TIDMIMI
RNS Number : 4823H
IMI PLC
28 July 2023
28 July 2023
Strong organic growth, margin improvement and cash delivery
Purpose-led strategy continuing to deliver growth
Full year guidance reconfirmed
Interim results, six months ended 30 June 2023
Adjusted(1) Statutory
---------------------------- ------------------------------------------- -----------------------------
H1 2023 H1 2022 Change Organic(3) H1 2023 H1 2022 Change
---------- -------- -------- ----------- ---------- -------- -------
Revenue GBP1,084m GBP972m +12% +7% GBP1,084m GBP972m +12%
Operating profit GBP193m GBP160m +21% +13% GBP149m GBP129m +15%
Operating margin 17.8% 16.4% +140bps 13.7% 13.3% +40bps
Profit before tax GBP180m GBP154m +17% GBP139m GBP121m +15%
Basic EPS 54.0p 47.1p +15% 42.2p 36.6p +15%
Operating cash flow(2) GBP145m GBP79m +84% GBP174m GBP111m +57%
Interim dividend per share 9.1p 8.3p +10% 9.1p 8.3p +10%
Net debt : EBITDA 1.6x 1.8x
(1 Excluding the effect of adjusting items as reported in the
income statement. See Note 2 for definitions of alternative
performance measures.)
(2 Adjusted operating cash flow, as described in Note 2 to the
financial statements. Statutory measure is Cash generated from
operations as shown on the cash flow statement.)
(3) After adjusting for acquisitions, disposals and exchange
rates (see Note 3).
Continued strong performance
-- 12% sales growth, 17% adjusted profit before tax growth, 15%
basic EPS growth
-- Adjusted operating margin 140bps higher than H1 2022
-- Statutory operating profit up 15%
-- Statutory profit after tax up 16%
-- Operating cash flow significantly higher
-- Interim dividend increased by 10%
-- Business structure aligning to key sectors
Roy Twite, Chief Executive, said:
"During the first half, we have made excellent progress with our
purpose-led strategy, Breakthrough Engineering for a Better World .
We are creating value for all our stakeholders by increasing
customer intimacy, driving market-led innovation and reducing
complexity. We continue to help our customers become safer, more
sustainable and more productive. Our new business structure from
July 2023 further aligns us to our key sectors and positions IMI to
accelerate growth. In light of the success of our Better World
strategy we have expanded our financial framework with
through-cycle targets of 5% organic growth, a 20% adjusted
operating margin and 90% cash conversion. In addition, as we grow
the business through M&A, we expect return on invested capital
to remain above 12%."
"Based on the strong first half result and current market
conditions we expect 2023 full year adjusted EPS to be between 112p
and 117p."
Enquiries
Tel: +44 (0)7866 148
Luke Grant IMI 374
Matt Denham Headland Tel: +44 (0)7551 825
496
A live webcast of the analyst meeting taking place today at
08:00am (BST) will be available on the investor page of the Group's
website: www.imiplc.com. The Group plans to release its next
Interim Management Statement on 9 November 2023.
Strategic progress
Positioning IMI for accelerated growth
Today we announce the next steps of our purpose-led strategy,
Breakthrough Engineering for a Better World. IMI is always
evolving. The sectors in which we operate have increased and
expanded and the way we help solve customer problems has
strengthened. We are making changes to our structure to enhance
further our customer focus.
To build on our growth opportunities, we are organising IMI into
an Automation business and a Life Technology business. The aim is
to accelerate Better World growth by getting us even closer to our
customers through sector focused teams.
Effective immediately, Jackie Hu will lead the Automation
business, which will leverage deep automation technology and
applications expertise to improve productivity, safety and
sustainability in the Process Automation and Industrial Automation
sectors. This platform includes IMI Critical Engineering and IMI
Precision Engineering's Industrial Automation business.
Beth Ferreira will lead the Life Technology business, which will
focus on technologies that enhance and improve everyday life,
particularly in the areas of health, sustainability and comfort
across the Climate Control, Transport, Life Science and Fluid
Control sectors. This platform includes IMI Hydronic Engineering
and IMI Precision Engineering's Fluid OEM and Transportation
businesses.
Business Unit Sectors Previous Name
---------------- ----------------------------- ------------------------------------
Automation Process Automation IMI Critical Engineering
----------------
Industrial Automation IMI Precision Industrial Automation
---------------- ----------------------------- ------------------------------------
Life Technology Climate Control IMI Hydronic Engineering
Life Science & Fluid Control IMI Precision Fluid OEM
Transport IMI Precision Transportation
From July 2023, reporting is being aligned across the two
businesses and five sectors and will be used in our 2023
preliminary results announcement in early 2024.
Our financial framework
Given the success of the Better World strategy launched in
November 2019, we are expanding the financial framework for the
Group. We continue to build towards our 20% through-cycle adjusted
operating margin target. Today we add through-cycle targets of 5%
organic growth and 90% cash conversion. In addition, as we grow the
business through M&A, we expect return on invested capital to
remain above 12%.
Financial Metric Through-cycle targets 2022 full year
---------------------------- ---------------------- ---------------
Organic revenue growth 5% 4%
Adjusted operating margin 20% 17.8%
Cash conversion 90% 80%
Return on invested capital >12% 12.7%
Sustainability: creating a Better World
Our purpose, Breakthrough Engineering for a Better World,
continues to drive our actions and create real energy across our
organisation. IMI's solutions support the safety, sustainability,
and productivity of our customers' products and operations, and
often directly contribute to the delivery of their carbon reduction
targets. When considering investments, we ensure that the impact on
IMI's ESG objectives is a prime consideration.
IMI sees a natural link between pursuing our ESG objectives with
vigour and our wider ambitions for improved growth and
profitability. Many of our best growth opportunities are supporting
customers in developing solutions for a zero-carbon future. In
particular, we are supporting development in many aspects of the
Hydrogen value chain, including electrolysis, liquid storage,
refuelling and heavy-duty trucks. Our hydrogen related orders in
2023 are expected to double from GBP7m in 2022.
We have also agreed our first Sustainability linked revolving
credit facility for GBP50m in June 2023 and will use this as a
template to convert our remaining lending facilities as they come
up for renewal.
We have submitted our commitment letter to the Science Based
Target Initiative and plan to submit our targets later this year
for approval. We continue to reduce our CO(2) emissions for Scope
1, Scope 2 and Scope 3, making meaningful progress toward our Net
Zero targets. We continue to improve our metrics regarding water
withdrawal and non-recyclable hazardous waste.
Our Inclusion and Diversity activities are helping to build a
more dynamic and innovative organisation. The female representation
on the Board is currently 44% and the Executive Committee is 43%.
Our employee engagement remains high, with 77% of all employees
seeing IMI as a great place to work (2022: 80%).
Ensuring all our employees feel safe at work is central to our
strategy and culture. Total recordable incidents in the first half
were 17 (2022: 15), we have a continued focus on identifying and
reducing workplace hazards, and remain committed to the ambition of
an accident-free workplace.
The Group's commitment to a Better World is evident in our many
external ESG credentials, including a MSCI AA rating, and our
membership of the FTSE4Good Index. We are also proud to have been
awarded the LSE's Green Economy Mark, as our products and services
contribute to a number of environmental objectives such as climate
change mitigation, waste and pollution reduction, and the circular
economy.
More information about our ESG credentials and initiatives,
including our policies and practices, can be found on our website:
www.imiplc.com .
Results overview
Strong organic growth, margin improvement and cash delivery
IMI has delivered a strong first half performance, with Group
revenue growth of 12% compared to the same period last year and 7%
higher organically. First half adjusted operating margin has
increased by 140bps when compared to the prior period.
GBPm Adjusted(1) Statutory
------------------ ===========================
H1 2023 H1 2022 Change Organic(2) H1 2023 H1 2022 Change
------------------ -------- -------- -------- ----------- -------- -------- -------
Revenue 1,084 972 +12% +7% 1,084 972 +12%
Operating profit 192.8 159.8 +21% +13% 148.9 129.0 +15%
Operating margin 17.8% 16.4% +140bps 13.7% 13.3% +40bps
(1 Excluding the effect of adjusting items as reported in the
income statement. See Note 2 for definitions of alternative
performance measures.)
2 After adjusting for exchange rates, acquisitions and disposals
(see Note 3).
This strong performance reflects continued focus on our unifying
purpose-led strategy, Breakthrough Engineering for a Better World .
We are creating value by increasing customer intimacy, driving
market-led innovation and reducing complexity. These actions have
allowed us to generate strong growth in the order book and revenue
as well as improving margins.
Sector performance
Sector (GBPm) H1 2023 H1 2022 Change Organic(1)
------------------------------ -------- -------- ------- -----------
Process Automation 366 312 17% 15%
Industrial Automation 243 226 8% 2%
Climate Control 201 175 15% 5%
Life Science & Fluid Control 152 150 1% -3%
Transport 122 109 12% 6%
Total revenue 1,084 972 12% 7%
-------- -----------
1 After adjusting for exchange rates, acquisitions and disposals
(see Note 3).
Process Automation Sector (GBPm) H1 2023 H1 2022 Change Organic(1)
---------------------------------- -------- -------- ------- -----------
Closing order book 774 587 +32%
Aftermarket order intake 296 228 +30% +26%
New Construction order intake 213 153 +39% +36%
---------------------------------- -------- -------- ------- -----------
Total order intake 509 381 +34% +30%
---------------------------------- -------- -------- ------- -----------
1 After adjusting for exchange rates, acquisitions and disposals
(see Note 3).
Process Automation (IMI Critical Engineering) had an excellent
first half, with strong order intake and continued organic growth.
Orders were up 30% organically, with a 26% increase in Aftermarket.
We have seen particular strength in LNG, Marine and downstream Oil
& Gas, with new products continuing to make a major
contribution to growth.
Industrial Automation ( IMI Precision Industrial Automation)
delivered a good performance despite uncertain markets. We see
continued demand for solutions that automate processes in a
competitive labour market.
Climate Control (IMI Hydronic Engineering) saw strong demand for
our energy saving products. The integration of Heatmiser, acquired
in December 2022, is progressing well and we see a significant
opportunity to scale Heatmiser's unique product portfolio across
our core European markets.
Life Science & Fluid Control ( IMI Precision Fluid OEM) saw
modest levels of customer destocking in the first half, although
underlying demand for our innovative product portfolio remains
solid.
Transport ( IMI Precision Transportation) saw growth across all
regions in the first half as supply chains began to normalise. We
have benefited from a particularly strong recovery in China
following the easing of COVID-19 restrictions.
Dividend
The Board is recommending a 2023 interim dividend of 9.1p per
share (2022: 8.3p per share). Payment will be made on 15 September
2023 to shareholders on the register at the close of business on 11
August 2023.
Outlook
Based on the strong first half results and current market
conditions our guidance for 2023 full year adjusted EPS is
unchanged at 112p to 117p.
This reflects c.3% business outperformance since our last
update, offset by foreign exchange, which is now expected to lead
to a full year headwind of 1%. Divisional guidance remains
unchanged.
Divisional results overview
The following review relates to our continuing businesses'
performance for the six months ended 30 June 2023 when compared to
the same period in 2022. References to organic growth are on a
constant currency basis and exclude disposals and acquisitions, see
Note 3 for a reconciliation of these measures.
GBPm Adjusted(1) Statutory
--------------------------- ----------------------------------------- ---------------------------
H1 2023 H1 2022 Change Organic(2) H1 2023 H1 2022 Change
--------------------------- -------- -------- -------- -------- -------- -------
Revenue
IMI Precision Engineering 517 485 +7% +2% 517 485 +7%
IMI Critical Engineering 366 312 +17% +15% 366 312 +17%
IMI Hydronic Engineering 201 175 +15% +5% 201 175 +15%
--------------------------- -------- -------- -------- ----------- -------- -------- -------
Total 1,084 972 +12% +7% 1,084 972 +12%
--------------------------- -------- -------- -------- ----------- -------- -------- -------
Operating profit
IMI Precision Engineering 101.4 88.2 +15% +10% 69.5 66.8 +4%
IMI Critical Engineering 60.5 48.8 +24% +21% 52.5 43.5 +21%
IMI Hydronic Engineering 43.9 35.5 +24% +4% 39.9 35.9 +11%
Corporate costs (13.0) (12.7) (13.0) (17.2)
--------------------------- -------- -------- -------- ----------- -------- -------- -------
Total 192.8 159.8 +21% +13% 148.9 129.0 +15%
--------------------------- -------- -------- -------- ----------- -------- -------- -------
Operating margin 17.8% 16.4% +140bps 13.7% 13.3% +40bps
(1 Excluding the effect of adjusting items as reported in the
income statement. See Note 2 for definitions of alternative
performance measures.)
2 After adjusting for exchange rates, acquisitions and disposals
(see Note 3).
IMI Precision Engineering
IMI Precision Engineering performed well in the first half.
Organic revenue grew by 2%, with growth in Industrial Automation
and Transportation more than offsetting lower revenue due to
customer destocking in Life Sciences. Adjusted revenue grew by 7%,
with recent acquisitions making a positive contribution to
divisional performance.
Adjusted operating margin in the division improved in the period
by 140bps to 19.6%. The division continues to advance complexity
reduction initiatives which will support further margin
expansion.
Statutory operating profit increased by 4%, as increased
restructuring spend partly offset the strong trading result.
IMI Critical Engineering
IMI Critical Engineering continues to advance its strategy and
is actively deploying Growth Hub where its expertise can support
sustainable future growth. Organic revenue was 15% higher than the
prior period, and 17% higher on an adjusted basis.
Organic adjusted operating profit was 21% higher than the first
half of 2022, another strong result reflecting the division's
strategy to maximise aftermarket opportunities and optimise its
operating footprint for the future. Adjusted operating margin for
the first half was 16.5%, 90bps higher than the prior period.
Statutory operating profit increased by 21%, reflecting the
excellent first half performance.
IMI Hydronic Engineering
With its strong brands and product positioning, combined with
the global imperative to reduce energy consumption in buildings,
IMI Hydronic Engineering is positioned to deliver sustainable,
profitable growth.
Organic revenue was 5% higher than the prior period and 15%
higher on an adjusted basis. The integration of Heatmiser, acquired
in December 2022, is progressing well as we look to accelerate our
growth in smart buildings.
Adjusted operating profit increased by 4% on an organic basis
and 24% on an adjusted basis. The adjusted operating margin
improved by 150bps in the period to 21.8%, reflecting the quality
of the business.
Statutory operating profit increased by 11%, with the strong
trading result partly offset by higher acquired intangible
amortisation following the Heatmiser acquisition.
Financial review
Strong first half performance
Revenue of GBP1,084m was up 12% (2022: GBP972m). Organic revenue
increased 7% when compared with the same period in the previous
year, after adjusting for acquisitions, disposals and exchange rate
movements. Adjusted operating profit was GBP193m, a 21% increase on
the prior period (2022: GBP160m). On an organic basis, adjusted
operating profit increased by 13%. Group adjusted operating margin
increased by 140bps to 17.8% (2022: 16.4%). Statutory operating
profit was up 15% at GBP149m (2022: GBP129m).
Adjusted net interest costs on borrowings were GBP12.0m (2022:
GBP6.6m) and were covered 20 times by adjusted earnings before
interest, tax, depreciation and amortisation (EBITDA) of GBP239m
(2022: GBP202m). The IAS19 pension net financial expense was
GBP0.7m (2022: GBP0.8m income). The total adjusted net financial
expense was GBP12.7m (2022: GBP5.8m), reflective of the increase in
both borrowing and interest rates since last year. Profit before
tax and adjusting items was GBP180m, an increase of 17% (2022:
GBP154m).
The adjusted Group effective tax rate on profit for the first
half increased to 22.3% (2022: 21.0%), reflecting the increase in
the UK statutory rate of corporation tax from 19% to 25% with
effect from 1 April 2023.
Statutory profit before tax was GBP139m (2022: GBP121m). The
total statutory profit for the period after taxation was GBP109m
(2022: GBP95m).
Adjusting items
Restructuring costs of GBP24m were incurred in the first half
(2022: GBP8m). A detailed breakdown of these costs by division,
alongside expected benefits is provided below. Further details on
2022 projects are included in Note 2.
The impact of amortisation of acquired intangibles and other
acquisition costs was GBP18m (2022: GBP15m), largely reflecting the
acquisitions of Bahr and Heatmiser, which completed during 2022.
The reversal of net economic hedge contract gains and losses
resulted in a GBP1m charge (2022: GBP1m charge).
The tax effect of the above adjusting items was a credit of
GBP11m (2022: GBP6m).
Complexity reduction continues to deliver benefits
Along with investments into our future growth, IMI continues to
identify and execute on opportunities to drive more efficient
operations. The following table provides a summary of progress on
our restructuring programmes:
GBPm H1 2023 2023* 2024* 2025*
-------------------------------- -------- ------ ------ ------
Restructuring charge
(including impairment losses)
IMI Precision Engineering (19) (37) (2) -
IMI Critical Engineering (5) (6) (37) (5)
IMI Hydronic Engineering - - - -
-------------------------------- -------- ------ ------ ------
Total charge (24) (43) (39) (5)
-------------------------------- -------- ------ ------ ------
Cash impact (23) (35) (32) (5)
-------------------------------- -------- ------ ------ ------
GBPm H1 2023 2023* 2024* 2025*
-------------------------------- -------- ------ ------ ------
Incremental annual benefits
IMI Precision Engineering 7 16 7 3
IMI Critical Engineering 1 3 6 6
IMI Hydronic Engineering - 1 - -
-------------------------------- -------- ------ ------ ------
Total benefits 8 20 13 9
-------------------------------- -------- ------ ------ ------
(*Future looking forecast information.)
All three divisions advanced their significant multi-year
restructuring programmes in the first half, recognising a total
charge of GBP24m.
The restructuring programme contributed GBP8m of benefits in the
first half, and is on track to deliver GBP20m for the full
year.
We continue to expect that significant projects will largely
complete by 2024, although the Group will always seek and execute
on opportunities that improve its competitive position.
Earnings per share
The average number of shares in issue during the period was 259m
(2022: 258m), resulting in adjusted basic earnings per share of
54.0p (2022: 47.1p). Statutory basic earnings per share was 42.2p
(2022: 36.6p) and statutory diluted earnings per share was 42.1p
(2022: 36.5p).
Foreign exchange
The impacts of translation on the reported growth of first half
revenue and adjusted operating profit was a favourable increase of
GBP35m and increase of GBP7m, respectively. The most significant
foreign currencies for the Group remain the Euro and the US Dollar
and the relevant rates of exchange for the period and at the period
end are shown in Note 13 to this report.
If the exchange rates on 14 July (US$1.31 and EUR1.17) remained
constant for the remainder of the year, it would negatively impact
both revenue and adjusted operating profit by 1% in the year when
compared to 2022.
Cash flow
Cash generated from operations increased to GBP174m (2022:
GBP111m). Adjusted operating cash flow (see definition in Note 2)
increased to GBP145m (2022: GBP79m), largely reflecting the strong
trading result and reduced working capital investments. Trade and
other receivables increased by GBP42m, inventories increased by
GBP52m and trade and other payables increased by GBP47m. Capital
expenditure amounted to GBP36m (2022: GBP40m) and was 1.2 times
(2022: 1.4 times) the adjusted depreciation and amortisation charge
for the period of GBP31m (2022: GBP28m), which excludes
depreciation from the IFRS 16 right of use assets of GBP15m (2022:
GBP14m).
The other major cash outflows in the period were dividends to
shareholders of GBP45m, a GBP24m outflow for adjusting items
primarily related to the Group's restructuring programme, and
GBP43m of tax. The total cash inflow for the period, excluding the
impact of foreign exchange and movement of lease liabilities, was
GBP28m, compared with an outflow of GBP122m in the first half of
the previous year.
Definitions of adjusted performance measures are included in
Note 2 and a reconciliation of adjusted measures to statutory
measures is included in Note 11.
Balance sheet
The Group maintains an appropriate mixture of cash and short,
medium and long-term debt arrangements which provide sufficient
headroom for both ongoing activities and acquisitions. Total
committed bank loan facilities available to the Group at 30 June
2023 were GBP300m (December 2022: GBP300m), of which GBP106m
(December 2022: GBP100m) was drawn.
The ratio of net debt to the last twelve months' EBITDA (before
adjusting items) is a funding covenant that is currently limited to
3.0x and was 1.6x at the end of June 2023 (December 2022:
1.8x).
Trade and other receivables have increased by GBP24m (5%) to
GBP508m at 30 June 2023 (December 2022: GBP484m). Inventories have
increased by GBP33m (8%) to GBP451m at 30 Ju ne 2023 (December
2022: GBP418m), with investments to support the order book growth
in Process Automation offsetting the strategic reduction of
inventory in other sectors. Trade and other payables have increased
by GBP24m (5%) to GBP463m at 30 June 2023 (December 2022:
GBP439m).
Goodwill decreased to GBP681m (December 2022 restated: GBP704m)
due to movements in exchange rates.
The net deficit for defined benefit obligations at 30 June 2023
was GBP40m (December 2022: GBP19m deficit). The UK surplus was
GBP6m (December 2022: GBP28m surplus) with the liabilities now
fully bought-in and no future funding requirements expected. The
deficit in the overseas funds as at 30 June 2023 was GBP46m (31
December 2022: GBP47m deficit).
Shareholders' equity at the end of June was GBP920m, an increase
of GBP14m since the end of last year. This is largely attributable
to the profit for the period of GBP109m and the after-tax impact of
share-based payments of GBP5m.These gains were offset by an
after-tax actuarial charge on the defined benefit pension plans of
GBP17m, unfavourable exchange differences and related tax of GBP38m
and dividends paid of GBP45m.
Other regulatory information
Going concern
After making enquiries, the directors have a reasonable
expectation that IMI plc ('the Company') and the Group have
adequate resources to continue in operational existence for the
foreseeable future and for a period of at least twelve months
following the approval of the Interim Financial Report.
Accordingly, they continue to adopt the going concern basis. See
Note 1 for further information on the directors' considerations in
reaching this conclusion.
The directors have considered the current macroeconomic
conditions on the Group's financial results and financial position.
The directors have assessed the viability of the Group and reviewed
detailed cash flow forecast scenarios, including comparing a
reverse stress test to those detailed forecasts. The directors have
a reasonable expectation that the financial headroom will not be
exhausted during the twelve months following the date of approval
of the Interim Financial Report.
Principal risks and uncertainties
The Group has a risk management structure and internal controls
in place which are designed to identify, manage and mitigate
business risk. IMI faces a number of risks and uncertainties which
could have a material impact on the Group's long-term
performance.
On pages 88 to 93 of its 2022 Annual Report (a copy of which is
available on IMI's website: www.imiplc.com), the Company sets out
what the directors regarded as being the principal risks and
uncertainties facing the Group and which could have a material
impact on the Group's long-term performance. These risks include
global economic uncertainty and political instability, competitive
markets, failure to manage the supply chain, talent retention and
attraction, cyber security risks, new product development, natural
disasters, major transformational project delivery risk, regulatory
breach, product quality issues and acquisition risk. Having
considered the current environment, the directors have considered
that these risks remain valid and have the potential to impact the
Group during the second half of 2023. The directors have identified
artificial intelligence as an additional principal risk during the
first half given the fast-developing technology in this area. The
impact of the macro-economic and end-market environments in which
the Group's businesses operate have been considered in making the
comments in the divisional review and outlook sections of this
Interim Financial Report.
Safe harbour statement
This Interim Financial Report contains forward-looking
statements with respect to the operations, performance and
financial condition of the Group. By their nature, these statements
involve uncertainty since future events and circumstances can cause
results and developments to differ materially from those
anticipated. The forward-looking statements reflect knowledge and
information available at the date of preparation of this
announcement and the Company undertakes no obligation to update
these forward-looking statements. All written or oral
forward-looking statements attributable to IMI plc are qualified by
this caution. Nothing in this Interim Financial Report should be
construed as a profit forecast.
Responsibility statement of the directors in respect of the
Interim Financial Report
We confirm that to the best of our knowledge:
-- the condensed set of interim financial statements has been
prepared in accordance with IAS 34 'Interim Financial Reporting' as
adopted by the UK
-- the Interim Financial Report includes a fair review of the
information required by DTR 4.2.7R of the Disclosure and
Transparency Rules, being an indication of important events that
have occurred during the first six months of the financial year and
their impact on the condensed set of financial statements, and a
description of the principal risks and uncertainties for the
remaining six months of the year, and
-- there were no changes in the related party transactions
described in the 2022 Annual Report thatmaterially affected the
Group's results or financial position during the six months ended
30 June 2023.
The directors of IMI plc are listed on the IMI plc website (
www.imiplc.com ).
Approved by the Board of IMI plc and signed on its behalf
by:
Roy Twite Daniel Shook
Chief Executive Finance Director
27 July 2023 27 July 2023
Notes to editors
IMI plc is a specialist engineering company operating in fluid
and motion control markets. We combine our deep engineering
knowledge with strong applications expertise to develop solutions
for the most acute industry problems. We help our customers become
safer, more sustainable and more productive. IMI employs around
10,000 people, has manufacturing facilities in 19 countries and
operates a global service network. The Company is listed on the
London Stock Exchange and is a constituent of the FTSE4Good Index.
Further information is available at www.imiplc.com .
IMI plc is registered in England No. 714275. Its legal entity
identifier ('LEI') number is 2138002W9Q21PF.
INDEPENT REVIEW REPORT TO IMI PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2023 which comprises the comprehensive
income, condensed consolidated interim balance sheet, condensed
consolidated interim statement of changes in equity, condensed
consolidated interim statement of cash flows and related Notes 1 to
15.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2023 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council for use in the
United Kingdom (ISRE (UK) 2410). A review of interim financial
information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in Note 1, the annual financial statements of the
Group will be prepared in accordance with United Kingdom adopted
international accounting standards. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE (UK) 2410. However future events or
conditions may cause the entity to cease to continue as a going
concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the company a conclusion on the
condensed set of financial statements in the half-yearly financial
report. Our conclusion, including our Conclusions Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
ISRE (UK) 2410. Our work has been undertaken so that we might state
to the company those matters we are required to state to it in an
independent review 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, for our review work, for this
report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London
27 July 2023
CONSOLIDATED INTERIM INCOME STATEMENT
6 months to 6 months to
30 June 2023 30 June 2022 Year to
Note (unaudited) (unaudited) 31 Dec 2022
Adjusting Adjusting Adjusting
items items items
(Note (Note (Note
Adjusted 2) Statutory Adjusted 2) Statutory Adjusted 2) Statutory
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------- --------- --------- -------- --------- --------- --------- --------- ---------
Revenue 3 1,084 1,084 972 972 2,049 2,049
Cost of sales (573.6) (1.6) (575.2) (523.4) (1.4) (524.8) (1,110.9) (1.2) (1,112.1)
-------- --------- --------- -------- --------- --------- --------- --------- ---------
Gross profit 510.4 (1.6) 508.8 448.6 (1.4) 447.2 938.1 (1.2) 936.9
Net operating costs (317.6) (42.3) (359.9) (288.8) (29.4) (318.2) (574.3) (64.4) (638.7)
Operating profit 3 192.8 (43.9) 148.9 159.8 (30.8) 129.0 363.8 (65.6) 298.2
Financial income 5 3.7 3.7 2.5 2.5 4.6 4.6
Financial expense 5 (15.7) (15.7) (9.1) (9.1) (23.8) (23.8)
Gains/(losses) on
instruments
measured
at fair value
through
profit or loss 2.3 2.3 (2.3) (2.3) 4.9 4.9
Net financial
(expense)/income
relating to defined
benefit pension
schemes (0.7) (0.7) 0.8 0.8 1.5 1.5
Net financial
(expense)/income 5 (12.7) 2.3 (10.4) (5.8) (2.3) (8.1) (17.7) 4.9 (12.8)
Profit before tax 180.1 (41.6) 138.5 154.0 (33.1) 120.9 346.1 (60.7) 285.4
Taxation 6 (40.2) 11.0 (29.2) (32.3) 6.0 (26.3) (73.7) 14.6 (59.1)
Profit after tax 139.9 (30.6) 109.3 121.7 (27.1) 94.6 272.4 (46.1) 226.3
Earnings per share 4
Basic - from profit
for the period 42.2p 36.6p 87.6p
Diluted - from profit
for the period 42.1p 36.5p 87.2p
All activities relate to continuing operations and are all attributable
to the owners of the Company.
CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
6 months
to 6 months to
30 June 2023 30 June 2022 Year to
(unaudited) (unaudited) 31 Dec 2022
GBPm GBPm GBPm GBPm GBPm GBPm
------- ------- ------- ------ ------ ------
Profit for the period 109.3 94.6 226.3
Items that will not subsequently be
reclassified to profit and loss
Re-measurement (loss)/gain on defined
benefit plans (22.6) 14.6 (82.7)
Related taxation effect 5.7 (3.9) 20.4
(16.9) 10.7 (62.3)
Items that may be reclassified to profit
and loss
Gain/(loss) arising on hedging instruments
designated in hedges
of the net assets in foreign operation 6.7 (2.7) (7.5)
(Loss)/gain on exchange differences on
translation
of foreign operations net of funding
revaluations (46.2) 38.6 40.9
Gain on exchange differences reclassified
to income statement
on disposal of operations - 0.5 0.6
Related tax credit/(charge) on items
that may subsequently be
reclassified to profit and loss 1.1 (0.8) (0.3)
------- ------- ------
(38.4) 35.6 33.7
Other comprehensive (loss)/income for
the period, net of taxation (55.3) 46.3 (28.6)
Total comprehensive income for the period,
net of taxation 54.0 140.9 197.7
CONSOLIDATED INTERIM BALANCE SHEET
30 June
2023 30 June 2022 31 Dec 2022
(unaudited) (unaudited) (Restated
Note 14)
Note GBPm GBPm GBPm
-------- ----------- ------------------------ -----------
Assets
Goodwill 680.5 646.2 703.7
Other intangible assets 290.0 239.1 316.7
Property, plant and
equipment 292.9 295.9 299.2
Right of use assets 102.3 88.5 107.0
Employee benefit assets 9 6.4 123.2 28.5
Deferred tax assets 23.5 38.1 24.2
Other receivables 2.0 1.5 2.6
Total non-current assets 1,397.6 1,432.5 1,481.9
Inventories 451.3 397.9 417.7
Trade and other receivables 507.7 464.8 483.9
Derivative financial assets 16.5 8.0 15.7
Current tax 1.7 5.6 1.9
Investments 1.7 2.0 2.0
Cash and cash equivalents 112.3 133.2 133.0
Total current assets 1,091.2 1,011.5 1,054.2
Total assets 2,488.8 2,444.0 2,536.1
Liabilities
Trade and other payables (463.2) (429.3) (439.1)
Bank overdraft (79.1) (83.0) (93.8)
Interest-bearing loans and
borrowings (153.2) (110.6) (150.1)
Lease liabilities (25.3) (24.1) (25.8)
Provisions (26.0) (35.0) (27.2)
Current tax (59.7) (65.4) (70.4)
Derivative financial
liabilities (10.1) (13.5) (13.8)
Total current liabilities (816.6) (760.9) (820.2)
Interest-bearing loans and
borrowings (551.8) (608.6) (595.4)
Lease liabilities (74.8) (67.2) (79.9)
Employee benefit
obligations 9 (46.0) (41.7) (47.4)
Provisions (16.5) (16.9) (15.3)
Deferred tax liabilities (47.0) (78.6) (59.2)
Other payables (16.3) (7.1) (13.1)
Total non-current
liabilities (752.4) (820.1) (810.3)
Total liabilities (1,569.0) (1,581.0) (1,630.5)
Net assets 919.8 863.0 905.6
Share capital 12 78.6 78.6 78.6
Share premium 16.5 15.3 16.4
Other reserves 183.0 223.3 221.4
Retained earnings 641.7 545.8 589.2
Total equity 919.8 863.0 905.6
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
Share Capital
Share premium redemption Translation Retained Total
capital account reserve reserve earnings equity
Note GBPm GBPm GBPm GBPm GBPm GBPm
---- -------- ----------- ----------- ----------- ----------- -----------------
As at 1 January 2022 78.6 15.2 177.6 10.1 497.6 779.1
Profit for the period 94.6 94.6
Other comprehensive
income
excluding related
taxation
effect 36.4 14.6 51.0
Related taxation
effect (0.8) (3.9) (4.7)
Total comprehensive
income 35.6 105.3 140.9
Issue of share
capital - 0.1 0.1
Dividends paid 7 (40.8) (40.8)
Share-based payments
(net of tax) 3.7 3.7
Shares acquired for:
employee share
scheme
trust (20.0) (20.0)
As at 30 June 2022
(unaudited) 78.6 15.3 177.6 45.7 545.8 863.0
As at 1 January 2022 78.6 15.2 177.6 10.1 497.6 779.1
Profit for the year 226.3 226.3
Other comprehensive
income/(expense)
excluding related
taxation
effect 34.0 (82.7) (48.7)
Related taxation
effect (0.3) 20.4 20.1
Total comprehensive
income 33.7 164.0 197.7
Issue of share
capital - 1.2 1.2
Dividends paid 7 (62.2) (62.2)
Share-based payments
(net of tax) 9.8 9.8
Shares acquired for:
employee share
scheme
trust (20.0) (20.0)
As at 31 December
2022 78.6 16.4 177.6 43.8 589.2 905.6
Changes in equity in
2023
Profit for the period 109.3 109.3
Other comprehensive
loss
excluding related
taxation
effect (39.5) (22.6) (62.1)
Related taxation
effect 1.1 5.7 6.8
Total comprehensive
(loss)/income (38.4) 92.4 54.0
Issue of share
capital - 0.1 0.1
Dividends paid 7 (45.1) (45.1)
Share-based payments
(net of tax) 5.2 5.2
Shares acquired for:
employee share
scheme
trust -
As at 30 June 2023
(unaudited) 78.6 16.5 177.6 5.4 641.7 919.8
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
6 months 6 months Year to
to to
30 June 30 June 31 Dec
2023 2022 2022
(unaudited) (unaudited)
Note GBPm GBPm GBPm
---- ---------------- ------------ -------
Cash flows from operating activities
Operating profit for the period 148.9 129.0 298.2
Adjustments for:
Depreciation and amortisation 62.0 55.7 122.2
Impairment/(reversal of impairment) of property
plant and equipment and intangible assets 0.1 (1.7) (1.6)
Loss on disposal of subsidiaries - 4.5 4.8
Loss on sale of property, plant, and equipment 0.4 0.2 1.7
Equity-settled share-based payment expense 6.3 6.0 11.7
Increase in inventories (52.1) (41.5) (47.6)
Increase in trade and other receivables (42.1) (44.9) (38.8)
Increase in trade and other payables 46.5 8.7 1.3
Increase/(decrease) in provisions 0.6 (6.0) (16.0)
Increase in employee benefits 0.6 0.9 2.2
Settlement of transactional derivatives 2.4 0.3 (2.3)
---------------- ------------ -------
Cash generated from operations 173.6 111.2 335.8
Income taxes paid (42.5) (20.0) (48.6)
---------------- ------------ -------
Cash generated from operations after tax 131.1 91.2 287.2
Additional pension scheme funding (3.5) (3.5)
---------------- ------------ -------
Net cash from operating activities 131.1 87.7 283.7
---------------- ------------ -------
Cash flows from investing activities
Interest received 5 3.7 2.5 4.6
Proceeds from sale of property, plant, and
equipment 0.6 1.3 2.9
Settlement of effective net investment hedge
derivatives 3.8 (1.6) (6.3)
Acquisitions of subsidiaries net of cash - (83.6) (201.2)
Acquisition of property, plant and equipment
and non-acquired intangibles (36.0) (40.3) (71.3)
Proceeds from disposal of subsidiaries net
of cash (2.1) (2.1)
---------------- ------------ -------
Net cash from investing activities (27.9) (123.8) (273.4)
---------------- ------------ -------
Cash flows from financing activities
Interest paid 5 (15.7) (9.1) (23.8)
Shares acquired for employee share scheme
trust - (20.0) (20.0)
Proceeds from the issue of share capital
for employee share schemes 0.1 0.1 1.2
Drawdown of borrowings 60.7 125.3 259.1
Repayment of borrowings (93.5) - (121.3)
Principal elements of lease payments (14.6) (13.8) (32.3)
Dividends paid to equity shareholders 7 (45.1) (40.8) (62.2)
---------------- ------------ -------
Net cash from financing activities (108.1) 41.7 0.7
---------------- ------------ -------
Net (decrease)/increase in cash and cash
equivalents (4.9) 5.6 11.0
Cash and cash equivalents at the start of
the period 39.2 29.1 29.1
Effect of exchange rate fluctuations (1.1) 15.5 (0.9)
---------------- ------------ -------
Cash and cash equivalents at the end of
the period 33.2 50.2 39.2
---------------- ------------ -------
Reconciliation of cash and cash equivalents
Cash and cash equivalents 112.3 133.2 133.0
Bank overdraft (79.1) (83.0) (93.8)
---------------- ------------ -------
Cash and cash equivalents at the end of
the period 33.2 50.2 39.2
---------------- ------------ -------
Notes to the cash flow appear in Note 11.
1. Significant accounting policies
Basis of preparation
This condensed set of financial statements has been prepared in
accordance with IAS 34 'Interim Financial Reporting' as adopted by
the UK. The Group's annual financial statements have been prepared
in accordance with International Financial Reporting Standards as
adopted by the UK.
The Interim Financial Statements are unaudited, but have been
reviewed by the Company's auditor in accordance with the
International Standard for Review Engagement (UK) 2410 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity', issued by the Financial Reporting Council. A copy
of their unqualified review report is attached.
The comparative figures for the financial year ended 31 December
2022 are derived from the Group's statutory accounts for that
financial year as defined in section 435 of the Companies Act 2006.
Those accounts have been reported on by the Company's auditors and
delivered to the registrar of companies. The report of the auditor
was (i) unqualified, (ii) did not include a reference to any
matters to which the auditor drew attention by way of emphasis
without qualifying their report, and (iii) did not contain a
statement under section 498(2) or (3) of the Companies Act
2006.
The Interim Financial Statements have been prepared for the
Group as a whole and therefore give greater emphasis to those
matters which are significant to IMI plc and its subsidiaries when
viewed as a whole. The Interim Financial Statements do not comprise
statutory accounts within the meaning of section 434 of the
Companies Act 2006.
Going concern
After making enquiries, the directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future and
for a period of at least twelve months (31 July 2024) following the
approval of the Interim Financial Report. Accordingly, they
continue to adopt the going concern basis in preparing the
financial statements.
The directors have considered the current macroeconomic
conditions. The Group is well diversified and maintains a balanced
portfolio operating across a range of markets, sectors and
geographies with no single dependency. Performance in each of IMI's
three divisions has been robust in the first half.
During this period of uncertainty, the Group continues to
maintain a robust financial position. At 30 June 2023, the Group
had cash and cash equivalents of GBP33m and undrawn committed
facilities of GBP194m in the form of Revolving Credit Facilities
(RCF), of which GBP9m is due for renewal in 2023, GBP65m in 2024,
GBP52m in 2025 and GBP68m in 2025. Forecasts indicate that the
Group can operate within the level of facilities in place without
the need to obtain any new facilities in the twelve-month period
following the approval of the Interim Financial Report.
The directors have assessed the viability of the Group and
reviewed detailed cash flow forecasts for a period of at least
twelve months following the date of approval of the Interim
Financial Report. After applying a reverse stress test on the
Group's banking covenants and making comparisons to the detailed
forecasts, the directors have a reasonable expectation that the
financial headroom will not be exhausted during this period.
Covenant compliance reviews are undertaken to ensure that the
Group remains fully within the covenant limits. Funding covenants
currently require EBITDA to be no less than 4.0 times interest and
net debt to be no more than 3.0 times EBITDA. Those covenant
ratios, at 30 June 2023, were 20.0 times and 1.6 times,
respectively.
A reverse stress test shows that for there to be a breach of
covenants during the twelve-month period following the approval of
the Interim Financial Report, forecast revenue would need to fall
by 35% and forecast EBITDA by 59% after taking into account the
mitigating actions that would be undertaken in these circumstances.
The mitigating actions include, but are not limited to, reducing
working capital, restricting capital expenditure, reducing overhead
spend and employee costs and cutting or suspending dividend
payments to shareholders.
Accounting policies
The financial statements are presented in Pounds Sterling (which
is the Company's functional currency), rounded to the nearest
hundred thousand, except revenues, which are rounded to the nearest
whole million. They are prepared on the historical cost basis
except for derivative financial instruments; financial assets
classified as fair value through profit and loss or other
comprehensive income assets and liabilities acquired through
business combinations which are stated at fair value and retirement
benefits. Non-current assets and liabilities held for sale are
stated at the lower of their carrying amounts and their fair values
less costs to sell.
1. Significant accounting policies (continued)
As required by the Disclosure and Transparency Rules (DTR) of
the Financial Conduct Authority, the condensed set of financial
statements has been prepared applying the accounting policies, key
sources of estimation and uncertainty and presentation that were
applied in the preparation of the Company's consolidated financial
statements for the year ended 31 December 2022 as described in the
2022 Annual Report and Accounts, except where new or revised
accounting standards have been applied as described in section (i)
below.
(i) New or amended UK Endorsed Accounting Standards adopted by
the Group during 2023
There are no amended or new International Financial Reporting
Standards which became effective for the Group as of 1 January
2023.
2. Alternative Performance Measures and Adjusting items
Alternative Performance Measures
The Group's policy is to exclude items from underlying performance that
are considered to be significant in nature (i.e. outside of the normal
course of business) and/or quantum and where treatment as an adjusting
item provides stakeholders with additional useful information to assess
period-on-period trading performance of the Group.
The Group believes Alternative Performance Measures ('APMs'), which
are not considered to be a substitute for, or superior to, IFRS measures,
provide stakeholders with additional helpful information on the performance
of the business. These APMs are consistent with how the business performance
is planned and reported within the internal management reporting to
the Board and Executive Committee. Some of these measures are also used
for the purpose of setting remuneration targets and for banking covenants.
The directors' commentary discusses these APMs to remove the effects
of items of both income and expense that are considered different in
nature from the underlying trading and normal quantum and where treatment
as an adjusting item provides stakeholders with additional information
to assess period-on-period trading.
Management has applied judgement in the selection of the APMs used in
the Interim Financial Report. The APMs presented are used in discussions
with the investment analyst community and by the Board and management
to monitor the trading performance of the Group.
APM Definition Reconciliation
to statutory
measure
-------------------------------------------------- ----------------
Adjusted profit before Adjusted profit before tax is statutory See income
tax profit before tax before adjusting items statement.
as shown on the income statement.
See income
Adjusted net interest Adjusted net interest cost is statutory statement.
cost net interest costs before adjusting items
as shown on the income statement.
See Note 4.
Adjusted earnings Adjusted earnings per share is defined
per share within the table in Note 4. See Note 6.
Adjusted effective The adjusted effective tax rate is the
tax rate tax impact on adjusted profit before tax See Note 11.
divided by adjusted profit before tax.
Adjusted EBITDA This measure reflects adjusted profit after
tax before interest, tax, depreciation,
amortisation and impairment.
-------------------------------------------------- ----------------
2. Alternative Performance Measures and Adjusting items (continued)
APM Definition Reconciliation
to statutory
measure
-------------------------------------------------- ----------------
Adjusted operating Adjusted operating profit is statutory See income
profit operating profit before adjusting items statement
as shown on the income statement. and segmental
reporting
Adjusted operating Adjusted operating margin is adjusted operating in Note 3.
margin profit divided by revenue.
Adjusted net financing costs is interest
Adjusted net financing received and interest paid including the
costs impact on interest costs on leases before
gains on instruments measured at fair value
through profit or loss (other economic
hedges) and net financial income relating
to defined benefit pension schemes.
Organic revenue growth These two measures remove the impact of
adjusting items, acquisitions,
Organic adjusted disposals and movements in exchange rates.
operating profit
-------------------------------------------------- ----------------
Adjusted operating This measure reflects cash generated from See Note 11.
cash flow operations as shown in the statement of
cash flows less cash spent acquiring property,
plant and equipment, non-acquired intangible
assets and investments; plus, cash received
from the sale of property, plant and equipment,
the sale of investments less the repayment
of principal amounts of lease payments
excluding the cash impact of adjusting
items.
-------------------------------------------------- ----------------
Net debt Net debt is defined as the cash and cash See Note 11.
equivalents, overdrafts, interest-bearing
loans and borrowings and lease liabilities.
Net debt: adjusted See Note 11.
EBITDA Net debt divided by adjusted EBITDA as
defined above.
See Note 11.
Free cash flow before
corporate activity This measure is a subtotal in the reconciliation
of adjusted EBITDA to Net Debt and is presented
to assist the reader to understand the
nature of the current year's cash flows
Return on invested excluding dividends, share buybacks and
capital (ROIC) the purchase and issuance of own shares.
This measure takes adjusted operating profit
after tax divided by average capital invested.
Capital invested is defined as net assets
adjusted to remove net debt, derivative
Cash conversion assets and liabilities, defined benefit
pension position (net of deferred tax)
and to reverse historical impairments of
goodwill and amortisation of acquired intangible
assets.
Cash conversion is the adjusted operating
cash flow as a percentage of the adjusted
operating profit.
-------------------------------------------------- ----------------
2. Alternative Performance Measures and Adjusting items (continued)
Adjusting items
Outlined below are the adjusting items impacting these Interim Financial
Statements:
6 months 6 months Year
to to to
30 June 30 June 31 Dec
Key 2023 2022 2022
---------- ----------------------- ----------------------- -------------------
Recognised in arriving at
operating profit
Reversal of net economic hedge
contract (gains)/losses (a) (2.8) 1.5 3.0
Restructuring costs and
associated impairment losses (b) (23.5) (7.7) (25.9)
Acquired intangible
amortisation and other
acquisition
items (c) (17.6) (15.4) (33.7)
Exit from Russia (d) - (9.2) (9.0)
----------------------- ----------------------- -------------------
(43.9) (30.8) (65.6)
Recognised in net financial
expense
Gains/(losses) on instruments
measured at fair value
through profit or loss (a) 2.3 (2.3) 4.9
Recognised in taxation
Tax impact of adjusting items
above (e) 11.0 6.0 14.6
(a) Reversal of net economic hedge contract losses/(gains) - for segmental
reporting purposes, changes in the fair value of economic hedges
which are not designated as hedges for accounting purposes, together
with the gains and losses on their settlement, are included in
the revenues and adjusted operating profit of the relevant business
segment. The adjusting items at the operating costs level reverse
this treatment. The financing adjusting items reflect the change
in value or settlement of these contracts with the financial institutions
with whom they were transacted.
(b) Restructuring costs and associated impairment losses - restructuring
costs of GBP23.5m were incurred in the six months to 30 June 2023.
The restructuring costs primarily relate to IMI Precision Engineering
and were for the Customer First project, across a number of businesses,
which is a reorganisation of the business into market segments,
and the rationalisation of four facilities. The benefits of the
restructuring programme are included in adjusted operating profit.
These ongoing significant restructuring projects are due to be
completed in 2024 .
Restructuring costs and associated impairment losses of GBP25.9m
were recognised in 2022 (six months to 30 June 2022: GBP7.7m).
These primarily related to IMI Precision Engineering and were for
the Customer First project, across a number of businesses and the
rationalisation of four facilities.
(c) Acquired intangible amortisation and other acquisition items -
the acquired intangible amortisation charge in the six months to
30 June 2023 was GBP16.0m (six months to 30 June 2022: GBP13.1m,
12 months to 31 December 2022: GBP29.5m), which largely relates
to the amortisation of the intangible assets recognised on the
acquisition of Adaptas, Heatmiser and Bahr. Other acquisition costs
of GBP1.6m for the six months to 30 June 2023 related to the write-off
of the inventory fair value uplift adjustment for Heatmiser. Other
acquisition costs of GBP4.2m for the year ended 31 December 2022
primarily related to professional fees associated with the acquisition
of Heatmiser and Bahr and the write-off of the inventory fair value
uplift adjustment for Adaptas.
(d) Exit from Russia - in 2022, the Group's decision to end all new
business in Russia resulted in a charge of GBP9.0m. The Group recorded
a loss on disposal of its Russian subsidiary of GBP4.8m. In addition,
the exit resulted in a GBP4.2m impairment of assets related to
Russian contracts.
(e) Taxation - the tax effect of the above items has been recognised
as an adjusting item and amounts to GBP11.0m (six months to 30
June 2022: GBP6.0m; year ended 31 December 2022: GBP14.6m). The
UK Government announced an increase in the corporation tax rate
from 19% to 25%, with an effective date of April 2023, which was
substantively enacted on 24 May 2021.
3. Segmental information
Segmental information is presented in the consolidated Interim
Financial Statements for each of the Group's operating segments.
The operating segment reporting format reflects the Group's
management and internal reporting structures and represents the
information that was presented during the period to the chief
operating decision-maker, being the Executive Committee. For the
purposes of reportable segmental information, operating segments
are aggregated into the Group's three divisions, as the nature of
the products, production processes and types of customer are
similar within each division. Inter-segmental revenue is
insignificant. Refer to the 'Strategic progress' section earlier in
the report, which outlines the changes we are making to our
structure ahead of the year end to enhance further our customer
focus.
IMI Precision Engineering specialises in the design and
manufacture of motion and fluid control technologies where
precision, speed and reliability are essential to the processes in
which they are involved.
IMI Critical Engineering is a world-leading provider of flow
control solutions that enable vital energy and process industries
to operate safely, cleanly, reliably and more efficiently. Our
products control the flow of steam, gas and liquids in harsh
environments and are designed to withstand temperature and pressure
extremes as well as intensely abrasive or corrosive cyclical
operations.
IMI Hydronic Engineering is a leading provider of technologies
that deliver operational and energy efficient water-based heating
and cooling systems for the residential and commercial building
sectors.
Performance is measured by the Executive Committee based on
adjusted operating profit and organic revenue growth which are
defined in Note 2. These two measures represent the two short term
key performance indicators for the Group.
Businesses enter into forward currency and metal contracts to
provide economic hedges against the impact on profitability of
swings in rates and values in accordance with the Group's policy to
minimise the risk of volatility in revenues, costs and margins.
Adjusted operating profits are therefore charged/credited with the
impact of these contracts. In accordance with IFRS 9, these
contracts do not meet the requirements for hedge accounting and
gains and losses are reversed out of operating profit and are
recorded in net financial income and expense for the purposes of
the consolidated income statement.
The following table illustrates how the results for the segments reconcile
to the overall results reported in the income
statement:
Revenue Operating profit Operating margin
6 months 6 months Year 6 months 6 months Year 6 months 6 months Year
to to 30 to 31 to to 30 to 31 to to 30 to 31
30 June June Dec 30 June June Dec 30 June June Dec
2023 2022 2022 2023 2022 2022 2023 2022 2022
GBPm GBPm GBPm GBPm GBPm GBPm % % %
-------- -------- ------ ---------- -------- ------ -------- -------- ------
IMI Precision Engineering 517 485 986 101.4 88.2 182.6 19.6% 18.2% 18.5%
IMI Critical Engineering 366 312 713 60.5 48.8 135.5 16.5% 15.6% 19.0%
IMI Hydronic Engineering 201 175 350 43.9 35.5 71.1 21.8% 20.3% 20.3%
Corporate costs (13.0) (12.7) (25.4)
Total revenue/adjusted
operating
profit and margin 1,084 972 2,049 192.8 159.8 363.8 17.8% 16.4% 17.8%
Reversal of net economic
hedge
(gains)/losses (2.8) 1.5 3.0
Restructuring costs
and associated
impairment losses (23.5) (7.7) (25.9)
Acquired intangible
amortisation and
other acquisition items (17.6) (15.4) (33.7)
Exit from Russia - (9.2) (9.0)
-------- -------- ------ ---------- -------- ------ -------- -------- ------
Statutory
revenue/operating
profit 1,084 972 2,049 148.9 129.0 298.2
Net financial expense (10.4) (8.1) (12.8)
-------- -------- ------ ---------- -------- ------ -------- -------- ------
Statutory profit before
tax 138.5 120.9 285.4
-------- -------- ------ ---------- -------- ------ -------- -------- ------
3. Segmental information (continued)
The following table shows a reconciliation of divisional adjusted operating
profit to statutory operating profit:
IMI Precision IMI Critical IMI Hydronic Corporate Total
Engineering Engineering Engineering
6 6 Year 6 6 Year 6 6 Year 6 6 Year 6 6 Year
months months to months months to months months to months months to months months to
to to 31 to to 31 to to 31 to to 31 to to 31
30 30 Dec 30 30 Dec 30 30 Dec 30 30 Dec 30 30 Dec
June June 2022 June June 2022 June June 2022 June June 2022 June June 2022
2023 2022 2023 2022 2023 2022 2023 2022 2023 2022
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------ ------ ------ ------ ------ ----- ------ ------ ----- ------- ------ ------ ------ ------ ------
Revenue 517 485 986 366 312 713 201 175 350 1,084 972 2,049
Adjusted
operating
profit 101.4 88.2 182.6 60.5 48.8 135.5 43.9 35.5 71.1 (13.0) (12.7) (25.4) 192.8 159.8 363.8
------ ------ ------ ------ ------ ----- ------ ------ ----- ------- ------ ------ ------ ------ ------
Reconciliation
to statutory
operating
profit:
Reversal of net
economic hedge
contract
losses/(gains) (2.2) (1.0) (2.4) (0.8) 2.0 3.1 0.2 0.5 2.3 (2.8) 1.5 3.0
Restructuring
costs
and associated
impairment
losses (18.9) (7.7) (24.8) (4.6) (0.4) (0.7) (23.5) (7.7) (25.9)
Acquired
intangible
amortisation
and
other
acquisition
items (10.8) (12.2) (25.1) (2.6) (3.2) (6.6) (4.2) (2.0) (17.6) (15.4) (33.7)
Exit from
Russia (0.5) (0.2) (4.1) (3.9) (0.1) (0.1) (4.5) (4.8) - (9.2) (9.0)
------ ------ ------ ------ ------ ----- ------ ------ ----- ------- ------ ------ ------ ------ ------
Statutory
operating
profit 69.5 66.8 130.1 52.5 43.5 127.7 39.9 35.9 70.6 (13.0) (17.2) (30.2) 148.9 129.0 298.2
------ ------ ------ ------ ------ ----- ------ ------ ----- ------- ------ ------ ------ ------ ------
Statutory
operating
margin (%) 13.4% 13.8% 13.2% 14.3% 13.9% 17.9% 19.9% 20.5% 20.2% 13.7% 13.3% 14.6%
The following table illustrates how revenue and adjusted operating
profit have been impacted by movements in foreign exchange, acquisitions
and disposals compared to the first half of 2022:
6 months to 30 June 2023 6 months to 30 June 2022
--------------------------------------------------- --------------------------------------------
As Acquisitions Organic Adjusted Organic As Exchange Disposals Organic
adjusted growth growth adjusted
(%) (%)
IMI Precision 517 (6) 511 7% 2% 485 19 (1) 503
IMI Critical 366 366 17% 15% 312 10 (5) 317
IMI Hydronic 201 (13) 188 15% 5% 175 6 (2) 179
-------- ------------ ------- --------- ------- -------- ---------- ------------- -------
Revenue 1,084 (19) 1,065 12% 7% 972 35 (8) 999
-------- ------------ ------- --------- ------- -------- ---------- ------------- -------
IMI Precision 101.4 (0.6) 100.8 15% 10% 88.2 3.6 (0.1) 91.7
IMI Critical 60.5 60.5 24% 21% 48.8 1.7 (0.5) 50.0
IMI Hydronic 43.9 (5.0) 38.9 24% 4% 35.5 1.7 0.1 37.3
Corporate costs (13.0) (13.0) (12.7) (12.7)
-------- ------------ ------- --------- ------- -------- ---------- ------------- -------
Adjusted
operating
profit 192.8 (5.6) 187.2 21% 13% 159.8 7.0 (0.5) 166.3
-------- ------------ ------- --------- ------- -------- ---------- ------------- -------
Adjusted
operating
profit margin
(%) 17.8% 17.6% 16.4% 16.6%
3. Segmental information (continued)
Balance sheet
The following table illustrates how the segmental assets and
liabilities reconcile to the overall total assets and liabilities
reported in the balance sheet:
Assets Liabilities
31 Dec 31 Dec
2022* 2022
(Restated (Restated
30 June 30 June Note 30 June 30 June Note
2023 2022* 14) 2023 2022 14)
GBPm GBPm GBPm GBPm GBPm GBPm
--------------- -------- ------------ ------- --------- ------- -------- ---------- -------------
IMI Precision
Engineering 1,107.4 1,091.6 1,139.6 195.3 216.2 202.0
IMI Critical
Engineering 811.5 749.7 794.0 299.9 244.8 262.5
IMI Hydronic
Engineering 402.4 278.8 389.5 100.9 88.4 102.4
--------------- -------- ------------ ------- --------- ------- -------- ---------- -------------
Total segmental
assets/liabilities
(including lease
liabilities) 2,321.3 2,120.1 2,323.1 596.1 549.4 566.9
Corporate items 21.9 21.8 23.4 36.1 43.7 47.3
Employee
benefits 6.4 123.2 28.5 46.0 41.7 47.4
Investments 1.7 2.0 2.0 - - -
Net debt items (excluding
lease liabilities) 112.3 133.2 133.0 784.1 802.2 839.3
Net taxation 25.2 43.7 26.1 106.7 144.0 129.6
------------ ------- --------- -------- ---------- -------------
Total assets
and
liabilities
in Group
balance
sheet 2,488.8 2,444.0 2,536.1 1,569.0 1,581.0 1,630.5
------------ ------- --------- -------- ---------- -------------
*Prior year comparatives have been re-presented to correctly
reflect the classification of assets. These related to acquired
intangibles amounting to GBP90.4m for the six-month period ended
30 June 2022 and GBP100.1m for the year ended 31 December 2022,
between IMI Precision Engineering and IMI Critical Engineering.
3. Segmental information (continued)
The Group's revenue streams are disaggregated by sector in the table
below:
H1 2023 H1 2022
Revenue Revenue
GBPm GBPm
IMI Precision
Engineering
Industrial
Automation 243 226
--------------- -------- --------------------- ------------------ -------- -------------------------
Life Sciences 73 76
Process Control 79 74
--------------- -------- --------------------- ------------------ -------- -------------------------
Precision Fluid
OEM 152 150
--------------- -------- --------------------- ------------------ -------- -------------------------
Commercial
Vehicle 99 91
Rail 23 18
--------------- -------- --------------------- ------------------ -------- -------------------------
Transportation 122 109
--------------- -------- --------------------- ------------------ -------- -------------------------
Total IMI Precision
Engineering 517 485
------------------------- --------------------- ------------------ -------- -------------------------
IMI Critical
Engineering
Power 79 71
Refining &
Petrochemical 66 50
Oil & Gas 33 21
Nuclear 22 20
Marine 4 8
Other 13 11
--------------- -------- --------------------- ------------------ -------- -------------------------
Aftermarket 217 181
--------------- -------- --------------------- ------------------ -------- -------------------------
Oil & Gas 46 33
Refining &
Petrochemical 36 44
Power 30 24
Marine 20 11
Nuclear - 1
Other 17 18
--------------- -------- --------------------- ------------------ -------- -------------------------
New
Construction 149 131
--------------- -------- --------------------- ------------------ -------- -------------------------
Total IMI Critical
Engineering 366 312
------------------------- --------------------- ------------------ -------- -------------------------
IMI Hydronic
Engineering
TA 84 78
Heimeier 62 61
Pneumatex 36 32
Heatmiser 13 -
Other 6 4
--------------- -------- --------------------- ------------------ -------- -------------------------
Total IMI Hydronic
Engineering 201 175
------------------------- --------------------- ------------------ -------- -------------------------
Revenue 1,084 972
------------------------- --------------------- ------------------ -------- -------------------------
4. Earnings per ordinary share
Basic and diluted earnings per share have been calculated on earnings
as set out below. Both of these measures are also presented on an
adjusted basis to assist the reader of the Interim Financial Statements
and provide insight into the performance of the Group.
30 June 30 June 31 Dec
2023 2022 2022
Key million million million
-------- -------- -------
Weighted average number of shares for the
purpose
of basic earnings per share A 259.0 258.4 258.3
Dilutive effect of employee share options 0.4 0.5 1.2
Weighted average number of shares for the
purpose
of diluted earnings per share B 259.4 258.9 259.5
-------- -------- -------
6 months 6 months Year
to 30 to 30 to 31
June June Dec
2023 2022 2022
GBPm GBPm GBPm
-------- -------- -------
Statutory profit for the period C 109.3 94.6 226.3
Total adjusting items charges included in
profit for the period, before tax 41.6 33.1 60.7
Total adjusting items credits included in
taxation (11.0) (6.0) (14.6)
-------- -------- -------
Earnings for adjusted EPS D 139.9 121.7 272.4
Statutory EPS measures
Statutory basic EPS C/A 42.2p 36.6p 87.6p
Statutory diluted EPS C/B 42.1p 36.5p 87.2p
Adjusted EPS measures
Adjusted basic EPS D/A 54.0p 47.1p 105.5p
Adjusted diluted EPS D/B 53.9p 47.0p 105.0p
------------------------------------------------ ----- -------- -------- -------
5. Net financing costs
6 months to 30 6 months to 30 Year to 31 Dec
June 2023 June 2022 2022
Recognised in the Financial Financial Financial
income Interest instruments Total Interest instruments Total Interest instruments Total
statement GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------- ------------ ------ -------- ------------ ----- -------- ------------ ------
Interest income on
bank
deposits 3.7 3.7 2.5 2.5 4.6 4.6
-------- ------------ ------ -------- ------------ ----- -------- ------------ ------
Financial income 3.7 - 3.7 2.5 - 2.5 4.6 - 4.6
-------- ------------ ------ -------- ------------ ----- -------- ------------ ------
Interest expense
on
interest-bearing
loans and
borrowings (14.2) (14.2) (7.7) (7.7) (21.0) (21.0)
Interest expense
on leases (1.5) (1.5) (1.4) (1.4) (2.8) (2.8)
-------- ------------ ------ -------- ------------ ----- -------- ------------ ------
Financial expense (15.7) - (15.7) (9.1) - (9.1) (23.8) - (23.8)
-------- ------------ ------ -------- ------------ ----- -------- ------------ ------
Recognised in
other
comprehensive
income
Gains/(losses) on
instruments
measured at fair
value
through profit or
loss:
Other economic
hedges 2.3 2.3 (2.3) (2.3) 4.9 4.9
Net financial
(expense)/income
relating to
defined benefit
pension
schemes (0.7) (0.7) 0.8 0.8 1.5 1.5
Net financial
(expense)/income (12.7) 2.3 (10.4) (5.8) (2.3) (8.1) (17.7) 4.9 (12.8)
-------- ------------ ------ -------- ------------ ----- -------- ------------ ------
Included in financial instruments are current period trading gains and
losses on economically effective transactions which for management reporting
purposes are included in adjusted revenue and operating profit (see Note
2). For statutory purposes, these are required to be shown within net
financial income and expense. Gains or losses on economic hedges for future
period transactions are in respect of financial instruments held by the
Group to provide stability of future trading cash flows.
6. Taxation
The tax charge before adjusting items is GBP40.2m (year ended 31
December 2022: GBP73.7m) which equates to an adjusted effective tax
rate of 22.3% compared to 21.0% for the comparative six-month
period in the prior year and 21.3% for the year ended 31 December
2022. The normalised rate of 22.3% has been calculated using the
full year projections and has been applied to adjusted profit
before tax for the period ended 30 June 2023.
The tax effects of adjusting items have been based on the
applicable rates of tax applying to the adjusting items arising in
the period ended 30 June 2023.
The statutory tax charge of GBP29.2m (year ended 31 December
2022: GBP59.1m) equates to an effective tax rate of 21.1%. This
compares to a rate of 21.8% for the six months ended 30 June 2022
and 20.7% for the year ended 31 December 2022.
7. Dividends
The final dividend relating to the year ended 31 December 2022
of 17.4p per share (relating to the year ended 2021: 15.8p) was
paid in May 2023 amounting to GBP45.1m (2022: GBP40.8m).
In addition, the directors have declared an interim dividend for
the current year of 9.1p per share (2022: 8.3p per share) amounting
to GBP23.6m which will be paid on 15 September 2023 to shareholders
on the register on 11 August 2023. In accordance with IAS10 'Events
after the Balance Sheet Date' this interim dividend has not been
reflected in these Interim Financial Statements.
8. Property, plant and equipment and intangible assets
Capital expenditure on property, plant and equipment in the
period was GBP28.1m (30 June 2022: GBP33.3m), the majority of which
was in respect of plant and equipment.
Capital expenditure on non-acquired intangible assets in the
period was GBP7.9m (30 June 2022: GBP7.0m). This included GBPnil
(30 June 2022: GBP2.8m) in respect of capitalised development costs
and GBP7.9m (30 June 2022: GBP4.2m) in respect of other
non-acquired intangible assets (including those under
construction).
9. Employee benefits
The net defined benefit pension deficit at 30 June 2023 was
GBP39.6m (31 December 2022: GBP18.9m); made up of assets of
GBP380.0m (31 December 2022: GBP412.2m), liabilities of GBP415.0m
(31 December 2022: GBP425.4m) and an asset ceiling of GBP4.6m (31
December 2022: GBP5.7m). The UK net surplus in the Funds decreased
to GBP5.9m (31 December 2022: GBP28.4m). The decrease is a result
of unfavourable movements in the return on plan assets.
The net deficit in respect of the total overseas obligations
decreased slightly to GBP46.0m (31 December 2022: GBP47.4m) due to
employer contributions and a favourable movement in exchange.
During 2022, the Group completed an insurance buy-in exercise
for the remaining uninsured members. The Trustees agreed to defer
part of the premium owed to the insurance company for this buy-in
and the outstanding amount is expected to be paid over the next 5
years. The present value of the deferred premium was deducted from
the total asset value during 2022. The impact was recognised as a
loss in other comprehensive income.
During 2022, the Group ceased contributions to the Scottish
Limited Partnership as the UK Deferred Fund is fully funded. The
final payment of GBP3.5m was made in February 2022.
10. Fair value hierarchy
The following table shows the Group's financial instruments held at
fair value (excluding cash):
30 June 2023 31 Dec 2022
Level Level Level Level Level Level
1 2 3 Total 1 2 3 Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------ ------- ------ ------- ------ ------ ----- ------
Financial assets measured
at fair value
Equity instruments* 1.7 1.7 2.0 2.0
Foreign currency forward
contracts 16.5 16.5 15.7 15.7
------ ------- ------ ------- ------ ------ ----- ------
1.7 16.5 - 18.2 2.0 15.7 - 17.7
------ ------- ------ ------- ------ ------ ----- ------
Financial liabilities
measured
at fair value
Foreign currency forward
contracts (10.1) (10.1) (13.8) (13.8)
------ ------- ------ ------- ------ ------ ----- ------
- (10.1) - (10.1) - (13.8) - (13.8)
------ ------- ------ ------- ------ ------ ----- ------
*Equity instruments primarily relate to investments in funds in order
to satisfy long-term benefit arrangements.
Level 1 - quoted prices in active markets for identical assets and
liabilities
Level 2 - significant other observable inputs
Level 3 - unobservable inputs
Valuation techniques for level 2 inputs
Derivative assets and liabilities of GBP16.5m and GBP10.1m, respectively,
are valued by level 2 techniques. The valuations are derived from discounted
contractual cash flows using observable, and directly relevant, market
interest rates and foreign exchange rates from market data providers.
Cash and cash equivalents and bank overdrafts are carried at their
book value as this approximates to the fair value due to the short-term
nature of the instruments.
The fair values of all other financial assets and liabilities in the
balance sheet as at 30 June 2023, 31 December 2022 and 30 June 2022
are materially equivalent to their carrying values with the exception
of the US private placement fixed rate loans, for which the carrying
values are set out below:
Carrying
value Fair value*
GBPm GBPm
-------------- -------------
30 June 2023 528.2 491.7
31 December 2022 545.8 504.6
30 June 2022 546.9 537.4
*The US private placement fixed rate loans are valued by level 2 techniques.
11. Cash flow reconciliation
Reconciliation of net cash to movement in net debt
6 months 6 months Year to
to 30 to 30 June 31 Dec
June 2023 2022 2022
GBPm GBPm GBPm
------------------- ----------- ------------
Net (decrease)/increase in cash and cash
equivalents* (4.9) 5.6 11.0
Less: cash acquired/disposed - (2.6) (10.0)
Net repayment/(drawdown) of borrowings
excluding foreign
exchange and net debt disposed/acquired 32.8 (125.3) (137.8)
------------------- ----------- ------------
Decrease/(increase) in net debt* 27.9 (122.3) (136.8)
Net cash acquired - 2.6 10.0
Currency translation differences 6.6 (20.4) (50.6)
Movement in lease liabilities 5.6 2.6 (11.8)
Movement in net debt in the period 40.1 (137.5) (189.2)
Net debt at the start of the period (812.0) (622.8) (622.8)
Net debt at the end of the period** (771.9) (760.3) (812.0)
------------------- ----------- ------------
*Excluding foreign exchange.
**Net debt is defined as cash and cash equivalents, overdrafts, interest-bearing
loans and borrowings and lease liabilities.
Reconciliation of net cash flow (excluding
debt movements)
6 months 6 months Year to
to 30 to 30 June 31 Dec
June 2023 2022 2022
GBPm GBPm GBPm
------------------- ----------- ------------
Adjusted EBITDA* 238.8 202.4 457.0
Working capital movements (47.7) (77.7) (85.1)
Capital and development expenditure (36.0) (40.3) (71.3)
Provisions and employee benefit movements** 0.3 (0.7) 1.5
Principal elements of lease payments (14.6) (13.8) (32.3)
Other 4.5 9.0 20.2
------------------- ----------- ------------
Adjusted operating cash flow*** 145.3 78.9 290.0
------------------- ----------- ------------
Adjusting items (24.1) (20.8) (52.6)
Tax paid (42.5) (20.0) (48.6)
Interest (12.0) (6.6) (19.2)
Derivatives 6.2 (1.3) (8.6)
Additional pension scheme funding - (3.5) (3.5)
Free cash flow before corporate activity 72.9 26.7 157.5
------------------- ----------- ------------
Dividends paid to equity shareholders (45.1) (40.8) (62.2)
Acquisition of subsidiaries - (88.3) (213.3)
Net issue/(purchase) of own shares and
share buyback programme 0.1 (19.9) (18.8)
Net cash flow (excluding debt movements) 27.9 (122.3) (136.8)
*Adjusted profit after tax (GBP139.9m), before interest (GBP12.7m),
tax (GBP40.2m), depreciation (GBP37.2m), amortisation (GBP8.8m) and
impairment of property, plant and equipment and non-acquired intangibles
(GBPnil).
**Movement in provisions and employee benefits as per the interim
statement of cash flows (GBP1.2m) adjusted for the movement in restructuring
provisions (GBP0.9m).
***Adjusted operating cash flow is the cash generated from the operations
shown in the statement of cash flows less cash spent acquiring property,
plant and equipment, non-acquired intangible assets and investments;
plus, cash received from the sale of property, plant and equipment
and the sale of investments, excluding the cash impact of adjusting
items. This measure best reflects the operating cash flows of the
Group.
11. Cash flow reconciliation (continued)
Reconciliation of adjusted operating cash
flow to cash flow statement
6 months 6 months
to 30 June to 30 June Year to
2023 2022 31 Dec 2022
GBPm GBPm GBPm
Cash generated from operations 173.6 111.2 335.8
Principal lease payments (14.6) (13.8) (32.3)
Settlement of transactional derivatives (2.4) (0.3) 2.3
Acquisition of property, plant and equipment
and non-acquired intangibles (36.0) (40.3) (71.3)
Adjusting items 24.1 20.8 52.6
Proceeds from sale of property, plant and
equipment 0.6 1.3 2.9
Adjusted operating cash flow 145.3 78.9 290.0
Reconciliation of cash and cash equivalents
6 months 6 months
to 30 June to 30 June Year to
2023 2022 31 Dec 2022
GBPm GBPm GBPm
Cash and cash equivalents in current assets 112.3 133.2 133.0
Bank overdraft in current liabilities (79.1) (83.0) (93.8)
Cash and cash equivalents 33.2 50.2 39.2
12. Share capital
Ordinary shares
of 28 4/7 p each
Number
(m) Value (GBPm)
In issue at the start
of the period 275.0 78.6
Issued to satisfy employee
share schemes 0.1 -
In issue at the end of the period 275.1 78.6
13. Exchange rates
The income and cash flow statements of overseas operations are
translated into sterling at the average rates of exchange for the
period, balance sheets are translated at period end rates. The most
significant currencies for the Group are the Euro and the US dollar
for which the relevant rates of exchange were:
Income statement and
cash flow Balance sheet
average rates rates as at
6 months
to 30 6 months Year
June to 30 June to 31 Dec 30 June 30 June 31 Dec
2023 2022 2022 2023 2022 2022
Euro 1.14 1.19 1.17 1.16 1.16 1.13
US dollar 1.23 1.30 1.24 1.27 1.22 1.21
14. Acquisitions
Acquisitions in 2022
During the year ended 31 December 2022, the Group made three
acquisitions, namely:
- Heatmiser UK Ltd ("Heatmiser")
- CorSolutions LLC ("CorSolutions")
- Bahr Modultechnik GmbH ("Bahr")
a) Heatmiser UK Ltd ("Heatmiser")
Fair value
at
23 December
2022
GBPm
Other intangible assets 46.2
Property, plant and equipment 0.2
Inventories 7.4
Trade and other receivables 5.6
Cash and cash equivalents 7.4
Trade and other payables (4.7)
Current taxation (0.6)
Deferred taxation (11.6)
Total identified net assets at fair value 49.9
Goodwill arising on acquisition 71.6
Total consideration 121.5
Of which relates to deferred consideration 4.0
Purchase consideration transferred 117.5
On 23 December 2022 the Group acquired 100% of the share
capital, and associated voting rights, of Heatmiser UK Ltd
("Heatmiser") for initial cash consideration of GBP117.5m, with up
to a further GBP8.0m payable based on future financial performance.
Heatmiser is a leading UK smart thermostatic control manufacturer
and is based in Blackburn, UK.
This acquisition has been accounted for as a business
combination. The provisional purchase price allocation has been
completed in the first half of 2023. The goodwill recognised above
includes certain intangible assets that cannot be separately
identified and measured due to their nature. This includes control
over the acquired business, the skills and experience of the
assembled workforce, the increase in scale, synergies and the
future growth opportunities that the businesses provide to the
Group's operations.
Acquisition costs of GBP2.0m were recognised in the income
statement in 2022.
b) CorSolutions LLC ("CorSolutions")
Fair value
at
27 October
2022
GBPm
Other intangible assets 8.8
Inventories 0.6
Deferred taxation -
Total identified net assets at fair value 9.4
Goodwill arising on acquisition 2.3
Total consideration 11.7
Of which relates to deferred consideration 3.6
Purchase consideration transferred 8.1
On 27 October 2022 the Group acquired 100% of the share capital,
and associated voting rights, of CorSolutions LLC ("CorSolutions")
for initial cash consideration of GBP7.5m and an expected earn-out
of GBP3.6m. An additional payment of GBP0.6m has been made in 2023
as part of the closing consideration. CorSolutions is a leading
innovator in micro-fluid flow control and is based in Ithaca, New
York.
14. Acquisitions (continued)
This acquisition has been accounted for as a business
combination. Changes were made to the provisional fair value
amounts recognised in the 2022 Annual Report and Accounts in
respect of the identified assets acquired and liabilities assumed
to reflect the closing consideration true-up payment. This resulted
in an increase in goodwill by GBP0.6m. Our accounting remains
provisional and will be finalised in the second half of 2023.
c) Bahr Modultechnik GmbH ("Bahr")
On 9 June 2022 the Group acquired 100% of the share capital, and
associated voting rights, of Bahr Modultechnik GmbH ("Bahr") for
cash consideration of GBP88.3m. Bahr is a leading provider of
highly configured modular electric linear motion systems, based on
a broad portfolio of specialist components and is based in Luhden,
Germany.
This acquisition has been accounted for as a business
combination. Our accounting has been finalised and there are no
changes to the provisional fair value amounts recognised in the
2022 Annual Report and Accounts in respect of the identified assets
acquired and liabilities assumed.
d) Adjustments arising on prior year acquisitions
In finalising the acquisition accounting for the prior year
acquisitions of CorSolutions and Heatmiser, an adjustment of
GBP30.0m was made to include acquired intangibles and corresponding
deferred tax, adjust working capital and other payables. This
resulted in a decrease in goodwill of GBP30.0m.
The adjustment is material and as such the comparative balance
sheet has been restated, as follows:
Allocation of
Heatmiser and
CorSolutions
Balance Sheet goodwill Restated
(as Reported) 2022 Balance Sheet
2022 GBPm 2022
GBPm GBPm
Non-current assets
Goodwill 733.7 (30.0) 703.7
Other Intangible
assets 270.5 46.2 316.7
Deferred tax assets 24.5 (0.3) 24.2
Current assets
Inventories 416.3 1.4 417.7
Trade and other receivables 484.9 (1.0) 483.9
Current tax 2.0 (0.1) 1.9
Total assets 2,519.9 16.2 2,536.1
Non-current liabilities
Deferred tax liabilities (47.9) (11.3) (59.2)
Other payables (9.9) (3.2) (13.1)
Current liabilities
Trade and other payables (437.7) (1.4) (439.1)
Current tax (70.1) (0.3) (70.4)
Total liabilities (1,614.3) (16.2) (1,630.5)
15. Disposals
Disposals in 2022
The Group disposed of its Russian subsidiary IMI International
LLC on 27 May 2022 for proceeds of GBPnil resulting in a loss on
disposal for the Group of GBP4.8m after disposing of GBP3.3m of net
assets and incurring GBP0.9m of associated disposal costs. In
addition, the exit resulted in a GBP4.2m impairment of assets
related to Russian contracts.
The exit from Russia is presented in the 2022 income statement
as an adjusting item but it is not disclosed as a discontinued item
because it did not represent a separate major line of business.
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