Interim Results
IMI PLC
03 September 2007
3 September 2007
IMI plc 2007 First Half Results
IMI plc, the international engineering group, today announced its interim
results for the six months ended 30 June 2007.
2007 2006 % change
Revenue £781m £732m +7
Operating profit * £95.6m £85.9m +11
Profit before tax * £95.5m £88.1m +8
Adjusted earnings per share ** 19.2p 16.9p +14
Basic earnings per share 15.4p 14.5p +6
Restructuring costs £10.9m £7.7m
Dividend 7.5p 7.0p +7
* before restructuring costs and intangible amortisation.
** before restructuring costs, change in fair value of financial
instruments and intangible amortisation.
Norman Askew, Chairman of IMI, commented:
'This is a strong set of results with an organic revenue growth, excluding the
impact of exchange rates and acquisitions, of 8%. End markets remain broadly
positive and we are benefiting from our cumulative investments of recent years
in new products and emerging markets. We remain confident of further progress in
the remainder of this year.'
2007 INTERIM REVIEW
Introduction
In the first half of 2007 IMI has seen encouraging momentum with an organic
revenue growth of 8%. Operating profits, including the contribution from
acquisitions, increased by 11%, and 17% on a constant currency basis. The
operating margin for the period was 12.2%, against 11.7% in the first half of
2006.
We completed the acquisition of Kloehn at the end of June, which strengthens our
presence within the medical sector of our Fluid Power business. We are now half
way through our three year £60m restructuring programme and remain on track to
deliver the expected margin improvements. The on-market share buy back programme
is also proceeding, which together with our acquisitions activity, will raise
net debt levels to between £400m and £500m over the next few years.
The Board has decided to increase the interim dividend by 7.1% to 7.5p (2006:
7.0p).
Results summary
Revenues increased 7% to £781m, which includes a contribution of £27m from
acquisitions. Sterling was about 10% stronger against the US Dollar than in the
first half of 2006 and exchange rate movements have depressed our reported
revenue growth by 5 percentage points and our profits growth by 6 points.
Operating profit before restructuring costs and intangible amortisation was
£95.6m, an increase of 11% on the prior period. Acquisitions contributed £5.1m
to these profits.
Interest costs on net borrowings were £5.6m and were covered 15 times. The IAS
19 pension financing credit was £5.3m and the change in fair value of financial
instruments under IAS39 was a credit of £0.2m. The total net financing cost was
£0.1m, compared to a credit of £2.2m in 2006.
Profit before tax, restructuring costs and intangible amortisation was £95.5m,
an increase of 8% on the prior period and 14% on a constant currency basis.
Restructuring costs were £10.9m and relate to announcements made to transfer
more production from the US, UK, and Switzerland to lower cost economies in
Mexico, The Czech Republic and China. Intangible amortisation was £7.8m and
predominantly relates to acquired intangibles. Profit before tax was £76.8m, an
increase of 2%.
The estimated effective tax rate for 2007 is 31%, which compares to the rate of
32% applied for the first half of 2006.
Adjusted earnings per share, which excludes restructuring costs, intangible
amortisation and the change in fair value of financial instruments, was 19.2p,
compared to 16.9p, an increase of 14%. Basic earnings per share was 15.4p, up 6%
on the prior period's 14.5p.
Cash flow
The operating cash flow was £49m (2006: £34m). Tax (£18m), the settlement of the
European Commission fine levied in respect of a former plumbing fittings
business which was sold in 2002 (£33m), acquisitions (£35m), dividends (£39m)
and share buy backs (£41m) absorbed £166m. The total cash outflow for the period
was £118m.
Balance sheet
Closing net debt was £192m (June 2006: £130m). The debt to annualised EBITDA
ratio at the end of June was 0.92.
Shareholders' equity at the end of June was £445m, an increase of £33m since the
end of last year, which includes the profit for the period (£51m) less the 2006
final dividend (£39m) paid in May, share buy backs (£41m) and an actuarial gain
net of tax on the defined benefit pension plans of £54m.
Severe Service investigation
As announced on 16 August, the company has initiated an independent
investigation into possible irregular payments associated with certain trading
contracts entered into by its Severe Service business, which may be in breach of
the law and the Company's policies and practices. At this early stage, it is not
possible to estimate the amount of possible fines and other liabilities
associated with this investigation and, as such, no provision has been made in
these accounts. The investigation is not expected to have a material impact on
trading for 2007. There will be costs associated with the investigation itself
and it is difficult to give a precise estimate of these costs at this early
stage. Our provisional estimates are currently of the order of £5m, the bulk of
which will be incurred in the second half of 2007.
Operations review
The following review of our business areas for the six months to 30 June 2007
compares the performance of our operations with the six month period to 30 June
2006. Operating profit is stated before restructuring costs and intangible
amortisation.
Severe Service
Revenues in the first half were up 34% to £171m (2006: £128m) and operating
profit rose 60% to £26.1m (2006: £16.3m).
Both our power and oil and gas markets remain buoyant and we have seen strong
order growth in the Americas. The planned rebalancing of our 2007 shipment
profile to lessen the weighting towards the second half resulted in an organic
revenue growth of 24%. Order intake grew at about 15% in the period. The Truflo
business acquired in April 2006 continues to perform well, particularly in
supplying highly engineered valves for Liquefied Natural Gas plants.
The Severe Service operating profit margin was 15.3% benefiting from the strong
first half volume growth and compares to the prior period margin of 12.7%.
Fluid Power
Revenues in the first half were in line with last year at £282m (2006: £281m) as
was operating profit at £35.7m (2006: £35.7m).
The organic growth in revenues was 2%. Our sector business selling customised
power train and chassis and cab controls to North American truck manufacturers
was down broadly in line with that market by nearly 40%. The organic growth in
the remainder of our Fluid Power business was between 5% and 6%. The European
commercial vehicle business, together with our other target sectors, is
maintaining strong momentum. Our non-sector business has enjoyed good growth in
Continental Europe while the US market has softened.
The operating profit margin was unchanged from the prior period at 12.7%. The
restructuring programme within Fluid Power is now at its peak with the transfer
of production from the US Denver site to Mexico nearing completion and transfers
from one UK and one Swiss site to The Czech Republic well underway. This
programme has involved some parallel production that has held back the margin
development.
Indoor Climate
Revenues in the first half were up 10% to £97m (2006: £88m) and operating profit
rose 15% to £14.0m (2006: £12.2m).
Organic revenue growth was 12% in the period. Price increases to recover sharply
higher metal costs have contributed about one half of this organic revenue
growth. The balancing valve business demonstrated good volume growth in all
geographies with a useful contribution from new products. Our thermostatic
radiator valve business has shown some good growth in Eastern Europe but there
has been a marked slowdown in the German market which has moderated the overall
progress in this segment of our business.
The operating profit margin was 14.4% compared with 13.9% in the prior period.
Beverage Dispense
Revenues in the first half were £147m (2006: £147m) and operating profit
declined by 14% to £11.4m (2006: £13.2m).
Organic revenue growth was 7%, reflecting particularly strong shipments in June.
There was a strong performance in Continental Europe and Asian markets. The US
market was more mixed with some return to previous buying patterns within the
Quick Service restaurant sector offset by a general slowdown in the convenience
sector. The UK market remains challenging.
The operating profit margin was 7.8%. However, adjusting for the £2m financial
impact of the flood of our UK Sheffield site in late June, the underlying margin
was about 9%, in line with that of the prior period. Closures of a US and a UK
site were announced in early 2007 and their restructuring continues alongside an
expansion of our facility in Tianjin, China.
Merchandising Systems
Revenues in the first half were £84m (2006: £88m) with operating profit at £8.4m
broadly flat compared to last year.
As about 80% of this business is in North America the weaker US dollar impacted
reported revenues; the underlying organic revenue growth was 4%. The cosmetics
and grocery sectors saw good growth and there was some improvement in the
automotive sector while the food and beverage sector was more mixed. The order
book benefited from a number of major contract wins during the period, with
shipments scheduled for the back end of 2007 into 2008.
The operating profit margin was 10%, up slightly on the 9.7% from the
corresponding period last year. The margin development was held back somewhat by
the impact of higher metal costs on certain of the older product lines.
Outlook
The oil, gas and power markets for Severe Service remain buoyant, as do the
Continental European and Asian markets for our Fluid Power business, while the
general fluid and motion control market in the US is more subdued. The balancing
valve business within Indoor Climate continues to see good prospects in Europe,
Middle East and Asia, although the German radiator valve market is clearly
weakening. The Beverage Dispense business should continue to make progress but
shipment growth may slow a little in the second half. The order book within
Merchandising is building and includes some new orders for our US cosmetics
business. While metal prices remain volatile and other cost pressures persist,
margin benefits from our restructuring programme should come through later this
year. We do not, at this stage, expect the Severe Service investigation to have
a material impact on trading for 2007 albeit there will be costs associated with
the investigation itself. Overall, we remain confident of continued progress in
the remainder of the year.
CONSOLIDATED INTERIM INCOME STATEMENT
Notes 6 months to 6 months to Year to
30 June 2007 30 June 2006 31 Dec 2006
(unaudited) (unaudited)
£m £m £m
__________________________________________
Revenue 1,2 781 732 1,505
__________________________________________
Operating profit before restructuring
costs and intangible amortisation 95.6 85.9 191.8
Restructuring costs (10.9) (7.7) (19.7)
Intangible amortisation (7.8) (5.1) (17.0)
__________________________________________
Operating profit 1,2 76.9 73.1 155.1
Financial income 3 40.0 39.6 73.8
Financial expense 3 (40.1) (37.4) (70.7)
__________________________________________
Net financial (expense)/income 3 (0.1) 2.2 3.1
Profit before tax
____________________________________________________________________________________________
Before restructuring costs and intangible
amortisation 95.5 88.1 194.9
Restructuring costs (10.9) (7.7) (19.7)
Intangible amortisation (7.8) (5.1) (17.0)
____________________________________________________________________________________________
Total 76.8 75.3 158.2
Taxation 4
____________________________________________________________________________________________
UK taxation (2.6) (2.6) (6.5)
Overseas taxation (21.3) (21.5) (42.5)
____________________________________________________________________________________________
Total (23.9) (24.1) (49.0)
Profit of continuing businesses after
tax 52.9 51.2 109.2
Loss from discontinued operations (net
of tax) 5 - - (33.5)
__________________________________________
Total profit for the period 52.9 51.2 75.7
__________________________________________
Attributable to:
Equity shareholders of the Company 51.3 49.5 72.7
Minority interest 1.6 1.7 3.0
__________________________________________
Total profit for the period 52.9 51.2 75.7
__________________________________________
Earnings per share 6
Basic earnings per share 15.4p 14.5p 21.4p
Diluted earnings per share 15.3p 14.4p 21.3p
Basic earnings per share (continuing
businesses) 15.4p 14.5p 31.3p
Diluted earnings per share (continuing
businesses) 15.3p 14.4p 31.1p
CONSOLIDATED BALANCE SHEET
30 June 30 June 31 Dec
2007 2006 2006
(unaudited) (unaudited)
£m £m £m
_____________________________________
Assets
Intangible assets 317.9 286.6 286.8
Property, plant and equipment 188.0 189.7 190.3
Deferred tax assets 32.9 61.0 55.8
_____________________________________
Total non-current assets 538.8 537.3 532.9
_____________________________________
Inventories 244.1 220.9 217.4
Trade and other receivables 324.1 300.6 295.2
Current tax 8.8 19.4 8.7
Investments 15.4 14.0 15.0
Cash and cash equivalents 83.0 114.2 107.2
_____________________________________
Total current assets 675.4 669.1 643.5
_____________________________________
Total assets 1,214.2 1,206.4 1,176.4
_____________________________________
Liabilities
Bank overdraft (5.8) (2.2) (3.6)
Interest-bearing loans and borrowings (33.0) (17.0) (43.3)
Provisions for liabilities and charges 11.1) - (6.2)
Current tax (19.3) (25.1) (18.2)
European Commission fine - - (33.5)
Trade and other payables (348.0) (295.5) (322.0)
_____________________________________
Total current liabilities (417.2) (339.8) (426.8)
_____________________________________
Interest-bearing loans and borrowings (235.7) (225.4) (140.7)
Employee benefits (40.5) (134.9) (120.6)
Provisions for liabilities and charges (33.6) (40.3) (34.3)
Deferred tax liabilities (19.6) (8.3) (15.5)
Other payables (20.0) (22.6) (21.9)
_____________________________________
Total non-current liabilities (349.4) (431.5) (333.0)
_____________________________________
Total liabilities (766.6) (771.3) (759.8)
_____________________________________
Net assets 447.6 435.1 416.6
_____________________________________
Equity
Share capital 90.7 90.1 90.3
Share premium 160.6 153.6 155.2
Other reserves (0.1) 3.1 (0.4)
Retained earnings 194.1 184.7 167.6
_____________________________________
Total equity attributable to equity shareholders 445.3 431.5 412.7
of the Company
Minority interest 2.3 3.6 3.9
_____________________________________
Total equity 447.6 435.1 416.6
_____________________________________
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
6 months to 6 months to Year to
Cash flows from operating activities 30 June 30 June 31 Dec 2006
2007 2006
(unaudited) (unaudited)
£m £m £m
______________________________________
Profit for the period 52.9 51.2 75.7
Adjustments for:
Depreciation 18.9 19.6 38.7
Amortisation 7.8 5.1 17.0
Loss from discontinued operations
(net of tax) - - 33.5
Gain on sale of property, plant and
equipment - - (2.0)
Financial income (40.0) (39.6) (73.8)
Financial expense 40.1 37.4 70.7
Equity-settled share-based payment
expenses 1.1 1.4 2.9
Income tax expense 23.9 24.1 49.0
Increase in inventories (27.4) (12.5) (14.8)
Increase in trade and other
receivables (32.3) (32.4) (30.9)
Increase/(decrease) in trade and
other payables 24.6 (10.7) 19.0
Increase in provisions and employee
benefits 2.4 7.8 1.3
______________________________________
Cash generated from the operations 72.0 51.4 186.3
Income taxes paid (17.8) (21.0) (40.0)
______________________________________
54.2 30.4 146.3
European Commission fine (32.8) - -
Additional pension scheme funding - - (15.6)
______________________________________
Net cash from operating activities 21.4 30.4 130.7
______________________________________
Cash flows from investing activities
Interest received 3.0 4.6 8.4
Proceeds from sale of property, plant
and equipment 1.2 5.4 7.7
Sale of investments - - 0.1
Purchase of investments (0.9) (1.4) (2.6)
Acquisition of subsidiaries, net of
cash acquired (34.8) (117.1) (118.4)
Redemption of vendor loan note re
Polypipe - 35.9 35.9
Acquisition of property, plant and
equipment (20.8) (18.3) (39.7)
Capitalised development expenditure (2.1) (3.2) (4.4)
______________________________________
Net cash from investing activities (54.4) (94.1) (113.0)
______________________________________
Cash flows from financing activities
Interest paid (8.4) (7.7) (17.0)
Purchase of own shares (41.4) (26.4) (42.4)
Proceeds from the issue of share
capital for employee share schemes 5.8 4.7 6.5
Drawdown of borrowings 91.7 61.6 7.4
Dividends paid to minority interest (1.9) (1.4) (2.1)
Dividends paid (39.2) (37.1) (60.7)
______________________________________
Net cash from financing activities 6.6 (6.3) (108.3)
______________________________________
Net decrease in cash and cash
equivalents (26.4) (70.0) (90.6)
Cash and cash equivalents at start of
period 103.6 182.0 182.0
Effect of exchange rate fluctuations on
cash held - - 12.2
______________________________________
Cash and cash equivalents at end of
period 77.2 112.0 103.6
______________________________________
CONSOLIDATED STATEMENT
OF RECOGNISED INCOME AND EXPENSE
6 months to 6 months to Year to
30 June 2007 30 June 2006 31 Dec 2006
(unaudited) (unaudited)
£m £m £m
___________________________________________
Foreign exchange translation differences 1.0 (2.9) (9.6)
Actuarial gains on defined benefit plans (net of tax) 54.1 25.4 23.3
Effective portion of change in fair value of net
investment hedges (net of tax) (0.7) (1.3) 1.9
___________________________________________
Income and expense recognised directly in equity 54.4 21.2 15.6
Profit for the period 52.9 51.2 75.7
___________________________________________
Total recognised income and expense for the period 107.3 72.4 91.3
___________________________________________
Attributable to:
Equity shareholders of the Company 105.7 70.7 88.3
Minority interest 1.6 1.7 3.0
___________________________________________
Total recognised income and expense for the period 107.3 72.4 91.3
RECONCILIATION OF CHANGES IN SHAREHOLDERS' EQUITY
6 months to 6 months to Year to
30 June 2007 30 June 2006 31 Dec 2006
(unaudited) (unaudited)
£m £m £m
____________________________________________
Shareholders' equity at start of the period 412.7 417.6 417.6
Total recognised income and expense for the period 105.7 70.7 88.3
Dividends paid (39.2) (37.1) (60.7)
Share based payments (net of tax) 1.7 2.0 3.4
Issue of ordinary shares net of costs 5.8 4.7 6.5
Purchase of own shares (41.4) (26.4) (42.4)
____________________________________________
(73.1) (56.8) (93.2)
____________________________________________
Shareholders' equity at end of the period 445.3 431.5 412.7
____________________________________________
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Segmental analysis
Segmental information is presented in the consolidated interim financial
statements in respect of the Group's continuing business segments, which are the
primary basis of segment reporting. The business segment reporting format
reflects the Group's management and internal reporting structures. Inter-segment
revenue is insignificant.
The Group comprises the following main business segments and activities:
Severe Service
Design, manufacture, supply and service of high performance critical control
valves and associated equipment for power generation plants, oil & gas producers
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,
medical, print, packaging and other industries.
Indoor Climate
Design, manufacture and supply of indoor climate control systems, principally
balancing valves for large commercial buildings and thermostatic radiator valves
for residential buildings.
Beverage Dispense
Design, manufacture and supply of still and carbonated beverage dispense systems
and associated merchandising equipment for brand owners and retailers.
Merchandising Systems
Design, manufacture and supply of point of purchase display systems for brand
owners and retailers.
Revenue Operating Profit
______________________________ ______________________________
6 months 6 months Year 6 months 6 months Year
to to to to to to
30 June 30 June 31 Dec 30 June 30 June 31 Dec
2007 2006 2006 2007 2006 2006
£m £m £m £m £m £m
______________________________ ______________________________
Before restructuring costs and intangible amortisation
Fluid Controls 550 497 1,043 75.8 64.2 147.0
_________________________________________________________________________________________
Severe Service 171 128 300 26.1 16.3 45.1
Fluid Power 282 281 557 35.7 35.7 72.4
Indoor Climate 97 88 186 14.0 12.2 29.5
_________________________________________________________________________________________
Retail Dispense 231 235 462 19.8 21.7 44.8
_________________________________________________________________________________________
Beverage Dispense 147 147 282 11.4 13.2 25.4
Merchandising Systems 84 88 180 8.4 8.5 19.4
_________________________________________________________________________________________
Segment result 781 732 1,505 95.6 85.9 191.8
_________________________________________________________________________________________
After restructuring costs and intangible amortisation
Fluid Controls 60.4 53.3 116.6
_________________________________________________________________________________________
Severe Service 21.1 13.2 33.4
Fluid Power 25.5 28.5 55.9
Indoor Climate 13.8 11.6 27.3
_________________________________________________________________________________________
Retail Dispense 16.5 19.8 38.5
_________________________________________________________________________________________
Beverage Dispense 8.6 11.8 22.0
Merchandising Systems 7.9 8.0 16.5
_________________________________________________________________________________________
Segment result 76.9 73.1 155.1
Net financial (expense) (0.1) 2.2 3.1
/income
Taxation (23.9) (24.1) (49.0)
______________________________
Profit of continuing operations after tax 52.9 51.2 109.2
______________________________
2. Acquisitions of subsidiaries
Of the reported increase in revenue and operating profit of continuing
operations (before restructuring costs and intangible amortisation), £27m of
revenue and £5.1m of profit result from acquisitions. These comprise the 2006
acquisitions.
The acquisition of Kloehn Company Limited was completed on Friday 29 June 2007
and has no effect on the trading results for this period.
3. Financial income and expense
6 months to 30 June 6 months to 30 June Year to 31 Dec
2007 2006 2006
Interest Other Total Interest Other Total Interest Other Total
£m £m £m £m £m £m £m £m £m
_________________________ _________________________ _________________________
Interest income 3.0 3.0 3.3 3.3 5.5 5.5
Gain on remeasurement
of financial
instruments 2.4 2.4 5.1 5.1 5.3 5.3
Expected return on
defined
benefit pension
plan assets 34.6 34.6 31.2 31.2 63.0 63.0
_________________________ _________________________ _________________________
Financial income 3.0 37.0 40.0 3.3 36.3 39.6 5.5 68.3 73.8
_________________________ _________________________ _________________________
Interest expense (8.6) (8.6) (6.4) (6.4) (13.0) (13.0)
Loss on remeasurement
of financial
instruments (2.2) (2.2) (4.2) (4.2) (3.0) (3.0)
Finance cost of
defined benefit
pension scheme
liabilities (29.3) (29.3) (26.8) (26.8) (54.7) (54.7)
_________________________ _________________________ _________________________
Financial expense (8.6) (31.5) (40.1) (6.4) (31.0) (37.4) (13.0) (57.7) (70.7)
_________________________ _________________________ _________________________
_________________________ _________________________ _________________________
Net financial
(expense)/income (5.6) 5.5 (0.1) (3.1) 5.3 2.2 (7.5) 10.6 3.1
_________________________ _________________________ _________________________
4. Taxation
The interim taxation charge of 31% is calculated by applying the directors' best
estimate of the annual tax rate to the taxable profit for the period (six months
ended 30 June 2006: 32%) in respect of profit before tax.
5. Discontinued operations
There were no businesses discontinued during the period.
In September 2006, the European Commission announced the imposition of a fine of
€48.3m on IMI in relation to its former copper fittings business, which was sold
in 2002. Pending the outcome of an appeal, the full amount of the fine together
with associated costs was provided and reported in the 2006 annual income
statement as a loss on discontinued operations (net of tax). The fine was paid
in January 2007.
6. Earnings per share
The weighted average number of shares in issue during the period, net of shares
purchased by the Company and held as treasury shares or to satisfy share option
vesting was 333.9m, 334.6m diluted for the effect of outstanding share options
(six months to 30 June 2006: 341.1m, 343.2m diluted). Basic and diluted earnings
per share have been calculated on profit of £51.3m (2006: profit of £49.5m).
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 June 2007 30 June 2006 31 Dec 2006
£m £m £m
______________________________________________
Profit for the period after tax 52.9 51.2 109.2
Minority interest (1.6) (1.7) (3.0)
Charges/(credits) included in profit
for the period:
Change in fair value of financial
instruments (0.2) (0.9) (2.3)
Intangible amortisation 7.8 5.1 17.0
Restructuring costs 10.9 7.7 19.7
Taxation on charges/(credits) included
in profit
before tax (5.7) (3.8) (10.7)
______________________________________________
Earnings for adjusted EPS 64.1 57.6 129.9
______________________________________________
Weighted average number of shares 333.9m 341.1m 339.3m
______________________________________________
Adjusted EPS 19.2p 16.9p 38.3p
______________________________________________
7. Dividends
The directors have declared an interim dividend for the current year of 7.5p per
share (2006: 7.0p) which will be paid on 19 October 2007 to shareholders on the
register on 14 September 2007. In accordance with IAS10 'Events after the
Balance Sheet Date', this interim dividend has not been reflected in the interim
accounts.
8. Reconciliation of cash generated from the operations
6 months to 6 months to Year to
30 June 30 June 31 Dec
2007 2006 2006
(unaudited) (unaudited)
£m £m £m
_____________________________________
(a) Reconciliation of operating cash flow
Cash generated from the operations 72.0 51.4 186.3
Sale of property, plant and equipment 1.2 5.4 7.7
Purchase of investments (0.9) (1.4) (2.5)
Acquisition of property, plant and
equipment (20.8) (18.3) (39.7)
Capitalised development expenditure (2.1) (3.2) (4.4)
_____________________________________
Operating cash flow from continuing
businesses 49.4 33.9 147.4
_____________________________________
(b) Reconciliation of net cash to movement in net
borrowings
Net decrease in cash and cash
equivalents (26.4) (70.0) (90.6)
Drawdown of borrowings (91.7) (61.6) (7.4)
_____________________________________
Cash outflow (118.1) (131.6) (98.0)
Currency translation differences 7.0 11.8 28.2
_____________________________________
Movement in net borrowings in the period (111.1) (119.8) (69.8)
Net borrowings at the start of the
period (80.4) (10.6) (10.6)
_____________________________________
Net borrowings at the end of the period (191.5) (130.4) (80.4)
_____________________________________
9. 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
2007 2006 2006 2007 2006 2006
____________________________________________________________
Euro 1.48 1.46 1.47 1.49 1.45 1.48
US Dollar 1.97 1.79 1.85 2.01 1.85 1.96
10. Contingent liability
On 16 August 2007 the Company reported that it had initiated an investigation
into possible irregular payments associated with certain trading contracts
entered into by its Severe Service business, which may be in breach of the law
and the Company's policies and practices. The Company has made appropriate
proactive notifications to the relevant authorities and will co-operate fully
with any enquiry from those authorities relating to this matter. It is too early
to be able to estimate the amount of possible fines and other liabilities
associated with this investigation and, as such, no provision has been made in
these accounts.
11. Financial information
This interim financial information has been prepared using the accounting
policies and presentation that were applied in the preparation of the Company's
published consolidated financial statements for the year ended 31 December 2006.
This interim statement has been reviewed by the Company'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 financial year ended 31 December 2006 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 (i) unqualified, (ii) did not include
a reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report, and (iii) 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 14 September 2007 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 2007.
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 Financial - Tel: 020 7067 0700
Independent review report by KPMG Audit Plc to IMI plc
We have been instructed by the Company to review the financial information for
the six months ended 30 June 2007 which comprises the consolidated income
statement, consolidated balance sheet, consolidated statement of cash flows,
consolidated statement of recognised income and expense and related notes set
out on pages 7 to 15. 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 of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual financial statements except
where any changes, and the reasons for them, are 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 excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with
International Statements on Auditing (UK and Ireland) 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 2007.
KPMG Audit Plc
Chartered Accountants
2 Cornwall Street
Birmingham
B3 2DL
3 September 2007
This information is provided by RNS
The company news service from the London Stock Exchange
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