Imi Plc · LSE:IMI
Imi — FY2012 Earnings Presentation
53 slides from Imi's earnings presentation, Mar 7, 2013
Slide 1: IMI plc 2012 Preliminary Results
IMI plc 2012 Preliminary Results 7 March 2013
Slide 2: Engineering Advantage – Martin Lamb
Engineering Advantage Martin Lamb
Slide 3: Key messages
Key messages • Resilient set of results for 2012 • Clear set of priorities for 2013 - Improving Severe Service margins - Higher growth in the emerging markets - Improving contribution from recently introduced new products • Progress on strategic convergence - Increasing investment in new products an
Slide 4: Agenda
Agenda Financial Review Douglas Hurt Business Review Roy Twite Martin Lamb Strategic progress and outlook Martin Lamb Questions and answers 4
Slide 5: Financial Review – Douglas Hurt
Douglas Hurt Financial Review 5
Slide 6: Results overview
Results overview £m 2012 2011 change % Revenue 2,190 2,131 +3% organic revenue growth +3% Segmental operating profit 373.0 374.1 Segmental operating margins 17.0% 17.5% Adjusted eps - basic 84.3p 81.5p +3% restated for new IAS19 rules 79.7p 77.6p Full year dividend 32.5p 30.0p +8% 6
Slide 7: Return on capital
Return on capital Post tax return on invested capital* 22.0% 20.3% 19.0% 19.2% 18.0% 15.2% 13.9% 14.2% 14.0% 13.0% 10.5% 10.0% 8.0% 8.2% 7.0% 7.2% WACC = 8% 6.0% 2.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 * Segmental operating profit after tax divided by the average invested ca
Slide 8: Segmental operating margin
Segmental operating margin Segmental operating margin 20.0% 17.5% 16.7% 17.0% 15.0% 14.0% 13.0% 13.1% 12.7% 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 8
Slide 9: Results overview
Results overview £m 2012 2011 change % Segmental revenues 2,138 2,072 +3% (excluding FX and acquisitions) Acquisitions 54 Segmental revenues at comparable rates 2,192 2,072 +6% Exchange impact 63 IAS 39 (2) (4) Revenue as published 2,190 2,131 +3% 9
Slide 10: Profit bridge
Profit bridge Segmental operating profit 10
Slide 11: Results overview
Results overview £m 2012 2011 Segmental operating profit 373.0 374.1 Interest (17.7) (16.9) Net pension finance income 11.0 6.2 Profit before tax and exceptional items 366.3 363.4 IAS39 adjustment (1.0) (6.2) Restructuring costs (23.3) (23.5) Other acquisition-related costs (6.3) - Acquired intangib
Slide 12: Operating cash flow summary
Operating cash flow summary £m 2012 2011 EBITDA* 394 392 Inventory 29 (36) Debtors (19) (45) Creditors (41) 68 Working capital (31) (13) Capital expenditure (47) (59) Provisions and employee benefits (32) (25) Asset sales/other 14 12 Operating cash flow 298 307 Interest and derivatives (4) (8) Tax (
Slide 13: Net cash flow summary
Net cash flow summary £m 2012 2011 Cash generation 191 208 Severe Service investigation costs (3) (2) Special pension contributions (26) (53) Cash flow before corporate activity 162 153 Corporate activity: Acquisitions (83) (9) Dividend to minority / others (5) (4) Shareholder activity: Dividends (9
Slide 14: Balance sheet
Balance sheet £m Dec Dec 2012 2011 Shareholders' funds 636 565 Net debt 144 108 Gearing 23% 19% Continuing businesses: EBITDA 394 392 Interest costs 17.7 16.9 Net debt / EBITDA 0.4x 0.3x EBITDA / interest 22x 23x 14
Slide 15: Pensions – IAS 19
Pensions – IAS 19 £m Dec Dec 2012 2011 Assets 1,211 1,194 Liabilities (1,443) (1,398) Accounting deficit (232) (204) • UK deficit increased by £9m to £111m • Overseas deficit £19m higher due to fall in discount rates • £9m gain in H1 resulting from pension increase exchange exercise 15
Slide 16: Exchange rates
Exchange rates 2012 2011 Change Average rates Euro 1.23 1.15 -7% US$ 1.59 1.60 +1% Closing rates Euro 1.23 1.20 -3% US$ 1.62 1.55 -5% Impact on FY 2012: Revenue -3% Segmental operating profit -4% Projection for 2013*: Revenue +4% Segmental operating profit +3% * Compares impact on 2012 results of us
Slide 17: Engineering Advantage – Roy Twite
Engineering Advantage Roy Twite 17
Slide 18: Severe Service
Severe Service 2012 2011 £m H1 H2 Year Year Sales 326 360 686 572 Organic growth % +17 +11 +14 +2 Operating profit 45.5 50.8 96.3 88.9 Operating margin % 14.0 14.1 14.0 15.5 • Revenues up 20% on a reported basis and 14% on an organic basis - Catch up on back log during the year - LNG and Fossil Powe
Slide 19: Severe Service order intake
Severe Service order intake 2012 vs 2011 Oil & Gas +0% Continued high levels of activity in LNG Petrochemical +27% Significant orders won in US Subdued US and Europe new power markets and more Fossil Power (11%) selectivity on new construction fossil power projects in India and China Nuclear (11%) N
Slide 20: Severe Service Margins
Severe Service Margins • Ongoing improvements in productivity at Brno site • Average margin in the order book continues to improve - Majority of low margin Fossil Power projects from 2009/10 shipped in 2012 - More selective approach to new Fossil Power projects in India and China - Some low margin f
Slide 21: Severe Service - new products: Truflo Rona Ball Valve
Severe Service - new products Truflo Rona – Ball Valve 21
Slide 22: Severe Service - new products
Severe Service - new products Quarter Turn Actuator Quarter Turn Actuators RTC Quarter Turn Actuator Norgren AFR Maxseal Solenoid Valve 22
Slide 23: Severe Service – new products
Severe Service – new products Quarter Turn Actuator Truflo Orton Isolation Valve 23
Slide 24: Fluid Power
Fluid Power 2012 2011 £m H1 H2 Year Year Sales 373 344 717 767 Organic growth % -1 -5 -3 +11 Operating profit 75.0 67.3 142.3 150.5 Operating margin % 20.1 19.6 19.8 19.6 • As expected revenues fell by 5% in H2 on an organic basis reflecting weaker end markets • 2012 margins increased to 19.8% despi
Slide 25: Fluid Power
Fluid Power • Commercial vehicles down 10% in H2 and 2% down for the full year • Life Science and Food & Beverage sectors resilient • Good growth in Energy sector • Overall sectors now represent 46% of total Fluid Power revenue 25
Slide 26: Fluid Power – new products
Fluid Power – new products • New products delivering business wins Energy: Commercial Vehicles: Life Sciences: Redundant valve manifold Euro VI inlet throttle valve Flatprop valve 26
Slide 27: Fluid Power
Fluid Power • Slow start to 2013 for commercial vehicle customers • Top 100 customer interviews indicate some improvement in demand sentiment, outside of commercial vehicles • Based on our latest customer insight and current order trends, we expect H1 revenues to be similar to H2 2012 • Expect a ret
Slide 28: Engineering Advantage – Martin Lamb
Engineering Advantage Martin Lamb 28
Slide 29: Indoor Climate
Indoor Climate 2012 2011 £m H1 H2 Year Year Sales 142 151 293 310 Organic growth % 0 0 0 +2 Operating profit 27.1 34.4 61.5 68.2 Operating margin % 19.1 22.8 21.0 22.0 • New commercial construction market in Europe remained subdued but refurbishment market remains resilient • Good growth in a number
Slide 30: Indoor Climate
Indoor Climate • Continued investment to drive growth outside of Europe • Increased seminar activity in growth markets - Up 16% • 4 new hydronic demonstration centres opened • Double digit growth in Turkey, Russia, China and Brazil 30
Slide 31: Indoor Climate – new products
Indoor Climate – new products • New range of hydronic control valves launched in 2013 31
Slide 32: Indoor Climate
Indoor Climate • Expect return to growth in 2013 - New construction market in Europe to remain subdued - Improving trends in Americas and Asia - Contribution from new products accelerating as year progresses 32
Slide 33: Beverage Dispense
Beverage Dispense 2012 2011 £m H1 H2 Year Year Sales 160 153 313 317 Organic growth % -1 -1 -1 +3 Operating profit 21.6 23.4 45.0 41.1 Operating margin % 13.5 15.3 14.4 13.0 • Revenues down 1% on an organic basis in the full year • Further good progress on operating margins - Programme of low margin
Slide 34: Beverage Dispense – new products
Beverage Dispense – new products • Significant new product opportunities in 2013 - Focus on increased automation, greater variety and new health & indulgence drinks - Awarded next generation automated beverage systems for McDonald’s drive-thru restaurants on a global basis Automated beverage Blend i
Slide 35: Beverage Dispense
Beverage Dispense • Well positioned for higher organic growth in 2013 - Customers more confident in their investment plans - Impact from low margin exits in H1 only - Increasing contribution from new products as year progresses • Continued focus on further margin improvement 35
Slide 36: Merchandising
Merchandising 2012 2011 £m H1 H2 Year Year Sales 90 93 183 169 Organic growth % +12 +4 +8 +3 Operating profit 11.7 16.2 27.9 25.4 Operating margin % 13.0 17.4 15.2 15.0 • Organic revenue growth of 8% - Good growth in Cosmetics and US automotive sectors • Business reorganisation implemented • Continu
Slide 37: Merchandising
Merchandising • Performance in key sectors remains very positive - Digital merchandising showing strong momentum in automotive sector - Two major multi-year cosmetics contracts secured in Europe - Major contract secured to support global consumer electronics launch • Further investment in the InVisi
Slide 38: Strategic Progress, Summary and Outlook
Strategic Progress Summary and Outlook 38
Slide 39: Key messages
Key messages • Resilient set of results for 2012 • Clear set of priorities for 2013 - Improving Severe Service margins - Higher growth in the emerging markets - Improving contribution from recently introduced new products • Progress on strategic convergence - Increasing investment in new products an
Slide 40: Driving sweetspot convergence
Driving sweetspot convergence From 58% today to 75% over next 5 years 2012 sweetspot 58% • Underlying growth in sweetspot niche markets greater than non-sweetspot +5% • Increased focus on new product +4% development • M&A (acquisitions + disposals) +8% Illustrative 2017 sweetspot 75% 40
Slide 41: Sweetspot development
Sweetspot development % Sweetspot 2011 2012 Severe Service 70% 73% Fluid Power 60% 63% Indoor Climate 81% 81% Beverage Dispense 24% 30% Merchandising 0% 0% Group 55% 58% 41
Slide 42: Capital allocation
Capital allocation • Group continues to be very cash generative • Priorities for use of capital 1. New product development and other organic investments for growth 2. Progressive dividend policy 3. Acquisitions targeted on the Sweetspot • Aim to maintain balance sheet efficiency and flexibility with
Slide 43: New product development
New product development • New product agenda is key to delivering strategic convergence targets • Increased number of cross platform projects – utilising flow control engineering expertise from across IMI • Objective to increase percentage of revenues coming from new products launched in the last 3
Slide 44: New product highlights in 2013
New product highlights in 2013 44
Slide 45: Emerging markets development
Emerging markets development • Favourable macro trends % Emerging Markets 2011 2012 Severe Service 34% 41% Fluid Power 17% 18% Indoor Climate 18% 19% Beverage Dispense 17% 19% Merchandising 3% 5% Group 20% 24% 45
Slide 46: M&A
M&A • Completed acquisitions of Remosa and InterAtiva in 2012 • Significant balance sheet capacity • Targeting significant increase in investment in acquisitions firmly in our sweetspot - existing niche markets - close adjacencies 46
Slide 47: Retail Dispense reorganisation
Retail Dispense reorganisation • Display Technologies moved from Merchandising to Beverage Dispense - Opportunities arising from common beverage customers 2012 pro forma revenue and segmental operating profit: Beverage DT Pro Merchandising DT Pro forma forma Revenue £m 313 36 349 183 (36) 147 Seg Op
Slide 48: Summary and outlook
Summary and outlook • Resilient set of 2012 results • Macro-economic environment has stabilised - Market conditions to remain subdued in H1 - Increased momentum as the year progresses - Improving sales mix - Increased contribution from a number of new products • Plans to accelerate strategic develop
Slide 49: Additional Information
Engineering Advantage Additional Information 49
Slide 50: 2012 sales
2012 sales By geography: By end market: Auto ROW Retail Truck 3% 7% 7% Emerging 6% Markets Western Europe Draught Dispense Energy 24% 14% 34% 31% Capital Equipment North America 25% Environmental Control UK 29% 13% 6% 50
Slide 51: Sales bridge
Sales bridge £m 2011 Translation Acquisitions Organic 2012 Severe Service 572 (18) 54 78 686 Fluid Power 767 (28) - (22) 717 Indoor Climate 310 (16) - (1) 293 Beverage Dispense 317 (2) - (2) 313 Merchandising 169 1 - 13 183 Segmental revenue 2,135 (63) 54 66 2,192 IAS39 adjustment (4) (2) Group reve
Slide 52: Profit bridge
Profit bridge £m 2011 Translation Acquisitions Organic 2012 Severe Service 88.9 (2.6) 8.6 1.4 96.3 Fluid Power 150.5 (7.1) - (1.1) 142.3 Indoor Climate 68.2 (3.8) - (2.9) 61.5 Beverage Dispense 41.1 (0.1) - 4.0 45.0 Merchandising 25.4 0.2 - 2.3 27.9 Segmental operating profit 374.1 (13.4) 8.6 3.7 37
Slide 53: Pensions IAS19 – Impact on 2013
Pensions IAS19 – Impact on 2013 FY 2011 FY 2012 FY 2013 Current Revised Revised Actual IAS 19 IAS 19 IAS 19 Estimate £m £m £m £m Current Service Cost (operating) 5.4 5.1 5.3 5.9 Net Finance credit (6.2) (11.0) 7.8 8.2 53