Final Results

IMI PLC 10 March 2003 10 March 2003 IMI plc Preliminary Results IMI plc, the major international engineering group, today announced its preliminary results for the year ended 31 December 2002. 2002 2001 Sales Â£1612m Â£1642m Results before rationalisation & restructuring costs * Operating profit from continuing businesses Â£146.0m Â£138.8m Profit before tax Â£131.5m Â£126.1m Adjusted earnings per share 25.0p 26.7p Rationalisation & restructuring costs Â£32.2m Â£44.6m Profit before tax Â£74.3m Â£86.4m Earnings per share 15.7p 18.3p Borrowings Â£173.5m Â£345.3m Gearing 33% 70% * Before goodwill amortisation and exceptional items â€¢ Operating margins improving â€¢ Another excellent cash performance â€¢ Borrowings halved â€¢ Maintained dividend of 15.5p for full year CHAIRMAN'S STATEMENT Looking back at the year 2002, it is pleasing to be able to report good progress both operationally and strategically. Against a backdrop of an increasingly uncertain economic outlook we pressed ahead into the second year of our restructuring programme and continued to reshape our portfolio of businesses. Each of our businesses faced challenging market conditions and each responded positively with market initiatives and strong cost and cash management. In continuing businesses on a like for like basis, new products and market share gains limited volume reductions in the first half to less than 2% while volumes in the second half were slightly ahead of last year. The benefits from the restructuring and cost reduction are now showing through in most areas with operating profit and margins improving. We continue with our policy of reinvesting some of the savings to promote longer term growth. We also continue to seek to optimise our capital employed and have again improved working capital and released assets for disposal. During the year we completed the acquisition of STI (Severe Service) and DCI Marketing (Merchandising Systems). Since the year end we have added further to Severe Service with the acquisition of Fluid Kinetics, and increased our investment in Indoor Climate with the acquisition of Commtech in the UK, at a combined cost of around Â£15m. Significant activity on the disposal front saw us divest all the remaining copper businesses with the sale of Copper Fittings and Copper Tube. We also sold the small Eley shotgun cartridge business. In late December the sale of the Witton site was completed and we shall be relocating our headquarters within the Birmingham area in April 2003. We have maintained focus on cash throughout the last two years of restructuring and repositioning of IMI. Strong operational cash flow performance and controlled corporate activity has reduced borrowings from Â£403m at the end of 2000 to Â£174m at 31 December 2002. Pensions The triennial actuarial valuation of the principal UK pension fund was carried out at 31 March 2002. At that date there was an actuarial surplus of Â£51m. In view of the deterioration of financial markets it has been decided that funding reviews will be carried out annually. The next reviews will be at 31 March 2003. We continue to account for pensions in accordance with SSAP24: Pension Costs. Details of the impact on the balance sheet and profit and loss account of adopting FRS17: Retirement Benefits are shown in note 6 of the Notes Relating to the Financial Statements. Results Summary Group sales at Â£1612m compare with Â£1642m reported last year. Sales of continuing businesses at Â£1463m (2001: Â£1419m) included Â£55m from acquisitions. Profit before rationalisation and restructuring costs, goodwill amortisation and exceptional items increased by over 4% to Â£131.5m compared with Â£126.1m last year. Rationalisation and restructuring costs charged against profit were Â£32.2m (2001: Â£44.6m), making a total of Â£76.8m for the full two years of our restructuring programme, in line with our previous indications. Reduced borrowings and lower rates enabled the interest charge to fall to Â£16.7m, (2001: Â£25.3m) giving interest cover based on operating profit before rationalisation and restructuring costs and goodwill amortisation of 9 times (2001: 6 times). For 2002, the effective rate of tax on profit before goodwill amortisation and exceptional items is 32%, the same underlying rate as last year. The 2001 tax charge benefited from overseas tax credits on profit distributions which reduced the actual rate to 25%. Net exceptional gains arising from the disposal of businesses and property amounted to Â£26.3m (2001: Â£27.1m) before charging Â£33.3m (2001: Â£5.8m) for acquired goodwill previously written off to reserves. Adjusted earnings per share (before rationalisation and restructuring, goodwill amortisation and exceptional items) were 25.0p (2001: 26.7p, including 2.5p as a result of the lower tax charge). Net cash flow for the year was Â£162m (2001: Â£60m) and net borrowings at the end of the year Â£173.5m (2001: Â£345.3m) resulting in balance sheet gearing of 33% compared with 70% last year. The interim dividend paid in October was maintained at 6.0p and the Board is recommending the payment of an unchanged final dividend of 9.5p making a total of 15.5p for the year. Excluding rationalisation and restructuring costs, goodwill amortisation and exceptional items, the dividend is covered 1.6 times (2001: 1.7 times). Free cash flow before dividend payments was Â£189m and dividend payments amounted to Â£55m. The Board has maintained the dividend throughout the period of restructuring and continues to recognise the importance to our shareholders of having a reliable dividend income stream. Outlook General economic conditions are yet to show any significant sign of improvement and we expect that 2003 will again present a challenging environment. The costs of the major operational restructuring we embarked on in 2001 had been incurred by the end of 2002 and the benefits are flowing through. Our businesses are stronger as a result and we look ahead with confidence to building on the solid foundation we have been laying for the past two years. CHIEF EXECUTIVE'S REVIEW For the past two years we have been engaged in a significant repositioning of the Group, building our future around businesses which can develop value-creating solutions for market-leading customers. IMI will be focused in just two areas, Fluid Control and Retail Dispense, where innovative, knowledge-based solutions provide protection from low-priced competition, and where a highly targeted, blue chip customer base provides the momentum for long term growth. Delivering this repositioning requires us to:- (i) reshape the business portfolio by exiting commodity businesses, and making bolt-on acquisitions in our 'platform' businesses; (ii) significantly increase the resource dedicated to developing customer solutions and partnerships, whilst minimising downstream operational costs through process simplification, the transfer of manufacturing to low cost economies, and the disposal of under-utilised assets. In 2002 we have made considerable progress in both respects:- (i) Of the businesses earmarked for disposal (Building Products), we have sold both Copper Fittings and Copper Tube, to separate trade buyers, for a combined sum of Â£78m. The major remaining business, Polypipe, continues to generate good profits and excellent cashflow, and will only be sold when full value can be extracted. We reinvested Â£47m in acquiring Milan-based STI for Â£4m, and Milwaukee-based DCI for Â£43m, welcome additions to our Fluid Controls and Retail Dispense platforms respectively. Both businesses have made an excellent first year contribution. (ii) Following the Â£45m of cost incurred in 2001, we have committed an additional Â£32m in 2002 in bringing about the required redistribution of our assets and resources within our platform businesses. The required restructuring has now either been completed or provided for, and rationalisation costs in 2003 will revert to the more traditional amount of less than Â£10m per year. Significant reductions in our cost base have been achieved, with six manufacturing plants now established in low cost economies (three in Mexico, two in Czech Republic, one in China) collectively employing more than 1000 people, rising to 1500 by the end of this year. By the end of 2004 we will be generating 30% of our output from these facilities. As well as the reduction in labour costs, significant savings will also be generated by switching to locally sourced materials. Slimming organisational structures, eliminating low margin product lines, and streamlining administrative processes have resulted in a further reduction of 500 overhead positions by the end of 2002. By 2004 we anticipate that our operating cost base compared to 2000, will have reduced by around Â£28m. The sale of under-utilised property assets (including the Witton site) has yielded over Â£30m in cash in the year. With the savings generated, we have added significantly to our customer development capabilities, this year alone bringing 100 top quality sales professionals through the IMI Academy; injecting a further Â£5m into the enlargement of our three technology centres; and investing further in e-commerce initiatives to transform our supply chain capabilities. We are greatly encouraged by the impact these initiatives are already having in building first class customer relationships and stimulating higher growth opportunities. Two years into our repositioning we stand in good shape. Much of the portfolio reshaping has been completed; we are focused around a much smaller number of higher added value businesses, each with leading market positions in closely defined global niches; we have a much greater proportion of our assets and resources engaged in value-building activities with a high quality customer base; our operational cost base has been materially reduced; and the cash-generating qualities of our businesses have significantly strengthened the balance sheet. Although economic and political uncertainties continue to cloud the outlook, we are confident of our future direction and our ability to deliver long term, sustainable growth in shareholder value. OPERATIONS REVIEW The following is a review of our business areas where comparisons with the previous years relate to continuing operations and operating profit is stated before rationalisation and reorganisation costs and goodwill amortisation. FLUID CONTROLS Sales: Â£661m (2001: Â£668m) Operating profit: Â£65.2m (2001: Â£62.8m) Severe Service Despite softer demand in the US power generation market, our Severe Service valve business maintained its growth record with organic sales some 10% ahead of last year. Global demand in power markets generally remained steady and the gas market had a strong year. CCI's ability to redirect its resources produced its most successful year to date in securing LNG (liquified natural gas) orders and, with continuing focus in the market on plant improvements, it enjoyed a good year in customer service and aftermarket business. The new facilities in Mexico and Czech Republic, although still only small, are coming on stream and will help provide a platform for capacity expansion. STI of Italy added to our actuation technology and the recent purchase of Fluid Kinetics in California extends our noise reduction expertise. Fluid Power Fluid Power volumes remain exposed to the capital equipment markets and declined further in 2002. However, the decline was largely in the first half of the year with second half volumes ahead overall, particularly against the fourth quarter of 2001. Margins improved significantly in the second half of the year. Our key OEM sector strategy continues to gather pace as resources are targeted increasingly at our chosen markets. We are not neglecting our end user and distribution channels with many new marketing initiatives implemented. The move to low cost manufacturing made significant progress with production in Mexico making a good start and the new facility in the Czech Republic opening during the fourth quarter. The restructuring of sales and technical resource and simplification of the infrastructure was accelerated further during the year. Further investment was made in new products and key account development. Following a major review of ISI Systems it was announced last December that further investment in this activity could not be justified and that it would close early in 2003. Closure costs of Â£5.7m have been provided. In 2002, ISI Systems incurred losses of around Â£2.5m which are included in discontinued businesses in the profit and loss account. Indoor Climate Although German TRV (thermostatic radiator valves) volumes were again lower this year, margins were maintained through aggressive cost reduction within our German operations. Encouragingly, balancing valve volumes which had been flat in the early part of the year regained momentum with some growth in the second half. Significant efficiency improvement measures have been taken including outsourcing of some manufacturing to Estonia and China. We continue to add to our European commissioning and service capability with the purchase of a small French business in June 2002 and Commtech in February 2003. UK-based Commtech is a specialist provider of commissioning services to building facility operators. RETAIL DISPENSE Sales: Â£437m (2001: Â£382m) Operating profit: Â£42.3m (2001: Â£36.7m) Beverage Dispense In Beverage Dispense, underlying volumes were around 3% ahead of last year and in addition, sales in the first half included around Â£21m from the roll out of the frozen carbonated beverage order received at the end of 2001. Good UK demand and increased market share led to a strong performance in beer dispense equipment. 2002 was a year of major operational changes particularly in the United States, where our ambitious programme to relocate a significant amount of component manufacture to Mexico and China had the most impact. The change in operations involved not only the closure of two of our US plants but also a significant relocation of production within the US. Given the magnitude of these changes, it became necessary to maintain parallel running of the US plants and the Mexican facility for most of the year, thus deferring costs savings into 2003. In a year with so much activity it is pleasing to report increased profit. Merchandising Systems In Merchandising Systems the volume decline experienced at the end of 2001 continued into 2002 but levelled out in the fourth quarter. Display Technologies, purchased in June 2001, produced a solid performance, a reflection of the large added value and innovative nature of its business. Operational improvements and overhead reductions were implemented throughout 2002 resulting in progressive enhancement of margins during the year. DCI, purchased in August 2002, made an excellent start. In what is traditionally its strongest period of trade during the year, it produced sales of Â£33m and operating profit of Â£4m and, encouragingly, a number of major new contracts were won. BUILDING PRODUCTS Sales: Â£365m (2001: Â£369m) Operating profit: Â£33.5m (2001: Â£32.3m) Continuing good UK demand enabled the Polypipe pipe businesses to produce another solid performance in both sales and profit. Operational efficiencies generally mitigated upward pressure on raw material prices. Significant reductions in working capital enhanced the excellent cash generated by this business. Elsewhere the small European businesses were affected during the year by weather and general economic conditions. The leisure business remains vulnerable to seasonal conditions but significantly reduced its capital employed. Polypipe continues to be managed vigorously and its results reflect the pro-active attitude of its management. GROUP PROFIT AND LOSS ACCOUNT for the year ended 31 December 2002 Rational- Before isation & restructuring, restructuring goodwill and & goodwill Exceptional exceptionals amortisation items Total 2002 2002 2002 2002 Notes Â£m Â£m Â£m Â£m ------------------- ------------------- ------------------ ------------ Turnover 1 Continuing operations 1427.0 1427.0 Acquisitions 36.3 36.3 ------------------- ------------------- ------------------ ------------ Total continuing operations 1463.3 1463.3 Discontinued operations 148.6 148.6 ------------------- ------------------- ------------------ ------------ Total turnover 1611.9 1611.9 ------------------- ------------------- ------------------ ------------ Operating profit 1 ------------------- ------------------- ------------------ ------------ Continuing operations before rationalisation and restructuring 141.0 (17.3) 123.7 Acquisitions 5.0 (0.7) 4.3 ------------------- ------------------- ------------------ ------------ Total continuing operations 146.0 (18.0) 128.0 before rationalisation and restructuring Rationalisation/restructuring (31.3) (31.3) ------------------- ------------------- ------------------ ------------ Total continuing operations 146.0 (49.3) 96.7 Discontinued operations 2.2 (0.9) 1.3 ------------------- ------------------- ------------------ ------------ Operating profit 148.2 (50.2) 98.0 Profit on disposal of 2 4.0 4.0 discontinued operations Provision for loss on 2 (30.7) (30.7) closure of a business Profit on disposal of 19.7 19.7 property ------------------- ------------------- ------------------ ------------ Profit before interest 148.2 (50.2) (7.0) 91.0 Net interest payable (16.7) (16.7) ------------------- ------------------- ------------------ ------------ Profit on ordinary 131.5 (50.2) (7.0) 74.3 activities before taxation Tax on profit 3 (42.1) 10.3 14.2 (17.6) ------------------- ------------------- ------------------ ------------ Profit on ordinary 89.4 (39.9) 7.2 56.7 activities after taxation Equity minority interests (1.3) (1.3) ------------------- ------------------- ------------------ ------------ Profit for the financial 88.1 (39.9) 7.2 55.4 year ------------------- ------------------- ------------------ Dividends paid and proposed 4 (54.6) ------------ Transfer to reserves 0.8 ------------ Adjusted earnings per share 5 25.0p Earnings per share 5 15.7p Diluted earnings per share 5 15.7p Rational- Before isation & restructuring, restructuring goodwill and & goodwill Exceptional exceptionals amortisation items Total 2001 2001 2001 2001 Notes Â£m Â£m Â£m Â£m ------------------- ------------------- ------------------ ------------ Turnover 1 Continuing operations 1419.0 1419.0 Acquisitions - - ------------------- ------------------- ------------------ ------------ Total continuing operations 1419.0 1419.0 Discontinued operations 222.7 222.7 ------------------- ------------------- ------------------ ------------ Total turnover 1641.7 1641.7 ------------------- ------------------- ------------------ ------------ Operating profit 1 ------------------- ------------------- ------------------ ------------ Continuing operations before rationalisation and restructuring 138.8 (16.4) 122.4 Acquisitions - - - ------------------- ------------------- ------------------ ------------ Total continuing operations 138.8 (16.4) 122.4 before rationalisation and restructuring Rationalisation/restructuring (38.4) (38.4) ------------------- ------------------- ------------------ ------------ Total continuing operations 138.8 (54.8) 84.0 Discontinued operations 12.6 (6.2) 6.4 ------------------- ------------------- ------------------ ------------ Operating profit 151.4 (61.0) 90.4 Profit on disposal of 2 20.3 20.3 discontinued operations Provision for loss on 2 - - closure of a business Profit on disposal of 1.0 1.0 property ------------------- ------------------- ------------------ ------------ Profit before interest 151.4 (61.0) 21.3 111.7 Net interest payable (25.3) (25.3) ------------------- ------------------- ------------------ ------------ Profit on ordinary 126.1 (61.0) 21.3 86.4 activities before taxation Tax on profit 3 (31.6) 11.2 (0.8) (21.2) ------------------- ------------------- ------------------ ------------ Profit on ordinary 94.5 (49.8) 20.5 65.2 activities after taxation Equity minority interests (0.7) (0.7) ------------------- ------------------- ------------------ ------------ Profit for the financial 93.8 (49.8) 20.5 64.5 year ------------------- ------------------- ------------------ Dividends paid and proposed 4 (54.5) ------------ Transfer to reserves 10.0 ------------ Adjusted earnings per share 5 26.7p Earnings per share 5 18.3p Diluted earnings per share 5 18.3p GROUP BALANCE SHEET at 31 December 2002 2002 2001 Â£m Â£m -------------------- -------------------- Fixed assets Intangible assets 302.5 298.0 Tangible assets 313.4 373.0 -------------------- -------------------- 615.9 671.0 -------------------- -------------------- Current assets Stocks 262.0 312.2 Debtors 305.5 311.1 Investments 8.2 7.7 Cash and deposits 74.3 58.2 -------------------- -------------------- 650.0 689.2 Creditors: amounts falling due within one year Borrowings and finance leases (65.1) (141.5) Other creditors (380.2) (330.6) -------------------- -------------------- Net current assets 204.7 217.1 -------------------- -------------------- Total assets less current liabilities 820.6 888.1 Creditors: amounts falling due after more than one year Borrowings and finance leases (182.7) (262.0) Other creditors (25.9) (24.3) Provisions for liabilities and charges (81.0) (108.5) -------------------- -------------------- Net Assets 531.0 493.3 -------------------- -------------------- Capital and reserves Called up share capital 88.1 87.9 Share premium account 134.1 132.4 Revaluation reserve 1.0 1.0 Other reserves 1.6 1.6 Profit and loss account 303.1 267.8 -------------------- -------------------- Equity shareholders' funds 527.9 490.7 -------------------- -------------------- Minority interest 3.1 2.6 -------------------- -------------------- 531.0 493.3 -------------------- -------------------- GROUP CASH FLOW STATEMENT for the year ended 31 December 2002 2002 2001 Â£m Â£m Â£m Â£m ------------- ------------- ------------- ------------- Reconciliation of operating profit to net cash inflow from operating activities Operating profit 98.0 90.4 Depreciation & goodwill amortisation 89.3 87.1 Stocks decrease 16.8 1.8 Debtors (increase)/decrease (0.6) 37.7 Creditors and provisions increase 26.8 3.7 ------------- ------------- Net cash inflow from operating activities 230.3 220.7 ------------- ------------- GROUP CASH FLOW STATEMENT Net cash inflow from operating activities 230.3 220.7 Return on investments and servicing of finance (16.7) (25.8) Taxation (13.8) (27.0) Capital expenditure and financial investment (11.3) (60.4) Acquisitions and disposals 26.3 6.5 Equity dividends paid (54.5) (54.5) ------------- ------------- Cash flow before use of liquid resources & financing 160.3 59.5 Management of liquid resources (3.3) 2.5 Financing Issue of ordinary shares 1.8 0.3 Decrease in borrowings (141.5) (44.2) ------------- ------------- (139.7) (43.9) ------------- ------------- Increase in cash in the year 17.3 18.1 ------------- ------------- Reconciliation of net cash to movement in net borrowings Increase in cash in the year 17.3 18.1 Cash used to repay borrowings 141.5 44.2 Cash outflow/(inflow) from movement in liquid resources 3.3 (2.5) ------------- ------------- Change in borrowings resulting from cash flows 162.1 59.8 Currency translation differences 9.7 (2.1) ------------- ------------- Movement in net borrowings in the year 171.8 57.7 Net borrowings at 1 January (345.3) (403.0) ------------- ------------- Net borrowings at 31 December (173.5) (345.3) ------------- ------------- RECONCILIATION OF MOVEMENTS IN GROUP SHAREHOLDERS' FUNDS for the year ended 31 December 2002 2002 2001 Â£m Â£m -------------- -------------- Profit for the financial year 55.4 64.5 Dividends (54.6) (54.5) -------------- -------------- 0.8 10.0 Other recognised gains and losses relating to the financial year 1.2 (1.5) New ordinary share capital issued 1.9 0.3 Previously acquired goodwill taken through the profit and loss account in arriving at the profit for the financial year 33.3 5.8 -------------- -------------- Net increase in shareholders' funds for the year 37.2 14.6 Shareholders' funds at 1 January 490.7 476.1 -------------- -------------- Shareholders' funds at 31 December 527.9 490.7 NOTES RELATING TO THE FINANCIAL STATEMENTS 1. Segmental analysis Operating profit before goodwill amortisation, rationalisation & Turnover restructuring 2002 2001 2002 2001 Â£m Â£m Â£m Â£m ------------ ------------ ------------ ------------ BY ACTIVITY Fluid Controls 661 668 65.2 62.8 ------------------------------ ------------ ------------ ------------ ------------ Severe Service 148 132 17.3 13.8 Fluid Power 379 402 25.3 26.9 Indoor Climate 134 134 22.6 22.1 ------------------------------ ------------ ------------ ------------ ------------ Retail Dispense 437 382 42.3 36.7 ------------------------------ ------------ ------------ ------------ ------------ Beverage Dispense 312 291 28.6 26.7 Merchandising Systems 125 91 13.7 10.0 ------------------------------ ------------ ------------ ------------ ------------ Building Products 365 369 33.5 32.3 ------------ ------------ ------------ ------------ 1463 1419 141.0 131.8 SSAP24 pension credit (note 6) - - 5.0 7.0 ------------ ------------ ------------ ------------ Total continuing operations 1463 1419 146.0 138.8 ------------------------------ ------------ ------------ ------------ ------------ BY GEOGRAPHICAL ORIGIN UK 436 428 39.8 36.3 Rest of Europe 470 487 52.7 50.6 The Americas 501 453 42.5 41.8 Asia/Pacific 56 51 6.0 3.1 ------------ ------------ ------------ ------------ 1463 1419 141.0 131.8 SSAP24 pension credit (note 6) - - 5.0 7.0 ------------ ------------ ------------ ------------ Total continuing operations 1463 1419 146.0 138.8 ------------------------------ ------------ ------------ ------------ ------------ Net assets excluding Operating profit goodwill 2002 2001 2002 2001 Â£m Â£m Â£m Â£m ------------ ------------ ------------ ------------ BY ACTIVITY Fluid Controls 46.7 32.9 221 246 ------------------------------ ------------ ------------ ------------ ------------ Severe Service 16.8 13.5 48 29 Fluid Power 9.8 2.0 154 189 Indoor Climate 20.1 17.4 19 28 ------------------------------ ------------ ------------ ------------ ------------ Retail Dispense 26.5 27.2 109 125 ------------------------------ ------------ ------------ ------------ ------------ Beverage Dispense 14.4 18.0 82 99 Merchandising Systems 12.1 9.2 27 26 ------------------------------ ------------ ------------ ------------ ------------ Building Products 18.5 16.9 143 179 ------------ ------------ ------------ ------------ 91.7 77.0 473 550 SSAP24 pension credit (note 6) 5.0 7.0 - - ------------ ------------ ------------ ------------ Total continuing operations 96.7 84.0 473 550 ------------------------------ ------------ ------------ ------------ ------------ BY GEOGRAPHICAL ORIGIN UK 20.8 15.7 159 197 Rest of Europe 40.8 28.8 171 180 The Americas 24.5 29.7 129 160 Asia/Pacific 5.6 2.8 14 13 ------------ ------------ ------------ ------------ 91.7 77.0 473 550 SSAP24 pension credit (note 6) 5.0 7.0 - - ------------ ------------ ------------ ------------ Total continuing operations 96.7 84.0 473 550 ------------------------------ ------------ ------------ ------------ ------------ TURNOVER BY GEOGRAPHICAL DESTINATION 2002 2001 Â£m Â£m ---------------------- ---------------------- UK 393 384 Germany 163 180 Rest of Europe 311 318 USA 438 387 Asia 80 75 Rest of World 78 75 ---------------------- ---------------------- Total continuing operations 1463 1419 ---------------------- ---------------------- Acquisitions Acquisitions comprise STI acquired in March 2002 (reported within Severe Service and Europe) and DCI Marketing acquired in July 2002 (reported within Merchandising Systems and Americas). Discontinued operations The amounts shown for discontinued operations comprise the turnover and operating profits for the Eley shotgun cartridge business sold in January 2002, the Copper Fittings businesses sold in August 2002 and the Copper Tube business sold in November 2002, all previously reported within Building Products and UK and Rest of Europe, together with the ISI Systems business, closure of which was announced in December 2002. This business was previously reported within Fluid Power and Americas and Rest of Europe. Comparatives for 2001 comprise a number of valve businesses sold in June 2001 which were located in UK, France and US and Marston Cooling (UK) sold in October 2001. 2. Exceptional items Profit on disposal of discontinued operations arises from the disposals of the Copper Fittings, Copper Tube and Eley shotgun cartridge businesses. Goodwill of Â£8.3m, previously written off to reserves, has been charged in arriving at this profit. The profit in 2001 relates to disposal of the valve businesses and Marston Cooling. Provision for loss on closure of a business relates to the closure of the ISI Systems business, including a charge of Â£25m for goodwill previously written off to reserves. 3. Taxation The tax rate on profit before goodwill amortisation and exceptional items is around 32%, the same as the underlying rate last year. The actual rate in 2001 was 25%, resulting from repatriation of overseas earnings from prior years. 4. Dividend The Directors recommend a final dividend of 9.5p per share (2001: 9.5p) payable on 27 May 2003 to shareholders on the register at close of business on 11 April 2003, which will absorb Â£33.5m (2001: Â£33.4m). Together with the interim dividend of 6.0p per share paid on 21 October 2002, this makes a total distribution of 15.5p per share (2001: 15.5p per share). 5. Earnings per ordinary share The weighted average number of shares in issue during the year was 351.8m, 352.7m diluted for the effect of outstanding share options (2001: 351.2m, 351.5m diluted). Earnings per share have been calculated on earnings of Â£55.4m (2001: Â£64.5m). The Directors consider that adjusted earnings per share figures, using earnings as calculated below, give a more meaningful indication of the underlying performance. 2002 2001 Â£m Â£m ---------------------- ---------------------- Profit for the period 55.4 64.5 Goodwill amortisation 18.0 16.4 Exceptional items (after tax) (7.2) (20.5) Rationalisation/restructuring (after tax) 21.9 33.4 ---------------------- ---------------------- Earnings for adjusted EPS 88.1 93.8 ---------------------- ---------------------- 6. Pensions The latest actuarial valuation of the main UK Pension Fund was carried out as at 31 March 2002. At that date the Funds assets were 106% of the accrued liabilities giving an actuarial surplus of Â£51m. For the year ended 31 December 2002, the Group has continued to account for pension costs under SSAP24: Pension Costs. The pension cost charged to the profit and loss account is calculated by an independent actuary in such a way as to spread the cost of pensions over the remaining service life of employees in membership. The net benefit in 2002 to the profit and loss account from amortising surpluses less deficits on pension schemes is Â£5m (2001: Â£7m). Adoption of FRS17: Retirement Benefits would have required the inclusion of an additional net pension liability of Â£121m, which after tax of Â£37m would result in a decrease in net assets of Â£84m. The impact on the published results of fully adopting FRS17 in 2002 is as follows: Published FRS17 Â£m Â£m Balance Sheet Net assets 531 447 Shareholder funds 528 444 Gearing 33% 39% Profit & Loss Account * Pension cost (14) (18) SSAP24 credit 5 - Finance income - 10 Net cost (9) (8) Profit before interest 148.2 139.2 Finance costs (16.7) (6.7) ------ ------ Profit before tax 131.5 132.5 * Before rationalisation, goodwill amortisation and exceptional items. 7. Exchange Rates The profit and loss accounts of overseas operations are translated into sterling at average rates of exchange for the year, balance sheets are translated at year end rates. The most significant currencies are the US Dollar and the Euro - the relevant rates of exchange were: Average Rates Balance Sheet Rates 2002 2001 2002 2001 ------------- ------------- ------------- ------------- Euro 1.59 1.61 1.53 1.63 US Dollar 1.51 1.44 1.61 1.46 The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2001 or 2002 but is derived from those accounts. Statutory accounts for 2001 have been delivered to the Registrar of Companies, and those for 2002 will be delivered following the Company's Annual General Meeting. The auditor has reported on those accounts, its reports were unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. The Company's 2002 Annual Report and Accounts including the notice of the forthcoming Annual General Meeting will be posted to shareholders on 8 April 2003. - ends - Enquiries to: Graham Truscott Corporate Communications Tel: 0121 332 2330 Press release available on the internet at www.imiplc.com Issued by: Ben Padovan Weber Shandwick Square Mile Tel: 0207 067 0700 This information is provided by RNS The company news service from the London Stock Exchange

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