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Monday 04 September, 2006


Interim Results

04 September 2006

4 September 2006

IMI plc 2006 First Half Results

IMI plc, the international engineering group, today announced its interim
results for the six months ended 30 June 2006.

                                                  2006         2005     % change
Continuing businesses:
Sales                                            £732m        £641m         +14
Operating profit *                              £85.9m       £74.3m         +16
Profit before tax *                             £88.1m       £69.6m         +27
Adjusted earnings per share **                   16.9p        13.5p         +25
Basic earnings per share                         14.5p        12.1p         +20

Restructuring costs                              £7.7m        £2.2m

Loss after tax on discontinued businesses            -       £85.1m

Basic earnings/(loss) per share                  14.5p      (12.0)p

Dividend                                          7.0p        6.65p          +5

* before restructuring costs, intangible amortisation and exceptional items
** before restructuring costs, change in fair value of financial instruments,
intangible amortisation and exceptional items 

Norman Askew, Chairman of IMI commented:

'We have delivered another encouraging set of results in the first half, with
healthy organic growth being supported by a strong contribution from recent
acquisitions. Prospects for the balance of the year remain positive.'



In the first half of 2006 IMI has continued its steady progress with an organic
sales growth of around 4%. Operating profits, including the contribution from
acquisitions, have increased by 16%.

The acquisition of Truflo was completed on 26 April 2006 and is making a good
contribution to the Fluid Controls businesses. During the period we have spent
£117m on acquisitions and £19m on the on-market share buy-back program. The
restructuring we announced in March will see us invest about £20m this year and
for each of the next two years. This is underway and on track to deliver
improvements in operating margins. We will continue to use the on-market share
buy-back as appropriate and envisage raising our debt levels to around
£400-£500m over the next few years.

The Board has decided to increase the interim dividend by 5.3% to 7.0p (2005:

Results summary

The comparatives for our continuing businesses have been adjusted to exclude the
Polypipe business, the disposal of which was completed on 2 September 2005.

Sales rose 14% to £732m, including £55m from acquisitions. A stronger US dollar
than in the first half of 2005 has meant that exchange rates have contributed
around two percentage points of growth to both sales and operating profits.
Operating profit before exceptional items, intangible amortisation and
restructuring costs was £85.9m, 16% ahead of last year, including £7.4m from

Interest costs on net borrowings were £3.1m and were covered 25 times. Other net
financial income of £5.3m, comprising the impact of pension financing under
IAS19 and the change in fair value of financial instruments under IAS39, brings
the total net financing income to £2.2m, compared to a charge of £4.7m in 2005.

Profit before tax, exceptional items, intangible amortisation and restructuring
costs was £88.1m, up 27% on the prior period. Restructuring costs were £7.7m and
related primarily to the continuing transfer of Fluid Power manufacturing from
the US to Mexico. Profit before tax was £75.3m, an increase of 15%.

The estimated effective tax rate for 2006 is 32% and is unchanged from the 2005
rate applied to profit before exceptional items.

Adjusted earnings per share from continuing operations, excluding the change in
fair value of financial instruments, intangible amortisation, restructuring
costs and exceptional items was 16.9p, compared to 13.5p, an increase of 25%.
The basic earnings per share was 14.5p which compares with the equivalent
earnings per share from continuing businesses in the prior period of 12.1p.
After the disposal of Polypipe, the reported loss per share in 2005 was 12.0p.

Cash flow

The total cash outflow for the period was £132m. Tax (£21m), acquisitions
(£117m), the purchase of shares held in treasury and in trust for employee share
schemes (£26m) and dividends (£37m) absorbed £201m. £36m was received from the
sale of the Polypipe vendor loan note. The operating cash flow was £34m (2005:

Balance sheet

Closing net debt was £130m (June 2005: £196m). The debt to annualised EBITDA
ratio at the end of June was 0.66.

Shareholders' equity at the end of June was £432m, an increase of £14m since the
end of last year, comprising the profit for the period less dividends and share
buy-backs plus an actuarial gain net of tax on the defined benefit pension plans
of £25m. Balance sheet gearing was 30%.

European Commission enquiry

As previously reported, the European Commission has been investigating
allegations of anti-competitive behaviour by certain manufacturers of plumbing
fittings, including IMI's former fittings business which was sold in 2002. A
decision, including notification of the fine on IMI is expected from the
Commission later this year.

Operations review

The following review of our business areas for the six months to 30 June 2006
compares the performance of our continuing operations with the six month period
to 30 June 2005. Operating profit is stated before restructuring costs,
intangible amortisation and exceptional items. Comparative figures have been
restated accordingly.

Severe Service

Sales in the first half were up 45% to £128m (2005: £88m) and operating profit
rose 61% to £16.3m (2005: £10.1m).

The strong energy market continues to drive demand in oil and gas and power
construction for our highly engineered severe service valves. Middle East and
Asian markets continue to be particularly buoyant. While first half underlying
sales grew at 12%, the rate of order growth on new valves was around 25%,
further extending the order book at the period end. We are continuing to invest
in sales and engineering resource to support this strong demand. The Truflo
business, acquired in April this year, is performing well and investment is
being made to increase capacity, particularly in support of our business in the
petrochemical and liquified natural gas sectors.

Fluid Power

Sales in the first half were up 16% to £281m (2005: £243m) and operating profit
rose 23% to £35.7m (2005: £29.1m).

Overall, the organic growth in sales was nearly 7%. Growth in our target sectors
has continued to be strong, with double digit increases in the commercial
vehicles, medical and print sectors. Our businesses have maintained their
momentum in the US market and performed strongly in Asia. We continue to see
improvement in Continental Europe. The UK remains broadly unchanged as the
manufacturing base continues to migrate to lower cost economies. Raw material
pricing pressure has held back the improvement in margins and we are
accelerating our efforts to claw back this impact through additional cost
reduction programs and the further transfer of manufacturing to lower cost

Indoor Climate

Sales in the first half were up 6% to £88m (2005: £83m) and operating profit
rose 7% to £12.2m (2005: £11.4m).

The balancing valve businesses enjoyed steady growth across much of Continental
Europe but experienced a slowdown in the UK due to a reduction in orders from
private finance initiatives. Growth in the Asia Pacific markets was particularly
strong. The thermostatic radiator valve business performed well in its home
German market, reversing the declining trend of recent years. Operating margins
have been maintained despite high material costs through cost reduction measures
and selective price increases.

Beverage Dispense

Sales in the first half were up 4% to £147m (2005: £141m) and operating profit
was down 9% to £13.2m (2005: £14.5m).

Excluding the acquisition of Northern Parts and Service, which was acquired in
November 2005, underlying sales in Beverage Dispense were down 5% in the first
half. This shortfall results primarily from a postponement of quick service
restaurant business in the US, where priority has been given to capital
investment in hot-side food equipment in support of recent menu extensions.

Volumes generally of traditional carbonated soft drinks equipment, both in the
US and Europe, continue to show small year on year reductions, whilst new
products targeted at the juice, water and frozen drinks sectors have again
showed good growth.

Margins were impacted by the unfavourable mix arising from lower quick service
restaurant activity and by sharply higher copper and aluminium prices. Programs
to recover some of the margin impact in the second half are in place with
accelerated sourcing from China and selective selling price increases.

Merchandising Systems

Sales in the first half were up 2% to £88m (2005: £86m) and operating profit was
down 8% to £8.5m (2005: £9.2m).

Excluding the impact of exchange rates, underlying sales were flat in the
period. The automotive sector, which was around 5% down on the first half of
2005, has now stabilised and we expect second half programs for 2007 model
launches to proceed to plan. The consumer electronics sector has performed very
well with a number of new product launches. The beverage, confectionery and
cosmetics sectors also continued their steady growth with a number of new
contracts secured during the period. Our business in the dairy sector slowed
during the period, not helped by higher interest rates. Margins were impacted by
further sharp increases in stainless steel prices, particularly on older product
lines with higher metal content. Again actions are in place to mitigate some of
this impact in the second half.


We are encouraged by continuing signs of improvement in Continental Europe and
consistent strong momentum in Asia. Healthy demand in oil and gas and energy
markets, together with continued buoyancy in commercial vehicle and medical
markets, should enable our Fluid Controls businesses to maintain the momentum of
the first half. Despite the relative weakness of the Retail Dispense businesses
in the first half and some concerns over consumer sentiment in the US, we do
expect some improvement in the second half. Material costs remain an issue,
albeit actions taken in the first six months should mitigate some of the impact
in the second half. With positive sales momentum, a continued focus on margin
improvement and a healthy contribution from new acquisitions, we expect to
deliver good progress for the year as a whole.


                                                        6 months to    6 months to        Year to
                                                       30 June 2006   30 June 2005    31 Dec 2005
                                                        (unaudited)    (unaudited)
                                                 Notes           £m             £m             £m
Revenue                                           1,2           732            641          1,341
Operating profit before restructuring costs
and intangible amortisation                                    85.9           74.3           163.7
Restructuring costs                                            (7.7)          (2.2)           (4.2)
Intangible amortisation                                        (5.1)          (1.9)           (5.6)
Operating profit before financing costs           1,2          73.1           70.2           153.9
Financial income                                   3           39.6           32.7            67.0
Financial expense                                  3          (37.4)         (37.4)          (69.8)

Profit before tax
  Before restructuring costs, intangible
  amortisation and exceptional items                           88.1           69.6           160.9
  Restructuring costs                                          (7.7)          (2.2)           (4.2)
  Intangible amortisation                                      (5.1)          (1.9)           (5.6)

Total                                                          75.3           65.5           151.1

UK taxation                                        4           (2.6)           0.7            (2.5)
Overseas taxation                                  4          (21.5)         (21.9)          (45.9)
Profit of continuing businesses after tax                      51.2           44.3           102.7
Loss after tax on discontinued businesses,
disposal and associated closure costs              5              -          (85.1)          (86.5)
Total profit/(loss) for the period                             51.2          (40.8)           16.2
Attributable to:
Equity shareholders of the parent                              49.5          (42.3)           13.5
Minority interest                                               1.7            1.5             2.7
Total profit/(loss) for the period                             51.2          (40.8)           16.2
Earnings per share:
Basic earnings/(loss) per share                    6           14.5p         (12.0)p           3.9p
Diluted earnings/(loss) per share                  6           14.4p         (11.9)p           3.8p

Basic earnings per share - continuing businesses   6           14.5p           12.1p          28.6p


                                                                        2006                    2005
                                                                     30 June             30 June     31 Dec
                                                                  (unaudited)         (unaudited)
                                                                          £m                  £m         £m
        Intangible assets                                              286.6               172.9      185.8
        Property, plant and equipment                                  189.7               185.6      192.1
        Deferred tax assets                                             61.0                55.8       75.5
  Total non-current assets                                             537.3               414.3      453.4
        Inventories                                                    220.9               203.7      205.6
        Trade and other receivables                                    300.6               274.9      301.8
        Current tax                                                     19.4                10.1       18.6
        Investments                                                     14.0                 8.6       13.0
        Cash and cash equivalents                                      114.2                84.1      188.9
        Disposal group assets classified as held for sale                  -               300.2          -
  Total current assets                                                 669.1               881.6      727.9
  Total assets                                                       1,206.4             1,295.9    1,181.3
        Bank overdraft                                                 (2.2)               (3.3)      (6.9)
        Interest-bearing loans and borrowings                         (17.0)              (62.2)     (44.4)
        Current tax                                                   (25.1)              (27.2)     (27.1)
        Trade and other payables                                     (295.5)             (276.6)    (301.9)
        Disposal group liabilities classified as held for sale             -              (59.7)          -
  Total current liabilities                                          (339.8)             (429.0)    (380.3)
        Interest-bearing loans and borrowings                        (225.4)             (214.1)    (148.2)
        Employee benefits                                            (134.9)             (130.0)    (172.8)
        Provisions                                                    (40.3)              (34.2)     (34.1)
        Deferred tax liabilities                                       (8.3)               (8.4)      (4.4)
        Other payables                                                (22.6)              (24.7)     (20.4)
  Total non-current liabilities                                      (431.5)             (411.4)    (379.9)
  Total liabilities                                                  (771.3)             (840.4)    (760.2)
Net assets                                                             435.1               455.5      421.1
        Issued capital                                                  90.1                89.2       89.6
        Share premium                                                  153.6               145.1      149.4
        Other reserves                                                   3.1                 1.6        7.3
        Retained earnings                                              184.7               214.8      171.3
  Total equity attributable to equity shareholders of the parent       431.5               450.7      417.6

Minority interest                                                        3.6                 4.8        3.5
Total equity                                                           435.1               455.5      421.1


                                                6 months to       6 months to          Year to
                                                    30 June           30 June           31 Dec
                                                       2006              2005             2005
                                                (unaudited)       (unaudited)
                                                         £m                £m               £m
Cash generated from operating activities               51.4              54.7            209.3
(note 8)
Interest paid                                          (7.7)             (9.7)           (18.2)
Income taxes paid                                     (21.0)            (25.6)           (54.2)
Net cash from operating activities -
   continuing businesses                               22.7              19.4            136.9
Additional pension scheme funding                         -                 -            (15.6)
European Commission fine                                  -             (31.3)           (31.3)
                                                       22.7             (11.9)            90.0
Cash flows from investing activities
Proceeds from sale of property, plant and 
equipment                                               5.4               2.0              5.6
Net purchase of investments                            (1.4)                -             (1.1)
Interest received                                       4.6               4.9             10.0
Acquisition of subsidiary, net of cash acquired      (117.1)            (18.8)           (63.6)
Disposal of subsidiary/discontinued operations            -               9.0            206.4
Redemption of vendor loan note re Polypipe             35.9                 -                -
Acquisition of property, plant and equipment          (18.3)            (17.1)           (41.9)
Capitalised development expenditure                    (3.2)             (3.3)            (5.2)
Net cash from investing activities                    (94.1)            (23.3)           110.2
Cash flows from financing activities
Proceeds from the issue of share capital                4.7               5.8             10.4
Purchase of own shares                                (26.4)            (33.6)           (72.6)
Drawdown/(repayment) of borrowings                     61.6              75.6            (14.0)
Dividends paid to minorities                           (1.4)             (0.9)            (1.6)
Dividends paid                                        (37.1)            (36.2)           (59.4)
Net cash from financing activities                      1.4              10.7           (137.2)

Net (decrease)/increase in cash and cash          
equivalents                                           (70.0)            (43.9)            63.0
Cash and cash equivalents at start of period          182.0             115.4            115.4
Effect of exchange rate fluctuations on cash held         -               0.4              3.6
Cash and cash equivalents at end of period            112.0              71.9            182.0

Reconciliation of net cash to movement in net 

Net (decrease)/increase in cash and cash          
equivalents                                           (70.0)            (24.5)            63.0
(Drawdown)/repayment of borrowings                    (61.6)            (75.6)            14.0
Cash (outflow)/inflow                                (131.6)           (100.1)            77.0
Currency translation differences                       11.8              (9.2)           (11.9)
Movement in net borrowings in the period             (119.8)           (109.3)            65.1
Disposal group assets classified as held for sale         -             (10.5)               -
Net borrowings at the start of the period             (10.6)            (75.7)           (75.7)
Net borrowings at the end of period                  (130.4)           (195.5)           (10.6)

                        OF RECOGNISED INCOME AND EXPENSE

                                                  6 months to     6 months to        Year to
                                                      30 June         30 June         31 Dec 
                                                         2006            2005           2005
                                                  (unaudited)      (unaudited)
                                                           £m              £m             £m
Foreign exchange translation differences                 (2.9)           0.2             5.6
Actuarial gains/(losses) on defined benefit plans     
(net of deferred tax)                                    25.4           (2.3)          (36.4)
Fair value (losses)/gains on financial                 
instruments (net of tax)                                 (1.3)           3.9             2.3
Income and expense recognised directly in equity         21.2            1.8           (28.5)
Profit/(loss) for the period                             51.2          (40.8)           16.2
Total recognised income and expense for the period       72.4          (39.0)          (12.3)
Attributable to:
         Equity shareholders of the parent               70.7          (40.5)          (15.0)
         Minority interest                                1.7            1.5             2.7
Total recognised income and expense for the period       72.4          (39.0)          (12.3)


                                                   6 months to     6 months to         Year to
                                                  30 June 2006    30 June 2005     31 Dec 2005
                                                   (unaudited)     (unaudited)
                                                            £m              £m              £m
Shareholders' equity at start of the period              417.6           553.9           550.8

Total recognised income and expense for the period        70.7           (40.5)          (15.0)

Dividends paid                                           (37.1)          (36.2)          (59.4)
Share based payments (net of deferred tax)                 2.0             1.3             3.4
Issue of ordinary shares net of costs                      4.7             5.8            10.4
Purchase of own shares into treasury                     (19.2)          (33.6)          (72.6)
Shares held in trust for employee share schemes           (7.2)              -               -
                                                         (56.8)          (62.7)         (118.2)

Shareholders' equity at end of the period                431.5           450.7           417.6


1. Segmental analysis

Segmental information is presented in the consolidated interim financial
statements in respect of the Group's continuing business segments, which are the
primary basis of segment reporting. The business segment reporting format
reflects the Group's management and internal reporting structures. Inter-segment
revenue is insignificant.

                                  Revenue                      Operating Profit
                         ----------------------------    -----------------------------
                           6 mths    6 mths     Year       6 mths    6 mths      Year
                               to        to       to           to        to        to
                          30 June   30 June   31 Dec      30 June   30 June    31 Dec
                             2006      2005     2005         2006      2005      2005
                               £m        £m       £m           £m        £m        £m
                         ----------------------------    -----------------------------

  before restructuring costs, intangible amortisation and exceptional items

                                                                 restated * restated *
  Fluid Controls              497       414      877         64.2      50.6     113.9
  Severe Service              128        88      213         16.3      10.1      28.3
  Fluid Power                 281       243      492         35.7      29.1      60.0
  Indoor Climate               88        83      172         12.2      11.4      25.6
  Retail Dispense             235       227      464         21.7      23.7      49.8
  Beverage Dispense           147       141      278         13.2      14.5      28.4
  Merchandising Systems        88        86      186          8.5       9.2      21.4
  Total continuing        
  operations                  732       641    1,341         85.9      74.3     163.7

  * restated to exclude restructuring costs

  after restructuring costs and intangible amortisation

  Fluid Controls                                             53.3      48.5     107.6
  Severe Service                                             13.2       9.9      27.3
  Fluid Power                                                28.5      27.5      55.4
  Indoor Climate                                             11.6      11.1      24.9
  Retail Dispense                                            19.8      21.7      46.3
  Beverage Dispense                                          11.8      13.6      26.3
  Merchandising Systems                                       8.0       8.1      20.0
  Total continuing operations                                73.1      70.2     153.9

2. Acquisitions of subsidiaries

Of the reported increase in revenue and operating profit of continuing
operations (before restructuring costs, intangible amortisation and exceptional
items), £55m and £7.4m revenue and profit respectively result from acquisitions.
These comprise the 2006 acquisition of the whole share capital of the Truflo
Group (Severe Service and Fluid Power), together with the extra months from the
2005 acquisitions of Syron Engineering & Manufacturing and GT Development
Corporation (Fluid Power), the ABB KK control valve business (Severe Service)
and Northern Parts and Service (Beverage Dispense).

3. Financial income and expense

                     6 months to 30 June      6 months to 30 June     Year to 31 Dec 2005
                             2006                     2005
                  Interest  Other    Total   Interest  Other  Total  Interest   Other  Total
                        £m     £m       £m        £m      £m     £m       £m       £m     £m
                  ------------------------- ------------------------ ------------------------
  Interest income      3.3             3.3       3.5            3.5      6.9             6.9
  Other investments:
    Gain on
    remeasurement of
    instruments and 
    derivatives               5.1      5.1               0.7    0.7               3.3    3.3
    Expected return on
    defined benefit
    pension plan 
    assets*                  31.2     31.2              28.5   28.5              56.8   56.8
                  ------------------------- ------------------------ ------------------------
  Financial income     3.3   36.3     39.6       3.5    29.2   32.7      6.9     60.1   67.0
                  ------------------------- ------------------------ ------------------------

  Interest expense    (6.4)           (6.4)     (8.3)          (8.3)   (15.1)          (15.1)
    Loss on
    remeasurement of
    instruments and   
    derivatives              (4.2)    (4.2)             (3.6)  (3.6)             (3.9)  (3.9)
    Finance cost of
    defined benefit
    pension scheme     
    liabilities*            (26.8)   (26.8)            (25.5) (25.5)            (50.8) (50.8)
                  ------------------------- ------------------------ ------------------------
  expense             (6.4) (31.0)   (37.4)     (8.3)  (29.1) (37.4)   (15.1)   (54.7) (69.8)
                  ------------------------- ------------------------ ------------------------

                  ------------------------- ------------------------ ------------------------
  Net financial 
  income /
  (expense)           (3.1)   5.3      2.2      (4.8)    0.1   (4.7)    (8.2)     5.4   (2.8)
                  ------------------------- ------------------------ ------------------------

* In line with best practice, the components of financial income and expense 
  related to defined benefit pension schemes have been separated into their 
  respective categories. The comparatives have been restated accordingly. Net 
  financial income/expense is unaffected.

4. Taxation

The interim taxation charge of 32% is calculated by applying the directors' best
estimate of the annual tax rate to the taxable profit for the period (six months
ended 30 June 2005: 32%) in respect of profit before exceptional items.

5. Discontinued operations

Loss after tax on discontinued businesses, disposal and associated closure costs
comprises the after tax trading result of the Polypipe Group together with the
loss on its disposal, which was completed on 2 September 2005, plus closure
costs of its Doors and Windows business which was closed prior to sale.

6. Earnings per share

The weighted average number of shares in issue during the period, net of shares
purchased by the company and held as treasury shares or in trust for employee
share schemes, was 341.1m, 343.2m diluted for the effect of outstanding share
options (six months to 30 June 2005: 352.9m, 355.7m diluted). Basic earnings per
share have been calculated on profit of £49.5m (2005: loss of £42.3m).

The directors consider that adjusted earnings per share figures, using earnings
as calculated below, give a more meaningful indication of the underlying
performance. Given the exceptional level of restructuring costs expected between
2006 and 2008, the adjusted earnings per share are now stated before these
charges and the comparatives have been restated accordingly:

                                           6 months   6 months    Year to
                                         to 30 June to 30 June     31 Dec
From continuing operations                     2006       2005       2005
                                                 £m         £m         £m
Profit for the period                          51.2       44.3       102.7
Minority interest                              (1.7)      (1.5)      (2.7)
Charges/(credits) included in profit for
the period:
  Change in fair value of financial
  instruments and derivatives                  (0.9)       2.9        0.6
  Intangible amortisation                       5.1        1.9        5.6
  Restructuring costs                           7.7        2.2        4.2
  Taxation on charges/credits included
  in profit before tax                         (3.8)      (2.2)      (3.5)
Earnings for adjusted EPS                      57.6       47.6      106.9
Adjusted EPS                                   16.9p      13.5p      30.6p
Weighted average number of shares             341.1m     352.9m     349.7m

7. Dividends

The directors have declared an interim dividend for the current year of 7.0p per
share (2005: 6.65p) which will be paid on 20 October to shareholders on the
register on 15 September 2006. In accordance with IAS10 'Events after the
Balance Sheet Date', this interim dividend has not been reflected in the interim

8. Reconciliation of cash generated from the operations

                                            6 months to   6 months to    Year to
                                                30 June       30 June     31 Dec
                                                   2006          2005       2005
                                            (unaudited)   (unaudited)
                                                     £m            £m         £m
   Cash flows from operating activities

   Profit/(loss) for the period                    51.2         (40.8)     16.2
   Adjustments for:
      Depreciation                                 19.6          18.5      38.4
      Amortisation                                  5.1           1.9       5.6
   Loss after tax on discontinued  
      businesses, disposal
      and associated closure costs                    -          85.1      86.5
   Financing income                               (39.6)        (32.7)    (67.0)
   Financing expense                               37.4          37.4      69.8
   Employee benefit charge                          2.4           1.0       2.2
   Equity settled share-based payment 
   expenses                                         1.4           1.0       2.0
      Income tax expense                           24.1          21.2      48.4
   Operating profit before changes in 
      working capital and provisions              101.6          92.6     202.1

   (Increase) in trade and other receivables      (32.4)        (31.9)     (8.9)
   (Increase)/decrease in inventories             (12.5)         (5.9)      5.7
   (Decrease)/increase in trade and other         
      payables                                    (10.7)          9.3      20.1
   Increase/(decrease) in provisions and
      employee benefits                             5.4          (9.4)     (9.7)
   Cash generated from the operations              51.4          54.7     209.3

   Reconciliation of operating cash flow

   Cash generated from the operations              51.4          54.7     209.3
   Sale of property, plant and equipment            5.4           2.0       5.6
   Purchase of investments                         (1.4)            -      (1.1)
   Acquisition of property, plant and     
      equipment                                   (18.3)        (17.1)    (41.9)
   Capitalised development expenditure             (3.2)         (3.3)     (5.2)
   Operating cash flow from continuing           
      businesses                                   33.9          36.3     166.7

9. Exchange rates

The profit and loss accounts of overseas subsidiaries are translated into
sterling at average rates of exchange for the period, balance sheets are
translated at period end rates. The main currencies are:

                  Average period rates           Balance sheet rates
              6 months to 30 June     Year     30 June 30 June  31 Dec
                   2006      2005     2005        2006    2005    2005
Euro               1.46      1.46     1.46        1.45    1.48    1.46
US Dollar          1.79      1.87     1.82        1.85    1.79    1.72

10. European Commission enquiry

The European Commission is investigating allegations of anti-competitive
behaviour among certain manufacturers of copper fittings. Notwithstanding IMI's
disposal of its Copper Fittings business in 2002, it retains responsibility in
relation to the European Commission's investigation. A Statement of Objections
was issued by the Commission in September 2005. It is not possible to give any
reliable estimate of the likely level of fine, a decision on which is not
expected until later in the year. Accordingly, no provision has been made for
any fine at 30 June 2006.

11. Financial information

This interim financial information has been prepared using the accounting
policies and presentation that were applied in the preparation of the Company's
published consolidated financial statements for the year ended 31 December 2005.

This interim statement has been reviewed by the Group's auditors having regard
to the bulletin Review of Interim Financial Information, issued by the Auditing
Practices Board. A copy of their unqualified review opinion is attached.

The comparative figures for the financial year ended 31 December 2005 are not
the Company's statutory accounts for that financial year. Those accounts have
been reported on by the Company's auditors and delivered to the registrar of
companies. The report of the auditors was (i) unqualified, (ii) did not include
a reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report, and (iii) did not contain a statement
under section 237(2) or (3) of the Companies Act 1985.

The Interim Report will be posted to shareholders on 14 September 2006 and will
be available from the same date at the Company's registered office, Lakeside,
Solihull Parkway, Birmingham Business Park, Birmingham, B37 7XZ.


Our next trading update will be issued on 15 December 2006.

Enquiries to:

Graham Truscott    -    Communications Director    -          Tel: 0121 717 3712

Press release available on the internet at

Issued by:
Nick Oborne    -    Weber Shandwick Square Mile    -    Tel: 0207 067 0700

Independent review report by KPMG Audit Plc to IMI plc

We have been instructed by the Company to review the financial information for
the six months ended 30 June 2006 which comprises the consolidated income
statement, consolidated balance sheet, consolidated statement of cash flows,
consolidated statement of recognised income and expense and related notes set
out on pages 6 to 14. We have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.

This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the Company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the Company for
our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual financial statements except
where any changes, and the reasons for them, are disclosed.

Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4
Review of interim financial information issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making enquiries
of Group management and applying analytical procedures to the financial
information and underlying financial data and, based thereon, assessing whether
the accounting policies and presentation have been consistently applied unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with
International Statements on Auditing (UK and Ireland) and therefore provides a
lower level of assurance than an audit. Accordingly, we do not express an audit
opinion on the financial information.

Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2006.

KPMG Audit Plc
Chartered Accountants
2 Cornwall Street
B3 2DL

4 September 2006

                      This information is provided by RNS
            The company news service from the London Stock Exchange


                      This information is provided by RNS
            The company news service from the London Stock Exchange

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