Imi Plc · LSE:IMI
Imi — H1 2012 Earnings Presentation
43 slides from Imi's earnings presentation, Aug 23, 2012
Slide 1: Interim Results Presentation
Interim Results Presentation 23 August 2012
Slide 2: Engineering Advantage – Martin Lamb
Engineering Advantage Martin Lamb
Slide 3: Key messages
Key messages • Good set of first half results - Organic revenue growth of 5% - Adjusted eps growth of 7% - Interim dividend increase of 7% • Confidence in addressing short term challenges - Severe Service margins - Protection of Fluid Power profitability in wake of weakening macroeconomic data • Con
Slide 4: Agenda
Agenda Introduction Martin Lamb Financial Review Douglas Hurt Business Review Roy Twite Sean Toomes Martin Lamb Strategy and outlook Martin Lamb Questions and answers 4
Slide 5: Douglas Hurt
Engineering Advantage Douglas Hurt
Slide 6: Results overview
Results overview £m 2012 H1 2011 H1 change % Revenue 1,090 1,032 +6% organic revenue growth +5% Segmental operating profit 180.9 176.4 +3% Segmental operating margins 16.6% 17.0% Adjusted basic eps 40.4p 37.9p +7% Interim dividend 11.8p 11.0p +7% 6
Slide 7: Return on capital
Return on capital Post tax return on invested capital* 24.0% 22.0% 20.2% 20.0% 19.8% 20.0% 15.9% 16.0% 14.4% 14.8% 13.7% 12.0% 10.8% 8.4% 8.6% WACC = 8% 7.5% 8.0% 7.0% 4.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2011 2012 H1** H1** * Segmental operating profit after tax divided by th
Slide 8: Segmental operating margin
Segmental operating margin 20.0% 17.5% 16.7% 17.0% 16.6% 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 H1 2011 2012 H1 8
Slide 9: Results overview
Results overview H1 H1 £m 2012 2011 change Segmental operating profit 180.9 176.4 +3% Interest (8.5) (8.2) Net pension finance income/(expense) 5.3 3.1 Profit before tax before exceptional items 177.7 171.3 +4% Restructuring costs (13.5) (9.9) Past service credit – UK pension scheme 9.0 Acquired int
Slide 10: Operating cash flow summary
Operating cash flow summary £m H1 H1 H2 Year 2012 2011 2011 2011 EBITDA* 195 187 205 392 Working capital (93) (64) 51 (13) Capital expenditure (20) (21) (38) (59) Employee benefit movement (12) (3) (18) (21) Asset sales/other (1) (3) 11 8 Operating cash flow 69 96 211 307 Interest and derivatives 4
Slide 11: Working capital movement
Working capital movement £m H1 H1 H2 Year 2012 2011 2011 2011 Inventories (24) (32) (4) (36) Trade and other receivables (43) (51) 6 (45) Trade and other payables (26) 19 49 68 Working Capital Movement (93) (64) 51 (13) 11
Slide 12: Net cash flow summary
Net cash flow summary £m H1 H1 H2 Year 2012 2011 2011 2011 Cash flow before corporate activity 19 27 126 153 Corporate activity: Acquisitions (83) 3 (12) (9) Dividend to minority/others (2) (2) (2) (4) Shareholder activity: Dividends (60) (54) (35) (89) Share buyback/issues (10) (7) - (7) Net cash f
Slide 13: Pensions – IAS 19
Pensions – IAS 19 £m Jun Jun Dec 2012 2011 2011 Assets 1,178 1,134 1,194 Liabilities (1,386) (1,322) (1,398) Deficit (208) (188) (204) • Deficit impacted by changes in actuarial assumptions • £9m gain resulting from pension increase exchange exercise 13
Slide 14: Balance sheet
Balance sheet £m June June Dec 2012 2011 2011 Shareholders' funds 578 582 565 Net debt (£m) 266 168 108 Gearing 46% 29% 19% EBITDA (£m) 195 187 392 Interest costs 8.5 8.2 16.9 Net debt/EBITDA* 0.7x 0.4x 0.3x EBITDA/interest* 23x 26x 23x * Debt covenants are based on 12 month pro forma analysis for E
Slide 15: Roy Twite
Engineering Advantage Roy Twite 15
Slide 16: Severe Service
Severe Service £m H1 H1 Year 2012 2011 change 2011 Revenue 326 258 +26% 572 Organic growth % +17 -1 +2 Operating profit 45.5 41.3 +10% 88.9 Operating margin % 14.0 16.0 15.5 • H1 revenue up 26% on a reported basis, up 17% on an organic basis - Strong growth in Fossil Power, Iron & Steel and Petroche
Slide 17: Severe Service project mix
Severe Service project mix High focus Lower Margin LNG Competitive pricing in 09/10 Combined cycle gas New construction coal Nuclear after-market power in China & India Petrochemical Nuclear new construction valves 17
Slide 18: Severe Service project mix
Severe Service project mix 09/10 Competitive pricing Shipments China & India FOAK engineering Balance 2009 2010 2011 2012 H1 2012 H2 F/C Blended GM 100 98 97 94 93 2009 Index 100 Order Book 09/10 Competitive pricing China & India FOAK engineering Balance 2009 2010 2011 2012 H1 2012 H2 F/C Blended GM
Slide 19: Severe Service operations
Severe Service operations Operational Challenges • High throughput at Brno where costs remained high - 3 shifts per day, 7 days per week production - Hindered the early implementation of productivity improvements - Higher overheads for training and improvement programmes • Improvements now taking ho
Slide 20: Severe Service outlook
Severe Service outlook • H2 margins are likely to be similar to H1 margins - Working through remaining lower margin projects in the order book - Productivity improvements in Brno in H2 • Expect continued good revenue growth in H2 • Expectation of healthy recovery in margins in 2013 20
Slide 21: Fluid Power
Fluid Power £m H1 H1 Year 2012 2011 change 2011 Revenue 373 387 -4% 767 Organic growth % -1 +16 +11 Operating profit 75.0 74.6 +1% 150.5 Operating margin % 20.1 19.3 19.6 • Revenues slightly down on an organic basis - Sector business up 2% and now represents 46% of total - New project wins • Commerc
Slide 22: Fluid Power
Fluid Power 6 week MA Order Intake Week 26, 2011 Week 52, 2011 Week 26, 2012 Week 32, 2012 change Change Change Change vs LY vs LY vs LY vs LY Americas +15% ‐2% ‐2% +4% Europe +5% +2% ‐1% ‐7% Asia Pacific +21% +31% ‐10% ‐8% Group +10% +3% ‐2% ‐4% • 6 week moving average orders show a softening in de
Slide 23: Fluid Power
Fluid Power • Continued good margin momentum - Improving product mix / good new project wins - Winning the inflation equation - Transfers to lower cost manufacturing sites • Cost reduction measures implemented. Detailed contingency plans in case of any further weakening in demand • Maintain flexible
Slide 24: Sean Toomes
Engineering Advantage Sean Toomes 24
Slide 25: Indoor Climate
Indoor Climate £m H1 H1 Year 2012 2011 change 2011 Revenue 142 150 -5% 310 Organic growth % 0 +3 +2 Operating profit 27.1 30.2 -10% 68.2 Operating margin % 19.1 20.1 22.0 • We remain focused on energy efficiency • European markets remain subdued • Margins lower in H1 - Investments for growth - Busin
Slide 26: Indoor Climate
Indoor Climate • Continued investment to drive growth outside of Europe - Seminars and hydronic control demonstration centres in emerging markets - New hydronic sales engineers • Increased project enquires in emerging markets 26
Slide 27: Indoor Climate
Indoor Climate • Heating season between September and November important • Overall expect to see H2 revenues, on an organic basis, slightly ahead of H2 2011 • Margins expected to show typical seasonal improvement in H2 27
Slide 28: Martin Lamb
Engineering Advantage Martin Lamb 28
Slide 29: Beverage Dispense
Beverage Dispense £m H1 H1 Year 2012 2011 change 2011 Revenue 160 161 -1% 317 Organic growth % -1 +5 +3 Operating profit 21.6 20.0 +8% 41.1 Operating margin % 13.5 12.4 13.0 • Broadly flat in H1 - US customers cautious - Good growth in China and Latin America following increased investment - UK mark
Slide 30: Merchandising
Merchandising £m H1 H1 Year 2012 2011 change 2011 Revenue 90 79 +14% 169 Organic growth % +12 +10 +3 Operating profit 11.7 10.3 +14% 25.4 Operating margin % 13.0 13.0 15.0 • Strong organic revenue growth of 12% - Good growth in US automotive showroom activity - Major project wins with European cosme
Slide 31: Key messages
Key messages • Strong set of first half results - Organic revenue growth of 5% - Adjusted eps growth of 7% - Interim dividend increase of 7% • Confidence in addressing short term challenges - Severe Service margins - Protection of Fluid Power profitability in wake of weakening macroeconomic data • C
Slide 32: Strategic convergence: Focusing on the 'sweetspot'
Strategic convergence Focusing on the ‘sweetspot’ 32
Slide 33: Driving convergence
Driving convergence Drive ‘sweetspot’ convergence to 75% over next 3-5 years • Investments for growth - New product development - Emerging Markets • Mergers and acquisitions • Exiting commoditised activities 33
Slide 34: Investments for growth
Investments for growth Incremental KAMs / Emerging Expenditure Engineers Markets By Division: * £m Number % Severe Service 3.6 65 30% Fluid Power 3.7 75 40% Indoor Climate 1.8 40 50% Retail Dispense 0.9 20 35% IMI Group 10.0 200 40% * H1 2012 vs H1 2011 34
Slide 35: H1 organic growth by region
H1 organic growth by region Organic Region growth North America + 7% Western Europe - 4% Germany + 4% Other Northern Europe (inc UK) - 3% Southern Europe - 29% Emerging Markets + 14% Rest of World + 27% IMI Group + 5% 35
Slide 36: Financing investments
Financing investments * * Segmental operating profit 36
Slide 37: M&A
M&A • Remosa and InterAtiva acquisitions completed in H1 • Challenges - Valuation vs acquisition criteria - Compliance • Investments to build actionable pipeline 37
Slide 38: Summary and outlook
Summary and outlook • Good set of H1 results • Confidence in addressing short term challenges • Continued progress on the strategic agenda • Based on current market conditions we still expect the Group to make further progress in the remainder of the year 38
Slide 39: Additional Information
Engineering Advantage Additional Information 39
Slide 40: H1 sales
H1 sales By geography By end market RoW Auto Emerging Truck 7% 7% 3% markets Retail 22% 7% Process Industries Draught 29% dispense Western 15% Europe 35% North America Environmental UK 30% Capital control equipment 13% 6% 26% 40
Slide 41: Exchange rates
Exchange rates June June % 2012 2011 Change Average rates Euro 1.22 1.15 -6% US$ 1.58 1.62 +2% Closing rates Euro 1.24 1.11 -12% US$ 1.57 1.61 +2% Translational impact on H1 2012: Revenue (18.4) -2% Segmental operating profit (4.4) -2% Estimated translational impact on FY*: Revenue (64.5) -3% Segmen
Slide 42: Sales bridge
Sales bridge H1 H1 £m 2011 Translation Acquisitions Organic 2012 Severe Service 258 (4) 28 44 326 Fluid Power 387 (9) (5) 373 Indoor Climate 150 (7) (1) 142 Beverage Dispense 161 1 (2) 160 Merchandising 79 1 10 90 Segmental revenue 1,035 (18) 28 46 1,091 IAS39 adjustment (3) (1) Group revenue 1,032
Slide 43: Profits bridge
Profits bridge £m H1 H1 2011 Translation Acquisitions Organic 2012 Severe Service 41.3 (0.8) 4.2 0.8 45.5 Fluid Power 74.6 (2.6) 3.0 75.0 Indoor Climate 30.2 (1.4) (1.7) 27.1 Beverage Dispense 20.0 0.2 1.4 21.6 Merchandising 10.3 0.2 1.2 11.7 Segmental operating profit 176.4 (4.4) 4.2 4.7 180.9 43