IMI plc Interim Results 2000 - 4 September 2000
|
2000
| 1999
|
 |
| Sales |
£813m |
£706m |
| Results before goodwill amortisation and exceptional items: |
|
|
|
Profit before interest |
£86.1m |
£71.0m |
|
Profit before tax |
£72.7m |
£67.4m |
|
Adjusted earnings per share |
14.0p |
12.7p |
| Dividend per share |
6.0p |
5.8p |
|
- Sales increased 15%
- Profit before goodwill and exceptional items increased 8%
- Adjusted earnings per share increased 10%
CHAIRMAN'S STATEMENT
IMI today reports a stronger first half performance with both sales and profit before goodwill amortisation ahead of last year. Sales at £813m were 15% higher and profit before goodwill amortisation and exceptional items at £72.7m was 8% higher. These figures include £120m sales and £1.6m profit in respect of the additional months' contribution from the Polypipe businesses acquired in May 1999.
The tax charge on profit before goodwill amortisation and exceptional items was 32%, the same rate as for the whole of last year.
Adjusted earnings per share at 14.0p, was 10% ahead of the same period last year.
Balance sheet gearing at 30 June was 100% (1999: 102%) increasing from the December 1999 gearing of 90% mainly as a result of the seasonal increase in working capital. Interest cover for the six months based on operating profit before goodwill amortisation was 6 times.
The Board has decided to increase the interim dividend by 3.4% to 6.0p.
Trading Review
Operating profit before goodwill amortisation at £86.1m (1999: £71.0m) was 21% higher than last year including £10.5m from the additional months' contribution from Polypipe. Excluding this contribution, operating profit was 6.5% ahead.
The further weakening of the Euro helped to stimulate growth in many of our continental European markets although it has resulted in increased pressure on our UK manufacturing businesses.
Raw material costs, particularly within the Polypipe businesses, have increased considerably and although it is expected that the majority of these cost increases will be recovered, there is a time-lag which has resulted in a reduction in margins in the first half of the year.
We continued to drive efficiency in our manufacturing operations resulting in rationalisation costs of £5.0m (1999: £9.6m). We have introduced a number of new products and increased our expenditure on the development of innovative products and services, logistics, key account and sales channel management.
The comments that follow relate to continuing operations and compare performance with the first half of 1999.
Hydronic Controls
In copper tube and fittings volumes were up on last year. Pricing pressure continued throughout the period although margins improved from the low point of last year. Heimeier and TA, our Indoor Climate Control businesses, maintained their excellent profit performance and enhanced their commissioning and balancing capability. In plastics, operating profit of the Polypipe businesses for the six months was £19.7m compared with £24.2m for the same period last year. Volumes improved with new products gaining strength. However, profit reduced due to polymer costs which on average increased by 60% over the same period of 1999 and were not fully recovered in selling prices. We continue to market aggressively our products in Eastern Europe where overall sales were up 14%.
Drinks Dispense
Sales for the period were 8% lower than in 1999 reflecting the expected reduced expenditure by our major soft drinks customers and further uncertainty in the brewing industry. The weak demand in soft drinks affected most geographic markets including the US. However, good progress continued to be made with quick service restaurants and the success of new product launches is increasing our market penetration. In response to lower demand, further cost reduction measures were implemented and we are well placed to benefit when activity levels improve. Our Cannon business maintained its excellent record, benefiting from strong sales of Point of Purchase equipment and encouraging demand for distribution carts. It ended the period with a strong order book.
Fluid Power
Fluid Power operations across Europe enjoyed improved trading conditions with volumes ahead of last year. Although the UK softened towards the end of the period, mainland Europe continued to improve and remains strong. Many of the industry sectors we serve, such as commercial vehicles and textiles, are seeing export growth helped by the weakness of the Euro. In the US the margins in the automotive sector came under pressure; the commercial vehicle sector slowed but our sales to the general industrial market, helped by market share gains, remained strong. We continued our cost reduction projects and initiated new advanced techniques to enhance process and product reliability and performance. We made significant progress with on-line technical service and internet trading. Investment in our market sector programme continued and helped in securing a number of major contracts for delivery commencing in 2001.
Energy Controls
Energy Controls achieved better results with volumes up 15%. Demand for severe service valves in both power generation and oil and gas improved. Order books are healthy and provide a good platform for the balance of the year and 2001. Safety Systems, Eley sporting ammunition and Nuclear components produced satisfactory results and Mecafrance increased sales and profit in Europe and the US.
Strategic Development
The closures of copper smelting and the Drinks Dispense operation in Brazil are proceeding to plan and the costs are expected to be within budget.
During the first half we spent around £6m on a number of small in-fill businesses in Hydronic Controls and Drinks Dispense.
In August we announced the acquisition of Robimatic for a consideration of up to £19m and Flow Design Inc for a consideration of £14m. Robimatic is the UK market leader in the packaging and distribution of plumbing products and will in particular broaden the range of Polypipe products channelled into the DIY and merchant sectors. Flow Design Inc is the US market leader in automatic flow control devices for heating, air-conditioning and ventilation. This addition to our Indoor Climate Control businesses provides us with an important entry into the world's largest balancing valve market.
Outlook
Current order intake is running ahead of last year except in Drinks Dispense. The UK and the US are showing some signs of softness but with mainland European demand still strong prospects for the second half remain satisfactory. We will continue to take costs out of our businesses and to take advantage of our market positions to improve financial performance.
For the complete press release in Adobe Acrobat format click here.
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