IMI plc 2018 Interim Results

Transcription

1 IMI plc 2018 Interim Results 1

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

3 Highlights Revenue 915m Up 6% 1 Segmental operating profit 120.0m Up 13% 1 Segmental operating margin 13.1% Up 60 bps Operating cash flow 2 68m Down 21% Adjusted earnings per share 32.9p Up 16% Dividend per share 14.6p Up 3% Organic revenue 6% higher Organic operating profit 13% higher Statutory operating profit 7% higher Adjusted basic EPS increased 16% Proposed 3% increase in interim dividend Bimba integration proceeding well 1. On an organic constant currency basis (OCC) 2. Excluding adjusting items 3

4 Financial review Daniel Shook Finance Director 4

5 Organic revenue and operating profit m Adjusted 6 months to 30 June months to 30 June 2017 Adjusted Organic Acquisitions/ Foreign Acquisitions/ Organic growth growth Adjusted Disposals exchange Disposals (%) (%) Organic Revenue IMI Critical Engineering % 6% 308 (6) (2) 300 IMI Precision Engineering 449 (40) % 8% 388 (10) 378 IMI Hydronic Engineering % -1% 150 (1) 149 Total 915 (40) 875 8% 6% 846 (17) (2) 827 Segmental operating profit IMI Critical Engineering % 7% 34.4 (1.1) IMI Precision Engineering 75.0 (4.2) % 19% 61.2 (1.8) 59.4 IMI Hydronic Engineering % -3% 23.9 (1.0) 22.9 Corporate costs (13.2) (13.2) (13.4) (13.4) Total (4.2) % 13% (3.9) Segmental operating profit margin (%) 13.1% 13.2% 12.5% 12.4% 5

6 Income statement m Adjusted segmental operating profit Restructuring costs (0.3) (1.3) Net interest expense (5.9) (6.6) Net pension finance expense (0.7) (0.7) Adjusted Profit Before Tax IFRS 9 adjustment (2.6) 3.8 Restructuring costs - adjusting item (4.5) (13.8) Gain on disposal of subsidiaries Gains on special pension events Acquired intangible amortisation/other (17.5) (9.6) Profit before tax Taxation (18.7) (14.8) Total profit for the period Net interest expense lower Restructuring costs of 5m lower by 9m Continued de-risking of pension schemes realises 4m of gains Acquired intangible amortisation increases due to Bimba 6

7 Operating cash flow m EBITDA (from continuing operations) Inventory (38) (21) Debtors (15) (13) Creditors (7) 14 Working capital (60) (20) Capital expenditure (23) (27) Provisions and employee benefits (1) (1) Asset sales/other 6 5 Adjusted Operating cash flow Increased inventory to support Precision Engineering market growth Creditor movement reflects 15m lower advanced payments in Critical Engineering Capital expenditure of 23m represents 0.9x depreciation and amortisation 7

8 Net cash flow m Adjusted Operating cash flow Adjusting items (13) (13) Statutory Operating cash flow Interest (6) (6) Derivatives (3) (24) Tax paid (19) (20) Cash generation Acquisitions (138) - Dividend (68) (67) Employee trust (purchases)/issues (3) 1 Special pension contributions/other (4) (2) Net cash flow (186) (45) Adjusting items include 9m of restructuring spend, primarily in Critical Engineering Bimba acquired debt free for 138m Net debt includes adverse currency translation impact of 9m Opening net debt (265) (283) Cash/ acquired 1 - Foreign exchange (9) 9 Closing net debt (459) (318) 8

9 Balance sheet Jun Dec Jun m Shareholders' funds Net debt Gearing 74% 44% 55% EBITDA* Interest costs (excluding IAS19) Net debt / EBITDA* 1.5x 0.9x 1.1x EBITDA* / interest 25x 20x 20x Net debt of 459m includes 138m acquisition of Bimba and 68m dividend payment Weighted average debt maturity of 4.9 years, 90% at fixed rates Net Debt / EBITDA expected to reduce to around 1.2x by year end * Before adjusting items 9

10 Operational Review Mark Selway - Chief Executive 10

11 IMI Critical Engineering 11

12 IMI Critical Engineering Operational review m H Value Engineering delivers 78m new orders Order book margins 3.1% higher than 30 June 2017 Restructuring benefits of 6m Order input to significantly increase in H2 FX Disp Organic H Revenue 319 (6) (2) Organic growth % +6% Operating profit 36.0 (1.1) Operating margin % Revenue split by geography 5% 6% 60% 12% Western Europe North America Emerging Markets UK RoW 17% Performance in H Revenue 319m Operating profit 36.0m Operating margin % 11.3% Number of employees 3,300 *Organic basis Up 5% Up 10bps Input by sector Order input H m Up 4% Down 12%* Aftermarket 164m Oil & Gas 54m Power 36m Petrochemical 17m Nuclear Power 3m Other 23m Up 3%* Down 10%* Down 14%* Down 66%* Down 74%* Up 23%* Control valves Butterfly valves Actuation Ball valves Slide valves FCC valves 12

13 IMI Critical Engineering Creating tangible value 1. Geographic footprint for growth Repositioning has placed the business at the centre of future markets. 2. Rationalisation delivering tangible benefits Rationalisation has generated c. 58m of annualised benefit, with 6m delivered in 2018 H1. People decreased by 16% in the West People increased by 15% in the East Cumulative benefit m 58.4m H1 3. Value Engineering now fully integrated From tactical tool to ingrained discipline contributing c.50% of New Construction wins. 4. Lean improving competitive advantage 73% Divisional Lean score, up 49 points from first assessment. 100m 80m 60m 40m 20m VAVE (% Proportion of NC Orders) 78m 69m (60%) (38%) 40m (25%) H H H % 70% 60% 50% 40% 30% 20% 10% 0% 73% 68% 62% 50% 24% First H H H H

14 IMI Critical Engineering Outlook In the second half, organic revenues are expected to show modest improvement when compared to the second half of The benefits of restructuring and phasing of the order backlog will deliver improved profits and margins in the second half of the year. 14

15 IMI Precision Engineering 15

16 IMI Precision Engineering Operational review Industrial Automation up 6%, good progress in North America & Asia m H Commercial Vehicle related sales up 9%, good market globally Strong H1 performance in Energy, Life Sciences and Rail Bimba integration on-track; planning in final stages FX Organic Acq. H Revenue 449 (10) Organic growth % +8% Operating profit 75.0 (1.8) Operating margin % % 6% 32% 4% 39% Western Europe North America Emerging Markets UK RoW Performance in H Revenue 449m Operating profit 75.0m *Organic basis Up 16% Up 23% Number of employees 6,000 Sales by sector Industrial Automation 257m Commercial Vehicle 98m 36m Life Sciences 37m Rail 21m Up 6%* Up 9%* Operating margin % Energy Revenue split by geography 16.7% Up 90bps Up 13%* Up 12%* Up 19%* Pneumatic valves Fluid control valves Pinch Valves Pneumatic actuators Electric actuators Air preparation Vacuum products Pneumatic fittings Product Photo Product Photo Product Photo Product Photo Product Photo 16

17 IMI Precision Engineering Creating tangible value 1. Growth across all major verticals Healthy growth across all markets. 2. New Product Development 33 new products in pipeline with process well established. Rail Life Sciences 21m 37m Up 19% Up 12% 2018 H1 Sales & Marketing lead Verticals lead Engineering lead Sales & Marketing lead Energy 36m Up 13% Commercial Vehicles 98m Up 9% Industrial Automation 257m Up 6% 3. Low cost manufacturing plants Low cost plants also give local access. New India Plant opens 2018 H2. 4. Lean improving competitive advantage Making further progress towards world-class, with some plants already there. Mexico Czech Republic India China 80% 70% 60% 50% 40% 30% 20% 10% 0% 72% 67% 62% 53% 33% First H H H H

18 Bimba integration On track Bimba contributed 40m of sales and 4m of operating profit to Precision s half year results in its maiden five months + Extends product range, no overlap Doubles presence in Industrial Automation in North America We remain confident that the synergy benefits are in line with acquisition assumptions Minneapolis Seattle Littleton Concord, CA Tijuana, Mex Queretaro, Mex Chicago Las Vegas Brookville Massachusetts Pennsylvania 18

19 IMI Precision Engineering Outlook On an organic basis, revenues, profits and margins are expected to improve when compared with the second half of Full year revenue growth is expected to be good although slightly lower than that achieved in the first half, reflecting the comparatively stronger second half of last year. Full year margins are expected to be slightly ahead of last year. 19

20 IMI Hydronic Engineering 20

21 IMI Hydronic Engineering Operational review m H Repositioning of the business progressing well Q2 revenues substantially recovered 4% decline in Q1 22% of revenues delivered by new products On-track for a marked improvement in H2 FX Organic H Revenue 147 (1) (2) 150 Organic growth % -1% Operating profit 22.2 (1.0) (0.7) 23.9 Operating margin % 15.1% 15.9% Revenue split by geography 3% 1% 7% 18% 71% Western Europe North America Performance in H Revenue 147m Operating profit Down 7% 22.2m Operating margin % Down 80bps 15.1% Down 2% Number of employees 1,800 Sales by business unit TA 73m Heimeier 46m Pneumatex 19m Other 9m Up 3%* Down 7%* Up 4%* Down 6%* Manual balancing Control Valves & Actuators Thermostatic Controls Pressurization & Water Quality Emerging Markets UK RoW *Organic basis 21

22 IMI Hydronic Engineering Creating tangible value 1. Economic recoveries Input cost inflation to be substantially recovered to protect margins. 2. Reducing complexity Renewed focus on profitability reveals further opportunities to sharpen focus. USD/lb Copper price $ % Top 6 markets: 67% profit Sales ( m) Operating margin ( m) Source: Bloomberg as at 20 July Copper 200-Day moving average 3. New Product Development New Product Development continues to be an important driver. 4. Lean improving competitive advantage Operations continue to improve, from a very strong base. 100% 80% 60% 40% 37% 65% 73% 77% 79% 20% TA-Modulator & TA Slider Eclipse & Halo Compresso & Zeparo 0% First H H H H

23 IMI Hydronic Engineering Outlook In the second half, on an organic basis, we expect our self-help initiatives to deliver significantly improved profits from modestly higher revenues, when compared to the same period in

24 IMI plc summary Group revenues, profits and margins were ahead of 2017 H1. Critical Engineering delivered good financial progress, despite continued tough markets. Value Engineering contributing hugely to competitiveness and win rate. Precision Engineering enjoying good markets and delivered growth in revenue, profit and margins. Bimba contribution and opportunity on track. Hydronic Engineering successfully undertook commercial, operational and restructuring actions necessary to deliver significant improvement in 2018 H2. 24

25 Group outlook The trading outlook for the Group remains positive and in the second half of 2018 we expect organic revenue and profits to show good improvement compared to the same period in The improved results will be supported by market growth in Precision Engineering, rationalisation benefits in Critical Engineering and a stronger performance from Hydronic Engineering. Based on current market conditions, we anticipate full year 2018 results will be slightly ahead of current market expectations. 25

26 Q&A 26

27 Appendices 27

28 Pensions Jun Dec Jun m Total Position: Liabilities (1,012) (1,080) (1,136) Assets 962 1,002 1,075 Deficit (50) (78) (61) UK scheme remains in surplus while we continue to de-risk the position Proactive management of schemes in Switzerland UK Schemes: Liabilities (856) (917) (966) Assets Surplus Overseas Schemes: Liabilities (156) (163) (170) Assets Deficit (78) (79) (79) 28

29 Foreign exchange Average rates H H Change Euro % US dollar % Closing rates June 2018 Dec 2017 Change Euro % US dollar % Ready reckoner for translation impact of movement in FX rates on 2018 FY performance Sensitivity to +/- 1 cent move in: Revenue Operating Profit Euro +/- 7.3m +/- 1.1m US dollar +/- 3.3m +/- 0.6m Year over year impact Revenue -2% Operating Profit -4% Projection for FY2018*: Revenue -2% Operating Profit -2% *Compares the impact of projecting 16 July 2018 average exchange rates (US$1.32 and 1.13) for the full year and applying to our 2017 results. 29

30 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.