|
The following is an overview of our four business areas where comparisons
with the previous year’s turnover and profit relate to continuing
operations.
Hydronic
Controls
To achieve an increase of 3 per cent in operating profit represents a
strong performance in the face of subdued market conditions. Heimeier
again made a significant contribution, increasing export sales to around
30 per cent and improving efficiency to put profit ahead of last year’s
record. TA Hydronics made progress through export sales of balancing valves
despite a flat home market in Sweden. Copper tube held its market position
and increased profitability although trading conditions continued to be
difficult; the refinery struggled as both the copper price
and scrap availability deteriorated. A reduction in volume in our plumbing
fittings business reflected lower construction activity in the UK and
Germany but a strong operational performance enabled us to improve margins
and maintain profit.
Drinks Dispense
Our major programme of offering to our key partnership customers a global
product and service capability made an important contribution to record
results in Drinks Dispense. Sales and operating profit both increased
by over 7 per cent based on a fine performance in the USA. Progress was
also made in much of Europe although activity declined in Germany with
lower demand from the brewery sector. Certain markets in the Asia Pacific
region continued to be difficult but overall our activities there maintained
their strong market position. Cannon had another good year with strong
growth in its point of purchase equipment business, which has been enhanced
through the acquisition in January 1999 of Melrose Displays Inc. of New
York, USA.
Fluid Power
Sales were £464 million and operating profit was £39.4 million
compared with £336 million and £38 million respectively for
the previous year. Herion performed in line with expectations to add sales
of £138 million and operating profit of £8.5 million before
£2.3 million of rationalisation costs. The integration of Herion
into Fluid Power continued during the year and we put particular emphasis
on developing integrated product solutions combining Herion valve technology
with other products. KIP Inc. had a satisfactory first six months within
the group with sales of £6 million and operating profit of £0.8
million before goodwill amortisation.
Overall
the year started strongly with good progress in Europe and the USA but
sales and orders declined during the second half particularly in the UK
and the US automotive sector.
We remain
committed to improving our efficiency and to cut costs throughout the
group. We will continue our programme to integrate Herion, which should
be completed in the first half of 1999.
Energy
Controls
Continuing operations again did well to improve on last year’s creditable
performance. Disposals of engineering components activities have reshaped
this business area into a focused portfolio of energy controls operations.
Following the structural changes to this business area, Nick Paul has
assumed responsibility for all of Energy Controls. Good progress was achieved,
with severe service valves performing particularly well despite increased
competition for the lower level of demand in Asia Pacific. In the small
engineering components activities which remain, operational improvements
at sporting ammunition reduced the impact of lower export sales whilst
IMI Marston’s aerospace businesses had another successful year.
Investment
Focus
In last year’s review I commented on our policy to divest non-core
businesses and concentrate future investment on our main business areas.
We substantially completed our divestment programme during the year. In
February we disposed of five small engineering businesses and in March
we sold both IMI Waterheating and the Industrial Heat Exchanger Division
of IMI Marston. The sale of the Birmingham Mint Group was completed in
May and IMI Pactrol followed in June. Cash proceeds from these disposals
were £74 million, representing an exceptional profit of £14.8
million.
We continued
to invest substantially in all our business areas, spending £54
million on fixed capital and increasing our research and development expenditure
by 19 per cent. The drive to improve competitiveness, efficiency and performance
of existing operations across the Group will continue unabated in 1999
and we expect to maintain our level of expenditure on fixed capital and
research and development.
|
