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IMI PLC (IMI)

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Friday 25 February, 2022

IMI PLC

Preliminary results, year ended 31 December 2021

RNS Number : 7830C
IMI PLC
25 February 2022
 

25 February 2022

 

Further strategic and operational progress made across the business

Completion of attractive Adaptas acquisition and £200m share buyback

Purpose and global environmental focus continue to unlock opportunities

 

Preliminary results, year ended 31 December 2021

 

Adjusted1

Statutory

 

2021

2020

Change

vs

2020

Organic3

vs

2020

Organic3

vs

20194

2021

2020

Change

vs

2020

Change

vs

2019

Revenue

£1,866m

£1,825m

+2%

+7%

+3%

£1,866m

£1,825m

+2%

0%

Operating profit

£318m

£285m

+12%

+18%

+23%

£251m

£227m

+10%

+23%

Operating margin

17.0%

15.6%

+140bps

 

 

13.4%

12.4%

+100bps

+250bps

Profit before tax

£307m

£274m

+12%

 

 

£245m

£214m

+14%

+29%

Basic EPS

92.0p

79.7p

+15%

 

 

73.5p

62.7p

+17%

+28%

Operating cash flow2

£274m

£335m

-18%

 

 

£327m

£377m

-13%

-10%

Dividend per share

23.7p

22.5p

+5%

 

 

23.7p

22.5p

+5%

 

Net debt

£623m

£316m

 

 

 

 

 

 

 

                       

 

1 Excluding the effect of adjusting items as reported in the income statement. See Note 1 for definitions of alternative performance measures.

2 Adjusted operating cash flow, as described in Note 9 to the financial statements. Statutory measure is Cash generated from operations as shown on the cash flow statement.

3 After adjusting for exchange rates, acquisitions and disposals (see Note 1).

4 Given the significant impact on business performance due to the pandemic in 2020, the results include comparative figures for 2019 and organic growth compared to 2021. A reconciliation is provided in Note 1.

Key points

§ Good progress towards sustainable, profitable growth and Group adjusted operating margins of 18% - 20%

§ 7% organic sales growth, 18% organic adjusted operating profit growth

§ Increased organic revenues, adjusted profits and margins in all three divisions

§ Statutory operating profit increased 10%

§ Statutory profit before tax increased 14%

§ Growth Hub and Sprint Teams delivered £23m orders, with momentum building

§ Adaptas acquisition completed in attractive Life Sciences market

§ ESG agenda gaining pace

§ Accelerated benefits and complexity reduction from restructuring supports margin improvement

 

Lord Smith of Kelvin, Chairman, commented:

"2021 has been another year of progress on many fronts, demonstrating how culture and purpose can drive fundamental change in an organisation, whilst fuelling profitable growth. Our absolute ambition is that everyone in the organisation is actively included in delivering our unifying purpose [ Breakthrough Engineering for a better world] as we generate significant value for all of our stakeholders."

 

Roy Twite, Chief Executive, said:

"In 2021 we have made excellent progress with our accelerated growth strategy through increasing customer intimacy, market-led innovation and reducing complexity. The Growth Hub and Sprint Teams continue to lead important cultural change, as well as increasing orders. We also completed the acquisition of Adaptas in the attractive Life Sciences market and concluded a £200m share buyback programme. In 2022, we expect further progress towards our ambition of sustainable profitable growth and Group margins of 18% to 20%."

" Based on the strong 2021 results and current market conditions we expect 2022 full year adjusted EPS to exceed 100p ."

Enquiries to:

John Dean

IMI

Tel: +44 (0)121 717 3712

Stephen Malthouse

Headland PR

Tel: +44 (0)7734 956 201

 

 

 

A live webcast of the analyst meeting taking place today at 08:30am (GMT) will be available on the investor page of the Group's website:  www.imiplc.com. The Group plans to release its next Interim Management Statement on 5 May 2022.
 

Results overview

During 2021 IMI delivered a strong performance, benefitting from positive market conditions within key business segments including Industrial Automation, Commercial Vehicle and Construction. New products are playing an increasing role in the Group's growth, with our Growth Hub and Sprint Teams well embedded across the Group.

 

Like most industrials, IMI has experienced supply chain constraints for certain components as well as increased inflation, creating continuing pressure for the sector and IMI. This pressure continues to be well managed, minimising the impact on service levels to our customers and protecting financial returns.

 

Dividend
 

The Board is recommending a 2021 final dividend of 15.8p per share (2020: 15.0p per share). Payment will be made on 13 May 2022 to shareholders on the register at the close of business on 8 April 2022.
 

Outlook

 

Based on current market conditions we expect 2022 full year adjusted EPS to exceed 100p.  This guidance includes the full year impact of the completed £200m share buyback on our average share position (2022 forecast: 259m average shares; 2021: 267m). Guidance assumes foreign exchange rates will create a headwind of 1% on sales and profits.

 

Strategic progress

IMI launched our purpose, [ Breakthrough Engineering for a better world], in late 2019, and set out our strategy to accelerate business performance and drive sustainable, profitable growth by solving acute customer problems at pace. Our strong financial performance reflects the progress being made and the engagement created with our employees. The number of Growth Hub teams is increasing, and many initiatives are now delivering tangible results. The shift in culture necessary to deliver that Value Tomorrow ambition has been swift and effective.

 

The other key ambition of our business model - to deliver Value Today - has helped improve returns across the business through greater customer intimacy, operational efficiency, and complexity reduction, despite the pressures and market volatility of the pandemic.

 

With the acquisition of Adaptas, the Group has demonstrated IMI's commitment to using its balance sheet to good effect by moving our business further into the attractive Life Sciences market. The completion of the £200m share buyback was further confirmation of IMI's desire to maintain an efficient balance sheet.

 

Along with investments into our future growth, IMI continues to identify and execute on opportunities to drive more efficient operations.  The following provides a summary of progress on our restructuring programmes:

 

 

£m

2021

2022*

Future years*

Restructuring charge

(including impairment losses)

 

 

 

IMI Precision Engineering

(36)

(29)

(35)

IMI Critical Engineering

(1)

(13)

-

IMI Hydronic Engineering

(3)

(1)

-

Total charge

(40)

(43)

(35)

Cash impact

(33)

(38)

(62)

£m

2021

2022*

Future years*

Benefits

 

 

 

IMI Precision Engineering

7

6

26

IMI Critical Engineering

15

4

-

IMI Hydronic Engineering

3

-

1

Total benefits

25

10

27

*Future looking forecast information.

All divisions advanced their programmes which provided £25m of benefits in the year, exceeding the earlier reported target of £22m. The projects are expected to run until 2024. The Group will continue to seek out and execute projects to improve its competitive advantage.

Environmental, Social & Governance (ESG)

Our purpose, [Breakthrough Engineering for a better world], continues to drive our actions and create real energy across our organisation.  Many of IMI's solutions enhance the safety, sustainability, and productivity of our customers' products and operations, and often contribute directly to the delivery of their carbon reduction targets. When considering investments, we ensure the impact on IMI's overall ESG ambitions is a prime consideration.

IMI sees a natural link between pursuing our ESG objectives with vigour and our wider ambitions for improved growth and profitability.  Many of our best growth opportunities are supporting customers in developing solutions for a zero carbon future.

We continue to develop clear plans to reduce the environmental impact of our facilities and operations, and progressed actions in 2021 that will contribute to our goal of halving our CO2 intensity by 2030. We are also committed to be net zero by 2040.

Our Inclusion and Diversity activities are helping us build a more dynamic and innovative organisation.  We launched a Group-wide communications platform in May that enables all employees to share activity and collaborate across the Group. The platform is both accelerating business initiatives by identifying and leveraging previously untapped resource and expertise, as well as supporting IMI's core value of One Big Team.

Ensuring all our employees feel safe at work is central to our strategy and culture and we have a continued focus on identifying and reducing workplace hazards. In 2021, we also introduced the IMI HSE Excellence Framework - an enhanced management system that assesses our HSE standards against areas such as distributed workforce (field service), environment (air, water, waste), leadership engagement and risk assessment.

More information about our ESG credentials and initiatives, including our policies and practices, can be found on our website: www.imiplc.com.

Coronavirus update

The protection of our employees, our operations and our broader communities, wherever in the world they may be, remains an absolute priority. The Coronavirus response team continues to support employee welfare and help mitigate disruption in our supply chains. We continue to keep particularly close to our customers, to support them as they incur challenges brought on by the pandemic.

 

Divisional results review

The following review relates to our businesses' performance for the year ended 31 December 2021 when compared to the same period in 2020 and 2019. References to organic growth are on a constant currency basis and exclude disposals and acquisitions, see Note 1 for a reconciliation of these measures.

 

Segmental information - Energy Transfer

 

During the year the Energy business of IMI Precision Engineering was transferred into IMI Critical Engineering. The resulting impact is to increase IMI Critical Engineering revenue by £63m (2020: £64m; 2019: £66m) and operating profit by £9.1m (2020: £13.3m; 2019: £13.6m) with the equal and opposite impact to reduce the results of IMI Precision Engineering. Prior year comparatives have been re-presented to reflect this.

 

IMI Precision Engineering

 

IMI Precision Engineering specialises in the design and manufacture of motion and fluid control technologies where precision, speed and reliability are essential to the processes in which they are involved. IMI Precision Engineering operates across three principal business units: Industrial Automation, Precision Fluid OEM and Transport. Further details on that segmentation, and comparison with the 2020 results are available in Note 1.

 

 

2021

2020**

Change

Organic

vs 2020*

2019**

Organic

vs 2019*

Revenue

£836m

£813m

+3%

+7%

£841m

+4%

Adjusted operating profit*

£148.9m

£138.1m

+8%

+13%

£134.4m

+15%

Adjusted operating margin*

17.8%

17.0%

+80bps

 

16.0%

 

 

 

 

 

 

 

 

Statutory operating profit

£99.6m

£122.2m

-18%

 

 

 

Statutory operating margin

11.9%

15.0%

-310bps

 

 

 

*See Note 1 for definitions of alternative performance measures and the references to reconciliations of these measures.

**2020 and 2019 results have been restated for the impact of the Energy business transfer, please see Note 1 for further details.

 

Key achievements

§ Strong underlying sales growth, excluding ventilator surge, of 19%

§ Acquisition of Adaptas completed in attractive Life Sciences sector

§ Good early progress from Customer First and Growth Hub

 

2021 performance
 

IMI Precision's core end markets continue to provide excellent new opportunities for growth, as highlighted in the Capital Markets Event held in September.

 

During the year, the division delivered solid organic revenue growth of 7% as recovering key markets more than offset the reduction in Life Sciences revenue, following the 2020 ventilator component sales surge. If ventilator sales are excluded, the underlying growth rate was very strong at 19%. That progress was driven by gains across all three business segments: Industrial Automation, Precision Fluid OEM, and Transport. When compared with 2019, the organic revenue growth was 4%.

 

Industrial Automation revenues were up 17% compared with 2020 on an organic basis, with Transport revenues 26% ahead on the same basis. Both of these performances reflected strong recovery in their respective markets, and were supported by the division's proactive supply chain management which ensured core products remained available despite the challenges globally brought on by the pandemic. Sales within Precision Fluid OEM were down 18%, compared with 2020 with good performance in Process Control more than offset by the non-repeat of the ventilator surge in Life Sciences.

 

Adjusted operating margin in the division improved in the period by 80 basis points to 17.8%. The division continues to advance complexity reduction initiatives which will enable further improvements in customer service and support progress towards its margin targets.

 

Statutory operating profit reduced by 18% due to the restructuring programmes announced in the year to increase customer focus and reduce complexity in the division, further details are included in Note 1.

 

Outlook
 

Based on current market conditions, IMI Precision Engineering 2022 organic revenues and margins are expected to be higher than in 2021.

 

IMI Critical Engineering

 

IMI Critical Engineering is a world-leading provider of flow control solutions that enable vital energy and process industries to operate safely, reliably and more efficiently. Our products control the flow of steam, gas and liquids in harsh environments and are designed to withstand temperature and pressure extremes as well as intensely abrasive or corrosive cyclical operations. Further details on IMI Critical Engineering market segmentation, and comparison with 2020, are available in Note 1 of this statement.

 

 

2021

2020**

Change

Organic vs 2020*

2019**

Organic

vs 2019*

Order intake

£712m

£720m

-1%

+3%

£762m

-6%

Closing order book

£531m

£535m

-1%

+3%

£540m

 

 

 

 

 

 

 

 

Revenue

£691m

£707m

-2%

+2%

£717m

-1%

Adjusted operating profit*

£125.0m

£119.8m

+4%

+10%

£103.7m

+23%

Adjusted operating margin*

18.1%

16.9%

+120bps

 

14.5%

 

 

 

 

 

 

 

 

Statutory operating profit

£110.7m

£82.1m

+35%

 

 

 

Statutory operating margin

16.0%

11.6%

+440bps

 

 

 

*See Note 1 for definitions of alternative performance measures and the references to reconciliations of these measures.

**2020 and 2019 results have been restated for the impact of the Energy business transfer, please see Note 1 for further details.

 

Key achievements

§ Organic order intake up 3% in the full year, organic order book up 3% year on year

§ Margin increased to 18.1% supported by increased restructuring benefits

§ Growth Hub delivered £20m in orders

 

2021 performance
 

As is evidenced by the 2021 results, IMI Critical Engineering is advancing its strategy and deploying Growth Hub to access new markets where its expertise can support sustainable future growth.  The division's Growth Hub and Sprint Teams are already providing a significant impact to the divisional results and contributed £20m of orders in 2021, vs £6m in 2020.

 

Organic order intake for 2021 was 3% higher than in 2020. Aftermarket orders grew 3%, with strong growth in Oil & Gas, Refining & Petrochemical and Power offsetting a reduction within Nuclear due to the significant upgrade activity in 2020.  New Construction orders grew 4%, with good order growth in Refining & Petrochemical and Marine offsetting the expected decline in Oil & Gas and Power.

 

The closing order book at the end of the period was 3% higher when compared with 31 December 2020 on an organic basis. Orderbook margins are also higher.

 

Organic revenues were 2% higher than last year and 2% lower on an adjusted basis. Aftermarket organic sales were 11% higher than in 2020, largely due to growth in the Refining & Petrochemical and Power segments. New Construction organic sales were 7% lower compared with last year, largely due to lower Refining & Petrochemical sales. 

 

Organic adjusted operating profit was 10% higher than in 2020, another strong result reflecting the hard work the division has done to maximise the aftermarket opportunity and optimise its operating footprint for the future.  Adjusted operating margin for the year was 18.1%, which was 120 basis points higher than the prior year (2020: 16.9%).

 

Statutory operating profit increased by 35% due to the strong trading result and the non-repeat of the prior year restructuring costs.

 

Outlook
 

Based on the division's order book and current market conditions, IMI Critical Engineering 2022 organic revenues and margins are expected to be slightly higher when compared to 2021.

 

 

IMI Hydronic Engineering

 

IMI Hydronic Engineering is a leading provider of technologies that deliver energy efficient water-based heating and cooling systems for the residential and commercial building sectors. 

 

 

2021

2020

Change

Organic vs 2020*

2019

Organic

vs 2019*

Revenue

£339m

£305m

+11%

+15%

£315m

+10%

Adjusted operating profit

£68.1m

£55.7m

+22%

+27%

£56.7m

+21%

Adjusted operating margin

20.1%

18.3%

+180bps

 

18.0%

 

 

 

 

 

 

 

 

Statutory operating profit

£64.1m

£50.6m

+27%

 

 

 

Statutory operating margin

18.9%

16.6%

+230bps

 

 

 

*See Note 1 for definitions of alternative performance measures and the references to reconciliations of these measures.

 

Key achievements

§ Strong organic sales growth of 15%, reflecting 10% growth vs 2019

§ Operating margins of 20.1%

§ Significant contribution from new products, including new connected products

 

2021 performance

 

With its strong brands and product positioning, as well as the global imperative to reduce energy consumption in buildings, IMI Hydronic Engineering is in a strong position to deliver sustainable, profitable growth.  The division's performance in 2021 reflects these good market conditions as well as successful delivery of key strategic projects and growth from new products.  

 

2021 revenues were 15% higher on an organic basis when compared to the prior year, and 10% ahead of 2019.  New products supported that growth, with good orders secured within control and actuation.  Sales of our digitally enabled products - including the TA-Smart valve - continue to make excellent progress.

 

Adjusted operating profit increased 27% on an organic basis versus the prior year, reflective of the quality of the business as well as continued delivery of key efficiency initiatives. The adjusted operating margin improved to 20.1%, versus 18.3% in 2020.

 

Statutory operating profit increased by 27% due to the strong performance of the business and the non-repeat of one-off restructuring costs in 2020.

 

Outlook
 

Based on current market conditions, IMI Hydronic Engineering 2022 organic revenues are expected to be higher, with margins slightly higher, when compared to 2021.

 

 

Financial review

Key highlights

 

 

 

Adjusted1

 

Statutory

 

2021

2020

Change

vs

2020

Organic3

vs

2020

Organic3

vs

20194

2021

2020

Change

vs

2020

Change

vs

2019

Revenue

£1,866m

£1,825m

+2%

+7%

+3%

£1,866m

£1,825m

+2%

0%

Operating profit

£318m

£285m

+12%

+18%

+23%

£251m

£227m

+10%

+23%

Operating margin

17.0%

15.6%

+140bps

 

 

13.4%

12.4%

+100bps

+250bps

Profit before tax

£307m

£274m

+12%

 

 

£245m

£214m

+14%

+29%

Basic EPS

92.0p

79.7p

+15%

 

 

73.5p

62.7p

+17%

+28%

Operating cash flow2

£274m

£335m

-18%

 

 

£327m

£377m

-13%

-10%

Dividend per share

23.7p

22.5p

+5%

 

 

23.7p

22.5p

+5%

 

Net debt

£623m

£316m

 

 

 

 

 

 

 

             

 

1 Excluding the effect of adjusting items as reported in the income statement. See Note 1 for definitions of alternative performance measures.

2 Adjusted operating cash flow, as described in Note 9 to the financial statements. Statutory measure is Cash generated from operations as shown on the cash flow statement.

3 After adjusting for exchange rates, acquisitions and disposals (see Note 1).

4 Given the significant impact on business performance due to the pandemic in 2020, the results include comparative figures for 2019 and organic growth compared to 2021. A reconciliation is provided in Note 1.

 

Results summary

Certain alternative performance measures ('APMs') have been included within this Annual Report. These APMs are used by the Executive Committee to monitor and manage the performance of the Group, in order to ensure that decisions taken align with the Group's long-term interests. Movements in revenue and adjusted operating profit are given on an organic basis (see definition in Note 1) so that performance is not distorted by acquisitions, disposals and movements in exchange rates. A table summarising the reconciliation of adjusted measures to statutory measures is included in Note 1.

 

The Group delivered a good financial result in the year, as revenue and operating margin improved. Revenue increased by 2% to £1,866m (2020: £1,825m). The exchange rate adjustment was adverse £72m. After adjusting for £4m of sales for the last 6 months of IMI InterAtiva in 2020 that were not in the comparative period in 2021 and excluding £2m of revenue from the recent acquisition of Adaptas, organic revenue was 7% higher and reflects the recovery of economic markets as a result of the global pandemic as well as early results from Growth Hub.

 

Adjusted operating profit of £318m (2020: £285m) was 12% higher and after removing the £14m adverse impact of exchange rates and the inorganic element of the IMI InterAtiva disposal and Adaptas acquisition was higher by 18%.

 

The adjusted operating margin was 17.0% (2020: 15.6%). All three divisions grew adjusted margins in the year, supported by revenue growth, the benefits of ongoing restructuring programmes, and value-pricing initiatives.  Statutory operating profit was £251m (2020: £227m), which increased 10%.

 

Adjusted net financing costs on net borrowings of £12.1m (2020: £11.0m) was higher due to the non-repeat of a one-off tax interest benefit in 2020 and includes the impact of £2.8m (2020: £2.5m) interest cost on leases. Statutory net finance costs were £5.9m compared to £12.5m in 2020 due primarily to a favourable adjusting finance gain of £5.2m in 2021.

 

Adjusted net financing costs were covered 33 times (2020: 35 times) by adjusted earnings before interest, tax, depreciation, amortisation, impairment and adjusting items of £404m (2020: £380m) and included £28m (2020: £30m) of depreciation on our leased assets. The net pension financing income under IAS 19 was £1.0m (2020: £0.2m). 

 

Statutory profit before taxation increased 14% to £245m (2020: £214m) as the Group continued its restructuring activities to improve customer focus and long-term competitiveness. Adjusted profit before taxation was £307m (2020: £274m), which is higher by 12% compared to 2020. The total statutory profit for the period after taxation was £196m (2020: £170m).

 

Adjusting items

 

Adjusting items

2021

£m

2020

£m

  Reversal of net economic hedge contract gains

(6)

(2)

  Restructuring costs

(35)

(36)

  Impairment losses

(5)

(2)

  Loss on disposal of subsidiary

(4)

-

  Acquired intangible amortisation and other acquisition items

(18)

(19)

  Net financing income/(expense)

5

(2)

  Tax in connection with the above adjusting items

15

13

  Change in UK tax rate

(19)

-

  Release of prior year provisions

17

-

 

Adjusting items that are excluded from adjusted profit before tax are listed below:

 

§ Changes in the fair value of economic hedges which are not designated as hedges for accounting purposes, together with the gains and losses on their settlements, are included in the revenue and adjusted operating profit of the relevant business segment with the net loss at £1m (2020: net loss of £4m), which is the net of the reversal of net economic hedge contract gains of £6m and the associated net financing income of £5m. The adjusting item at the operating level reverses this treatment. The net financing adjusting item reflects the change in value or settlement of these contracts with the financial institutions with whom they were transacted.

 

§ Restructuring costs of £35m (2020: £36m) were the result of a number of major restructuring projects across the Group. These include costs of £31m within IMI Precision Engineering, primarily for the closure of a factory in Europe, which is currently under consultation with the Works Council, and the Customer First project, which both simplify the structure of the division and ensures the business structure is aligned to our customer base. In IMI Critical Engineering there were costs of £1m relating to the finalisation of projects announced in 2020. In IMI Hydronic Engineering there were costs of £3m for the finalisation of the ongoing projects announced in 2020 and a new project announced in 2021 to simplify finance processes through a shared service centre in Poland. These restructuring projects are due to be completed in 2023. Restructuring provisions at the year end were £32m and primarily related to expected payments to employees. Details of 2020 projects are included in Note 6.

 

§ In 2021, the Group recorded an adjusting impairment charge of £5m (2020: £2m) associated with the restructuring programmes ongoing in IMI Precision Engineering, and £2m associated with the restructuring programmes ongoing in IMI Critical Engineering in 2020.

 

§ Acquired intangible amortisation is excluded from adjusted profits, to allow for comparability of the performance across divisions. This allows users of the financial statements to gain a clearer understanding of the performance of the business, with the impact of amortisation identified separately in line with internal reporting to management. Acquired intangible amortisation reduced to £15m (2020: £19m). Other acquisition costs of £3m primarily relates to professional fees associated with the acquisition of Adaptas in December 2021.

 

§ A gain arose on the revaluation of financial instruments and derivatives under IFRS 9 of £5m (2020: £2m loss).

 

§ The tax effect of the above items has been recognised as an adjusting item and amounts to a £15m gain (2020: £13m gain). The UK Government announced an increase in the corporation tax rate from 19% to 25%, with an effective date of April 2023, which was substantively enacted on 24 May 2021. The impact of this on the Group's deferred tax liabilities of £19m during the period has been recorded as an adjusting item. A credit of £17m due to the release of provisions in respect of exposures related to prior years which are no longer expected to arise, including the closure of open years with tax authorities, has also been recorded as an adjusting item within the income statement.

Taxation

The adjusted effective tax rate for the Group reduced to 20.0% (2020: 21.0%) and benefitted from a one-off tax credit in the year. The total adjusted tax charge for the year was £61m (2020: £58m) and the statutory effective tax rate was 19.7% (2020: 20.6%).

 

The Group seeks to manage its tax affairs within its core tax principles of compliance, fairness, value and transparency, in accordance with the Group's Tax Policy which is available on the Group's corporate website.

 

Earnings per share

The average number of shares in issue during the period was 267m (2020: 271m), resulting in adjusted basic earnings per share of 92.0p (2020: 79.7p), an increase of 15%. Statutory basic earnings per share increased by 17% at 73.5p (2020: 62.7p) and statutory diluted earnings per share increased by 17% at 73.2p (2020: 62.6p).

 

Share buyback

In 2021, we successfully completed our planned £200m share buyback with the purchase and cancellation of 11,653,829 shares. Our average shares in issue for 2021 are 267m, and in 2022 are expected to be 259m.

 

 

Cash flow 

 

Movement in net debt

2021

2020

 

 

£m

£m

 

Adjusted EBITDA*

403.5

379.5

 

Working capital movements

(50.6)

14.6

 

Capital and development expenditure

(57.5)

(50.7)

 

Provisions and employee benefit movements**

(0.5)

8.5

 

Principal elements of lease payments

(30.0)

(28.7)

 

Other

9.0

11.3

 

Adjusted operating cash flow ***

273.9

334.5

 

Cash impact of adjusting items

(35.6)

(36.7)

 

Interest

(12.1)

(11.0)

 

Derivatives

26.4

(22.5)

 

Tax paid

(50.9)

(41.0)

 

Additional pension scheme funding

(7.0)

(7.0)

 

Free cash flow before corporate activity

194.7

216.3

 

Dividends paid to equity shareholders

(61.8)

(91.6)

 
 

Acquisition/disposal of subsidiaries

(203.8)

-

 

Net purchase of own shares and share buyback programme

(225.6)

(8.5)

 

Net cash flow (excluding debt movements)

(296.5)

116.2

 

 

 

 

 

Reconciliation of net cash to movement in net borrowings

 

 

 

Net (decrease)/increase in cash and cash equivalents excluding foreign exchange

(86.7)

98.4

 

Debt acquired

(1.8)

-

 

Net (drawdown)/repayment of borrowings excluding foreign exchange and net debt disposed/acquired

(208.0)

17.8

 

(Increase)/decrease in net debt before acquisitions, disposals and foreign exchange

(296.5)

116.2

 

Net cash/(debt) acquired

-

-

 

Currency translation differences

(4.5)

3.3

 

Movement in lease creditors

(5.6)

2.1

 

Movement in net borrowings in the year

(306.6)

121.6

 

Net borrowings at the start of the year

(316.2)

(437.8)

 

Net borrowings at the end of the year

(622.8)

(316.2)

 

 

*Adjusted profit after tax (£245.6m) before interest (£11.1m), tax (£61.4m), depreciation (£68.3m), amortisation (£16.2m) and impairment (£0.9m).

**Movement in provisions and employee benefits as per the statement of cash flows (£1.8m) adjusted for the movement in restructuring provisions (£2.3m).

***Adjusted operating cash flow is the cash generated from the operations shown in the statement of cash flows less cash spent acquiring property, plant and equipment, non-acquired intangible assets and investments; plus cash received from the sale of property, plant and equipment and the sale of investments, excluding the cash impact of adjusting items, a reconciliation is included in Note 9.

Adjusted operating cash flow was £274m (2020: £335m). This represents a conversion rate of total Group adjusted operating profit to adjusted operating cash flow of 86% (2020: 117%). There was a £36m cash outflow from adjusting items (2020: £37m outflow) primarily related to restructuring costs.

 

Net working capital balances increased £51m due to an increase in receivables of £44m as a result of the growth and an increase in inventory of £37m to maintain service levels to customers in light of the global supply chain crisis, partly offset by an increase in payables of £31m. The decrease in 2020 of £15m was due to a decrease in receivables of £18m and an increase in payables of £6m partly offset by an increase in inventory of £9m.

 

Cash spent on property, plant and equipment and other non-acquired intangibles in the year was £58m (2020: £51m) which was equivalent to 1.0 times (2020: 0.8 times) depreciation and amortisation thereon. Capital spending in 2021 increased toward historical levels after being curtailed during the pandemic in 2020.

 

Research and development spend, including capitalised intangible development costs of £5m (2020: £7m), totalled £54m (2020: £46m) representing an increase year on year as the Group continues to support investment in Growth Hub and Sprint Teams. As this measure focuses primarily on the efforts of the engineering function, it does not fully capture the cross-functional support in Growth Hub initiatives with over 700 employees involved across the Group - a significant investment alongside our research and development spend.

 

In 2021 the Group paid cash tax of £51m (2020: £41m) which was 83% (2020: 71%) of the adjusted tax charge for the year.

 

Dividends paid to shareholders totalled £62m (2020: £92m), reflecting the Group's decision to reduce its distribution to provide a dividend earnings cover baseline of three times adjusted earnings per share, which will enable IMI to deliver more effectively on its long-term growth ambitions.

 

In addition, there was a cash outflow of £200m in relation to the share buyback programme (2020: £nil) and £26m (2020: £9m outflow) for net share purchases to satisfy employee share options.

 

Balance sheet 

Net debt at the year-end was £623m compared to £316m at the end of the previous year. The increase reflects the share buyback programme and the acquisition of Adaptas partly offset by the cash generation in the year. The net debt is composed of a cash balance of £95m (2020: £208m), a bank overdraft of £66m (2020: £74m), interest-bearing loans and borrowings of £558m (2020: £362m) and lease liabilities of £94m (2020: £88m).

 

The year-end net debt to adjusted EBITDA ratio was 1.5 times (2020: 0.8 times). At the end of 2021, loan notes totalled £353m (2020: £362m), with a weighted average maturity of 4.3 years (2020: 5.3 years) and other loans including bank overdrafts totalled £271m (2020: £74m). Total committed bank loan facilities available to the Group at the year-end were £300m (2020: £300m), of which £70m (2020: £nil) was drawn.

 

At 31 December 2021, the value of the Group's intangible assets was £768m (2020: £600m). The increase compared to the prior year is primarily due to the acquisition of Adaptas.

 

The net book value of the Group's property, plant and equipment at 31 December 2021 was £268m (2020: £266m). Capital expenditure on property, plant and equipment amounted to £46m (2020: £38m), with the main capital expenditure focused on production facility investment to support operational efficiency and growth. Including capitalised intangible assets, total capital expenditure was £58m (2020: £51m) and was 1.0 times (2020: 0.8 times) the depreciation and amortisation charge (excluding acquired intangible amortisation and lease asset depreciation) for the year of £56m (2020: £63m). 

 

The net surplus for defined benefit obligations at 31 December 2021 was £63m (2020: £22m deficit). The UK surplus was £129m (2020: £69m surplus) and constituted 77% (2020: 77%) of the total defined benefit liabilities and 88% (2020: 89%) of the total defined benefit assets. The deficit in the overseas funds as at 31 December 2021 was £66m (2020: £91m deficit).

 

Return on invested capital ('ROIC')

The Group uses ROIC as an indication of IMI's ability to deploy capital effectively. This metric is the same as that presented in 2020, however it was previously referred to as Return on Capital Employed and has been renamed to Return on Invested Capital to better describe the metric. References to capital employed have also been updated to capital invested.

 

The Group's definition is Adjusted Operating Profit after tax divided by Average Capital invested (previously referred to as Average Capital employed). Capital invested (previously referred to as capital employed) is defined as net assets adjusted to remove net debt, derivative assets/liabilities, defined pension position (net of deferred tax) and to reverse historical impairments of goodwill and amortisation of acquired intangibles. ROIC was 13.2% in 2021 (2020: 12.3%) which increased by 0.9%. The acquisition of Adaptas adversely impacted the metric by 0.7% due to its proximity to the year end with incremental capital invested, but no corresponding operating profit.

 

Return on invested capital

2021

£m

2020

£m

 

£m

£m

Adjusted operating profit

318.1

284.7

Notional tax charge

(63.6)

(59.8)

Net adjusted operating profit after tax

254.5

224.9

 

 

 

Net assets

779.1

799.5

Adjusted for:

 

 

Net debt

622.8

316.2

Restructuring provision

31.6

30.1

Net derivative assets / liabilities

(3.7)

(6.1)

Net defined pension benefit

(62.5)

22.0

Deferred tax on employee benefits

13.9

(7.0)

Previously written-off / impaired goodwill

346.9

351.9

Acquired intangibles amortisation

311.5

311.5

Closing capital invested

2,039.6

1,818.1

Opening capital invested

1,818.1

1,832.3

Average capital invested

1,928.9

1,825.2

Return on invested capital

13.2%

12.3%

 

Acquisitions

On 20 December 2021 the Group acquired 100% of the share capital, and associated voting rights, of Adaptas Solutions (Adaptas) for cash consideration of £203.9m. Adaptas is a manufacturer of mission critical mass spectrometry subsystems and components and is based in North America with facilities in the UK, Australia and China.

 

Disposals

On 23 July 2021 the Group disposed of IMI InterAtiva for proceeds of £0.1m resulting in a loss on disposal of £3.8m.

 

Foreign exchange 

The income statements of overseas operations are translated into sterling at average rates of exchange for the year, balance sheets are translated at year end rates.  The most significant currencies are the Euro and the US dollar - the relevant rates of exchange were:

 

 

Average Rates

 

Balance Sheet Rates

 

2021 

2020 

 

2021 

2020 

Euro

1.16

1.13

 

1.19

1.12

US Dollar

1.38

1.28

 

1.35

1.37

 

The movement in average exchange rates between 2020 and 2021 resulted in a 4% reduction to our 2021 revenue and a 5% decrease in adjusted operating profit, with both the Euro and US Dollar weakening against Sterling.

 

If exchange rates as at 11 February 2022 of US$1.36 and €1.19 were projected for the full year and applied to our 2021 results, it is estimated that both revenue and adjusted operating profit would be 1% lower.

 

Treasury

IMI has a centralised Treasury function that provides treasury services to Group companies including funding liquidity, credit, foreign exchange, interest rate and base metal commodity management. The Group Treasury function manages financial risks in compliance with Board-approved policies.

 

Capital allocation & dividend policy

The Board determines the appropriate capital structure for the Group, specifically, how much cash is raised from shareholders (equity) and how much is borrowed from financial institutions (debt) in order to finance the Group's activities both now and in the future.

 

The Board considers the Group's capital structure and dividend policy at least twice a year ahead of announcing results in the context of its ability to continue as a going concern and deliver its business plan.

The Board is mindful that equity capital cannot be easily flexed and raising new equity would normally be likely only in the context of an acquisition. Debt can be issued and repurchased more easily, but frequent changes lead to high transaction costs and debt holders are under no obligation to accept repurchase offers.

 

At 31 December 2021, IMI plc (the company) had distributable reserves of £294m (2020: £292m).

 

 

CONSOLIDATED INCOME STATEMENT

 

FOR THE YEAR ENDED 31 DECEMBER 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

2020

 

 

 

 

Adjusted

Adjust-

ing items

(Note 1)

Statutory

 

Adjusted

Adjust-

ing items (Note 1)

Statutory

 

 

Notes

£m

£m

£m

 

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

1

  1,866

 

  1,866

 

  1,825

 

  1,825

 

Cost of sales

 

(1,004.3)

(0.3)

(1,004.6)

 

(1,008.8)

 

(1,008.8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

861.7 

(0.3)

861.4

 

816.2 

 

816.2

 

Operating costs

 

(543.6)

(67.3)

(610.9)

 

(531.5)

(57.9)

(589.4)

 

 

 

 

 

 

 

 

 

 

 

Operating profit

1

318.1

(67.6)

250.5

 

284.7

(57.9)

226.8

 

 

 

 

 

 

 

 

 

 

 

Financial income

3

2.4

5.2

7.6

 

3.8

 

3.8

 

Financial expense

3

(14.5)

 

(14.5)

 

(14.8)

(1.7)

(16.5)

 

Net financial income relating to defined

 

 

 

 

 

 

 

 

 

 

benefit pension schemes

8

1.0

 

1.0

 

0.2

 

0.2

 

 

 

 

 

 

 

 

 

 

 

Net financial (expense)/income

 

(11.1)

5.2

(5.9)

 

(10.8)

(1.7)

(12.5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit before tax

 

307.0

 (62.4)

244.6

 

273.9

(59.6)

214.3

 

Taxation

4

(61.4)

13.1

(48.3)

 

(57.5)

13.4

(44.1)

 

 

 

 

 

 

 

 

 

 

 

Profit after tax

 

245.6

(49.3)

196.3

 

216.4

(46.2)

170.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

5

 

 

 

 

 

 

 

 

 

Basic - from profit for the year

 

 

 

73.5p

 

 

 

62.7p

 

 

Diluted - from profit for the year

 

 

 

73.2p

 

 

 

62.6p

 

 

 

 

 

 

 

 

 

 

 

 

                       

All activities relate to continuing operations.
 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

 

£m

£m

 

£m

£m

 

 

 

 

 

 

 

Profit for the year

 

196.3 

 

 

170.2

 

 

 

 

 

 

 

 

 

 

 

 

Items that will not subsequently be reclassified to profit and loss

 

 

 

 

Re-measurement gain on defined benefit plans

70.9 

 

 

4.3

 

Related tax effect

(18.4)

 

 

(2.1)

 

Effect of taxation rate change on previously recognised items

15.8

 

 

5.7

 

 

 

 

 

 

 

 

 

68.3

 

 

7.9

Items that may be reclassified to profit and loss

 

 

 

 

 

Gain/(loss) arising on hedging instruments designated in hedges of the net assets in foreign operations (Note 1)

20.0

 

 

(19.4)

 

Exchange differences on translation of foreign operations net of funding revaluations

(33.8)

 

 

21.4

 

Exchange differences reclassified to the income statement on disposal of operations

0.1

 

 

 

 

Related tax effect on items that may subsequently be reclassified

 

 

 

 

 

  to profit and loss

1.2

 

 

(0.7)

 

 

 

 

 

 

 

 

 

 

 

(12.5)

 

 

1.3

 

 

 

 

 

 

 

Other comprehensive income for the year, net of taxation

 

55.8

 

 

9.2

Total comprehensive income for the year, net of taxation

 

252.1

 

 

179.4

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

Equity holders of the parent

 

252.1

 

 

179.4

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

 

 

 

 

 

 

 

 

 

FOR THE YEAR ENDED 31 DECEMBER 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share capital

Share premium account

Capital redemption reserve

Translation reserve (Note 1)

Retained earnings

Total

equity

 

 

 

 

 

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

As at 1 January 2020

 

81.8

14.1

174.4

21.3

418.3

709.9

 

 

 

 

 

 

 

 

 

 

 

Profit for the year

 

 

 

 

 

 

170.2

170.2

 

Other comprehensive income excluding related taxation effect

 

 

 

 

 

2.0

 

4.3

 

6.3

 

Related taxation effect

 

 

 

 

 

(0.7)

3.6

2.9

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

 

1.3

 

178.1

 

179.4

 

 

 

 

 

 

 

 

 

 

 

 

Issue of share capital

 

 

-

0.2

 

 

 

0.2

 

Dividends paid

 

 

 

 

 

 

(91.6)

(91.6)

 

Share-based payments (net of tax)

 

 

 

 

 

 

10.3

10.3

 

Shares acquired for:

 

 

 

 

 

 

 

 

 

 

employee share scheme trust

 

 

 

 

 

 

(8.7)

(8.7)

 

 

 

 

 

 

 

 

 

 

 

 

As at 31 December 2020

 

 

81.8

14.3

174.4

22.6

506.4

799.5

 

 

 

 

 

 

 

 

 

 

 

 

Changes in equity in 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the year

 

 

 

 

 

 

196.3

196.3

 

Other comprehensive (expense)/income excluding related taxation effect

 

 

 

 

 

(13.7)

70.9

57.2

 

Related taxation effect

 

 

 

 

 

1.2

(2.6)

(1.4)

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive (expense)/income

 

 

 

 

 

(12.5)

 

264.6

 

252.1

 

 

 

 

 

 

 

 

 

 

 

 

Issue of share capital

 

 

-

0.9

 

 

 

0.9

 

Dividends paid

 

 

 

 

 

 

(61.8)

(61.8)

 

Share-based payments (net of tax)

 

 

 

 

 

 

15.0

15.0

 

Cancellation of Treasury Shares

 

 

(3.2)

 

3.2

 

 

-

 

Shares acquired for:

 

 

 

 

 

 

 

 

 

 

employee share scheme trust

 

 

 

 

 

 

(26.6)

(26.6)

 

 

Share buyback programme

 

 

 

 

 

 

(200.0)

(200.0)

 

 

 

 

 

 

 

 

 

 

 

 

As at 31 December 2021

 

 

78.6

15.2

177.6

10.1

497.6

779.1

 

 

 

 

 

 

 

 

 

 

 

 

                          
 

 

CONSOLIDATED BALANCE SHEET

AS AT 31 DECEMBER 2021

 

 

 

 

2021 

2020 

 

£m

£m

Assets

 

 

Goodwill

533.6

449.5

Other intangible assets

234.5

150.3

Property, plant and equipment

267.7

266.0

Right of use assets

91.5

85.6

Employee benefit assets

129.0

69.1

Deferred tax assets

39.7

36.3

Other receivables

1.9

3.4

 

 

 

Total non-current assets

1,297.9

1,060.2

 

 

 

 

 

 

Inventories

335.2

293.3

Trade and other receivables

414.0

378.9

Derivative financial assets

10.0

10.8

Current tax

14.2

3.3

Investments

2.9

3.1

Cash and cash equivalents

94.6

207.9

 

 

 

Total current assets

870.9

897.3

 

 

 

 

 

 

Total assets

2,168.8

1,957.5

 

 

 

 

 

 

Liabilities

 

 

Trade and other payables

(400.4)

(371.9)

Bank overdraft

(65.5)

(73.5)

Interest-bearing loans and borrowings

(127.7)

-

Lease liabilities

(23.9)

(26.3)

Provisions

(38.1)

(43.9)

Current tax

(66.0)

(66.3)

Derivative financial liabilities

(6.3)

(4.7)

 

 

 

Total current liabilities

(727.9)

(586.6)

 

 

 

 

 

 

Interest-bearing loans and borrowings

(430.3)

(362.3)

Lease liabilities

(70.0)

(62.0)

Employee benefit obligations

(66.5)

(91.1)

Provisions

(18.3)

(15.1)

Deferred tax liabilities

(70.2)

(33.9)

Other payables

(6.5)

(7.0)

 

 

 

Total non-current liabilities

(661.8)

(571.4)

 

 

 

Total liabilities

(1,389.7)

(1,158.0)

 

 

 

Net assets

779.1 

799.5 

 

 

 

 

 

 

Equity

 

 

Share capital

78.6

81.8

Share premium

15.2

14.3

Other reserves

187.7

197.0

Retained earnings

497.6

506.4

 

 

 

 

 

 

Total equity

779.1

799.5

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2021

 

 

 

 

 

 

2021 

2020 

 

 

£m

£m

Cash flows from operating activities

 

 

Operating profit for the year

250.5

226.8

Adjustments for:

 

 

  Depreciation and amortisation

99.5

111.1

  Impairment of property, plant and equipment and intangible assets

5.5

4.0

  Loss on disposal of subsidiaries

3.8

-

  (Profit)/loss on sale of property, plant and equipment

(1.3)

2.3

  Equity-settled share-based payment expense

12.0

10.3

Increase in inventories

(37.3)

(8.8)

(Increase)/decrease in trade and other receivables

(44.0)

17.2

Increase in trade and other payables

30.7

6.2

Increase in provisions and employee benefits

1.8

7.9

Settlement of transactional derivatives (Note 1)

5.9

0.2

 

 

 

 

Cash generated from operations

327.1 

377.2 

Income taxes paid

(50.9)

(41.0)

 

 

 

Cash generated from operations after tax

276.2

336.2

Additional pension scheme funding

(7.0)

(7.0)

 

 

 

Net cash from operating activities

269.2

329.2

 

 

 

 

Cash flows from investing activities

 

 

Interest received

 

2.4

 

3.8

Proceeds from sale of property, plant and equipment

4.6

0.2

Settlement of effective net investment hedge derivatives

20.5

(22.7)

Acquisitions of subsidiaries, net of cash

(202.1)

 

Acquisition of property, plant and equipment and non-acquired intangibles

(57.5)

(50.7)

Proceeds from disposal of subsidiaries, net of cash

0.1

 

 

 

 

Net cash from investing activities

(232.0)

(69.4)

 

 

 

 

Cash flows from financing activities

 

 

Interest paid

(14.5)

(14.8)

Shares acquired for employee share scheme trust

(26.6)

(8.7)

Share buyback programme including acquisition expenses

(200.0)

 

Proceeds from the issue of share capital for employee share schemes

1.0

0.2

Repayment of borrowings

 

(17.8)

Drawdown of borrowings

208.0

 

Principal elements of lease payments

(30.0)

(28.7)

Dividends paid to equity shareholders

(61.8)

(91.6)

 

 

 

Net cash from financing activities

(123.9)

(161.4)

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

(86.7)

98.4

Cash and cash equivalents at the start of the year

134.4

28.1

Effect of exchange rate fluctuations

(18.6)

7.9

 

 

 

Cash and cash equivalents at the end of the year

29.1

134.4

 

 

 

Reconciliation of cash and cash equivalents

 

 

Cash and cash equivalents

94.6

207.9

Bank overdraft

(65.5)

(73.5)

Cash and cash equivalents at the end of the period

29.1

134.4

 

 

 

 

 

Reconciliation of net cash to movement in net borrowings appears in Note 9.

 

 

 

 

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS

1.  Segmental information

 

Segmental information is presented in the consolidated financial statements for each of the Group's operating segments.  The operating segment reporting format reflects the Group's management and internal reporting structures and represents the information that was presented to the chief operating decision-maker, being the Executive Committee. Each of the Group's three divisions has a number of key brands across its main markets and operational locations. For the purposes of reportable segmental information, operating segments are aggregated into the Group's three divisions, as the nature of the products, production processes and types of customer are similar within each division. Inter-segment revenue is insignificant.

 

Segmental information - Energy Transfer

During 2021, the Energy business of the IMI Precision Engineering division was transferred into the IMI Critical Engineering division. The resulting impact has increased IMI Critical Engineering revenue by £63m (2020: £64m) and operating profit by £9.1m (2020: £13.3m) with the equal and opposite impact reducing the results of IMI Precision Engineering. Prior year comparatives have been re-presented to reflect this.

 

IMI Precision Engineering - IMI Precision Engineering specialises in the design and manufacture of motion and fluid control technologies where precision, speed and reliability are essential to the processes in which they are involved.

 

IMI Critical Engineering - IMI Critical Engineering is a world-leading provider of critical flow control solutions that enable vital energy and process industries to operate safely, cleanly, reliably and more efficiently. Our products control the flow of steam, gas and liquids in harsh environments and are designed to withstand temperature and pressure extremes as well as intensely abrasive or corrosive cyclical operations.

 

IMI Hydronic Engineering - IMI Hydronic Engineering is a leading provider of technologies that deliver operational and energy efficient water-based heating and cooling systems to the residential and commercial building sectors.

 

Performance is measured by the Executive Committee based on adjusted operating profit and organic revenue growth which are defined in the table on page 20.

 

Businesses enter into forward currency and metal contracts to provide economic hedges against the impact on profitability of swings in rates and values in accordance with the Group's policy to minimise the risk of volatility in revenues, costs and margins.  Adjusted operating profits are therefore charged/credited with the impact of these contracts.  In accordance with IFRS 9, these contracts do not meet the requirements for hedge accounting and gains and losses are reversed out of operating profit and are recorded in net financial income and expense for the purposes of the consolidated income statement.

 

Re-presentations

 

The following re-presentations have been included in the financial statements in the current year and as a result, 2020 comparatives have been re-presented accordingly:

 

Consolidated statement of changes in equity

 

Within the Statement of changes in equity, the Hedging reserve and Translation reserve have been merged to reflect better the impact of matching the gains and losses on the hedged items with the gains and losses on the hedging instruments. Prior year comparatives have been re-presented.

 

Consolidated statement of comprehensive income

 

'Change in fair value of unsettled effective net investment hedge derivatives' and 'Settled effective net investment hedge derivatives' disclosed in the Consolidated statement of comprehensive income in the prior year are now disclosed as the 'Gain/(loss) arising on hedging instruments designated in hedges of the net assets in foreign operation'. Prior year comparatives have been re-presented.

 

Consolidated statement of cash flows

 

The 'Settlement of transactional derivatives' previously recorded within 'Cash flows from investing activities' are now

disclosed as 'Cash flows from operating activities' within the 'Consolidated statement of cash flows' following an internal review of our policy. Prior year comparatives have been re-presented.

 

 

1.  Segmental information (continued)

 

Alternative Performance Measures ('APMs')

Certain alternative performance measures ('APMs') have been included within this announcement. These APMs are used by the Executive Committee to monitor and manage the performance of the Group. Movements in revenue and adjusted operating profit are given on an organic basis (see definition below) so that performance is not distorted by acquisitions, disposals and movements in exchange rates.

 

The directors' commentary discusses these alternative performance measures to remove the effects of items of both income and expense that are considered different in nature from the underlying trading and normal quantum and where treatment as an adjusting item provides stakeholders with additional information to assess period-on-period trading. The table below details the definition of each APM and a reference to where it can be reconciled to the equivalent statutory measure. Adjusting items are discussed further in Note 6.

 

APM

Definition

Reconciliation to statutory measure

Adjusted profit before tax

 

 

Adjusted net interest cost

 

 

Adjusted earnings per share

 

 

Adjusted effective tax rate

 

 

 

Adjusted EBITDA

Adjusted profit before tax is statutory profit before tax before adjusting items as shown on the income statement.

 

Adjusted net interest cost is statutory net interest costs before adjusting items as shown on the income statement.

 

Adjusted earnings per share is defined within the table in Note 5.

 

The adjusted effective tax rate is the tax impact on adjusted profit before tax divided by adjusted profit before tax.

 

 

This measure reflects adjusted profit after tax before interest, tax, depreciation, amortisation and impairment.

See income statement on page 14.

 

See income statement on page 14.

 

 

See Note 5.

 

 

See Note 4.

 

 

See Note 9.

Adjusted operating profit

 

 

Adjusted operating margin

 

 

Organic revenue growth

 

 

Organic adjusted operating profit

 

Adjusted operating profit is statutory operating profit before adjusted items as shown on the income statement.

 

Adjusted operating margin is adjusted operating profit divided by revenue.

 

 

These two measures remove the impact of adjusting items, acquisitions, disposals and movements in exchange rates.

 

 

 

 

See income statement on page 14 and segmental reporting in Note 1.

Adjusted operating cash flow

This measure reflects cash generated from operations as shown in the statement of cash flows less cash spent acquiring property, plant and equipment, non-acquired intangible assets and investments; plus cash received from the sale of property, plant and equipment, the sale of investments less the repayment of principal amounts of lease payments excluding the cash impact of adjusting items.

 

 

 

See Note 9.

Net debt

 

 

 

Free cash flow before

corporate activity

 

Net debt is defined as the cash and cash equivalents, overdrafts, interest-bearing loans and borrowings and lease liabilities.

 

This measure is a sub-total in the reconciliation of adjusted EBITDA to Net Debt and is presented to assist the reader to understand the nature of the current year's cash flows excluding dividends, share buybacks and the purchase and issuance of own shares.

 

 

See Note 9.

 

 

 

See Note 9.

 

 

 

 

 

 

 

 

1.  Segmental information (continued)

 

 

 

 

 

 

 

 

 

 

The following table illustrates how the results for the segments reconcile to the overall results reported in the income statement.

 

 

 

 

Revenue

 

Operating profit

Operating margin

 

 

 

 

2021 

2020* 

2021 

2020* 

2021 

2020* 

 

 

 

 

£m

£m

£m

£m

%

%

 

 

 

 

 

 

 

 

 

 

  IMI Precision Engineering

 

 

 

836

813

148.9

138.1

17.8%

17.0%

  IMI Critical Engineering

 

 

 

691

707

125.0

119.8

18.1%

16.9%

  IMI Hydronic Engineering

 

 

 

339

305

68.1

55.7

20.1%

18.3%

  Corporate costs

 

 

 

-

-

(23.9)

(28.9)

 

 

Total adjusted revenue/operating profit and margin

  1,866

  1,825

  318.1

  284.7

17.0%

15.6%

Reversal of net economic hedge contract gains

 

 

(6.0)

(1.5) 

 

 

Restructuring costs

 

 

 

 

 

(35.1)

(36.1)

 

 

Loss on disposal of subsidiary

 

 

 

 

 

 (3.8)

 -

 

 

Acquired intangible amortisation and other acquisition items

 

 

(18.1)

(18.7)

 

 

Impairment losses

 

 

 

 

 

(4.6)

(1.6)

 

 

Statutory revenue/operating profit

 

 

 

  1,866

  1,825

  250.5

  226.8

 

 

Net financial expense

 

 

 

 

 

(5.9)

(12.5)

 

 

Statutory profit before tax

 

 

 

 

 

244.6

214.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*2020 results for IMI Precision and IMI Critical have been restated to reflect the Energy business transfer.

 

 

The following table shows a reconciliation of divisional adjusted operating profit to statutory operating profit:

 

 

IMI Precision Engineering

IMI Critical Engineering

IMI Hydronic Engineering

Corporate

Total

 

 

2021

2020*

2021

2020*

2021

2020

2021

2020

2021

2020

 

 

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

  Revenue

836

813

691

707

339

305

 

 

1,866

1,825

 

  Adjusted operating profit

148.9

138.1

125.0

119.8

68.1

55.7

(23.9)

(28.9)

318.1

284.7

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation to statutory operating profit:

 

 

 

 

 

 

 

 

 

 

 

Reversal of net economic hedge contract gains

 

(3.4)

 

(0.9)

 

(1.9)

 

(0.6)

 

(0.7)

 

 

 

 

(6.0)

 

(1.5)

 

Restructuring costs

(31.0)

(7.3)

(0.8)

(24.5)

(3.3)

(5.1)

 

0.8

(35.1)

(36.1)

 

Loss on disposal of subsidiary

 

 

(3.8)

 

 

 

 

 

(3.8)

 

 

Acquired intangible amortisation and other acquisition items

 

(10.3)

 

(7.7)

(7.8)

(11.0)

 

 

 

 

(18.1)

(18.7)

 

Impairment losses

(4.6)

 

 

(1.6)

 

 

 

 

(4.6)

(1.6)

 

Statutory operating profit

99.6

122.2

110.7

82.1

64.1

50.6

(23.9)

(28.1)

250.5

226.8

 

Statutory operating margin (%)

11.9%

15.0%

16.0%

11.6%

18.9%

16.6%

 

 

13.4%

12.4%

 

 

 

 

 

 

 

 

 

 

 

 

                   

*2020 results for IMI Precision and IMI Critical have been restated to reflect the Energy business transfer. 

 

 

1.  Segmental information (continued)

 

The following table illustrates how revenue and adjusted operating profit have been impacted by movements in foreign exchange, acquisitions and disposals compared to 2020 by restating 2020 to the 2021 full year average rates and removing the impact of Adaptas from the 2021 results, and removing InterAtiva from the final 6 months of 2020 as the business was disposed of in July 2021:

 

 

 

Year ended 31 December 2020

 

 

Year ended 31 December 2021

Revenue

As adjusted

Exchange

 

Disposals

 

 

Organic

 

 

As adjusted

 

Acquisitions

 

 

Organic

 

Adjusted growth (%)

 

Organic growth (%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IMI Precision Engineering

813

(36)

 

 

 

 

777

 

 

836

 

(2)

 

 

834

 

3%

 

7%

IMI Critical Engineering

707

(27)

 

(4)

 

 

676

 

 

691

 

 

 

 

691

 

-2%

 

2%

IMI Hydronic Engineering

305

(9)

 

 

 

 

296

 

 

339

 

 

 

 

339

 

11%

 

15%

Total

1,825

(72)

 

(4)

 

 

1,749

 

 

1,866

 

(2)

 

 

1,864

 

2%

 

7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IMI Precision Engineering

138.1

(6.7)

 

 

 

 

131.4

 

 

148.9

 

-

 

 

148.9

 

8%

 

13%

IMI Critical Engineering

119.8

(5.6)

 

(0.5)

 

 

113.7

 

 

125.0

 

 

 

 

125.0

 

4%

 

10%

IMI Hydronic Engineering

55.7

(2.0)

 

 

 

 

53.7

 

 

68.1

 

 

 

 

68.1

 

22%

 

27%

Corporate costs

(28.9)

 

 

 

 

 

(28.9)

 

 

(23.9)

 

 

 

 

(23.9)

 

 

 

 

Total

284.7

(14.3)

 

(0.5)

 

 

269.9

 

 

318.1

 

-

 

 

318.1

 

12%

 

18%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit margin (%)

15.6%

 

 

 

 

 

15.4%

 

 

17.0%

 

  17.1%

 

                          

 

 

Given the significant impact on the business performance due to the pandemic in 2020, comparative figures for 2019 are shown below. The following table illustrates how revenue and adjusted operating profit have been impacted by movements in foreign exchange, acquisitions and disposals compared to 2019 by restating 2019 to the 2021 full year average rates and removing the impact of Adaptas from the 2021 results, removing the impact of PBM from the 2021 results for the first 9 months of the year as the business was not owned by IMI until September 2019, and removing InterAtiva from the final 6 months of 2019 as the business was disposed of in July 2021:

 

 

 

Year ended 31 December 2019

 

 

Year ended 31 December 2021

 

Revenue

As adjusted

Exchange

 

Disposals

 

 

Organic

 

 

As adjusted

 

Acquisitions

 

 

Organic

 

Adjusted growth (%)

 

Organic growth (%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IMI Precision Engineering*

841

(37)

 

 

 

 

804

 

 

836

 

 (2)

 

 

834

 

-1%

 

4%

 

IMI Critical Engineering*

717

(29)

 

(4)

 

 

684

 

 

691

 

(17)

 

 

674

 

-4%

 

-1%

 

IMI Hydronic Engineering

315

(8)

 

 

 

 

307

 

 

339

 

 

 

 

339

 

8%

 

10%

 

Total

1,873

(74)

 

(4)

 

 

1,795

 

 

1,866

 

(19)

 

 

1,847

 

0%

 

3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IMI Precision Engineering*

134.4

(5.0)

 

 

 

 

129.4

 

 

148.9

 

 

 

 

148.9

 

11%

 

15%

 

IMI Critical Engineering*

103.7

(5.0)

 

(0.2)

 

 

98.5

 

 

125.0

 

(3.4)

 

 

121.6

 

21%

 

23%

 

IMI Hydronic Engineering

56.7

(0.5)

 

 

 

 

56.2

 

 

68.1

 

 

 

 

68.1

 

20%

 

21%

 

Corporate costs

(28.7)

 

 

 

 

 

(28.7)

 

 

(23.9)

 

 

 

 

(23.9)

 

 

 

 

 

Total

266.1

(10.5)

 

(0.2)

 

 

255.4

 

 

318.1

 

(3.4)

 

 

314.7

 

20%

 

23%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit margin (%)

14.2%

 

 

 

 

 

14.2%

 

 

17.0%

 

  17.0%

 

                           

 

*2019 results for IMI Precision and IMI Critical have been restated to reflect the Energy business transfer.
 

1.  Segmental information (continued)

 

 

The following table shows a geographical analysis of how the Group's revenue is derived by destination.

 

 

 

 

2021

2020

 

 

 

 

Revenue

Revenue

 

 

 

 

£m

£m

 

UK

 

 

83

88

 

Germany

 

 

238

222

 

Rest of Europe

 

 

520

486

 

Total Europe

 

 

841

796

 

 

 

 

 

 

 

USA

 

 

410

443

 

Rest of Americas

 

 

116

102

 

Total Americas

 

 

526

545

 

 

 

 

 

 

 

China

 

 

165

156

 

Rest of Asia Pacific

 

 

244

234

 

Total Asia Pacific

 

 

409

390

 

 

 

 

 

 

 

Middle East & Africa

 

 

90

94

 

 

 

 

 

 

 

Total revenue

 

 

1,866

1,825

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Group's revenue streams are disaggregated in the table below.

 

 

 

2021

2020

 

 

 

Revenue

Revenue

IMI Precision Engineering*

 

 

£m

£m

Industrial Automation

 

 

  413

  369

Process Control

 

 

  119

  102

Life Sciences

 

 

  91

  165

Precision Fluid OEM

 

 

  210

  267

Commercial Vehicle

 

 

  180

  140

Rail

 

 

33

37

Transport

 

 

  213

  177

Total IMI Precision Engineering

 

 

  836

  813

 

 

 

 

 

IMI Critical Engineering**

 

 

 

 

Power

 

 

144

134

Refining & Petrochemical

 

 

105

94

Nuclear

 

 

57

46

Oil & Gas

 

 

45

49

Marine

 

 

11

19

Other

 

 

17

17

Aftermarket

 

 

379

359

Oil & Gas

 

 

77

71

Refining & Petrochemical

 

 

108

126

Power

 

 

66

69

Marine

 

 

22

25

Nuclear

 

 

3

6

Other

 

 

36

51

New Construction

 

 

312

348

Total IMI Critical Engineering

 

 

691

707

 

 

 

 

 

IMI Hydronic Engineering

 

 

 

 

TA

 

 

159

146

Heimeier

 

 

106

95

Pneumatex

 

 

61

51

Other

 

 

13

13

Total IMI Hydronic Engineering

 

 

339

305

Total revenue

 

 

  1,866

  1,825

         

 

 

1.  Segmental information (continued)

 

*The IMI Precision Engineering sector segmentation has been restated to reflect the new business structure as part of the Customer First restructuring project. In addition, the 2020 figures have been restated for the impact of the Energy transfer with £64m of revenue moved to IMI Critical from IMI Precision.

 
 

**The IMI Critical Engineering sector segmentation has been re-ordered to display Aftermarket and New Construction totals for the division, and includes a £10m reclassification from New Construction to Aftermarket for Petrochemical for 2020, with the total of each segment included in the table consistent with the prior year. In addition, the 2020 figures have been restated for the impact of the Energy transfer with £64m of revenue moved to IMI Critical from IMI Precision.

 
 
 

 

2.  Discontinued operations

 

There was no profit or loss from discontinued operations in 2020.

 

3.  Net financing costs

 

2021

 

2020

 

Interest

Total

 

Interest

Total

Recognised in the income statement

£m

£m

£m

 

£m

£m

£m

Interest income on bank deposits

2.4

 

2.4

 

3.8

 

3.8

Financial instruments at fair value

 

 

 

 

 

 

 

  through profit or loss:

 

 

 

 

 

 

 

  Other economic hedges

 

5.2

5.2

 

 

 

 

 

 

 

 

 

 

 

 

Financial income

2.4

5.2

7.6

 

3.8

 

3.8

 

 

 

 

 

 

 

 

Interest expense on interest-bearing loans and borrowings

(11.7)

 

(11.7)

 

(12.3)

 

(12.3)

Interest expense on lease arrangements

(2.8)

 

(2.8)

 

(2.5)

 

(2.5)

Financial instruments at fair value

 

 

 

 

 

 

 

  through profit or loss:

 

 

 

 

 

 

 

  Other economic hedges

 

 

 

 

 

(1.7)

(1.7)

 

 

 

 

 

 

 

 

Financial expense

(14.5)

 

(14.5)

 

(14.8)

(1.7)

(16.5)

 

 

 

 

 

 

 

 

Net finance income relating to defined benefit

 

 

 

 

 

 

 

  pension schemes

1.0

 

1.0

 

0.2

 

0.2

 

 

 

 

 

 

 

 

Net financial (expense)/income

(11.1)

5.2

(5.9)

 

(10.8)

(1.7)

(12.5)

 

Included in financial instruments are current year trading gains and losses on economically effective transactions which for management reporting purposes are included in adjusted revenue and operating profit. For statutory purposes these are shown within net financial income and expense above. Gains or losses for future year transactions are in respect of financial instruments held by the Group to provide stability of future trading cash flows.

4.  Taxation

 

The tax charge before adjusting items is £61.4m (2020: £57.5m) which equates to an adjusted effective tax rate of 20.0% compared to 21.0% for the year ended 31 December 2020. Taxes of £51m (2020: £41m) were paid in the year.  The Group seeks to manage its tax affairs within its core tax principles of compliance, fairness, value and transparency, in accordance with the Group's Tax Policy.

 

As IMI's head office and parent company is domiciled in the UK, the Group references its effective tax rate to the UK corporation tax rate, despite only a small portion of the Group's business being in the UK. The rate of corporation tax in the UK for the year ended 31 December 2021 is 19.0% (year ended 31 December 2020: 19.0%). The Group's effective tax rate remains slightly above the UK tax rate due to the Group's overseas profits being taxed at higher rates.

 

In January 2022, the UK Government reconfirmed its intention to introduce legislation to give effect to the OECD Inclusive Framework agreement that there should be a global minimum corporate income tax rate of 15%, taking effect in 2023. This event does not affect IMI's results for 2021 and is not expected to have a material impact on IMI's financial statements for subsequent years. However, the exact impact will depend on the precise rules adopted in individual countries which are not known at this time.

5.  Earnings per ordinary share

 

 

 

2021 

2020 

 

Key

million

million

Weighted average number of shares for the purpose of basic earnings per share

A

266.9

271.4

Dilutive effect of employee share options

 

1.1

0.5

Weighted average number of shares for the purpose of diluted earnings per share

B

268.0

271.9

 

 

 

 

 

 

£m

£m

 

 

 

 

Statutory profit for the year

C

196.3

170.2

 

 

 

 

Total adjusting items charges included in profit before tax

 

62.4

59.6

Total adjusting items credits included in taxation

 

(13.1)

(13.4)

 

 

 

 

Earnings for adjusted EPS

E

245.6

216.4

 

 

 

 

 

Statutory EPS measures

 

 

 

Statutory basic EPS

C/A

73.5p

62.7p

Statutory diluted EPS

C/B

73.2p

62.6p

 

 

 

 

 

 

 

 

Adjusted EPS measures

 

 

 

Adjusted basic EPS

E/A

92.0p

79.7p

Adjusted diluted EPS

E/B

91.6p

79.6p

 

 

 

 

 

 

 

 

6.  Adjusting items

 

Reversal of net economic hedge contract losses/gains

 

For segmental reporting purposes, changes in the fair value of economic hedges which are not designated as hedges for accounting purposes, together with the gains and losses on their settlement, are included in the revenues and adjusted operating profit of the relevant business segment. The adjusting items at the operating level reverse this treatment. The financing adjusting item reflect the change in value or settlement of these contracts with the financial institutions with whom they were transacted.

 

Restructuring costs

 

The restructuring costs of £35.1m (2020: £36.1m) were the result of a number of major restructuring projects across the Group. These include costs of £31.0m within IMI Precision Engineering, primarily for the closure of a factory in Europe, which is currently under consultation with the Works Council, and the Customer First project, which both simplify the structure of the division and ensures the business structure is aligned to our customer base. In IMI Critical Engineering there were costs of £0.8m relating to the finalisation of ongoing projects announced in 2020. In IMI Hydronic Engineering there were costs of £3.3m for the finalisation of the ongoing projects announced in 2020 and a new project announced in 2021 to simplify finance processes through a shared service centre in Poland. These restructuring projects are due to be completed in 2023. The cash effect of restructuring costs incurred during the year was £32.8m and restructuring provisions at the year-end totalled £31.6m.

 

Restructuring costs of £36.1m were recognised in 2020. These included the continuation of a cost and footprint rationalisation programme within IMI Precision Engineering, £4.8m in Europe and £2.5m in the Americas, which included the closure of a manufacturing site in each region. In IMI Critical Engineering, adjusted restructuring costs related to a restructuring programme in the EMEA region of £22.4m, which included the closure of manufacturing at two Italian sites and restructuring at two German sites, and £2.1m in the Americas to right size the workforce. In IMI Hydronic Engineering, there were costs of £5.1m related to closure of a manufacturing site in Slovenia and consolidation of the Swedish and German distribution hubs into one hub in Poland. There was a provision release of £0.8m related to the Corporate HQ following the closure of matters relating to previous projects.

 

Loss on disposal of subsidiary

 

Following the disposal of IMI InterAtiva in July 2021, the Group recorded a loss on disposal of £3.8m. Further details are included in Note 12.

 

Impairment losses

 

In 2021, the Group recorded an adjusting impairment charge of £4.6m associated with the restructuring programmes ongoing in IMI Precision Engineering, and £1.6m associated with the restructuring programmes ongoing in IMI Critical Engineering in 2020.

 

 

6.  Adjusting items   (continued)

 

Acquired intangible amortisation and other acquisition items

Acquired intangible amortisation is excluded from adjusted profits, to allow for better comparability of the performance across divisions. This allows users of the financial statements to gain an understanding of the performance of the business, with the impact of amortisation identified separately in line with internal reporting to management. Acquired intangible amortisation reduced to £15.0m (2020: £18.7m), which largely relates to the amortisation of the intangible assets recognised on the acquisition of Bimba in 2018. Other acquisition costs of £3.1m primarily relates to professional fees associated with the acquisition of Adaptas in December 2021.

 

Taxation

 

The tax effect of the above items has been recognised as an adjusting item and amounts to a credit of £15.1m (2020: £13.4m). In addition, there are two tax items which have been treated as adjusting due to their large size: a charge of £18.6m due to the effect of the forthcoming increase in the UK corporation tax rate on timing differences recognised for deferred tax purposes, and a credit of £16.6m due to the release of provisions in respect of exposures related to prior years which are no longer expected to arise, including the closure of open years with tax authorities.

 

 

7.  Dividend

 

The directors recommend a final dividend of 15.8p per share (2020: 15.0p) payable on 13 May 2022 to shareholders on the register at close of business on 8 April 2022, which will cost approximately £40.9m (2020: £40.7m). Together with the interim dividend of 7.9p (2020: 7.5p) per share paid in September 2021, this makes a total distribution of 23.7p per share (2020: 22.5p per share).  In accordance with IAS10 'Events after the Balance Sheet date', this final proposed dividend has not been reflected in the 31 December 2021 balance sheet.

 

 

8.  Employee Benefits

 

The Group has 70 (2020: 71) defined benefit obligations in existence as at 31 December 2021. The Group recognises there is a funding and investment risk inherent within defined benefit arrangements and seeks to continue its programme of closing overseas defined benefit plans where possible and providing in their place appropriate defined contribution arrangements.

 

The net surplus for defined benefit obligations at 31 December 2021 was £62.5m (2020: deficit of £22.0m). The UK surplus was £129.0m (2020: £69.1m) and constituted 77% (2020: 77%) of the total defined benefit liabilities and 88% (2020: 89%) of the total defined benefit assets. The deficit in the overseas funds as at 31 December 2021 was £66.5m (2020: £91.1m).

 

 

UK

Overseas

Total

 

 

£m

£m

£m

Net defined benefit surplus/(obligation) as at 1 January 2021

  69.1

(91.1)

(22.0)

Movement recognised in:

 

 

 

 

Income statement

2.0 

(6.5)

(4.5)

 

Other comprehensive income

50.9

20.0

70.9

 

Cash flow statement

7.0

6.8

13.8

Exchange movements

-

4.3

4.3

Net defined benefit surplus/(obligation) as at 31 December 2021

129.0

(66.5)

62.5

9.  Cash flow and net debt reconciliation

 

 

 

 

 

Reconciliation of net cash to movement in net borrowings

 

 

 

2021 

2020 

 

£m

£m

Net (decrease)/increase in cash and cash equivalents excluding foreign exchange

(86.7)

98.4

Debt acquired

(1.8)

-

Net (drawdown)/repayment of borrowings excluding foreign exchange and net debt disposed/ acquired

(208.0)

17.8

(Increase)/decrease in net debt before acquisitions, disposals and foreign exchange

(296.5)

116.2

Currency translation differences

(4.5)

3.3

Movement in lease creditors

(5.6)

2.1

Movement in net borrowings in the year

(306.6)

121.6

Net borrowings at the start of the year

(316.2)

(437.8)

Net borrowings at the end of the year

(622.8)

(316.2)

 

 

 

Movement in net debt

 

 

 

2021

2020

 

£m

£m

Adjusted EBITDA*

403.5

379.5

Working capital movements

(50.6)

14.6

Capital and development expenditure

(57.5)

(50.7)

Provisions and employee benefit movements**

(0.5)

8.5

Principal elements of lease payments

(30.0)

(28.7)

Other

9.0

11.3

Adjusted operating cash flow***

273.9

334.5

Cash impact of adjusting items

(35.6)

(36.7)

Interest

(12.1)

(11.0)

Derivatives

26.4

(22.5)

Tax paid

(50.9)

(41.0)

Additional pension scheme funding

(7.0)

(7.0)

Free cash flow before corporate activity

194.7

216.3

Dividends paid to equity shareholders

(61.8)

(91.6)

Acquisition of subsidiaries

(203.9)

-

Disposal of subsidiaries

0.1

 

Net purchase of own shares and share buyback programme

(225.6)

(8.5)

Net cash flow (excluding debt movements)

(296.5)

116.2

Opening net debt

(316.2)

(437.8)

Net cash acquired

-

-

Foreign exchange translation

(4.5)

3.3

Movement in lease creditors

(5.6)

2.1

Closing net debt

(622.8)

(316.2)

 

 

 

 

 

 

* Adjusted profit after tax (£245.6m) before interest (£11.1m), tax (£61.4m), depreciation (£68.3m) and amortisation (£16.2m) and impairment on property, plant and equipment and non-acquired intangible assets (£0.9m).

 

** Movement in provisions and employee benefits as per the statement of cash flows (£1.8m) adjusted for the movement in the restructuring provisions (£2.3m).

 

*** Adjusted operating cash flow is the cash generated from the operations shown in the statement of cash flows less cash spent acquiring property, plant and equipment, non-acquired intangible assets and investments; plus cash received from the sale of property, plant and equipment and the sale of investments, excluding the cash impact of adjusting items. This measure best reflects the operating cash flows of the Group.

 

 

 

Reconciliation of adjusted operating cash flow to cash flow statement

 

 

 

2021 

2020 

 

£m

£m

Cash generated from operations

327.1

377.2

Principal lease payments

(30.0)

(28.7)

Settlement of transaction derivatives

(5.9)

(0.2)

Acquisition of property, plant and equipment and non-acquired intangibles

(57.5)

(50.7)

Cash impact of adjusting items

35.6

36.7

Proceeds from sale of property, plant and equipment

4.6

0.2

Adjusted operating cash flow

273.9

334.5

 

 

 

 

 

 

10.  Exchange rates

 

 

 

 

 

 

 

 

The income statements of overseas operations are translated into sterling at average rates of exchange for the year, balance sheets are translated at year end rates.  The most significant currencies are the euro and the US dollar - the relevant rates of exchange were:

 

 

 

 

 

 

 

 

 

 

Average Rates

 

Balance Sheet Rates

 

 

 

2021 

2020 

 

2021 

2020

 

 

Euro

1.16

1.13

 

1.19

1.12

 

 

US Dollar

1.38

1.28

 

1.35

1.37

 

 

 

 

 

 

 

 

 

 

The movement in average exchange rates between 2020 and 2021 resulted in a 4% reduction to our 2021 revenue and a 5% decrease in adjusted operating profit, with both the Euro and US Dollar weakening against Sterling.

 

If the exchange rates as at 11 February 2022 of US$1.36 and €1.19 were projected for the full year and applied to our 2021 results, it is estimated that both revenue and adjusted operating profit would be 1% lower.

11. Acquisitions

 

On 20 December 2021, the Group acquired 100% of the share capital, and associated voting rights, of Adaptas Solutions (Adaptas) for cash consideration of £203.9m. Adaptas is a manufacturer of mission critical mass spectrometry subsystems and components and is based in North America with facilities in the UK, Australia and China.

 

This acquisition has been accounted for as a business combination. The provisional fair value amounts recognised in respect of the identified assets acquired and liabilities assumed are set out in the table below:

 

 

Fair value at 20 December 2021 

 

 

£m

Intangible assets

 

109.6

Property, plant and equipment

 

9.6

Leased assets

 

3.9

Inventories

 

15.7

Trade and other receivables

 

8.4

Cash and cash equivalents

 

1.8

Interest-bearing loans and borrowings

 

(1.8)

Lease liabilities

 

(3.9)

Trade and other payables

 

(9.4)

Current taxation

 

(0.9)

Deferred taxation

 

(26.5)

Total identified net assets at fair value

 

106.5

Goodwill arising on acquisition

 

97.4

Purchase consideration transferred

 

203.9

 

The goodwill recognised above includes certain intangible assets that cannot be separately identified and measured due to their nature. This includes control over the acquired business, the skills and experience of the assembled workforce, the increase in scale, synergies and the future growth opportunities that the businesses provide to the Group's operations. The goodwill and all intangible assets recognised are amortisable for tax purposes. Acquisition costs of £2.8m were recognised in the income statement in 2021.

 

The revenue and adjusted operating profit included in the income statement for 2021 contributed by Adaptas were £2.0m and £nil respectively. If the acquisition had taken place on 1 January 2021, Adaptas would have contributed revenue and adjusted operating profit of £58.0m and £9.2m respectively.

 

There were no acquisitions during 2020.

 

 

12. Disposals

 

During the year, the Group disposed of Interativa Industria, Comercio e Representacoes Ltda.

 

This disposal resulted in a loss of £3.8m and is presented in the income statement as an adjusting item as it meets our definition of adjusting items based on its nature and quantum. The loss on disposal is not disclosed within discontinued operations because this business did not represent a separate major line of business.

 

A summary of the proceeds received, assets disposed and resulting loss on disposal is included in the table below:

 

 

23 July 2021 

 

 

£m

Sale consideration

 

0.2

Net assets disposed

 

(3.8)

Costs of disposal

 

(0.1)

Foreign exchange loss reclassified on disposal

 

(0.1)

Loss on disposal

 

(3.8)

 

 

 

Net cash flow arising on disposal

 

 

Sale consideration

 

0.2

Cash costs of disposal

 

(0.1)

Net cash flow arising on disposal of operations

 

0.1

 

There were no disposals of subsidiaries during 2020.
 

13.  Financial information

The preliminary statement of results was approved by the Board on 24 February 2022. The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2021 or 2020 but is derived from the 2021 accounts, which are prepared on the same basis as the 2020 accounts. Statutory accounts for 2020 have been delivered to the registrar of companies and those for 2021 will be delivered in due course. Deloitte LLP has reported on the 2021 results and Ernst & Young LLP reported on the 2020 accounts. Their reports were (i) unqualified, (ii) did not include references to any matters to which the auditor drew attention by way of emphasis without qualifying its reports and (iii) did not contain statements under section S498(2) or S498(3) of the Companies Act 2006.

 

This announcement may contain forward-looking statements that may or may not prove accurate. For example, statements regarding expected revenue growth and operating margins, market trends and our product pipeline are forward-looking statements. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a number of risks and uncertainties that are inherent in any forward-looking statement which could cause actual results to differ materially from those currently anticipated. Any forward-looking statement is made in good faith and based on information available to IMI plc as of the date of the preparation of this announcement. All written or oral forward-looking statements attributable to IMI plc are qualified by this caution. IMI plc does not undertake any obligation to update or revise any forward-looking statement to reflect any change in circumstances or in IMI plc's expectations. Nothing in this preliminary announcement should be construed as a profit forecast.

 

This preliminary statement has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to IMI plc and its subsidiaries when viewed as a whole.

 

References in the commentary to revenue, adjusted operating profit and adjusted operating margins, unless otherwise stated, relate to amounts on an adjusted basis before adjusting items as noted on the face of the consolidated income statement.

 

Alternative Performance Measures ('APMs') are used in discussions with the investment analyst community and by the Board and management to monitor the trading performance of the Group. We consider that the presentation of APMs allows for stakeholders with additional information to assess period-on-period trading. The APMs presented in the Annual Report and Accounts to 31 December 2021 are defined in Note 1.

 

References to organic growth exclude the impact of exchange rate translation and acquisitions or disposals that are included in adjusted growth figures. The organic growth is derived from excluding any contribution from acquired businesses to revenues or profits in the current period until the first anniversary of their acquisition. It also excludes the contribution to revenues or profits in both the current and comparative period from any business that has been disposed of. These organic revenues or profits will then be compared to the organic revenue or profits for the prior period after their re-translation at the current period average exchange rates to provide the organic growth rate. The impact on revenue and adjusted operating profit of movements in foreign exchange, acquisitions and disposals is set out in Note 1.

 

IMI plc is registered in England No. 714275. Its legal entity identifier ('LEI') number is 2138002W9Q21PF751R30. The person responsible for releasing this announcement on behalf of the Board is Louise Waldek, Company Secretary and Group Legal Director.

 

The Company's 2021 Annual Report and Notice of the forthcoming Annual General Meeting will be posted to shareholders on 25 March 2022.

 

Notes to editors

IMI plc, the specialist engineering company, designs, manufactures and services highly engineered products that control the precise movement of fluids.  Its innovative technologies, built around valves and actuators, enable vital processes to operate safely, sustainably, cleanly, efficiently and cost effectively. IMI employs approximately 10,000 people, has manufacturing facilities in 19 countries and operates a global service network. The Company is listed on the London Stock Exchange.  Further information is available at www.imiplc.com.

 

 

 

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