IMI plc is issuing the following Interim Management Statement for the period from 1 January to 7 May 2009, ahead of its Annual General Meeting to be held at 12 noon today.
Trading overall remains broadly in line with the indications given in our preliminary results announcement on 4 March, with a stronger performance in Severe Service and Indoor Climate, offset by weaker shipments in the Fluid Power and the Retail Dispense businesses. Group revenues for the four month period to the end of April are around 16% lower than the prior year, on a constant currency basis.
The Severe Service business has enjoyed strong shipments in the first few months, helped also by operational improvements focussed on reducing lead times. There have been relatively few project deferrals or postponements, albeit, as previously highlighted, order intake has softened in Japan and in North American power markets. Customer service orders generally have been encouraging.
Our Fluid Power markets continue to face extremely challenging conditions, with the in-plant automotive and truck sectors remaining at very depressed levels. Demand from the general factory automation markets has weakened further since February. As a result first half profits in Fluid Power will be very sharply down on last year, albeit this should improve appreciably in the second half as the full benefit of cost reduction measures taken earlier in the year accrues. Recent signs of an improvement in China are emerging, and we have brought forward our plans to open a new manufacturing facility in Shanghai.
Our Indoor Climate business continues to demonstrate pleasing resilience in its refurbishment markets, particularly in German thermostatic radiator valves. Whilst new construction markets have, as expected, slowed, some product sectors have held up well and Pneumatex, our recent acquisition, continues to increase its penetration into new markets.
Our Beverage Dispense business has continued to experience very challenging markets, with demand reducing further in March, particularly in North America and the UK. More recent signs seem to indicate at least a levelling off in demand, with some soft drinks bottlers now planning for the normal seasonal upturn.
The Merchandising business has held up reasonably well in its cosmetics and grocery sectors, whilst the automotive sector has suffered a significant reduction. Second and third quarter comparables with last year will of course be impacted negatively by the large US grocery order secured in April last year.
In March we set out four key areas of management actions in response to the challenges of the economic downturn:- the reallocation of sales and engineering resource in support of more resilient end markets; the alignment of capacity to lower demand; focus on product margins; and the maximisation of profit to cash conversion. We have made encouraging progress in all respects. Order intake in resilient end sectors such as infrastructure, healthcare and energy has increased as a proportion of the overall order book. Since June 2008 about 2,000 employees (13%) have left the Group, with a further 400 scheduled to leave by the end of June. In addition around 3,700 employees (26% of total) are currently on short time working arrangements. Plans to bring forward the expansion of our manufacturing facilities in China, Eastern Europe and India are well advanced, paving the way for a further transfer of capacity to lower cost economies once the global economy recovers. Selling prices generally are holding up well, albeit pressure on older, more commoditised product lines is growing and we continue to make good progress in driving down material costs on the back of weaker commodity prices. The combination of all the above actions continues to mitigate the profit impact of lower revenues. As we have already indicated there will be rationalisation charges of around £25m in 2009 and £10m in 2010.
Financial position and exchange rates
The Group maintains a strong balance sheet. Since the year end we have agreed two additional three year bank facilities of £25m and €30m respectively.
As previously indicated the Group expects 2009 results to benefit from exchange rate movements. For example, if average exchange rates ruling in the first four months of 2009 were applied to 2008 full year results both revenues and segmental operating profits would have been approximately 16% higher.
The Group is in a strong financial position with a healthy balance sheet. As expected, many of our end markets continue to be challenging and we have experienced a sharp reduction in demand in a number of product sectors. Recent order intake indicates at least a stabilisation in this position, albeit prospects for any significant recovery in the short term look muted. The management actions taken to mitigate the profit impact of lower demand are proving effective, and plans to expand our low cost manufacturing capabilities will enhance margins as and when the global economy recovers.
IMI will announce its interim results for the period ending 30 June 2009 on 27 August 2009.
Tel: 0121 717 3712
Weber Shandwick Financial
Nick Oborne / Stephanie Badjonat
Tel: 020 7067 0700
Notes to editors
IMI is a dynamic, worldwide company delivering innovative engineering solutions to leading global customers in clearly defined niche markets. Its five businesses share a common goal - to convert their industry knowledge and market insight into customised, design-engineered solutions which create customer advantage and value. These include severe service valves, motion and fluid control systems, indoor climate controls, beverage dispense systems, and merchandising display systems for retail operations.
Close customer relationships, strong positions in growing markets and clear differentiation through technological innovation or service are the defining characteristics of all IMI businesses.
IMI is quoted on the London Stock Exchange. Information about IMI plc can be found on the website: www.imiplc.com