imi plc 2017 preliminary results reports/presentations...5 imi plc 2017 preliminary results £m...
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IMI plc2017 Preliminary Results
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IMI plc 2017 Preliminary Results
Agenda
► Highlights Lord Smith of Kelvin – Chairman
► Financial review Daniel Shook – Finance Director
► Operational review Mark Selway – Chief Executive
► Q&A IMI Executive Team
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IMI plc 2017 Preliminary Results
Highlights
► Results in-line with expectations► Good progress on strategic initiatives ► Good operating cash flow and further pensions de-risking► Acquisition of Bimba
1. On an organic constant currency basis (OCC)2. Excluding adjusting items
Revenue
£1,751m Flat% 1
Segmental operating profit
£240.9m Down 1%1
Segmental operating margin
13.8% Flat
Operating cash flow2
£218m Down 11%
Adjusted earnings per share
65.3p Up 9%
Dividend per share
39.4p Up 2%
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Financial reviewDaniel Shook – Finance Director
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IMI plc 2017 Preliminary Results
£m
RevenueIMI Critical Engineering 648 (3) 645 0% -6% 651 40 (5) 686 IMI Precision Engineering 791 - 791 12% 5% 708 42 - 750 IMI Hydronic Engineering 312 - 312 8% 1% 290 18 - 308 Total 1,751 (3) 1,748 6% 0% 1,649 100 (5) 1,744
Segmental operating profitIMI Critical Engineering 84.0 0.6 84.6 3% -5% 81.8 6.3 0.5 88.6 IMI Precision Engineering 133.5 - 133.5 13% 7% 118.5 6.7 - 125.2 IMI Hydronic Engineering 49.7 - 49.7 -4% -9% 51.9 2.7 - 54.6 Corporate costs (26.3) (26.3) (24.5) (24.5)Total 240.9 0.6 241.5 6% -1% 227.7 15.7 0.5 243.9
Segmental operating profit margin (%) 13.8% 13.8% 13.8% 14.0%
Year to 31 December 2017 Year to 31 December 2016
AdjustedReported
growth (%)
Organic growth
(%)Adjusted Foreign
exchange Disposals OrganicDisposals Organic
Organic revenue and operating profit
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IMI plc 2017 Preliminary Results
Income statement
► Net interest expense of £14m lower following repayment of US$75m of private placement debt in July 2016
► Restructuring costs of £35m primarily in Critical Engineering including closure of Belgian manufacturing plant
► Continued de-risking of pension schemes realises £11m of gains
£m 2017 2016
Segmental operating profit 240.9 227.7 Restructuring costs - adjusted (1.7) (3.5)Net interest expense (14.3) (17.3)Net pension finance (expense)/income (0.8) 1.1 Adjusted Profit Before Tax 224.1 208.0 IAS39 adjustment 2.4 (1.2)Restructuring costs - adjusting item (34.6) (18.8)Impairment losses - (5.0)Loss on disposal of subsidiaries (2.3) -Gains on special pension events 10.8 2.8 Acquired intangible amortisation and acquisition costs (19.5) (20.5)Profit before tax 180.9 165.3 Taxation (35.6) (32.1)Profit from continuing operations after tax 145.3 133.2 Profit from discontinued operations (net of tax) 16.9 -Total profit for the year 162.2 133.2
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IMI plc 2017 Preliminary Results
Operating cash flow
► Good operating cash flow► Continued improved inventory
management in Critical Engineering and Precision Engineering
► Capital expenditure to depreciation and amortisation at 1.5x
£m 2017 2016
EBITDA (from continuing operations) 288 273
Inventory 4 18 Debtors (26) 7 Creditors 22 5 Working capital - 30
Capital expenditure (70) (71)Provisions and employee benefits (10) (2)Asset sales/other 10 16 Adjusted Operating cash flow 218 246
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IMI plc 2017 Preliminary Results
Net cash flow
► Adjusting items include £25m of restructuring spend, primarily in Critical Engineering
► Interest and derivatives positively impacted by Sterling strengthening in H2
► Net employee benefit trust share purchases of £2m
► Net debt adverse currency translation impact of £4m
£m 2017 2016Adjusted Operating cash flow 218 246 Adjusting items (29) (25)Statutory Operating cash flow 189 221 Tax paid (40) (32)Interest (14) (17)Derivatives (20) (44)Cash generation 115 128 Special pension contributions (3) (2)(Acquisitions)/disposals - -Dividend and minority (108) (110)Employee trust (purchases)/issues (2) (7)Net cash flow 2 9
Opening net debt (283) (237)Net debt disposed/ acquired - -Foreign exchange 16 (55)Closing net debt (265) (283)
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IMI plc 2017 Preliminary Results
Balance sheet
► Lower net debt of £265m despite adverse currency movement
► Weighted average debt maturity of 3.5 years, 98% at fixed rates
► Reduced Net Debt / EBITDA before Bimba, 0.9x
► Pro Forma Net Debt / EBITDA including Bimba, 1.3x
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IMI plc 2017 Preliminary Results
Pensions
► UK insurance buy-out of £429m of liabilities completed in January 2017 with further UK buy-out planned
► UK scheme remains in surplus while we continue to de-risk the position
► Proactive management of schemes in the US and Switzerland
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IMI plc 2017 Preliminary Results
Foreign exchange
Sensitivity to +/- 1 cent move in: Revenue Operating Profit
Euro +/- £6.8m +/- £0.9m
US dollar +/- £3.3m +/- £0.6m
*Compares the impact of projecting January average exchange rates (US$1.38 and €1.13) for the full year and applying to our 2017 results.
Ready reckoner for translation impact of movement in FX rates on 2017 FY performance
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Operational ReviewMark Selway - Chief Executive
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IMI plc 2017 Preliminary Results
Strategy execution timeline“Nearly firing on all cylinders”
✓
Year 0:The hard work begins
2014
✓
Year 1:Increased investment
2015
✓
Year 2:Benefits starting to show
2016
Year 3:Nearly firing on all cylinders
2017
Year 4:Up to full speed
2018
Ambition:Double operating profits
✓
► Assess our markets and drivers for growth
► Benchmark performance and plan for improvement
► Invest in products and capital for growth
► Foundations established and benchmark improvements evident
► Sorting the basics in Precision Engineering complexities and structure
► Accelerated growth evident in results
► Working capital benefits visible in results
► Emerging markets ready for local full technology supply
► Growth outruns peers in every division
► Benchmark performance nearing world-class standards
► Precision supply chain and capacity issues resolved
► Ambitions for growth fully realised
► Achievement of world-class performance evident in results
► All divisions in attractive, high growth markets
Supported by value enhancing acquisitions
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IMI plc 2017 Preliminary ResultsIMI plc 2017 Preliminary Results
IMI Critical Engineering
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IMI plc 2017 Preliminary Results
13%
18%
58%
3%8%
Western EuropeNorth AmericaEmerging MarketsUKRoW
IMI Critical EngineeringOperational Review
Revenue
£648mOperating profit
£84mOperating margin %
13.0%Number of employees
3,500
Controlvalves
Butterflyvalves
Actuation
Ballvalves
Slidevalves
FCCvalves
Order input 2017
£658mAftermarket
£321mOil & Gas
£128mPower
£88mPetrochemical
£73mNuclear Power
£16mOther
£32m
Our performance in 2017
Revenue split by geography
► Year-end order book of £515m and margins in-line with the end of 2016
► Value Engineering delivers £139m new orders
► Aftermarket up 1%, with second half good growth in LNG
► Order intake increases 2% with strong Petrochemical bookings
► Improved margins supported by £23m cost-cutting benefits
Up 2%*
Up 1%*
Down 11%*
Up 53%*
Up 101%*
Up 5%*
Flat
Up 3%
£m 2017 FX Disp Organic 2016
Revenue 648 40 (2) (41) 651
Organic growth % -6%
Operating profit 84.0 6.3 (0.1) (4.0) 81.8
Operating margin % 13.0 12.6
Down 11%*
Up 40bps
*Organic growth
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IMI plc 2017 Preliminary Results
IMI Critical EngineeringKey sectors
Oil & Gas improving with continued uncertainty in Power
Power Generation Oil & Gas Petrochemical
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IMI plc 2017 Preliminary Results
IMI Critical EngineeringInvesting for growth
The difference 2013 to 2018 100 Value Engineering workshops held.
£140 million of new orders generated as a
result in 2017.
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IMI plc 2017 Preliminary Results
IMI Critical EngineeringRestructure programme
Consolidated or sold 13 plants
People increased by 15%in the East
People decreased by 16%in the West
IMI CCI SriCity75% Lean Score
IMI Critical Engineering China 72% Lean Score
IMI CCI Korea 82% Lean Score2014 to 2017
Total cost (£m) Total annualisedbenefit (£m)
66.8 55.3
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IMI plc 2017 Preliminary Results
IMI Critical EngineeringLean assessment
24
38
5662
70
01020304050607080
First 2014 2015 2016 2017
Lean Percentage (%)
70% Lean score up 46 percentage points from first assessment
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IMI plc 2017 Preliminary Results
IMI Critical EngineeringStrategic checklist
Value Engineering process secures £139m of new orders
Rationalisation programme delivers £23m of benefits
Average Lean score increased to 70%
ERP now live in 10 Critical sites
Agreement to close loss making Belgian site
✓✓✓✓✓
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IMI plc 2017 Preliminary Results
IMI Critical EngineeringOutlook
► Based on the current order book and market outlook, we expect first half organic revenues to reflect a slight improvement with broadly flat margins when compared to 2017
► Results for the full year are expected to include the benefits of restructuring and the normal second half bias
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IMI plc 2017 Preliminary ResultsIMI plc 2017 Preliminary Results
IMI Precision Engineering
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IMI plc 2017 Preliminary Results
43%
26%
21%
6%
4%
Western EuropeNorth AmericaEmerging MarketsUKRoW *Organic growth
Industrial Automation
£440mCommercial Vehicle
£183mEnergy
£67mLife Sciences
£64mRail
£37m
Pneumatic valves
Fluid control valves
Pneumatic actuators
Air preparation
Product Photo
Product Photo
Product Photo
Product Photo
Product PhotoPneumatic fittings
Electric actuators
Pinch Valves
Vacuum products
IMI Precision EngineeringOperational Review
► Industrial Automation increases 5%, with 3% growth in North America, 5% in Europe, and 15% in Asia
► Commercial Vehicle sales up 7% despite £13m contract completions
► Successful launch of first new platform products in 2017
► Restructuring benefits ahead of plan
Up 5%*
Up 7%*
Up 6%*
Up 15%*
Revenue
£791mOperating profit
£133.5mOperating margin %
16.9%Number of employees
5,300
Up 12%
Up 13%
Our performance in 2017£m 2017 FX Organic 2016
Revenue 791 42 41 708
Organic growth % +5%
Operating profit 133.5 6.7 8.3 118.5
Operating margin % 16.9 16.7
Revenue split by geography Down 1%*Up 20bps
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IMI plc 2017 Preliminary Results
IMI Precision EngineeringKey sectors
Americas: Sales growth +5%
Europe:Sales growth +4%
APAC:Sales growth +14%
VerticalOrganisationStructure
IndustrialAutomation
CommercialVehicle
Energy Life Sciences Rail
Largest verticals showing favourable trends
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IMI plc 2017 Preliminary Results
IMI Precision EngineeringFix. Focus.
New Product Development
Leadership indigital marketing
VerticalOrganisationStructure
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IMI plc 2017 Preliminary Results
IMI Precision EngineeringAn exciting pipeline of great new products
► New product processes embedded across IMI Precision Engineering
► 33 projects in the process
► Significant 5 year sales potential
Fast-Track Batting AverageManagementProcess
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IMI plc 2017 Preliminary Results
IMI Precision EngineeringFix. Focus.
Project JanusNew Indian Factory
► Simplification of global footprint
► Utilisation in the year increases to c.70%
► Delivered £7.4m of benefit in 2017
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IMI plc 2017 Preliminary Results
IMI Precision EngineeringLean assessment
33
4759
66 70
01020304050607080
First 2014 2015 2016 2017
Lean Percentage (%)
70% Lean score up 37 percentage points from first assessment
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IMI plc 2017 Preliminary Results
IMI Precision Engineering & BimbaBimba acquisition
Noida, IND
Querétaro MEX
Alpen, GERFellbach GERBad Oeynhausen, GERMerklingen, GER
Shanghai, CN
Sao Paulo, BR
LittletonBrookville
UKFradley Bristol, Leeds & Poole
Las Vegas
SeattleGeneva, CH
Brno, CZ
Singapore
Melbourne, Aus
ChicagoMinneapolis
Concord, CA
Tijuana, MEX
PennsylvaniaMassachusetts
Doubles Industrial Automation presence in North America
Opens access to market leading distributor network
Enhances product portfolio Creates cross-selling
opportunities across North American markets
Application of Lean will enhance performance and grow margins
Combined Americas IA Market Position
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IMI plc 2017 Preliminary Results
IMI Precision EngineeringStrategic checklist
New Product Development delivers first new platform products for 10 years
Restructured Americas into sector facing verticals with improved customer focus
Successful ERP implementation in US operations
Average Lean score increased to 70%
Project Janus delivers ahead of plan
Acquisition of Bimba
✓✓✓✓
✓✓
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IMI plc 2017 Preliminary Results
IMI Precision EngineeringOutlook
► Based on current market conditions, we expect first half organic revenues and profits to show good improvement when compared to the first half of 2017
► The benefits of new product launches and improved market conditions are expected to deliver improved results for the full year
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IMI plc 2017 Preliminary ResultsIMI plc 2017 Preliminary Results
IMI Hydronic Engineering
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IMI plc 2017 Preliminary Results
► Higher revenue in core European markets
► 23% of revenue delivered from new products
► Lean score improves to 78%
► Phil Clifton appointed as Interim Managing Director 72%
6%
19%
2% 1%
Western EuropeNorth AmericaEmerging MarketsUKRoW *Organic growth
IMI Hydronic EngineeringOperational Review
Revenue
£312mOperating profit
£49.7mOperating margin %
15.9%Number of employees
1,800
TA
£147mHeimeier
£104mPneumatex
£41mOther
£20m
Up 2%*
Up 2%*
Down 3%*
Down 2%*
Up 8%
Down 4%
£m 2017 FX Organic 2016
Revenue 312 18 4 290
Organic growth % +1%
Operating profit 49.7 2.7 (4.9) 51.9
Operating margin % 15.9 17.9
Manualbalancing
ControlValves &Actuators
ThermostaticControls
Pressurization& Water Quality
Our performance in 2017
Revenue split by geography
Down 2%
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IMI plc 2017 Preliminary Results
IMI Hydronic EngineeringKey markets
Hydronic Balancing Hydronic Conditioning Thermostatic Controls
Modest growth in key markets
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IMI plc 2017 Preliminary Results
IMI Hydronic EngineeringFix. Focus.
World-class NPD
JD Edwards ERP system
13 new products launched in the year. A total of £73m, or 23% of the division’s 2017 sales, from new products
Now live in two manufacturing businesses and 13 sales offices
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IMI plc 2017 Preliminary Results
IMI Hydronic EngineeringLean assessment
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5972 76 78
0
20
40
60
80
100
First 2014 2015 2016 2017
Lean Percentage (%)
78% Lean score up 41 percentage points from first assessment
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IMI plc 2017 Preliminary Results
IMI Hydronic EngineeringStrategic checklist
56 new products launched in last four years, accounting for 23% revenues
Leading the way with Lean, divisional score increased to 78%
ERP now provides proven standard for roll-out to balance of division
New leadership to review performance and opportunities for growth
✓✓✓✓
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IMI plc 2017 Preliminary Results
IMI Hydronic EngineeringOutlook
► In the European construction markets the modest level of growth experienced in 2017 is forecast to continue
► Organic revenue is expected to grow in the first half of 2018 with margins broadly similar to the first half of last year
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IMI plc 2017 Preliminary Results
Group outlook► In the first half of 2018 we expect organic revenues to be higher than the
same period in 2017 with margins reflecting a modest improvement, supported by both rationalisation savings and improved market conditions in IMI Precision Engineering
► Results for the full year will also reflect our normal second-half bias
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Q&A
This document may contain forward-looking statements that may or may not prove accurate. For example, statements regarding expected revenue growth and operating margins, market trends and our product pipeline are forward-looking statements. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a number of risks and uncertainties that are inherent in any forward-looking statement which could cause actual results to differ materially from those currently anticipated. Any forward-looking statement is made in good faith and based on information available to IMI plc as of the date of the statement. All written or oral forward-looking statements attributable to IMI plc are qualified by this caution. IMI plc does not undertake any obligation to update or revise any forward-looking statement to reflect any change in circumstances or in IMI plc’s expectations.