Interim Results

IMI PLC 08 September 2003 8 September 2003 IMI plc presents its First Half Results IMI plc, the major international engineering group, today announced its interim results for the six months ended 30 June 2003. 2003 2002 Sales £780m £826m Results before rationalisation & restructuring * Profit before tax £68.3m £66.0m Adjusted earnings per share 12.9p 12.5p Rationalisation & restructuring £2.4m £14.1m Profit before tax £56.4m £47.0m Earnings per share 9.7p 8.5p Net borrowings £199.1m £329.4m Gearing 37% 65% Interest cover before rationalisation & restructuring* 13x 8x * Before goodwill amortisation and exceptional items • Repositioning progressing well • Market positions strengthened • Strong balance sheet CHAIRMAN'S STATEMENT We continue to make good progress with the repositioning of our business, increasingly benefiting from the last two years of restructuring. We have reinvested much of the savings in customer development and innovation activities designed to improve market positions and drive long term growth. In spite of an economic climate that remains challenging, and little improved from that reported six months ago, we are able to announce an increase in half year profit (before tax, rationalisation and restructuring costs, goodwill amortisation and exceptional items) to £68.3m from £66.0m. With the bulk of restructuring completed at the end of last year, profit after rationalisation and restructuring increased to £65.9m from £51.9m. The Board has decided to again maintain the interim dividend at 6.0p. Overall, on a like for like basis, sales have remained steady at similar levels to last year. It is pleasing that we have increased volumes in Fluid Power by around 4% and have significantly increased the forward order books of Severe Service and Merchandising Systems, with good momentum for the second half of the year and beyond. Beverage Dispense had another challenging six months and Indoor Climate is still coping with the German construction market decline. Polypipe continued its solid performance. Our recent acquisitions all made encouraging contributions. DCI Marketing (Merchandising Systems) and STI (Severe Service), acquired last year, are on schedule to deliver significant growth, much of it new product related. Fluid Kinetics (Severe Service) and Commtech (Indoor Climate), acquired earlier this year, have now been fully assimilated and have expanded the options for their respective businesses in technology and service. Our principal low cost manufacturing facilities in Mexico, The Czech Republic and China all continued to improve their efficiency levels and expand their output. With over 1200 people now employed in these countries, we are well on our way to meeting our goal of achieving 30% of manufacturing output from these locations. Increasing focus on sourcing materials locally, together with our other purchasing initiatives, has enabled us to offset inflation pressures elsewhere. The IMI Academy, with its long term aim of building first class customer relationships, is making excellent progress and the investment in innovation through IMI Vision is stimulating further new product developments. Results summary Sales of continuing businesses increased to £780m from £738m including £39m from acquisitions. The impact of exchange rates on translation was negligible. Reported sales of £826m for the same period last year included £88m in respect of businesses subsequently sold. Reported operating profit (before rationalisation and restructuring costs and goodwill amortisation) was £74.0m (2002: £75.5m). 2002 included £2.5m for businesses subsequently sold and a £2.5m SSAP24 pension credit which, as expected, is no longer applicable. After adjusting for these items, the increase in operating profit of continuing businesses was £3.5m including £2.6m from acquisitions. Interest costs were reduced to £5.7m (2002: £9.5m). Profit before tax, before rationalisation and restructuring costs, goodwill amortisation and exceptional items, increased by 3.5% to £68.3m (2002: £66.0m). Rationalisation costs for the period were £2.4m (2002: £14.1m) leaving profit before tax, goodwill amortisation and exceptional items of £65.9m (2002: £51.9m). After goodwill amortisation and exceptional items, profit before tax was £56.4m (2002: £47.0m), an increase of 20%. The effective rate of tax for the year on profit before goodwill and exceptional items is expected to be 33% (2002: 32%). Adjusted earnings per share at 12.9p (2002: 12.5p) increased by 3.2% and earnings per share at 9.7p (2002: 8.5p) increased by 14.1%. Operating cash flow after rationalisation spend was £49m (2002: £61m) and free cash flow before dividend was £31m (2002: £50m). Acquisitions absorbed £15m (2002: £3m net of disposals). Borrowings at the end of June were £199.1m (June 2002: £329.4m) compared with £173.5m at the end of December 2002. Gearing was 37% (June 2002: 65%; December 2002: 33%). Interest cover for the period was 13.0 times (2002: 7.9 times) before rationalisation and restructuring costs and 12.6 times (2002: 6.5 times) after rationalisation and restructuring costs. The interim dividend of 6.0p (2002: 6.0p) costing £21.2m (2002: £21.1m) will be paid on 20 October 2003. OPERATIONS REVIEW The following is a review of our business areas for the six months to June 2003. Comparisons with the previous year relate to continuing operations and operating profit is stated before rationalisation and restructuring costs, goodwill amortisation and exceptional items. FLUID CONTROLS Sales: £362m (2002: £322m) Operating Profit: £36.6m (2002: £29.6m) Severe Service Our Severe Service valves business continues to reap the rewards of the considerable investment in specialist sales engineers with overall order intake growing a further 8% over last year. The much publicised weakness in the US Power market continued but was more than offset by a number of major new contracts in China, and excellent progress in all geographic territories in a buoyant gas market. Our strategy to bolster growth through upgrades to existing plants continues to meet the demands of the market. Sales in the first half were 14% ahead of last year with a high proportion of new valve projects delivered; operating profits improved to £8.1m (2002: £7.4m). Fluid Power The performance of our Fluid Power business was encouraging. Helped by new products, a 12% increase in sales to our key target sectors, and good growth in Asia Pacific, overall volumes were 4% ahead of last year despite an otherwise flat underlying market. The transfer of production to both the Mexican and Czech Republic facilities accelerated during the period and efficiency levels are on track to achieve year end targets. The significant infrastructure changes being made to the European market-facing activities are progressing well, with a number of locations now consolidated. The benefits from the restructuring programme are continuing to mature and have contributed to margin enhancement and an increase in operating profit to £17.4m (2002: £12.2m). Indoor Climate Our Indoor Climate business faced generally subdued market conditions. Balancing valves and commissioning service showed some modest growth but thermostatic radiator valve sales in Germany were again lower, although the decline seems to be slowing. Sales to Eastern Europe have recovered some momentum and an office has been opened to exploit opportunities in China. Attention to cost control enabled margins to be maintained and, excluding acquisitions, operating profit increased to £10.6m (2002: £10.0m). In addition, Commtech, acquired in February to add to our commissioning services business, contributed £9m sales and £0.5m operating profit. RETAIL DISPENSE Sales: £222m (2002: £223m) Operating Profit: £19.2m (2002: £22.4m) Beverage Dispense Stripping out the impact of a one-off £21m contract for frozen carbonated equipment enjoyed in the first half of last year, underlying volumes grew by around 3%. In an otherwise difficult market, with the food-service sector in the US particularly weak and soft volumes generally in Europe, this was an encouraging performance. New products, once again, provided the uplift and our UK business, in particular, performed strongly, supporting an active beer market with a number of innovative products. The relocation of production, both within the US and to Mexico, is now complete. Whilst operational efficiency levels are improving, we are still short of our internal targets. This, coupled with higher than normal rework costs in the first quarter, has impacted first half margins. Although not yet at break-even, our newly established US on-line parts distribution business, BEVCORe, continues to make progress. An improvement in underlying market conditions, particularly in food-service, should enable this business to achieve its considerable potential. Operating profit for the period was £12.9m (2002: £17.5m) on sales of £149m (2002: £174m). Merchandising Systems Excluding DCI, acquired in August 2002, sales volume in our Merchandising Systems business was at the same level as last year, however activity is considerably stronger. Enquiries and quotations are being converted into firm orders or commitments as the added value of merchandising investment is again being recognised. Previously postponed programmes are now being rescheduled and the underlying trend is positive. Order intake in the six months to June 2003 was significantly higher than in 2002. DCI has continued its excellent start with results well ahead of the equivalent period last year before it became part of the Group. In what is traditionally its quieter period it has contributed £28m sales and £1.8m operating profit. In addition, it has achieved strong growth in automotive orders and already has an order book stretching into 2004 and beyond. Merchandising Systems overall had an operating profit of £6.3m (2002: £4.9m) on sales of £73m (2002: £49m) . BUILDING PRODUCTS Sales: £196m (2002: £193m) Operating Profit: £18.2m (2002: £18.5m) In Building Products, the Polypipe core pipes business continues to demonstrate its ability to generate satisfactory returns on the back of a solid UK base. Volumes have held up well and strong emphasis on cost reduction helped mitigate the pressure on margins from raw material prices, which increased during the period before easing off. Other Polypipe businesses are finding some softness in their markets and are taking further steps to reduce the impact on margins. Copper Tube and Fittings As reported in our press release of 2 September, in respect of copper plumbing tube we have now received a Statement of Objections from the European Commission setting out complaints of alleged anti-competitive practices among a number of parties including IMI. The investigation in respect of copper plumbing fittings is continuing but no Statement of Objections has yet been received. We continue to co-operate with the Commission in respect of both investigations. IMI disposed of its copper plumbing tube and fittings businesses during 2002 but retains responsibility for these investigations. OUTLOOK The repositioning is on track and the considerable investments we have made, in customer development and product innovation, are beginning to bear fruit. Whilst the macro-economic environment is difficult, and in our view likely to remain so for some time, our strengthened market positions and reduced cost base should allow us to report progress for the year as a whole. Confidence in our businesses' ability to establish long term profitable growth continues to build. GROUP PROFIT AND LOSS -------------------------------------------------------------------------------- 6 months to 30 June 2003 Restructuring, Before goodwill restructuring, amortisation goodwill and & exceptional exceptionals items Total Notes £m £m £m --------------------------------------- Turnover 1 Total continuing operations 780 780 Discontinued operations - - --------------------------------------- Total turnover 780 780 --------------------------------------- Operating profit 1 Continuing operations before rationalisation and restructuring 74.0 74.0 Rationalisation/ restructuring (2.4) (2.4) Goodwill amortisation (9.5) (9.5) --------------------------------------- Total continuing operations 74.0 (11.9) 62.1 Discontinued operations - - - --------------------------------------- Operating profit 74.0 (11.9) 62.1 Exceptional items Profit on disposal of discontinued operations - - Provision for loss on closure of a business - - Profit on disposal of property - - --------------------------------------- Profit before interest 74.0 (11.9) 62.1 Net interest payable (5.7) (5.7) --------------------------------------- Profit on ordinary activities before taxation 68.3 (11.9) 56.4 Tax on profit 2 (22.5) 0.8 (21.7) --------------------------------------- Profit on ordinary activities after taxation 45.8 (11.1) 34.7 Equity minority interests (0.5) - (0.5) --------------------------------------- Profit for the financial year 45.3 (11.1) 34.2 ------------------------------ Dividends paid and proposed 3 (21.2) --------- Transfer to reserves 13.0 --------- Adjusted earnings per share 4 12.9p Earnings per share 4 9.7p Diluted earnings per share 4 9.7p 6 months to 30 June 2002 Year to 31 December 2002 Before Before restructuring, restructuring, goodwill and goodwill and exceptionals Total exceptionals Total £m £m £m £m ------------------- ------------------ Turnover Total continuing operations 738 738 1463 1463 Discontinued operations 88 88 149 149 ------------------- ------------------ Total turnover 826 826 1612 1612 ------------------- ------------------ Operating profit Continuing operations before rationalisation and restructuring 73.0 73.0 146.0 146.0 Rationalisation/ restructuring (13.4) (31.3) Goodwill amortisation (8.4) (18.0) ------------------- ------------------ Total continuing operations 73.0 51.2 146.0 96.7 Discontinued operations 2.5 1.8 2.2 1.3 ------------------- ------------------ Operating profit 75.5 53.0 148.2 98.0 Exceptional items Profit on disposal of discontinued operations 1.0 4.0 Provision for loss on closure of a business - (30.7) Profit on disposal of property 2.5 19.7 ------------------- ------------------ Profit before interest 75.5 56.5 148.2 91.0 Net interest payable (9.5) (9.5) (16.7) (16.7) ------------------- ------------------ Profit on ordinary activities before taxation 66.0 47.0 131.5 74.3 Tax on profit (21.1) (16.0) (42.1) (17.6) ------------------- ------------------ Profit on ordinary activities after taxation 44.9 31.0 89.4 56.7 Equity minority interests (0.9) (0.9) (1.3) (1.3) ------------------- ------------------ Profit for the financial year 44.0 30.1 88.1 55.4 ----------- ---------- Dividends paid and proposed (21.1) (54.6) -------- ------- Transfer to reserves 9.0 0.8 -------- ------- Adjusted earnings per share 12.5p 25.0p Earnings per share 8.5p 15.7p Diluted earnings per share 8.5p 15.7p GROUP BALANCE SHEET -------------------------------------------------------------------------------- 30 June 30 June 31 December 2003 2002 2002 £m £m £m ------------------------------------ Fixed assets Intangible assets 304.8 291.1 302.5 Tangible assets 309.9 361.7 313.4 ------------------------------------ 614.7 652.8 615.9 ------------------------------------ Current assets Stocks 263.3 313.5 262.0 Debtors 334.2 342.0 305.5 Investments 8.2 8.0 8.2 Cash and deposits 70.7 67.9 74.3 ------------------------------------ 676.4 731.4 650.0 Creditors: amounts falling due within one year Borrowings and finance leases (78.9) (149.3) (65.1) Other creditors (381.3) (348.0) (380.2) ------------------------------------ Net current assets 216.2 234.1 204.7 ------------------------------------ Total assets less current liabilities 830.9 886.9 820.6 Creditors: amounts falling due after more than one year Borrowings and finance leases (190.9) (248.0) (182.7) Other creditors (27.8) (22.9) (25.9) Provisions for liabilities and charges (72.3) (109.7) (81.0) ------------------------------------ Net assets 539.9 506.3 531.0 ------------------------------------ Capital and reserves Called up share capital 88.2 87.9 88.1 Share premium account 135.2 133.0 134.1 Revaluation reserve 1.0 1.0 1.0 Other reserves 1.6 1.6 1.6 Profit and loss account 310.6 279.7 303.1 ------------------------------------ Equity shareholders' funds 536.6 503.2 527.9 ------------------------------------ Minority interests 3.3 3.1 3.1 ------------------------------------ 539.9 506.3 531.0 ------------------------------------ GROUP CASH FLOW STATEMENT -------------------------------------------------------------------------------- 6 months to 6 months to Year to 30 June 30 June 31 December 2003 2002 2002 £m £m £m --------------------------------- Reconciliation of operating profit to net cash inflow from operating activities Operating profit 62.1 53.0 98.0 Depreciation/amortisation 41.5 44.0 89.3 Stocks decrease 1.2 0.9 16.8 Debtors increase (35.4) (35.4) (0.6) Creditors and provisions 3.2 17.7 26.8 increase --------------------------------- Net cash inflow from operating activities 72.6 80.2 230.3 --------------------------------- CASH FLOW STATEMENT Net cash inflow from operating activities 72.6 80.2 230.3 Return on investments and servicing of finance (6.1) (11.4) (16.7) Taxation (12.2) (0.2) (13.8) Capital expenditure and financial investment (23.5) (19.1) (11.3) Acquisitions and disposals (14.9) (2.5) 26.3 Equity dividends paid (33.5) (33.4) (54.5) --------------------------------- Cash flow before use of liquid resources and financing (17.6) 13.6 160.3 Management of liquid resources (9.4) (15.8) (3.3) Financing Issue of ordinary shares 1.2 0.7 1.8 Increase/(decrease) in borrowings 21.8 2.4 (141.5) --------------------------------- 23.0 3.1 (139.7) --------------------------------- (Decrease)/increase in cash in the period (4.0) 0.9 17.3 --------------------------------- Reconciliation of net cash to movement in net borrowings (Decrease)/increase in cash in the period (4.0) 0.9 17.3 Cash (inflow)/outflow from borrowings (21.8) (2.4) 141.5 Cash outflow from movement in liquid resources 9.4 15.8 3.3 --------------------------------- Change in borrowings resulting (16.4) 14.3 162.1 from cash flows Cash assumed with acquisitions - 0.6 - Currency translation differences (9.2) 1.0 9.7 --------------------------------- Movement in net borrowings in the period (25.6) 15.9 171.8 Net borrowings at start of period (173.5) (345.3) (345.3) --------------------------------- Net borrowings at end of period (199.1) (329.4) (173.5) --------------------------------- STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES 6 months 6 months Year to to 30 June to 30 June 31 December 2003 2002 2002 £m £m £m --------------------------------- Profit for the period 34.2 30.1 55.4 Currency translation differences (5.4) 2.9 1.3 --------------------------------- Total recognised gains and losses for the period 28.8 33.0 56.7 --------------------------------- GROUP HISTORICAL COST PROFITS AND LOSSES There is no material difference between the profit before taxation and the retained profit for each period as shown in the Group profit and loss account and their historical cost equivalent RECONCILIATION OF MOVEMENTS IN GROUP SHAREHOLDERS' FUNDS 6 months 6 months Year to to 30 June to 30 June 31 December 2003 2002 2002 £m £m £m ------------------------------- Profit for the period 34.2 30.1 55.4 Dividends (21.2) (21.1) (54.6) ------------------------------- 13.0 9.0 0.8 Previously written off goodwill taken through profit & loss account in arriving at the profit for the period - - 33.3 Other recognised gains and losses relating to the period (5.4) 2.9 1.2 New ordinary share capital issued 1.1 0.6 1.9 ------------------------------- Net increase in shareholders' funds for the period 8.7 12.5 37.2 Shareholders' funds at start of period 527.9 490.7 490.7 ------------------------------- Shareholders' funds at end of period 536.6 503.2 527.9 ------------------------------- NOTES TO THE INTERIM FINANCIAL STATEMENTS 1. Segmental Analysis Turnover Operating Profit ----------------------------- ----------------------------- 6 mths 6 mths Year 6 mths 6 mths Year to to to to to to 30 June 30 June 31 Dec 30 June 30 June 31 Dec 2003 2002 2002 2003 2002 2002 £m £m £m £m £m £m ----------------------------- ----------------------------- (i) by activity: before goodwill amortisation and rationalisation/restructuring Fluid Controls 362 322 661 36.6 29.6 65.2 ------------------------------------------------------------------------------------- Severe Service 80 69 148 8.1 7.4 17.3 Fluid Power 205 190 379 17.4 12.2 25.3 Indoor Climate 77 63 134 11.1 10.0 22.6 ------------------------------------------------------------------------------------- Retail Dispense 222 223 437 19.2 22.4 42.3 ------------------------------------------------------------------------------------- Beverage Dispense 149 174 312 12.9 17.5 28.6 Merchandising Systems 73 49 125 6.3 4.9 13.7 ------------------------------------------------------------------------------------- Building Products 196 193 365 18.2 18.5 33.5 ---------------------------------------------------------------- 780 738 1463 74.0 70.5 141.0 SSAP24 pension credit - 2.5 5.0 ------------------------------------------------------------------------------------- Total continuing operations 780 738 1463 74.0 73.0 146.0 ------------------------------------------------------------------------------------- after goodwill amortisation and rationalisation/restructuring Fluid Controls 33.3 23.7 46.7 ------------------------------------------------------------------------------------- Severe Service 7.3 7.2 16.8 Fluid Power 15.5 7.6 9.8 Indoor Climate 10.5 8.9 20.1 ------------------------------------------------------------------------------------- Retail Dispense 17.6 14.5 26.5 ------------------------------------------------------------------------------------- Beverage Dispense 12.4 10.2 14.4 Merchandising Systems 5.2 4.3 12.1 ------------------------------------------------------------------------------------- Building Products 11.2 10.5 18.5 --------------------------- 62.1 48.7 91.7 SSAP24 pension credit - 2.5 5.0 --------------------------- Total continuing operations 62.1 51.2 96.7 --------------------------- Operating Assets -------------------------------------- 6 mths 6 mths Year to to to 30 June 30 June 31 Dec 2003 2002 2002 £m £m £m -------------------------------------- by activity: Fluid Controls 237 265 221 -------------------------------------------------------------------------------- Severe Service 29 32 48 Fluid Power 171 194 154 Indoor Climate 37 39 19 -------------------------------------------------------------------------------- Retail Dispense 123 130 109 -------------------------------------------------------------------------------- Beverage Dispense 95 109 82 Merchandising Systems 28 21 27 -------------------------------------------------------------------------------- Building Products 144 160 143 ------------------------------------ 504 555 473 SSAP24 pension credit -------------------------------------------------------------------------------- Total continuing operations 504 555 473 -------------------------------------------------------------------------------- Turnover Operating Profit ------------------------------ ----------------------------- 6 mths 6 mths Year 6 mths 6 mths Year to to to to to to 30 June 30 June 31 Dec 30 June 30 June 31 Dec 2003 2002 2002 2003 2002 2002 £m £m £m £m £m £m ------------------------------ ----------------------------- (ii) by geographical origin: after goodwill amortisation and rationalisation/restructuring UK 239 221 436 15.6 13.7 20.8 Rest of Europe 258 236 470 29.7 20.4 40.8 The Americas 254 252 501 14.6 12.5 24.5 Asia/ Pacific 29 29 56 2.2 2.1 5.6 SSAP24 - 2.5 5.0 pension credit ------------------------------ ----------------------------- Total continuing operations 780 738 1463 62.1 51.2 96.7 ------------------------------ ----------------------------- Operating Assets ----------------------------------- 6 mths 6 mths Year to to to 30 June 30 June 31 Dec 2003 2002 2002 £m £m £m ----------------------------------- by geographical origin: UK 150 183 159 Rest of Europe 199 208 171 The Americas 138 150 129 Asia/Pacific 17 14 14 SSAP24 pension credit ----------------------------------- Total continuing operations 504 555 473 ----------------------------------- (iii) turnover by geographical destination: 6 mths 6 mths Year to to to 30 June 30 June 31 Dec 2003 2002 2002 £m £m £m ----------------------------------- UK 219 203 393 Germany 90 82 163 Rest of Europe 172 155 311 USA 222 224 438 Asia 41 44 80 Rest of World 36 30 78 ----------------------------------- Total continuing operations 780 738 1463 ----------------------------------- 1. Segmental Analysis (continued) Acquisitions Acquisitions in the period were not sufficiently material that they warrant separate disclosure on the face of the Profit and Loss account. Of the reported increase in turnover and operating profit of continuing operations, £39m and £2.6m respectively result from the 2003 acquisitions of Commtech Group (Indoor Climate) and Fluid Kinetics (Severe Service) together with the extra months from the 2002 acquisitions of DCI Marketing (Merchandising Systems) and STI (Severe Service). Discontinued The amounts shown for discontinued operations in 2002 comprise the turnover and operating profits of the businesses sold (Eley, Copper Fittings and Copper Tube, all previously reported within Building Products and UK and Rest of Europe) and closed (ISI Systems, previously reported within Fluid Power and Americas and Rest of Europe). Rationalisation/restructuring Rationalisation/restructuring is analysed as follows: 6 months to 6 months to Year to 30 Jun 30 Jun 31 Dec 2003 2002 2002 £m £m £m ---------------------------------- Shown as rationalisation/restructuring of continuing operations 2.4 13.4 31.3 Included within discontinued operations - 0.7 0.9 ---------------------------------- Total rationalisation/restructuring charge 2.4 14.1 32.2 ---------------------------------- 2. Taxation The effective tax rate for the year on profit before goodwill amortisation and exceptional items is expected to be around 33% (year 2002: 32%). 3. Dividends The Directors have declared an interim dividend for the current year of 6.0p per share (2002: 6.0p) which will be paid on 20 October 2003 to shareholders on the register on 19 September 2003. 4. Earnings per share The weighted average number of shares in issue during the period was 352.4m, 353.2m diluted for the effect of outstanding share options (six months to 30 June 2002: 351.6m, 352.9m diluted). Earnings per share have been calculated on earnings of £34.2m, (2002: £30.1m). The Directors consider that adjusted earnings per share figures, using earnings as calculated below, give a more meaningful indication of the underlying performance. 6 months to 6 months to Year to 30 Jun 30 Jun 31 Dec 2003 2002 2002 £m £m £m --------------------------------------- Profit for the period 34.2 30.1 55.4 Goodwill amortisation 9.5 8.4 18.0 Exceptional items (after tax) - (4.1) (7.2) Rationalisation/restructuring (after tax) 1.6 9.6 21.9 --------------------------------------- Earnings for adjusted EPS 45.3 44.0 88.1 --------------------------------------- 5. Exchange rates The profit and loss accounts of overseas subsidiaries are translated into sterling at average rates of exchange for the period, balance sheets are translated at period end rates. The main currencies are: Average period rates Balance sheet rates ---------------------------------- ------------------------------------- 6 months to 30 June Year 30 June 30 June 31 Dec 2003 2002 2002 2003 2002 2002 ---------------------------------- ------------------------------------- Euro 1.46 1.61 1.59 1.44 1.54 1.53 US Dollar 1.61 1.45 1.51 1.65 1.52 1.61 6. Financial information This interim statement has been reviewed by the Group's auditors having regard to the bulletin Review of Interim Financial Information, issued by the Auditing Practices Board. A copy of their unqualified review opinion is attached. The comparative figures for the year ended 31 December 2002 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985. The Interim Report will be posted to shareholders on 12 September 2003 and will be available from the same date at the Company's registered office, Lakeside, Solihull Parkway, Birmingham Business Park, Birmingham, B37 7XZ. NEXT TRADING ANNOUNCEMENT Our next trading update will be issued on 19 December 2003. ENQUIRIES Enquiries to: Graham Truscott Communications Director Tel: 0121 717 3712 Press release available on the internet at www.imiplc.com Issued by: Nick Oborne Weber Shandwick Square Mile Tel: 0207 067 0700 Independent review report by KPMG Audit Plc to IMI plc Introduction We have been engaged by the company to review the financial information set out on pages 7 to 13 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Listing Rules of the Financial Services Authority. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where they are to be changed in the next annual accounts in which case any changes, and the reasons for them, are to be disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4: Review of interim financial information issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2003. KPMG Audit Plc Chartered Accountants Birmingham 8 September 2003 This information is provided by RNS The company news service from the London Stock Exchange ND IR NKAKKBBKKPCK

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