18 December 2002
18 December 2002
Embargoed until 0700
IMI plc TRADING UPDATE
In accordance with its normal practice, IMI plc is today issuing a trading
update in advance of its preliminary results announcement for the twelve months
ending 31 December 2002, due to be published on 10 March 2003.
As anticipated in the interim results statement, there has been no improvement
in market conditions. Sales volumes (on a like for like basis for continuing
businesses) will be similar to the second half of last year. Operating profit
and margins, however, on the same basis, are expected to show improvement over
last year, with cost reductions arising from our restructuring and
rationalisation programme continuing to build momentum. We continue with our
policy of reinvesting some of the savings into technology and marketing
initiatives to promote longer term growth.
For the year, the impact of the reduction in operating profit as a result of
disposals will be largely offset by acquisitions and lower interest costs.
Overall, profit before restructuring and rationalisation costs, goodwill
amortisation, exceptional items and tax is expected to be in the range
£128m-£132m compared to £126.1m in 2001.
Restructuring and rationalisation costs for the year will, as previously
indicated, be around £32m (2001: £45m)
The trading environment for each of our businesses remains largely unchanged
from that reported in September. In Fluid Controls, our Severe Service valve
business has a healthy order book going into next year; Fluid Power volumes
remain subdued but margins are improving as a result of restructuring; in Indoor
Climate, operational improvements are enabling us to maintain margins, despite
the ongoing decline in the German construction market. In Retail Dispense,
Cornelius sales in the second half will be similar to last year with continuing
new product growth offsetting a fourth quarter decline in the US food service
distribution market; margins in the second half will be lower than last year due
to the operational impact of relocating manufacturing capacity to Mexico and
China. In Merchandising Systems, there is still little evidence of a pick up in
demand although the early signs for DCI, acquired in August, are encouraging.
In the remaining Building Products operations, sales and margins in Polypipe's
main building products businesses are holding up well as UK demand remains
Operating cash generation will again be strong this year, as a result of further
reductions in working capital. With positive cash flow arising from corporate
activity, borrowings at the end of the year will be considerably lower than at
31 December 2001.
The disposal of the Copper Tube business was completed on 29 November bringing
the total gross proceeds from the sale of the Copper Tube and Fittings
businesses to £78m.
The difficulties experienced in the ISI Systems activity within Fluid Power were
referred to in our interim report. The systems business supplies handling
equipment for automotive press shops and substantial investment in updating the
technology is required. Following a major review it has been decided that
further investment cannot be justified and it is proposed to close ISI Systems
early next year. The cost of closure, both cash and tangible asset write off,
will be around £6m and will be provided as an exceptional item in the 2002
This business was part of the ISI business acquired in 1996 and the goodwill
associated with the ISI Systems activity when originally purchased was £25m. UK
accounting standards require that this amount, which was at that time written
off to reserves, is written back through the profit and loss account as part of
the exceptional loss. Such accounting treatment has no impact on shareholders'
In 2003 we expect to complete the major operational restructuring we embarked on
in 2001. The costs of this restructuring will have been substantially committed
by the end of the current year and rationalisation costs in 2003 should be at a
more normal level of less than £10m.
Going into 2003 our view is very similar to that expressed throughout the last
twelve months and we do not expect any significant improvement in general
conditions in the coming year. A clear strategy and strong balance sheet
continue to provide a sound platform for moving our businesses forward.
- Ends -
Information about IMI plc can be found on the website: www.imiplc.com
For further information contact:
Graham Truscott, Communications Director Tel: 0121 332 2330
Weber Shandwick Square Mile
Ben Padovan / Peter Corbin Tel: 020 7067 0700
Note to editors:
IMI plc is a dynamic international engineering business specialising in
innovative solutions and services for a wide range of industrial and retail
customers. Its future growth is being built on the two business areas of Fluid
Controls and Retail Dispense.
IMI's operations in these two business areas share the following core
characteristics: strong market positions in growing markets; the ability to be
clearly differentiated from their competitors through technological innovation
or after-sales service; and the provision of 'added value' solutions through
bespoke solutions rather than a high manufacturing or material content.
IMI is quoted on the London Stock Exchange and is capitalised at approximately
This information is provided by RNS
The company news service from the London Stock Exchange