IMI plc · LSE:IMI
IMI — H1 2013 Earnings Presentation
44 slides from IMI's earnings presentation, Aug 22, 2013
Slide 1: Interim Results Presentation
Interim Results Presentation 22 August 2013
Slide 2: Engineering Advantage – Martin Lamb
Engineering Advantage Martin Lamb
Slide 3: Key messages
Key messages • Good set of first half results – In line with management projections – Improved margins, earnings growth +4% – Good momentum in Severe Service, both orders and margins • Positive H2 outlook – Healthy order backlog Severe Service – Improving Fluid Power demand – More encouraging PMI da
Slide 4: Agenda
Agenda Introduction Martin Lamb Financial Review Douglas Hurt Business Review Roy Twite Martin Lamb Strategic update and outlook Martin Lamb Questions and answers 4
Slide 5: Engineering Advantage – Douglas Hurt
Engineering Advantage Douglas Hurt
Slide 6: Results overview
Results overview 2013 H1 2012 H1 change % Revenue £1,087m £1,090m 0% organic revenue growth -3% Segmental operating profit £182.6m £180.9m +1% Segmental operating margins 16.8% 16.6% Adjusted basic eps 39.6p 38.2p +4% Interim dividend 12.8p 11.8p +8% 6
Slide 7: Return on capital
Return on capital Post tax return on invested capital* 24.0% 20.3% 20.0% 19.0% 19.2% 18.2% 17.6% 16.0% 15.2% 13.9% 14.2% 13.0% 12.0% 10.5% 8.0% 8.2% WACC = 8% 8.0% 7.0% 7.2% 4.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2012 2013 H1** H1** * Segmental operating profit after tax di
Slide 8: Results overview
Results overview H1 H1 £m 2013 2012 change Segmental operating profit 182.6 180.9 +1% Interest (8.3) (8.5) Net pension finance expense (4.2) (4.1) Profit before tax before exceptional items 170.1 168.3 +1% Restructuring costs (5.3) (13.5) Past service credit – UK pension scheme - 9.0 Acquired intang
Slide 9: Working capital movement
Working capital movement £m H1 H1 H2 Year 2013 2012 2012 2012 Inventories (40) (24) 53 29 Trade and other receivables (27) (43) 24 (19) Trade and other payables 15 (26) (15) (41) Working Capital Movement (52) (93) 62 (31) 9
Slide 10: Operating cash flow summary
Operating cash flow summary £m H1 H1 H2 Year 2013 2012 2012 2012 EBITDA 197 195 199 394 Working capital (52) (93) 62 (31) Capital expenditure (20) (20) (27) (47) Provisions and employee benefits (6) (12) (20) (32) Asset sales/other 5 (1) 15 14 Operating cash flow 124 69 229 298 Interest and derivati
Slide 11: Net cash flow summary
Net cash flow summary £m H1 H1 H2 Year 2013 2012 2012 2012 Cash flow before corporate activity 80 19 143 162 Corporate activity: Acquisitions - (83) - (83) Dividend to minority/others (2) (2) (3) (5) Shareholder activity: Dividends (66) (60) (38) (98) Share buyback/issues (69) (10) 9 (1) Net cash fl
Slide 12: Balance sheet
Balance sheet £m June June Dec 2013 2012 2012 Shareholders' funds 667 578 636 Net debt (£m) 212 266 144 Gearing 32% 46% 23% EBITDA (£m) 197 195 394 Interest costs 8.3 8.5 17.7 Net debt/EBITDA* 0.5x 0.7x 0.4x EBITDA/interest* 23x 23x 22x * Debt ratios are based on 12 month pro forma analysis for EBIT
Slide 13: Pensions – IAS 19
Pensions – IAS 19 £m Jun Jun Dec 2013 2012 2012 Assets 1,250 1,178 1,211 Liabilities (1,433) (1,386) (1,443) Deficit (183) (208) (232) • Deficit reduction on UK pension fund resulting from positive equity markets • Deficit on overseas obligations also lower as a result of rises in the discount rates
Slide 14: Engineering Advantage – Roy Twite
Engineering Advantage Roy Twite 14
Slide 15: Severe Service
Severe Service £m H1 H1 Year 2013 2012 change 2012 Revenue 322 326 -1% 686 Organic growth % -3 +17 +14 Operating profit 49.0 45.5 +8% 96.3 Operating margin % 15.2 14.0 14.0 • Revenues down 3% on an organic basis - Catch up on back log in H1 2012 sets strong comparator - Good growth in Oil & Gas ship
Slide 16: Severe Service - order book margins
Severe Service - order book margins • Margins in the order book continue to improve • Second half margins are expected to show significant progress over the first half - Shipment of projects with improved margins - Further productivity improvements across operations 16
Slide 17: Severe Service – new products
Severe Service – new products • Good orders received for new products Truflo Rona – Ball Valve Quarter Turn Actuator 17
Slide 18: Severe Service - order intake
Severe Service - order intake 2013 H1 vs 2012 H1 Oil & Gas +66% Major HIPPS contract secured in Middle East and continued good bookings momentum in LNG Petrochemical +18% Significant orders won in China and India Project wins in South Korea and India consistent with more Fossil Power +6% selective a
Slide 19: Fluid Power
Fluid Power £m H1 H1 Year 2013 2012 change 2012 Revenue 363 373 -3% 717 Organic growth % -5 -1 -3 Operating profit 69.4 75.0 -7% 142.3 Operating margin % 19.1 20.1 19.8 • Revenues down 5% on an organic basis • Commercial vehicle revenues down 9% - North America and Europe both down around 15% - Rest
Slide 20: Fluid Power
Fluid Power • Outlook for truck volumes is more positive in H2 - Improvement in industry demand data in US - Expect limited pre-buy of existing models in Europe ahead of Euro VI legislation in 2014 • Improving contribution from new products in H2 • Overall expect return to good growth in the second
Slide 21: Fluid Power – new products
Fluid Power – new products Energy: Energy: Energy: Commercial Vehicles: Smart solenoid Redundant valve ESD valve for shale Euro VI inlet throttle manifold gas applications valve 21
Slide 22: Fluid Power - technology acquisition
Fluid Power - technology acquisition • Analytical Flow Products - Based in Quebec, Canada - Highly specialised valves critical to chromatography and other analytical platforms - Unique R&D capability with proven success at launching new technologies - Enhances Norgren’s capabilities in the Life Scie
Slide 23: Engineering Advantage – Martin Lamb
Engineering Advantage Martin Lamb 23
Slide 24: Indoor Climate
Indoor Climate £m H1 H1 Year 2013 2012 change 2012 Revenue 146 142 +3% 293 Organic growth % -1 0 0 Operating profit 27.7 27.1 +2% 61.5 Operating margin % 19.0 19.1 21.0 • Revenues similar to last year despite weak European construction activity • H1 margins similar to H1 2012 - Operating cost reduct
Slide 25: Indoor Climate – new products
Indoor Climate – new products TA-Fusion - Integrated hydronic A-Exact – TRV with unique control and balancing valve integrated flow limiter 25
Slide 26: Indoor Climate
Indoor Climate • Continued investment to drive growth outside of Europe with additional sales and engineering resource • Expect European construction markets to remain subdued in H2 • Expect growth to improve in H2 supported by increased contribution from recent product launches • H2 margins expecte
Slide 27: Beverage Dispense
Beverage Dispense £m H1 H1 Year 2013 2012* change 2012* Revenue 172 180 -4% 349 Organic growth % -7 n/a n/a Operating profit 24.9 26.6 -6% 53.5 Operating margin % 14.5 14.8 15.3 • Revenues down 7% on an organic basis - Major customers continue to defer capital expenditure in certain key markets - Im
Slide 28: Beverage Dispense
Beverage Dispense • Good progress made on a number of major project opportunities - Focus on greater beverage variety and increased automation - Sponsored by key customers - Undergoing extensive market testing and field trials with a number of products • Expect to secure major new orders over the ne
Slide 29: Merchandising
Merchandising £m H1 H1 Year 2013 2012* change 2012* Revenue 83 70 +19% 147 Organic growth % +16 n/a n/a Operating profit 11.6 6.7 +73% 19.4 Operating margin % 14.0 9.6 13.2 • Organic growth of 16% • Good growth in European cosmetics and continued good momentum in US automotive sector • Significant i
Slide 30: Strategic Progress, Summary and Outlook
Strategic Progress Summary and Outlook 30
Slide 31: Key messages
Key messages • Good set of first half results – In line with management projections – Improved margins, earnings growth +4% – Good momentum in Severe Service, both orders and margins • Positive H2 outlook – Healthy order backlog Severe Service – Improving Fluid Power demand – More encouraging PMI da
Slide 32: Driving sweetspot convergence
Driving sweetspot convergence From 58% to 75% over 5 years 2012 sweetspot 58% Underlying growth in sweetspot niche markets greater than non- +5% sweetspot Increased focus on new product +4% development M&A (acquisitions + disposals) +8% Illustrative 2017 sweetspot 75% 32
Slide 33: 2013 H1 sweetspot update
2013 H1 sweetspot update • Accelerating NPD contribution % Sweetspot 2013 H1 2012 2011 • Emerging markets growth +6% Severe Service 73% 73% 70% Fluid Power 65% 63% 60% • Technology road maps complete Indoor Climate 83% 81% 81% and matched closely to favourable Beverage Dispense 33% 30% 24% global tr
Slide 34: Driving cross platform synergies
Driving cross platform synergies Accelerated Growth • Technology transfer/joint NPD projects - Commercial Vehicles - Energy markets - Actuation & control • Emerging markets critical mass - Single country leadership model with full P&L - China / Russia / Brazil - Shared infrastructure - Localised NPD
Slide 35: Driving cross platform synergies
Driving cross platform synergies Continued margin expansion • Supply chain consolidation / global procurement platform - 16% reduction last 2 years - Scope for further 50% reduction over next 4 years • Group wide Value Engineering process and teams in place - £23m annualised savings achieved from pr
Slide 36: Corporate Development / M&A
Corporate Development / M&A • Acquisition of Analytical Flow Products • SAIC China nuclear JV received government approval • Ongoing investment to build acquisition pipeline – Existing niche markets – Close adjacencies • Process to dispose of the majority of Merchandising business on track 36
Slide 37: Summary and outlook
Summary and outlook • Good set of first half results in line with our expectations • Anticipate stronger H2 trading conditions - Healthy Severe Service backlog - Improving trends in Fluid Power - Accelerating contribution from new products (all business platforms) - Improved sales mix • Based on cur
Slide 38: Additional Information
Engineering Advantage Additional Information 38
Slide 39: H1 sales
H1 sales By geography By end market RoW Auto Emerging Truck 6% 3% markets 7% Retail 24% 7% Process Industries Western Draught 30% dispense Europe 14% 33% North America Environmental UK Capital control 7% 30% equipment 13% 26% 39
Slide 40: Exchange rates
Exchange rates June June % 2013 2012 Change Average rates Euro 1.18 1.22 +3% US$ 1.54 1.58 +3% Closing rates Euro 1.17 1.24 +6% US$ 1.53 1.57 +3% Translational impact on H1 2013: Revenue +2% Segmental operating profit +2% Estimated translational impact on FY*: Revenue +3% Segmental operating profit
Slide 41: Segmental operating margin
Segmental operating margin 20.0% 17.5% 16.7% 16.6% 17.0% 16.8% 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 2012 2012 2013 H1 H1 41
Slide 42: H1 profit bridge
£m 220 140 160 180 200 240 2012 H1 180.9 3.5 Translational FX Acquisitions (0.6) H1 profit bridge Volume (23.0) Inflation Equation 17.0 Operating 8.4 Improvements Segmental operating profit Investments for Growth (7.1) 7.6 Mix Other / FX Transaction (4.1) 2013 H1 182.6 42
Slide 43: Sales bridge
Sales bridge H1 H1 £m 2012 Translation Acquisitions Organic 2013 2011 Severe Service 326 4 3 (11) 322 Fluid Power 373 8 (18) 363 Indoor Climate 142 5 (1) 146 Beverage Dispense 180 5 (13) 172 Merchandising 70 1 12 83 Segmental revenue 1,091 23 3 (31) 1,086 IAS39 adjustment (1) 1 Group revenue 1,090 1
Slide 44: Profits bridge
Profits bridge £m H1 H1 2012 Translation Acquisitions Organic 2013 Severe Service 45.5 0.1 (0.6) 4.0 49.0 Fluid Power 75.0 1.8 (7.4) 69.4 Indoor Climate 27.1 0.6 - 27.7 Beverage Dispense 26.7 0.9 (2.7) 24.9 Merchandising 6.6 0.2 4.8 11.6 Segmental operating profit 180.9 3.6 (0.6) (1.3) 182.6 44