5th Mar 2008 07:01
IMI PLC05 March 2008 5 March 2008 IMI plc Preliminary Results IMI plc, the major international engineering group, today announced itspreliminary results for the year ended 31 December 2007. 2007 2006 % changeContinuing operations: Revenue £1,599m £1,505m +6 Operating profit * £210.8m £191.8m +10 Profit before tax* £210.1m £194.9m +8 Restructuring costs £22.0m £19.7m Profit before tax £171.0m £158.2m +8 Adjusted earnings per share ** 42.5p 38.3p +11 Discontinued operations gain/(loss) net of tax £1.9m £(33.5)m Basic earnings per share 35.4p 21.4p +65 Total dividend for year 20.2p 18.7p +8 * before restructuring, investigation costs, intangible amortisation and other income totalling £39.1m (2006: £36.7m)** before the after tax cost of restructuring, investigation costs, intangible amortisation, other income and change in fair value of financial instruments totalling £25.6m (2006: £23.7m) Norman Askew, Chairman of IMI commented: "This is another strong set of results, with organic sales growth of 7% andoperating margins improving further to 13.2%. We have a promising new productspipeline, further cost savings expected from our recent restructuring programme,and a robust balance sheet. We look forward to another year of good progress forIMI in 2008". CHAIRMAN'S STATEMENT I am pleased to report another strong set of results for the Group in 2007, withencouraging progress across most dimensions of the business. Revenue, operating profit, operating margin and earnings per share all showedsignificant progress over the prior year. Our Fluid Controls businesses delivered another strong result, buoyed bycontinuing strength in energy markets in particular. The acquisitions of Kloehnfor £30m in June and Pneumatex for £19m in September, are welcome additions tothe business and have made an encouraging start in the early months of trading.Our Retail Dispense businesses enjoyed a return to growth on the back of anumber of new product launches and some significant new contracts. Operating profit, before restructuring, investigation costs, intangibleamortisation and other income increased by 10%, and the operating marginimproved from 12.7% to 13.2%. We are now two thirds of the way through our 3year restructuring programme to shift a greater proportion of our manufacturingcapacity to low cost economies, and the benefits are beginning to accrue asexpected. During the year we trebled the size of our manufacturing operation forBeverage Dispense equipment in China, and doubled our facility for Fluid Powerin Mexico. We returned a further £93m to shareholders through our share buyback programmeduring the year, acquiring a further 5.1% of our share capital. We will continuewith a buyback programme in 2008 which, alongside our continuing acquisitionprogramme, should deliver further progress towards our medium term target fornet debt of between £400m and £500m. Net debt at the end of 2007 was £233m. Adjusted earnings per share increased by 11% to 42.5p. The Board is recommendingthat the final dividend be increased by 9% to 12.7p. This makes the totaldividend for the year 20.2p, an increase of 8% over last year's 18.7p. The independent investigation into improper payments within our Severe Servicebusiness is now largely complete and the Company continues to cooperate with theUS Department of Justice. Additional costs in 2008 are not expected to bematerial but will be dependent on how the US Department of Justice decides toproceed. Our business is recovering well from what has been a period ofconsiderable disruption and we expect normal order patterns to be fully restoredby the middle of the year. Order intake for the first two months of this year isahead of the equivalent period last year. Revenues in 2008 are expected to be atsimilar levels to last year, with a resumption of growth expected in early 2009.Our organisation has worked hard to put corrective actions in place,implementing rigorous compliance procedures and terminating a number of employeecontracts. Looking to the future for IMI as a whole, I am delighted with the strength anddepth of our new products pipeline, and by the quality and breadth of our keyaccount relationships. Our focus remains on attracting and retaining the bestpossible talent to help us take full advantage of the considerable opportunitiesavailable to us. OUTLOOK Trading in the first two months of this year has been encouraging, with organicsales up over 7% and order intake in all our business divisions comfortablyahead of last year. The order book at the end of February was 13% up on last year. Generally our customers in industrialised economies continue to have confidencein their medium term prospects and the strong momentum in emerging markets hasbeen maintained. Providing end markets remain supportive, the combination of afull new products pipeline, strong emerging markets growth, and lower operatingcosts arising from our recent restructuring programme should enable us to makefurther good progress in 2008. CHIEF EXECUTIVE'S REVIEW 2007 was another encouraging year for the business, with organic sales growth ofnearly 7% and further good progress towards our long term operating margintarget of 15%. The contribution to both sales and margin improvement from our cumulativeinvestments in new products was particularly pleasing. Amongst the many newproduct highlights for the year were advanced new actuator and valve controls insupport of a new generation of nuclear power plants; new door operating systemsfor Siemens for use on their high speed trains; balanced heating and coolingsystems in high profile buildings such as the Burj Tower and Heathrow Terminal5; new refrigeration technology which reduces the energy consumption oftraditional drinks dispense equipment by up to 40%; a new cold beer station fora UK nationwide roll out of a super chilled beer for Coors; and breakthroughadvances in the use of LED lighting for substantially improving the impact ofmerchandising displays used in the cosmetics industry. Equally pleasing was the contribution from our activities in the emergingmarkets of Asia, East Europe and Latin America, where sales collectively grew byover 20% in the year and now account for 17% of Group revenues. China, Mexico,and the Czech Republic are now also central to our manufacturing capability,accounting for over 30% of Group wide manufacturing capacity, growing to anestimated 40% by the end of next year once our 3 year programme of factoryrestructuring, which began in 2006, has been completed. Operating margins areexpected to have improved by around 150 basis points as a result of thisprogramme. Fluid Controls delivered another strong set of results, with organic salesgrowth of 7% and operating margins improving to 14.5%. End markets in the energysector in particular remained buoyant, and new products contributedsignificantly to year on year growth. Within Retail Dispense, both the Beverage and Merchandising business exhibitedsigns of improvement, collectively delivering organic sales growth of 5% overlast year, and improving operating margins by around 25 basis points, helped byhigher margin new products and a growing contribution from our low costmanufacturing initiatives. Operating cash conversion at 87% was encouraging given the inevitable disruptionassociated with factory restructuring. Our balance sheet remains in good shape,with net debt at around 1 x EBITDA. We are well positioned to fund furtheracquisitions and a continuation of our share buyback programme which started in2005. Kloehn and Pneumatex, acquired in the second half of 2007, performed welland, given their exposure to favourable end markets, we expect an acceleratingcontribution in the years ahead. With its leading market positions in clearly defined global niches, strongcustomer relationships, a vibrant new products programme, reliable and recurringrevenues from the aftermarket, an increasing exposure to fast growing emergingmarkets, and accelerating cost benefits from a largely implemented factoryrestructuring programme, the Group is well placed to continue its progress ofrecent years. FINANCIAL AND OPERATIONS REVIEW Results summary The results have been presented using accounting policies consistent with thoseapplied for the year ended 31 December 2006. Revenue increased 6% to £1,599m (2006: £1,505m) including acquisitions whichcontributed £42m or 3%. Operating profit, before restructuring, investigation costs, intangibleamortisation and other income, was £210.8m, an increase of 10%. Operating marginimproved from 12.7% last year to 13.2%. Acquisitions contributed £6.5m at thislevel. Operating profit, after restructuring costs of £22m, Severe Serviceinvestigation costs of £4.9m, intangible amortisation of £13.9m and other incomeof £1.7m, was £171.7m (2006: £155.1m). At this date it is not possible to assessthe level of any fines, defence or other costs arising from any action which maybe taken in connection with the Severe Service investigation or the timing ofany such action and accordingly no provision has been made for them in theseaccounts. Interest costs on net borrowings were £12.8m (2006: £7.5m). After offsetting thepension fund financing credit (IAS19) and the gain on remeasurement of financialinstruments (IAS39) the net financing costs were £0.7m (2006: income of £3.1m). Profit before tax on continuing businesses was £171.0m (2006: £158.2m). Theeffective tax rate for the Group was unchanged from 2006 at 31%. Adjusted earnings per share on continuing businesses (excluding restructuring,investigation costs, intangible amortisation, other income and the change in thefair value of financial instruments) was 42.5p (2006: £38.3p), an increase of11%. The basic earnings per share, after the profit net of tax in respect ofdiscontinued operations was 35.4p (2006: 21.4p). Exchange rates If average exchange rates had remained at 2006 levels, our reported 2007 revenueand profit growth would each have been 3% higher. The Euro strengthenedsignificantly later in the year. If current exchange rates of US$1.97 and €1.33had been applied to our 2007 results, it is estimated that revenue would havebeen £94m higher and profit before tax £13m higher. Discontinued operations The IMI Refiners business was a part of the previously owned Building ProductsGroup. The profit, net of tax, on the disposal of the land that was the formersite for this business was £1.9m. Cash flow Operating cash flow (see note 9) was £160m, 87% of operating profit beforeintangible amortisation and other income. Corporate activity comprisingacquisitions, share issues and share buy backs accounted for an outflow of£137m. After interest, tax, the additional pension scheme contribution andpayment of the European Commission fine levied in 2006 and dividends of £64m,the net cash outflow was £140m. Balance sheet Net assets at 31 December 2007 were £412.9m and shareholders' equity was£406.5m. Shareholders' equity declined during 2007 by £6.2m, comprising mainlythe profit for the year of £119.9m, the after tax actuarial gains on definedbenefit plans of £21.5m, less dividends paid of £63.9m and the purchase of thecompany's own shares, £93.3m. Intangible assets at 31 December 2007 were£314.7m, property plant and equipment totalled £207.9m and current assets lesscurrent liabilities were £295.4m. The pension fund deficit under IAS19 at 31 December 2007 was £64m, a £57mimprovement on the prior year mainly due to the increase in the value of thepension assets and the additional £16m contribution made in the year. Closingnet debt was £233m. In the following analysis, operating profit and margin are stated beforerestructuring, investigation costs, intangible amortisation and other income.Organic growth rates exclude the impact of foreign exchange movements andacquisitions. Severe Service Revenue £362m (2006: £300m)Operating profit £56.0m (2006: £45.1m)Operating margin 15.5% (2006: 15.0%) Severe Service revenue, excluding acquisitions and exchange rate movements, grewat 18%. All end markets remain buoyant with the strongest growths in NorthAmerica and the emerging markets, especially in the Middle East. Oil and gas markets remain firm. Orton, a supplier of high technology valves tothe LNG market, grew revenues at over 50%. We took possession of the new Ortonfactory in October and have commenced fitting it out which, when complete, willdouble its capacity. Revenues from the conventional power market, and particularly in the USA, showedgood growth. In the nuclear power sector specification work for new powerstations is picking up and we are investing heavily in nuclear engineering andcertification from a strong existing technical base. We have manufacturingcapability for the nuclear industry in our facilities in the US, Switzerland, UK,Canada, Japan and Korea. We ended 2007 with a strong order book. Fluid Power Revenue £571m (2006: £557m)Operating profit £76.3m (2006: £72.4m)Operating margin 13.4% (2006: 13.0%) Underlying revenue growth in Fluid Power was around 6% before the impact, asexpected, of the 40% downturn in our North American truck business, whichreduced overall organic growth to 2%. Our sector businesses, where we bring engineered solutions for specificapplication needs of major customers in the commercial vehicle, life science,PET bottling, printing and rail industries, have continued to perform well and,excluding US trucks, grew at 10%. Within these sectors, our commercial vehiclebusiness outside the US, and our PET bottling businesses, demonstratedparticularly good growth. The remainder of the Fluid Power business providespneumatic motion control products to a broad set of industrial customers. Inthese markets, while the Americas were broadly flat, European revenues grewabout 8%. 2007 operating profit was £76.3m (2006: £72.4m) and represents a 13.4% operatingmargin (2006: 13%). During 2007, £14m of costs were charged to continue therestructuring of the Fluid Power cost base. One US site has now moved productionto an enlarged established Mexican facility, a further UK site closure wasannounced and that production is being transferred to an existing facility inthe Czech Republic and to the Mexican facility. A further rationalisation sawproduction move from Switzerland to the Czech Republic. The resultant costbenefits will be accruing more fully in 2008 and beyond. Whilst we remain alert to the possibility of a slowdown in certain industrialmarkets, order intake in the first two months of the year has been encouraging.The US truck market is expected to recover sharply in 2008 and current orderpatterns and industry intelligence support that view. The Kloehn acquisition, completed in June 2007, strengthens our capabilities inthe life sciences sector. Indoor Climate Revenue £207m (2006: £186m)Operating profit £32.9m (2006: £29.5m)Operating margin 15.9% (2006: 15.9%) The Indoor Climate organic revenue growth was 7%. Growth did slow in the secondhalf of the year to 1% after a particularly strong first half. The majority ofthe increased cost of copper, which represents a significant part of the cost ofthe valves, was passed on in selling prices. The underlying volume growth in thebalancing valve business remains firm and was particularly strong in Europe. There was, however, a significant downturn in our thermostatic radiator valvebusiness in Germany during the second half, following a sharp fall in the numberof residential building permits issued earlier in the year. Permits have pickedup from their low point, however, and our sales of TRVs would now appear to berecovering, albeit not yet up to the same levels as the early part of 2007.Sales in the emerging markets of Eastern Europe maintained their strongdevelopment of recent years. 2007 operating profit was £32.9m (2006: £29.5m), representing an operatingmargin of 15.9% (2006: 15.9%). We increased our investment in customer training, with 32,000 industryprofessionals around the world receiving training in Indoor Climate hydronicbalancing technologies in 2007, encouraging additional demand for our productsand services. The acquisition of Pneumatex, with its complementary productrange, enhances our offering in this field. It made a strong contribution in itsfirst few months in the Group and has already made inroads into new marketspreviously beyond its reach. Beverage Dispense Revenue £285m (2006: £282m)Operating profit £25.6m (2006: £25.4m)Operating margin 9.0% (2006: 9.0%) The organic growth for the year was 6% in Beverage Dispense. Both the Asia Pacific market and Eastern European market returned strongperformances. The US market did show some signs of improvement in the secondhalf, in particular in the "health and wellness" categories to a variety ofretailers. The beer market in the UK remained challenging, however. We had a pleasing contribution to growth from new products in 2007. We remainconfident of the new product opportunities in the growing health and wellnessdrinks categories such as water, juices, dairy, smoothies and frozen drinks andhave an extensive new product development programme addressing many of theseneeds. Operating profits for the year were £25.6m (2006: £25.4m) representing anunchanged operating margin of 9% (2006: 9%). The Beverage team closed twosignificant factories in 2007, on time and to budget, and we expect to see thebenefits from this consolidation flowing through in 2008 and beyond. We alsotrebled the floor area of our factory in China and increased our manufacturingin low cost economies to half of our total manufacturing output for thisbusiness. Merchandising Revenue £174m (2006: £180m)Operating profit £20.0m (2006: £19.4m)Operating margin 11.5% (2006: 10.8%) The organic growth for the year was 4% with a number of shipments originallyslated for December delivery rescheduled to early 2008. The strongest sectorperformance in 2007 came from cosmetics with some significant European successesand some promising inroads being made into the US market. Solid progress wasmade in the food and beverage sectors, while the automotive sector held up well,supported by a strong commitment to merchandising from the car manufacturers.Sales within our consumer electronics sector however were disappointing, with anumber of new launches failing to deliver the anticipated momentum. Theopportunities in this sector, however, remain considerable. Second half operating margins increased to nearly 13%, with our cost basecontinuing to benefit from value engineering programmes in general and from afocus on low cost sourcing in China and India in particular. With strong shipments in the first two months of 2008, momentum remainspositive. CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2007 Notes 2007 2006 £m £m ------------------Revenue 1, 2 1,599 1,505 ------------------Operating profit before restructuring, investigation costs, intangible amortisation and other income 210.8 191.8Restructuring costs (22.0) (19.7)Severe Service investigation costs (4.9) -Intangible amortisation (13.9) (17.0)Other income 1.7 - ------------------Operating profit 2, 3 171.7 155.1 Financial income 5 81.1 73.8Financial expense 5 (81.8) (70.7) ------------------Net financial (expense)/income 5 (0.7) 3.1 ------------------ Profit before tax--------------------------------------------------------------------------------Before restructuring, investigation costs, intangible amortisation and other income 210.1 194.9Restructuring costs (22.0) (19.7)Severe Service investigation costs (4.9) -Intangible amortisation (13.9) (17.0)Other income 1.7 ---------------------------------------------------------------------------------Total 171.0 158.2 Taxation 6--------------------------------------------------------------------------------UK taxation (10.5) (6.5)Overseas taxation (42.5) (42.5)--------------------------------------------------------------------------------Total (53.0) (49.0) Profit of continuing operations after tax 118.0 109.2 Gain/(loss) from discontinued operations (net of tax) 1.9 (33.5) ------------------Total profit for the year 119.9 75.7 ================== Attributable to:Equity shareholders of the Company 117.0 72.7Minority interest 2.9 3.0 ------------------Total profit for the year 119.9 75.7 ================== Earnings per share 7Basic earnings per share 35.4p 21.4pDiluted earnings per share 35.3p 21.3p Basic earnings per share (continuing operations) 34.8p 31.3pDiluted earnings per share (continuing operations) 34.7p 31.1p CONSOLIDATED BALANCE SHEET at 31 December 2007 2007 2006 Restated £m £m ------------------------AssetsIntangible assets 314.7 286.8Property, plant and equipment 207.9 190.3Employee benefit assets 1.3 0.7Deferred tax assets 37.2 55.8 ------------------------Total non-current assets 561.1 533.6 ------------------------ Inventories 252.0 217.4Trade and other receivables 332.6 295.2Current tax 1.9 8.7Investments 14.4 15.0Cash and cash equivalents 106.5 107.2 ------------------------Total current assets 707.4 643.5 ------------------------Total assets 1,268.5 1,177.1 ------------------------ LiabilitiesBank overdraft (29.1) (3.6)Interest-bearing loans and borrowings (5.0) (43.3)Provisions (6.9) (6.2)Current tax (21.0) (18.2)European Commission fine - (33.5)Trade and other payables (350.0) (322.0) ------------------------Total current liabilities (412.0) (426.8) ------------------------ Interest-bearing loans and borrowings (305.5) (140.7)Employee benefit obligations (64.9) (121.3)Provisions (34.0) (34.3)Deferred tax liabilities (18.8) (15.5)Other payables (20.4) (21.9) ------------------------Total non-current liabilities (443.6) (333.7) ------------------------Total liabilities (855.6) (760.5) ------------------------Net assets 412.9 416.6 ------------------------ EquityShare capital 84.6 90.3Share premium 163.3 155.2Other reserves 6.8 (0.4)Retained earnings 151.8 167.6 ------------------------ Total equity attributable to equity shareholders of the Company 406.5 412.7Minority interest 6.4 3.9 ------------------------Total equity 412.9 416.6 ------------------------ CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 December 2007 2007 2006Cash flows from operating activities £m £m ------------------------ Profit for the period 119.9 75.7 Adjustments for: Depreciation 35.9 38.7 Amortisation 13.9 17.0 (Profit)/loss from discontinued operations (net of tax) (1.9) 33.5 Other income - disposal of business (1.7) - Gain on sale of property, plant and equipment (0.1) (2.0) Financial income (81.1) (73.8) Financial expense 81.8 70.7 Equity-settled share-based payment expenses 3.1 2.9 Income tax expense 53.0 49.0 Increase in trade and other receivables (12.6) (30.9) Increase in inventories (18.6) (14.8) Increase in trade and other payables 20.5 19.0 (Decrease)/increase in provisions and employee benefits (6.6) 1.3 ------------------------Cash generated from the operations 205.5 186.3 Income taxes paid (37.1) (40.0) ------------------------ 168.4 146.3 Additional pension scheme funding (15.6) (15.6) European Commission fine (32.8) - ------------------------Net cash from operating activities 120.0 130.7 ------------------------ Cash flows from investing activities Interest received 7.2 8.4 Proceeds from sale of property, plant and equipment 8.3 7.7 (including £1m from discontinued operations) Sale of investments 0.1 0.1 Purchase of investments (1.2) (2.6) Acquisition of subsidiaries net of cash acquired (52.2) (118.4) Disposal of businesses (net of cash disposed) 2.0 - Redemption of vendor loan note re Polypipe - 35.9 Acquisition of property, plant and equipment (49.9) (39.7) Capitalised development expenditure (3.2) (4.4) ------------------------Net cash from investing activities (88.9) (113.0) ------------------------ Cash flows from financing activities Interest paid (19.9) (17.0) Purchase of own shares (93.3) (42.4) Proceeds from the issue of share capital for employee share schemes 8.7 6.5 Drawdown of borrowings 110.7 7.4 Dividends paid to minority interest (2.4) (2.1) Dividends paid (63.9) (60.7) ------------------------Net cash from financing activities (60.1) (108.3) ------------------------ Net decrease in cash and cash equivalents (29.0) (90.6)Cash and cash equivalents at start of the year 103.6 182.0Effect of exchange rate fluctuations on cash held 2.8 12.2 ------------------------Cash and cash equivalents at end of the year 77.4 103.6 ------------------------ Notes to the cash flow appear in note 9 CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE 2007 2006 £m £m ------------------------- Foreign currency translation differences (1.0) (9.6)Actuarial gains on defined benefit plans 21.5 23.3Change in fair value of other financial assets 4.2 -Effective portion of change in fair value of net investment hedges (2.3) 1.9 -------------------------Income and expense net of tax recognised directly in equity 22.4 15.6 Profit for the year 119.9 75.7 -------------------------Total recognised income and expense for the year 142.3 91.3 ------------------------- Attributable to: Equity shareholders of the Company 139.4 88.3 Minority interest 2.9 3.0 -------------------------Total recognised income and expense for the year 142.3 91.3-------------------------------------------------------------------------------- Note of changes in shareholders' equity 2007 2006 £m £m ------------------------- Shareholders' equity at start of the year 412.7 417.6 Total recognised income and expense for the year 139.4 88.3 Dividends paid (63.9) (60.7)Share based payments (net of tax) 2.9 3.4Issue of ordinary shares net of costs 8.7 6.5Purchase of own shares (93.3) (42.4) ------------------------- (145.6) (93.2) ------------------------- Shareholders' equity at end of the year 406.5 412.7 ------------------------- NOTES RELATING TO THE FINANCIAL STATEMENTS 1. Segmental analysis Segment information is presented in the consolidated financial statements inrespect of the Group's continuing operating segments, which are the primarybasis of segment reporting. The operating segment reporting format reflects theGroup's management and internal reporting structure. Adjusted operating Revenue profit * Operating profit 2007 2006 2007 2006 2007 2006BY ACTIVITY £m £m £m £m £m £m -------------- ------------------- -----------------Fluid Controls 1,140 1,043 165.2 147.0 133.8 116.6 -------------------------------------------------------------------------------------------- Severe Service 362 300 56.0 45.1 44.2 33.4 Fluid Power 571 557 76.3 72.4 57.9 55.9 Indoor Climate 207 186 32.9 29.5 31.7 27.3 --------------------------------------------------------------------------------------------Retail Dispense 459 462 45.6 44.8 37.9 38.5 -------------------------------------------------------------------------------------------- Beverage Dispense 285 282 25.6 25.4 17.4 22.0 Merchandising Systems 174 180 20.0 19.4 20.5 16.5 --------------------------------------------------------------------------------------------Total continuing operations 1,599 1,505 210.8 191.8 171.7 155.1 -----------------------------------------------Net financial (expense)/income (0.7) 3.1Taxation (53.0) (49.0) -----------------Profit of continuing operations after tax 118.0 109.2-----------------------------------------------------------------------------------------------* Before restructuring, investigation costs, intangible amortisation, and other income REVENUE BY GEOGRAPHICAL DESTINATION 2007 2006 £m £m --------------UK 188 173Germany 209 194Rest of Europe 423 376USA 460 490Asia/Pacific 202 183Rest of World 117 89 --------------Total continuing operations 1,599 1,505 -------------- 2. Acquisitions Acquisitions completed in the year were the business of Kloehn Company Ltd(Kloehn), a leading US provider of specialist pumping and fluid handling systemsfor the medical sector, acquired on 29 June 2007 and reported within FluidPower, and a 70% share in Pneumatex AG (Pneumatex), a specialist provider ofwater conditioning equipment for building heating, cooling and related systems,on 28 September 2007 and reported within Indoor Climate. Of the reported increase in revenue and operating profits of continuingbusinesses (before restructuring, investigation costs, intangible amortisationand other income), £15m and £1.8m respectively result from these acquisitions.The extra months of the prior year acquisitions of Truflo, reported withinSevere Service and Fluid Power, contributed £27m and £4.7m of revenue andoperating profit respectively. 3. Other income In December 2007 the Company sold its interest in Imagine, a Hong Kong basedmerchandising business, realising a profit of £1.7m. 4. Discontinued operations The Company made a profit of £1.9m (net of tax) on the disposal of land onceoccupied by the previously discontinued business of IMI Refiners. In September 2006, the European Commission announced the imposition of a fine of€48.3m on IMI in relation to its former copper fittings business, which was soldin 2002. Pending the outcome of an appeal, the full amount of the fine togetherwith associated costs was provided in 2006 as a loss on discontinued operations(net of tax). The fine was paid in January 2007. 5. Net financial income & expense 2007 2006 Interest Other Total Interest Other Total £m £m £m £m £m £m --------------------------------------------------------- Interest income 7.4 7.4 5.5 5.5Increase in fair value of financialinstruments: Designated hedges 0.8 0.8 2.4 2.4 Other economic hedges 3.3 3.3 2.9 2.9Expected return on defined benefit pension 63.0 63.0 plan assets 69.6 69.6 ---------------------------------------------------------Financial income 7.4 73.7 81.1 5.5 68.3 73.8 --------------------------------------------------------- Interest expense (20.2) (20.2) (13.0) (13.0)Reduction in fair value of financialinstruments: Designated hedges (0.9) (0.9) (2.0) (2.0) Other economic hedges (1.6) (1.6) (1.0) (1.0)Financial cost of defined benefit pension scheme liabilities (59.1) (59.1) (54.7) (54.7) ---------------------------------------------------------Financial expense (20.2) (61.6) (81.8) (13.0) (57.7) (70.7) ---------------------------------------------------------Net financial (expense)/ income (12.8) 12.1 (0.7) (7.5) 10.6 3.1 --------------------------------------------------------- 6. Taxation The effective tax rate on profit before tax is 31% (2006: 31%). 7. Earnings per ordinary share The weighted average number of shares in issue during the period, net of sharespurchased by the company and held as treasury shares or to satisfy share optionvesting, was 330.7m, 331.8m diluted for the effect of outstanding share options(2006: 339.3m, 341.3m diluted). Basic earnings per share have been calculated onearnings of £117.0m, (2006: £72.7m) and the equivalent ratios for continuingoperations have been calculated on earnings of £115.1m (2006: £106.2m), beforegain/(loss) from discontinued operations (net of tax). The directors consider that adjusted earnings per share figures, using earningsas calculated below, give a more meaningful indication of the underlyingperformance because either the quantum, the one off nature, or the volatility ofthese items would otherwise distort the underlying performance. From continuing operations 2007 2006 £m £m --------------------Profit for the year after tax 118.0 109.2Minority interest (2.9) (3.0) -------------------- 115.1 106.2Charges/(credits) included in profit for the year: Change in fair value of financial instruments (1.6) (2.3) Intangible amortisation 13.9 17.0 Restructuring costs 22.0 19.7Severe Service investigation costs 4.9 -Other income (1.7) - Taxation on charges/(credits) included in profit before tax (11.9) (10.7) --------------------Earnings for adjusted EPS 140.7 129.9 --------------------Weighted average number of shares 330.7m 339.3m --------------------Adjusted EPS 42.5p 38.3p --------------------Diluted adjusted EPS 42.4p 38.1p -------------------- 8. Dividend The directors recommend a final dividend of 12.7p per share (2006: 11.7p)payable on 23 May 2008 to shareholders on the register at close of business on11 April 2008, which will absorb around £41m (2006: £39.2m). Together with theinterim dividend of 7.5p per share paid on 19 October 2007, this makes a totaldistribution of 20.2p per share (2006: 18.7p per share). In accordance withIAS10: 'Events after the Balance Sheet date', this final proposed dividend hasnot been reflected in the 31 December 2007 balance sheet. 9. Cash flow reconciliations Reconciliation of cash generated from the operations 2007 2006Reconciliation of operating cash flow £m £m -------------------- Cash generated from the operations 205.5 186.3 Sale of property, plant and equipment 8.3 7.7 Net purchase of investments (1.1) (2.5) Acquisition of property, plant and equipment (49.9) (39.7) Capitalised development expenditure (3.2) (4.4) -------------------- Operating cash flow 159.6 147.4 -------------------- Reconciliation of net cash to movement in net borrowings Net decrease in cash and cash equivalents (29.0) (90.6) Drawdown of borrowings (110.7) (7.4) -------------------- Cash outflow (139.7) (98.0) Currency translation differences (13.0) 28.2 -------------------- Movement in net borrowings in the year (152.7) (69.8) Net borrowings at the start of the year (80.4) (10.6) -------------------- Net borrowings at the end of the year (233.1) (80.4) -------------------- 10. Restatement 2006 comparative figures have been restated where appropriate to show separatelythe employee benefit net assets and the employee benefit net obligations in thebalance sheet. 11. Exchange rates The income statements of overseas operations are translated into sterling ataverage rates of exchange for the year, balance sheets are translated at yearend rates. The most significant currencies are the Euro and the US Dollar - therelevant rates of exchange were: Average Rates Balance Sheet Rates 2007 2006 2007 2006 --------------------- --------------------Euro 1.46 1.47 1.36 1.48US Dollar 2.00 1.85 1.99 1.96 The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31 December 2007 or 2006 but is derivedfrom the 2007 accounts. Statutory accounts for 2006 have been delivered to theregistrar of companies and those for 2007 will be delivered in due course. Theauditor has reported on those accounts; its reports were (i) unqualified, (ii)did not include references to any matters to which the auditor drew attention byway of emphasis without qualifying its reports and (iii) did not containstatements under section 237(2) or (3) of the Companies Act 1985. The Company's 2007 Annual Report and notice of the forthcoming Annual GeneralMeeting will be posted to shareholders on 3 April 2008. - 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 Financial - Tel: 020 7067 0700 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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