IMI plc · LSE:IMI
IMI — H1 2007 Earnings Presentation
41 slides from IMI's earnings presentation, Sep 3, 2007
Slide 1: Interim results presentation
Interim results presentation 3 September 2007 1
Slide 2: Norman Askew
Norman Askew 2
Slide 3: Agenda
Agenda • Opening remarks Norman Askew • Results overview Martin Lamb • Financial review Douglas Hurt • Sector performance David Nicholas Roy Twite • Outlook Martin Lamb • Questions and answers 3
Slide 4: Results overview
Results overview • Sales £781m up 7% • Profit before tax * £95.5m up 8% - on constant currency basis up 14% • Adjusted earnings per share ** 19.2p up 14% • Interim dividend 7.5p up 7% * Before restructuring costs and intangible amortisation ** Before restructuring costs, change in fair value of fina
Slide 5: Martin Lamb
Martin Lamb 5
Slide 6: Results overview
Results overview • Organic sales +8% • Profit before tax and restructuring at constant currency +14% • Strong June shipments in Severe Service, Indoor Climate and Beverage Dispense 6
Slide 7: Strong regional markets
Strong regional markets Emerging Markets* N. America 17% 30% Growth key (organic yoy%) W. Europe 25%+ 36% 10-15% UK 12% 0-5% <0% ROW 5% * Emerging markets = Asia/M.East/E.Europe 7
Slide 8: Positive end markets
Positive end markets Truck 6% Oil and Gas Auto 9% 5% Power 13% Draught Dispense 19% Growth key Construction (organic yoy%) 12% 25% + Retail 9% 10-15% 5-10% 0-5% Capital <0% Equipment 27% 8
Slide 9: Accelerating growth
Accelerating growth • New talent - 8 new senior managers in top 100 Chief Financial Vice-President Director of Officer Controller Global Engineering Quality Merchandising IMI CCI Norgren Vice-President Vice-President Group President HR Sales Americas Purchasing Director Cannon CCI Norgren Equipment
Slide 10: Positive margin development
Positive margin development H1 H1 Before restructuring costs and intangible amortisation 2007 2006 Severe Service 15.3% 12.7% Fluid Power 12.7% 12.7% Indoor Climate 14.4% 13.9% Beverage Dispense 9.1% * 9.0% Merchandising Systems 10.0% 9.7% Group 12.5% * 11.7% * Before impact of flood (after impact o
Slide 11: Restructuring
Restructuring • £60m three year programme • Low cost manufacturing from 25% to 40% • Built on existing facilities – Mexico, Czech Republic & China • £31m charged to date to close and restructure facilities - Fluid Power – Shipston (UK), Balterswill (Switzerland) & Littleton (US) - Beverage Dispense
Slide 12: Severe Service investigation
Severe Service investigation • Very early stages • US Counsel appointed to lead investigation • Forensic accountants retained • Data secured and being gathered • Interviews commenced • Focused on commission agents, representing 20% of Severe Service business 12
Slide 13: Douglas Hurt
Douglas Hurt 13
Slide 14: Results overview
Results overview £m H1 H1 % 2007 2006 change Sales at comparable rates 754 697 +8 Exchange impact - 35 -5 754 732 +3 Acquisitions 27 - +4 Sales as published 781 732 +7 14
Slide 15: Results overview
Results overview £m H1 H1 % 2007 2006 change Operating profit* 95.6 85.9 +11 Interest (5.6) (3.1) Return on pension plan asset 5.3 4.4 IAS39 0.2 0.9 Net financing (costs)/income (0.1) 2.2 Profit before tax* 95.5 88.1 +8 Profit before tax (constant currency) +14 * before restructuring costs and intan
Slide 16: Results overview
Results overview £m H1 H1 % 2007 2006 change Profit before tax * 95.5 88.1 +8 Restructuring costs (10.9) (7.7) Intangible amortisation (7.8) (5.1) Profit before tax 76.8 75.3 +2 Taxation (23.9) (24.1) Profit after tax 52.9 51.2 +3 * before restructuring costs and intangible amortisation 16
Slide 17: Earnings per share
Earnings per share % 2007 2006 change Adjusted EPS * 19.2p 16.9p +14 Basic EPS 15.4p 14.5p +6 * before restructuring costs, change in fair value of financial instruments and intangible amortisation 17
Slide 18: Operating cash flow summary
Operating cash flow summary £m H1 H1 H2 Year 2007 2006 2006 2006 Continuing businesses: EBITDA 104 98 113 211 Working capital (35) (56) 29 (27) Capital expenditure (23) (22) (22) (44) Asset sales/other 4 14 (7) 7 Operating cash flow - continuing 50 34 113 147 Interest (5) (3) (5) (8) Tax (18) (21) (
Slide 19: Net cash flow summary
Net cash flow summary £m H1 H1 H2 Year 2007 2006 2006 2006 Cash flow before corporate activity (6) 10 73 83 Corporate activity: Redemption of vendor loan note - 36 - 36 Acquisitions (35) (117) (1) (118) Dividend to minority/others (2) (2) - (2) Shareholder activity: Dividends (39) (37) (24) (61) Sha
Slide 20: Balance sheet
Balance sheet £m June June Dec 2007 2006 2006 Shareholders funds 445 432 413 Net borrowings 192 130 80 Gearing % 43 30 19 Continuing businesses: Debt/EBITDA 0.9 0.7 0.4 EBITDA/interest 19x 32x 28x 20
Slide 21: Other matters
Other matters • Share buy-back • Exchange rates • Pensions – IAS19 • Tax rates 21
Slide 22: On-market share buy-back
On-market share buy-back Total since H1 07 21/03/2005 Number of shares 7.2m 31.2m Cost £41.3m £148.6m Average price £5.76 £4.76 % of issued share capital 8.6% 22
Slide 23: Exchange rates
Exchange rates June June % Year 2007 2006 change 2006 Average rates Euro 1.48 1.46 -1.4 1.47 US$ 1.97 1.79 -10.1 1.85 Closing rates Euro 1.49 1.45 -2.8 1.48 US$ 2.01 1.85 -8.6 1.96 23
Slide 24: Pensions – IAS 19
Pensions – IAS 19 £m UK Others Total Assets 1,005 58 1,063 Liabilities (990) (113) (1,103) Surplus/(deficit) at 30.06.07 15 (55) (40) Deficit 31.12.06 (60) (61) (121) 24
Slide 25: Tax rates
Tax rates • UK corporate tax 30% to 28% (from April 2008) • Germany – combined tax rate 38% to 30% (from January 2008) • UK phasing out industrial building allowances (in 2008) • Favourable impact on 2008 and 2009 tax rates 25
Slide 26: David Nicholas
David Nicholas On the following slides, operating profit is stated before restructuring costs and intangible amortisation and organic growth numbers strip out the impact of acquisitions and exchange translation effects. 26
Slide 27: Severe Service
Severe Service £m H1 H1 % Year 2007 2006 change 2006 Sales 171 128 +34 300 Organic growth % +24 +12 +11 Operating profit 26.1 16.3 +60 45.1 Operating margin % 15.3 12.7 15.0 • Strong organic growth • Rebalanced shipment profile H1/H2 • Orton major project growth • Margin improvement from volumes, mi
Slide 28: Fluid Power
Fluid Power £m H1 H1 % Year 2007 2006 change 2006 Sales 282 281 - 557 Organic growth % +2 * +7 +6 Operating profit 35.7 35.7 - 72.4 Operating margin % 12.7 12.7 13.0 * H1 2007 growth excluding US truck +6% • European markets strengthen • US truck slowdown as expected • Sector growth positive. Truflo
Slide 29: Commercial vehicle market
Commercial vehicle market • US truck volumes down 40% (as expected) • 2008 US truck Volumes expected to recover to about 90% of 2006 volumes (= 50% growth vs 2007) • European commercial vehicle market strong 29
Slide 30: Kloehn
Kloehn • Sales of US$26m based in Las Vegas • Specialist medical fluid handling company • Strengthening sector strategy • Good key account relationships • Excellent technology 30
Slide 31: Indoor Climate
Indoor Climate £m H1 H1 % Year 2007 2006 change 2006 Sales 97 88 +10 186 Organic growth % +12 +5 +8 Operating profit 14.0 12.2 +15 29.5 Operating margin % 14.4 13.9 15.9 • Balancing valves strong growth • Germany TRV slowed • Eastern Europe positive progress including TRV • Price increases offset si
Slide 32: Pneumatex
Pneumatex • Sales of CHF63m (£26m) based in Basle (Switzerland) • Water conditioning and pressurisation for building systems • Specification sell fits directly with Indoor Climate • Strong opportunity through Indoor Climate existing channels • Growth opportunity in Eastern Europe 32
Slide 33: Roy Twite
Roy Twite On the following slides, operating profit is stated before restructuring costs and intangible amortisation and organic growth numbers strip out the impact of acquisitions and exchange translation effects. 33
Slide 34: Beverage Dispense
Beverage Dispense £m H1 H1 % Year 2007 2006 change 2006 Sales 147 147 - 282 Organic growth % +7 -5 -3 Operating profit 11.4 13.2 -14 25.4 Operating margin % 9.1 * 9.0 9.0 * Before impact of flood (after impact of flood 7.8%) • Strong organic growth in Continental Europe, Asia and parts business • Go
Slide 35: Merchandising Systems
Merchandising Systems £m H1 H1 % Year 2007 2006 change 2006 Sales 84 88 -4 180 Organic growth % +4 - -2 Operating profit 8.4 8.5 -1 19.4 Operating margin % 10.0 9.7 10.8 • Pleasing growth in the cosmetics and grocery sectors • Momentum building for the second half • Healthy order book 35
Slide 36: Martin Lamb
Martin Lamb 36
Slide 37: Outlook
Outlook • End markets positive • Industrial customers - strong order books • Consumer sentiment weaker • CCI enquiry disruption • Continued progress in the year 37
Slide 38: Additional information
Additional information 38
Slide 39: Sales bridge
Sales bridge £m H1 Translation Acquisitions Organic H1 2006 2007 Severe Service 128 (7) 21 29 171 Fluid Power 281 (11) 6 6 282 Indoor Climate 88 (1) 10 97 Beverage Dispense 147 (9) 9 147 Merchandising Systems 88 (7) 3 84 732 (35) 27 57 781 39
Slide 40: Profit bridge
Profit bridge £m H1 Translation Acquisitions Organic H1 2006 2007 Severe Service 16.3 (0.8) 4.2 6.4 26.1 Fluid Power 35.7 (1.7) 0.9 0.8 35.7 Indoor Climate 12.2 (0.2) 2.0 14.0 Beverage Dispense 13.2 (0.9) (0.9) * 11.4 Merchandising Systems 8.5 (0.7) 0.6 8.4 85.9 (4.3) 5.1 8.9 95.6 * After £2m impact
Slide 41: Low cost manufacturing – costs / benefits
Low cost manufacturing – costs / benefits £m 2006 2007 2008 2009 Annual costs 20 22 18 Cumulative benefits 2 8 18 26 41