IMI plc 2015 Preliminary Results

Transcription

1 IMI plc 2015 Preliminary Results 26 February 2016

2 Agenda Operational review Financial review Strategic update Q&A Mark Selway Chief Executive Daniel Shook Finance Director Mark Selway IMI Executive Team

3 Highlights Revenue 1,557m Down 5% 1 Segmental operating profit 239.4m Down 15% 1 Segmental operating margins 15.4% Down 230bps Cash generation 2 192m Up 25% Adjusted earnings per share 62.2p Down 20% Dividend per share 38.4p Up 2% Steady progress made during the year Results slightly ahead of expectations Growth strategy embedded across the Group with initiatives delivering benefits Strong cash generation 1. On an organic constant currency basis (OCC) 2. Cash generated from the operations after interest and tax

4 Financial review Daniel Shook Finance Director

5 Segmental revenue continuing operations m 2015 Translation Acquisitions / disposals Organic 2014 Critical Engineering 631 (26) 29 (64) 692 Precision Engineering 662 (23) (1) (24) 710 Hydronic Engineering 264 (23) (2) Group 1,557 (72) 26 (83) 1,686 % Change on % +2% -5%

6 Segmental operating profit m 2015 Translation Acquisitions/ disposals Organic 2014 Critical Engineering 93.1 (5.4) (4.5) (28.4) Precision Engineering (3.4) 1.7 (19.1) Hydronic Engineering 51.8 (4.3) (0.1) (0.6) 56.8 Corporate Costs (23.2) 5.4 (28.6) Group (13.1) (2.9) (42.7) % change on % -1% -15% Operating margin 15.4% 17.7%

7 Income statement m Segmental operating profit Restructuring costs - not exceptional (2.1) (2.6) Loss on disposal of subsidiaries - not exceptional (0.4) - Net interest expense (18.4) (14.3) Net pension finance income/(charge) 0.2 (3.1) Profit before tax and exceptional items IAS39 adjustment 2.6 (2.8) Restructuring costs - exceptional (27.1) (8.6) Gains on special pension events Impairment charges - (40.8) (Losses)/gains on disposal of subsidiaries (8.4) 34.2 Acquisition/disposal costs - (1.8) Acquired intangible amortisation (32.2) (19.6) Profit before tax Taxation (39.4) (52.9) Profit from continuing operations after tax Profit from discontinued operations (net of tax) Total profit for the year Adjusted basic EPS from continuing operations 62.2p 78.0p

8 Operating cash flow summary m Continuing operations: EBITDA* Exceptional items (13) (4) Working capital 18 (51) Capital expenditure (71) (71) Losses/(gains) on non-exceptional disposals 1 - Asset sales/other 12 (3) Operating cash flow from continued operations Discontinued operations 1 (6) Operating cashflow total Interest and derivatives 5 22 Tax (36) (67) Cash generation * Before exceptional items

9 Net cash flow summary m Cash generation Special pension contributions (3) (87) Cash flow before corporate activity Corporate activity: (Acquisitions)/disposals (108) 725 Dividend to minority/others (4) (4) Shareholder activity: Return of cash - (620) Dividends (102) (98) Employee trust net issues/(purchases) 3 (29) Net cash flow (22) 41 Opening net debt (200) (199) Net cash disposed/debt acquired (7) (29) Foreign exchange revaluation (8) (13) Closing net debt (237) (200)

10 Balance sheet m Dec Dec Shareholders' funds Net debt Gearing 43% 39% Continuing businesses: EBITDA* Interest costs Net debt / EBITDA* EBITDA* / interest 15x 23x * Before exceptional items

11 Pensions m Dec 2015 Dec 2014 UK O'seas Total UK O'seas Total Assets 1, ,346 1, ,476 Liabilities (1,184) (158) (1,342) (1,264) (247) (1,511) Accounting surplus/(deficit) 89 (85) 4 60 (95) (35) Overall position now in surplus Gross liabilities reduced by 169m Completed scheme closures and buyouts in US and Switzerland UK surplus increased by 29m, cash contributions stopped UK investment portfolio shifted to over 80% in protection assets Continuing initiatives to reduce Group s exposures across all geographies

12 Foreign exchange sensitivities 2015 and Change Average rates Euro % US$ % Closing rates Euro % US$ % Impact on 2015: Revenue -4% Operating profit -4% Ready reckoner for translation impact of movement in FX rates on 2016 FY performance Sensitivity to +/- 1 cent move in: Revenue Operating Profit US $ +/- 2.1m +/- 0.4m Euro +/- 4.8m +/- 0.7m Projection for FY2016*: Revenue +3% Operating profit +4% *Compares impact on 2015 results of using average rates for January 2016 projected to the end of the year versus average exchange rates for 2015.

13 Operational review Mark Selway Chief Executive

14 Strategy execution timeline Year The hard work begins Year Increased investment Year Benefits starting to show Year Nearly firing on all cylinders Year Up to full speed Year Double operating profits Assess our markets and drivers for growth Benchmark performance and plan for improvement Organic Initiatives 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

15 IMI Critical Engineering Operational Review m 2015 FX Disp/Acq Organic 2014 Revenue 631 (26) 29 (64) 692 Organic growth % Operating profit 93.1 (5.4) (4.5) (28.4) Operating margin % order intake 619m down 13% organically Aftermarket down 3% 283m Oil & Gas down 3% 137m Fossil Power down 1% 108m Petrochemical down 42% 39m Nuclear down 76% 14m Other down 22% 38m Oil & Gas decline reflects large Kazakhstan order in 2014 Aftermarket decline in third quarter before recovery in Q4 Revenue by geography 5% 5% 15% Western Europe North America LNG aftermarket reflects new projects coming on line 22% Emerging Markets Year end order book of 438m with similar margins to % UK RoW

16 IMI Critical Engineering Focus and grow strategy 1. Capitalise on attractive growth in existing markets Our goal for the division is to deliver 5 year compound organic growth of 6 to 8% Strategic objective August 2014 Power Generation Oil & Gas Petrochemical + + Addressable Market = 7bn Strategic objective August 2014

17 IMI Critical Engineering Investing for Growth 2. Continued investment in worldclass manufacturing operations and new service facilities The investments we continue to make, while many others are retreating, will prove to be significant differentiators when the market recovers Czech Republic Austria Sweden Japan The new world-class manufacturing plant in Korea was a major success and that business now boasts the highest lean score of all the businesses in Critical Engineering The successful development of Critical s global ERP system is now being rolled out across all business units The new Obeya project management system is actively improving on time delivery, management of costs and smoothing of workload resulting in immediate and significant impact

18 IMI CCI Korea IMI CCI Brno IMI CCI RSM IMI STI IMI CCI Japan IMI InterAtiva IMI CCI SriCity IMI Fluid Kinetics IMI CCI Sweden IMI Remosa IMI Critical Eng Houston IMI Orton IMI Z&J Germany IMI Truflo Rona Belgium IMI Truflo Marine IMI SSF IMI Bopp & Reuther IMI plc Preliminary Results Presentation IMI Critical Engineering Lean Assessments Year end assessment score (average 56%) 2014 Year end (average 40%) 2015 Year end target (average 56%) First assessment 1H 2014 (average 26%) IMI CCI Korea IMI CCI Brno IMI CCI RSM IMI STI IMI CCI Japan IMI InterAtiva IMI CCI SriCity IMI Fluid Kinetics IMI CCI Sweden IMI Remosa IMI CE Houston IMI Orton IMI Z&J Germany IMI Truflo Rona Belgium IMI Truflo Marine IMI SSF IMI Bopp & Reuther 2015 Year end target % Year end score %

19 IMI Critical Engineering Restructuring 3. Focusing the business Invest to support growth markets This period is an opportunity to realign our footprint to the higher growth markets Disposals: Eley IMI Scott Z&J South Africa Nuclear Manufacturing consolidation TH Jansen into Z&J Germany, target completion in 4 th quarter

20 IMI Critical Engineering Focus and grow strategy 4. Acquisitions to support growth Invest to support growth markets We continue to target bolt-on acquisitions to expand our product range and our geographic footprint The Bopp & Reuther integration was undertaken with great attention and while the markets have been similarly difficult the company now looks and feels like an integral part of the IMI family. 19

21 IMI Critical Engineering Strategic checklist Investment in world-class manufacturing operations in Korea, Germany and China ERP successfully implemented in Czech Republic, Austria, Japan and Sweden Lean, Obeya and Value Engineering tools will provide foundations for sustainable competitive advantage Disposal of Eley, Scott and Z&J South Africa will increase focus on core business Consolidation of manufacturing footprint and alignment to higher growth markets Integration of Bopp & Reuther on track to deliver anticipated synergies

22 IMI Critical Engineering Outlook Outlook DRAFT 13 ( ) First half revenues and margins will reflect a similar percentage reduction as 2015 full year. Second half improvement in both revenues and margins when compared to first half

23 IMI Precision Engineering Operational Review m 2015 FX Acquisitions / Disposals Organic Revenue 662m down 3% organically Revenue 662 (23) (1) (24) 710 Organic growth % Operating profit (3.4) 1.7 (19.1) Operating margin % Industrial Automation down 5% 364m Commercial Vehicle down 1% 158m Oil & Gas down 10% 62m Life Sciences up 1% 50m Rail up 17% 28m Industrial Automation decline of 5% reflects 3% lower in Europe, 2% lower in North America and 19% lower in Asia Commercial Vehicle sales reduced 1% with Europe up 9%, USA second half down 18% and continuing weakness in Brazil Oil & Gas sales 10% lower Revenue by geography 7% 4% Western Europe North America 18% 43% Emerging Markets UK 28% RoW

24 IMI Precision Engineering Fix and focus strategy 1. Capitalise on significant potential for accelerated growth Our goal for the division is to improve our competitiveness and build a strong platform for future growth Strategic objective August 2014 Industrial Automation Commercial Vehicle Oil & Gas Life Sciences Addressable Market = 14bn Strategic objective August 2014

25 IMI Precision Engineering Fix and focus strategy 2. Fixing the basics to improve competitiveness and build a strong platform for the future The impact of the FIX8 programme has been huge and vital to the achievement of our five year ambitions Industrial Automation largest sector accounting for approximately 50% of the division s total revenues. Detailed region by region analysis completed and our plans aligned to areas where we see opportunity for growth Product rationalisation included the elimination of nearly 300,000 obsolete and duplicate products which helped unclog our IT systems and rationalise purchase materials New Product Development process introduced which, together with Value Engineering and competitor tear downs, will bring new products to market in a more accelerated way

26 IMI Norgren Seattle IMI Norgren Brno IMI FAS Switzerland IMI Norgren Australia IMI Norgren India IMI Norgren China IMI Norgren Singapore IMI EDC Warehouse Alpen IMI Watson Smith IMI Thompson Valves IMI Buschjost IMI Norgren Germany Fellbach IMI Norgren Germany Alpen IMI Norgren Queretaro IMI Norgren Fradley IMI Webber IMI Norgren Warehouse Louisville IMI Norgren Farmington IMI Norgren Detroit IMI Norgren Kloehn IMI Norgren Littleton IMI Norgren Brookville IMI Norgren Brazil IMI IMF IMI Norgren Denmark IMI Herion Systemtechnik IMI Norgren Belgium IMI plc Preliminary Results Presentation IMI Precision Engineering Lean Assessments Year end assessment score (average 59%) Year end target (average 60%) 2014 Year end (average 46%) First assessment 1H 2014 (average 32%) Year end target % Year end score %

27 IMI Precision Engineering Restructuring 0.9M Traded intra region 367.1M Traded intra region 5.1M Traded intra region 29.8M Traded Europe to Americas 9.6M Traded Asia to Europe 11.2M Traded Americas to Europe 30.4M Traded Europe to Asia 5.0M Traded Americas to Asia Disposal of non-core elements of NPSL while retaining core rail business, avoids a 1.7m loss Brazil operation brought to a cash and profit neutral position Swiss operation transferred to Czech Republic Project Janus will determine the division s geographic footprint and manufacturing strategy

28 IMI Precision Engineering Strategic Checklist Massimo Grassi, Divisional Managing Director Global Industrial Automation review Increase completed plant and opportunities for growth defined utilisation First ERP systems successfully launched in Brazil and USA New Product Development process introduced with projects underway across all divisions Average lean score increased to 59% Project Janus underway to determine the division s geographic footprint and manufacturing strategy

29 IMI Precision Engineering Outlook Outlook DRAFT 13 ( ) First half revenues will reflect a similar percentage reduction to the second half of 2015 with margins comparable to the second half of 2015 Restructuring activities expected to deliver improved margins in the second half of 2016

30 IMI Hydronic Engineering Operational Review 2015 Revenue m 2015 FX Disp Organic 2014 Revenue 264 (23) (2) Organic growth % +2-1 Operating profit 51.8 (4.3) (0.1) (0.6) 56.8 Operating margin % m Up 2% organically TA up 1% 117m Heimeier up 8% 82m Pneumatex up 2% 37m Other down 7% 28m 10% of 2015 revenues delivered from new products in last 2 years IMI Hydronic Poland is first IMI plant to achieve 85% world-class standard New actuator range extends potential to adjacent markets Over the counter strategy extends geographic cover in Europe Revenue by geography 6% 1% 21% 2% Western Europe North America 70% Emerging Markets UK RoW

31 IMI Hydronic Engineering Focus & Grow strategy 1. Capitalise on European leadership position Our goal for the division is to deliver 5 year compound organic growth of > 5% Strategic objective August 2014 Hydronic Balancing Hydronic Conditioning Thermostatic Controls Addressable Market = 2bn Strategic objective August 2014

32 IMI Hydronic Engineering New Product Development Eclipse TA-Slider ERP ERP Patented technology, reduces noise, quick installation Sales of 4m in 2015 Sales potential of 15m/year Time to develop: 9 months Patented, unique digitally configurable actuator 50% reduction in commissioning time Increased addressable market Time to develop: 12 months Hydronic Engineering s new JD Edwards computer system will be launched in 2016

33 IMI Hydronic Engineering Lean Assessments 2015 Year end assessment score (average 72%) 2014 Year end (average 59%) 2015 Year end target (average 69%) First assessment 1H 2014 (average 37%) IMI Hydronic Poland IMI Hydronic Slovenia IMI Hydronic Sweden IMI Hydronic Germany IMI Hydronic Switzerland IMI Hydronic North America IMI Hydronic Poland IMI Hydronic Slovenia IMI Hydronic Sweden IMI Hydronic Germany IMI Hydronic Switzerland IMI Hydronic North America Year end target % Year end score %

34 IMI Hydronic Engineering Strategic Checklist 29 new products launched, accounting for 10% revenues Revenue increased, despite market Increase softness plant utilisation New Slider product range provides adjacency and increases available market to 3 billion Leading the way with Lean: first site achieves world-class standard ERP remains on time and on budget for implementation in the first half of 2016

35 IMI Hydronic Engineering Outlook Outlook DRAFT 13 ( ) New product launches expected to result in good revenue growth in 2016 Margins expected to show normal second half improvement

36 Outlook First half revenues to reflect a similar percentage reduction to full year of 2015 First half margins around 250 basis points lower than the first half of 2015 Improved revenues and margins in the second half of the year

37 Engineering GREAT the IMI Way Engineering GREAT the IMI Way 36

38 Q&A The Executive Team

39 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 forwardlooking 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.

40