Imi Plc · LSE:IMI
Imi — FY2014 Earnings Presentation
47 slides from Imi's earnings presentation, Feb 27, 2015
Slide 1: IMI plc 2014 Preliminary Results
IMI plc Preliminary Results Presentation IMI plc 2014 Preliminary Results 27 February 2015 1
Slide 2: Agenda
IMI plc Preliminary Results Presentation Agenda ‣ Operational review Mark Selway – Chief Executive ‣ Financial review Douglas Hurt – Finance Director ‣ Strategic update Mark Selway ‣ Q&A IMI Executive Team
Slide 3: Highlights
IMI plc Preliminary Results Presentation Highlights Revenue Adjusted profit before tax2 Operating margins2 £1,686m Up 2% 1 £278.1m Down 7% 17.7% Down 70bps Cash generation Adjusted earnings per share2 Dividend per share £205m Down 28% 78.0p Up 7% 37.6p Up 7% ‣ Good progress made during the year ‣ Re
Slide 4: Operational Review: IMI Critical Engineering
IMI plc Preliminary Results Presentation Operational Review: IMI Critical Engineering £m 2014 FX Disposals Organic 2013 2014 order intake Revenue 692 (37) (3) 16 716 £686m flat organically Aftermarket up 9% £274m Organic growth % +2 +3 Oil & Gas up 3% £143m Operating profit 119.8 (6.9) (0.7) 10.6 11
Slide 5: Operational Review: IMI Precision Engineering
IMI plc Preliminary Results Presentation Operational Review: IMI Precision Engineering 2014 Revenue Acquisitions £m 2014 FX / Disposals Organic 2013 £710m up 4% organically Revenue 710 (40) 2 25 723 Industrial Automation up 5% £332m Commercial Vehicles up 4% £163m Organic growth % +4 -1 Oil & Gas do
Slide 6: Operational Review: IMI Hydronic Engineering
IMI plc Preliminary Results Presentation Operational Review: IMI Hydronic Engineering 2014 Revenue £m 2014 FX Organic 2013 £284m Down 1% organically TA up 1% £118m Revenue 284 (19) (2) 305 Heimeier down 1% £95m Organic growth % -1 +1 Pneumatex down 2% £39m Operating profit 51.9 (3.3) (9.1) 64.3 Othe
Slide 7: Outlook
IMI plc Preliminary Results Presentation Outlook ‣ Organic revenues expected to be broadly flat but slightly down in H1 ‣ Operating margins expected to be lower than in 2014 ‣ Expect modest organic revenue growth ‣ Operating margins expected to be similar to 2014 ‣ Expect organic revenues to be broa
Slide 8: Financial review
Financial review Douglas Hurt – Finance Director
Slide 9: Segmental revenue – continuing operations
IMI plc Preliminary Results Presentation Segmental revenue – continuing operations Acquisitions / £m 2014 Translation disposals Organic 2013 Critical Engineering 692 (37) (3) 16 716 Precision Engineering 710 (40) 2 25 723 Hydronic Engineering 284 (19) - (2) 305 Group 1,686 (96) (1) 39 1,744 % Change
Slide 10: Segmental operating profit
IMI plc Preliminary Results Presentation Segmental operating profit Acquisitions/ £m 2014 Translation disposals Organic 2013 Critical Engineering 119.8 (6.9) (0.7) 10.6 116.8 Precision Engineering 126.4 (7.6) (2.7) (3.8) 140.5 Hydronic Engineering 51.9 (3.3) - (9.1) 64.3 Group 298.1 (17.8) (3.4) (2.
Slide 11: Segmental analysis – excluding corporate costs
IMI plc Preliminary Results Presentation Segmental analysis – excluding corporate costs 2014 Operating Operating £m Revenue Profit Margins Critical Engineering 692 131.4 19.0% Precision Engineering 710 138.5 19.5% Hydronic Engineering 284 56.8 20.0% 1,686 326.7 19.4% Corporate Costs (28.6) (1.7%) Gr
Slide 12: Income statement
IMI plc Preliminary Results Presentation Income statement £m 2014 2013 Segmental operating profit 298.1 321.6 Restructuring costs - not exceptional (2.6) - Net interest expense (14.3) (16.0) Net pension finance charge (3.1) (7.9) Profit before tax and exceptional items 278.1 297.7 IAS39 adjustment (
Slide 13: Operating cash flow summary
IMI plc Preliminary Results Presentation Operating cash flow summary £m 2014 2013 Continuing operations: EBITDA* 371 332 Working capital (51) (17) Capital expenditure (71) (45) Gains on disposals (34) - Gains on special pension events (7) - Asset sales/other (3) 13 Operating cash flow from continued
Slide 14: Working capital
IMI plc Preliminary Results Presentation Working capital Continuing operations: £m 2014 2013 Inventory 6 3 Debtors (38) (11) Creditors (19) (9) (51) (17)
Slide 15: Net cash flow summary
IMI plc Preliminary Results Presentation Net cash flow summary £m 2014 2013 Cash generation 154 285 Special pension contributions (87) (35) Cash flow before corporate activity 67 250 Corporate activity: Disposals 725 (8) Dividend to minority / others (4) (5) Shareholder activity: Return of cash (620
Slide 16: Balance sheet
IMI plc Preliminary Results Presentation Balance sheet £m Dec Dec 2014 2013 Shareholders' funds 509 601 Net debt 200 199 Gearing 39% 33% Continuing businesses: EBITDA* 330 332 Interest costs 14.3 16.0 Net debt / EBITDA* 0.6x 0.6x EBITDA* / interest 23x 21x * EBITDA excluding gains on disposals of £3
Slide 17: Pensions
IMI plc Preliminary Results Presentation Pensions £m Dec 2014 Dec 2013 UK O'seas Total UK O'seas Total Assets 1,324 152 1,476 1,147 147 1,294 Liabilities (1,264) (247) (1,511) (1,210) (242) (1,452) Accounting surplus/(deficit) 60 (95) (35) (63) (95) (158) ‣ UK scheme has moved into surplus reflectin
Slide 18: Foreign exchange sensitivities 2014 and 2015
IMI plc Preliminary Results Presentation Foreign exchange sensitivities 2014 and 2015 Translational: Ready reckoner for translation 2014 2013 Change impact of movement in FX rates on 2015 FY performance Average rates Sensitivity to +/- 1 cent move in: Revenue Operating Profit Euro 1.24 1.18 -5% US$
Slide 19: Strategic Update
Strategic Update Mark Selway – Chief Executive
Slide 20: Strategic work streams completed
IMI plc Preliminary Results Presentation Strategic work streams completed Reviewed existing competencies and opportunities 1. ✓ 2. ✓ 3. ✓ 4. ✓ Markets Manufacturing Collaboration Investment Customers operations Synergies for growth Products Product Economies of Acquisitions development scale Peers S
Slide 21: Strategy execution timeline
IMI plc Preliminary Results Presentation Strategy execution timeline Year Year Year Year Year Year 0 1 2 3 4 5 2014 2015 2016 2017 2018 2019 ✓ “The hard work “Increased investment” “Benefits starting to “Nearly firing on “Up to full “Double operati begins” show” all speed” ng cylinders” profits” Org
Slide 22: Focus and grow strategy
IMI plc Preliminary Results Presentation IMI Critical Engineering Focus and grow strategy 1. Capitalise on Power Generation Oil & Gas Petrochemical attractive growth in existing markets Addressable Market = £7bn Our goal for the division is to deliver 5 year compound organic growth of 6 to 8%
Slide 23: Focus and grow: invest to support growth markets
IMI plc Preliminary Results Presentation IMI Critical Engineering Focus and grow 2. Invest to support growth markets 1. New Houston Facility 2. New Italian Facility 3. New Korean Facility 4. Beijing Service Centre 2 4 3 1 5 New Service Centres planned for 2015 5. Shanghai Service Centre
Slide 24: Focus and grow: enhance systems and processes
IMI plc Preliminary Results Presentation IMI Critical Engineering Focus and grow 3. Enhance systems and processes ‣ ERP ‣ New Project ‣ New Product implementation Management process Development process underway at IMI CCI (c.£10m)
Slide 25: Lean Assessments
IMI plc Preliminary Results Presentation IMI Critical Engineering Lean Assessments 1st assessment score 1st improvement 70 target 2nd assessment score Next improvement target 60 ‣ All major sites 2nd assessments complete 50 ‣ First assessment average 40 % Score score 26% ‣ Second assessment average
Slide 26: Focus and grow: acquisitions to support growth
IMI plc Preliminary Results Presentation IMI Critical Engineering Focus and grow 4. Acquisitions to support growth “Brings together two fantastic companies to create the world’s leading control & safety valve company for critical applications” Roy Twite IMI Critical Engineering Divisional Managing D
Slide 27: Strategic checklist
IMI plc Preliminary Results Presentation IMI Critical Engineering Strategic checklist ✓ Investment in world class manufacturing operations and new service facilities were delivered on time and to budget ✓ New ERP solution is progressing well against plan and we remain confident in our go live object
Slide 28: Fix and focus strategy
IMI plc Preliminary Results Presentation IMI Precision Engineering Fix and focus strategy 1. Capitalise on Industrial Automation Commercial Vehicles Oil & Gas Food & Beverage significant potential for accelerated growth Addressable Market = £14bn Our goal for the division is to improve our competiti
Slide 29: Fix and focus strategy
IMI plc Preliminary Results Presentation IMI Precision Engineering Fix and focus strategy 2. “TOGETHER, we Fix the basics in will improve our the next two competitiveness years and build a strong platform for future growth.” Mark Selway Group CEO and Precision Divisional Managing Director
Slide 30: Fix and focus strategy: business-specific growth plans
IMI plc Preliminary Results Presentation IMI Precision Engineering Fix and focus strategy 2. 1. Introduce business-specific growth plans for every Fix the basics in IMI Precision business the next two years Norgren Industrial Automation = Industrial Automation Product Plans Norgren Americas Norgren
Slide 31: Fix and focus strategy: standardise product portfolio
IMI plc Preliminary Results Presentation IMI Precision Engineering Fix and focus strategy 2. 2. Reduce and standardise product portfolio to reduce Fix the basics in complexity and improve responsiveness the next two years
Slide 32: Fix and focus strategy: quality system and Lean
IMI plc Preliminary Results Presentation IMI Precision Engineering Fix and focus strategy 2. 3. Introduce global Norgren Quality system and Lean Fix the basics in best practices to improve efficiency and customer the next two years responsiveness
Slide 33: Fix and focus strategy: new IT strategy
IMI plc Preliminary Results Presentation IMI Precision Engineering Fix and focus strategy 2. 4. Develop a new IT strategy to build competitive Fix the basics in advantage and support future growth the next two years ‣ New ‘out of the box’ JD Edwards system was successfully installed in Brazil and wi
Slide 34: Fix and focus strategy: organisation and forecasting
IMI plc Preliminary Results Presentation IMI Precision Engineering Fix and focus strategy 2. 5. Build a dynamic organisation to better compete and Fix the basics in respond to market potential the next two years 6. Establish accurate and reliable sales and financial forecast planning 7. Introduce mo
Slide 35: Lean Assessments
IMI plc Preliminary Results Presentation IMI Precision Engineering Lean Assessments 1st assessment score 1st improvement target 2nd assessment score Next improvement target 80 ‣ All major sites 2nd 70 assessments complete 60 ‣ First assessment average score 32% 50 % Score ‣ Second assessment average
Slide 36: Strategic Checklist
IMI plc Preliminary Results Presentation IMI Precision Engineering Strategic Checklist ✓ New simplified organisational structure implemented in Europe ✓ Analysis of industrial automationIncrease market progressing plant well ✓ New system of standard costing implemented worldwide utilisation ✓ Early
Slide 37: Focus & Grow strategy
IMI plc Preliminary Results Presentation IMI Hydronic Engineering Focus & Grow strategy 1. Hydronic Balancing Hydronic Conditioning Thermostatic Controls Capitalise on European leadership position Addressable Market = £2bn Our goal for the division is to deliver 5 year compound organic growth of >5%
Slide 38: Focus & Grow strategy: increase new product development
IMI plc Preliminary Results Presentation IMI Hydronic Engineering Focus & Grow strategy 2. ‣ 14 new products launched in last 12 Increase new months ‣ Double investment product in great new development products over next 5 years
Slide 39: Focus & Grow strategy: enhance systems and processes
IMI plc Preliminary Results Presentation IMI Hydronic Engineering Focus & Grow strategy 3. Enhance systems and processes ‣ Implement new ERP ‣ Introduce core ‣ Reduced complexity system (c.£10m) processes ‣ Promotes competitiveness and growth prospects of the division
Slide 40: Lean Assessments
IMI plc Preliminary Results Presentation IMI Hydronic Engineering Lean Assessments 1st assessment score 1st improvement target 2nd assessment score Next improvement target 80 ‣ All major sites 2nd 70 assessments complete ‣ First assessment average 60 score 38% 50 % Score ‣ Second assessment average
Slide 41: Strategic Checklist
IMI plc Preliminary Results Presentation IMI Hydronic Engineering Strategic Checklist ✓ Great progress on new product development with 14 new products launched – representing £13m of revenues in 2014 ✓ Increase plant Completed withdrawal from 20 low margin emerging markets utilisation ✓ Rebranding c
Slide 42: What does this all mean?
What does this all mean? Mark Selway – Chief Executive
Slide 43: Operational improvements: average lean scores by division
IMI plc Preliminary Results Presentation Operational improvements Average lean scores by division June 2014 – score 31% December 2014 – score 46% Cultural Awareness Cultural Awareness Visual Management Visual Management Level Production Level Production & Housekeeping & Housekeeping Worldclass >85%
Slide 44: People
IMI plc Preliminary Results Presentation People ‣ Good engagement on 5 year plan by all employees ‣ New simpler management and employee incentive schemes being rolled out ‣ Clearly aligned to strategy ‣ Upgraded senior management team
Slide 45: Strategic Progress in 2014
IMI plc Preliminary Results Presentation Strategic Progress in 2014 ✓ Strategic review completed and 5 year roadmap defined ✓ Benchmarking complete and improvement plans developed in operational, project management and financial systems ✓ Excellent progress made in Lean with further improvement targ
Slide 46: Q&A
IMI plc Preliminary Results Presentation Q&A The Executive Team
Slide 47: N Engineering
N Engineering GREAT the IMI Way