Interim Management Statement

RNS Number : 4395I

IMI PLC

19 November 2008

 



Embargoed for 7.00am

19 November 2008

IMI plc 

('IMI' or 'the Group')

INTERIM MANAGEMENT STATEMENT

IMI is today issuing the following Interim Management Statement for the period from 1 July to 18 November 2008.

IMI has maintained its revenue momentum of the first half through to the end of October and is confident of delivering on expectations for 2008. In spite of the deteriorating economic climate, the majority of our end markets are showing good resilience, and early action continues to be taken to mitigate the profit impact in any areas of business weakness.  A healthy balance sheet, together with the naturally cash generative qualities of our businesses, places the Group in a good position to deal both with continued economic uncertainty and to take advantage of any acquisition or market share opportunities that might emerge.

Current trading

The Severe Service business continues to trade well. Routes to market are now fully reopened following the disruption caused by the CCI investigation and order intake in the four months to October was up 14%.  Project activity in the oil and gas and power markets remains healthy.

The Fluid Power business has slowed in recent weeks, most notably in the general pneumatic markets in both North America and Western Europe.  The majority of our sector business has continued to deliver good growth with the exception of the in-plant automotive and European commercial vehicle sectors.  New products focused on improved air efficiency, labour productivity, and technology leadership continue to resonate well with our customers.

The Indoor Climate business has continued to deliver good organic growth in the last four months. Sales of balancing valves have maintained momentum in most Western European construction markets and the Thermostatic Radiator Valve business has benefited from increased refurbishment activity in Germany, helped by recent legislation in respect of energy efficiency.  Actions taken at the start of the year to skew sales activity in favour of government infrastructure projects are also beginning to bear fruit.

As previously highlighted the Beverage Dispense business has experienced a sharp reduction in demand from the major soft drinks bottlers in both North America and, more recently, in Europe.  Second half revenues are currently down around 5% on last year leaving organic revenue for the ten months of the year to date broadly flat.  The UK market remains very challenging with the capital budgets of major brewers being further tightened.

Merchandising revenues have benefited from strong shipments to a major US supermarket chain in the period. The food and cosmetics sectors have maintained momentum and good growth has been delivered in consumer electronics.  The beverage sector within Merchandising has slowed and the automotive sector, whilst demonstrating reasonable resilience to date, has shown recent signs of weakening.  However, overall sales momentum has been consistent with the strong organic growth exhibited in the first half.  

Severe Service investigation

The independent investigation has been completed and we continue to hope that we can resolve this matter with the US Department of Justice by the end of March 2009.  

Exchange rates

The further weakening of sterling since 30 June 2008, especially against the US dollar, has had a positive impact on the Group's translation of revenues and profits. If the full year 2007 results were translated at average exchange rates ruling for the ten months to October 2008, this would result in a 10% increase in both revenues and operating profits.  

The Group uses derivatives to hedge some future cash flows to protect the margin on certain contracts. These contracts will be revalued at the balance sheet date and recent strengthening of the US dollar is likely to result in an additional charge in the income statement under IAS39.  

Balance sheet

Steps have been taken during the year to maintain our strong balance sheet and cash facilities.  We have term debt and committed facilities available to the Group of £557m, of which £280m were refinanced this year, extending the average maturity of our debt to 3.6 years.  Applying current exchange rates to the net debt at 30 June 2008 of £275m would result in an upward revaluation of about £75m.      

The triennial actuarial valuation of the UK defined benefit plan at 31 March 2008 has shown an increase in the deficit from £51m to £118m primarily due to the impact of lower gilt yields on the valuation of the liabilities. An appropriate funding plan, which will include additional company contributions, will be finalised in the next few months.  

Outlook

Prospects for the oil and gas and power markets remain positive for our Severe Service business, although we are alert to the possibility of lower oil prices and tighter credit markets leading to some project deferrals.

The recent weakening of fluid power and beverage dispense markets, together with the potential impact of global financial turmoil on private sector construction markets, leave us cautious in respect of the outlook, albeit we are pleased with the resilience exhibited to date in the majority of our end markets.

The Group is in a strong financial position with a healthy balance sheet and good cash generation.  The repositioning of the Group over the last few years with a focus on higher added value products and more resilient end markets, together with lower operating costs resulting from our restructuring programme, leaves the Group considerably better placed to meet the challenges arising from the global economic downturn.  

IMI will announce its Preliminary Results for the year ending 31 December 2008 on 4 March 2009.  

Enquiries to:

IMI plc
Will Shaw	Tel: [phone]
Weber Shandwick Financial
Nick Oborne / Stephanie Badjonat	Tel: [phone]

Notes to editors

IMI is a dynamic, worldwide company delivering innovative engineering solutions to leading global customers in clearly defined niche markets. Its five businesses share a common goal - to convert their industry knowledge and market insight into customised, design-engineered solutions which create customer advantage and value. These include severe service valves, motion and fluid control systems, indoor climate controls, beverage dispense systems, and merchandising display systems for retail operations.

Close customer relationships, strong positions in growing markets and clear differentiation through technological innovation or service are the defining characteristics of all IMI businesses.

IMI is quoted on the London Stock Exchange. Information about IMI plc can be found on the website: www.imiplc.com.

 

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