IMI plc 2017 Preliminary Results

Transcription

1 IMI plc 2017 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 1,751m Flat% 1 Segmental operating profit 240.9m Down 1% 1 Segmental operating margin 13.8% Flat Operating cash flow 2 218m Down 11% Adjusted earnings per share 65.3p Up 9% Dividend per share 39.4p Up 2% 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 3

4 Financial review Daniel Shook Finance Director 4

5 Organic revenue and operating profit m Adjusted Year to 31 December 2017 Year to 31 December 2016 Reported Organic Disposals Organic Foreign growth growth Adjusted exchange Disposals Organic (%) (%) Revenue IMI Critical Engineering 648 (3) 645 0% -6% (5) 686 IMI Precision Engineering % 5% IMI Hydronic Engineering % 1% Total 1,751 (3) 1,748 6% 0% 1, (5) 1,744 Segmental operating profit IMI Critical Engineering % -5% IMI Precision Engineering % 7% IMI Hydronic Engineering % -9% Corporate costs (26.3) (26.3) (24.5) (24.5) Total % -1% Segmental operating profit margin (%) 13.8% 13.8% 13.8% 14.0% 5

6 Income statement m Segmental operating profit 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 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 Acquired intangible amortisation and acquisition costs (19.5) (20.5) Profit before tax Taxation (35.6) (32.1) Profit from continuing operations after tax Profit from discontinued operations (net of tax) Total profit for the year 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 6

7 Operating cash flow m EBITDA (from continuing operations) 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 Adjusted 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 7

8 Net cash flow m Adjusted Operating cash flow Adjusting items (29) (25) Statutory Operating cash flow Tax paid (40) (32) Interest (14) (17) Derivatives (20) (44) Cash generation Special pension contributions (3) (2) (Acquisitions)/disposals - - Dividend and minority (108) (110) Employee trust (purchases)/issues (2) (7) Net cash flow 2 9 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 Opening net debt (283) (237) Net debt disposed/ acquired - - Foreign exchange 16 (55) Closing net debt (265) (283) 8

9 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 9

10 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 10

11 Foreign exchange Ready reckoner for translation impact of movement in FX rates on 2017 FY performance 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. 11

12 Operational Review Mark Selway - Chief Executive 12

13 Strategy execution timeline Nearly firing on all cylinders 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 world-class performance evident in results All divisions in attractive, high growth markets Supported by value enhancing acquisitions 13

14 IMI Critical Engineering 14

15 IMI Critical Engineering Operational Review m 2017 FX Disp Organic 2016 Revenue (2) (41) 651 Organic growth % -6% Our performance in 2017 Revenue 648m Flat Order input m Up 2%* Control valves Operating profit (0.1) (4.0) 81.8 Operating margin % 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 Revenue split by geography 3% 8% 58% 13% Western Europe North America Emerging Markets UK RoW 18% Operating profit 84m Operating margin % Up 40bps 13.0% Number of employees 3,500 *Organic growth Up 3% Aftermarket 321m Oil & Gas 128m Power 88m Petrochemical 73m Nuclear Power 16m Other 32m Up 1%* Down 11%* Down 11%* Up 53%* Up 101%* Up 5%* Butterfly valves Actuation Ball valves Slide valves FCC valves 15

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

17 IMI Critical Engineering Investing for growth The difference 2013 to Value Engineering workshops held. 140 million of new orders generated as a result in

18 IMI Critical Engineering Restructure programme Consolidated or sold 13 plants People decreased by 16% in the West People increased by 15% in the East 2014 to 2017 IMI CCI Korea 82% Lean Score Total cost ( m) Total annualised benefit ( m) IMI CCI SriCity 75% Lean Score IMI Critical Engineering China 72% Lean Score 18

19 IMI Critical Engineering Lean assessment 70% Lean score up 46 percentage points from first assessment Lean Percentage (%) First

20 IMI Critical Engineering Strategic 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 20

21 IMI Critical Engineering Outlook 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 21

22 IMI Precision Engineering 22

23 IMI Precision Engineering Operational Review m 2017 FX Organic 2016 Our performance in 2017 Revenue Organic growth % +5% Revenue 791m Up 12% Industrial Automation 440m Up 5%* Pneumatic valves Product Photo 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 Operating profit Operating margin % Successful launch of first new platform products in 2017 Restructuring benefits ahead of plan 21% 6% 26% 4% 43% Western Europe North America Emerging Markets UK RoW Operating profit 133.5m 16.9% Number of employees 5,300 *Organic growth Up 13% Commercial Vehicle 183m 67m Life Sciences 64m Rail 37m Up 7%* Operating margin % Energy Revenue split by geography Up 20bps Down 1%* Up 6%* Up 15%* Fluid control valves Pinch Valves Pneumatic actuators Electric actuators Air preparation Vacuum products Pneumatic fittings Product Photo Product Photo Product Photo Product Photo 23

24 IMI Precision Engineering Key sectors Industrial Automation Commercial Vehicle Energy Life Sciences Rail Largest verticals showing favourable trends Vertical Organisation Structure Americas: Sales growth +5% Europe: Sales growth +4% APAC: Sales growth +14% 24

25 IMI Precision Engineering Fix. Focus. Vertical Organisation Structure Leadership in digital marketing New Product Development 25

26 IMI Precision Engineering An exciting pipeline of great new products Process Management Fast-Track Batting Average New product processes embedded across IMI Precision Engineering 33 projects in the process Significant 5 year sales potential 26

27 IMI Precision Engineering Fix. Focus. New Indian Factory Project Janus Simplification of global footprint Utilisation in the year increases to c.70% Delivered 7.4m of benefit in

28 IMI Precision Engineering Lean assessment 70% Lean score up 37 percentage points from first assessment Lean Percentage (%) First

29 IMI Precision Engineering & Bimba Bimba acquisition 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 Seattle Littleton Concord, CA Minneapolis Tijuana, MEX Querétaro MEX Combined Americas IA Market Position Chicago Las Vegas Brookville Massachusetts Pennsylvania UK Fradley Bristol, Leeds & Poole Geneva, CH Alpen, GER Fellbach GER Bad Oeynhausen, GER Merklingen, GER Brno, CZ Shanghai, CN Noida, IND Singapore Sao Paulo, BR Melbourne, Aus 29

30 IMI Precision Engineering Strategic 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 30

31 IMI Precision Engineering Outlook 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 31

32 IMI Hydronic Engineering 32

33 IMI Hydronic Engineering Operational Review m 2017 FX Organic 2016 Our performance in 2017 Revenue Organic growth % +1% Operating profit (4.9) 51.9 Operating margin % Higher revenue in core European markets Revenue split by geography 2% 1% 23% of revenue delivered from new products 19% Lean score improves to 78% 6% Phil Clifton appointed as Interim Managing Director 72% Revenue 312m Operating profit Down 4% 49.7m Operating margin % Down 2% 15.9% Up 8% Number of employees 1,800 TA 147m Heimeier 104m Pneumatex 41m Other 20m Up 2%* Up 2%* Down 3%* Down 2%* Manual balancing Control Valves & Actuators Thermostatic Controls Western Europe North America Pressurization & Water Quality Emerging Markets UK RoW *Organic growth 33

34 IMI Hydronic Engineering Key markets Hydronic Balancing Hydronic Conditioning Thermostatic Controls Modest growth in key markets 34

35 IMI Hydronic Engineering Fix. Focus. World-class NPD 13 new products launched in the year. A total of 73m, or 23% of the division s 2017 sales, from new products JD Edwards ERP system Now live in two manufacturing businesses and 13 sales offices 35

36 IMI Hydronic Engineering Lean assessment 78% Lean score up 41 percentage points from first assessment Lean Percentage (%) First

37 IMI Hydronic Engineering Strategic 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 37

38 IMI Hydronic Engineering Outlook 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 38

39 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 39

40 Q&A 40

41 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.