1 April 2010
Annual Financial Report
IMI Plc (the "Company") released its preliminary results announcement on 4 March 2010. Further to that announcement, the Company can now confirm that in compliance with paragraph 9.6.1 of the Listing Rules, it has today submitted two copies of each of the documents listed below to the UK Listing Authority:
(a) Annual Report and Accounts for the year ended 31 December 2009;
(b) Notice of Annual General Meeting for 2010; and
(c) Form of proxy for the 2010 Annual General Meeting.
Copies of the above documents will be available for inspection at the UK Listing Authority's Document Viewing Facility which is situated at:
The Financial Services Authority
25 The North Colonnade
London E14 5HS
The documents are being despatched to shareholders today. The Annual Report and Accounts and the Notice of Annual General Meeting are also available on the IMI plc website at www.imi.plc.uk/investors (click on Annual Reports).
The Notice of Annual General Meeting for 2010 includes a resolution for the Company to adopt new articles of association. The principal changes introduced in the new articles of association are summarised in the Appendix to the Notice of Annual General Meeting for 2010. Pursuant to paragraph 6.1.2 of the Disclosure and Transparency Rules (DTR), two draft copies of the proposed amendments to the Company's articles of association have been submitted to the UK Listing Authority. In addition, a full set of the proposed new articles of association and a copy of the memorandum and current articles of association, marked to show the changes proposed, are available for inspection at the Company's registered office and at the offices of Allen & Overy LLP, One Bishops Square, London, E1 6AD during normal business hours until the conclusion of the annual general meeting.
The Company's preliminary results announcement of 4 March 2010 contained a management report as well as the audited financial statements which were prepared in accordance with the applicable accounting standards. The Annual Report and Accounts submitted to the UKLA today also contains information regarding the Company's principal risks and uncertainties and a responsibility statement relating to the content of the Annual Report and Accounts (from the Directors in office as at 4 March 2010); an extract of this information is provided below as required under paragraph 6.3.5 of the DTR, however this material should be read in conjunction with and is not a substitute for reading the full Annual Report and Accounts. There are no related party transactions requiring disclosure. Page and note references in the text below refer to page numbers and notes in the Annual Report and Accounts.
DIRECTORS' RESPONSIBILITY STATEMENT
The following statement is repeated here solely for the purpose of complying with DTR 6.3.5. This statement relates to and is extracted from page 39 of the Annual Report and Accounts and is signed by order of the Board by John O'Shea, Company Secretary. Responsibility is for the full Annual Report and Accounts and not the extracted information presented in this announcement or the preliminary results announcement.
Directors' responsibility statement under the Disclosure and Transparency Rules
Each of the directors listed on pages 34 and 35 confirm that:
• the Group and parent company financial statements in this annual report, which have been prepared in accordance with applicable UK law and with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the Group taken as a whole; and
• the management report (which comprises the Directors' report and the business review) includes a fair review of the development and performance of the business and the position of the Company and the Group taken as a whole, together with a description of the principal risks and uncertainties that they face.
RISKS AND UNCERTAINTIES
In common with all businesses, there are a number of risks and uncertainties which could have a material impact on the Group's long-term performance. The Group has in place an established risk management structure and internal controls framework which together are designed to identify, manage and mitigate business risk. A summary of the Group's risk management structure is given on pages 44 and 45. The Group's financial risk management practices are also discussed in note 18 to the financial statements. In addition, the Group's approach to corporate social responsibility and associated risks is described on pages 28 to 33.
The principal risks faced by the Group, as identified by the Board, are summarised below:
Economic and market environment
The status of the global economy and the levels of activity in the markets in which the Group operates could adversely affect the Group's revenues. The Group's cost base includes many costs that cannot be reduced in the short-term in line with reductions in revenue, which may result in sharper reductions in profitability. The Group may also be required to reassess the carrying value of acquired goodwill and other assets if certain end markets deteriorate further or for longer, which may result in impairment charges.
· The diverse nature of the Group's products, services, customers and markets served, together with the development of aftermarket revenues and appropriate contingency planning, help to mitigate the impact of unfavourable economic conditions.
Certain of the Group's businesses benefit from close commercial relationships with key customers. The loss of certain of these key relationships whether through competition, consolidation or insolvency could have a material impact on the Group's results. The Group's top ten customers represent approximately 14% of total group revenues.
· The Group devotes resources to ensure that these good relationships are maintained and developed while building strong relationships with new accounts to ensure a diverse portfolio across business sectors and geographic regions.
· The Group also monitors the markets that it operates in for advance warning of any negative commercial developments.
The Group has a significant number of contracts with a broad base of suppliers. In the current economic environment there is a risk that their access to credit or adverse trading conditions could lead to an inability to meet their contractual commitments to the Group. This could have a material impact on the Group's results.
· The Group actively monitors these risks and is continuously developing contingency plans to mitigate the impact of any supplier failure.
The Group operates in highly competitive markets. Significant product innovations, technical advances or the intensification of price competition could all adversely affect the Group's results. The Group's continued success depends upon its ability to continue to develop and produce new and enhanced products and services on a cost effective and timely basis in accordance with customer demands.
· The Group's initiatives in research and development are targeted to sustain its competitive advantage and the Group takes appropriate action to ensure that its cost base remains competitive.
· The Group's processes for managing investment in research and development include appropriate stage gates for reviewing progress against clearly defined, often customer driven, technical and commercial objectives.
Legal, regulatory and political risks
The Group's worldwide operations expose it to different legal and regulatory requirements and standards in each of the jurisdictions in which it operates including those for financial reporting, taxation, environmental, operational, anti-corruption and competition matters. The Group is also exposed to the potential for litigation from third parties which may arise in the ordinary course of business.
The Group's worldwide operations also expose it to the effect of political risk which can include sudden changes in regulations, expropriation of assets, imposition of trade barriers and wage controls and limits on the export of currency.
· The Group is committed to good governance practices and during the year has increased its resources dedicated to legal and regulatory compliance in order to further enhance its capability to identify and manage the risk of compliance failure.
· Appropriate training is provided to employees on key risk areas such as competition law and anti-corruption and also on The IMI Way which provides a guiding set of values that exemplify how IMI employees should behave.
· The IMI Hotline is available for any concerns to be reported in confidence.
Financial market risks
The Group is exposed to a number of financial market risks including credit risk, liquidity risk and fluctuations in foreign exchange rates, interest rates and commodity prices. A description of these risks and the Group's centralized approach to managing them is described in note 18 to the financial statements.
A loss of key personnel or the inability of the Group to recruit and retain high calibre managers and engineering talent may lead to the Group not being able to effectively implement its business plans and strategy and experiencing delays in the development of, or increased difficulty in the strategic development of the Group, including in developing and selling its products and services.
· Succession plans are in place and are regularly reviewed by the Board.
· A number of people development initiatives are co-ordinated across the Group, including the IMI graduate programme and high potential programmes called Aspire and Aspire Plus.
Compliance and internal controls
The Company operates various corporate governance, compliance and internal control frameworks which are essential for the effective management of such geographically diverse businesses. Failures in these controls might have a material impact on the Group.
· The IMI Way provides a guiding set of values that exemplify how IMI employees should behave and has been issued with face-to-face training to all employees.
· Further training is being provided to strengthen employee awareness of the Group's values.
· Concerns regarding breaches in compliance matters or internal controls can be reported in confidence via the IMI Hotline. All such reports are followed up and are monitored by the Chief Compliance Officer and reported to the Audit Committee.
· During the year the Group has increased its Group Assurance resources to provide more assurance on the adequacy of the Group's financial control and reporting process.
Products and technology
The Group is exposed to risks associated with the commercial failure of products, projects and technologies such as product liability and warranty claims. The quality and safety of our products is of the highest importance and there is an associated risk if they are below standard. For product claims not covered by insurance, the costs that cannot otherwise be recovered may be material to the Group.
· The Group maintains a continued focus on quality and has processes in place to mitigate the reputational and legal implications of any failure.
· The Group maintains insurance cover for product liability claims where possible and seeks to ensure that it is also protected so far as possible by the contract terms in place.
Health, safety and environmental
The Group recognises that it has a duty of care to all of its employees and to others that the Group interacts with through its products and operations. In the event of any failure in the Group's health, safety and environmental procedures, there is a potential risk of injury or death to IMI's employees or others; or environmental damage, with the consequential impact on the operations and the risk of regulatory action against the Group.
· The Group has established systems in place to ensure that health, safety and environmental matters are appropriately addressed and any such risks are minimised. These procedures were enhanced during 2009 by the introduction of the IMI Corporate Health & Safety requirements.
· The Group maintains insurance for the costs associated with any employers' liability, workers compensation or equivalent claims and also maintains insurance covering certain environmental incidents. In common with all classes of insurance, the policies do not cover fines or penalties which could, in the event of a significant failure, be material to the Group.
M & A activity
IMI's growth strategy is in part dependent on acquisitions. The execution and integration of acquisitions involves a number of risks, including diversion of management's attention, failure to retain key personnel of the acquired business and risks associated with unanticipated events or liabilities. The Group may also be subject to liabilities as a result of past or future disposals.
· The Group has a rigorous due diligence process and ensures clear financial targets are in place.
· Any potential acquisition is also subject to a formal approval process.
· The Group also puts in place appropriate business integration processes to ensure that the Group's policies, values, ethical code, compliance and control framework are adopted and embedded to ensure a smooth transition.
The Group's defined benefit pension arrangements are exposed to the risk of changes in interest rates and the market values of investments as well as inflation, increased longevity of members and statutory requirements. This may result in the cost of funding defined benefit pension arrangements becoming an increasingly significant burden on the Group's financial resources.
· The Group and the trustees of the schemes continually review these risks with actuarial and investment advice as appropriate and take action to mitigate the risks where possible.
Helen Afford Corporate Counsel Tel: 0121 717 3700
Will Shaw Investor Relations Tel: 0121 717 3700