19 December 2007
19 December 2007
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 2007 due to be published on 5 March 2008.
In line with our expectations at the time of the interim results, organic
revenue growth for the full year, excluding acquisitions and the impact of
exchange rates, will be in the range 6-7%, with underlying second half momentum
little changed from the first half.
The power and oil and gas end markets remain buoyant. The full year 2007 revenue
growth for the Severe Service business will be about 15%. The CCI investigation,
which is discussed separately below, has had no material impact on current year
revenues. In Fluid Power, our sector business in both Europe and the US
continues to show good progress. The US commercial vehicle market is, as
expected, sharply down against last year, but we remain confident of a strong
bounce back next year ahead of further emissions legislation to be introduced in
2010. Overall, our Fluid Power revenues are expected to deliver organic growth
of around 2% for the year. Within Indoor Climate, our balancing valves business
has continued its strong first half momentum. Our thermostatic radiator
business, however, has been significantly impacted by a second half slow down in
construction and refurbishment activity in Germany. More encouragingly, recent
data shows that German construction permits, which are one leading indicator,
have now recovered from their low point earlier this year. Indoor Climate second
half organic revenue growth is projected to be about 2%.
The Beverage Dispense business continues to show improvement with underlying
revenue growth for the full year expected to be in the range 5-6%. The US
business is performing in line with expectations, Continental Europe and Asia
are delivering good growth, although the UK remains challenging. The
Merchandising Systems business continues to show good promise, albeit some of
the shipments provisionally scheduled for December will now take place in
January, giving a strong start to 2008. Second half revenues are likely to be up
around 4% on last year, similar to the growth delivered in the first half.
The effect of exchange rates on the translation of our results for the full year
2007 when compared to the prior year is estimated to be a negative 3% on both
revenues and profits. In more recent months the stronger euro has largely offset
the impact of a weaker US dollar.
We would expect reported profit before tax on continuing businesses, before the
CCI investigation costs, the amortisation of intangibles and before
restructuring costs, to be in the range of £202-£206m compared to £194.9m last
year. At the mid-point of the range, and on a constant currency basis, this
represents a growth of around 8% over the prior year.
The investigation by independent counsel into the CCI business is well advanced
and should be largely completed by the end of the first quarter of 2008. Costs
of the investigation incurred in 2007 will be around £5m, as previously
indicated. Additional costs in 2008 are not expected to be material but will be
dependent on how the US Department of Justice decides to proceed. At this stage
it is not possible to assess the level of any fines or defence costs arising
from any action which may be taken by regulatory authorities or the timing of
any such action.
As to the future impact on trading, we have now consulted widely with our
customer base who, in the circumstances, have thus far reacted supportively.
Order intake for the majority of our business, mainly in the industrialised west
and typically not involving agents, has been largely unaffected. Order intake
elsewhere has been disrupted as we continue the task, with appropriate legal
advice, of either clearing agents or putting in place alternative arrangements.
This process is gathering momentum and we would expect to have concluded much of
this work during the first half of 2008, enabling more normal patterns of order
intake to resume thereafter. As a result of this disruption, 2008 shipments for
Severe Service will be broadly in line with 2007.
Our organisation is focused on implementing the necessary corrective actions,
including the introduction of new compliance procedures and the termination of a
number of employee contracts. We expect Severe Service to return to normal
patterns of business in 2009 and beyond.
Order intake remains positive. The forecast deterioration in economic growth
stemming from the financial and housing markets has yet to be seen, but we
remain alert to these risks.
The impact of the CCI investigation will disrupt revenue growth prospects for
2008 to a degree, reducing the anticipated growth for IMI as a whole by around 2
The underlying momentum in the business remains broadly unchanged from the first
half. A healthy new product pipeline and an increasingly significant presence in
the emerging markets of Asia and East Europe continue to underpin that momentum.
- Ends -
Graham Truscott, Communications Director Tel: 0121 717 3712
Weber Shandwick Financial
Nick Oborne/Stephanie Badjonat/Charlie Hooper Tel: 020 7067 0700
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.
This information is provided by RNS
The company news service from the London Stock Exchange