BIRMINGHAM, U.K., Sept. 9, 2002 (PRIMEZONE) -- IMI plc, the major international engineering group, today announced its interim results for the six months ended 30 June 2002.
2002 2001
Sales 826m pounds 847m pounds
Results before rationalisation &
restructuring*
Profit before tax 66.0m pounds 68.6m pounds
Adjusted earnings per share 12.5p 14.5p
Rationalisation & restructuring 14.1m pounds 11.8m pounds
Net borrowings 329m pounds 414m pounds
Gearing 65% 81%
Interest cover before rationalization
& restructuring* 8x 6x
-- Before goodwill amortisation and exceptional items
-- Solid progress with strategic initiatives
-- Another strong cash performance
-- Interim dividend maintained at 6.0p
CHAIRMAN'S STATEMENT
New products and market share gains limited volume reduction to around 2% compared to the first half of last year. Market conditions generally remain subdued.
We have pressed ahead with our restructuring measures and investment programme. We have made solid progress with the transfer of manufacturing activities to Mexico and China and are on target for our new plants in the Czech Republic to be fully operational early next year. Overhead reduction is being achieved as we continue with the streamlining of our businesses. Resources in technology, customer relationship management and e-commerce, particularly our beverage aftermarket initiative (Bevcore), have all been increased.
The drive to reshape the Group is continuing. Earlier this year we announced the sale of the Eley shotgun cartridge business and the acquisition of STI in our Severe Service business. In August we completed the sale of the Copper Fittings business for 65m pounds and acquired DCI Marketing in our Merchandising Systems business for 43m pounds . Since January 2001 we have realised 120m pounds from the sale of businesses and spent 90m pounds on acquisitions.
Cash generation remains sharply in focus and it is pleasing to report another strong performance with operating cash flow after restructuring increasing to 60m pounds, compared to 48m pounds in the first half of last year. Free cash flow before dividend was 50m pounds (2001: 21m pounds).
When we embarked on our repositioning of IMI it was our intention to maintain dividends throughout the period of restructuring. The interim dividend is being maintained at 6.0p at a cost of 21m pounds.
Results Summary
Reported sales at 826m pounds compare with 847m pounds last year. After adjusting for acquisitions and first half disposals, organic sales were 15m pounds (2%) lower. Operating profit before restructuring costs was 75.5m pounds (2001: 82.6m pounds) after revenue investments of 9m pounds (2001: 1m pounds). The interest charge at 9.5m pounds was 4.5m pounds lower, leaving profit before rationalisation and restructuring costs, goodwill amortisation and exceptional items down 4% at 66m pounds (2001: 68.6m pounds).
Rationalisation and restructuring costs charged against profit were 14.1m pounds (2001: 11.8m pounds), resulting in profit before tax, goodwill amortisation and exceptional items of 51.9m pounds (2001: 56.8m pounds).
For 2002 the effective rate of tax on profit before goodwill amortisation and exceptional items, is expected to be 32%. The 2001 tax charge benefited from overseas tax credits on profit distributions and the effective rate was 25%, with the underlying rate the same as this year at 32%.
Adjusted earnings per share (before rationalisation and restructuring costs, goodwill amortisation and exceptional items) were 12.5p (2001: 14.5p). It is estimated that the first half 2001 adjusted earnings per share benefited by 1.3p from the reduction in the tax charge.
Borrowings at the end of June were 329m pounds, a reduction of 16m pounds from the end of December 2001 and 85m pounds from the end of June last year. Gearing was 65% (June 2001: 81%; December 2001: 70%). Interest cover for the six months based on operating profit before rationalisation and restructuring costs was 8 times (2001: 6 times) and after rationalisation and restructuring costs, 6.5 times (2001: 5 times).
OPERATIONS REVIEW
Fluid Controls
Our Severe Service valves business continued its record of growth with another increase in sales and profit. Strong new valve shipments and a growing order intake underpin our decision to continue the investment in specialist sales engineers and capacity expansion. The new facility in Tijuana, Mexico is coming on stream and STI of Italy, purchased earlier in the year, has been integrated fully.
Fluid Power volumes remain disappointing, around 9% lower than the first half of last year. This included a difficult second quarter at our automotive tooling subsidiary, ISI. The momentum behind the cost reduction initiatives is gathering pace with a good start to manufacturing in Mexico and simplification of the infrastructure leading to reductions in headcount. The pace will accelerate in the second half and the new facility in the Czech Republic is expected to be fully operational early in 2003.
Indoor Climate, as expected, suffered lower volumes in Germany but the impact on profit was restricted by cost saving initiatives. Implementation of the downsizing of the German operations is continuing and benefits will materialise in the second half. Balancing valve volumes generally are about level with last year. We again added to our European commissioning capability with the purchase of a small French service company in June.
Retail Dispense
Beverage Dispense sales in the U.S. included the roll out of the major order for new frozen carbonated beverage equipment received late last year, most of which was shipped in the first half of this year. The benefit of this order has more than absorbed the expected costs arising from the closure of two U.S. plants and transfers to Mexico and China, and the investment cost of establishing Bevcore. Underlying volumes were generally around 3% ahead of last year.
Merchandising Systems continued to see low levels of demand with some customers' advertising and promotional spend remaining on hold since the events of 11 September 2001. We are confident that this market will see strong long term growth and were pleased to secure the acquisition of DCI Marketing in early August. With this addition, the pro forma annual sales of our Merchandising Systems business are around $250m, up from $100m in 2000.
Building Products
In Building Products, the pipe businesses within Polypipe performed well despite upward pressure on PVC prices. Elsewhere in Polypipe the results were mixed. Copper Tube had a difficult period with a rising copper price putting pressure on margins. Our Copper Fittings business, which was sold in August, had a solid six months trading performance.
Outlook
We are not anticipating any improvement in general market conditions in the near term. As a result of our restructuring and rationalisation, however, the Group is better equipped to manage in difficult trading environments, and we remain confident of reporting progress for the year as a whole.
To view the full interim report, including financial tables, please use the following link: http://reports.huginonline.com/872951/107887.pdf