Final Results
IMI PLC
05 March 2008
5 March 2008
IMI plc Preliminary Results
IMI plc, the major international engineering group, today announced its
preliminary results for the year ended 31 December 2007.
2007 2006 % change
Continuing operations:
Revenue £1,599m £1,505m +6
Operating profit * £210.8m £191.8m +10
Profit before tax* £210.1m £194.9m +8
Restructuring costs £22.0m £19.7m
Profit before tax £171.0m £158.2m +8
Adjusted earnings per share ** 42.5p 38.3p +11
Discontinued operations gain/(loss) net of tax £1.9m £(33.5)m
Basic earnings per share 35.4p 21.4p +65
Total dividend for year 20.2p 18.7p +8
* before restructuring, investigation costs, intangible amortisation and other
income totalling £39.1m (2006: £36.7m)
** before the after tax cost of restructuring, investigation costs, intangible
amortisation, other income and change in fair value of financial instruments
totalling £25.6m (2006: £23.7m)
Norman Askew, Chairman of IMI commented:
'This is another strong set of results, with organic sales growth of 7% and
operating margins improving further to 13.2%. We have a promising new products
pipeline, further cost savings expected from our recent restructuring programme,
and a robust balance sheet. We look forward to another year of good progress for
IMI in 2008'.
CHAIRMAN'S STATEMENT
I am pleased to report another strong set of results for the Group in 2007, with
encouraging progress across most dimensions of the business.
Revenue, operating profit, operating margin and earnings per share all showed
significant progress over the prior year.
Our Fluid Controls businesses delivered another strong result, buoyed by
continuing strength in energy markets in particular. The acquisitions of Kloehn
for £30m in June and Pneumatex for £19m in September, are welcome additions to
the business and have made an encouraging start in the early months of trading.
Our Retail Dispense businesses enjoyed a return to growth on the back of a
number of new product launches and some significant new contracts.
Operating profit, before restructuring, investigation costs, intangible
amortisation and other income increased by 10%, and the operating margin
improved from 12.7% to 13.2%. We are now two thirds of the way through our 3
year restructuring programme to shift a greater proportion of our manufacturing
capacity to low cost economies, and the benefits are beginning to accrue as
expected. During the year we trebled the size of our manufacturing operation for
Beverage Dispense equipment in China, and doubled our facility for Fluid Power
in Mexico.
We returned a further £93m to shareholders through our share buyback programme
during the year, acquiring a further 5.1% of our share capital. We will continue
with a buyback programme in 2008 which, alongside our continuing acquisition
programme, should deliver further progress towards our medium term target for
net debt of between £400m and £500m. Net debt at the end of 2007 was £233m.
Adjusted earnings per share increased by 11% to 42.5p. The Board is recommending
that the final dividend be increased by 9% to 12.7p. This makes the total
dividend for the year 20.2p, an increase of 8% over last year's 18.7p.
The independent investigation into improper payments within our Severe Service
business is now largely complete and the Company continues to cooperate with the
US Department of Justice. Additional costs in 2008 are not expected to be
material but will be dependent on how the US Department of Justice decides to
proceed. Our business is recovering well from what has been a period of
considerable disruption and we expect normal order patterns to be fully restored
by the middle of the year. Order intake for the first two months of this year is
ahead of the equivalent period last year. Revenues in 2008 are expected to be at
similar levels to last year, with a resumption of growth expected in early 2009.
Our organisation has worked hard to put corrective actions in place,
implementing rigorous compliance procedures and terminating a number of employee
contracts.
Looking to the future for IMI as a whole, I am delighted with the strength and
depth of our new products pipeline, and by the quality and breadth of our key
account relationships. Our focus remains on attracting and retaining the best
possible talent to help us take full advantage of the considerable opportunities
available to us.
OUTLOOK
Trading in the first two months of this year has been encouraging, with organic
sales up over 7% and order intake in all our business divisions comfortably
ahead of last year.
The order book at the end of February was 13% up on last year.
Generally our customers in industrialised economies continue to have confidence
in their medium term prospects and the strong momentum in emerging markets has
been maintained. Providing end markets remain supportive, the combination of a
full new products pipeline, strong emerging markets growth, and lower operating
costs arising from our recent restructuring programme should enable us to make
further good progress in 2008.
CHIEF EXECUTIVE'S REVIEW
2007 was another encouraging year for the business, with organic sales growth of
nearly 7% and further good progress towards our long term operating margin
target of 15%.
The contribution to both sales and margin improvement from our cumulative
investments in new products was particularly pleasing. Amongst the many new
product highlights for the year were advanced new actuator and valve controls in
support of a new generation of nuclear power plants; new door operating systems
for Siemens for use on their high speed trains; balanced heating and cooling
systems in high profile buildings such as the Burj Tower and Heathrow Terminal
5; new refrigeration technology which reduces the energy consumption of
traditional drinks dispense equipment by up to 40%; a new cold beer station for
a UK nationwide roll out of a super chilled beer for Coors; and breakthrough
advances in the use of LED lighting for substantially improving the impact of
merchandising displays used in the cosmetics industry.
Equally pleasing was the contribution from our activities in the emerging
markets of Asia, East Europe and Latin America, where sales collectively grew by
over 20% in the year and now account for 17% of Group revenues. China, Mexico,
and the Czech Republic are now also central to our manufacturing capability,
accounting for over 30% of Group wide manufacturing capacity, growing to an
estimated 40% by the end of next year once our 3 year programme of factory
restructuring, which began in 2006, has been completed. Operating margins are
expected to have improved by around 150 basis points as a result of this
programme.
Fluid Controls delivered another strong set of results, with organic sales
growth of 7% and operating margins improving to 14.5%. End markets in the energy
sector in particular remained buoyant, and new products contributed
significantly to year on year growth.
Within Retail Dispense, both the Beverage and Merchandising business exhibited
signs of improvement, collectively delivering organic sales growth of 5% over
last year, and improving operating margins by around 25 basis points, helped by
higher margin new products and a growing contribution from our low cost
manufacturing initiatives.
Operating cash conversion at 87% was encouraging given the inevitable disruption
associated with factory restructuring. Our balance sheet remains in good shape,
with net debt at around 1 x EBITDA. We are well positioned to fund further
acquisitions and a continuation of our share buyback programme which started in
2005. Kloehn and Pneumatex, acquired in the second half of 2007, performed well
and, given their exposure to favourable end markets, we expect an accelerating
contribution in the years ahead.
With its leading market positions in clearly defined global niches, strong
customer relationships, a vibrant new products programme, reliable and recurring
revenues from the aftermarket, an increasing exposure to fast growing emerging
markets, and accelerating cost benefits from a largely implemented factory
restructuring programme, the Group is well placed to continue its progress of
recent years.
FINANCIAL AND OPERATIONS REVIEW
Results summary
The results have been presented using accounting policies consistent with those
applied for the year ended 31 December 2006.
Revenue increased 6% to £1,599m (2006: £1,505m) including acquisitions which
contributed £42m or 3%.
Operating profit, before restructuring, investigation costs, intangible
amortisation and other income, was £210.8m, an increase of 10%. Operating margin
improved from 12.7% last year to 13.2%. Acquisitions contributed £6.5m at this
level. Operating profit, after restructuring costs of £22m, Severe Service
investigation costs of £4.9m, intangible amortisation of £13.9m and other income
of £1.7m, was £171.7m (2006: £155.1m). At this date it is not possible to assess
the level of any fines, defence or other costs arising from any action which may
be taken in connection with the Severe Service investigation or the timing of
any such action and accordingly no provision has been made for them in these
accounts.
Interest costs on net borrowings were £12.8m (2006: £7.5m). After offsetting the
pension fund financing credit (IAS19) and the gain on remeasurement of financial
instruments (IAS39) the net financing costs were £0.7m (2006: income of £3.1m).
Profit before tax on continuing businesses was £171.0m (2006: £158.2m). The
effective tax rate for the Group was unchanged from 2006 at 31%.
Adjusted earnings per share on continuing businesses (excluding restructuring,
investigation costs, intangible amortisation, other income and the change in the
fair value of financial instruments) was 42.5p (2006: £38.3p), an increase of
11%. The basic earnings per share, after the profit net of tax in respect of
discontinued operations was 35.4p (2006: 21.4p).
Exchange rates
If average exchange rates had remained at 2006 levels, our reported 2007 revenue
and profit growth would each have been 3% higher. The Euro strengthened
significantly later in the year. If current exchange rates of US$1.97 and €1.33
had been applied to our 2007 results, it is estimated that revenue would have
been £94m higher and profit before tax £13m higher.
Discontinued operations
The IMI Refiners business was a part of the previously owned Building Products
Group. The profit, net of tax, on the disposal of the land that was the former
site for this business was £1.9m.
Cash flow
Operating cash flow (see note 9) was £160m, 87% of operating profit before
intangible amortisation and other income. Corporate activity comprising
acquisitions, share issues and share buy backs accounted for an outflow of
£137m. After interest, tax, the additional pension scheme contribution and
payment of the European Commission fine levied in 2006 and dividends of £64m,
the net cash outflow was £140m.
Balance sheet
Net assets at 31 December 2007 were £412.9m and shareholders' equity was
£406.5m. Shareholders' equity declined during 2007 by £6.2m, comprising mainly
the profit for the year of £119.9m, the after tax actuarial gains on defined
benefit plans of £21.5m, less dividends paid of £63.9m and the purchase of the
company's own shares, £93.3m. Intangible assets at 31 December 2007 were
£314.7m, property plant and equipment totalled £207.9m and current assets less
current liabilities were £295.4m.
The pension fund deficit under IAS19 at 31 December 2007 was £64m, a £57m
improvement on the prior year mainly due to the increase in the value of the
pension assets and the additional £16m contribution made in the year. Closing
net debt was £233m.
In the following analysis, operating profit and margin are stated before
restructuring, investigation costs, intangible amortisation and other income.
Organic growth rates exclude the impact of foreign exchange movements and
acquisitions.
Severe Service
Revenue £362m (2006: £300m)
Operating profit £56.0m (2006: £45.1m)
Operating margin 15.5% (2006: 15.0%)
Severe Service revenue, excluding acquisitions and exchange rate movements, grew
at 18%. All end markets remain buoyant with the strongest growths in North
America and the emerging markets, especially in the Middle East.
Oil and gas markets remain firm. Orton, a supplier of high technology valves to
the LNG market, grew revenues at over 50%. We took possession of the new Orton
factory in October and have commenced fitting it out which, when complete, will
double its capacity.
Revenues from the conventional power market, and particularly in the USA, showed
good growth. In the nuclear power sector specification work for new power
stations is picking up and we are investing heavily in nuclear engineering and
certification from a strong existing technical base. We have manufacturing
capability for the nuclear industry in our facilities in the US, Switzerland, UK,
Canada, Japan and Korea.
We ended 2007 with a strong order book.
Fluid Power
Revenue £571m (2006: £557m)
Operating profit £76.3m (2006: £72.4m)
Operating margin 13.4% (2006: 13.0%)
Underlying revenue growth in Fluid Power was around 6% before the impact, as
expected, of the 40% downturn in our North American truck business, which
reduced overall organic growth to 2%.
Our sector businesses, where we bring engineered solutions for specific
application needs of major customers in the commercial vehicle, life science,
PET bottling, printing and rail industries, have continued to perform well and,
excluding US trucks, grew at 10%. Within these sectors, our commercial vehicle
business outside the US, and our PET bottling businesses, demonstrated
particularly good growth. The remainder of the Fluid Power business provides
pneumatic motion control products to a broad set of industrial customers. In
these markets, while the Americas were broadly flat, European revenues grew
about 8%.
2007 operating profit was £76.3m (2006: £72.4m) and represents a 13.4% operating
margin (2006: 13%). During 2007, £14m of costs were charged to continue the
restructuring of the Fluid Power cost base. One US site has now moved production
to an enlarged established Mexican facility, a further UK site closure was
announced and that production is being transferred to an existing facility in
the Czech Republic and to the Mexican facility. A further rationalisation saw
production move from Switzerland to the Czech Republic. The resultant cost
benefits will be accruing more fully in 2008 and beyond.
Whilst we remain alert to the possibility of a slowdown in certain industrial
markets, order intake in the first two months of the year has been encouraging.
The US truck market is expected to recover sharply in 2008 and current order
patterns and industry intelligence support that view.
The Kloehn acquisition, completed in June 2007, strengthens our capabilities in
the life sciences sector.
Indoor Climate
Revenue £207m (2006: £186m)
Operating profit £32.9m (2006: £29.5m)
Operating margin 15.9% (2006: 15.9%)
The Indoor Climate organic revenue growth was 7%. Growth did slow in the second
half of the year to 1% after a particularly strong first half. The majority of
the increased cost of copper, which represents a significant part of the cost of
the valves, was passed on in selling prices. The underlying volume growth in the
balancing valve business remains firm and was particularly strong in Europe.
There was, however, a significant downturn in our thermostatic radiator valve
business in Germany during the second half, following a sharp fall in the number
of residential building permits issued earlier in the year. Permits have picked
up from their low point, however, and our sales of TRVs would now appear to be
recovering, albeit not yet up to the same levels as the early part of 2007.
Sales in the emerging markets of Eastern Europe maintained their strong
development of recent years.
2007 operating profit was £32.9m (2006: £29.5m), representing an operating
margin of 15.9% (2006: 15.9%).
We increased our investment in customer training, with 32,000 industry
professionals around the world receiving training in Indoor Climate hydronic
balancing technologies in 2007, encouraging additional demand for our products
and services. The acquisition of Pneumatex, with its complementary product
range, enhances our offering in this field. It made a strong contribution in its
first few months in the Group and has already made inroads into new markets
previously beyond its reach.
Beverage Dispense
Revenue £285m (2006: £282m)
Operating profit £25.6m (2006: £25.4m)
Operating margin 9.0% (2006: 9.0%)
The organic growth for the year was 6% in Beverage Dispense.
Both the Asia Pacific market and Eastern European market returned strong
performances. The US market did show some signs of improvement in the second
half, in particular in the 'health and wellness' categories to a variety of
retailers. The beer market in the UK remained challenging, however.
We had a pleasing contribution to growth from new products in 2007. We remain
confident of the new product opportunities in the growing health and wellness
drinks categories such as water, juices, dairy, smoothies and frozen drinks and
have an extensive new product development programme addressing many of these
needs.
Operating profits for the year were £25.6m (2006: £25.4m) representing an
unchanged operating margin of 9% (2006: 9%). The Beverage team closed two
significant factories in 2007, on time and to budget, and we expect to see the
benefits from this consolidation flowing through in 2008 and beyond. We also
trebled the floor area of our factory in China and increased our manufacturing
in low cost economies to half of our total manufacturing output for this
business.
Merchandising
Revenue £174m (2006: £180m)
Operating profit £20.0m (2006: £19.4m)
Operating margin 11.5% (2006: 10.8%)
The organic growth for the year was 4% with a number of shipments originally
slated for December delivery rescheduled to early 2008. The strongest sector
performance in 2007 came from cosmetics with some significant European successes
and some promising inroads being made into the US market. Solid progress was
made in the food and beverage sectors, while the automotive sector held up well,
supported by a strong commitment to merchandising from the car manufacturers.
Sales within our consumer electronics sector however were disappointing, with a
number of new launches failing to deliver the anticipated momentum. The
opportunities in this sector, however, remain considerable.
Second half operating margins increased to nearly 13%, with our cost base
continuing to benefit from value engineering programmes in general and from a
focus on low cost sourcing in China and India in particular.
With strong shipments in the first two months of 2008, momentum remains
positive.
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2007
Notes 2007 2006
£m £m
------------------
Revenue 1, 2 1,599 1,505
------------------
Operating profit before restructuring, investigation
costs, intangible amortisation and other income 210.8 191.8
Restructuring costs (22.0) (19.7)
Severe Service investigation costs (4.9) -
Intangible amortisation (13.9) (17.0)
Other income 1.7 -
------------------
Operating profit 2, 3 171.7 155.1
Financial income 5 81.1 73.8
Financial expense 5 (81.8) (70.7)
------------------
Net financial (expense)/income 5 (0.7) 3.1
------------------
Profit before tax
--------------------------------------------------------------------------------
Before restructuring, investigation
costs, intangible amortisation and other income 210.1 194.9
Restructuring costs (22.0) (19.7)
Severe Service investigation costs (4.9) -
Intangible amortisation (13.9) (17.0)
Other income 1.7 -
--------------------------------------------------------------------------------
Total 171.0 158.2
Taxation 6
--------------------------------------------------------------------------------
UK taxation (10.5) (6.5)
Overseas taxation (42.5) (42.5)
--------------------------------------------------------------------------------
Total (53.0) (49.0)
Profit of continuing operations after tax 118.0 109.2
Gain/(loss) from discontinued operations (net of tax) 1.9 (33.5)
------------------
Total profit for the year 119.9 75.7
==================
Attributable to:
Equity shareholders of the Company 117.0 72.7
Minority interest 2.9 3.0
------------------
Total profit for the year 119.9 75.7
==================
Earnings per share 7
Basic earnings per share 35.4p 21.4p
Diluted earnings per share 35.3p 21.3p
Basic earnings per share (continuing operations) 34.8p 31.3p
Diluted earnings per share (continuing operations) 34.7p 31.1p
CONSOLIDATED BALANCE SHEET
at 31 December 2007
2007 2006
Restated
£m £m
------------------------
Assets
Intangible assets 314.7 286.8
Property, plant and equipment 207.9 190.3
Employee benefit assets 1.3 0.7
Deferred tax assets 37.2 55.8
------------------------
Total non-current assets 561.1 533.6
------------------------
Inventories 252.0 217.4
Trade and other receivables 332.6 295.2
Current tax 1.9 8.7
Investments 14.4 15.0
Cash and cash equivalents 106.5 107.2
------------------------
Total current assets 707.4 643.5
------------------------
Total assets 1,268.5 1,177.1
------------------------
Liabilities
Bank overdraft (29.1) (3.6)
Interest-bearing loans and borrowings (5.0) (43.3)
Provisions (6.9) (6.2)
Current tax (21.0) (18.2)
European Commission fine - (33.5)
Trade and other payables (350.0) (322.0)
------------------------
Total current liabilities (412.0) (426.8)
------------------------
Interest-bearing loans and borrowings (305.5) (140.7)
Employee benefit obligations (64.9) (121.3)
Provisions (34.0) (34.3)
Deferred tax liabilities (18.8) (15.5)
Other payables (20.4) (21.9)
------------------------
Total non-current liabilities (443.6) (333.7)
------------------------
Total liabilities (855.6) (760.5)
------------------------
Net assets 412.9 416.6
------------------------
Equity
Share capital 84.6 90.3
Share premium 163.3 155.2
Other reserves 6.8 (0.4)
Retained earnings 151.8 167.6
------------------------
Total equity attributable to equity shareholders
of the Company 406.5 412.7
Minority interest 6.4 3.9
------------------------
Total equity 412.9 416.6
------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2007
2007 2006
Cash flows from operating activities
£m £m
------------------------
Profit for the period 119.9 75.7
Adjustments for:
Depreciation 35.9 38.7
Amortisation 13.9 17.0
(Profit)/loss from discontinued operations (net of tax) (1.9) 33.5
Other income - disposal of business (1.7) -
Gain on sale of property, plant and equipment (0.1) (2.0)
Financial income (81.1) (73.8)
Financial expense 81.8 70.7
Equity-settled share-based payment expenses 3.1 2.9
Income tax expense 53.0 49.0
Increase in trade and other receivables (12.6) (30.9)
Increase in inventories (18.6) (14.8)
Increase in trade and other payables 20.5 19.0
(Decrease)/increase in provisions and employee
benefits (6.6) 1.3
------------------------
Cash generated from the operations 205.5 186.3
Income taxes paid (37.1) (40.0)
------------------------
168.4 146.3
Additional pension scheme funding (15.6) (15.6)
European Commission fine (32.8) -
------------------------
Net cash from operating activities 120.0 130.7
------------------------
Cash flows from investing activities
Interest received 7.2 8.4
Proceeds from sale of property, plant and equipment 8.3 7.7
(including £1m from discontinued operations)
Sale of investments 0.1 0.1
Purchase of investments (1.2) (2.6)
Acquisition of subsidiaries net of cash acquired (52.2) (118.4)
Disposal of businesses (net of cash disposed) 2.0 -
Redemption of vendor loan note re Polypipe - 35.9
Acquisition of property, plant and equipment (49.9) (39.7)
Capitalised development expenditure (3.2) (4.4)
------------------------
Net cash from investing activities (88.9) (113.0)
------------------------
Cash flows from financing activities
Interest paid (19.9) (17.0)
Purchase of own shares (93.3) (42.4)
Proceeds from the issue of share capital for employee
share schemes 8.7 6.5
Drawdown of borrowings 110.7 7.4
Dividends paid to minority interest (2.4) (2.1)
Dividends paid (63.9) (60.7)
------------------------
Net cash from financing activities (60.1) (108.3)
------------------------
Net decrease in cash and cash equivalents (29.0) (90.6)
Cash and cash equivalents at start of the year 103.6 182.0
Effect of exchange rate fluctuations on cash held 2.8 12.2
------------------------
Cash and cash equivalents at end of the year 77.4 103.6
------------------------
Notes to the cash flow appear in note 9
CONSOLIDATED STATEMENT
OF RECOGNISED INCOME AND EXPENSE
2007 2006
£m £m
-------------------------
Foreign currency translation differences (1.0) (9.6)
Actuarial gains on defined benefit plans 21.5 23.3
Change in fair value of other financial assets 4.2 -
Effective portion of change in fair value of
net investment hedges (2.3) 1.9
-------------------------
Income and expense net of tax recognised directly
in equity 22.4 15.6
Profit for the year 119.9 75.7
-------------------------
Total recognised income and expense for the year 142.3 91.3
-------------------------
Attributable to:
Equity shareholders of the Company 139.4 88.3
Minority interest 2.9 3.0
-------------------------
Total recognised income and expense for the year 142.3 91.3
--------------------------------------------------------------------------------
Note of changes in shareholders' equity
2007 2006
£m £m
-------------------------
Shareholders' equity at start of the year 412.7 417.6
Total recognised income and expense for the year 139.4 88.3
Dividends paid (63.9) (60.7)
Share based payments (net of tax) 2.9 3.4
Issue of ordinary shares net of costs 8.7 6.5
Purchase of own shares (93.3) (42.4)
-------------------------
(145.6) (93.2)
-------------------------
Shareholders' equity at end of the year 406.5 412.7
-------------------------
NOTES RELATING TO THE FINANCIAL STATEMENTS
1. Segmental analysis
Segment information is presented in the consolidated financial statements in
respect of the Group's continuing operating segments, which are the primary
basis of segment reporting. The operating segment reporting format reflects the
Group's management and internal reporting structure.
Adjusted operating
Revenue profit * Operating profit
2007 2006 2007 2006 2007 2006
BY ACTIVITY £m £m £m £m £m £m
-------------- ------------------- -----------------
Fluid Controls 1,140 1,043 165.2 147.0 133.8 116.6
--------------------------------------------------------------------------------------------
Severe Service 362 300 56.0 45.1 44.2 33.4
Fluid Power 571 557 76.3 72.4 57.9 55.9
Indoor Climate 207 186 32.9 29.5 31.7 27.3
--------------------------------------------------------------------------------------------
Retail Dispense 459 462 45.6 44.8 37.9 38.5
--------------------------------------------------------------------------------------------
Beverage Dispense 285 282 25.6 25.4 17.4 22.0
Merchandising Systems 174 180 20.0 19.4 20.5 16.5
--------------------------------------------------------------------------------------------
Total continuing operations 1,599 1,505 210.8 191.8 171.7 155.1
-----------------------------------------------
Net financial (expense)/income (0.7) 3.1
Taxation (53.0) (49.0)
-----------------
Profit of continuing operations after
tax 118.0 109.2
-----------------------------------------------------------------------------------------------
* Before restructuring, investigation costs, intangible amortisation, and other income
REVENUE BY GEOGRAPHICAL DESTINATION
2007 2006
£m £m
--------------
UK 188 173
Germany 209 194
Rest of Europe 423 376
USA 460 490
Asia/Pacific 202 183
Rest of World 117 89
--------------
Total continuing operations 1,599 1,505
--------------
2. Acquisitions
Acquisitions completed in the year were the business of Kloehn Company Ltd
(Kloehn), a leading US provider of specialist pumping and fluid handling systems
for the medical sector, acquired on 29 June 2007 and reported within Fluid
Power, and a 70% share in Pneumatex AG (Pneumatex), a specialist provider of
water conditioning equipment for building heating, cooling and related systems,
on 28 September 2007 and reported within Indoor Climate.
Of the reported increase in revenue and operating profits of continuing
businesses (before restructuring, investigation costs, intangible amortisation
and other income), £15m and £1.8m respectively result from these acquisitions.
The extra months of the prior year acquisitions of Truflo, reported within
Severe Service and Fluid Power, contributed £27m and £4.7m of revenue and
operating profit respectively.
3. Other income
In December 2007 the Company sold its interest in Imagine, a Hong Kong based
merchandising business, realising a profit of £1.7m.
4. Discontinued operations
The Company made a profit of £1.9m (net of tax) on the disposal of land once
occupied by the previously discontinued business of IMI Refiners.
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 in 2006 as a loss on discontinued operations
(net of tax). The fine was paid in January 2007.
5. Net financial income & expense
2007 2006
Interest Other Total Interest Other Total
£m £m £m £m £m £m
---------------------------------------------------------
Interest income 7.4 7.4 5.5 5.5
Increase in fair value of financial
instruments:
Designated hedges 0.8 0.8 2.4 2.4
Other economic hedges 3.3 3.3 2.9 2.9
Expected return on defined benefit pension 63.0 63.0
plan assets 69.6 69.6
---------------------------------------------------------
Financial income 7.4 73.7 81.1 5.5 68.3 73.8
---------------------------------------------------------
Interest expense (20.2) (20.2) (13.0) (13.0)
Reduction in fair value of financial
instruments:
Designated hedges (0.9) (0.9) (2.0) (2.0)
Other economic hedges (1.6) (1.6) (1.0) (1.0)
Financial cost of defined benefit pension
scheme liabilities (59.1) (59.1) (54.7) (54.7)
---------------------------------------------------------
Financial expense (20.2) (61.6) (81.8) (13.0) (57.7) (70.7)
---------------------------------------------------------
Net financial (expense)/ income (12.8) 12.1 (0.7) (7.5) 10.6 3.1
---------------------------------------------------------
6. Taxation
The effective tax rate on profit before tax is 31% (2006: 31%).
7. Earnings per ordinary 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 330.7m, 331.8m diluted for the effect of outstanding share options
(2006: 339.3m, 341.3m diluted). Basic earnings per share have been calculated on
earnings of £117.0m, (2006: £72.7m) and the equivalent ratios for continuing
operations have been calculated on earnings of £115.1m (2006: £106.2m), before
gain/(loss) from discontinued operations (net of tax).
The directors consider that adjusted earnings per share figures, using earnings
as calculated below, give a more meaningful indication of the underlying
performance because either the quantum, the one off nature, or the volatility of
these items would otherwise distort the underlying performance.
From continuing operations 2007 2006
£m £m
--------------------
Profit for the year after tax 118.0 109.2
Minority interest (2.9) (3.0)
--------------------
115.1 106.2
Charges/(credits) included in profit for the year:
Change in fair value of financial instruments (1.6) (2.3)
Intangible amortisation 13.9 17.0
Restructuring costs 22.0 19.7
Severe Service investigation costs 4.9 -
Other income (1.7) -
Taxation on charges/(credits) included in profit
before tax (11.9) (10.7)
--------------------
Earnings for adjusted EPS 140.7 129.9
--------------------
Weighted average number of shares 330.7m 339.3m
--------------------
Adjusted EPS 42.5p 38.3p
--------------------
Diluted adjusted EPS 42.4p 38.1p
--------------------
8. Dividend
The directors recommend a final dividend of 12.7p per share (2006: 11.7p)
payable on 23 May 2008 to shareholders on the register at close of business on
11 April 2008, which will absorb around £41m (2006: £39.2m). Together with the
interim dividend of 7.5p per share paid on 19 October 2007, this makes a total
distribution of 20.2p per share (2006: 18.7p per share). In accordance with
IAS10: 'Events after the Balance Sheet date', this final proposed dividend has
not been reflected in the 31 December 2007 balance sheet.
9. Cash flow reconciliations
Reconciliation of cash generated from the operations
2007 2006
Reconciliation of operating cash flow £m £m
--------------------
Cash generated from the operations 205.5 186.3
Sale of property, plant and equipment 8.3 7.7
Net purchase of investments (1.1) (2.5)
Acquisition of property, plant and equipment (49.9) (39.7)
Capitalised development expenditure (3.2) (4.4)
--------------------
Operating cash flow 159.6 147.4
--------------------
Reconciliation of net cash to movement in net borrowings
Net decrease in cash and cash equivalents (29.0) (90.6)
Drawdown of borrowings (110.7) (7.4)
--------------------
Cash outflow (139.7) (98.0)
Currency translation differences (13.0) 28.2
--------------------
Movement in net borrowings in the year (152.7) (69.8)
Net borrowings at the start of the year (80.4) (10.6)
--------------------
Net borrowings at the end of the year (233.1) (80.4)
--------------------
10. Restatement
2006 comparative figures have been restated where appropriate to show separately
the employee benefit net assets and the employee benefit net obligations in the
balance sheet.
11. Exchange rates
The income statements 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 Euro and the US Dollar - the
relevant rates of exchange were:
Average Rates Balance Sheet Rates
2007 2006 2007 2006
--------------------- --------------------
Euro 1.46 1.47 1.36 1.48
US Dollar 2.00 1.85 1.99 1.96
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2007 or 2006 but is derived
from the 2007 accounts. Statutory accounts for 2006 have been delivered to the
registrar of companies and those for 2007 will be delivered in due course. The
auditor has reported on those accounts; its reports were (i) unqualified, (ii)
did not include references to any matters to which the auditor drew attention by
way of emphasis without qualifying its reports and (iii) did not contain
statements under section 237(2) or (3) of the Companies Act 1985.
The Company's 2007 Annual Report and notice of the forthcoming Annual General
Meeting will be posted to shareholders on 3 April 2008.
- ends -
Enquiries to:
Graham Truscott - Corporate Communications - 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
This information is provided by RNS
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