3 July 2001
3 July 2001
In line with its announcement at the AGM, IMI plc is today issuing a trading
update in advance of its interim results for the six months to 30 June 2001,
which will be published on 10 September 2001.
In the trading update provided at the AGM in May we referred to the
deteriorating German construction market which continues to weaken. Our sales
of copper tube, fittings and valves to this market are around 20% lower than
the £40m achieved in the first half of last year. Other European markets have
held up reasonably well but are now showing signs of weakness. In Polypipe,
the main Building Products division volumes are similar to last year and
margins have improved. The other Polypipe businesses however, particularly
Civils, hit by the foot and mouth outbreak, and Kitchens and Bathrooms are
finding market conditions difficult with margins continuing to come under
Whilst the much publicised slowdown in the US food service market has dampened
our expectations of a beverage market recovery, equipment volumes are
reasonable, buoyed by a strong performance from recently introduced new
products (both in carbonated and non-carbonated sectors), and continued gains
in market share. European volumes remain slightly ahead of last year, with
good progress in the UK beer sector. Margins continue to benefit from a lower
cost base. Cannon, particularly the POP (point of purchase) business,
continues to grow.
As previously reported, sales in the US automotive and commercial vehicles
sectors are well down on last year and the general industrial fluid power
market is also lower. Overall US sales which were approximately £60m in the
first half of 2000 will be around 20% lower. Demand in Europe has so far been
ahead of last year but there are now some signs that the slowing US economy is
beginning to affect the confidence of European exporters, particularly in
The strong demand for our Severe Service Valves continues, with order books at
record levels and sales on a 'like for like' basis in the first half 15% ahead
of last year. With investment in power generation expected to be strong over a
long period this business has very good growth prospects. To take full
advantage of this we have, as indicated in May, increased our resources in
sales and engineering, the costs of which will impact on the margins in the
first half. Margins will improve significantly in the second half of the year.
Overall operating profit before rationalisation costs and goodwill
amortisation is expected to be around 10% lower than the first half of 2000.
Cash generation remains a priority and operating cash flow will be much
improved on last year.
Recent press speculation referring to burst pipes in Polypipe is without
foundation. The £25m provision, properly disclosed in the Annual Report and
Accounts, relates to a warranty issue in the Windows division of Polypipe.
This is in respect of products manufactured and supplied prior to the
acquisition of Polypipe by IMI. Litigation against the raw material suppliers
is ongoing. The provision for rectification costs has been thoroughly and
independently assessed and aggregate costs to date incurred are around £6m.
We announced in March that IMI has been visited by the European Commission in
connection with an enquiry into the European copper plumbing and fittings
market. There have been no further developments to report to shareholders.
The strategy review is nearing completion and we will be communicating further
to shareholders in our Interim Report in September. The restructuring
programme announced in March, involving rationalisation costs of £40m for the
year, is proceeding according to plan. Rationalisation costs incurred in the
first half will be around £10-12m compared to £5m in 2000. In January we
purchased BTG for £16m to enhance our Severe Service Valve business and in
June we purchased 80% of Display Technologies for £26m to add to our growing
POP (point of purchase) business. Also in June we sold a number of businesses
in Energy Controls for £55m resulting in an exceptional profit on sale of
- Ends -
IMI plc Tel: 0121 332 2343
Martin Lamb, Chief Executive
Trevor Slack, Finance Director
Weber Shandwick Worldwide Tel: 020 7329 0096