3rd Sep 2007 07:01
IMI PLC03 September 2007 3 September 2007 IMI plc 2007 First Half Results IMI plc, the international engineering group, today announced its interimresults for the six months ended 30 June 2007. 2007 2006 % change Revenue £781m £732m +7Operating profit * £95.6m £85.9m +11Profit before tax * £95.5m £88.1m +8Adjusted earnings per share ** 19.2p 16.9p +14Basic earnings per share 15.4p 14.5p +6 Restructuring costs £10.9m £7.7m Dividend 7.5p 7.0p +7 * before restructuring costs and intangible amortisation. ** before restructuring costs, change in fair value of financial instruments and intangible amortisation. Norman Askew, Chairman of IMI, commented: "This is a strong set of results with an organic revenue growth, excluding theimpact of exchange rates and acquisitions, of 8%. End markets remain broadlypositive and we are benefiting from our cumulative investments of recent yearsin new products and emerging markets. We remain confident of further progress inthe remainder of this year." 2007 INTERIM REVIEW Introduction In the first half of 2007 IMI has seen encouraging momentum with an organicrevenue growth of 8%. Operating profits, including the contribution fromacquisitions, increased by 11%, and 17% on a constant currency basis. Theoperating margin for the period was 12.2%, against 11.7% in the first half of2006. We completed the acquisition of Kloehn at the end of June, which strengthens ourpresence within the medical sector of our Fluid Power business. We are now halfway through our three year £60m restructuring programme and remain on track todeliver the expected margin improvements. The on-market share buy back programmeis also proceeding, which together with our acquisitions activity, will raisenet debt levels to between £400m and £500m over the next few years. The Board has decided to increase the interim dividend by 7.1% to 7.5p (2006:7.0p). Results summary Revenues increased 7% to £781m, which includes a contribution of £27m fromacquisitions. Sterling was about 10% stronger against the US Dollar than in thefirst half of 2006 and exchange rate movements have depressed our reportedrevenue growth by 5 percentage points and our profits growth by 6 points.Operating profit before restructuring costs and intangible amortisation was£95.6m, an increase of 11% on the prior period. Acquisitions contributed £5.1mto these profits. Interest costs on net borrowings were £5.6m and were covered 15 times. The IAS19 pension financing credit was £5.3m and the change in fair value of financialinstruments under IAS39 was a credit of £0.2m. The total net financing cost was£0.1m, compared to a credit of £2.2m in 2006. Profit before tax, restructuring costs and intangible amortisation was £95.5m,an increase of 8% on the prior period and 14% on a constant currency basis.Restructuring costs were £10.9m and relate to announcements made to transfermore production from the US, UK, and Switzerland to lower cost economies inMexico, The Czech Republic and China. Intangible amortisation was £7.8m andpredominantly relates to acquired intangibles. Profit before tax was £76.8m, anincrease of 2%. The estimated effective tax rate for 2007 is 31%, which compares to the rate of32% applied for the first half of 2006. Adjusted earnings per share, which excludes restructuring costs, intangibleamortisation and the change in fair value of financial instruments, was 19.2p,compared to 16.9p, an increase of 14%. Basic earnings per share was 15.4p, up 6%on the prior period's 14.5p. Cash flow The operating cash flow was £49m (2006: £34m). Tax (£18m), the settlement of theEuropean Commission fine levied in respect of a former plumbing fittingsbusiness which was sold in 2002 (£33m), acquisitions (£35m), dividends (£39m)and share buy backs (£41m) absorbed £166m. The total cash outflow for the periodwas £118m. Balance sheet Closing net debt was £192m (June 2006: £130m). The debt to annualised EBITDAratio at the end of June was 0.92. Shareholders' equity at the end of June was £445m, an increase of £33m since theend of last year, which includes the profit for the period (£51m) less the 2006final dividend (£39m) paid in May, share buy backs (£41m) and an actuarial gainnet of tax on the defined benefit pension plans of £54m. Severe Service investigation As announced on 16 August, the company has initiated an independentinvestigation into possible irregular payments associated with certain tradingcontracts entered into by its Severe Service business, which may be in breach ofthe law and the Company's policies and practices. At this early stage, it is notpossible to estimate the amount of possible fines and other liabilitiesassociated with this investigation and, as such, no provision has been made inthese accounts. The investigation is not expected to have a material impact ontrading for 2007. There will be costs associated with the investigation itselfand it is difficult to give a precise estimate of these costs at this earlystage. Our provisional estimates are currently of the order of £5m, the bulk ofwhich will be incurred in the second half of 2007. Operations review The following review of our business areas for the six months to 30 June 2007compares the performance of our operations with the six month period to 30 June2006. Operating profit is stated before restructuring costs and intangibleamortisation. Severe Service Revenues in the first half were up 34% to £171m (2006: £128m) and operatingprofit rose 60% to £26.1m (2006: £16.3m). Both our power and oil and gas markets remain buoyant and we have seen strongorder growth in the Americas. The planned rebalancing of our 2007 shipmentprofile to lessen the weighting towards the second half resulted in an organicrevenue growth of 24%. Order intake grew at about 15% in the period. The Truflobusiness acquired in April 2006 continues to perform well, particularly insupplying highly engineered valves for Liquefied Natural Gas plants. The Severe Service operating profit margin was 15.3% benefiting from the strongfirst half volume growth and compares to the prior period margin of 12.7%. Fluid Power Revenues in the first half were in line with last year at £282m (2006: £281m) aswas operating profit at £35.7m (2006: £35.7m). The organic growth in revenues was 2%. Our sector business selling customisedpower train and chassis and cab controls to North American truck manufacturerswas down broadly in line with that market by nearly 40%. The organic growth inthe remainder of our Fluid Power business was between 5% and 6%. The Europeancommercial vehicle business, together with our other target sectors, ismaintaining strong momentum. Our non-sector business has enjoyed good growth inContinental Europe while the US market has softened. The operating profit margin was unchanged from the prior period at 12.7%. Therestructuring programme within Fluid Power is now at its peak with the transferof production from the US Denver site to Mexico nearing completion and transfersfrom one UK and one Swiss site to The Czech Republic well underway. Thisprogramme has involved some parallel production that has held back the margindevelopment. Indoor Climate Revenues in the first half were up 10% to £97m (2006: £88m) and operating profitrose 15% to £14.0m (2006: £12.2m). Organic revenue growth was 12% in the period. Price increases to recover sharplyhigher metal costs have contributed about one half of this organic revenuegrowth. The balancing valve business demonstrated good volume growth in allgeographies with a useful contribution from new products. Our thermostaticradiator valve business has shown some good growth in Eastern Europe but therehas been a marked slowdown in the German market which has moderated the overallprogress in this segment of our business. The operating profit margin was 14.4% compared with 13.9% in the prior period. Beverage Dispense Revenues in the first half were £147m (2006: £147m) and operating profitdeclined by 14% to £11.4m (2006: £13.2m). Organic revenue growth was 7%, reflecting particularly strong shipments in June.There was a strong performance in Continental Europe and Asian markets. The USmarket was more mixed with some return to previous buying patterns within theQuick Service restaurant sector offset by a general slowdown in the conveniencesector. The UK market remains challenging. The operating profit margin was 7.8%. However, adjusting for the £2m financialimpact of the flood of our UK Sheffield site in late June, the underlying marginwas about 9%, in line with that of the prior period. Closures of a US and a UKsite were announced in early 2007 and their restructuring continues alongside anexpansion of our facility in Tianjin, China. Merchandising Systems Revenues in the first half were £84m (2006: £88m) with operating profit at £8.4mbroadly flat compared to last year. As about 80% of this business is in North America the weaker US dollar impactedreported revenues; the underlying organic revenue growth was 4%. The cosmeticsand grocery sectors saw good growth and there was some improvement in theautomotive sector while the food and beverage sector was more mixed. The orderbook benefited from a number of major contract wins during the period, withshipments scheduled for the back end of 2007 into 2008. The operating profit margin was 10%, up slightly on the 9.7% from thecorresponding period last year. The margin development was held back somewhat bythe impact of higher metal costs on certain of the older product lines. Outlook The oil, gas and power markets for Severe Service remain buoyant, as do theContinental European and Asian markets for our Fluid Power business, while thegeneral fluid and motion control market in the US is more subdued. The balancingvalve business within Indoor Climate continues to see good prospects in Europe,Middle East and Asia, although the German radiator valve market is clearlyweakening. The Beverage Dispense business should continue to make progress butshipment growth may slow a little in the second half. The order book withinMerchandising is building and includes some new orders for our US cosmeticsbusiness. While metal prices remain volatile and other cost pressures persist,margin benefits from our restructuring programme should come through later thisyear. We do not, at this stage, expect the Severe Service investigation to havea material impact on trading for 2007 albeit there will be costs associated withthe investigation itself. Overall, we remain confident of continued progress inthe remainder of the year. CONSOLIDATED INTERIM INCOME STATEMENT Notes 6 months to 6 months to Year to 30 June 2007 30 June 2006 31 Dec 2006 (unaudited) (unaudited) £m £m £m __________________________________________ Revenue 1,2 781 732 1,505 __________________________________________ Operating profit before restructuring costs and intangible amortisation 95.6 85.9 191.8Restructuring costs (10.9) (7.7) (19.7)Intangible amortisation (7.8) (5.1) (17.0) __________________________________________ Operating profit 1,2 76.9 73.1 155.1 Financial income 3 40.0 39.6 73.8Financial expense 3 (40.1) (37.4) (70.7) __________________________________________ Net financial (expense)/income 3 (0.1) 2.2 3.1 Profit before tax ____________________________________________________________________________________________ Before restructuring costs and intangible amortisation 95.5 88.1 194.9 Restructuring costs (10.9) (7.7) (19.7)Intangible amortisation (7.8) (5.1) (17.0)____________________________________________________________________________________________Total 76.8 75.3 158.2 Taxation 4 ____________________________________________________________________________________________ UK taxation (2.6) (2.6) (6.5)Overseas taxation (21.3) (21.5) (42.5)____________________________________________________________________________________________ Total (23.9) (24.1) (49.0) Profit of continuing businesses after tax 52.9 51.2 109.2 Loss from discontinued operations (net of tax) 5 - - (33.5) __________________________________________ Total profit for the period 52.9 51.2 75.7 __________________________________________ Attributable to: Equity shareholders of the Company 51.3 49.5 72.7Minority interest 1.6 1.7 3.0 __________________________________________ Total profit for the period 52.9 51.2 75.7 __________________________________________ Earnings per share 6 Basic earnings per share 15.4p 14.5p 21.4pDiluted earnings per share 15.3p 14.4p 21.3pBasic earnings per share (continuing businesses) 15.4p 14.5p 31.3p Diluted earnings per share (continuing businesses) 15.3p 14.4p 31.1p CONSOLIDATED BALANCE SHEET 30 June 30 June 31 Dec 2007 2006 2006 (unaudited) (unaudited) £m £m £m _____________________________________ Assets Intangible assets 317.9 286.6 286.8 Property, plant and equipment 188.0 189.7 190.3 Deferred tax assets 32.9 61.0 55.8 _____________________________________ Total non-current assets 538.8 537.3 532.9 _____________________________________ Inventories 244.1 220.9 217.4 Trade and other receivables 324.1 300.6 295.2 Current tax 8.8 19.4 8.7 Investments 15.4 14.0 15.0 Cash and cash equivalents 83.0 114.2 107.2 _____________________________________ Total current assets 675.4 669.1 643.5 _____________________________________ Total assets 1,214.2 1,206.4 1,176.4 _____________________________________ Liabilities Bank overdraft (5.8) (2.2) (3.6) Interest-bearing loans and borrowings (33.0) (17.0) (43.3) Provisions for liabilities and charges 11.1) - (6.2) Current tax (19.3) (25.1) (18.2) European Commission fine - - (33.5) Trade and other payables (348.0) (295.5) (322.0) _____________________________________ Total current liabilities (417.2) (339.8) (426.8) _____________________________________ Interest-bearing loans and borrowings (235.7) (225.4) (140.7) Employee benefits (40.5) (134.9) (120.6) Provisions for liabilities and charges (33.6) (40.3) (34.3) Deferred tax liabilities (19.6) (8.3) (15.5) Other payables (20.0) (22.6) (21.9) _____________________________________ Total non-current liabilities (349.4) (431.5) (333.0) _____________________________________ Total liabilities (766.6) (771.3) (759.8) _____________________________________ Net assets 447.6 435.1 416.6 _____________________________________ Equity Share capital 90.7 90.1 90.3 Share premium 160.6 153.6 155.2 Other reserves (0.1) 3.1 (0.4) Retained earnings 194.1 184.7 167.6 _____________________________________ Total equity attributable to equity shareholders 445.3 431.5 412.7 of the Company Minority interest 2.3 3.6 3.9 _____________________________________ Total equity 447.6 435.1 416.6 _____________________________________ CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS 6 months to 6 months to Year toCash flows from operating activities 30 June 30 June 31 Dec 2006 2007 2006 (unaudited) (unaudited) £m £m £m ______________________________________ Profit for the period 52.9 51.2 75.7 Adjustments for: Depreciation 18.9 19.6 38.7 Amortisation 7.8 5.1 17.0 Loss from discontinued operations (net of tax) - - 33.5 Gain on sale of property, plant and equipment - - (2.0) Financial income (40.0) (39.6) (73.8) Financial expense 40.1 37.4 70.7 Equity-settled share-based payment expenses 1.1 1.4 2.9 Income tax expense 23.9 24.1 49.0 Increase in inventories (27.4) (12.5) (14.8) Increase in trade and other receivables (32.3) (32.4) (30.9) Increase/(decrease) in trade and other payables 24.6 (10.7) 19.0 Increase in provisions and employee benefits 2.4 7.8 1.3 ______________________________________ Cash generated from the operations 72.0 51.4 186.3 Income taxes paid (17.8) (21.0) (40.0) ______________________________________ 54.2 30.4 146.3 European Commission fine (32.8) - - Additional pension scheme funding - - (15.6) ______________________________________ Net cash from operating activities 21.4 30.4 130.7 ______________________________________ Cash flows from investing activities Interest received 3.0 4.6 8.4 Proceeds from sale of property, plant and equipment 1.2 5.4 7.7 Sale of investments - - 0.1 Purchase of investments (0.9) (1.4) (2.6) Acquisition of subsidiaries, net of cash acquired (34.8) (117.1) (118.4) Redemption of vendor loan note re Polypipe - 35.9 35.9 Acquisition of property, plant and equipment (20.8) (18.3) (39.7) Capitalised development expenditure (2.1) (3.2) (4.4) ______________________________________ Net cash from investing activities (54.4) (94.1) (113.0) ______________________________________ Cash flows from financing activities Interest paid (8.4) (7.7) (17.0) Purchase of own shares (41.4) (26.4) (42.4) Proceeds from the issue of share capital for employee share schemes 5.8 4.7 6.5 Drawdown of borrowings 91.7 61.6 7.4 Dividends paid to minority interest (1.9) (1.4) (2.1) Dividends paid (39.2) (37.1) (60.7) ______________________________________ Net cash from financing activities 6.6 (6.3) (108.3) ______________________________________ Net decrease in cash and cash equivalents (26.4) (70.0) (90.6) Cash and cash equivalents at start of period 103.6 182.0 182.0 Effect of exchange rate fluctuations on cash held - - 12.2 ______________________________________ Cash and cash equivalents at end of period 77.2 112.0 103.6 ______________________________________ CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE 6 months to 6 months to Year to 30 June 2007 30 June 2006 31 Dec 2006 (unaudited) (unaudited) £m £m £m ___________________________________________ Foreign exchange translation differences 1.0 (2.9) (9.6)Actuarial gains on defined benefit plans (net of tax) 54.1 25.4 23.3Effective portion of change in fair value of net investment hedges (net of tax) (0.7) (1.3) 1.9 ___________________________________________ Income and expense recognised directly in equity 54.4 21.2 15.6Profit for the period 52.9 51.2 75.7 ___________________________________________ Total recognised income and expense for the period 107.3 72.4 91.3 ___________________________________________ Attributable to: Equity shareholders of the Company 105.7 70.7 88.3 Minority interest 1.6 1.7 3.0 ___________________________________________ Total recognised income and expense for the period 107.3 72.4 91.3 RECONCILIATION OF CHANGES IN SHAREHOLDERS' EQUITY 6 months to 6 months to Year to 30 June 2007 30 June 2006 31 Dec 2006 (unaudited) (unaudited) £m £m £m ____________________________________________ Shareholders' equity at start of the period 412.7 417.6 417.6 Total recognised income and expense for the period 105.7 70.7 88.3 Dividends paid (39.2) (37.1) (60.7) Share based payments (net of tax) 1.7 2.0 3.4 Issue of ordinary shares net of costs 5.8 4.7 6.5 Purchase of own shares (41.4) (26.4) (42.4) ____________________________________________ (73.1) (56.8) (93.2) ____________________________________________ Shareholders' equity at end of the period 445.3 431.5 412.7 ____________________________________________ NOTES TO THE INTERIM FINANCIAL STATEMENTS 1. Segmental analysis Segmental information is presented in the consolidated interim financialstatements in respect of the Group's continuing business segments, which are theprimary basis of segment reporting. The business segment reporting formatreflects the Group's management and internal reporting structures. Inter-segmentrevenue is insignificant. The Group comprises the following main business segments and activities: Severe ServiceDesign, manufacture, supply and service of high performance critical controlvalves and associated equipment for power generation plants, oil & gas producersand other process industries. Fluid PowerDesign, manufacture and supply of motion and fluid control systems, principallypneumatic devices, for original equipment manufacturers in commercial vehicle,medical, print, packaging and other industries. Indoor ClimateDesign, manufacture and supply of indoor climate control systems, principallybalancing valves for large commercial buildings and thermostatic radiator valvesfor residential buildings. Beverage DispenseDesign, manufacture and supply of still and carbonated beverage dispense systemsand associated merchandising equipment for brand owners and retailers. Merchandising SystemsDesign, manufacture and supply of point of purchase display systems for brandowners and retailers. Revenue Operating Profit ______________________________ ______________________________ 6 months 6 months Year 6 months 6 months Year to to to to to to 30 June 30 June 31 Dec 30 June 30 June 31 Dec 2007 2006 2006 2007 2006 2006 £m £m £m £m £m £m ______________________________ ______________________________ Before restructuring costs and intangible amortisation Fluid Controls 550 497 1,043 75.8 64.2 147.0_________________________________________________________________________________________Severe Service 171 128 300 26.1 16.3 45.1Fluid Power 282 281 557 35.7 35.7 72.4Indoor Climate 97 88 186 14.0 12.2 29.5_________________________________________________________________________________________Retail Dispense 231 235 462 19.8 21.7 44.8_________________________________________________________________________________________Beverage Dispense 147 147 282 11.4 13.2 25.4Merchandising Systems 84 88 180 8.4 8.5 19.4_________________________________________________________________________________________Segment result 781 732 1,505 95.6 85.9 191.8_________________________________________________________________________________________ After restructuring costs and intangible amortisation Fluid Controls 60.4 53.3 116.6_________________________________________________________________________________________Severe Service 21.1 13.2 33.4Fluid Power 25.5 28.5 55.9Indoor Climate 13.8 11.6 27.3_________________________________________________________________________________________Retail Dispense 16.5 19.8 38.5_________________________________________________________________________________________Beverage Dispense 8.6 11.8 22.0Merchandising Systems 7.9 8.0 16.5_________________________________________________________________________________________Segment result 76.9 73.1 155.1Net financial (expense) (0.1) 2.2 3.1/income Taxation (23.9) (24.1) (49.0) ______________________________ Profit of continuing operations after tax 52.9 51.2 109.2 ______________________________ 2. Acquisitions of subsidiaries Of the reported increase in revenue and operating profit of continuingoperations (before restructuring costs and intangible amortisation), £27m ofrevenue and £5.1m of profit result from acquisitions. These comprise the 2006acquisitions. The acquisition of Kloehn Company Limited was completed on Friday 29 June 2007and has no effect on the trading results for this period. 3. Financial income and expense 6 months to 30 June 6 months to 30 June Year to 31 Dec 2007 2006 2006 Interest Other Total Interest Other Total Interest Other Total £m £m £m £m £m £m £m £m £m _________________________ _________________________ _________________________ Interest income 3.0 3.0 3.3 3.3 5.5 5.5 Gain on remeasurement of financial instruments 2.4 2.4 5.1 5.1 5.3 5.3 Expected return on defined benefit pension plan assets 34.6 34.6 31.2 31.2 63.0 63.0 _________________________ _________________________ _________________________ Financial income 3.0 37.0 40.0 3.3 36.3 39.6 5.5 68.3 73.8 _________________________ _________________________ _________________________ Interest expense (8.6) (8.6) (6.4) (6.4) (13.0) (13.0) Loss on remeasurement of financial instruments (2.2) (2.2) (4.2) (4.2) (3.0) (3.0) Finance cost of defined benefit pension scheme liabilities (29.3) (29.3) (26.8) (26.8) (54.7) (54.7) _________________________ _________________________ _________________________ Financial expense (8.6) (31.5) (40.1) (6.4) (31.0) (37.4) (13.0) (57.7) (70.7) _________________________ _________________________ _________________________ _________________________ _________________________ _________________________ Net financial (expense)/income (5.6) 5.5 (0.1) (3.1) 5.3 2.2 (7.5) 10.6 3.1 _________________________ _________________________ _________________________ 4. Taxation The interim taxation charge of 31% is calculated by applying the directors' bestestimate of the annual tax rate to the taxable profit for the period (six monthsended 30 June 2006: 32%) in respect of profit before tax. 5. Discontinued operations There were no businesses discontinued during the period. 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 and reported in the 2006 annual incomestatement as a loss on discontinued operations (net of tax). The fine was paidin January 2007. 6. Earnings per 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 333.9m, 334.6m diluted for the effect of outstanding share options(six months to 30 June 2006: 341.1m, 343.2m diluted). Basic and diluted earningsper share have been calculated on profit of £51.3m (2006: profit of £49.5m). The directors consider that adjusted earnings per share figures, using earningsas calculated below, give a more meaningful indication of the underlyingperformance. 6 months to 6 months to Year to 30 June 2007 30 June 2006 31 Dec 2006 £m £m £m ______________________________________________ Profit for the period after tax 52.9 51.2 109.2 Minority interest (1.6) (1.7) (3.0) Charges/(credits) included in profit for the period: Change in fair value of financial instruments (0.2) (0.9) (2.3) Intangible amortisation 7.8 5.1 17.0 Restructuring costs 10.9 7.7 19.7 Taxation on charges/(credits) included in profit before tax (5.7) (3.8) (10.7) ______________________________________________ Earnings for adjusted EPS 64.1 57.6 129.9 ______________________________________________ Weighted average number of shares 333.9m 341.1m 339.3m ______________________________________________ Adjusted EPS 19.2p 16.9p 38.3p ______________________________________________ 7. Dividends The directors have declared an interim dividend for the current year of 7.5p pershare (2006: 7.0p) which will be paid on 19 October 2007 to shareholders on theregister on 14 September 2007. In accordance with IAS10 'Events after theBalance Sheet Date', this interim dividend has not been reflected in the interimaccounts. 8. Reconciliation of cash generated from the operations 6 months to 6 months to Year to 30 June 30 June 31 Dec 2007 2006 2006 (unaudited) (unaudited) £m £m £m _____________________________________ (a) Reconciliation of operating cash flow Cash generated from the operations 72.0 51.4 186.3 Sale of property, plant and equipment 1.2 5.4 7.7 Purchase of investments (0.9) (1.4) (2.5) Acquisition of property, plant and equipment (20.8) (18.3) (39.7) Capitalised development expenditure (2.1) (3.2) (4.4) _____________________________________ Operating cash flow from continuing businesses 49.4 33.9 147.4 _____________________________________ (b) Reconciliation of net cash to movement in net borrowings Net decrease in cash and cash equivalents (26.4) (70.0) (90.6) Drawdown of borrowings (91.7) (61.6) (7.4) _____________________________________ Cash outflow (118.1) (131.6) (98.0) Currency translation differences 7.0 11.8 28.2 _____________________________________ Movement in net borrowings in the period (111.1) (119.8) (69.8) Net borrowings at the start of the period (80.4) (10.6) (10.6) _____________________________________ Net borrowings at the end of the period (191.5) (130.4) (80.4) _____________________________________ 9. Exchange rates The profit and loss accounts of overseas subsidiaries are translated intosterling at average rates of exchange for the period, balance sheets aretranslated at period end rates. The main currencies are: Average period rates Balance sheet rates ____________________________________________________________ 6 months to 30 June Year 30 June 30 June 31 Dec 2007 2006 2006 2007 2006 2006 ____________________________________________________________ Euro 1.48 1.46 1.47 1.49 1.45 1.48US Dollar 1.97 1.79 1.85 2.01 1.85 1.96 10. Contingent liability On 16 August 2007 the Company reported that it had initiated an investigationinto possible irregular payments associated with certain trading contractsentered into by its Severe Service business, which may be in breach of the lawand the Company's policies and practices. The Company has made appropriateproactive notifications to the relevant authorities and will co-operate fullywith any enquiry from those authorities relating to this matter. It is too earlyto be able to estimate the amount of possible fines and other liabilitiesassociated with this investigation and, as such, no provision has been made inthese accounts. 11. Financial information This interim financial information has been prepared using the accountingpolicies and presentation that were applied in the preparation of the Company'spublished consolidated financial statements for the year ended 31 December 2006. This interim statement has been reviewed by the Company's auditors having regardto the bulletin Review of Interim Financial Information, issued by the AuditingPractices Board. A copy of their unqualified review opinion is attached. The comparative figures for the financial year ended 31 December 2006 are notthe Company's statutory accounts for that financial year. Those accounts havebeen reported on by the Company's auditors and delivered to the registrar ofcompanies. The report of the auditors was (i) unqualified, (ii) did not includea reference to any matters to which the auditors drew attention by way ofemphasis without qualifying their report, and (iii) did not contain a statementunder section 237(2) or (3) of the Companies Act 1985. The Interim Report will be posted to shareholders on 14 September 2007 and willbe available from the same date at the Company's registered office, Lakeside,Solihull Parkway, Birmingham Business Park, Birmingham, B37 7XZ. NEXT TRADING ANNOUNCEMENT Our next trading update will be issued on 19 December 2007. Enquiries to: Graham Truscott - Communications Director - 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 Independent review report by KPMG Audit Plc to IMI plc We have been instructed by the Company to review the financial information forthe six months ended 30 June 2007 which comprises the consolidated incomestatement, consolidated balance sheet, consolidated statement of cash flows,consolidated statement of recognised income and expense and related notes setout on pages 7 to 15. We have read the other information contained in theinterim report and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. This report is made solely to the Company in accordance with the terms of ourengagement to assist the Company in meeting the requirements of the ListingRules of the Financial Services Authority. Our review has been undertaken sothat we might state to the Company those matters we are required to state to itin this report and for no other purpose. To the fullest extent permitted by law,we do not accept or assume responsibility to anyone other than the Company forour review work, for this report, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual financial statements exceptwhere any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4Review of Interim Financial Information issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of making enquiriesof Group management and applying analytical procedures to the financialinformation and underlying financial data and, based thereon, assessing whetherthe accounting policies and presentation have been consistently applied unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance withInternational Statements on Auditing (UK and Ireland) and therefore provides alower level of assurance than an audit. Accordingly, we do not express an auditopinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. KPMG Audit PlcChartered Accountants2 Cornwall StreetBirminghamB3 2DL 3 September 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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