			(0.5)			(71.4)
Share based payments (net
	of tax)															10.3		10.3						10.3
Shares acquired for employee
	share scheme trust															(29.5)		(29.5)						(29.5)
Investment in partnership
	by UK Pension Fund																				48.6			48.6
Non-controlling interest payable
	within one year *																				(2.2)			(2.2)
At 31 December 2010			85.0			168.1		7.9		2.7			56.8			205.2		525.7			50.1			575.8
* Previously described as - Income earned by partnership
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
																	Restated (note 1)					Restated (note 1)
											6 months to 30 June 2011 (unaudited)						6 months to 30 June 2010 (unaudited)					Year to 31 Dec 2010
											£m						£m					£m
Cash flows from operating activities
Profit for the period from continuing operations											102.6						94.0					213.6
Adjustments for:
Depreciation											19.1						25.3					47.2
Amortisation and impairment											19.8						5.9					12.8
Gain on sale of property, plant and equipment											-						(2.2)					(2.9)
Loss on disposal of investments											-						-					0.1
Financial income											(14.1)						(14.0)					(25.7)
Financial expense											21.2						16.2					28.7
Net finance (income)/expense relating to defined benefit pension schemes											(3.1)						0.9					-
Equity-settled share-based payment expenses											4.1						1.8					5.5
Income tax expense											41.7						39.5					92.5
Increase in trade and other receivables											(51.0)						(35.9)					(13.3)
Increase in inventories											(31.9)						(12.5)					(7.8)
Increase in trade and other payables											18.5						22.0					53.3
Decrease in provisions and employee benefits											(10.5)						(6.9)					(26.0)
Cash generated from the operations											116.4						134.1					378.0
Income taxes paid											(40.6)						(29.3)					(56.3)
											75.8						104.8					321.7
CCI investigation costs											(1.2)						(2.9)					(4.3)
Refund of EU fine *											-						5.4					5.4
Additional pension scheme funding											-						-					(16.8)
Special contribution to the UK Pension Fund											-						(48.6)					(48.6)
Net cash from operating activities											74.6						58.7					257.4
Cash flows from investing activities
Interest received											1.2						2.3					5.2
Proceeds from sale of property, plant and equipment											0.5						4.5					7.1
Sale of investments											1.2						1.1					0.8
Purchase of investments											(0.8)						(0.2)					(0.3)
Settlement of transactional derivatives											2.9						3.9					4.0
Settlement of currency derivatives hedging balance sheet											(21.5)						11.1					(2.7)
Income from discontinued business (Polypipe) *											-						-					7.4
Acquisitions of controlling interests											3.6						(1.6)					(117.4)
Acquisition of property, plant and equipment											(19.0)						(20.0)					(45.8)
Capitalised development expenditure											(2.4)						(1.4)					(5.0)
Net cash from investing activities											(34.3)						(0.3)					(146.7)
Cash flows from financing activities
Interest paid											(9.5)						(9.7)					(20.7)
Investment in pension partnership by UK Pension Fund											-						48.6					48.6
Acquisition of non-controlling interests											-						(12.4)					(12.4)
Payment to non-controlling interest											(2.3)						-					-
Purchase of own shares											(7.9)						(10.5)					(29.5)
Proceeds from the issue of share capital for employee     share schemes											0.8						0.8					1.6
Net (repayment)/drawdown of borrowings											(12.2)						22.7					14.2
Dividends paid to non-controlling interests											-						-					(0.5)
Dividends paid to equity shareholders											(53.9)						(42.2)					(70.9)
Net cash from financing activities											(85.0)						(2.7)					(69.6)
Net (decrease)/increase in cash and cash equivalents											(44.7)						55.7					41.1
Cash and cash equivalents at the start of the year											120.4						75.7					75.7
Effect of exchange rate fluctuations on cash held											4.2						0.4					3.6
Cash and cash equivalents at the end of the period **											79.9						131.8					120.4
* Representing profit from operations discontinued in prior periods
** Net of bank overdrafts
Reconciliation of net cash to movement in net borrowings appears in note 9.

1.  Reclassification

The following reclassifications have been made in these condensed consolidated interim financial statements to reflect changes in presentation introduced in the 2010 Annual report:

·      Net financial expense has been restated to show net finance expense relating to defined benefit pension schemes separately on the face of the income statement.  The effect of this restatement is to reduce financial income and financial expense for the six months ended 30 June 2010 by £34.1m and £35.0m respectively and reporting a net finance expense relating to defined benefit pension schemes of £0.9m.

·      The consolidated balance sheet at 30 June 2010 has been restated to show other receivables and other financial assets due after more than one year as non-current assets.  The effect is to transfer £11.5m from current assets to non-current assets.

Settlement of currency derivatives hedging balance sheet has been reclassified as investing activity.  This was previously recognised as a currency fluctuation and consequently has increased cash flow for the 6 months to 30 June 2010 by £11.1m and reduced cash flow for the 12 months to 31 December 2010 by £2.7m.

The goodwill on acquisition of Z&J has been finalised resulting in the 2010 year end balance sheet being restated.  Further details of these changes are disclosed in note 3.

2.  Segmental information

Segmental information is presented in the condensed consolidated interim financial statements for each of the Group's operating segments.  The operating segment reporting format reflects the Group's management and internal reporting structures.  Inter-segment revenue is insignificant.    

The Group continues to include the following five operating segments and activities:       

Fluid Controls                                                                                                                                                     

Severe Service

Design, manufacture, supply and service of high performance critical control valves and associated equipment for power generation plants, oil and gas producers, petrochemical and iron and steel plants and other process industries.

Fluid Power

Design, manufacture and supply of motion and fluid control systems, principally pneumatic devices, for original equipment manufacturers in commercial vehicle, life science, process, rail, food and beverage and other industries.

Indoor Climate

Design, manufacture and supply of indoor climate control systems, principally balancing valves and water conditioning and pressurisation equipment for large commercial buildings and thermostatic radiator valves for residential buildings.

Retail Dispense

Beverage Dispense

Design, manufacture and supply of still and carbonated beverage dispense systems and associated merchandising equipment for brand owners and retailers.

Merchandising

Design, manufacture and supply of point of purchase display systems for brand owners and retailers.

Zimmermann & Jansen was acquired on 31 December 2010 and its results are included in Severe Service with effect from 31 December 2010.  There is no impact on prior year segmental revenues and operating profits.

Information regarding the operations of each reporting segment is included below.  Performance is measured based on segmental operating profit which is the profit reported by the business, stated before exceptional items including restructuring, acquired intangible amortisation, the reversal of economic hedge contract gains and losses and the employee benefit curtailment on the UK scheme.  Businesses enter into forward currency and metal contracts to provide economic hedges against the impact on profitability of swings in rates and values in accordance with the Group's policy to minimise the risk of volatility in revenues, costs and margins.  Segmental operating profits are therefore charged/credited with the impact of these contracts.  In accordance with IAS39, these contracts do not meet the technical provisions required for hedge accounting and gains and losses are reversed out of segmental profit and are recorded in net financial income and expense for the purposes of the condensed consolidated interim income statement.

		Segmental				Segmental				Segmental
		revenue				operating profit				operating margin
		6 months to 30 June 2011	6 months to 30 June 2010	Year to 31 Dec 2010		6 months to 30 June 2011	6 months to 30 June 2010	Year to 31 Dec 2010		6 months to 30 June 2011	6 months to 30 June 2010	Year to 31 Dec 2010
		£m	£m	£m		£m	£m	£m		%	%	%
Fluid Controls		795	692	1,433		146.1	119.0	262.4		18.4	17.2	18.3
	Severe Service	258	217	452		41.3	38.4	78.4		16.0	17.7	17.3
	Fluid Power	387	333	685		74.6	49.8	113.7		19.3	15.0	16.6
	Indoor Climate	150	142	296		30.2	30.8	70.3		20.1	21.7	23.8
Retail Dispense		240	235	484		30.3	26.6	57.3		12.6	11.3	11.8
	Beverage Dispense	161	159	315		20.0	16.9	32.0		12.4	10.6	10.2
	Merchandising	79	76	169		10.3	9.7	25.3		13.0	12.8	15.0
Segmental result		1,035	927	1,917		176.4	145.6	319.7		17.0	15.7	16.7

Reconciliation of reported segmental revenue and operating profit
						Revenue				Profit
						6 months to 30 June 2011	6 months to 30 June 2010	Year to 31 Dec 2010		6 months to 30 June 2011	6 months to 30 June 2010	Year to 31 Dec 2010
						£m	£m	£m		£m	£m	£m
Segmental result						1,035	927	1,917		176.4	145.6	319.7
Restructuring costs										(9.9)	(3.3)	(16.0)
Employee benefit curtailment - UK scheme										-	-	15.1
Acquired intangible amortisation										(17.4)	(3.6)	(7.0)
Reversal of net economic hedge contract gains						(3)	(2)	(6)		(0.8)	(2.1)	(2.7)
Total revenue/operating profit reported						1,032	925	1,911		148.3	136.6	309.1
Net financial expense										(4.0)	(3.1)	(3.0)
Profit before tax - continuing operations										144.3	133.5	306.1

3.  Acquisitions

There were no acquisitions in the period to 30 June 2011.

The consideration for Z&J acquired at the end of 2010 has increased by £2.8m in accordance with the sale and purchase agreement.  In addition net assets have been increased by £0.6m, represented by an increase in trade and other receivables of £0.4m and a reduction in trade and other payables by £0.4m with corresponding increases in the deferred tax liability of £0.2m.  The combined impact of these adjustments has increased the goodwill by £2.2m.

4.  Discontinued operations

There were no operations discontinued during the period.

5.  Net financial income and expense
					6 months to 30 June 2011				6 months to 30 June 2010
Recognised in the income statement					Interest	Financial	Total		Interest	Financial		Total
						instruments				instruments
Interest income on bank deposits					1.2		1.2		2.2			2.2
Financial instruments at fair value through
profit or loss:
Designated hedges						0.3	0.3			0.4		0.4
Other economic hedges
- current period trading						8.0	8.0			2.9		2.9
- future period transactions						4.6	4.6			8.4		8.4
Income from investments					-		-		0.1			0.1
Financial income					1.2	12.9	14.1		2.3	11.7		14.0
Interest expense on interest bearing
loans and borrowings					(9.5)		(9.5)		(10.7)			(10.7)
Interest cost capitalised					0.1		0.1		0.1			0.1
Financial instruments at fair value through
profit or loss:
Designated hedges						(0.3)	(0.3)			(0.3)		(0.3)
Other economic hedges
- current period trading						(8.9)	(8.9)			(3.4)		(3.4)
- future period transactions						(2.6)	(2.6)			(1.9)		(1.9)
Financial expense					(9.4)	(11.8)	(21.2)		(10.6)	(5.6)		(16.2)
Net finance income/(expense) relating to
defined benefit pension schemes					3.1		3.1		(0.9)			(0.9)
Net financial (expense)/income					(5.1)	1.1	(4.0)		(9.2)	6.1		(3.1)
									Year to 31 Dec 2010
Recognised in the income statement									Interest	Financial	Total
										instruments
Interest income on bank deposits									5.2		5.2
Financial instruments at fair value through
profit or loss:
Designated hedges										0.5	0.5
Other economic hedges
- current year trading										9.6	9.6
- future year transactions										10.4	10.4
Financial income									5.2	20.5	25.7
Interest expense on interest bearing
loans and borrowings									(20.7)		(20.7)
Interest cost capitalised									0.2		0.2
Financial instruments at fair value through
profit or loss:
Designated hedges										(0.4)	(0.4)
Other economic hedges
- current year trading										(7.3)	(7.3)
- future year transactions										(0.5)	(0.5)
Financial expense									(20.5)	(8.2)	(28.7)
Net finance expense relating to
defined benefit pension schemes									-		-
Net financial (expense)/income									(15.3)	12.3	(3.0)
Included in financial instruments are current year trading gains and losses on economically effective transactions which for management reporting purposes (see note 2) are included in segmental operating profit.  For statutory purposes these are required to be shown within net financial income and expense above.  Gains or losses for future year transactions are in respect of financial instruments held by the Group to provide stability of future trading cash flows.

6.  Taxation

The tax charge before exceptional items is £49.7m which equates to an effective tax rate of 29% (2010: 30%).

The tax rate before exceptional items includes the reduction in the UK Corporation tax rate to 26% from 1 April 2011.  This rate change was substantially enacted prior to the interim balance sheet date and the resulting impact on the Group's deferred tax position is recognised at the interim date.

Additional changes to the main rate of UK Corporation tax are proposed, to reduce the rate by 1% per annum to 23% by 1 April 2014.  These changes had not been substantively enacted at the balance sheet date and consequently are not included in these condensed financial statements.

7.  Earnings per ordinary share
		30 June	30 June	31 Dec
		2011	2010	2010
		million	million	million
Weighted average number of shares for the purpose of basic earnings per share		316.2	319.6	319.0
Dilutive effect of employee share options		5.4	4.1	4.8
Weighted average number of shares for the purpose of diluted earnings per share		321.6	323.7	323.8

Basic and diluted earnings per share have been calculated on earnings of £100.9m (2010: £99.3m).

The directors consider that adjusted earnings per share figures, using earnings as calculated below, give a more meaningful indication of the underlying performance because either the quantum, the one off nature, or volatility of these items would otherwise distort the underlying performance.

			6 months to 30 June 2011	6 months to 30 June 2010	Year to 31 Dec 2010
			£m	£m	£m
Profit for the period from continuing operations			102.6	94.0	213.6
Non-controlling interests			(1.7)	(0.1)	(1.7)
			100.9	93.9	211.9
Charges/(credits) included in profit for the period:
	Restructuring costs		9.9	3.3	16.0
	Employee benefit curtailment - UK scheme		-	-	(15.1)
	Acquired intangible amortisation		17.4	3.6	7.0
	Financial instruments excluding economic hedge contract gains and losses		(0.3)	(4.0)	(9.6)
			127.9	96.8	210.2
	Taxation on charges/(credits) included in profit before tax		(8.0)	(1.4)	1.2
Earnings for adjusted EPS			119.9	95.4	211.4
Adjusted basic EPS			37.9p	29.8p	66.3p
Diluted adjusted EPS			37.3p	29.5p	65.3p

8.  Dividend

The final dividend relating to the year ended 31 December 2010 of 17.0p per share was paid in May 2011 absorbing £53.9m (2010: £42.2m).

In addition, the directors have declared an interim dividend for the current year of 11.0p per share (2010: 9.0p) which will be paid on 14 October 2011 to shareholders on the register on 9 September 2011.  In accordance with IAS10 'Events after the Balance Sheet Date' this interim dividend has not been reflected in the condensed interim financial statements.

9.  Cash flow reconciliations
Reconciliation of net cash to movement in net borrowings
		Restated (note 1)	Restated (note 1)
	6 months to 30 June 2011	6 months to 30 June 2010	Year to 31 Dec 2010
	£m	£m	£m
Net (decrease)/increase in cash and cash equivalents	(44.7)	55.7	41.1
Repayment/(Drawdown) of borrowings	12.2	(22.7)	(14.2)
Cash (outflow)/inflow	(32.5)	33.0	26.9
Currency translation differences	10.2	(17.5)	0.1
Movement in net borrowings in the period	(22.3)	15.5	27.0
Net borrowings at the start of the period	(145.4)	(172.4)	(172.4)
Net borrowings at the end of the period	(167.7)	(156.9)	(145.4)
The total currency effect on the debt movement including currency balance sheet         derivatives settlements	(11.3)	(6.4)	(2.6)

10.  Exchange rates

The income and cash flow statements of overseas operations are translated into sterling at average rates of exchange for the period, balance sheets are translated at period end rates.  The most significant currencies are the Euro and the US Dollar - the relevant rates of exchange were:

		Income statement and cash flow average rates				Balance sheet rates as at
		6 months to 30 June 2011	6 months to 30 June 2010	Year to 31 Dec 2010		30 June 2011	30 June 2010	31 Dec 2010
Euro		1.15	1.15	1.17		1.11	1.22	1.17
US Dollar		1.62	1.52	1.54		1.61	1.50	1.57

11. Property, plant and equipment

Capital expenditure of £19.0m in the period includes £17.1m in respect of plant and equipment, and £1.9m in respect of land and buildings.

12.  Financial information

This condensed set of financial statements has been prepared in accordance with IAS34 'Interim Financial Reporting' as adopted by the EU. The Group's annual financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU.

The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of at least 12 months from the date of this report.  Accordingly, they continue to adopt the going concern basis in the preparation of the condensed financial statements.

As required by the Disclosure and Transparency Rules of the Financial Services Authority, the condensed set of financial statements has been prepared applying the same accounting policies and computation methods that were applied in the preparation of the company's published consolidated financial statements for the year ended 31 December 2010 other than the adoption of amended IAS34 'Interim Financial Reporting', amended IFRS3 'Business Combinations', amended IAS27 'Consolidated and Separate Financial Statements', amended IFRS7 'Financial Instruments: Disclosures', amended IAS1 'Presentation of Financial Statements' and amended IFRIC13 'Customer Loyalty Programmes'.  None of these changes have any significant impact on the results or financial position.  In accordance with amended IAS 34 the Group can confirm that there are no such changes in circumstance, transfers between categories, or reclassification to disclose.

This Interim Financial Report is unaudited, but has been reviewed by the Company's auditor having regard to the International Standard on Review Engagements (UK and Ireland) 2410 'Review of Financial Information Performed by the Independent Auditor of the Entity', issued by the Auditing Practices Board.  A copy of their unqualified review opinion is attached. 

The comparative figures for the financial year ended 31 December 2010 are not the Company's statutory accounts for that financial year as defined in section 435 of the Companies Act 2006. Those accounts have been reported on by the Company's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

This announcement contains certain forward-looking statements with respect to the operations, performance and financial condition of the Group. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information at the time of the approval of this announcement and the Company undertakes no obligation to update these forward-looking statements.  Nothing in this Interim Financial Report should be construed as a profit forecast.

This Interim Financial Report has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to IMI plc and its subsidiaries when viewed as a whole.

References in the commentary to segmental operating profit, operating margins and profit before tax, unless otherwise stated, relate to reported numbers after adjustment for restructuring, employee benefit curtailment - UK Scheme, acquired intangible amortisation and financial instruments excluding economic hedge contract gains and losses. Segmental operating profit is reported as if economic currency and metals hedges were effective for financial reporting purposes.  Business segments enter into forward currency and metal contracts to provide economic hedges against the impact on profitability of swings in rates and values in accordance with the Group's policy tominimisethe risk of volatility in revenues, costs and margins.  Business segmental operating profits are therefore charged/credited with the impact of those contracts.  In accordance with IAS39 'Financial Instruments: Recognition and Measurement', these contracts do not meet the technical provisions required for hedge accounting and gains and losses are recorded in net financial income and expense. References to EPS, unless otherwise stated, relate to reported EPS from continuing operations adjusted for the per share after tax impact of restructuring, employee benefit curtailment - UK scheme, acquired intangible amortisation and financial instruments excluding economic hedge contract gains and losses.  The directors consider that the quantum, one off nature or volatility of these adjustments can distort the underlying performance of the Group and for this reason the commentary discusses these adjusted amounts. 

References to organic growth are to like for like or underlying growth and exclude the impact of exchange rate translation and acquisitions or disposals that are included in headline reported growth figures. The organic growth is derived from excluding any contribution from acquired companies to revenues or profits in the current period until the first anniversary of their acquisition. It also excludes the contribution to revenues or profits in both the current and comparative period from any business that has been disposed of or sold.  This adjusted growth in revenues or profits will then be compared to the adjusted prior period after its re-translation at the average exchange rates of the current period to provide the organic growth rate.

NEXT ANNOUNCEMENT

IMI expects to release its next interim management statement on 10 November 2011.

ENQUIRIES TO:
Will Shaw	Investor Relations Director	Tel: [phone]
Rollo Head/ Charles Chichester	RLM Finsbury	Tel: [phone]

The press release, presentation and video webcast will be available on the corporate website at www.imiplc.com.

Notes to editors:

IMI is a global engineering group focused on the precise control and movement of fluids in critical applications. It works with leading international companies in over 50 countries to deliver innovative engineering solutions, built around valves and actuators, to address global trends such as clean energy, energy efficiency, healthcare and increasing automation. Its shares are listed on the London Stock Exchange and it is a member of the FTSE100. Further information is available at www.imiplc.com.

 

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