19th Dec 2007 07:01
IMI PLC19 December 2007 19 December 2007 IMI plc TRADING UPDATE In accordance with its normal practice, IMI plc is today issuing a tradingupdate in advance of its preliminary results announcement for the twelve monthsending 31 December 2007 due to be published on 5 March 2008. Current trading In line with our expectations at the time of the interim results, organicrevenue growth for the full year, excluding acquisitions and the impact ofexchange rates, will be in the range 6-7%, with underlying second half momentumlittle changed from the first half. Fluid Controls The power and oil and gas end markets remain buoyant. The full year 2007 revenuegrowth for the Severe Service business will be about 15%. The CCI investigation,which is discussed separately below, has had no material impact on current yearrevenues. In Fluid Power, our sector business in both Europe and the UScontinues to show good progress. The US commercial vehicle market is, asexpected, sharply down against last year, but we remain confident of a strongbounce back next year ahead of further emissions legislation to be introduced in2010. Overall, our Fluid Power revenues are expected to deliver organic growthof around 2% for the year. Within Indoor Climate, our balancing valves businesshas continued its strong first half momentum. Our thermostatic radiatorbusiness, however, has been significantly impacted by a second half slow down inconstruction and refurbishment activity in Germany. More encouragingly, recentdata shows that German construction permits, which are one leading indicator,have now recovered from their low point earlier this year. Indoor Climate secondhalf organic revenue growth is projected to be about 2%. Retail Dispense The Beverage Dispense business continues to show improvement with underlyingrevenue growth for the full year expected to be in the range 5-6%. The USbusiness is performing in line with expectations, Continental Europe and Asiaare delivering good growth, although the UK remains challenging. TheMerchandising Systems business continues to show good promise, albeit some ofthe shipments provisionally scheduled for December will now take place inJanuary, giving a strong start to 2008. Second half revenues are likely to be uparound 4% on last year, similar to the growth delivered in the first half. The effect of exchange rates on the translation of our results for the full year2007 when compared to the prior year is estimated to be a negative 3% on bothrevenues and profits. In more recent months the stronger euro has largely offsetthe impact of a weaker US dollar. We would expect reported profit before tax on continuing businesses, before theCCI investigation costs, the amortisation of intangibles and beforerestructuring costs, to be in the range of £202-£206m compared to £194.9m lastyear. At the mid-point of the range, and on a constant currency basis, thisrepresents a growth of around 8% over the prior year. CCI investigation The investigation by independent counsel into the CCI business is well advancedand should be largely completed by the end of the first quarter of 2008. Costsof the investigation incurred in 2007 will be around £5m, as previouslyindicated. Additional costs in 2008 are not expected to be material but will bedependent on how the US Department of Justice decides to proceed. At this stageit is not possible to assess the level of any fines or defence costs arisingfrom any action which may be taken by regulatory authorities or the timing ofany such action. As to the future impact on trading, we have now consulted widely with ourcustomer base who, in the circumstances, have thus far reacted supportively.Order intake for the majority of our business, mainly in the industrialised westand typically not involving agents, has been largely unaffected. Order intakeelsewhere has been disrupted as we continue the task, with appropriate legaladvice, of either clearing agents or putting in place alternative arrangements.This process is gathering momentum and we would expect to have concluded much ofthis work during the first half of 2008, enabling more normal patterns of orderintake to resume thereafter. As a result of this disruption, 2008 shipments forSevere Service will be broadly in line with 2007. Our organisation is focused on implementing the necessary corrective actions,including the introduction of new compliance procedures and the termination of anumber of employee contracts. We expect Severe Service to return to normalpatterns of business in 2009 and beyond. Outlook Order intake remains positive. The forecast deterioration in economic growthstemming from the financial and housing markets has yet to be seen, but weremain alert to these risks. The impact of the CCI investigation will disrupt revenue growth prospects for2008 to a degree, reducing the anticipated growth for IMI as a whole by around 2percentage points. The underlying momentum in the business remains broadly unchanged from the firsthalf. A healthy new product pipeline and an increasingly significant presence inthe emerging markets of Asia and East Europe continue to underpin that momentum. - Ends - IMI plcGraham Truscott, Communications Director Tel: 0121 717 3712 Weber Shandwick FinancialNick Oborne/Stephanie Badjonat/Charlie Hooper Tel: 020 7067 0700 Notes to editors IMI is a dynamic, worldwide company delivering innovative engineering solutionsto leading global customers in clearly defined niche markets. Its fivebusinesses share a common goal - to convert their industry knowledge and marketinsight into customised, design-engineered solutions which create customeradvantage and value. These include severe service valves, motion and fluidcontrol systems, indoor climate controls, beverage dispense systems, andmerchandising display systems for retail operations. Close customer relationships, strong positions in growing markets and cleardifferentiation through technological innovation or service are the definingcharacteristics of all IMI businesses. IMI is quoted on the London Stock Exchange. Information about IMI plc can befound on the website: www.imiplc.com. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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