7th Mar 2005 07:02
IMI PLC07 March 2005 7 March 2005 IMI plc Preliminary Results IMI plc, the major international engineering group, today announced itspreliminary results for the year ended 31 December 2004. 2004 2003 Sales £1611m £1573m Results before goodwill amortisation and exceptionalitems Operating profit from continuing businesses £164.6m £147.8m * Profit before tax £155.4m £136.9m * Adjusted earnings per share 28.9p 25.7p * Exceptional items £33.1m - Profit before tax £100.7m £117.2m Earnings per share 13.4p 20.1p Borrowings £69.0m £136.3m Gearing 13% 25% Dividend per share 16.5p 15.5p * 2003 restated to include rationalisation costs of £5.7m, previously shownseparately. • Increased operating profit • Strong cash generation continued • Increased dividend CHAIRMAN'S STATEMENT I am very pleased to be able to report on another year of solid progress, withprofit before tax, goodwill amortisation and exceptional items at £155.4m beingthe highest ever made by the Group, and adjusted earnings per share up 12%. Most of our businesses achieved organic growth in the year. All, with theexception of Building Products, achieved increased operating profits. Cashgeneration remained a strong focus and we once again enjoyed very healthyinterest cover and further reduced our borrowings. Order intake continued to maintain the momentum we saw in the first half of 2004and on a like for like basis increased by around 7% for the year as a whole. The interim dividend was increased by 5% to 6.3p and the Board is recommendingthat the final dividend be increased by 7.4% from 9.5p to 10.2p. This makes thetotal dividend for the year 16.5p, an increase of 6.5% over the 15.5p paid inrespect of 2003. The total dividend is covered 1.7 times (2003: 1.7 times) basedon adjusted earnings and absorbs £58.5m, a cash cover of 2.2 times (2003: 2.6times). In addition to increasing the dividend, as part of the ongoing capitalmanagement of the Group, the Board has decided to undertake an on-market sharebuy-back programme. The timing and amount of the buy-back will be managedaccording to the ongoing capital needs of the Group including acquisitions. Theauthority for an on-market buy-back already exists and we will be asking forthis authority to be renewed at the annual general meeting in May. We have clear criteria, both strategic and financial, for assessing acquisitionsand continue to evaluate targeted opportunities within our chosen businessareas. In July 2004 we acquired the Swiss based Fluid Automation Systems (FAS)and in February 2005 we acquired the US based Syron Engineering andManufacturing (Syron). Both these businesses add key technology and closecustomer relationships in our targeted market sectors within our Fluid Powerbusiness and have combined annual sales of around £35m. In recent months we have received a number of enquiries from parties interestedin acquiring Polypipe. As a result, the Board has provided certain confidentialinformation to interested parties. The Board is committed to delivering valuefrom the Polypipe businesses and the potential proceeds from any possible salewill be weighed against the value which the Board believes can be delivered fromcontinuing to own and run the business. Results summary Sales for the year at £1611m compared with £1573m in 2003. The adverse impact ofexchange rates on translation of reported sales was £68m, and after adjustingfor the effect of acquisitions of £36m, like for like sales were around 5%higher than last year. Reported operating profit (before goodwill amortisation) was £164.6m, anincrease of 11.4% over last year. Rationalisation costs charged in arriving atoperating profit were £5.3m (2003: £5.7m). Profit before tax, goodwillamortisation and exceptional items increased 13.5% to £155.4m (2003: £136.9m).At constant exchange rates the increase was 19%. Interest costs for the year were reduced to £9.2m (2003: £10.9m) as a result oflower borrowings. Interest was covered 18 times (2003: 14 times) based onoperating profit before goodwill amortisation. In September 2004, the European Commission announced the imposition of a fine of€44.98m on IMI in connection with its former copper tube business sold in 2002.Pending the outcome of the appeal made in January 2005, the full amount of thefine, together with associated costs, has been provided in the FinancialStatements and is shown as an exceptional item of £33.1m. The copper plumbingfittings enquiry is still at an early stage, with a decision on any fineunlikely to be made by the Commission before the second half of 2005. It is notpossible to give any reliable estimate of the likely level of fine and thereforeit is noted as a contingent liability in the Financial Statements. The effective tax rate for the year on profit before goodwill amortisation andexceptional items is 33%, the same rate as 2003. Adjusted earnings per share (excluding goodwill amortisation and exceptionalitems) increased by 12% from 25.7p to 28.9p. Following another year of working capital efficiency improvements, operatingcash conversion was 115% of operating profit resulting in operating cash flow of£190m (2003: £196m). Free cash flow before dividends and corporate activity was£127m (2003: £142m). Net borrowings reduced to £69m (2003: £136m) giving balancesheet gearing of 13% (2003: 25%) and a net debt to EBITDA ratio of 0.3. Since the year end we have paid the EU fine of €44.98m (£32m) and acquired Syronat a cost of £18m. Board changes Lance Browne joined the Board as an independent non-executive director on 1January 2005 and I am pleased to report that with effect from 8 March 2005 KevinBeeston will also join the Board as an independent non-executive director. Outlook 2004 has seen us successfully continue on the path we set out three years agoand our financial performance reflects the progress we have made to date. Whilstthere are still some concerns that mainland Europe remains subdued, theunderlying momentum in our businesses overall is encouraging. We remain intenton delivering top line growth and continuing the steady upwards progression ofoperating margins in recent years. CHIEF EXECUTIVE'S REVIEW We can look back on 2004 with satisfaction, with all five of our platformbusinesses recording improvements in profit. In general, the businesses dealtwell with the twin effects of materials inflation and a stronger pound, leavingreported pre-tax profits (before goodwill amortisation and exceptional items)some 14% ahead of last year. Cashflow was again strong, leaving the year-endbalance sheet lightly geared, with net debt of less than £70m, as compared toover £400m just four years ago. Each of our platform businesses now has a clear and established strategicframework in which to move forward, developed progressively over the last fewyears. Within each of those strategic frameworks, sustainable profitable growthis the primary objective. The principal drivers of growth for all our businessesare the same: - acceleration of our key account focus and capability, adopting a carefully targeted approach to the selection of our customer partners, and assembling highly talented teams of people to promote double-digit revenue growth with these partners; - delivering a step change in the creative competence of our organisation, investing in techniques to acquire improved customer and market insight, and upgrading our capacity to convert that insight into commercial solutions through a larger engineering resource; - seizing the initiative in respect of the fast-growing markets of Asia and Eastern Europe, expanding our local resource and investment and recruiting highly talented people from these territories throughout our business (in 2004, 25% of our graduate intake was of Chinese origin); and - accelerating our efforts to secure strategic bolt-on acquisitions in our chosen areas. These four growth imperatives are understood by all the senior management inIMI, and are increasingly becoming embedded throughout our organisation. Wecontinually look for talent to accelerate our capabilities in these areas and anumber of new appointments were made during the year. The recent non-executivedirector appointments to the Board support our growth imperatives. Lance Browneis based in Shanghai and brings with him great knowledge of China; KevinBeeston's experience will be invaluable in our efforts to expand ourafter-market and service capability. Our search for a new chairman and anothernon-executive director is on-going. Going into 2005, the US and Asian economies remain buoyant whilst concerns growover the outlook for European economies. Inflationary pressures around materialsand energy costs are unlikely to subside, at least in the near term, requiringcontinued diligence by our management in both securing price increases of ourown and mitigating the impact through increased sourcing of materials in the FarEast and cost reduction programmes. We have built a strong platform over the last few years and management is nowfirmly engaged on the growth agenda. Whilst prevailing economic conditions willinevitably play a part, we are well placed to deliver sustainable growth overthe long term. OPERATIONS REVIEW The following is a review of our business areas for the year. Operating profitis stated before goodwill amortisation. Severe Service Sales £169m (2003: £168m)Operating profit £21.5m (2003: £20.3m) In our Severe Service business, in a year when additional investment inspecialist sales engineers was held back to allow operational efficiencies tokeep pace with the growth, 2004 still saw another year of solid growth in plantlevel sales and new construction projects. The running rate for order intake wasover 10% higher than 2003 with much of the growth coming from Asia where we arewinning a good share of new projects and benefiting from an establishedinstalled base. We also continue to see increased activity in the oil and gassector where CCI is the recognised authority on severe service valveapplications for LNG (liquified natural gas). With the US new construction powermarket still soft, we are focusing more of our resources on these growth areas.The profile of our order book is currently more weighted to new valve projectsthan in the recent past and contains significant orders for shipment datesbeyond 2005. Our customer service business remains very healthy. As reported in our interim statement, shipments in the first half were 5% lowerthan the first half of 2003 but this was reversed with a strong finish to theyear resulting in shipments being 6% ahead for the year as a whole. Margins arealso ahead of last year and should continue to improve in 2005 in another yearof consolidating on past investment spend. Fluid Power Sales £439m (2003: £410m)Operating profit £44.3m (2003: £31.0m) A strong performance in the year from our Fluid Power business saw operatingprofit considerably increased over last year. Volumes overall were over 8%ahead, driven by organic growth of around 6% in the underlying markets and 16%in our target sectors. The commercial vehicles sector was particularly strong. The US, which represents around a quarter of sales, had a buoyant year and wasable to respond to the increased volume demand through a strong operationalperformance from our Mexican facility. The UK and Germany both benefited fromthe introduction of new valve products to support key accounts within thetargeted sectors. Mainland European sales in general, however, showed onlymodest growth and disappointed towards the end of the year. Sales into the AsiaPacific region continue to be encouraging. We were very pleased to be able to complete the acquisition of FAS in July whichcontributed £1m operating profit on sales of £10m. We are already seeing thebenefit of having a greater range of miniature solenoid valves and increasedcapabilities in the important medical sector. Our specialist end-of-arm tooling business, serving the in-plant automotivesector, had a successful year and the acquisition of Syron in February 2005extends its reach into transfer press tooling. We continue to drive cost reduction measures and spent a further £2.7m onrationalisation during the year. Our new facility in Brno, Czech Republic isthriving and to date has met all approval standards and efficiency targets. Alsoin Brno, we have established a technical centre working on new productdevelopments. Indoor Climate Sales £168m (2003: £169m)Operating profit £24.2m (2003: £23.8m) Our Indoor Climate business produced a resilient performance, increasingoperating profit despite another challenging year in its major European marketsand price pressure on raw materials. Overall, volumes were similar to last yearwith growth in Eastern Europe, UK and Asia offsetting a small decline in thetraditional European markets. The small first half improvement in TRV sales in the German market was notsustained, leaving sales for the year as a whole unchanged. However, it waspleasing to see that in a nationwide survey of installers, Heimeier wasrecognised as being the number one brand for service and support. The pattern ofdemand for balancing valves is patchy across Europe and the weak US dollar isholding back sales to the US. In the UK, however, our high performance balancingvalves are winning market share in PFI financed projects. We continue to invest in our Eastern European infrastructure and opened newfacilities in Russia during the year. We now have 175 people in our EasternEuropean operations which grew sales by 15% in 2004. We also continue to investin China, where the considerable construction programme offers great potential.Although not substantial yet, we are beginning to see increased sales. Beverage Dispense Sales £267m (2003: £278m)Operating profit £24.4m (2003: £21.5m) Our Beverage Dispense business performed well throughout the year in the US withencouraging underlying demand and operational efficiencies continuing a strongimprovement. Consumer confidence appears to be growing, as evidenced byincreasing restaurant traffic enabling operators to report same store salesgains. This backdrop has provided the impetus for good demand in our foodservice sector and brand owner business, although this has been tempered by arecent slowdown with one of our major soft drinks customers. We continue toachieve successes with our sales of non-carbonated dispense equipment, withjuice, frozen offerings and Lipton iced tea again showing good growth. OurMexican manufacturing facility made a much improved contribution withefficiencies at target levels and our US operations reaping the benefit ofongoing efficiency programmes. In mainland Europe, we achieved modest growth in the year in both soft drinksand beer dispense although the second half of the year was slower. Encouragingsales both in Eastern Europe and of our small but growing water dispenseequipment in Germany, helped offset lower volumes in our traditional beerdispense markets. In the UK, sales into the soft drinks dispense market were up on last year. Inbeer dispense we had benefited in 2002 and 2003 from a shift into extra coldprogrammes and two years of heavy brand owner promotional spend. Consequently,volumes in 2004 showed a marked decline. In Asia, although sales were ahead of last year, we still lack critical mass andwill be looking to increase our investment particularly in respect of a growingfood service sector opportunity. We have recently moved our regionalheadquarters to Shanghai. Merchandising Systems Sales £188m (2003: £170m)Operating profit £22.2m (2003: £18.2m) Merchandising Systems continues to make progress, with organic growth of nearly5% building on the very good 10% growth delivered in 2003. Helped by a fullyear's contribution from Artform, we are able to report operating profit £4mahead of last year despite the adverse impact of around £5m from exchange ratesand raw material costs. Our traditional Cannon business was affected by raw materials costs as steelprices were driven up by as much as 75%. This was mitigated more in the secondhalf by pricing and increased Far East sourcing of other materials. Underlyingdemand, however, was encouraging and quotation activity increased furthertowards the end of the year. Particularly encouraging was our first time entryinto the growing US DIY sector. Display Technologies repeated its success inbeverage and bulk display systems and grew its international sales further. Itcontinues to develop a focused key account and key sector strategy. Although lower than the very successful 2003 in which a number of largecontracts were shipped, DCI had another very good year with the first halfbenefiting from the Toyota Scion programme and customer Point of Purchase salesagain increasing. The automotive sector continues to be a significantcontributor to DCI but several other key sectors are being targeted which lendthemselves to DCI's creative knowledge-based solutions. Artform completed a very good first full year with sales 5% ahead of thatachieved prior to acquisition and with maintained margins. Cosmetics remain themajor proportion of sales with the leading European brand owners the keycustomers. We are still in the early stages of development of our category managementbusiness model and have a number of pilot programmes running with selectedaccounts. Building Products Sales £380m (2003: £370m)Operating profit £28.0m (2003: £33.0m) In Polypipe, although overall volumes slowed a little in the second half, themarket, particularly for our core pipes business, remains generally positive.Price increases were successfully implemented in the second half of the year,mitigating the impact of raw material costs and restoring some of the marginerosion seen earlier. New product introductions continue and offer good growthopportunities. Losses in the Doors and Windows division and difficult conditionsin Bathroom and Kitchens and Leisure contributed significantly to the reductionin profit in the year. Action has been taken to arrest the decline in thesebusinesses. The small European pipes businesses continue to improve, producingincreased profits. The underlying strength of Polypipe's main business remainssolid and this, together with the management changes made during 2004, shouldprovide for a recovery in performance in 2005. GROUP PROFIT AND LOSS ACCOUNTfor the year ended 31 December 2004 Before Before goodwill goodwill amortisation and Goodwill Exceptional amortisation and Goodwill exceptionals amortisation items Total exceptionals (i) amortisation Total 2004 2004 2004 2004 2003 2003 2003 Notes £m £m £m £m £m £m £m ----------------------------------------------------------- ------------------------------------------Turnover 1 Continuing operations 1611 1611 1565 1565Discontinued operations - - 8 8 ----------------------------------------------------------- ------------------------------------------Total turnover 1611 1611 1573 1573 ----------------------------------------------------------- ------------------------------------------Operating profit 1 Total continuing operations 164.6 (21.6) - 143.0 147.8 (19.7) 128.1 Discontinued - - - - - - - operations ----------------------------------------------------------- ------------------------------------------Operating profit 164.6 (21.6) - 143.0 147.8 (19.7) 128.1 European Commission enquiry (ii) 2 (33.1) (33.1) - ----------------------------------------------------------- ------------------------------------------Profit before interest 164.6 (21.6) (33.1) 109.9 147.8 (19.7) 128.1 Net interest payable (9.2) (9.2) (10.9) (10.9) ----------------------------------------------------------- ------------------------------------------ Profit on ordinary activities before taxation 155.4 (21.6) (33.1) 100.7 136.9 (19.7) 117.2 Tax on profit on ordinary activities 3 (51.4) - - (51.4) (45.2) - (45.2) ----------------------------------------------------------- ------------------------------------------ Profit on ordinary activities after taxation 104.0 (21.6) (33.1) 49.3 91.7 (19.7) 72.0 Equity minority interests (1.8) (1.8) (1.0) (1.0) ----------------------------------------------------------- ------------------------------------------ Profit for the financial year 102.2 (21.6) (33.1) 47.5 90.7 (19.7) 71.0 ----------------------------------------------------------- ------------------------------------------ Dividends paid and proposed 4 (58.5) (54.8) ----------------------------------------------------------- ------------------------------------------Transfer (from)/to reserves (11.0) 16.2 ----------------------------------------------------------- ------------------------------------------Adjusted earnings per share 5 28.9p 25.7p (i) Earnings per share 5 13.4p 20.1p Diluted earnings per share 5 13.3p 20.1p (i) 2003 restated to include rationalisation costs of £5.7m previously shown separately. (ii) relating to businesses sold in 2002. GROUP BALANCE SHEETat 31 December 2004 2004 2003 £m £m --------------------Fixed assetsIntangible assets 306.3 317.9Tangible assets 279.7 292.6 -------------------- 586.0 610.5 --------------------Current assetsStocks 248.1 243.3Debtors 304.0 304.4Investments 8.0 8.2Cash and deposits 120.7 81.3 -------------------- 680.8 637.2Creditors:amounts falling due within one year --------------------Borrowings and finance leases (60.5) (76.7)Other creditors (423.5) (379.6) -------------------- (484.0) (456.3) --------------------Net current assets 196.8 180.9 -------------------- Total assets less current liabilities 782.8 791.4 Creditors:amounts falling due after more than one year --------------------Borrowings and finance leases (129.2) (140.9)Other creditors (28.4) (31.4) -------------------- (157.6) (172.3)Provisions for liabilities and charges (87.0) (76.1) --------------------Net Assets 538.2 543.0 -------------------- Capital and reservesCalled up share capital 88.7 88.3Share premium account 139.9 136.5Revaluation reserve 1.0 1.0Other reserves 1.6 1.6Profit and loss account 303.0 312.0 --------------------Equity shareholders' funds 534.2 539.4 --------------------Minority interest 4.0 3.6 -------------------- 538.2 543.0 -------------------- GROUP CASH FLOW STATEMENTfor the year ended 31 December 2004 2004 2003 £m £m £m £m -------- -------- ------- --------Reconciliation of operating profit to net cash inflow from operating activities Operating profit 143.0 128.1 Depreciation & goodwill amortisation 79.9 85.8 Stocks (increase)/decrease (4.7) 20.9 Debtors decrease 0.2 2.7 Creditors and provisions increase/ 18.2 (6.5) (decrease) -------- -------- Net cash inflow from operating 236.6 231.0 activities -------- -------- GROUP CASH FLOW STATEMENT Net cash inflow from operating activities 236.6 231.0Return on investments and servicing of finance (10.5) (11.8)Taxation (52.3) (41.5)Capital expenditure and financial investment (46.6) (36.0)Acquisitions and disposals (20.9) (56.0)Equity dividends paid (55.9) (54.7) -------- --------Cash flow before use of liquid resources & financing 50.4 31.0Management of liquid resources 3.6 4.5Financing Issue of ordinary shares 3.8 2.5 Decrease in borrowings (9.8) (35.1) -------- ------- (6.0) (32.6) -------- --------Increase in cash in the year 48.0 2.9 -------- -------- Reconciliation of net cash to movement in net borrowings Increase in cash in the year 48.0 2.9 Cash used to repay borrowings 9.8 35.1 Cash inflow from movement in liquid (3.6) (4.5) resources -------- ------- Change in borrowings resulting from cash flows 54.2 33.5 Currency translation differences 13.1 3.7 -------- -------- Movement in net borrowings in the year 67.3 37.2 Net borrowings at 1 January (136.3) (173.5) -------- -------- Net borrowings at 31 December (69.0) (136.3) -------- -------- RECONCILIATION OF MOVEMENTS IN GROUP SHAREHOLDERS' FUNDSfor the year ended 31 December 2004 2004 2003 £m £m -----------------Profit for the financial year 47.5 71.0Dividends (58.5) (54.8) ----------------- (11.0) 16.2Other recognised gains and losses relating to the financial year 2.0 (7.3)New ordinary share capital issued 3.8 2.6 -----------------Net (decrease)/increase in shareholders' funds for the year (5.2) 11.5Shareholders' funds at 1 January 539.4 527.9 -----------------Shareholders' funds at 31 December 534.2 539.4 NOTES RELATING TO THE FINANCIAL STATEMENTS 1. Segmental analysis Operating profit before goodwill Operating Turnover amortisation Operating profit assets 2004 2003 2004 2003 2004 2003 2004 2003 £m £m £m £m £m £m £m £m ------------- ------------------- --------------- ------------- BY ACTIVITY restated * Fluid Controls 776 747 90.0 75.1 86.2 72.2 198 210 ------------------------------------------------------------------------------------------------------- Severe 169 168 21.5 20.3 20.8 19.5 29 34 Service Fluid Power 439 410 44.3 31.0 42.9 30.1 141 145 Indoor Climate 168 169 24.2 23.8 22.5 22.6 28 31 ------------------------------------------------------------------------------------------------------- Retail Dispense 455 448 46.6 39.7 42.4 36.9 94 105 ------------------------------------------------------------------------------------------------------- Beverage Dispense 267 278 24.4 21.5 24.1 21.2 67 74 Merchandising Systems 188 170 22.2 18.2 18.3 15.7 27 31 ------------------------------------------------------------------------------------------------------- Building Products 380 370 28.0 33.0 14.4 19.0 141 125 ------------------------------------------------------------------------------------------------------- Total continuing operations 1611 1565 164.6 147.8 143.0 128.1 433 440 ------------------------------------------------------------------------------------------------------- * Restated to include rationalisation costs previously shown separately. BY GEOGRAPHICAL ORIGIN UK 497 464 28.4 27.0 165 152 Rest of Europe 553 531 66.7 60.6 157 161 The Americas 492 510 38.1 34.9 96 114 Asia/Pacific 69 60 9.8 5.6 15 13 ------------ ------------- ------------ Total continuing operations 1611 1565 143.0 128.1 433 440 ------------------------------------ ----------------------------------- TURNOVER BY GEOGRAPHICAL DESTINATION 2004 2003 £m £m ------------- UK 447 424 Germany 194 185 Rest of Europe 368 345 USA 431 447 Asia/Pacific 107 101 Rest of World 64 63 ------------- Total continuing 1611 1565 operations ------------- Acquisitions Acquisitions in the period were not sufficiently material to warrant separate disclosure on the face of the profit and loss account. Of the reported increase in turnover and operating profit of continuing operations (before goodwill amortisation), £36m and £5m respectively result from the 2004 acquisition of Fluid Automation Systems (Fluid Power) together with the extra months from the 2003 acquisitions of Artform International Limited (Merchandising Systems), Commtech Group (Indoor Climate) and Fluid Kinetics (Severe Service). Discontinued operations Amounts shown for discontinued operations in 2003 relate to the air-conditioning business which was sold in November 2003 and previously reported within Building Products and UK. 2. Exceptional items In September 2004, the European Commission announced the imposition of a fine of €44.98m on IMI in connection with its former copper tube business sold in 2002. Pending the outcome of an appeal made in January 2005, the full amount of the fine, together with associated costs, has been provided and is shown as an exceptional item of £33.1m. The fine was paid in February 2005. 3. Taxation The tax rate on profit before goodwill amortisation and exceptional items is 33%, the same rate as in 2003. 4. Dividend The Directors recommend a final dividend of 10.2p per share (2003: 9.5p) payable on 27 May 2005 to shareholders on the register at close of business on 15 April 2005, which will absorb £36.2m (2003: £33.6m). Together with the interim dividend of 6.3p per share paid on 22 October 2004, this makes a total distribution of 16.5p per share (2003: 15.5p per share). 5. Earnings per ordinary share The weighted average number of shares in issue during the year was 354.0m, 356.5m diluted for the effect of outstanding share options (2003: 352.8m, 353.7m diluted). Earnings per share have been calculated on earnings of £47.5m (2003: £71.0m). The Directors consider that adjusted earnings per share figures, using earnings as calculated below, give a more meaningful indication of the underlying performance. 2004 2003 £m £m --------------- Profit for the period 47.5 71.0 Goodwill amortisation 21.6 19.7 Exceptional items (after tax) 33.1 - --------------- Earnings for adjusted EPS 102.2 90.7 --------------- Rationalisation is now included as a normal operating cost whereas it was previously excluded from adjusted earnings per share. 2003 figures have been restated accordingly. 6. Pensions The next triennial actuarial valuation of the principal UK pension fund will be carried out at 31 March 2005. For the year ended 31 December 2004, the Group has continued to account for pension costs under SSAP24: 'Pension Costs'. The pension cost charged to the profit and loss account is calculated by an independent actuary in such a way as to spread the cost of pensions over the remaining service life of employees in membership. Adoption of FRS17: 'Retirement Benefits' would have required the inclusion of an additional net pension liability of £100m, which after tax of £29m would result in a decrease in net assets of £71m. The impact on the published results of fully adopting FRS17 in 2004 is as follows: Published FRS17 £m £m Balance Sheet Net Assets 538 467 Shareholder funds 534 463 Gearing 13% 15% Profit & Loss Account * Pension cost (18) (19) Finance income - 5 ----------------- Net cost (18) (14) Profit before interest 164.6 163.6 Finance costs (9.2) (4.2) Profit before tax 155.4 159.4 * Before goodwill amortisation and exceptional items. 7. Exchange Rates The profit and loss accounts of overseas operations are translated into sterling at average rates of exchange for the year, balance sheets are translated at year end rates. The most significant currencies are the US Dollar and the Euro - the relevant rates of exchange were: Average Rates Balance Sheet Rates 2004 2003 2004 2003 -------------- ------------------- Euro 1.47 1.44 1.41 1.42 US Dollar 1.83 1.64 1.92 1.79 8. International Financial Reporting Standards The Group, in line with other European Union (EU) listed groups, is required to prepare its financial statements for 2005 (including comparative information for 2004) under EU-adopted International Financial Reporting Standards (IFRS). The impact of these changes on IMI's reported profits is expected to be minimal. An un-audited pro-forma full year 2004 profit and loss account and balance sheet will be included in the Company's 2004 Annual Report. The financial information set out above does not constitute the Company'sstatutory accounts for the year ended 31 December 2003 or 2004 but is derivedfrom those accounts. Statutory accounts for 2003 have been delivered to theRegistrar of Companies, and those for 2004 will be delivered following theCompany's Annual General Meeting. The auditor has reported on those accounts,its reports were unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The Company's 2004 Annual Report and notice of the forthcoming Annual GeneralMeeting will be posted to shareholders on 6 April 2005. - ends - Enquiries to:Graham Truscott - Corporate Communications - Tel: 0121 717 3712 Press release available on the internet at www.imiplc.com Issued by:Nick Oborne - Weber Shandwick Square Mile - Tel: 020 7067 0700 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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