Interim Results 2000
IMI PLC
4 September 2000
IMI plc Interim Results 2000
2000 1999
Sales £813m £706m
Results before goodwill amortisation and
exceptional items:
Profit before interest £86.1m £71.0m
Profit before tax £72.7m £67.4m
Adjusted earnings per share 14.0p 12.7p
Dividend per share 6.0p 5.8p
- Sales increased 15%
- Profit before goodwill and exceptional items increased 8%
- Adjusted earnings per share increased 10%
CHAIRMAN'S STATEMENT
IMI today reports a stronger first half performance with both sales
and profit before goodwill amortisation ahead of last year. Sales at
£813m were 15% higher and profit before goodwill amortisation and
exceptional items at £72.7m was 8% higher. These figures include
£120m sales and £1.6m profit in respect of the additional months'
contribution from the Polypipe businesses acquired in May 1999.
The tax charge on profit before goodwill amortisation and exceptional
items was 32%, the same rate as for the whole of last year.
Adjusted earnings per share at 14.0p, was 10% ahead of the same period
last year.
Balance sheet gearing at 30 June was 100% (1999: 102%) increasing from
the December 1999 gearing of 90% mainly as a result of the seasonal
increase in working capital. Interest cover for the six months based
on operating profit before goodwill amortisation was 6 times.
The Board has decided to increase the interim dividend by 3.4% to
6.0p.
Trading Review
Operating profit before goodwill amortisation at £86.1m (1999: £71.0m)
was 21% higher than last year including £10.5m from the additional
months' contribution from Polypipe. Excluding this contribution,
operating profit was 6.5% ahead.
The further weakening of the Euro helped to stimulate growth in many
of our continental European markets although it has resulted in
increased pressure on our UK manufacturing businesses.
Raw material costs, particularly within the Polypipe businesses, have
increased considerably and although it is expected that the majority
of these cost increases will be recovered, there is a time-lag which
has resulted in a reduction in margins in the first half of the year.
We continued to drive efficiency in our manufacturing operations
resulting in rationalisation costs of £5.0m (1999: £9.6m). We have introduced
a number of new products and increased our expenditure on the development of
innovative products and services, logistics, key account and sales channel
management.
The comments that follow relate to continuing operations and compare
performance with the first half of 1999.
Hydronic Controls
In copper tube and fittings volumes were up on last year. Pricing
pressure continued throughout the period although margins improved
from the low point of last year. Heimeier and TA, our Indoor Climate
Control businesses, maintained their excellent profit performance and
enhanced their commissioning and balancing capability. In plastics,
operating profit of the Polypipe businesses for the six months was
£19.7m compared with £24.2m for the same period last year. Volumes
improved with new products gaining strength. However, profit reduced
due to polymer costs which on average increased by 60% over the same
period of 1999 and were not fully recovered in selling prices. We
continue to market aggressively our products in Eastern Europe where
overall sales were up 14%.
Drinks Dispense
Sales for the period were 8% lower than in 1999 reflecting the
expected reduced expenditure by our major soft drinks customers and
further uncertainty in the brewing industry. The weak demand in soft
drinks affected most geographic markets including the US. However,
good progress continued to be made with quick service restaurants and
the success of new product launches is increasing our market
penetration. In response to lower demand, further cost reduction
measures were implemented and we are well placed to benefit when
activity levels improve. Our Cannon business maintained its
excellent record, benefiting from strong sales of Point of Purchase
equipment and encouraging demand for distribution carts. It ended the
period with a strong order book.
Fluid Power
Fluid Power operations across Europe enjoyed improved trading
conditions with volumes ahead of last year. Although the UK softened
towards the end of the period, mainland Europe continued to improve
and remains strong. Many of the industry sectors we serve, such as
commercial vehicles and textiles, are seeing export growth helped by
the weakness of the Euro. In the US the margins in the automotive
sector came under pressure; the commercial vehicle sector slowed but
our sales to the general industrial market, helped by market share
gains, remained strong. We continued our cost reduction projects and
initiated new advanced techniques to enhance process and product
reliability and performance. We made significant progress with on-
line technical service and internet trading. Investment in our market
sector programme continued and helped in securing a number of major
contracts for delivery commencing in 2001.
Energy Controls
Energy Controls achieved better results with volumes up 15%. Demand
for severe service valves in both power generation and oil and gas
improved. Order books are healthy and provide a good platform for the
balance of the year and 2001. Safety Systems, Eley sporting
ammunition and Nuclear components produced satisfactory results and
Mecafrance increased sales and profit in Europe and the US.
Strategic Development
The closures of copper smelting and the Drinks Dispense operation in
Brazil are proceeding to plan and the costs are expected to be within
budget.
During the first half we spent around £6m on a number of small in-fill
businesses in Hydronic Controls and Drinks Dispense.
In August we announced the acquisition of Robimatic for a
consideration of up to £19m and Flow Design Inc for a consideration of
£14m. Robimatic is the UK market leader in the packaging and
distribution of plumbing products and will in particular broaden the
range of Polypipe products channelled into the DIY and merchant
sectors. Flow Design Inc is the US market leader in automatic flow
control devices for heating, air-conditioning and ventilation. This
addition to our Indoor Climate Control businesses provides us with an
important entry into the world's largest balancing valve market.
Outlook
Current order intake is running ahead of last year except in Drinks
Dispense. The UK and the US are showing some signs of softness but
with mainland European demand still strong prospects for the second
half remain satisfactory. We will continue to take costs out of our
businesses and to take advantage of our market positions to improve
financial performance.
GROUP PROFIT AND LOSS ACCOUNT
------------------------------------------
6 months to
30 June 2000
-----------------------------------
Before
goodwill Goodwill
amortisation amortisation Total
Notes £m £m £m
------------------------------------------
Turnover 1
Continuing operations 813 813
Discontinued operations - -
------------------------------------------
Total turnover 813 813
------------------------------------------
Operating profit 1
----------------------------------
Continuing operations 86.1 (6.3) 79.8
Discontinued operations - -
----------------------------------
Operating profit 86.1 (6.3) 79.8
Net interest payable (13.4) (13.4)
------------------------------------------
Profit before exceptional
items and taxation 72.7 (6.3) 66.4
Profit on disposal of
discontinued operations 2 -
Provision for losses on
closure of businesses 2 -
------------------------------------------
Profit before taxation 72.7 (6.3) 66.4
Tax on profit 3 (23.3) - (23.3)
------------------------------------------
Profit after taxation 49.4 (6.3) 43.1
Equity minority interests (0.3) (0.3)
------------------------------------------
Profit for the period 49.1 (6.3) 42.8
---------------------------------
Dividends paid and proposed 4 (21.1)
-------
Transfer to reserves 21.7
-------
Earnings per share 5 12.2p
Diluted earnings per share 5 12.2p
Adjusted earnings per share 5 14.0p
----------------------------------------------------------
6 months to Year to
30 June 1999 31 December 1999
-------------------- --------------------
Before Before
exceptional exceptional
items & items &
goodwill goodwill
amortisation Total amortisation Total
Notes £m £m £m £m
--------------------------- -------------------
Turnover 1
Continuing operations 688 688 1470 1470
Discontinued
operations 18 18 32 32
--------------------------- --------------------
Total turnover 706 706 1502 1502
--------------------------- --------------------
Operating profit 1
-------------------- --------------------
Continuing operations 73.8 71.8 165.0 156.2
Discontinued
operations (2.8) (2.8) (4.2) (4.2)
-------------------- --------------------
Operating profit 71.0 69.0 160.8 152.0
Net interest payable (3.6) (3.6) (15.8) (15.8)
--------------------------- --------------------
Profit before
exceptional items and
taxation 67.4 65.4 145.0 136.2
Profit on disposal of
discontinued
operations 2 6.0 6.0
Provision for losses
on closure of
businesses 2 - (19.1)
--------------------------- --------------------
Profit before taxation 67.4 71.4 145.0 123.1
Tax on profit 3 (22.9) (24.9) (46.5) (43.3)
--------------------------- --------------------
Profit after taxation 44.5 46.5 98.5 79.8
Equity minority
interests - - (0.5) (0.5)
--------------------------- --------------------
Profit for the period 44.5 46.5 98.0 79.3
------------ ------------
Dividends paid and
proposed 4 (20.3) (53.0)
------ ------
Transfer to reserves 26.2 26.3
------ ------
Earnings per share 5 13.3p 22.6p
Diluted earnings per
share 5 13.3p 22.6p
Adjusted earnings per
share 5 12.7p 28.0p
GROUP BALANCE SHEET
----------------------------------------------------------------------
30 June 30 June 31 December
2000 1999 1999
£m £m £m
-------------------------------------
Fixed assets
Intangible assets 246.1 251.5 246.0
Tangible assets 392.2 410.8 392.2
-------------------------------------
638.3 662.3 638.2
-------------------------------------
Current assets
Stocks 317.1 295.5 289.1
Debtors 383.6 334.7 301.1
Investments 2.0 4.8 3.8
Cash and deposits 39.4 77.9 46.4
-------------------------------------
742.1 712.9 640.4
Creditors:
amounts falling due within one
year
Borrowings and finance leases (87.6) (113.1) (101.3)
Other creditors (337.0) (338.2) (314.5)
-------------------------------------
Net current assets 317.5 261.6 224.6
-------------------------------------
Total assets less current
liabilities 955.8 923.9 862.8
Creditors:
amounts falling due after more
than one year
Borrowings and finance leases (406.1) (411.4) (333.1)
Other creditors (30.9) (25.9) (31.0)
Provisions for liabilities and
charges (62.7) (50.1) (69.6)
-------------------------------------
Net assets 456.1 436.5 429.1
-------------------------------------
Capital and reserves
Called up share capital 87.8 87.6 87.7
Share premium account 131.6 129.9 130.8
Revaluation reserve 1.0 1.0 1.0
Other reserves 1.6 1.6 1.6
Profit and loss account 234.1 216.4 208.0
-------------------------------------
Equity shareholders' funds 456.1 436.5 429.1
-------------------------------------
GROUP CASH FLOW STATEMENT
----------------------------------------------------------------------
6 months 6 months Year to
to to
30 June 30 June 31 December
2000 1999 1999
£m £m £m
------------------------------
Reconciliation of operating profit to
net cash inflow from operating
activities
Operating profit 79.8 69.0 152.0
Depreciation/amortisation 41.1 30.0 78.7
Stocks (increase)/decrease (22.3) 1.9 3.6
Debtors (increase)/decrease (73.9) (38.3) 0.7
Creditors and provisions
increase/(decrease) 25.9 5.5 (13.8)
Exceptional items (4.1) - -
------------------------------
Net cash inflow from operating
activities 46.5 68.1 221.2
------------------------------
CASH FLOW STATEMENT
Net cash inflow from operating
activities 46.5 68.1 221.2
Return on investments and servicing
of finance (12.4) (3.2) (16.2)
Taxation (21.4) (18.2) (30.9)
Capital expenditure and financial
investment (28.5) (12.8) (45.2)
Acquisitions and disposals (4.6) (319.0) (268.2)
Equity dividends paid (32.7) (31.9) (52.2)
------------------------------
Cash flow before use of liquid
resources and financing (53.1) (317.0) (191.5)
Management of liquid resources (1.1) 1.4 8.2
Financing
Issue of ordinary shares 0.9 0.8 1.8
Increase in borrowings 34.2 361.7 205.8
------------------------------
35.1 362.5 207.6
------------------------------
(Decrease)/increase in cash in the
period (19.1) 46.9 24.3
------------------------------
Reconciliation of net cash to
movement in net borrowings
(Decrease)/increase in cash in the
period (19.1) 46.9 24.3
Cash inflow from borrowings (34.2) (361.7) (205.8)
Cash outflow/(inflow) from
movement in liquid resources 1.1 (1.4) (8.2)
------------------------------
Change in borrowings resulting
from cash flows (52.2) (316.2) (189.7)
Borrowings assumed with
acquisitions (0.8) (49.0) (53.6)
Loan notes issued as part of
acquisition - - (63.0)
Currency translation differences (13.3) 4.4 4.1
------------------------------
Movement in net borrowings in the
period (66.3) (360.8) (302.2)
Net borrowings at start of period (388.0) (85.8) (85.8)
------------------------------
Net borrowings at end of period (454.3) (446.6) (388.0)
------------------------------
STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES
----------------------------------------------------------------------
6 months 6 months Year to
to 30 June to 30 June 31 December
2000 1999 1999
£m £m £m
-----------------------------------
Profit for the period 42.8 46.5 79.3
Currency translation differences 4.4 - (8.4)
-----------------------------------
Total recognised gains and losses
for the period 47.2 46.5 70.9
-----------------------------------
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 to 30 31
June June December
2000 1999 1999
£m £m £m
-----------------------------
Profit for the period 42.8 46.5 79.3
Dividends (21.1) (20.3) (53.0)
-----------------------------
21.7 26.2 26.3
Other recognised gains and losses
relating to the period 4.4 - (8.5)
New ordinary share capital issued 0.9 0.8 1.8
-----------------------------
Net increase in shareholders' funds for
the period 27.0 27.0 19.6
Shareholders' funds at start of period 429.1 409.5 409.5
-----------------------------
Shareholders' funds at end of period 456.1 436.5 429.1
-----------------------------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Segmental Analysis
Turnover
6 mths 6 mths Year
to to to
30 June 30 June 31 Dec
2000 1999 1999
£m £m £m
-----------------------------
(i) by activity:
before goodwill amortisation
Hydronic Controls 346 224 543
Drinks Dispense 176 191 353
Fluid Power 221 214 435
Energy Controls 70 59 139
-----------------------------
Continuing operations 813 688 1470
-----------------------------
(ii) by geographical origin:
before goodwill
amortisation
UK 288 197 445
Rest of Europe 270 245 531
The Americas 223 216 435
Asia/Pacific 32 30 59
-----------------------------
Continuing operations 813 688 1470
-----------------------------
(iii) turnover by geographical destination:
6 mths 6 mths Year
to to to
30 June 30 June 31 Dec
2000 1999 1999
£m £m £m
-------------------------------
UK 243 152 374
Germany 105 103 220
Rest of Europe 191 174 353
USA 198 187 373
Asia 31 26 55
Rest of World 45 46 95
-------------------------------
Continuing operations 813 688 1470
-------------------------------
1. Segmental Analysis
Operating Profit
-------------------------------
6 mths 6 mths Year
to to to
30 June 30 June 31 Dec
2000 1999 1999
£m £m £m
-------------------------------
(i) by activity:
before goodwill amortisation
Hydronic Controls 42.3 34.7 76.9
Drinks Dispense 15.7 20.6 34.6
Fluid Power 21.4 13.3 38.1
Energy Controls 6.7 5.2 15.4
-------------------------------
Continuing operations 86.1 73.8 165.0
-------------------------------
after goodwill amortisation
Hydronic Controls 36.7 33.3 69.5
Drinks Dispense 15.5 20.5 34.3
Fluid Power 20.9 12.8 37.2
Energy Controls 6.7 5.2 15.2
-------------------------------
Continuing operations 79.8 71.8 156.2
-------------------------------
(ii) by geographical origin:
before goodwill amortisation
UK 35.7 24.7 56.5
Rest of Europe 27.4 23.2 55.0
The Americas 20.6 24.8 50.2
Asia/Pacific 2.4 1.1 3.3
-------------------------------
Continuing operations 86.1 73.8 165.0
-------------------------------
after goodwill amortisation
UK 30.1 23.2 49.1
Rest of Europe 27.4 23.2 54.8
The Americas 19.9 24.3 49.0
Asia/Pacific 2.4 1.1 3.3
-------------------------------
Continuing operations 79.8 71.8 156.2
-------------------------------
1. Segmental Analysis
Operating Assets
-------------------------------
6 mths 6 mths Year
to to to
30 June 30 June 31 Dec
2000 1999 1999
£m £m £m
-------------------------------
(i) by activity:
before goodwill amortisation
Hydronic Controls 345 310 306
Drinks Dispense 133 136 108
Fluid Power 227 200 211
Energy Controls 39 58 36
-------------------------------
Continuing operations 744 704 661
-------------------------------
(ii) by geographical origin:
before goodwill amortisation
UK 339 300 296
Rest of Europe 223 227 201
The Americas 161 153 142
Asia/Pacific 21 24 22
-------------------------------
Continuing operations 744 704 661
-------------------------------
1. Segmental Analysis
Hydronic Controls for 2000 include a full 6 months' results from
Polypipe (mainly UK); 1999 included results from the date of
acquisition (19 May) to period end.
Discontinued operations
The amounts shown for discontinued operations comprise the
turnover and operating profits of the IMI Refiners smelting
operation (Hydronic Controls, UK), the Drinks Dispense operation
in Brazil and the Marston aerospace businesses, previously
reported within Energy Controls and located in the UK.
2. Exceptional items
In 1999 the profit on disposal of discontinued operations
comprises the surplus arising on the sale of the Marston
aerospace businesses.
In 1999 the provision for losses on closure of businesses
comprises £16.0m for the complete cessation of copper smelting
and £3.1m for closing the Drinks Dispense Brazilian operation.
3. Taxation
The effective tax rate on the profit before exceptional items and
goodwill amortisation is 32% (year 1999: 32%).
4. Dividends
The Directors have declared an interim dividend for the current
year of 6.0p per share (six months to 30 June 1999: 5.8p) which
will be paid on 16 October 2000 to shareholders on the register
on 15 September 2000.
5. Earnings per share
The weighted average number of shares in issue during the period
was 350.9m, 350.9m diluted for the effect of outstanding share
options (six months to 30 June 1999: 350.3m, 350.5m diluted).
Earnings per share have been calculated on earnings of £42.8m,
(six months to 30 June 1999: £46.5m) and adjusted earnings per
share on earnings of £49.1m (six months to 30 June 1999: £44.5m).
Adjusted earnings per share figures exclude goodwill amortisation
and exceptional items and have been shown because the Directors
consider that they give a more meaningful indication of the
underlying performance.
6. 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
-------------------- ---------------------
June June Dec 30 June 30 June 31 Dec
2000 1999 1999 200 1999 1999
----- ----- ----- ----- ----- -----
Euro 1.63 1.49 1.52 1.58 1.53 1.61
US Dollar 1.57 1.62 1.62 1.51 1.58 1.61
7. 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 1999 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 7 September
2000 and will be available from the same date at the Company's
registered office, Kynoch Works, Witton, Birmingham, B6 7BA.
Enquiries to:
Gary Allen - Chief Executive - Tel: 020 7329 0096
Nick Paul - Deputy Chief Executive - Tel: 020 7329 0096
Trevor Slack - Finance Director - Tel: 020 7329 0096
Gerard Whelan - Corporate Communications - Tel: 020 7329 0096
Nigel Gilpin - Controller - Tel: 0121 356 4848
Press release available on the Internet at www.imi.plc.uk
Issued by:
Ben Padovan - Shandwick International - Tel: 020 7329 0096
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