4th Sep 2006 07:02
IMI PLC04 September 2006 4 September 2006 IMI plc 2006 First Half Results IMI plc, the international engineering group, today announced its interimresults for the six months ended 30 June 2006. 2006 2005 % changeContinuing businesses:Sales £732m £641m +14Operating profit * £85.9m £74.3m +16Profit before tax * £88.1m £69.6m +27Adjusted earnings per share ** 16.9p 13.5p +25Basic earnings per share 14.5p 12.1p +20 Restructuring costs £7.7m £2.2m Loss after tax on discontinued businesses - £85.1m Basic earnings/(loss) per share 14.5p (12.0)p Dividend 7.0p 6.65p +5 * before restructuring costs, intangible amortisation and exceptional items** before restructuring costs, change in fair value of financial instruments,intangible amortisation and exceptional items Norman Askew, Chairman of IMI commented: "We have delivered another encouraging set of results in the first half, withhealthy organic growth being supported by a strong contribution from recentacquisitions. Prospects for the balance of the year remain positive." 2006 INTERIM REVIEW Introduction In the first half of 2006 IMI has continued its steady progress with an organicsales growth of around 4%. Operating profits, including the contribution fromacquisitions, have increased by 16%. The acquisition of Truflo was completed on 26 April 2006 and is making a goodcontribution to the Fluid Controls businesses. During the period we have spent£117m on acquisitions and £19m on the on-market share buy-back program. Therestructuring we announced in March will see us invest about £20m this year andfor each of the next two years. This is underway and on track to deliverimprovements in operating margins. We will continue to use the on-market sharebuy-back as appropriate and envisage raising our debt levels to around£400-£500m over the next few years. The Board has decided to increase the interim dividend by 5.3% to 7.0p (2005:6.65p). Results summary The comparatives for our continuing businesses have been adjusted to exclude thePolypipe business, the disposal of which was completed on 2 September 2005. Sales rose 14% to £732m, including £55m from acquisitions. A stronger US dollarthan in the first half of 2005 has meant that exchange rates have contributedaround two percentage points of growth to both sales and operating profits.Operating profit before exceptional items, intangible amortisation andrestructuring costs was £85.9m, 16% ahead of last year, including £7.4m fromacquisitions. Interest costs on net borrowings were £3.1m and were covered 25 times. Other netfinancial income of £5.3m, comprising the impact of pension financing underIAS19 and the change in fair value of financial instruments under IAS39, bringsthe total net financing income to £2.2m, compared to a charge of £4.7m in 2005. Profit before tax, exceptional items, intangible amortisation and restructuringcosts was £88.1m, up 27% on the prior period. Restructuring costs were £7.7m andrelated primarily to the continuing transfer of Fluid Power manufacturing fromthe US to Mexico. Profit before tax was £75.3m, an increase of 15%. The estimated effective tax rate for 2006 is 32% and is unchanged from the 2005rate applied to profit before exceptional items. Adjusted earnings per share from continuing operations, excluding the change infair value of financial instruments, intangible amortisation, restructuringcosts and exceptional items was 16.9p, compared to 13.5p, an increase of 25%.The basic earnings per share was 14.5p which compares with the equivalentearnings per share from continuing businesses in the prior period of 12.1p.After the disposal of Polypipe, the reported loss per share in 2005 was 12.0p. Cash flow The total cash outflow for the period was £132m. Tax (£21m), acquisitions(£117m), the purchase of shares held in treasury and in trust for employee shareschemes (£26m) and dividends (£37m) absorbed £201m. £36m was received from thesale of the Polypipe vendor loan note. The operating cash flow was £34m (2005:£36m). Balance sheet Closing net debt was £130m (June 2005: £196m). The debt to annualised EBITDAratio at the end of June was 0.66. Shareholders' equity at the end of June was £432m, an increase of £14m since theend of last year, comprising the profit for the period less dividends and sharebuy-backs plus an actuarial gain net of tax on the defined benefit pension plansof £25m. Balance sheet gearing was 30%. European Commission enquiry As previously reported, the European Commission has been investigatingallegations of anti-competitive behaviour by certain manufacturers of plumbingfittings, including IMI's former fittings business which was sold in 2002. Adecision, including notification of the fine on IMI is expected from theCommission later this year. Operations review The following review of our business areas for the six months to 30 June 2006compares the performance of our continuing operations with the six month periodto 30 June 2005. Operating profit is stated before restructuring costs,intangible amortisation and exceptional items. Comparative figures have beenrestated accordingly. Severe Service Sales in the first half were up 45% to £128m (2005: £88m) and operating profitrose 61% to £16.3m (2005: £10.1m). The strong energy market continues to drive demand in oil and gas and powerconstruction for our highly engineered severe service valves. Middle East andAsian markets continue to be particularly buoyant. While first half underlyingsales grew at 12%, the rate of order growth on new valves was around 25%,further extending the order book at the period end. We are continuing to investin sales and engineering resource to support this strong demand. The Truflobusiness, acquired in April this year, is performing well and investment isbeing made to increase capacity, particularly in support of our business in thepetrochemical and liquified natural gas sectors. Fluid Power Sales in the first half were up 16% to £281m (2005: £243m) and operating profitrose 23% to £35.7m (2005: £29.1m). Overall, the organic growth in sales was nearly 7%. Growth in our target sectorshas continued to be strong, with double digit increases in the commercialvehicles, medical and print sectors. Our businesses have maintained theirmomentum in the US market and performed strongly in Asia. We continue to seeimprovement in Continental Europe. The UK remains broadly unchanged as themanufacturing base continues to migrate to lower cost economies. Raw materialpricing pressure has held back the improvement in margins and we areaccelerating our efforts to claw back this impact through additional costreduction programs and the further transfer of manufacturing to lower costlocations. Indoor Climate Sales in the first half were up 6% to £88m (2005: £83m) and operating profitrose 7% to £12.2m (2005: £11.4m). The balancing valve businesses enjoyed steady growth across much of ContinentalEurope but experienced a slowdown in the UK due to a reduction in orders fromprivate finance initiatives. Growth in the Asia Pacific markets was particularlystrong. The thermostatic radiator valve business performed well in its homeGerman market, reversing the declining trend of recent years. Operating marginshave been maintained despite high material costs through cost reduction measuresand selective price increases. Beverage Dispense Sales in the first half were up 4% to £147m (2005: £141m) and operating profitwas down 9% to £13.2m (2005: £14.5m). Excluding the acquisition of Northern Parts and Service, which was acquired inNovember 2005, underlying sales in Beverage Dispense were down 5% in the firsthalf. This shortfall results primarily from a postponement of quick servicerestaurant business in the US, where priority has been given to capitalinvestment in hot-side food equipment in support of recent menu extensions. Volumes generally of traditional carbonated soft drinks equipment, both in theUS and Europe, continue to show small year on year reductions, whilst newproducts targeted at the juice, water and frozen drinks sectors have againshowed good growth. Margins were impacted by the unfavourable mix arising from lower quick servicerestaurant activity and by sharply higher copper and aluminium prices. Programsto recover some of the margin impact in the second half are in place withaccelerated sourcing from China and selective selling price increases. Merchandising Systems Sales in the first half were up 2% to £88m (2005: £86m) and operating profit wasdown 8% to £8.5m (2005: £9.2m). Excluding the impact of exchange rates, underlying sales were flat in theperiod. The automotive sector, which was around 5% down on the first half of2005, has now stabilised and we expect second half programs for 2007 modellaunches to proceed to plan. The consumer electronics sector has performed verywell with a number of new product launches. The beverage, confectionery andcosmetics sectors also continued their steady growth with a number of newcontracts secured during the period. Our business in the dairy sector slowedduring the period, not helped by higher interest rates. Margins were impacted byfurther sharp increases in stainless steel prices, particularly on older productlines with higher metal content. Again actions are in place to mitigate some ofthis impact in the second half. Outlook We are encouraged by continuing signs of improvement in Continental Europe andconsistent strong momentum in Asia. Healthy demand in oil and gas and energymarkets, together with continued buoyancy in commercial vehicle and medicalmarkets, should enable our Fluid Controls businesses to maintain the momentum ofthe first half. Despite the relative weakness of the Retail Dispense businessesin the first half and some concerns over consumer sentiment in the US, we doexpect some improvement in the second half. Material costs remain an issue,albeit actions taken in the first six months should mitigate some of the impactin the second half. With positive sales momentum, a continued focus on marginimprovement and a healthy contribution from new acquisitions, we expect todeliver good progress for the year as a whole. CONSOLIDATED INTERIM INCOME STATEMENT 6 months to 6 months to Year to 30 June 2006 30 June 2005 31 Dec 2005 (unaudited) (unaudited) Notes £m £m £m -----------------------------------------Revenue 1,2 732 641 1,341 -----------------------------------------Operating profit before restructuring costsand intangible amortisation 85.9 74.3 163.7Restructuring costs (7.7) (2.2) (4.2)Intangible amortisation (5.1) (1.9) (5.6) ------------------------------------------Operating profit before financing costs 1,2 73.1 70.2 153.9Financial income 3 39.6 32.7 67.0Financial expense 3 (37.4) (37.4) (69.8) Profit before tax-------------------------------------------------------------------------------------------------- Before restructuring costs, intangible amortisation and exceptional items 88.1 69.6 160.9 Restructuring costs (7.7) (2.2) (4.2) Intangible amortisation (5.1) (1.9) (5.6)-------------------------------------------------------------------------------------------------- Total 75.3 65.5 151.1 UK taxation 4 (2.6) 0.7 (2.5)Overseas taxation 4 (21.5) (21.9) (45.9) ----------------------------------------- Profit of continuing businesses after tax 51.2 44.3 102.7Loss after tax on discontinued businesses,disposal and associated closure costs 5 - (85.1) (86.5) -----------------------------------------Total profit/(loss) for the period 51.2 (40.8) 16.2 -----------------------------------------Attributable to:Equity shareholders of the parent 49.5 (42.3) 13.5Minority interest 1.7 1.5 2.7 -----------------------------------------Total profit/(loss) for the period 51.2 (40.8) 16.2 -----------------------------------------Earnings per share:Basic earnings/(loss) per share 6 14.5p (12.0)p 3.9pDiluted earnings/(loss) per share 6 14.4p (11.9)p 3.8p Basic earnings per share - continuing businesses 6 14.5p 12.1p 28.6p CONSOLIDATED INTERIM BALANCE SHEET 2006 2005 30 June 30 June 31 Dec (unaudited) (unaudited) £m £m £m -------------------------------------------Assets Intangible assets 286.6 172.9 185.8 Property, plant and equipment 189.7 185.6 192.1 Deferred tax assets 61.0 55.8 75.5 ------------------------------------------- Total non-current assets 537.3 414.3 453.4 ------------------------------------------- Inventories 220.9 203.7 205.6 Trade and other receivables 300.6 274.9 301.8 Current tax 19.4 10.1 18.6 Investments 14.0 8.6 13.0 Cash and cash equivalents 114.2 84.1 188.9 Disposal group assets classified as held for sale - 300.2 - ------------------------------------------- Total current assets 669.1 881.6 727.9 ------------------------------------------- Total assets 1,206.4 1,295.9 1,181.3 -------------------------------------------Liabilities Bank overdraft (2.2) (3.3) (6.9) Interest-bearing loans and borrowings (17.0) (62.2) (44.4) Current tax (25.1) (27.2) (27.1) Trade and other payables (295.5) (276.6) (301.9) Disposal group liabilities classified as held for sale - (59.7) - ------------------------------------------- Total current liabilities (339.8) (429.0) (380.3) ------------------------------------------- Interest-bearing loans and borrowings (225.4) (214.1) (148.2) Employee benefits (134.9) (130.0) (172.8) Provisions (40.3) (34.2) (34.1) Deferred tax liabilities (8.3) (8.4) (4.4) Other payables (22.6) (24.7) (20.4) ------------------------------------------- Total non-current liabilities (431.5) (411.4) (379.9) ------------------------------------------- Total liabilities (771.3) (840.4) (760.2) -------------------------------------------Net assets 435.1 455.5 421.1 -------------------------------------------Equity Issued capital 90.1 89.2 89.6 Share premium 153.6 145.1 149.4 Other reserves 3.1 1.6 7.3 Retained earnings 184.7 214.8 171.3 ------------------------------------------- Total equity attributable to equity shareholders of the parent 431.5 450.7 417.6 Minority interest 3.6 4.8 3.5 -------------------------------------------Total equity 435.1 455.5 421.1 CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS 6 months to 6 months to Year to 30 June 30 June 31 Dec 2006 2005 2005 (unaudited) (unaudited) £m £m £m ------------------------------------------------Cash generated from operating activities 51.4 54.7 209.3(note 8)Interest paid (7.7) (9.7) (18.2)Income taxes paid (21.0) (25.6) (54.2) ------------------------------------------------Net cash from operating activities - continuing businesses 22.7 19.4 136.9Additional pension scheme funding - - (15.6)European Commission fine - (31.3) (31.3) ------------------------------------------------ 22.7 (11.9) 90.0 ------------------------------------------------Cash flows from investing activitiesProceeds from sale of property, plant and equipment 5.4 2.0 5.6Net purchase of investments (1.4) - (1.1)Interest received 4.6 4.9 10.0Acquisition of subsidiary, net of cash acquired (117.1) (18.8) (63.6)Disposal of subsidiary/discontinued operations - 9.0 206.4Redemption of vendor loan note re Polypipe 35.9 - -Acquisition of property, plant and equipment (18.3) (17.1) (41.9)Capitalised development expenditure (3.2) (3.3) (5.2) ------------------------------------------------Net cash from investing activities (94.1) (23.3) 110.2 ------------------------------------------------Cash flows from financing activitiesProceeds from the issue of share capital 4.7 5.8 10.4Purchase of own shares (26.4) (33.6) (72.6)Drawdown/(repayment) of borrowings 61.6 75.6 (14.0)Dividends paid to minorities (1.4) (0.9) (1.6)Dividends paid (37.1) (36.2) (59.4) ------------------------------------------------Net cash from financing activities 1.4 10.7 (137.2) ------------------------------------------------ Net (decrease)/increase in cash and cash equivalents (70.0) (43.9) 63.0Cash and cash equivalents at start of period 182.0 115.4 115.4Effect of exchange rate fluctuations on cash held - 0.4 3.6 ------------------------------------------------Cash and cash equivalents at end of period 112.0 71.9 182.0 ------------------------------------------------ Reconciliation of net cash to movement in net borrowings Net (decrease)/increase in cash and cash equivalents (70.0) (24.5) 63.0(Drawdown)/repayment of borrowings (61.6) (75.6) 14.0 ------------------------------------------------Cash (outflow)/inflow (131.6) (100.1) 77.0Currency translation differences 11.8 (9.2) (11.9) ------------------------------------------------Movement in net borrowings in the period (119.8) (109.3) 65.1Disposal group assets classified as held for sale - (10.5) -Net borrowings at the start of the period (10.6) (75.7) (75.7) ------------------------------------------------Net borrowings at the end of period (130.4) (195.5) (10.6) ------------------------------------------------ CONSOLIDATED INTERIM STATEMENT OF RECOGNISED INCOME AND EXPENSE 6 months to 6 months to Year to 30 June 30 June 31 Dec 2006 2005 2005 (unaudited) (unaudited) £m £m £m ------------------------------------------------Foreign exchange translation differences (2.9) 0.2 5.6Actuarial gains/(losses) on defined benefit plans (net of deferred tax) 25.4 (2.3) (36.4)Fair value (losses)/gains on financial instruments (net of tax) (1.3) 3.9 2.3 ------------------------------------------------Income and expense recognised directly in equity 21.2 1.8 (28.5)Profit/(loss) for the period 51.2 (40.8) 16.2 ------------------------------------------------ Total recognised income and expense for the period 72.4 (39.0) (12.3) ------------------------------------------------Attributable to: Equity shareholders of the parent 70.7 (40.5) (15.0) Minority interest 1.7 1.5 2.7 ------------------------------------------------Total recognised income and expense for the period 72.4 (39.0) (12.3) ------------------------------------------------ STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY 6 months to 6 months to Year to 30 June 2006 30 June 2005 31 Dec 2005 (unaudited) (unaudited) £m £m £m ------------------------------------------------Shareholders' equity at start of the period 417.6 553.9 550.8 Total recognised income and expense for the period 70.7 (40.5) (15.0) Dividends paid (37.1) (36.2) (59.4)Share based payments (net of deferred tax) 2.0 1.3 3.4Issue of ordinary shares net of costs 4.7 5.8 10.4Purchase of own shares into treasury (19.2) (33.6) (72.6)Shares held in trust for employee share schemes (7.2) - - ------------------------------------------------ (56.8) (62.7) (118.2) ------------------------------------------------ Shareholders' equity at end of the period 431.5 450.7 417.6 ------------------------------------------------ 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. Revenue Operating Profit ---------------------------- ----------------------------- 6 mths 6 mths Year 6 mths 6 mths Year to to to to to to 30 June 30 June 31 Dec 30 June 30 June 31 Dec 2006 2005 2005 2006 2005 2005 £m £m £m £m £m £m ---------------------------- ----------------------------- before restructuring costs, intangible amortisation and exceptional items restated * restated * Fluid Controls 497 414 877 64.2 50.6 113.9------------------------------------------------------------------------------------- Severe Service 128 88 213 16.3 10.1 28.3 Fluid Power 281 243 492 35.7 29.1 60.0 Indoor Climate 88 83 172 12.2 11.4 25.6------------------------------------------------------------------------------------- Retail Dispense 235 227 464 21.7 23.7 49.8------------------------------------------------------------------------------------- Beverage Dispense 147 141 278 13.2 14.5 28.4 Merchandising Systems 88 86 186 8.5 9.2 21.4------------------------------------------------------------------------------------- Total continuing operations 732 641 1,341 85.9 74.3 163.7------------------------------------------------------------------------------------- * restated to exclude restructuring costs after restructuring costs and intangible amortisation Fluid Controls 53.3 48.5 107.6------------------------------------------------------------------------------------- Severe Service 13.2 9.9 27.3 Fluid Power 28.5 27.5 55.4 Indoor Climate 11.6 11.1 24.9------------------------------------------------------------------------------------- Retail Dispense 19.8 21.7 46.3------------------------------------------------------------------------------------- Beverage Dispense 11.8 13.6 26.3 Merchandising Systems 8.0 8.1 20.0------------------------------------------------------------------------------------- Total continuing operations 73.1 70.2 153.9------------------------------------------------------------------------------------- 2. Acquisitions of subsidiaries Of the reported increase in revenue and operating profit of continuingoperations (before restructuring costs, intangible amortisation and exceptionalitems), £55m and £7.4m revenue and profit respectively result from acquisitions.These comprise the 2006 acquisition of the whole share capital of the TrufloGroup (Severe Service and Fluid Power), together with the extra months from the2005 acquisitions of Syron Engineering & Manufacturing and GT DevelopmentCorporation (Fluid Power), the ABB KK control valve business (Severe Service)and Northern Parts and Service (Beverage Dispense). 3. Financial income and expense 6 months to 30 June 6 months to 30 June Year to 31 Dec 2005 2006 2005 Interest Other Total Interest Other Total Interest Other Total £m £m £m £m £m £m £m £m £m ------------------------- ------------------------ ------------------------ Interest income 3.3 3.3 3.5 3.5 6.9 6.9 Other investments: Gain on remeasurement of financial instruments and derivatives 5.1 5.1 0.7 0.7 3.3 3.3 Expected return on defined benefit pension plan assets* 31.2 31.2 28.5 28.5 56.8 56.8 ------------------------- ------------------------ ------------------------ Financial income 3.3 36.3 39.6 3.5 29.2 32.7 6.9 60.1 67.0 ------------------------- ------------------------ ------------------------ Interest expense (6.4) (6.4) (8.3) (8.3) (15.1) (15.1) Loss on remeasurement of financial instruments and derivatives (4.2) (4.2) (3.6) (3.6) (3.9) (3.9) Finance cost of defined benefit pension scheme liabilities* (26.8) (26.8) (25.5) (25.5) (50.8) (50.8) ------------------------- ------------------------ ------------------------ Financial expense (6.4) (31.0) (37.4) (8.3) (29.1) (37.4) (15.1) (54.7) (69.8) ------------------------- ------------------------ ------------------------ ------------------------- ------------------------ ------------------------ Net financial income / (expense) (3.1) 5.3 2.2 (4.8) 0.1 (4.7) (8.2) 5.4 (2.8) ------------------------- ------------------------ ------------------------ * In line with best practice, the components of financial income and expense related to defined benefit pension schemes have been separated into their respective categories. The comparatives have been restated accordingly. Net financial income/expense is unaffected. 4. Taxation The interim taxation charge of 32% is calculated by applying the directors' bestestimate of the annual tax rate to the taxable profit for the period (six monthsended 30 June 2005: 32%) in respect of profit before exceptional items. 5. Discontinued operations Loss after tax on discontinued businesses, disposal and associated closure costscomprises the after tax trading result of the Polypipe Group together with theloss on its disposal, which was completed on 2 September 2005, plus closurecosts of its Doors and Windows business which was closed prior to sale. 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 in trust for employeeshare schemes, was 341.1m, 343.2m diluted for the effect of outstanding shareoptions (six months to 30 June 2005: 352.9m, 355.7m diluted). Basic earnings pershare have been calculated on profit of £49.5m (2005: loss of £42.3m). The directors consider that adjusted earnings per share figures, using earningsas calculated below, give a more meaningful indication of the underlyingperformance. Given the exceptional level of restructuring costs expected between2006 and 2008, the adjusted earnings per share are now stated before thesecharges and the comparatives have been restated accordingly: 6 months 6 months Year to to 30 June to 30 June 31 DecFrom continuing operations 2006 2005 2005 £m £m £m --------------------------------Profit for the period 51.2 44.3 102.7Minority interest (1.7) (1.5) (2.7)Charges/(credits) included in profit forthe period: Change in fair value of financial instruments and derivatives (0.9) 2.9 0.6 Intangible amortisation 5.1 1.9 5.6 Restructuring costs 7.7 2.2 4.2 Taxation on charges/credits included in profit before tax (3.8) (2.2) (3.5) --------------------------------Earnings for adjusted EPS 57.6 47.6 106.9 --------------------------------Adjusted EPS 16.9p 13.5p 30.6p ================================Weighted average number of shares 341.1m 352.9m 349.7m ================================ 7. Dividends The directors have declared an interim dividend for the current year of 7.0p pershare (2005: 6.65p) which will be paid on 20 October to shareholders on theregister on 15 September 2006. 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 2006 2005 2005 (unaudited) (unaudited) £m £m £m ------------------------------------- Cash flows from operating activities Profit/(loss) for the period 51.2 (40.8) 16.2 Adjustments for: Depreciation 19.6 18.5 38.4 Amortisation 5.1 1.9 5.6 Loss after tax on discontinued businesses, disposal and associated closure costs - 85.1 86.5 Financing income (39.6) (32.7) (67.0) Financing expense 37.4 37.4 69.8 Employee benefit charge 2.4 1.0 2.2 Equity settled share-based payment expenses 1.4 1.0 2.0 Income tax expense 24.1 21.2 48.4 ------------------------------------- Operating profit before changes in working capital and provisions 101.6 92.6 202.1 (Increase) in trade and other receivables (32.4) (31.9) (8.9) (Increase)/decrease in inventories (12.5) (5.9) 5.7 (Decrease)/increase in trade and other payables (10.7) 9.3 20.1 Increase/(decrease) in provisions and employee benefits 5.4 (9.4) (9.7) ------------------------------------- Cash generated from the operations 51.4 54.7 209.3 ------------------------------------- Reconciliation of operating cash flow Cash generated from the operations 51.4 54.7 209.3 Sale of property, plant and equipment 5.4 2.0 5.6 Purchase of investments (1.4) - (1.1) Acquisition of property, plant and equipment (18.3) (17.1) (41.9) Capitalised development expenditure (3.2) (3.3) (5.2) ------------------------------------- Operating cash flow from continuing businesses 33.9 36.3 166.7 ------------------------------------- 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 2006 2005 2005 2006 2005 2005 ------------------------------------------------------------Euro 1.46 1.46 1.46 1.45 1.48 1.46US Dollar 1.79 1.87 1.82 1.85 1.79 1.72 10. European Commission enquiry The European Commission is investigating allegations of anti-competitivebehaviour among certain manufacturers of copper fittings. Notwithstanding IMI'sdisposal of its Copper Fittings business in 2002, it retains responsibility inrelation to the European Commission's investigation. A Statement of Objectionswas issued by the Commission in September 2005. It is not possible to give anyreliable estimate of the likely level of fine, a decision on which is notexpected until later in the year. Accordingly, no provision has been made forany fine at 30 June 2006. 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 2005. This interim statement has been reviewed by the Group'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 2005 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 2006 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 15 December 2006. 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 Square Mile - Tel: 0207 067 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 2006 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 6 to 14. 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 2006. KPMG Audit PlcChartered Accountants2 Cornwall StreetBirminghamB3 2DL 4 September 2006 This information is provided by RNS The company news service from the London Stock Exchange END This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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