10 November 2011
IMI plc ("IMI" or "the Group")
Interim Management Statement
IMI, the global engineering group, issues the following Interim Management Statement, which covers the period from 1 July to 9 November 2011.
Current trading and Outlook
As we confirmed with the announcement on the day of our capital markets event in October, current trading remains broadly unchanged from that set out in the interim results announcement in August. On an organic basis, after adjusting for the acquisition of Zimmermann & Jansen ("Z&J") at the end of last year and for exchange rate movements, revenues for the ten months to the end of October are around 6% ahead of last year, reflecting the stronger comparatives in the second half of last year. On a reported basis revenues year to date are up 10%. Based on current trading patterns we expect adjusted earnings per share for the full year to be in line with current market expectations.
Whilst the macro-economic environment continues to be uncertain, IMI is well placed to capitalise on the favourable trends in clean fuel, energy efficiency, environmental control and healthcare expenditure.
Our Severe Service business shipments have continued to improve in the second half with revenues on an organic basis 4% higher in the four months to the end of October and now 1% higher year to date. Shipments continue to be strong in LNG offsetting weaker performances in Fossil Power, reflecting the order intake in the second half of last year, and in Nuclear, where aftermarket activity in particular is being adversely affected by the incident in Japan, as customers cancel or defer upgrade and maintenance programmes.
Total order intake for Severe Service was up 2% for the ten months to October and the order book at the end of October was 16% higher than at the same point last year. An unfavourable mix of aftermarket nuclear shipments together with higher than anticipated operational costs in our new facility in Brno are expected to result in second half margins being slightly below those in the first half.
Z&J is performing well and both order intake and shipments are expected to show good growth for the full year. We were pleased to announce the acquisition of TH Jansen Armaturen GmbH ("THJ") on 17 October 2011 for an enterprise value of €17.5m. THJ is highly complementary to Z&J and will significantly enhance Z&J's capabilities as a leading global provider of custom engineered valve, actuation and control solutions for critical in-plant processes in the Iron & Steel and Petrochemical sectors.
Fluid Power has continued to perform strongly with revenues in the ten months to the end of October up 12% on an organic basis, and up 6% for the four months to October reflecting the stronger second half comparables last year. The six week moving average order intake for Fluid Power remains at a similar level to that reported in the Interim results. We continue to see good momentum in our key global sectors which now represent 43% of Fluid Power revenues. Whilst we expect a fourth quarter slowdown in our Commercial Vehicle business in Europe, as publicly reported by some of our key customers, activity levels in North America remain strong, and our innovative solutions to help customers meet emissions standards continues to increase our revenue per truck across all geographies.
We remain focused on our margin improvement initiatives including ongoing programmes to transfer more manufacturing to low cost centres, to optimise pricing and to deliver further savings from value engineering and supplier rationalisation. Overall we expect to make further progress on margins in the second half compared to the first half of the year.
Indoor Climate revenues for the ten months to the end of October are up 2% on an organic basis. We have seen a slower start to the traditional heating season, with warmer early autumn weather across Europe delaying some of the seasonal refurbishment activity. We continue to invest to drive long term growth and take advantage of the positive market trends on energy efficiency. We are on track to have over 75,000 customers attend our Hydronic seminars this year, up from 66,000 last year, including a significant uplift in North America and China.
As previously indicated, we expect Indoor Climate margins to improve in the second half and to be in line with the strong underlying level achieved in the second half of last year.
Beverage Dispense has continued to perform well with revenues, on an organic basis, up 4% for the ten months to the end of October. Revenue growth has reflected our ongoing strategy to exit lower margin more commoditised product lines, which has accounted for 4% to 5% of revenue year to date, and by the performance in Asia Pacific where we continue to see slower capital investment by the major brand owners in China.
The Beverage business is maintaining its focus on margin improvement through a combination of growth in new product areas such as smoothies, juices and frozen drinks, further cost saving initiatives and the continued product exits mentioned above. Accordingly, we expect margins in the second half to be considerably ahead of the second half of last year.
Merchandising revenues on an organic basis are up 1% in the ten months to the end of October. As expected, revenues are down in the second half to date reflecting the large automotive order that we benefitted from in 2010. The Food & Beverage sector continues to perform strongly. We expect operating margins to show the normal seasonal improvement in the fourth quarter and for full year margins to be similar to last year.
The Group continues to be highly cash generative with cash conversion expected to be around 90% for the year. Year end net debt will, after allowing for the acquisition of THJ, show a significant reduction on the half year position.
As announced in May, Roberto Quarta, appointed as a non-executive director from 1 June 2011, has assumed the role of Chairman with effect from 1 November, following the retirement of Norman Askew.
IMI will announce its preliminary results for the year ending 31 December 2011 on 2 March 2012.
Will Shaw Tel: 0121 717 3712
Rollo Head / Charlie Chichester Tel: 020 7251 3801
Notes to editors:
IMI is a global engineering group focused on the precise control and movement of fluids in critical applications. It works with leading international companies in over 50 countries to deliver innovative engineering solutions, built around valves and actuators, to address global trends such as clean energy, energy efficiency, healthcare and increasing automation. Its shares are listed on the London Stock Exchange and it is a member of the FTSE100. Further information is available at www.imiplc.com.