imi plc 2017 interim results · 2017-07-28 · imi plc interim results presentation net cash flow...

IMI plc Interim Results Presentation

IMI plc 2017 Interim Results 28 July 2017



Agenda

► Results overview Mark Selway – Chief Executive

► Financial review Daniel Shook – Finance Director

► Operational review Mark Selway

► Q&A IMI Executive Team

1


Highlights

► Results slightly ahead of expectations► Further good progress against 5 year strategic plan► Re-organisation plans proceeding to time and budget► Strong cash flow and continuing improvement in working capital

1. On an organic constant currency basis (OCC)2. Excluding exceptional items

Revenue

£846m Flat 1

Segmental operating profit

£106.1m Down 3%1

Segmental operating margins

12.5% Down 10bps

Operating cash flow2

£86m Up 1%

Adjusted earnings per share

28.4p Up 16%

Dividend per share

14.2p Up 1.4%

2

Financial reviewDaniel Shook – Finance Director

3


Organic revenue and operating profit

£m

RevenueIMI Critical Engineering 308 8% -3% 285 33 318 IMI Precision Engineering 388 14% 2% 341 38 379 IMI Hydronic Engineering 150 13% 2% 133 14 147 Total 846 11% 0% 759 85 844

Segmental operating profitIMI Critical Engineering 34.4 12% -4% 30.7 5.1 35.8 IMI Precision Engineering 61.2 7% -3% 57.1 5.9 63.0 IMI Hydronic Engineering 23.9 12% 0% 21.4 2.6 24.0 Corporate costs (13.4) (13.6) (13.6)Total 106.1 11% -3% 95.6 13.6 109.2

Segmental operating profit margin (%) 12.5% 12.6% 12.9%

6 months to 30 June 2017 6 months to 30 June 2016As

reportedReported

growth (%)Organic

growth (%)As

reportedForeign

exchange Organic

4


Income statement

► Net interest expense of £6.6m lower following repayment of US$75m of private placement in July

► Exceptional restructuring costs of £13.8m with programmes underway across all divisions

► Gain on special pension events of £10.7m following UK buy-out, curtailment of Swiss scheme and settlement of US scheme

H1 H1£m 2017 2016

Segmental operating profit 106.1 95.6Restructuring costs - non exceptional (1.3) (1.3)Net interest expense (6.6) (8.8)Net pension finance (expense) / income (0.7) 0.6Profit before tax and exceptional items 97.5 86.1IAS39 adjustment 3.8 1.0Restructuring costs - exceptional (13.8) (9.7)Gains on special pension events 10.7 2.5Acquired intangible amortisation (9.6) (9.8)Profit before tax 88.6 70.1Taxation (14.8) (16.4)Total profit for the year 73.8 53.7

5


Operating cash flow

► EBITDA up 12% on 2016

► Capital expenditure to depreciation and amortisation at 1.1x

► Operating cash flow up 1% against the same period last year

6


Net cash flow

► Adverse foreign exchange movements resulted in first half cash out flow of £23m on derivatives

► Net debt favourable currency translation impact of £9m

H1 H1£m 2017 2016Operating cash flow - pre exceptional items 85.6 84.5 Exceptional items (12.5) (10.9)Operating cash flow - post exceptional items 73.1 73.6 Interest and derivatives (29.6) (38.8)Tax (20.2) (13.4)Cash generation 23.3 21.4 Special pension contributions - (1.9)Dividend and minority (69.2) (68.5)Employee trust issues/(purchases) 1.1 (8.0)Net cash flow (44.8) (57.0)

Opening net debt (282.6) (236.9)Foreign exchange 9.3 (39.9)Closing net debt (318.1) (333.8)

7


Balance sheet

► Net debt of £318m includes £12m adverse currency movements

► Weighted average debt maturity of 3.9 years, 97% at fixed rates

► Net debt/EBITDA at 1.1x. Well within our covenants

Jun Dec Jun£m 2017 2016 2016

Shareholders' funds 581 543 542 Net debt 318 283 334 Gearing 55% 52% 62%

EBITDA* 129 273 115 Interest costs (excluding IAS19) 6.6 17.3 8.8

Net debt / EBITDA* 1.1 1.0 1.3 EBITDA* / interest 20x 16x 13x

* Before exceptional items

8


Pensions

► UK insurance buy-out of £430m of liabilities completed in January resulting in £4m net gain

► UK scheme remains surplus despite adverse actuarial movements

► Significant US scheme settled in the first half with gain of £2m and restructuring in Switzerland resulted in £5m curtailment gain

9


Foreign exchangeH1

2017H1

2016 Change

Average ratesEuro 1.16 1.28 -9%US dollar 1.26 1.43 -12%

Jun2017

Dec2016 Change

Closing ratesEuro 1.14 1.17 -3%US dollar 1.30 1.23 +6%

Year over year impact: Revenue +11%Operating Profit +12%

Projection for FY2017*: Revenue +6%Operating Profit +6%

Sensitivity to +/- 1 cent move in: Revenue Operating Profit

Euro +/- £6.7m +/- £0.9m

US dollar +/- £2.7m +/- £0.5m

Ready reckoner for translation impact of movement in FX rates on 2017 FY performance

*Compares impact on 2017 results of using average rates for the first two weeks in July and projecting to the end of the year versus average exchange rates for 2016.

10

Operational reviewMark Selway – Chief Executive

11


Strategy execution timeline

✓

Year 0:The hard work begins

2014

✓

Year 1:Increased investment

2015

✓

Year 2:Benefits starting to show

2016

Year 3:Nearly firing on all cylinders

2017

Year 4:Up to full speed

2018

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

12


2017 H1 order intake

£350m up 11% organically

Aftermarket up 9% £164m

Oil & Gas down 5% £60m

Fossil Power down 5% £44m

Petrochemical up 74% £50m

Nuclear up 191% £11m

Other down 2% £21m

Revenue by geography

12%

18%

59%

3%8% Western Europe

North America

Emerging Markets

UK

RoW

£m 2017 H1 FX Disp Organic 2016 H1

Revenue 308 33 - (10) 285

Organic growth % -3%

Operating profit 34.4 5.1 - (1.4) 30.7

Operating margin % 11.2% 10.8%


► Order input increase 11% with Aftermarket up 9%

► Value Engineering contributes almost £70m to order wins

► Half year order book £552m with 1.7% margin decline when compared to H1 2016

► Restructuring benefits of £10.8m outruns expectations

IMI Critical EngineeringOperational Review

Highlights

13


IMI Critical EngineeringFocus and grow strategy


Addressable Market = £6bn

“Our goal for the division is to deliver results which outrun all of our peers.”

We are focused on 3 principal sectors

Power Generation Oil & Gas Petrochemical

14


IMI Critical EngineeringInvesting for Growth


Ongoing restructuring delivering improved financials and market aligned footprint

Positioning for market recoveryRestructuring actions deliver more than £10m of benefit in the first half of 2017. Our focus shifts increasingly to recovery and growth.

“Clear direction and targeted investment through turbulent markets will allow a stronger response as conditions improve.”

ERP roll out continues on track On time and on budget roll-outs in Singapore and Malaysia with two further plants planned in H2.

Value Engineering continuesto gain momentumNew projects won increased to almost £70m in the first half of 2017.

Roy Twite

Czech Republic

Austria

India

Sweden

Korea

Japan

IFS

15

SingaporeMalaysia


IMI Critical EngineeringLean Assessments


16

First assessment(average 27%)

2015 H1assessment score(average 49%)



2017 H2target(average 72%)


Outlook

► In the second half of the year, organic revenue is still expected to be weaker than the second half of last year.

► Full year margins are expected to show a modest improvement on 2016 – and a significant improvement on the first half of this year – due to the benefits of the division’s reorganisation activities and phasing of the order backlog.

DRAFT 13 (22.2.16)IMI Critical EngineeringOutlook


17



44%

25%

20%

6%5% Western Europe

North America

Emerging Markets

UK

RoW

2017 H1 Revenue

£388m up 2% organically

Industrial Automation up 3% £215m

Commercial Vehicle up 1% £93m

Energy down 4% £32m

Life Sciences down 1% £31m

Rail up 14% £17m

► Industrial Automation grows 3%► Commercial Vehicle sales increase despite contract

completions in Europe► Major new platform products launched at Hannover

Messe► Project Janus and supply chain improvements now fully

resourced


IMI Precision EngineeringOperational Review


Revenue 388 38 - 9 341

Organic growth % 2%

Operating profit 61.2 5.9 (4.2)* 2.4 57.1


Highlights

18

* Property gain in 2016


IMI Precision EngineeringFix and focus strategy


“Our goal for the division is to improve our competitiveness and build a strong platform for future growth.”

Capitalise on significant potential for accelerated growth and recovery in many of our core markets


IndustrialAutomation

CommercialVehicle

Energy Life Sciences

19


IMI Precision EngineeringFix and focus strategy


“Fundamental self-help initiatives continue whilst market conditions show early signs of recovery.”

Fixing the basics is improving our competitiveness and building a stronger platform for the future

Massimo Grassi

Commercial VehicleNorth American and European markets outrun expectations in H1 2017.

Industrial AutomationNew vertical structure and supply chain improvements successfully launched in Europe and USA.

New Product DevelopmentFirst IA products launched at Hannover Messe with significant pipeline still under development.

Project JanusSupply chain leadership in place in USA and Europe and utilisation increases to 66%.

£29.8m TradedEurope to Americas

£9.6m TradedAsia to Europe

£11.2m TradedAmericas to Europe

£30.4m TradedEurope to Asia

£5.0m TradedAmericas to Asia

£0.9m Traded intra region



20


IMI Precision EngineeringLean Assessments


21







OutlookDRAFT 13 (22.2.16)

► In the second half, on a constant currency basis, organic revenues and margins are expected to improve when compared with the second half of last year reflecting the benefits of ongoing cost reduction and improved market conditions.

► Full year revenue is expected to reflect similar growth to the first half of the year with margins consistent with 2016.

IMI Precision EngineeringOutlook


22


2017 H1 Revenue

£150m Up 2% organically

IMI TA up 1% £72m

IMI Heimeier up 7% £50m

IMI Pneumatex down 6% £19m

Other down 3% £9m


73%

7%

17% 2%1% Western Europe

North America

Emerging Markets

UK

RoW

► Growth in Europe and Asia► 22% of first half sales from new products► Over-the-counter orders increase underpinned by lower cost

products► On time, on budget launch of J D Edwards in Slovenia


IMI Hydronic EngineeringOperational Review


Revenue 150 14 - 3 133

Organic growth % 2%

Operating profit 23.9 2.6 - (0.1) 21.4


Highlights

23


IMI Hydronic EngineeringFocus & Grow strategy


“Our goal for the division is to deliver 5 year compound organic growth of > 5%.”Capitalise on European leadership

position and expand sales in key strategic markets


Hydronic Balancing Hydronic Conditioning Thermostatic Controls

24


IMI Hydronic EngineeringNew Product Development


Divisional IT solutionSuccessful roll-out in Slovenia and sales companies in the first half of 2017 provides the foundation for 12 sales offices in H2.

Great new productsFirst half sales include 22% from products delivered in the past three and a half years.

Over-the-counter salesLower cost and technically superior products help increase over-the-counter orders in H1 2017.

ERP

Supporting customers with new products, partnerships and platforms

“ Great new products are driving business competitiveness and underpinning the division’s

success. When combined with leading IT and operational capabilities, the future looks very

bright.” Peter Spencer

25

IMI Hydronic EngineeringLean Assessments


26







OutlookDRAFT 13 (22.2.16)

► In the second half, on a constant currency basis, we expect revenue growth to show some improvement when compared to the first half of the year.

► Margins are expected to improve when compared to the second half of last year, despite the increased costs associated with our investments for growth.

IMI Hydronic EngineeringOutlook


27


IMI plc strategic achievements scorecard

✓ Continued to deliver on clearly defined roadmap for development of IMIAll businesses made good progress in plans to adopt best practice Excellent progress in Lean across all three divisionsThe underinvestment in IT continues to be addressed Critical’s reorganisation delivers £11m first half benefitPrecision makes excellent progress with Project JanusHydronic’s new products deliver 22% of first half revenues

✓✓✓✓✓✓

28


Outlook

► In the remainder of the year, organic revenue is still expected to be below last year, principally driven by order phasing in Critical Engineering. However, second half margins will show a modest improvement compared with the same period in 2016, supported by both rationalisation savings and improved market conditions in Precision Engineering.

► Based on current market conditions, we expect full year 2017 results will be modestly above current market expectations.

29


Engineering GREAT the IMI WayIMI plc Interim Results Presentation

Engineering GREAT the IMI Way

Q&AThe Executive Team


imi plc 2017 interim results · 2017-07-28 · imi plc interim results presentation net cash flow...

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