20 April 2012
IMI plc ("IMI" or "the Group")
Interim Management Statement
IMI, the international engineering group, issues the following Interim Management Statement, which covers the period from 1 January to 19 April 2012.
Current trading and outlook
IMI has had a positive start to 2012 with Group revenues in the three months to the end of March up 8% on a reported basis and 6% on an organic basis, after adjusting for exchange rate movements and acquisitions. We have seen good growth in both our Severe Service and Merchandising businesses with the rest of the Group trading at similar levels to last year.
Overall we expect results in the first six months of the year to be in line with our expectations and, based on current market conditions, we remain optimistic that the Group will make further progress in 2012.
Severe Service has had a strong start to the year with shipments for the first three months of the year up around 30% on a reported basis and, excluding the benefit from recent acquisitions, over 20% on an organic basis. This strong start partly reflects a catch up in new valve shipments as output from our Brno facility increases and we would expect year on year growth to moderate significantly in the second quarter against stronger revenue comparables from last year. The improved output from Brno, together with encouraging first quarter bookings (up over 10% on last year) gives us increased confidence of good growth for the full year.
As previously indicated, margins in the first half are expected to be at similar levels to the second half of last year reflecting a higher mix of lower margin new valve shipments and higher operational costs in Brno. Second half margins are expected to improve as both of these factors begin to unwind.
In February we were pleased to announce the acquisitions of Remosa SpA and Grupo InterAtiva which have significantly strengthened our isolation valve capabilities and our emerging market exposure, notably in South America.
Revenues in the first quarter for our Fluid Power business were at similar levels to last year, with reasonable growth in the US and Asia offset by weaker sales in central and southern Europe. Our sector business has grown 3% in the first three months, representing 45% of total Fluid Power revenues in the period. Overall commercial vehicle revenues are up 4% year to date with a strong performance in North American trucks more than offsetting a weaker market in Europe where revenues are down almost 10%. In our remaining sector businesses the strongest performance has been in energy, whilst food and beverage is slightly down.
We are continuing to focus on margin improvement through a number of ongoing initiatives including product mix, further moves to lower cost manufacturing sites, value engineering and supplier rationalisation. At the same time we are investing in additional sales engineers and key account managers to help drive future growth, most notably in the emerging markets.
As expected, revenues in Indoor Climate, on a constant currency basis, are similar to the first quarter of last year. Whilst the new construction market in Europe remains weak, refurbishment activity, driven by energy efficiency legislation, remains robust, particularly in Scandinavia and Germany. We continue to increase our investment in seminars, hydronic control demonstration centres and hydronic sales engineers to accelerate long term growth in Asia and North America.
First quarter revenues in Beverage Dispense are also at similar levels to last year, with reasonable growth in North America offset by weaker sales in the UK. We remain focused on improving the quality of the overall sales mix in Beverage Dispense through a combination of growth in new product sales, notably in the fast growing health and indulgence markets and by exiting a number of lower margin, more commoditised product areas. Consequently we expect first half margins to show further good progress over the first half of last year.
Merchandising has seen strong organic revenue growth of 14% in the first quarter. Whilst to some extent this reflects a low first quarter comparable from last year, we are seeing good activity levels in the US, particularly in the automotive sector where dealers are investing in our merchandising solutions for their showrooms. We have also seen good growth in our European cosmetics business. On the back of this promising start to the year we are now optimistic that we should deliver growth in the full year.
As mentioned above, in February we acquired two companies in our Severe Service division, Remosa and InterAtiva for a total initial cash consideration of £107m. We retain a strong balance sheet and continue to work on a number of other acquisition opportunities.
During the period we have seen sterling strengthen against the Euro and slightly weaken against the US Dollar giving an overall translational headwind. If the first quarter average exchange rates of $1.57 and €1.20 had been applied to our 2011 results, it is estimated that revenue and segmental operating profit would have been respectively 1% and 2% lower.
IMI will announce its interim financial report for the six months ending 30 June 2012 on 23 August 2012.
Will Shaw IMI plc Tel: +44 (0)121 717 3712
Rollo Head / Charlie Chichester RLM Finsbury Tel: +44 (0)20 7251 3801
This announcement contains certain forward-looking statements with respect to the operations, performance and financial condition of the Group. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this announcement and IMI undertakes no obligation to update these forward-looking statements. Nothing in this interim management statement should be construed as a profit forecast.
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.