Imi Plc · LSE:IMI

Imi — FY2011 Earnings Presentation

49 slides from Imi's earnings presentation, Mar 2, 2012

  1. Slide 1: IMI plc 2011 Preliminary Results

    IMI plc 2011 Preliminary Results 2 March 2012

  2. Slide 2: Engineering Advantage – Martin Lamb

    Engineering Advantage Martin Lamb

  3. Slide 3: Key messages

    Key messages 1. Strong set of results for 2011 • Reported revenue growth +12% • Record operating margins (17.5%) • Adjusted eps growth +23% 2. Good progress on strategic agenda • Strategic convergence • Investment for increased long term growth • Scope for ongoing margin improvement • Accelerated M&

  4. Slide 4: Agenda

    Agenda Financial Review Douglas Hurt Business Review Roy Twite Ian Whiting Sean Toomes Martin Lamb Current trends and outlook Martin Lamb Questions and answers 4

  5. Slide 5: Financial Review – Douglas Hurt

    Douglas Hurt Financial Review 5

  6. Slide 6: Results overview

    Results overview £m 2011 2010 change % Revenue 2,131 1,911 12% organic revenue growth 5% Segmental operating profit 374.1 319.7 17% Segmental operating margins 17.5% 16.7% Adjusted eps 81.5p 66.3p 23% Full year dividend 30.0p 26.0p 15% 6

  7. Slide 7: Return on capital

    Return on capital Post tax return on invested capital* 24.0% 22.0% 20.2% 20.0% 15.9% 16.0% 14.8% 14.4% 13.7% 12.0% 10.8% 8.4% 8.6% 8.0% 7.5% 7.0% WACC = 8% 4.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 * Segmental operating profit after tax divided by the average invested capital of th

  8. Slide 8: Further margin improvement

    Further margin improvement Segmental operating margin 20.0% 17.5% 16.7% 15.0% 14.0% 12.7% 13.0% 13.1% 12.2% 10.5% 9.8% 10.0% 9.2% 7.7% 5.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 8

  9. Slide 9: Results overview

    Results overview £m 2011 2010 change Segmental operating profit 374.1 319.7 +17% Interest (16.9) (15.3) Net pension finance income/(expense) 6.2 - Profit before tax before exceptional items 363.4 304.4 +19% IAS39 adjustment (6.2) 9.6 Restructuring costs (23.5) (16.0) Acquired intangible amortisation

  10. Slide 10: Operating cash flow summary

    Operating cash flow summary £m 2011 2010 EBITDA* 392 369 Working capital (13) 33 Capital expenditure (59) (51) Employee benefit movement (21) (21) Asset sales/other 8 5 Operating cash flow 307 335 Interest and derivatives (8) (15) Tax (91) (56) Cash generation 208 264 Severe Service investigation co

  11. Slide 11: Net cash flow summary

    Net cash flow summary £m 2011 2010 Cash flow before corporate activity 153 200 Corporate activity: Acquisitions (9) (130) Polypipe earnout recovery - 8 Dividend to minority / others (4) (1) Investment by pension fund - 49 Shareholder activity: Dividends (89) (71) Employee share trust purchases (7) (

  12. Slide 12: Balance sheet

    Balance sheet £m Dec Dec 2011 2010 Shareholders' funds 565 526 Net debt 108 145 Gearing 19% 28% Continuing businesses: EBITDA 392 369 Interest costs 16.9 15.3 Net debt / EBITDA 0.3x 0.4x EBITDA / interest 23x 24x 12

  13. Slide 13: Pensions – IAS 19

    Pensions – IAS 19 £m Dec Dec 2011 2010 Assets 1,194 1,115 Liabilities (1,398) (1,314) Accounting deficit (204) (199) • Triennial actuarial valuation completed - at 31 March 2011 UK plan had a funding deficit of £120m • Recovery plan agreed with Trustee - One off contribution of £36.1m paid in Decemb

  14. Slide 14: Financial summary

    Financial summary • Reported revenue growth up 12% • Segmental margin up from 16.7% to 17.5% • Underlying effective tax rate down from 30% to 28% • Pensions – further progress on derisking • Balance sheet remains strong, after £107m spent on acquisitions of Remosa SpA and Grupo InterAtiva • Proposed

  15. Slide 15: Engineering Advantage – Roy Twite

    Engineering Advantage Roy Twite 15

  16. Slide 16: Fluid Power

    Fluid Power 2011 2010 £m H1 H2 Year Year Sales 387 380 767 685 Organic growth % +16 +6 +11 +31 Operating profit 74.6 75.9 150.5 113.7 Operating margin % 19.3 20.0 19.6 16.6 • Continued good organic growth in H2 versus stronger comparators • Further strong progress on margin improvement - Improved mi

  17. Slide 17: Fluid Power

    Fluid Power • Overall sectors now represent 43% of total Fluid Power business • Good growth in sector business up 14% for the full year - Commercial Vehicles up 31% - Rail up 9% - Energy up 14% - Flatter performance from Life Sciences and Food & Beverage • Several good project wins in commercial veh

  18. Slide 18: Fluid Power

    Fluid Power • Recent survey of top customers to gauge future demand levels - Commercial Vehicles activity weakening in Europe, but strengthening in US - Europe, excluding CV, expected to be stable - Reasonable growth in North America - Good demand in Asia Pacific • Overall expect modest growth in 20

  19. Slide 19: Severe Service

    Severe Service 2011 2010 £m H1 H2 Year Year Sales 258 314 572 452 Organic growth % -1 +5 +2 -14 Operating profit 41.3 47.6 88.9 78.4 Operating margin % 16.0 15.2 15.5 17.3 • Revenues up 27% on a reported basis • Improved shipments in second half up 5% on an organic basis - Strong growth in LNG shipm

  20. Slide 20: Severe Service order intake

    Severe Service order intake 2011 vs 2010 Fossil Power +6% Strong uplift in order intake in H2 versus weak comparator in 2010 Oil & Gas +1% Good project activity in LNG markets Nuclear (14%) Order intake impacted by Fukushima incident Aftermarket +7% Good levels of order intake in aftermarket Total +

  21. Slide 21: Engineering Advantage – Ian Whiting

    Engineering Advantage lan Whiting 21

  22. Slide 22: Remosa Spa – overview

    Remosa Spa – overview • Acquired 16 February for enterprise value of £85m • Headquartered in Sardinia, Italy • Focused on isolation valves, actuators and controls for the refinery sector • Strong exposure to aftermarket service and parts • Over half of revenues in emerging markets • Combined with Z&

  23. Slide 23: Remosa Spa – growth and synergies

    Remosa Spa – growth and synergies • US market penetration • Aftermarket growth: Service centres close to markets • Key customer access: Latin America, Asia-Pacific • Global Footprint: Centres of Excellence in Germany/Italy • Supply Chain: Consolidation of Actuation and Control 23

  24. Slide 24: Grupo InterAtiva – overview

    Grupo InterAtiva – overview • Acquired 16 February for initial consideration of £22m • Brazilian butterfly valve business focused on Oil & Gas, Mining, Sugar/Ethanol and Water sectors • All revenues in fast growing South American markets • High aftermarket content • Strong relationships with key cus

  25. Slide 25: Grupo InterAtiva – growth and synergies

    Grupo InterAtiva – growth and synergies • Entry point to Brazilian oil and gas sector: Floating production and storage off-shore vessel − Fastest growing region − $225bn capital investment planned − Building 50 new FPSOs − Strict localisation requirements • Short-term: Launch Orton valves • Medium-t

  26. Slide 26: Engineering Advantage – Sean Toomes

    Engineering Advantage Sean Toomes 26

  27. Slide 27: Indoor Climate

    Indoor Climate 2011 2010 £m H1 H2 Year Year Sales 150 160 310 296 Organic growth % +3 +0 +2 +2 Operating profit 30.2 38.0 68.2 70.3 Operating margin % 20.1 23.8 22.0 23.8 • New commercial construction market remained subdued • Second half growth impacted by warmer weather across Europe during the au

  28. Slide 28: Indoor Climate

    Indoor Climate • Increased investment in 2011 to accelerate future growth - 50 new hydronic sales engineers mainly focused on the emerging markets - Installed 10 new hydronic control demonstration centres - Established a presence in 8 new emerging markets - Significant uplift in seminars in US, Chin

  29. Slide 29: Engineering Advantage – Martin Lamb

    Engineering Advantage Martin Lamb 29

  30. Slide 30: Beverage Dispense

    Beverage Dispense 2011 2010 £m H1 H2 Year Year Sales 161 156 317 315 Organic growth % +5 +0 +3 +5 Operating profit 20.0 21.1 41.1 32.0 Operating margin % 12.4 13.5 13.0 10.2 • Good overall performance for the year with organic growth of 3% - Strong growth in the Americas - More challenging European

  31. Slide 31: Beverage Dispense

    Beverage Dispense • Focus on new product opportunities in 2012 - Micro dosing technologies / high ratio syrups - Blending technologies • Expect continued organic growth - Customers more confident in their investment plans - Further lower margin product exits • Further progress on margins 31

  32. Slide 32: Merchandising

    Merchandising 2011 2010 £m H1 H2 Year Year Sales 79 90 169 169 Organic growth % +10 -2 +3 +2 Operating profit 10.3 15.1 25.4 25.3 Operating margin % 13.0 16.8 15.0 15.0 • Overall organic growth of 3% - Very strong 2010 comparator in H2 with large automotive shipment - Good growth in Cosmetics and Fo

  33. Slide 33: Merchandising

    Merchandising • Underlying trends in US automotive sector remain positive - US dealerships investing in showrooms • Positive customer response to new InVision Retail Science laboratory in Milwaukee, US • New leadership • Performance in 2012 expected to be broadly similar to 2011 33

  34. Slide 34: Strategic Development: Current trends and outlook

    Strategic Development Current trends and outlook 34

  35. Slide 35: Strategic agenda

    Strategic agenda 1. Drive Strategic Convergence • Focusing on the ‘Sweetspot’ 2. Invest for Long Term Growth 3. Maintain long track record of margin improvement 4. Increased M&A activity 35

  36. Slide 36: Strategic convergence

    Strategic convergence Focusing on the ‘Sweetspot’ • Share progress through Capital Markets series • Drive „Sweetspot‟ convergence from 55% today, to 75% over next 3-5 years • 80% of current new product & market investment focused on „Sweetspot‟ activity 36

  37. Slide 37: Investments for growth

    Investments for growth • 300 new Key Account Managers and Applications Engineers • £15m incremental investment • 50% in emerging markets • Fluid Power Asia Technical Centre, Shanghai • Expanded Severe Service engineering centre, Bangalore • Newly established Indoor Climate technical centre Poland 37

  38. Slide 38: Continued margin momentum

    Continued margin momentum 20.0% 17.5% 16.7% 15.0% 14.0% 12.7% 13.0% 13.1% 12.2% 10.5% 9.8% 10.0% 9.2% 7.7% 5.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 • Improved product mix • New product development • Life cycle management/low margin product exits • Optimised pricing • Low cost manu

  39. Slide 39: M&A

    M&A • Strong track record over 10 years • 20 acquisitions, combined consideration £650m • Long term relationships vs auction • Collective post tax returns 2 x WACC • Investment in M&A resource doubled in 2011 (£6m) further increases planned for 2012 • Actionable pipeline improving 39

  40. Slide 40: Current trading

    Current trading • PMI / ISM data stabilising • Mild contraction Europe • Improving sentiment US • Continued growth emerging markets • High European exposure, but 40

  41. Slide 41: Emerging markets exposure

    Emerging markets exposure By direct destination Business Direct Sales Indirect Sales Total EM, 20% Europe, Severe Service 34% 11% 45% 44% RoW, 6% Fluid Power 17% 7% 24% US, 30% Indoor Climate 18% - 18% Fluid Controls 23% 7% 30% By end destination Beverage Dispense 17% - 17% Merchandising 3% - 3% EM,

  42. Slide 42: Western Europe exposure

    Western Europe exposure Business UK Northern Southern Total Europe Europe Severe Service 4% 21% 7% 32% Fluid Power 8% 44% 4% 56% Indoor Climate 2% 71% 3% 76% Beverage Dispense 8% 10% 4% 22% Merchandising 12% 5% 2% 18% Group 6% 33% 5% 44% 42

  43. Slide 43: Current trading

    Current trading • PMI / ISM data stabilising • Mild contraction Europe • Improving sentiment US • Continued growth emerging markets • High European exposure, but • Significant onward shipments to emerging markets • Low exposure to Southern Europe • Further progress expected in 2012 • Growth in US an

  44. Slide 44: Summary

    Summary • Strong 2011 results • Record margins and eps • 15% dividend increase • Clearly defined strategic roadmap • Acceleration of long term growth • Maintenance of margin development track record • Well placed for further progress in 2012 • Modest organic revenue growth expected • Continued margi

  45. Slide 45: Additional Information

    Engineering Advantage Additional Information 45

  46. Slide 46: 2011 sales

    2011 sales By geography: By end market: Auto ROW Truck 3% Emerging Retail 7% 7% 7% Markets 20% Energy Draught Dispense 28% 15% Western Europe 38% North America 29% Capital Equipment Environmental Control 26% 15% UK 6% 46

  47. Slide 47: Exchange rates

    Exchange rates 2011 2010 Change Average rates Euro 1.15 1.17 +2% US$ 1.60 1.54 -4% Closing rates Euro 1.20 1.17 -3% US$ 1.55 1.57 +1% Impact on FY 2011: Revenue +1% Segmental operating profit +2% Projection for 2012*: Revenue -1% Segmental operating profit -1% * Compares impact on 2011 results of us

  48. Slide 48: Sales bridge

    Sales bridge £m 2010 Translation Acquisitions Organic 2011 Severe Service 452 15 95 10 572 Fluid Power 685 7 - 75 767 Indoor Climate 296 9 - 5 310 Beverage Dispense 315 (6) - 8 317 Merchandising 169 (5) - 5 169 Segmental revenue 1,917 20 95 103 2,135 IAS39 adjustment (6) (4) Group revenue 1,911 2,13

  49. Slide 49: Profit bridge

    Profit bridge £m 2010 Translation Acquisitions Organic 2011 Severe Service 78.4 2.6 18.7 (10.8) 88.9 Fluid Power 113.7 2.7 - 34.1 150.5 Indoor Climate 70.3 2.9 - (5.0) 68.2 Beverage Dispense 32.0 (0.9) - 10.0 41.1 Merchandising 25.3 (0.9) - 1.0 25.4 Segmental operating profit 319.7 6.4 18.7 29.3 374

IMI — FY2011 Earnings Presentation on 6ix