Segmental operating profit 227.7m Down 17% 1. Reported earnings per share 59.8p Down 4%

Transcription

1 Highlights Revenue 1,649m Down 5% 1 Segmental operating profit 227.7m Down 17% 1 Segmental operating margins 13.8% Down 160bps Operating cash flow 2 246m Up 6% Reported earnings per share 59.8p Down 4% Dividend per share 38.7p Up 1% Results in-line with expectations Strategic progress continues at pace Strong operating cash flow in the year Headwinds continue in a number of markets 1. On an organic constant currency basis (OCC) 2. Excluding exceptional items 2

2 Financial review

3 Organic revenue and operating profit m Year to 31 December 2016 Year to 31 December 2015 As reported Reported growth (%) Organic growth (%) As reported Foreign exchange Disposals Organic Revenue IMI Critical Engineering 651 3% -7% (6) 702 IMI Precision Engineering 708 7% -3% (1) 733 IMI Hydronic Engineering % -1% Total 1,649 6% -5% 1, (7) 1,729 Segmental operating profit IMI Critical Engineering % -24% IMI Precision Engineering % -10% IMI Hydronic Engineering % -10% Corporate costs (24.5) (23.2) (23.2) Total % -17% Segmental operating profit margin (%) 13.8% 15.4% 15.8% 4

4 Income statement m Segmental operating profit Restructuring costs - non exceptional (3.5) (2.1) Loss on disposal of subsidiaries - non exceptional - (0.4) Net interest expense (17.3) (18.4) Net pension finance income Profit before tax and exceptional items IAS39 adjustment (1.2) 2.6 Restructuring costs - exceptional (18.8) (27.1) Impairment losses (5.0) - Loss on disposal of subsidiaries - (8.4) Gains on special pension events Acquired intangible amortisation (20.5) (32.2) Profit before tax Taxation (32.1) (39.4) Profit from continuing operations after tax Profit from discontinued operations (net of tax) Total profit for the year Net interest expense of 17m lower following repayment of US$75m of private placement debt in July Exceptional restructuring costs of 19m primarily in Critical Engineering within Europe Acquired intangible amortisation of 21m reduced following the amortisation of the Bopp & Reuther acquired order book in

5 Operating cash flow m EBITDA (from continuing operations) Inventory 18 (4) Debtors 7 29 Creditors 5 (7) Working capital Operating cash flow up 6% on 2015 Favourable working capital movements versus 2015 Capital expenditure to depreciation and amortisation at 1.5x Capital expenditure (71) (71) Provisions and employee benefits (2) (4) Loss on non-exceptional disposals - 1 Asset sales/other Operating cash flow - pre exceptional items

6 Net cash flow m Operating cash flow - pre exceptional items Exceptional items (25) (9) Operating cash flow - post exceptional items Tax paid (32) (36) Interest and derivatives (61) 5 Cash generation Special pension contributions (2) (3) (Acquisitions)/disposals - (108) Dividend and minority (110) (107) Employee trust (purchases)/issues (7) 3 Net cash flow 9 (23) Exceptional spend of 25m due to restructuring Interest and derivatives adversely impacted by foreign exchange Net employee benefit trust share purchases of 7m Net debt adverse currency translation impact of 55m Opening net debt (237) (200) Net debt disposed/ acquired - (6) Foreign exchange (55) (8) Closing net debt (283) (237) 7

7 Balance sheet Dec Dec m Shareholders' funds Net debt Gearing 52% 43% EBITDA* Interest costs (excluding IAS19) Net debt of 283m includes 97m adverse currency movements Weighted average debt maturity of 4.3 years, 95% at fixed rates Net debt/ebitda at 1.0x, providing ample headroom Net debt / EBITDA* 1.0x 0.9x EBITDA* / interest 16x 15x * Before exceptional items 8

8 Pensions Dec Dec m Total Position: Liabilities (1,590) (1,342) Assets 1,510 1,346 (Deficit)/surplus (80) 4 UK Schemes: Liabilities (1,400) (1,184) Assets 1,424 1,273 Surplus Overseas Schemes: Liabilities (190) (158) Assets Deficit (104) (85) Good progress managing our exposures across all geographies UK scheme remains in surplus despite adverse actuarial movements Buy-ins transacted in H1 and H2 which further de-risked the UK schemes Buy-out of c. 430m of UK liabilities, representing c.5,000 pensioners, completed in January

9 Foreign exchange Average rates Change Euro % US dollar % Closing rates Dec 2016 Dec 2015 Change Euro % US dollar % Ready reckoner for translation impact of movement in FX rates on 2016 FY performance Sensitivity to +/- 1 cent move in: Revenue Operating Profit Euro +/- 6.0m +/- 0.7m US dollar +/- 2.5m +/- 0.4m Impact on 2016: Revenue +11% Operating Profit +13% Projection for FY2017*: Revenue +6% Operating Profit +7% *Compares the impact of projecting the exchange rates as at 6 February (US$1.25 and 1.16) for the full year and applying to our 2016 results 10

10 Operational & strategic review

11 Strategy execution timeline Year 0: The hard work begins Year 1: Increased investment Year 2: Benefits starting to show Year 3: Nearly firing on all cylinders Year 4: Up to full speed 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 worldclass performance evident in results All divisions in attractive, high growth markets Supported by value enhancing acquisitions 12

12 IMI Critical Engineering Operational review 2016 order intake m 2016 FX Disposals Organic 2015 Revenue (6) (51) 631 Organic growth % -7 Operating profit (25.8) 93.1 Operating margin % m down 11% organically Aftermarket down 6% 299m Oil & Gas down 13% 135m Fossil Power down 23% 94m Petrochemical up 2% 45m Other down 16% 41m Year-end order book of 486m at similar margins to yearend 2015 Aftermarket decline of 6%, with flat second half Revenue by geography 4% 7% Western Europe 16% North America Fossil Power reflects reduced activities globally 22% Emerging Markets Oil & Gas decline reflects lower LNG activity 51% UK RoW 13

13 IMI Critical Engineering Focus and grow strategy We are focused on 3 principal sectors Our goal for the division is to deliver results that outrun all of our peers Roy Twite Power Generation Oil & Gas Petrochemical Addressable Market = 7bn 14

14 IMI Critical Engineering Investing for growth Continued investment in worldclass manufacturing operations and new service facilities Continued investment to realign footprint, reduce costs and build competitive advantage Austria Korea Japan IFS Sweden India Czech Republic Improving our footprint New Korean facility in 2015 Consolidation of China footprint in 2016 Upgrade to Z&J facilities, Germany The successful development of Critical Engineering s global ERP system is now being rolled out across all business units and included Korea, India, Japan and Sweden in 2016 Value Engineering helped secure 80m of orders, delivering good margins and significant cost benefits to our customers 15

15 IMI Critical Engineering Lean assessments 16

16 IMI Critical Engineering Restructuring Improve competitiveness by repositioning our footprint and lowering costs On-time delivery of restructuring projects delivers 12m of cost benefits in 2016 Recent disposals: Eley IMI Scott Z&J South Africa Disposals 2016: Italian Service business Nuclear manufacturing consolidation: Closure of IMI Components Closure and transfer of Canadian operations Closure and transfer of Swiss operations Footprint rationalisation: TH Jansen into Z&J Germany completed on-time and on budget Consolidation of three sites into new world-class facility in China 17

17 IMI Critical Engineering Strategic checklist Value Engineering process helps secure 80m of new orders Rationalisation programme delivers 12m of benefits Further ERP implementation in Korea, India, Japan and Sweden Average lean score increased to 62% Manufacturing footprint being re-aligned to higher growth markets 18

18 IMI Critical Engineering Outlook Outlook DRAFT 13 ( ) Based on the current order book and market outlook, we expect first half organic revenues to reflect a similar percentage reduction to the first half of 2016 with margins broadly similar to the first half of last year Results for the full year are expected to include a second half bias reflecting the timing of restructuring benefits and normal trading seasonality 19

19 IMI Precision Engineering Operational review 2016 revenue m 2016 FX Disposals Organic 2015 Revenue (1) (25) 662 Organic growth % -3 Operating profit (12.9) Operating margin % m down 3% organically Industrial Automation down 1% 396m Commercial Vehicle down 9% 161m Energy down 7% 63m Life Sciences down 1% 57m Rail up 3% 31m Industrial Automation reduces 1% with growth in North America offset by reductions in Europe and Asia Commercial Vehicle sales reflect 22% decline in North America Energy sales impacted by lower Oil & Gas activity Cautious optimism for Industrial Automation in 2017 Revenue by geography 7% 4% Western Europe North America 19% 44% Emerging Markets UK 26% RoW 20

20 IMI Precision Engineering Fix and focus strategy 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 Massimo Grassi Industrial Automation Commercial Vehicle Energy Life Sciences Addressable Market = 14bn 21

21 IMI Precision Engineering Fix and focus strategy Fixing the basics to improve competitiveness and build a strong platform for the future In 2016 the division delivered fundamental improvements which promise to transform our competitive dynamics Industrial Automation Market definition provides focus on opportunities for growth New product development 2017 launch of industry-leading range of platform products represents the first significant investment for more than 10 years Organisation structure US and European operations have been reorganised around key industry verticals to target specific market opportunities and build stronger customer relationships 22

22 IMI Precision Engineering Lean assessments 23

23 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 Project Janus Phase 1 Insourcing to improve utilisation New Americas Executive team Unified European structure Leveraging low cost operations Re-organising to sector verticals Americas region complete Improved customer focus Early benefits being delivered Europe structure complete Q Layer of management now removed Project Janus Phase 2 Customer approvals required Longer payback projects Market forces could impact returns Major Commercial Vehicle opportunity could impact plant options 24

24 IMI Precision Engineering Strategic checklist New Product Development provides first new platform products for 10 years Restructuring into verticals in Americas Increase to plant enhance customer focus utilisation Reorganisation of European regions in a single, unified structure Successful ERP roll out continues Average lean score increased to 66% Project Janus phase 1 now underway 25

25 IMI Precision Engineering Outlook Outlook DRAFT 13 ( ) Based on current market conditions, we expect first half organic revenues to be slightly lower than the first half of 2016 Excluding the 4m benefit from 2016 property disposals, margins will be comparable to the first half of last year While markets remain uncertain, the benefits of further restructuring activities and new product launches are expected to deliver broadly equivalent margins for the full year 26

26 IMI Hydronic Engineering Operational review 2016 revenue m 2016 FX Organic 2015 Revenue (4) 264 Organic growth % -1 Operating profit (5.5) 51.8 Operating margin % m Down 1% organically TA down 3% 135m Heimeier up 4% 96m Pneumatex down 2% 40m Other down 10% 19m Higher revenue in core European markets despite warmer weather in Q4 19% of revenues delivered from new products Over-the-counter strategy extends geographic cover in Europe Divisional lean score improves to 76% Revenue by geography 6% 1% 19% 2% Western Europe North America 72% Emerging Markets UK RoW 27

27 IMI Hydronic Engineering Focus and grow strategy Capitalise on European leadership position Our goal for the division is to deliver 5 year compound organic growth of > 5% Peter Spencer Hydronic Balancing Hydronic Conditioning Thermostatic Controls Addressable Market = 2.5bn 28

28 IMI Hydronic Engineering New Product Development Supporting customers with new products, partnerships and platforms Great new products and investments in infrastructure underpin our potential for the future ERP Great new products 13 new products launched in m revenue from products in last three years TA-Slider increases addressable market 0.5bn Over-the-counter sales 2 new European agreements New products provide access to new markets and partners New branding and point of sales marketing Divisional IT solution JD Edwards system launched in Poland and Switzerland Division-wide roll out in 2017 and 2018 New divisional website goes live 29

29 IMI Hydronic Engineering Lean assessments 30

30 IMI Hydronic Engineering Strategic checklist 43 new products launched in last three years, accounting for 19% revenues Successes in over-the-counter strategy Increase expands plant geographic reach utilisation Refurbishment of German foundry reduces scrap to world-class standards Leading the way with lean, divisional score increased to 76% ERP successfully launched in two sites with the balance of division on track for implementation over the next 18 months 31

31 IMI Hydronic Engineering Outlook Outlook DRAFT 13 ( ) While the European construction markets are forecast to remain subdued, the success of new products and over-the-counter sales are expected to result in organic revenue growth in the year, albeit weighted to the second half Operating margins are also expected to show their normal second half improvement and will include the benefits of restructuring 32

32 Outlook Based on current market conditions, we expect organic revenues in the first half of 2017 to reflect a similar percentage reduction to the first half of 2016, with margins slightly lower than the first half of last year Results for the full year are expected to include a second half bias reflecting the timing of restructuring benefits and normal trading seasonality 33

33 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. 34

34 Engineering GREAT the IMI Way 33