Imi Plc · LSE:IMI
Imi — FY2009 Earnings Presentation
52 slides from Imi's earnings presentation, Mar 4, 2010
Slide 1: 2009 Preliminary Results
2009 Preliminary Results 4 March 2010 1
Slide 2: Agenda
Agenda • Introduction Norman Askew • 2009 business review Martin Lamb Roy Twite • 2009 financial review Douglas Hurt • Outlook for 2010 Martin Lamb • Question and answers 2
Slide 3: Martin Lamb
Martin Lamb 3
Slide 4: Results overview
Results overview • Revenue £1,792m -6% - Organic revenue decline -16% • Segmental operating profit £234.2m -12% - Organic operating profit decline -22% - Profits drop through 19% - Segmental operating margin 13.1% • Adjusted earnings per share* 45.8p -15% • Net borrowings £172m -42% - Cash conversio
Slide 5: Sales and order momentum
Sales and order momentum £m Q1 Q2 Q3 Q4 Year Sales 2008 490 571 539 530 2,130 2009 429 449 437 470 1,785 % Change (Organic) (12%) (21%) (19%) (11%) (16%) Orders 2008 587 605 532 450 2,174 2009 473 424 414 463 1,774 % Change (Organic) (19%) (30%) (22%) +3% (18%) All at 2009 average year rates: US $1.
Slide 6: Margin development
Margin development Segmental operating profit margin: H1 H2 2009 2008 Severe Service 19.0% 20.6% 19.8% 18.4% Fluid Power 2.9% 9.6% 6.3% 13.7% Indoor Climate 17.0% 24.3% 20.8% 16.1% Beverage Dispense 6.8% 7.4% 7.1% 9.0% Merchandising 8.5% 14.0% 11.1% 10.3% Group 10.9% 15.3% 13.1% 14.0% • H2 Group mar
Slide 7: Return on invested capital
Return on invested capital* IMI Group ROIC* 16.0% 14.2% 12.0% 12.2% 12.0% 10.8% 11.0% 11.0% 9.3% 8.0% WACC = 8% 7.0% 6.8% 4.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 * After restructuring costs and pre Severe Service investigation costs in 2007 & 2008 7
Slide 8: Management priorities in 2009
Management priorities in 2009 1. Simple and effective game plan with clear priorities - Resource allocation - Capacity alignment - Product margins - Cash optimisation - Business integrity / IMI Way 2. Early and comprehensive execution with short interval management 8
Slide 9: Resource allocation
Resource allocation • Aftermarket/refurbishment - CCI aftermarket sales +18% - Indoor climate refurbishment +20% • Legislation (energy/environmental) - Heimeier TRV sales in Germany +6% - £55m single nuclear order in CCI - Energy efficient coolers in beverage dispense • Resilient end markets - Life
Slide 10: Capacity alignment
Capacity alignment • Headcount reduction of c.2,600 since June 2008 • Continued use of short time working arrangements • Several smaller sites closed • Good progress made on longer term restructuring - Severe Service expansion in Czech Republic / India - New Norgren facility opened in Shanghai • Rat
Slide 11: Product margins
Product margins “Winning the inflation equation” • Defended and increased selling prices - Overall average increase of c.1.5% - Differentiated products / customer value • Material cost savings delivered - Metals cost reductions - Low cost sourcing initiatives - Supplier rationalisation / value engin
Slide 12: Cash optimisation
Cash optimisation • Cash conversion of 139% (2008: 98%) • Working capital improvements - Inventory reductions (constant currency) of £57m or 19% - Debtor days reduced by 6 days • Capital expenditure* constrained to 0.8x depreciation - Low cost manufacturing expansion - New product tooling - Health a
Slide 13: IMI Way / responsible business
IMI Way / responsible business • IMI Way - 13,000 employees trained face to face - 100% completion of on-line training • Health & Safety - 43% LTA reduction 0.47 to 0.27 - 11 additional full time H&S officers • 125 supplier audits completed • CO2 emissions - new target to reduce by 10% over 3 years
Slide 14: Platform Businesses
Platform Businesses 14
Slide 15: Indoor Climate
Indoor Climate 2009 2008 £m H1 H2 Year Year Sales 142 150 292 281 Organic growth % -4 -4 -4 +6 Operating profit 24.2 36.5 60.7 45.2 Operating margin % 17.0 24.3 20.8 16.1 • Organic decline contained to just 4% throughout the year • Operating profits up 21% on a constant currency basis • Significant
Slide 16: Indoor Climate
Indoor Climate • Later cycle business for new construction • High resilience - Strong aftermarket - Energy legislation increasing - New markets opening up - Project penetration • Increased investment in seminars to create pull demand - c.45,000 trained in 2009 - Engineering design support centre in
Slide 17: Severe Service
Severe Service 2009 2008 £m H1 H2 Year Year Sales 252 260 512 443 Organic growth % +11 -5 +3 +9 Operating profit 47.9 53.5 101.4 81.3 Operating margin % 19.0 20.6 19.8 18.4 • Record sales and operating profit for the year • Organic sales decline in H2 after strong shipments in H1 • Continued improve
Slide 18: Severe Service Order intake trends
Severe Service Order intake trends H1* H2 2009 New Construction : Power (8%) (49%) (25%) Oil & Gas (37%) (40%) (39%) Nuclear** (17%) +91% +34% Total (18%) (21%) (20%) Aftermarket +26% +30% +28% Group Total (5%) (8%) (7%) * Adjusted for approximately £20m orders deferred from H2 2007 to H1 2008 arisi
Slide 19: Severe Service: Significant change initiatives in 2010
Severe Service Significant change initiatives in 2010 • New business structure - Control valves - Isolation valves - Nuclear • Global operations restructure - New facilities in Czech Republic and India - % low cost manufacturing to increase from 30% (2009) to over 60% (2012) • Global ERP implementat
Slide 20: Beverage Dispense
Beverage Dispense 2009 2008 £m H1 H2 Year Year Sales 154 143 297 305 Organic growth % -20 -7 -15 -1 Operating profit 10.5 10.6 21.1 27.6 Operating margin % 6.8 7.4 7.1 9.0 • H2 markets improved but challenging • 3Wire parts business more resilient - Successful technology upgrade • Significant cost r
Slide 21: Beverage Dispense
Beverage Dispense • Good progress on new product development - Viper (carbonated frozen beverages) roll out continues - Energy efficient cooling systems • Focus on margins / added value - Gradual exit of low margin product lines 21
Slide 22: Merchandising
Merchandising 2009 2008 £m H1 H2 Year Year Sales 87 77 164 202 Organic growth % -22 -35 -29 +11 Operating profit 7.4 10.8 18.2 20.9 Operating margin % 8.5 14.0 11.1 10.3 • As expected sharp organic sales decline in H2 - 2008 US grocery order - Impact of lower US automotive activity • Profits drop th
Slide 23: Merchandising
Merchandising • Automotive risks well managed • Food and beverage and consumer electronics more resilient • Focus on margins / added value - Gradual exit of low margin product lines • New product development - LED lighting - Digital merchandising 23
Slide 24: Roy Twite
Roy Twite 24
Slide 25: Fluid Power
Fluid Power 2009 2008 £m H1 H2 Year Year Sales 255 265 520 666 Organic growth % -36 -24 -31 +3 Operating profit 7.4 25.4 32.8 91.3 Operating margin % 2.9 9.6 6.3 13.7 • Markets stabilised after the sharp fall in H1 • Revenue up 4% in H2 versus H1 2009 • Significant improvement in H2 margins to 9.6%
Slide 26: Fluid Power Sales and order momentum
Fluid Power Sales and order momentum £m Q1 Q2 Q3 Q4 Year Sales 2008 192 201 190 165 748 2009 130 122 130 138 520 % Change (Organic) (32%) (39%) (32%) (16%) (30%) Orders 2008 204 204 181 151 740 2009 131 121 132 143 527 % Change (Organic) (36%) (41%) (27%) (5%) (29%) All at 2009 average year rates: U
Slide 27: Fluid Power
Fluid Power • Engineering Advantage sector strategy accelerated • Advanced Tech Centre expanded in China • Outlook more positive • Focus remains on margin improvement 27
Slide 28: Douglas Hurt
Douglas Hurt 28
Slide 29: Results overview
Results overview £m 2009 2008 change Segmental revenue at comparable rates 1,785 2,130 -16% IAS 39 7 4 Exchange impact (233) Revenue as published 1,792 1,901 -6% 29
Slide 30: Results overview
Results overview £m 2009 2008 change Segmental operating profit 234.2 266.3 -12% Interest (18.5) (15.4) Net (expense)/return on pension plan (4.0) 3.8 Profit before tax* 211.7 254.7 -17% * Before exceptional items 30
Slide 31: Results overview
Results overview £m 2009 2008 change Profit before tax * 211.7 254.7 -17% Restructuring costs (34.9) (19.6) Investigation costs & fines - (26.3) Acquired intangible amortisation & impairment (7.2) (13.2) Financial instruments excluding economic hedge contacts 16.6 (19.6) Profit before tax 186.2 176.
Slide 32: Restructuring - costs / benefits
Restructuring - costs / benefits 2006 Low Cost Manufacturing programme £m 2006 2007 2008 2009 Annual costs 20 22 20 Cumulative benefits* 2 8 18 28 Low cost manufacturing 25% 35% * From base year 2005 32
Slide 33: Restructuring - costs / benefits
Restructuring - costs / benefits 2009/10 Low Cost Manufacturing programme £m 2009 2010 2011 2012 Annual costs 35 10 - - Cumulative benefits*: Permanent 19 40 55 62 Temporary 16 8 - - Total 35 48 55 62 Low Cost Manufacturing 35% 50% * From base year 2008 33
Slide 34: Operating cash flow summary
Operating cash flow summary £m 2009 2008 Change EBITDA* 262 269 Working capital 61 4 Capital expenditure (42) (53) Asset sales/other (3) 21 Operating cash flow 278 241 +15% Interest and derivatives (27) (19) Tax (53) (54) Cash generation 198 168 Severe Service investigation costs and fines (13) - Sp
Slide 35: Net cash flow summary
Net cash flow summary £m 2009 2008 Change Cash flow before corporate activity 168 151 +11% Corporate activity: Acquisitions (19) - Dividend to minority / others (2) (2) Shareholder activity: Dividends (66) (66) Share buyback / issues 1 (15) Net cash flow 82 68 +21% Opening net (borrowings) (299) (23
Slide 36: Balance sheet
Balance sheet £m Dec Dec 2009 2008 Shareholders funds 400 452 Net borrowings 172 299 Gearing 43% 66% Continuing businesses: EBITDA 262.5 269.3 Interest costs 18.5 15.4 Debt / EBITDA 0.7x 1.1x EBITDA / interest 14.2x 17.5x 36
Slide 37: Debt summary
Debt summary £m Dec Dec 2009 2008 Bilateral bank facilities 277 370 US loan notes 246 201 Other drawn uncommitted facilities 7 6 Total funding available 530 577 Average maturity (years) 4.4 3.5 Drawn at period end 253 423 Undrawn at period end 277 154 Cash balance 81 124 37
Slide 38: Pensions – IAS 19
Pensions – IAS 19 £m Dec Jun Dec 2009 2009 2008 Assets 1,043 915 957 Liabilities (1,301) (1,196) (1,094) Surplus/(deficit) (258) (281) (137) • Commenced consultation with members to close UK pension fund to future accrual with effect from 30 September 2010 • Deficit impacted by changes in assumption
Slide 39: Dividend progression
Dividend progression 2001 2002 2003 2004 2005 2006 2007 2008 2009 Pence per share Full year dividend 15.5 15.5 15.5 16.5 17.5 18.7 20.2 20.7 21.2 39
Slide 40: Outlook for 2010
Outlook for 2010 40
Slide 41: Proven long term strategy
Proven long term strategy Market characteristics Business competencies Niche global markets £1-3bn World Class Market leadership Key Account Management No.1 or 2, 20% + share Insight & Innovation Large global customers, “Engineering Advantage” key account focus Differentiated & customised Discipline
Slide 42: Focus for 2010
Focus for 2010 • Continue 2009 focus on cost control, inflation equation and cash generation • Enhance core skill base - Key account management - Engineering advantage • Further investment in low cost manufacturing • Leverage strong balance sheet - Investment in organic growth - Strategic acquisitio
Slide 43: Outlook
Outlook • Greater stability / more visibility • No „V‟ shaped recovery assumed - Late cycle vs early cycle businesses evenly weighted - Some restocking potential (Fluid Power) - Emerging markets strong • Continued margin development opportunities - Further cost reductions - Increased % of low cost m
Slide 44: Additional information
Additional information 44
Slide 45: 2009 Sales
2009 Sales By Geography: By end market: Truck ROW 5% Retail 4% Auto Emerging 8% 3% Markets 20% Energy Draught 30% W. Europe Dispense 39% 17% N. America Capital 29% Equipment Environmental Control 22% UK 16% 7% 45
Slide 46: Exchange rates
Exchange rates 2009 2008 Change Average rates Euro 1.12 1.26 +11% US$ 1.57 1.85 +15% Closing rates Euro 1.13 1.03 -10% US$ 1.61 1.44 -12% Impact on FY 2009: Revenue +12% Segmental operating profit +13% Projection for 2010*: Revenue +4% Segmental operating profit +5% * Compares impact on 2009 results
Slide 47: Sales and margin development
Sales and margin development 2002 2003 2004 2005 2006 2007 2008 2009 % Sales momentum - organic growth nil +3 +5 +5 +4 +7 +5 -16 Segmental Operating margin 9.2 9.8 10.5 12.2 12.7 13.0 14.0 13.1 47
Slide 48: New product momentum
New product momentum Integrated pneumatic valve system to TA Differential pressure control valve for CCI’s Oil & Gas production choke valve control gas flow in an Anesthesia large cooling systems and district energy with DRAG technology Ventilator applications The Viper frozen New “10 Wide” beverage
Slide 49: Sales bridge
Sales bridge £m 2008 Translation Organic 2009 Severe Service 443 56 13 512 Fluid Power 666 83 (229) 520 Indoor Climate 281 24 (13) 292 Beverage Dispense 305 42 (50) 297 Merchandising 202 28 (66) 164 Segment revenue 1,897 233 (345) 1,785 IAS39 adjustment 4 7 Group revenue 1,901 1,792 49
Slide 50: Profit bridge
Profit bridge £m 2008 Translation Organic 2009 Severe Service 81.3 10.3 9.8 101.4 Fluid Power 91.3 11.2 (69.7) 32.8 Indoor Climate 45.2 4.9 10.6 60.7 Beverage Dispense 27.6 5.0 (11.5) 21.1 Merchandising 20.9 3.8 (6.5) 18.2 Segmental operating profit 266.3 35.2 (67.3) 234.2 50
Slide 51: Restructuring – by business
Restructuring – by business £m H1 H2 2009 Severe Service 1.1 1.6 2.7 Fluid Power 9.2 11.8 21.0 Indoor Climate 1.6 1.5 3.1 Beverage Dispense 5.0 2.1 7.1 Merchandising 0.6 0.4 1.0 Total Group 17.5 17.4 34.9 51
Slide 52: Return on operating capital
Return on operating capital* 40.0% 27.4% 27.4% 27.6% 25.0% 10.0% 2007 2008 2009 * Segmental operating profits over segmental assets as per the statutory accounts 52