IMI plc 2018 Preliminary Results

Transcription

1 IMI plc 2018 Preliminary Results 1

2 Agenda Highlights Lord Smith of Kelvin Chairman Financial review Daniel Shook Finance Director Operational review Mark Selway Chief Executive Q&A IMI Executive Team 2

3 Highlights Revenue 1,907m Up 5% 1 Segmental operating profit 266.3m Up 9% 1 Segmental operating margin 14.0% Up 20bps Operating cash flow 2 222m Up 2% Adjusted earnings per share 73.2p Up 12% Dividend per share 40.6p Up 3% Results ahead of expectations Continued progress on strategic initiatives Good operating cash flow and further pensions de-risking Integration of Bimba on track 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 Year to 31 December 2018 Year to 31 December 2017 Acquisitions Organic Adjusted growth (%) Organic growth (%) Adjusted Foreign exchange Disposals Organic Revenue IMI Critical Engineering % 7% 648 (6) (3) 639 IMI Precision Engineering 916 (88) % 6% 791 (10) IMI Hydronic Engineering % 0% 312 (3) Total 1,907 (88) 1,819 9% 5% 1,751 (19) (3) 1,729 Segmental operating profit IMI Critical Engineering % 6% 84.0 (1.3) IMI Precision Engineering (6.7) % 11% (1.5) IMI Hydronic Engineering % 6% 49.7 (0.5) Corporate costs (27.2) (27.2) (26.3) (26.3) Total (6.7) % 9% (3.3) Segmental operating profit margin (%) 14.0% 14.3% 13.8% 13.8% 5

6 Income statement m Segmental operating profit Restructuring costs - underlying (0.8) (1.7) Net interest expense (12.9) (14.3) Net pension finance (expense)/income (1.4) (0.8) Adjusted Profit Before Tax IFRS 9 adjustment (2.5) 2.4 Restructuring costs - adjusting item (12.4) (34.6) Impairment losses (2.0) - Loss on disposal of subsidiaries 0.6 (2.3) Gains on special pension events Gain on property disposal Indirect taxes on reorganisation (3.2) - Acquired intangible amortisation/other acquisition items (28.8) (19.5) Profit before tax Taxation (43.5) (35.6) Profit from continuing operations after tax Net interest expense of 13m lower following refinancing of legacy loans Restructuring costs of 12m primarily in Critical Engineering including full closure of Belgian manufacturing plant Continued de-risking of pension schemes realises 7m of gains 6

7 Operating cash flow m EBITDA (from continuing operations) Inventory 5 4 Debtors (8) (26) Creditors (47) 22 Working capital (50) - Capital expenditure (58) (70) Provisions and employee benefits 2 (10) Asset sales/other 8 10 Adjusted Operating cash flow Good operating cash flow Lower inventory and debtor days Creditors impacted by lower Critical advance payments Capital expenditure to depreciation and amortisation at 1.1x 7

8 Net cash flow m Adjusted Operating cash flow Adjusting items (9) (29) Statutory Operating cash flow Interest (13) (14) Derivatives (18) (20) Tax paid (41) (40) Cash generation Special pension contributions (10) (3) (Acquisitions)/disposals (123) - Dividend and minority (108) (108) Employee trust (purchases)/issues (5) (2) Net cash flow (105) 2 Adjusting items include 21m of restructuring spend, offset by 12m of property disposals Bimba acquired for 138m Net debt includes adverse currency impact of 38m Opening net debt (265) (283) Net debt disposed/acquired (15) - Foreign exchange (20) 16 Closing net debt (405) (265) 8

9 Balance sheet Dec Dec m Shareholders' funds Net debt Gearing 61% 44% EBITDA* Interest costs (excluding IAS19) Net debt of 405m following the Bimba acquisition Weighted average debt maturity of 6.2 years, 98% at fixed rates Net Debt / EBITDA at 1.3x provides further headroom Net debt / EBITDA* 1.3x 0.9x EBITDA* / interest 25x 20x * Before adjusting items 9

10 Pensions Dec Dec m Total Position: Liabilities (596) (1,080) Assets 544 1,002 Deficit (52) (78) UK Schemes: Liabilities (445) (917) Assets Surplus 28 2 Overseas Schemes: Liabilities (151) (163) Assets Deficit (80) (80) UK insurance buy-out of 409m of liabilities completed in November UK scheme remains in surplus Overseas deficit largely unchanged and mostly reflect unfunded schemes 10

11 Lease Accounting Changes (IFRS 16) from 1 January 2019 m 2018 Impact from IFRS 16 Notional Rent Proforma 2018 Income Statement Critical Engineering Precision Engineering Hydronic Engineering Corporate costs (27.2) 0.1 (3.3) (30.4) Segmental Operating Profit Adjusted EBITDA Statutory net financial expense (18.7) (2.1) (20.8) Statutory profit before tax (0.6) Balance Sheet Property, Plant and Equipment Net debt (404.5) (113.2) (517.7) Ratios Net debt/ebitda Segmental operating profit increases by 1.5m, offset by higher finance expense Minimal impact to profit before tax Internal rent recharges also removed as no longer required Minimal impact to financial ratios 11

12 Foreign exchange Change Average rates Euro % US dollar % Dec Dec Change Closing rates Euro % US dollar % Ready reckoner for translation impact on 2018 FY performance Sensitivity to +/- 1 cent move in: Revenue Operating Profit Impact on 2018: Revenue -1% Operating Profit -1% Euro +/- 7.0m +/- 0.9m US dollar +/- 2.7m +/- 0.5m Projection for FY2019*: Revenue 0% Operating Profit 0% *Compares the impact of projecting January average exchange rates (US$1.30 and 1.14) for the full year and applying to our 2018 results. 12

13 Operational Review Mark Selway - Chief Executive 13

14 IMI Critical Engineering 14

15 IMI Critical Engineering Operational review m 2018 FX Disp Organic 2017 Our performance in 2018 Revenue 682 (6) (3) Organic growth % 7% Revenue 682m Up 5% Order input m Flat Control valves Operating profit 88.3 (1.3) Operating margin % 13.0% 13.0% Revenue and profit growth in the year Revenue split by geography Operating profit 88.3m Operating margin % 13.0% Up 5% Flat Aftermarket 350m Oil & Gas 97m Up 11%* Down 24%* Butterfly valves Actuation Value Engineering delivered 180m new orders Aftermarket up 11% through focus on upgrades Year-end order book lower with margins slightly higher 5% 6% 54% 17% Western Europe North America Emerging Markets UK RoW 18% Number of employees 3,200 *Organic growth Power 64m Petrochemical 82m Nuclear Power 4m Other 55m Down 26%* Up 7%* Down 77%* Up 91%* Ball valves Slide valves FCC valves 15

16 IMI Critical Engineering Key markets Power Generation Oil & Gas Petrochemical Aftermarket Oil & Gas improving with continued uncertainty in Power 16

17 IMI Critical Engineering Optimising operations 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. 60m of annualised benefit, with 12m delivered in People decreased by 16% in the West People increased by 15% in the East Cumulative benefit m 60m Value Engineering accesses untapped markets VAVE (% Proportion of NC Orders) 100m 139m 80m (41%) 60m 40m 20m 8m (3%) 80m (25%) 180m (60%) Value Engineering secured 60% of New Construction orders and helped gain access to adjacent markets. 4. Lean improving competitive advantage 80% 70% 60% 50% 40% 30% 20% 10% 0% 24% 38% 56% 62% 70% 74% First % Divisional Lean score, up 50 points from first assessment. 17

18 IMI Critical Engineering Strategic checklist Revenue and profits growth despite continued difficult markets Value Engineering process secures 180m of new orders Rationalisation programme delivers 12m of benefits Average Lean score increased to 74% ERP now live in 14 Critical sites Extending restructuring to European Power activities 18

19 IMI Critical Engineering Outlook Based on current order book phasing and the comparatively large Petrochemical deliveries in early 2018, we expect first half organic revenues and profits to be lower when compared to Results for the full year are expected to reflect a more favourable second half phasing and the benefits from restructuring. 19

20 IMI Precision Engineering 20

21 IMI Precision Engineering Operational review m 2018 FX Acq Organic 2017 Our performance in 2018 Revenue 916 (10) Organic growth % 6% Operating profit (1.5) Operating margin % 16.7% 16.9% Growth across all regions and verticals Industrial Automation slowed in H2 Commercial Vehicle sales up 8% despite contract completions New product launches extend across all verticals Bimba integration progressing to plan 19% 6% 4% 33% 38% Western Europe North America Emerging Markets UK RoW Revenue 916m Operating profit 153.2m 16.7% Number of employees 6,100 Up 16% Up 15% Industrial Automation 525m Commercial Vehicle 196m 77m Life Sciences 77m Rail 41m Up 5%* 2%* Up 7%* 8%* Operating margin % Energy Revenue split by geography Down 20bps Down Up 16%* 1%* *Organic growth Up Up 6%* 12%* Up 15%* 14%* 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 21

22 IMI Precision Engineering Key sectors Industrial Automation Commercial Vehicle Energy Life Sciences Rail Improving markets and foundation building over recent years, translating into improved competitive dynamics and stronger revenues 22

23 IMI Precision Engineering Creating tangible value 1. Fixed and focused Digital marketing has become a competitive lever in Precision Engineering s toolbox. 2. New Product Development New product launches represent 12% of 2018 revenues. Vertical Organisation Structure 3. Low cost manufacturing plants New India plant opened on time and on budget, with zero LTAs. 4. Lean improving performance Visible contribution to operational performance. Mexico China Czech Republic India 80% 70% 60% 50% 40% 30% 20% 10% 0% 70% 75% 66% 59% 47% 33% First

24 Bimba integration Combined market potential Bimba contributed 88m of sales and 6.7m of operating profit to Precision s full year results in its maiden 11 months + Extends product range, no overlap Doubles presence in Industrial Automation in North America First year integration delivered to plan Seattle Detroit Boston Minneapolis Chicago Pittsburgh Farmington Concord Littleton Las Vegas Brookville Louisville We remain confident that the synergy benefits are in line with acquisition assumptions Tijuana Queretaro 24

25 IMI Precision Engineering Strategic checklist Delivering growth in revenues and profits and like for like margins Top line growth in all regions and verticals New Product launches provides a vitality rate of 12% New India plant up and running on time and on budget Successful advancement of Bimba integration plan 25

26 IMI Precision Engineering Outlook The industrial outlook has become more volatile with leading indicators pointing to continued but slower growth in the Industrial Automation and the Commercial Vehicle markets in Based on current market conditions, we expect first half organic revenues to be slightly higher, with broadly flat margins, when compared to the first half of The benefits of new product launches and operational improvements are expected to support improved results for the full year. 26

27 IMI Hydronic Engineering 27

28 IMI Hydronic Engineering Operational review m 2018 FX Organic 2017 Our performance in 2018 Revenue 309 (3) 312 Organic growth % 0% Operating profit 52.0 (0.5) Operating margin % 16.8% 15.9% Successful reset of business towards margin delivery Good growth in TA and Pneumatex products North America sales up 19% Revenue split by geography 3% 1% 19% Revenue 309m Operating profit 52.0m Up 5% Operating margin % 16.8% Down 1% Up 90bps Number of employees 1,800 TA 151m Heimeier 98m Pneumatex 43m Other 17m Up 4%* Down 6%* Up 5%* Down 6%* Manual balancing Control Valves & Actuators Thermostatic Controls 22% of sales from new products 7% Phil Clifton confirmed as MD 70% Western Europe North America Pressurisation & Water Quality Emerging Markets UK RoW *Organic growth 28

29 IMI Hydronic Engineering Key markets Hydronic Balancing Hydronic Conditioning Thermostatic Controls A reinvigorated business, increasing margins in the the second half 29

30 IMI Hydronic Engineering Decisive action 1. Commercial relationships rebalanced Prices adjusted to ensure commodity and cost increases were recovered. 2. Reducing complexity and lowering cost base 3m restructuring costs incurred which included the closure of loss-making service business in Sweden. Top 6 markets: 67% profit Sales ( m) Operating margin ( m) 3. Higher value New Product Development Focused on fewer, high value new product development opportunities. New products 22% of revenue. 4. Continual improvement with Lean Operations continue to improve, from a very strong base. 100% 80% 60% 40% 37% 59% 72% 76% 78% 78% 20% 0% First

31 IMI Hydronic Engineering Strategic checklist Delivered profit and margin improvement despite first half restructuring New products launched in the last four years accounting for 22% revenues Leading the way with Lean, divisional score at 78% ERP now provides proven standard for roll-out to balance of division New leadership delivered on margin commitment 31

32 IMI Hydronic Engineering Outlook Based on current market conditions organic revenue is expected to grow in the first half of 2019 with margins slightly improved when compared to the first half of last year. Results for the full year are expected to reflect the benefits of our 2018 restructuring and our normal second half bias. 32

33 Summary 2018 delivered improved revenues, profits, margins, cash and earnings per share Critical delivered good financial progress, despite tough market conditions Precision delivered growth in revenues, profits and like for like margins Hydronic successfully undertook the commercial, operational and restructuring actions necessary to deliver a significantly improved second half to the year 33

34 Group outlook In the first half of 2019 we expect organic revenues to be lower than the same period in 2018 due to the phasing of Critical Engineering s order book and slowing market demand in the Industrial Automation sector in Precision Engineering. Margins are expected to be broadly similar, supported by our operational initiatives and an improved performance from Hydronic Engineering. Results for the full year will also reflect the benefits of restructuring and our normal second-half bias. 34

35 Q&A 35

36 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 forwardlooking 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. 36