IMI plc · LSE:IMI
IMI — FY2007 Earnings Presentation
52 slides from IMI's earnings presentation, Mar 5, 2008
Slide 1: 2007 Results presentation
2007 Results presentation 5 March 2008 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 • Business outlook Martin Lamb • Questions and answers 3
Slide 4: Results overview - highlights
Results overview - highlights • Revenues £1,599m up 6% • Profit before tax* £210m up 8% - on constant currency basis up 11% • Adjusted earnings per share** 42.5p up 11% • Final dividend proposed 12.7p up 9% * Before restructuring, investigation costs, intangible amortisation and other income ** Befo
Slide 5: Martin Lamb
Martin Lamb 5
Slide 6: Results overview
Results overview • Organic revenue growth + 7% • Profit before tax* £210m – at constant currency + 11% • Before restructuring, investigation costs, intangible amortisation and other income 6
Slide 7: Positive end markets
Positive end markets Sales Truck Auto 5% Oil and gas 5% 9% Retail 9% Power 14% Draught dispense Construction 18% 13% Growth key (organic yoy%) Capital equipment 15%+ 27% 5-10% 0-5% <0% 7
Slide 8: Strong regional markets
Strong regional markets Sales Emerging markets 17% N. America RoW 30% 5% Western Europe UK 36% Growth key 12% (organic yoy%) 20%+ 10-15% 5-10% 0-5% 8
Slide 9: New product momentum
New product momentum % revenue from products less than 3 years old 2002 2005 2007 Target 4% 7% 13% 15-20% 9
Slide 10: Positive margin development
Positive margin development Before restructuring costs and intangible amortisation 2007 2006 Severe Service 15.5% * 15.0% Fluid Power 13.4% 13.0% Indoor Climate 15.9% 15.9% Beverage Dispense 9.0% 9.0% Merchandising Systems 11.5% 10.8% Group 13.2% * 12.7% * Before investigation costs (after these cos
Slide 11: Restructuring
Restructuring • £60m three year programme • Low cost manufacturing from 25% to 40% • Expanded existing facilities – Mexico, Czech Republic and China • £42m charged to date to close and restructure facilities – Fluid Power – Shipston (UK), Balterswil (Switzerland) and Littleton (US) – Beverage Dispen
Slide 12: Low cost sourcing
Low cost sourcing • Shanghai Procurement Centre – 35 professionals • 20% Global Sourcing low cost • 40% long range target 12
Slide 13: Douglas Hurt
Douglas Hurt 13
Slide 14: Results overview
Results overview £m % 2007 2006 change Sales at comparable rates 1,557 1,461 +7 Exchange impact - 44 -3 1,557 1,505 +3 Acquisitions 42 - +3 As reported 1,599 1,505 +6 14
Slide 15: Results overview – continuing businesses
Results overview – continuing businesses £m % 2007 2006 change Operating profit* 210.8 191.8 +10 Interest (12.8) (7.5) Net return on pension plan 10.5 8.3 IAS39 1.6 2.3 Net financing (costs)/income (0.7) 3.1 Profit before tax* 210.1 194.9 +8 Profit before tax (constant currency) +11 * before restruc
Slide 16: Results overview – continuing businesses
Results overview – continuing businesses £m % 2007 2006 change Profit before tax * 210.1 194.9 +8 Restructuring costs (22.0) (19.7) Severe Service investigation costs (4.9) - Intangible amortisation (13.9) (17.0) Other income 1.7 - Profit before tax 171.0 158.2 +8 Taxation (53.0) (49.0) Profit after
Slide 17: Earnings per share
Earnings per share % 2007 2006 change Adjusted EPS * 42.5p 38.3p +11 Basic EPS - continuing 34.8p 31.3p +11 Basic EPS - total 35.4p 21.4p +65 * before restructuring, investigation costs, change in fair value of financial instruments, intangible amortisation and other income 17
Slide 18: Operating cash flow summary
Operating cash flow summary £m 2007 2006 Year Year Continuing businesses: EBITDA* 220 211 Working capital (11) (27) Capital expenditure (53) (44) Asset sales/other 4 7 Operating cash flow - continuing 160 147 Interest (13) (8) Tax (37) (40) Cash generation 110 99 Special pension contribution (16) (1
Slide 19: Net cash flow summary
Net cash flow summary £m 2007 2006 Year Year Cash flow before corporate activity 61 83 Corporate activity: Redemption of vendor loan note - 36 Acquisitions (52) (118) Disposals / discontinued 2 - Dividend to minority / others (2) (2) Shareholder activity: Dividends (64) (61) Share buyback / issues (
Slide 20: Balance sheet
Balance sheet £m Dec Dec 2007 2006 Shareholders funds 407 413 Net borrowings 233 80 Gearing % 57 19 Continuing businesses: Debt / EBITDA 1.1 0.4 EBITDA / interest 17x 28x 20
Slide 21: Group EVA record
Group EVA record £m nd ts e e 80.0 ke cl ar cy m ng Lo 60.0 40.0 20.0 0.0 -20.0 2001 2002 2003 2004 2005 2006 2007
Slide 22: Other matters
Other matters • Share buyback • Exchange rates • Pensions – IAS19 • Tax rates 22
Slide 23: Share buybacks
Share buybacks 2007 Total since H1 H2 Year 21/03/2005 Number of shares (m) 7.2 10.0 17.2 41.3 * Cost (£m) 41.5 51.8 93.3 200.6 Average price (£) 5.76 5.14 5.42 4.86 EPS impact 2007 +0.4p * 25.3m of these shares were cancelled in December 2007, the remaining 16m are held in Treasury 23
Slide 24: Exchange rates
Exchange rates % change 2007 2006 2007 Year Year Year Average rates Euro 1.46 1.47 1% US$ 2.00 1.85 -8% Closing rates Euro 1.36 1.48 8% US$ 1.99 1.96 -2% 24
Slide 25: Exchange rates - translation
Exchange rates - translation Average 2007 At 22 Feb 2008 % change Euro 1.46 1.33 10.0 US$ 2.00 1.97 1.5 Translation As reported 2007 At 22 Feb 2008 rates impact £m £m £m Sales 1,599 1,693 94 Profit before tax 171 184 13 25
Slide 26: Pensions – IAS 19
Pensions – IAS 19 £m UK Others Total Assets 1,031 89 1,120 Liabilities 1,035 149 1,184 Deficit at 31.12.07 (4) (60) (64) Deficit at 31.12.06 (60) (61) (121) 26
Slide 27: Tax rates
Tax rates • Group 2007 effective tax rate 31% (2006, 31%) • Cash tax rate 22% (2006, 25%) • 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 ra
Slide 28: David Nicholas
David Nicholas 28
Slide 29: Severe Service
Severe Service 2007 2006 £m H1 H2 Year Year Sales 171 191 362 300 Organic growth % +24 +13 +18 +11 Operating profit* 25.7 30.3 56.0 45.1 Operating margin %* 15.0 15.9 15.5 15.0 • Strong organic sales growth • Oil and gas remains buoyant – particularly LNG • Growth in power in the US • Increased inve
Slide 30: Severe Service
Severe Service • Orton focused on LNG – growth over 50 % • Orton new facility – cryogenic test upgrade • Rona ( Truflo ) – LNG carriers and terminals • LNG – severe duties – emission testing • Nuclear activity starting • Nuclear capability from 6 global locations • N stamp at new Korea factory • Con
Slide 31: Fluid Power
Fluid Power 2007 2006 £m H1 H2 Year Year Sales 282 289 571 557 Organic growth % +2 +2 +2 +6 Operating profit 35.2 41.1 76.3 72.4 Operating margin % 12.5 14.2 13.4 13.0 • Organic growth 2% - net of US truck underlying 6% • Sector focus, double digit growth outside US truck • Asia Pacific and Eastern
Slide 32: Fluid Power
Fluid Power • European truck markets positive – Eastern Europe • US truck rebound forecast from 2nd quarter • Good growth in packaging – PET bottling • Restructuring on track - £4m benefit in 2007 • Closed volume manufacturing in Denver / Switzerland • In process of closing Shipston UK • Doubled siz
Slide 33: Indoor Climate
Indoor Climate 2007 2006 £m H1 H2 Year Year Sales 97 110 207 186 Organic growth % +12 +1 +7 +8 Operating profit 13.7 19.2 32.9 29.5 Operating margin % 14.1 17.5 15.9 15.9 • Balancing valve business maintained positive momentum • Eastern Europe strong development • German radiator valve business – do
Slide 34: Indoor Climate
Indoor Climate • Professional balancing valve seminars • Major project wins - system technology • Terminal 5 • Oslo Opera House • Burj Tower • Stepped up investment in new products • Balancing – TA Hub • Heimeier – Epro TRV timer • Pneumatex opening up new markets 34
Slide 35: Roy Twite
Roy Twite 35
Slide 36: Beverage Dispense
Beverage Dispense 2007 2006 £m H1 H2 Year Year Sales 147 138 285 282 Organic growth % +7 +5 +6 -3 Operating profit 11.4 14.2 25.6 25.4 Operating margin %* 7.8 10.3 9.0 9.0 * After impact of Sheffield flood • Organic growth 6% • Strong growth in emerging markets • US better in the second half • UK be
Slide 37: Beverage Dispense
Beverage Dispense • Closed two Western factories • Trebled China manufacturing capacity • Refreshed management team • Focused on improving customer service and margins • Accelerating new product development 37
Slide 38: Merchandising Systems
Merchandising Systems 2007 2006 £m H1 H2 Year Year Sales 84 90 174 180 Organic growth % +3 +5 +4 -2 Operating profit 8.4 11.6 20.0 19.4 Operating margin % 10.0 12.9 11.5 10.8 • 4% organic growth • Strong performance in cosmetics sector • Solid growth in food and beverage sectors • Consumer electroni
Slide 39: Merchandising Systems
Merchandising Systems • Margins increased to 11.5% • Increased sourcing from low cost economies • Successful value engineering programmes • Focused on: – improving supply chain efficiency – winning next large projects – increasing distribution of high value products 39
Slide 40: Martin Lamb
Martin Lamb 40
Slide 41: Forward momentum
Forward momentum • Strong customer and new products momentum CAGR 10% IMI top customers outperform nominal GDP growth over time Revenue index (1988 = 100) CAGR 5% 41
Slide 42: Forward momentum • Severe Service progressing well
Forward momentum • Strong customer and new products momentum • Severe Service progressing well • Internal investigation near completion (2007 costs £4.9m) • Customer discussions positive • Order clearance backlog eliminated • New routes to market being established • Normal order patterns to return i
Slide 43: Forward momentum • Positive impact of repositioning
Forward momentum • Strong customer and new products momentum • Severe Service progressing well • Positive impact of repositioning • Commodity sectors exited • Leadership positions established • Differentiated and customised product range • Greater operational flexibility 43
Slide 44: Market repositioning 2000 - 2007
Market repositioning 2000 - 2007 rket t ke ke g ar i n r a ts a m erg Afterm Sh rm Em o te rt c Af ycle yc le o n gc Emerging L Short cycle Markets Re no le vat ion d cyc Lo ixe ng M ix n M cy tio ed c cle va no ycle le Re g cyc ets k Lon mar end IMI 2000 IMI Today Resilience Low High 44
Slide 45: Business restructuring 2000 - 2007
Business restructuring 2000 - 2007 2000 2007 Operational gearing Net operating assets as % sales 43% 29% SG & A as % sales 28% 24% % low cost manufacturing 2% 31% Financial gearing Debt / EBITDA 1.6 1.1 Working capital as % sales 18% 14% Pricing power % revenue new products 4% 13% % revenue customis
Slide 46: Outlook
Outlook • Good start to year • Organic sales +7% • Order book + 13% • Positive developments • Severe Service resolution • US truck recovery • Cost management • Further progress expected in 2008 46
Slide 47: Additional information
Additional information 47
Slide 48: Sales bridge
Sales bridge £m 2006 Translation Acquisitions / Organic 2007 (Disposals) Severe Service 300 (10) 21 51 362 Fluid Power 557 (11) 13 12 571 Indoor Climate 186 1 8 12 207 Beverage Dispense 282 (13) - 16 285 Merchandising Systems 176 (11) - 6 171 Business Disposal 4 (1) 3 1,505 (44) 41 97 1,599 48
Slide 49: Profit bridge
Profit bridge £m 2006 Translation Acquisitions / Organic 2007 (Disposals) Severe Service 45.1 (1.2) 4.2 7.9 56.0 Fluid Power 72.4 (1.9) 1.6 4.2 76.3 Indoor Climate 29.5 0.2 0.7 2.5 32.9 Beverage Dispense 25.4 (1.3) 1.5 25.6 Merchandising Systems 19.4 (1.2) (0.3) 2.2 20.0 191.8 (5.4) 6.2 18.3 210.8 4
Slide 50: 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 50
Slide 51: Fluid Controls end markets
Fluid Controls end markets Severe service Fluid Power Indoor Climate anrdket rket Resi Fo owe p a ss r et Aftster e e Afterm de nt g m k gin ts il ke cl Nu ar r ar cy po clea m e ke ing Emmar ial we r r erg s m ng te & r icaling m E rket Af Lo General e d M ckag pa Non- ma pneumatics ga s Em residen
Slide 52: Retail Dispense end markets
Retail Dispense end markets Beverage Dispense Merchandising et t mark rke Be a Di e rm str After r/ te Af tics ibu ot e he osm tio r C Emerging n Consumer Markets electronics ks Re ve Soft drin moti Be Gro no t o va Au New ve ce tio rag ry n ea Beverage Age nd and grocery Resilience Low High