REG - IMI PLC - Interim Results
29/07/2022 07:00
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RNS Number : 1685U IMI PLC 29 July 2022
29 July 2022
Accelerating business performance with improving growth and margin
On track for sustainable, profitable growth and Group operating margin of 20%
Increasing momentum from purpose-led strategy and Growth Hub
Interim results, six months ended 30 June 2022
Adjusted(1) Statutory
H1 2022 H1 2021 Change Organic(3) H1 2022 H1 2021 Change
Revenue £972m £907m +7% +3% £972m £907m +7%
Operating profit £160m £142m +12% +9% £129m £123m +5%
Operating margin 16.4% 15.7% +70bps 13.3% 13.6% -30bps
Profit before tax £154m £137m +13% £121m £123m -2%
Basic EPS 47.1p 39.9p +18% 36.6p 31.3p +17%
Operating cash flow(2) £79m £111m -29% £111m £128m -13%
Interim dividend per share 8.3p 7.9p +5% 8.3p 7.9p +5%
Net debt £760m £339m
( )
(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
§ 7% sales growth, 13% adjusted profit before tax growth, 18% adjusted basic EPS growth
§ Adjusted operating margin 70bps higher than H1 2021
§ Statutory operating profit up 5%
§ Statutory profit after tax up 12%
§ Order book growth, £22m of Growth Hub orders, pipelines growing
§ Operating cash flow impacted by higher inventory to prioritise customer service
§ Bahr acquisition provides highly scalable electric actuation portfolio
§ Interim dividend increased by 5%
§ Group operating margin target increased to 20% through the cycle
§ Continue to expect full year adjusted EPS to exceed 100p
Roy Twite, Chief Executive, said:
"We have made excellent progress with our purpose-led strategy during the first half. We are creating tremendous value for all our stakeholders by increasing customer intimacy, driving market-led innovation and reducing complexity. We continue to invest in Growth Hub and Sprint Teams, delivering £22m of orders from these projects during the first half. We completed the acquisition of Bahr Modultechnik, the electric linear automation specialist, offering the potential for great synergies with our existing businesses. We remain on track to deliver our long-term ambition of sustainable profitable growth and achieve our 20% margin target through the cycle."
"Based on the strong first half result and current market conditions we continue to expect 2022 full year adjusted EPS to exceed 100p."
Enquiries
Luke Grant IMI Tel: +44 (0)7866 148 374
Matt Denham Headland PR 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 8 November
2022.
Results overview
IMI has delivered a strong first half performance, with Group revenue growth
of 7% compared to the same period last year and 3% higher organically. First
half adjusted operating margin has increased by 70bps when compared to the
prior period.
£m Adjusted(1) Statutory
H1 2022 H1 2021 Change Organic(3) H1 2022 H1 2021 Change
Revenue
IMI Precision Engineering(2) 485 412 +18% +7% 485 412 +18%
IMI Critical Engineering(2) 312 325 -4% -3% 312 325 -4%
IMI Hydronic Engineering 175 170 +3% +5% 175 170 +3%
Total 972 907 +7% +3% 972 907 +7%
Operating profit
IMI Precision Engineering(2) 88.2 73.7 +20% +10% 66.8 63.8 +5%
IMI Critical Engineering(2) 48.8 45.8 +7% +7% 43.5 39.2 +11%
IMI Hydronic Engineering 35.5 34.2 +4% +8% 35.9 31.9 +13%
Corporate costs (12.7) (11.6) (17.2) (11.6)
Total 159.8 142.1 +12% +9% 129.0 123.3 +5%
Operating margin 16.4% 15.7% +70bps 13.3% 13.6% -30bps
(1 Excluding the effect of adjusting items as reported in the income
statement. See Note 2 for definitions of alternative performance measures.)
(2) (During H2 2021 the Energy business was transferred from IMI Precision to
IMI Critical. Prior period results have been restated to be on the same basis.
Please see Note 3 for further details. )
(3 After adjusting for exchange rates, acquisitions and disposals (see Note
2).)
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.
Good momentum in our Growth Hub and Sprint Teams continue to drive cultural
changes through the
business. We delivered £22m of orders from these projects during the first
half and remain on track to deliver over £40m in 2022.
We remain confident in delivering our Group operating margin target of 20%
through the cycle.
Dividend
The Board is recommending a 2022 interim dividend of 8.3p per share (2021:
7.9p per share). Payment will be made on 16 September 2022 to shareholders on
the register at the close of business on 12 August 2022.
Outlook
Based on the strong first half results and current market conditions we continue to expect 2022 full year adjusted EPS will exceed 100p.
Strategic progress
Our purpose-led strategy [Breakthrough Engineering for a better world]
continues to accelerate business performance, driving sustainable, profitable
growth across the Group.
We are delivering Value Today - evident in our improved returns - through
greater customer intimacy, operational efficiencies and complexity reduction;
and Value Tomorrow by developing creative and innovative solutions to the
greatest challenges our customers and society face.
We continue to invest in Business Development resource and Growth Hub projects
and are seeing real, tangible benefits. We delivered £22m of orders from
Growth Hub projects in the first half. Adaptas, our recent acquisition in the
attractive Life Sciences sector, is performing strongly.
The acquisition of Bahr, the German electric linear motion specialist,
completed in June 2022. As part of the Industrial Automation Business Unit
within IMI Precision Engineering, Bahr will enable the delivery of a power
agnostic offering of pneumatic and electric linear motion systems. The
addition of Bahr offers the potential for significant synergies and is
expected to be both margin and growth accretive to IMI Precision, delivering a
financial return in excess of IMI's cost of capital by the end of year three.
Along with investments into our future growth, IMI continues to identify and
execute on opportunities to drive more efficient operations. The following
provides a summary of progress on our restructuring programmes:
£m H1 2022 2022* Future years*
Restructuring charge
(including impairment losses)
IMI Precision Engineering (8) (29) (35)
IMI Critical Engineering - (13) (35)
IMI Hydronic Engineering - (1) -
Total charge (8) (43) (70)
Cash impact (12) (38) (77)
£m H1 2022 2022* Future years*
Benefits
IMI Precision Engineering 4 6 26
IMI Critical Engineering 3 4 13
IMI Hydronic Engineering - - 1
Total benefits 7 10 40
(*Future looking forecast information.)
All three divisions advanced their multi-year significant restructuring
programmes, which contributed £7m of benefits in the first half. The Group is
on track to deliver £10m for the full year.
This includes the previously announced £35m additional cost (£30m cash, £5m
non-cash) and £13m of benefits, which will expand the programme for IMI
Critical.
The forecast cash cost also reduced by £15m as a result of improved proceeds
for a property sale and wider project savings.
These programmes are expected to run until 2024, although the Group will
always seek and execute projects that improve its competitive position.
Divestment of Russia subsidiary
IMI strongly opposes the invasion of Ukraine. We are deeply concerned for its
people and are supporting humanitarian efforts for the ongoing refugee crisis.
IMI fully supports all sanctions. On 4 March 2022 we ended all new business
and international deliveries to Russia and on 27 May 2022 we completed the
divestment of our Russian subsidiary to local management. See Note 15 for
further details.
Russia accounted for 2% of Group revenue in 2021 and represented less than 1%
of revenue for IMI Precision, 4% for IMI Critical and 2% for IMI Hydronic.
Environmental, Social & Governance (ESG)
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 impacts on IMI's overall ESG positioning 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.
We continue to reduce the environmental impact of our facilities and operations. All divisions are progressing actions that will contribute to our goal of halving our factory CO(2) intensity by 2030, and IMI is committed to achieving net zero Scope 1 and Scope 2 emissions by 2040. Supported by external expertise, we are developing our reduction plans for Scope 3 emissions.
Our Inclusion and Diversity activities are helping us build a more dynamic and innovative organisation. The female representation on the Executive Committee is currently 43% and we have met the Parker Review requirements for non-white representation on our board. Whilst we recognise there is still work to be done, the benefits of increased diversity are being felt across the organisation - employee engagement increased from 80% to 82% in our recent survey.
Ensuring all our employees feel safe at work is central to our strategy and
culture and we have a continued focus on identifying and reducing workplace
hazards. The number of recordable incidents reduced by 48% during the first
half and whilst this is excellent progress, we remain committed to the
ambition of an accident-free workplace.
More information about our ESG credentials and initiatives, including our policies and practices, can be found on our website:
www.imiplc.com (http://www.imiplc.com)
.
Divisional results overview
The following review relates to our continuing businesses' performance for the
six months ended 30 June 2022 when compared to the same period in 2021.
References to organic growth are on a constant currency basis and exclude
disposals and acquisitions, see Note 3 for a reconciliation of these measures.
Segmental information - Energy Transfer
During the second half of 2021 the Energy business of IMI Precision
Engineering was transferred into IMI Critical Engineering. Prior period
comparatives have been re-presented to reflect this, with IMI Critical
Engineering H1 2021 revenue increasing by £28m and operating profit
increasing by £2.9m. The equal and opposite impact has reduced prior period
results of IMI Precision Engineering.
IMI Precision Engineering
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 Precision
Engineering operates across three principal business units: Industrial
Automation, Precision Fluid OEM and Transport. Further details on that
segmentation, and comparison with the 2021 first half report, are available in
Note 3.
H1 2022 H1 2021** Change Organic
vs 2021*
Revenue £485m £412m +18% +7%
Adjusted operating profit* £88.2m £73.7m +20% +10%
Adjusted operating margin* 18.2% 17.9% +30bps
Statutory operating profit £66.8m £63.8m +5%
Statutory operating margin 13.8% 15.5% -170bps
( )
(*See Note 2 for definitions of alternative performance measures and the
references to reconciliations of these measures.)
(**2021 results have been restated for the impact of the Energy business
transfer, please see Note 3 for further details. )
Key developments
§ Strong sales growth of 18%, organic growth of 7%
§ Adjusted operating margin up 30bps
§ Acquisition of Bahr completed, expanding electric linear motion offering
§ Statutory operating profit up 5%
2022 H1 performance
IMI Precision's core end markets continue to provide excellent new
opportunities for growth.
During the period, the division delivered very strong growth of 18% supported
by revenue from the recent Adaptas acquisition. On an organic basis, revenue
grew 7%.
Industrial Automation delivered strong organic revenue growth of 14% compared
with the first half 2021, with Precision Fluid OEM ahead 5% and Transport
broadly flat on the same basis. The division's proactive management of supply
chains minimised customer disruptions and enabled this strong performance.
Adjusted operating margin in the division improved in the period by 30bps to
18.2%. The division continues to advance complexity reduction initiatives
which will enable further improvements and support progress towards its margin
targets.
Statutory operating profit increased by 5% due to the strong trading result
partly offset by increased acquired intangible amortisation and other
acquisition costs following the acquisitions of Adaptas and Bahr.
Outlook
Based on strong first half results and current market conditions, we continue
to expect IMI Precision Engineering's 2022 organic revenue and margin to be
higher than in 2021.
IMI Critical Engineering
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. Further details on IMI Critical Engineering market segmentation,
and comparison with the 2021 first half, are available in Note 3 of this
statement.
H1 2022 H1 2021** Change Organic vs 2021*
Order intake £381m £366m +4% +4%
Closing order book £587m £570m +3%
Revenue £312m £325m -4% -3%
Adjusted operating profit* £48.8m £45.8m +7% +7%
Adjusted operating margin* 15.6% 14.1% +150bps
Statutory operating profit £43.5m £39.2m +11%
Statutory operating margin 13.9% 12.1% +180bps
( )
(*See Note 2 for definitions of alternative performance measures and the
references to reconciliations of these measures.)
(**2021 results have been restated for the impact of the Energy business
transfer, please see Note 3 for further details. )
Key developments
§ Strong Aftermarket orders, up 17% in the first half
§ Growth Hub delivers £19m orders
§ Statutory operating profit up 11%
2022 H1 performance
IMI Critical Engineering continues to advance its strategy and is actively
deploying Growth Hub where its expertise can support sustainable future
growth. The division's Growth Hub and Sprint Teams are providing a significant
impact to the divisional results and contributed £19m of orders in the period
(2021: £5m).
Organic order intake for the first half of 2022 was 4% higher than the first
half of 2021. Aftermarket orders grew 17%, with strong growth in Oil &
Gas, Refining and Petrochemical and Nuclear. New Construction orders were 11%
lower largely reflecting reduced petrochemical activity.
The IMI Critical order book at the end of the period was 3% higher than at
June 2021, with order book margins also higher.
Organic revenue was 3% lower than the prior period, and 4% lower on an
adjusted basis. Aftermarket organic sales were 7% higher than the first half
of 2021, largely due to growth in the Refining and Petrochemical, Marine and
Power segments. New Construction organic sales were 15% lower compared with
last year, largely due to lower Power and Oil & Gas sales.
Organic adjusted operating profit was 7% higher than first half 2021, 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 15.6%, 150bps higher than the prior
period.
Statutory operating profit increased by 11% due to strong aftermarket growth.
Outlook
Based on the division's order book and current market conditions, we continue
to expect IMI Critical Engineering's 2022 adjusted revenue and margin to be in
line with 2021.
IMI Hydronic Engineering
IMI Hydronic Engineering is a leading provider of technologies that deliver
energy efficient water-based heating and cooling systems for the residential
and commercial building sectors.
H1 2022 H1 2021 Change Organic vs 2021*
Revenue £175m £170m +3% +5%
Adjusted operating profit £35.5m £34.2m +4% +8%
Adjusted operating margin 20.3% 20.1% +20bps
Statutory operating profit £35.9m £31.9m +13%
Statutory operating margin 20.5% 18.8% +170bps
(*See Note 2 for definitions of alternative performance measures and the
references to reconciliations of these measures.)
Key developments
§ 5% organic sales growth with adjusted operating margin improved to 20.3%
§ Continued strong demand for our energy saving solutions
§ Statutory operating profit up 13%
2022 H1 performance
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.
Revenue for the first half was 5% higher on an organic basis when compared to
the same period in the prior year. Growth in the first half was supported by
strong orders for automated control and actuation products. Sales of our
digitally enabled products - including the TA-Smart valve - continue to make
excellent progress.
Adjusted operating profit increased 8% on an organic basis versus the prior
year and adjusted operating margin improved to 20.3%, an increase of 20 basis
points.
Statutory operating profit increased by 13% due to the strong trading result
and non-repeat of restructuring costs.
Outlook
Given the strong first half results and current market conditions, we continue
to expect IMI Hydronic Engineering's 2022 organic revenue to be higher than
2021, with margins slightly higher.
Financial review
Continued strong performance
Revenue of £972m was up 7% (2021: £907m). Organic revenue increased 3% when
compared with the same period in the previous year, after adjusting for
acquisitions, disposals and exchange rate movements. Adjusted operating profit
was £160m, a 12% increase on the prior period (2021: £142m). On an organic
basis, adjusted operating profit increased by 9%. Group adjusted operating
margin increased by 70bps to 16.4% (2021: 15.7%), with all three divisions
showing adjusted operating margin improvement. Statutory operating profit was
up 5% at £129m (2021: £123m).
Adjusted net interest costs on borrowings were £6.6m (2021: £5.7m) and were
covered 31 times by adjusted earnings before interest, tax, depreciation and
amortisation (EBITDA) of £202m (2021: £186m). The IAS19 pension net
financial income was £0.8m (2021: £0.3m income). The total adjusted net
financial expense was £5.8m (2021: £5.4m). Profit before tax and adjusting
items was £154m, an increase of 13% (2021: £137m).
The adjusted effective tax rate on profit for 2022 is 21%, which is consistent
with the rate applicable in the first half of 2021 (21%).
Statutory profit before tax was £121m (2021: £123m). The total statutory
profit for the period after taxation was £95m (2021: £85m).
Adjusting items
Restructuring costs were £8m (2021: £7m), primarily relating to the ongoing
significant restructuring programme in IMI Precision Engineering.
The impact of amortisation of acquired intangibles and other acquisition costs
was £15m (2021: £7m). The reversal of net economic hedge contract gains and
losses resulted in a £1m charge (2021: £nil).
Costs associated with our decision to exit the Russian market have been
recognised as an adjusting item. The impact in the period was £9m (2021:
£nil).
The tax effect of the above adjusting items was a credit of £6m (2021: £3m).
During 2021 the UK Government announced an increase in the corporation tax
rate from 19% to 25% resulting in a charge of £18m in the prior period, which
was partially offset by a £5m gain following the resolution of a tax
authority audit.
Earnings per share
The average number of shares in issue during the period was 258m (2021: 271m),
resulting in adjusted basic earnings per share of 47.1p (2021: 39.9p).
Statutory basic earnings per share was 36.6p (2021: 31.3p) and statutory
diluted earnings per share was 36.5p (2021: 31.2p).
Foreign exchange
The impacts of translation on the reported growth of first half revenue and
adjusted operating profit was an increase of £6m and increase of £1m,
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 15 July (US$1.19 and €1.18) remained constant for
the remainder of the year, it would positively impact both revenue and
adjusted operating profit by 3% in the full year when compared to 2021.
Cash flow
Cash generated from operations decreased to £111m (2021: £128m). Adjusted
operating cash flow (see definition in Note 2) decreased to £79m (2021:
£111m), as IMI made the decision to increase stock levels to support customer
deliveries and continued its capital investment programme. Trade and other
receivables increased by £45m, inventories increased by £42m and trade and
other payables increased by £9m. Capital expenditure amounted to £40m (2021:
£22m) and was 1.4 times (2021: 0.8 times) the adjusted depreciation and
amortisation charge for the period of £28m (2021: £29m), which excludes
depreciation from the IFRS 16 right of use assets of £14m (2021: £14m).
The other major cash outflows in the period were the Bahr acquisition of
£84m, dividends of £41m, employee benefit trust share purchases of £20m, a
£21m outflow for adjusting items primarily related to the Group's
restructuring programme, and £20m of tax. The total cash outflow for the
period, excluding the impact of foreign exchange was £122m, compared with an
outflow of £19m 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 2022 were £300m (December 2021: £300m), of which £49m
(December 2021: £70m) 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 1.8x
at the end of June 2022 (December 2021: 1.5x).
Trade and other receivables have increased by £51m (12%) to £465m at 30 June
2022 (December 2021: £414m) and inventories have increased by £63m (19%) to
£398m at 30 June 2022 (December 2021: £335m) to secure customer deliveries.
Goodwill increased to £646m (December 2021: £534m) following the Bahr
acquisition.
The IAS19 net pension surplus was £82m which compares to a surplus of £27m
at 30 June 2021 and a surplus of £63m at 31 December 2021. This amount
included a surplus of £123m (December 2021: £129m) relating to the UK Fund
which is the most significant of the Group's defined benefit schemes. The
surplus decrease since the year end is a result of movements in the actuarial
assumptions. The deficit relating to the overseas schemes decreased to £42m
(December 2021: £66m) due to increases in the discount rates.
Shareholders' equity at the end of June was £863m, an increase of £84m since
the end of last year. This is largely attributable to the profit for the
period of £95m; an after-tax actuarial gain on the defined benefit pension
plans of £11m; favourable exchange differences and related tax of £35m; and
the after-tax impact of the share-based payments of £4m. These gains were
offset by dividends paid of £41m and purchases for the employee benefit trust
of £20m.
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 of 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 74 to 79 of its 2021 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 macro-economic and political instability, competitive markets,
supply chain risk, talent retention and attraction, product quality issues,
acquisition risk, cyber security risks, regulatory breach and new product
development. 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 2022. The impact of the 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 related party transactions or changes in the related party
transactions described in the 2021 Annual Report that materially affected the
Group's results or financial position during the six months ended 30 June
2022.
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
28 July
2022
28 July 2022
Notes to editors
IMI plc, the specialist engineering company, designs, manufactures and
services highly engineered products that control the precise movement of
fluids. Its innovative technologies, built around valves and actuators, enable
vital processes to operate safely, sustainably, cleanly, efficiently and cost
effectively. 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
(http://www.imiplc.com) .
IMI plc is registered in England No. 714275. Its legal entity identifier
('LEI') number is 2138002W9Q21PF.
INDEPENDENT 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 2022 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 2022 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. 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), 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 group'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 group a conclusion on the condensed set of financial
statement 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 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. 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
28 July 2022
CONSOLIDATED INTERIM INCOME STATEMENT
Note 6 months to 6 months to Year to
30 June 2022 30 June 2021 31 Dec 2021
(unaudited) (unaudited)
Adjusted Adjusting items (Note 2) Statutory Adjusted Adjusting items (Note 2) Statutory Adjusted Adjusting items (Note 2) Statutory
£m £m £m £m £m £m £m £m £m
Revenue 3 972 972 907 907 1,866 1,866
Cost of sales (523.4) (1.4) (524.8) (487.9) (487.9) (1,004.3) (0.3) (1,004.6)
Gross profit 448.6 (1.4) 447.2 419.1 419.1 861.7 (0.3) 861.4
Operating costs (288.8) (29.4) (318.2) (277.0) (18.8) (295.8) (543.6) (67.3) (610.9)
Operating profit 3 159.8 (30.8) 129.0 142.1 (18.8) 123.3 318.1 (67.6) 250.5
Financial income 5 2.5 2.5 1.5 1.5 2.4 2.4
Financial expense 5 (9.1) (9.1) (7.2) (7.2) (14.5) (14.5)
(Losses)/gains on instruments measured at fair value through profit or loss (2.3) (2.3) 4.9 4.9 5.2 5.2
(Note 1)
Net finance income relating to defined benefit pension schemes 5 0.8 0.8 0.3 0.3 1.0 1.0
Net financial (expense)/income 5 (5.8) (2.3) (8.1) (5.4) 4.9 (0.5) (11.1) 5.2 (5.9)
Profit before tax 154.0 (33.1) 120.9 136.7 (13.9) 122.8 307.0 (62.4) 244.6
Taxation 6 (32.3) 6.0 (26.3) (28.7) (9.4) (38.1) (61.4) 13.1 (48.3)
Profit for the period 121.7 (27.1) 94.6 108.0 (23.3) 84.7 245.6 (49.3) 196.3
Earnings per share 4
Basic - from profit for the period 36.6p 31.3p 73.5p
Diluted - from profit for the period 36.5p 31.2p 73.2p
All activities relate to continuing operations.
CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
6 months to 6 months to Year to
30 June 2022 30 June 2021 31 Dec 2021
(unaudited) (unaudited)
£m £m £m £m £m £m
Profit for the period 94.6 84.7 196.3
Items that will not subsequently be reclassified to profit and loss
Re-measurement gain on defined benefit plans 14.6 40.9 70.9
Related taxation effect (3.9) (10.5) (18.4)
Effect of tax rate change on previously recognised items - 15.8 15.8
10.7 46.2 68.3
Items that may be reclassified to profit and loss
(Loss)/gain arising on hedging instruments designated in hedges
of the net assets in foreign operation (2.7) 17.5 20.0
Gain/(loss) on exchange differences on translation
of foreign operations net of funding revaluations 38.6 (32.5) (33.8)
Gain on exchange differences reclassified to income statement
on disposal of operations 0.5 0.1
Related tax (charge)/credit on items that may subsequently be
reclassified to profit and loss (0.8) 1.0 1.2
35.6 (14.0) (12.5)
Other comprehensive income for the period, net of taxation 46.3 32.2 55.8
Total comprehensive income for the period, net of taxation 140.9 116.9 252.1
CONSOLIDATED INTERIM BALANCE SHEET
30 June 2022 30 June 2021 31 Dec 2021
(unaudited) (unaudited)
Note £m £m £m
Assets
Goodwill 646.2 436.5 533.6
Other intangible assets 239.1 134.5 234.5
Property, plant and equipment 295.9 255.1 267.7
Right of use assets 88.5 90.9 91.5
Employee benefit assets 9 123.2 102.8 129.0
Deferred tax assets 38.1 34.5 39.7
Other receivables 1.5 2.5 1.9
Total non-current assets 1,432.5 1,056.8 1,297.9
Inventories 397.9 317.9 335.2
Trade and other receivables 464.8 415.0 414.0
Derivative financial assets 8.0 3.6 10.0
Current tax 5.6 7.7 14.2
Investments 2.0 3.1 2.9
Cash and cash equivalents 133.2 145.6 94.6
Total current assets 1,011.5 892.9 870.9
Total assets 2,444.0 1,949.7 2,168.8
Liabilities
Trade and other payables (429.3) (408.6) (400.4)
Bank overdraft (83.0) (38.1) (65.5)
Interest-bearing loans and borrowings (110.6) - (127.7)
Lease liabilities (24.1) (24.5) (23.9)
Provisions (35.0) (27.2) (38.1)
Current tax (65.4) (59.0) (66.0)
Derivative financial liabilities (13.5) (3.1) (6.3)
Total current liabilities (760.9) (560.5) (727.9)
Interest-bearing loans and borrowings (608.6) (352.4) (430.3)
Lease liabilities (67.2) (69.1) (70.0)
Employee benefit obligations 9 (41.7) (75.9) (66.5)
Provisions (16.9) (14.8) (18.3)
Deferred tax liabilities (78.6) (44.6) (70.2)
Other payables (7.1) (6.3) (6.5)
Total non-current liabilities (820.1) (563.1) (661.8)
Total liabilities (1,581.0) (1,123.6) (1,389.7)
Net assets 863.0 826.1 779.1
Share capital 12 78.6 80.8 78.6
Share premium 15.3 14.5 15.2
Other reserves 223.3 184.0 187.7
Retained earnings 545.8 546.8 497.6
Total equity 863.0 826.1 779.1
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
Share capital Share premium account Capital redemption reserve Translation reserve Retained earnings Total
equity
Note £m £m £m £m £m £m
As at 1 January 2021 81.8 14.3 174.4 22.6 506.4 799.5
Profit for the period 84.7 84.7
Other comprehensive (expense)/income
excluding related taxation effect (15.0) 40.9 25.9
Related taxation effect 1.0 5.3 6.3
Total comprehensive (expense)/income (14.0) 130.9 116.9
Issue of share capital - 0.2 0.2
Dividends paid 7 (40.7) (40.7)
Share-based payments (net of tax) 7.9 7.9
Cancellation of Treasury shares (1.0) 1.0
Shares acquired for:
employee share scheme trust 2.8 2.8
share buyback programme (60.5) (60.5)
As at 30 June 2021 (unaudited) 80.8 14.5 175.4 8.6 546.8 826.1
As at 1 January 2021 81.8 14.3 174.4 22.6 506.4 799.5
Profit for the year 196.3 196.3
Other comprehensive (expense)/income
excluding related taxation effect (13.7) 70.9 57.2
Related taxation effect 1.2 (2.6) (1)
Total comprehensive (expense)/income (12.5) 264.6 252.1
Issue of share capital - 0.9 0.9
Dividends paid 7 (61.8) (61.8)
Share-based payments (net of tax) 15.0 15.0
Cancellation of Treasury shares (3.2) 3.2 -
Shares acquired for:
employee share scheme trust (26.6) (26.6)
share buyback programme (200.0) (200.0)
As at 31 December 2021 78.6 15.2 177.6 10.1 497.6 779.1
Changes in equity in 2022
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 12 - 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
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
6 months to 6 months to Year to
30 June 2022 30 June 2021 31 Dec 2021
(unaudited) (unaudited)
Note £m £m £m
Cash flows from operating activities
Operating profit for the period 129.0 123.3 250.5
Adjustments for:
Depreciation and amortisation 55.7 50.5 99.5
(Reversal of impairment)/Impairment of property,
plant and equipment and intangible assets (1.7) 0.2 5.5
Loss on disposal of subsidiaries 4.5 - 3.8
Loss/(profit) on sale of property, plant and equipment 0.2 (1.1) (1.3)
Equity-settled share-based payment expense 6.0 6.2 12.0
Increase in inventories (41.5) (34.2) (37.3)
Increase in trade and other receivables (44.9) (52.1) (44.0)
Increase in trade and other payables 8.7 45.0 30.7
Decrease in provisions (Note 1) (6.0) (15.7) (1.2)
Increase in employee benefits (Note 1) 0.9 1.5 3.0
Settlement of transactional derivatives 0.3 4.1 5.9
Cash generated from operations 111.2 127.7 327.1
Income taxes paid (20.0) (27.9) (50.9)
Cash generated from operations after tax 91.2 99.8 276.2
Additional pension scheme funding (3.5) (3.5) (7.0)
Net cash from operating activities 87.7 96.3 269.2
Cash flows from investing activities
Interest received 5 2.5 1.5 2.4
Proceeds from sale of property, plant and equipment 1.3 1.7 4.6
Settlement of effective net investment hedge derivatives (1.6) 22.7 20.5
Acquisitions of subsidiaries net of cash (83.6) - (202.1)
Acquisition of property, plant and equipment and non-acquired intangibles (40.3) (22.2) (57.5)
Proceeds from disposal of subsidiaries net of cash (2.1) - 0.1
Net cash from investing activities (123.8) 3.7 (232.0)
Cash flows from financing activities
Interest paid 5 (9.1) (7.2) (14.5)
Proceeds for shares issued from employee share scheme trust (Note 1) - 2.8 3.4
Shares acquired for employee share scheme trust (Note 1) (20.0) - (30.0)
Share buyback programme including acquisition expenses - (60.5) (200.0)
Proceeds from issue of share capital for employee share schemes 0.1 0.2 1.0
Drawdown of borrowings 125.3 - 208.0
Principal elements of lease payments (13.8) (13.5) (30.0)
Dividends paid to equity shareholders 7 (40.8) (40.7) (61.8)
Net cash from financing activities 41.7 (118.9) (123.9)
Net increase/(decrease) in cash and cash equivalents 5.6 (18.9) (86.7)
Cash and cash equivalents at the start of the period 29.1 134.4 134.4
Effect of exchange rate fluctuations 15.5 (8.0) (18.6)
Cash and cash equivalents at the end of the period* 50.2 107.5 29.1
*Reconciliation of cash and cash equivalents
Cash and cash equivalents 133.2 145.6 94.6
Bank overdraft (83.0) (38.1) (65.5)
Cash and cash equivalents at the end of the period 50.2 107.5 29.1
The reconciliation of net increase/(decrease) in cash to movement in net debt
appears 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 2021 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 previous auditor 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 2023) 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.
Across the Group, supply chain disruptions have been well managed and
alternative suppliers or contingency stocks have addressed the few instances
of part shortages.
During this period of uncertainty, the Group continues to maintain a robust
financial position. At 30 June 2022, the group had cash and cash equivalents
of £50m and undrawn committed facilities of £251m in the form of Revolving
Credit Facilities (RCF), of which £125m is due for renewal in 2023, £100m in
2024 and £75m 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 (see covenants tested below) 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 2022, were 32.3 times and 1.8
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 28% and forecast EBITDA by 56%
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.
Re-presentations
The following re-presentations have been included in the Interim Financial
Statements in the current year and as a result, prior year comparatives have
been re-presented accordingly:
Consolidated interim income statement
'Net financial income/(expense) relating to financial instruments' which was
previously recorded within 'Financial income' or 'Financial expense' is now
disclosed separately. Prior year comparatives have been re-presented.
1. Significant accounting policies (continued)
Re-presentations (continued)
Consolidated interim statement of cash flows
The 'Increase/(decrease) in provisions and employee benefits' within 'Cash
flows from operating activities' are now disclosed separately as
'Increase/(decrease) in provisions' and 'Increase/(decrease) in employee
benefits'. Prior year comparatives have been re-presented.
The 'Proceeds/(expenditure) for shares acquired for employee share scheme
trust' within 'Cash flows from investing activities' is now split into
'Proceeds for shares acquired for employee share scheme trust' and 'Shares
acquired for employee share scheme trust'. Prior year comparatives have been
re-presented.
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 pension assets; derivative
financial instruments; financial assets classified as fair value through
profit and loss or other comprehensive income and assets and liabilities
acquired through business combinations which are stated at fair value.
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. The results
and financial position are not affected by seasonality.
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 2021 as
described in the 2021 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 2022
There are no amended or new International Financial Reporting Standards which
became effective for the Group as of 1 January 2022.
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 adjusted 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
provide 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 tax Adjusted profit before tax is statutory profit before tax before adjusting See income
items as shown on the income statement.
statement.
Adjusted net interest cost is statutory net interest costs before adjusting
Adjusted net interest cost items as shown on the income statement. See income statement.
Adjusted earnings per share is defined within the table in Note 4. See Note 4.
Adjusted earnings per share
The adjusted effective tax rate is the tax impact on adjusted profit before See Note 6.
tax divided by adjusted profit before tax.
Adjusted effective tax rate
This measure reflects adjusted profit after tax before interest, tax,
depreciation and amortisation. See Note 11.
Adjusted EBITDA
Adjusted operating Adjusted operating profit is statutory operating profit before adjusting items See income statement and segmental reporting in Note 3.
as shown on the income statement.
profit
Adjusted operating margin is adjusted operating profit divided by revenue.
Adjusted operating margin
These two measures remove the impact of adjusting items, acquisitions,
Organic revenue growth
disposals and movements in exchange rates.
Organic adjusted operating profit
Adjusted operating cash flow This measure reflects cash generated from operations as shown in the statement See Note 11.
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 equivalents, overdrafts, See Note 11.
interest-bearing loans and borrowings and lease liabilities.
This measure is a subtotal in the reconciliation of adjusted EBITDA to Net
Free cash flow before corporate activity Debt and is presented to assist the reader to understand the nature of the See Note 11.
current year's cash flows excluding dividends, share buybacks and the purchase
and issuance of own shares.
2. Alternative Performance Measures and Adjusting items (continued)
Adjusting items
Outlined below are the adjusting items impacting these Interim Financial
Statements:
Key 6 months to 6 months to Year to
30 June 2022 30 June 2021 31 Dec 2021
Recognised in arriving at operating profit
Reversal of net economic hedge contract losses/(gains) (a) 1.5 (4.9) (6.0)
Restructuring costs and associated impairment losses* (b) (7.7) (6.6) (39.7)
Loss on disposal of subsidiary (c) - - (3.8)
Acquired intangible amortisation and other acquisition items (d) (15.4) (7.3) (18.1)
Exit from Russia (e) (9.2) - -
(30.8) (18.8) (67.6)
Recognised in net financial expense
Financial (expense)/income (a) (2.3) 4.9 5.2
Recognised in taxation
Tax impact of adjusting items above (f) 6.0 3.4 15.1
Change in UK tax rate (f) - (18.0) (18.6)
Resolution of tax authority audit (f) - 5.2 16.6
6.0 (9.4) 13.1
(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 adjusted revenues and
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
£7.7m were incurred in the six months to 30 June 2022, which includes a
£1.7m impairment reversal. The restructuring costs relate to IMI Precision
Engineering and were for the Customer First project and the rationalisation of
three facilities. These ongoing significant restructuring projects are due to
be completed in 2023.
Restructuring costs and associated impairment losses of £39.7m were
recognised in 2021 (six months to 30 June 2021: £6.6m). These included costs
of £35.6m, of which £4.6m related to impairment losses within IMI Precision
Engineering, primarily for the rationalisation of a factory in Europe, which
was under consultation with the Works Council, and the Customer First project,
which both simplify the structure of the division and ensures the business
structure is aligned to our customer base. In IMI Critical Engineering there
were costs of £0.8m relating to the finalisation of the ongoing projects
announced in 2020. In IMI Hydronic Engineering there were costs of £3.3m for
the finalisation of the ongoing projects announced in 2020 and a new project
announced in 2021 to simplify finance processes through a shared service
centre in Poland.
(c) Loss on disposal of subsidiary - following the disposal of IMI Interativa in
July 2021, the Group recorded a loss on disposal of £3.8m.
(d) Acquired intangible amortisation and other acquisition items - the acquired
intangible amortisation charge in the six months to 30 June 2022 was £13.1m
(six months to 30 June 2021: £7.3m, 12 months to 31 December 2021: £15.0m),
which largely relates to the amortisation of the intangible assets recognised
on the acquisition of Adaptas in 2021. Other acquisition costs of £2.3m for
the six months to 30 June 2022 primarily related to professional fees
associated with the acquisition of Bahr and the Adaptas IFRS 3 release of the
fair value uplift to inventory, recognised to cost of sales. Other acquisition
costs of £3.1m for the 12 months to 31 December 2021 primarily related to
professional fees associated with the acquisition of Adaptas in December 2021.
(e) Exit from Russia - the Group's decision to end all new business in Russia
resulted in a charge of £9.2m. The Group recorded a loss on disposal of its
Russian subsidiary of £4.5m. In addition, the exit resulted in a £4.7m
impairment of assets related to Russian contracts.
(f) Taxation - the tax effect of the above items has been recognised as an
adjusting item and amounts to £6.0m (six months to 30 June 2021: £3.4m; year
ended 31 December 2021: £15.1m). 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. In 2021, the impact of
this on the Group's deferred tax liabilities of £18.6m was recorded as an
adjusting item. A credit of £16.6m due to the release of provisions in
respect of exposures related to prior years which are no longer expected to
arise, including the closure of open years with tax authorities was also
recorded as an adjusting item within the income statement in 2021.
*'Restructuring costs and associated impairment losses' were previously
reported separately as ' Restructuring costs' and 'Impairment losses'. These
amounts are now reported together as they relate to the same projects.
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 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-segment revenue
is insignificant.
Segmental information Energy Transfer
During the second half of 2021, the Energy business of the IMI Precision
Engineering division was transferred into IMI Critical Engineering. 2021
half-year comparatives have been re-presented to reflect this, with IMI
Critical Engineering revenue increasing by £28m and operating profit by
£2.9m with the equal and opposite impact reducing the prior period results of
IMI Precision Engineering.
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 30 June to 30 June to 31 Dec to 30 June to 30 June to 31 Dec to 30 June to 30 June to 31 Dec
2022 2021 2021 2022 2021 2021 2022 2021 2021
£m £m £m £m £m £m % % %
IMI Precision Engineering 485 412 836 88.2 73.7 148.9 18.2% 17.9% 17.8%
IMI Critical Engineering 312 325 691 48.8 45.8 125.0 15.6% 14.1% 18.1%
IMI Hydronic Engineering 175 170 339 35.5 34.2 68.1 20.3% 20.1% 20.1%
Corporate costs (12.7) (11.6) (23.9)
Total revenue/adjusted operating
profit and margin 972 907 1,866 159.8 142.1 318.1 16.4% 15.7% 17.0%
Reversal of net economic hedge
losses/(gains) 1.5 (4.9) (6.0)
Restructuring costs and associated (7.7) (6.6) (39.7)
impairment losses*
Loss on disposal of subsidiary (3.8)
Acquired intangible amortisation and (15.4) (7.3) (18.1)
other acquisition items
Exit from Russia (9.2)
Statutory revenue/operating profit 972 907 1,866 129.0 123.3 250.5
Net financial expense (8.1) (0.5) (5.9)
Statutory profit before tax 120.9 122.8 244.6
*'Restructuring costs and associated impairment losses' were previously
reported separately as 'Restructuring costs' and 'Impairment losses'. These
amounts are now reported together as they relate to the same projects.
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 months to 30 June 2022 6 months to 30 June 2021 Year to 31 Dec 2021 6 months to 30 June 2022 6 months to 30 June 2021 Year to 31 Dec 2021 6 months to 30 June 2022 6 months to 30 June 2021 Year to 31 Dec 2021 6 months to 30 June 2022 6 months to 30 June 2021 Year to 31 Dec 2021 6 months to 30 June 2022 6 months to 30 June 2021 Year to 31 Dec 2021
£m £m £m £m £m £m £m £m £m £m £m £m £m £m £m
Revenue 485 412 836 312 325 691 175 170 339 972 907 1866
Adjusted operating profit 88.2 73.7 148.9 48.8 45.8 125.0 35.5 34.2 68.1 (12.7) (11.6) (23.9) 159.8 142.1 318.1
Reconciliation to statutory operating profit: - -
Reversal of net economic hedge contract losses/(gains) (1.0) (2.1) (3.4) 2.0 (2.0) (1.9) 0.5 (0.8) (0.7) 1.5 (4.9) (6.0)
Restructuring costs and associated impairment losses (7.7) (4.4) (35.6) - (0.7) (0.8) (1.5) (3.3) (7.7) (6.6) (39.7)
Loss on disposal of subsidiary (3.8) - - (3.8)
Acquired intangible amortisation and other acquisition items (12.2) (3.4) (10.3) (3.2) (3.9) (7.8) (15.4) (7.3) (18.1)
Exit from Russia (0.5) (4.1) (0.1) (4.5) (9.2) - -
Statutory operating profit 66.8 63.8 99.6 43.5 39.2 110.7 35.9 31.9 64.1 (17.2) (11.6) (23.9) 129.0 123.3 250.5
Statutory operating margin (%) 13.8% 15.5% 11.9% 13.9% 12.1% 16.0% 20.5% 18.8% 18.9% 13.3% 13.6% 13.4%
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 2021:
6 months to 30 June 2022 6 months to 30 June 2021
As adjusted Acquisitions Organic Adjusted growth (%) Organic growth (%) As adjusted Exchange Disposals Organic
IMI Precision 485 (35) 450 18% 7% 412 8 - 420
IMI Critical 312 - 312 -4% -3% 325 1 (4) 322
IMI Hydronic 175 - 175 3% 5% 170 (3) (1) 166
Revenue 972 (35) 937 7% 3% 907 6 (5) 908
IMI Precision 88.2 (5.0) 83.2 20% 10% 73.7 1.7 (0.1) 75.3
IMI Critical 48.8 - 48.8 7% 7% 45.8 0.7 (0.7) 45.8
IMI Hydronic 35.5 - 35.5 4% 8% 34.2 (1.3) (0.1) 32.8
Corporate costs (12.7) - (12.7) -9% -9% (11.6) - - (11.6)
Adjusted operating profit 159.8 (5.0) 154.8 12% 9% 142.1 1.1 (0.9) 142.3
Adjusted operating profit margin (%) 16.4% 16.5% 15.7% 15.7%
3. Segmental information (continued)
Balance sheet
Assets Liabilities
30 June 2022 30 June 2021 31 December 2021 30 June 2022 30 June 2021 31 December 2021
£m £m £m £m £m £m
IMI Precision Engineering 1,001.2 664.0 916.1 216.2 157.9 202.4
IMI Critical Engineering 840.1 725.7 714.6 244.8 266.5 231.2
IMI Hydronic Engineering 278.8 250.3 233.5 88.4 92.6 90.9
Total segmental assets/liabilities
(including lease liabilities) 2,120.1 1,640.0 1,864.2 549.4 516.9 524.5
Corporate items 21.8 16.0 24.2 43.7 36.7 39.0
Employee benefits 123.2 102.8 129.0 41.7 75.9 66.5
Investments 2.0 3.1 2.9 - - -
Net debt items (excluding lease liabilities) 133.2 145.6 94.6 802.2 390.5 623.5
Net taxation and others 43.7 42.2 53.9 144.0 103.6 136.2
Total assets and liabilities
in Group balance sheet 2,444.0 1,949.7 2,168.8 1,581.0 1,123.6 1,389.7
Adjusting restructuring costs
and associated impairment losses
6 months 6 months Year
to 30 June to 30 June to 31 Dec
2022 2021 2021
£m £m £m
Total Group 7.7 6.6 39.7
IMI Precision Engineering 7.7 4.4 35.6
IMI Critical Engineering - 0.7 0.8
IMI Hydronic Engineering - 1.5 3.3
3. Segmental information (continued)
The Group's revenue streams are disaggregated by sector in the table below:
H1 2022 Revenue £m H1 2021 Revenue £m
IMI Precision Engineering*
Industrial Automation 226 194
Life Sciences 76 48
Process Control 74 62
Precision Fluid OEM 150 110
Commercial Vehicle 91 91
Rail 18 17
Transport 109 108
Total IMI Precision Engineering 485 412
IMI Critical Engineering**
Power 71 68
Refining & Petrochemical 50 45
Oil & Gas 21 20
Nuclear 20 22
Marine 8 5
Other 11 8
Aftermarket 181 168
Refining & Petrochemical 44 50
Oil & Gas 33 43
Power 24 32
Marine 11 9
Nuclear 1 2
Other 18 21
New Construction 131 157
Total IMI Critical Engineering 312 325
IMI Hydronic Engineering***
TA 78 73
Heimeier 61 63
Pneumatex 32 28
Other 4 6
Total IMI Hydronic Engineering 175 170
Revenue 972 907
*The IMI Precision Engineering sector segmentation in the prior period has
been restated to reflect the new business structure as part of the Customer
First restructuring project. In addition, the prior period figures have been
restated for the impact of the Energy transfer with £28m of revenue moved to
IMI Critical from IMI Precision.
** Prior period IMI Critical Engineering figures have been restated for the
impact of the Energy transfer with £28m of revenue moved to IMI Critical from
IMI Precision.
***Prior period IMI Hydronic results have been restated to reflect an £8m
reclassification between TA and Heimeier.
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 consolidated Interim Financial Statements and provide
insight into the performance of the Group.
30 June 30 June 31 Dec
2022 2021 2021
Key million million million
Weighted average number of shares for the purpose
of basic earnings per share A 258.4 270.7 266.9
Dilutive effect of employee share options 0.5 0.4 1.1
Weighted average number of shares for the purpose
of diluted earnings per share B 258.9 271.1 268.0
6 months 6 months Year
to 30 June to 30 June to 31 Dec
2022 2021 2021
£m £m £m
Statutory profit for the period C 94.6 84.7 196.3
Total adjusting items charges included in profit for the period, before tax 33.1 13.9 62.4
Total adjusting items (credits)/charges included in taxation (6.0) 9.4 (13.1)
Earnings for adjusted EPS D 121.7 108.0 245.6
Statutory EPS measures
Statutory basic EPS C/A 36.6p 31.3p 73.5p
Statutory diluted EPS C/B 36.5p 31.3p 73.4p
Adjusted EPS measures
Adjusted basic EPS D/A 47.1p 39.9p 92p
Adjusted diluted EPS D/B 47.0p 39.9p 91.9p
5. Net financial expense
6 months to 30 June 2022 6 months to 30 June 2021 Year to 31 Dec 2021
Recognised in the income statement Interest Financial Total Interest Financial Total Interest Financial Total
instruments instruments instruments
Interest income on bank deposits 2.5 2.5 1.5 1.5 2.4 2.4
Financial income 2.5 - 2.5 1.5 - 1.5 2.4 - 2.4
Interest expense on interest-bearing
loans and borrowings (7.7) (7.7) (5.8) (5.8) (11.7) (11.7)
Interest expense on leases (1.4) (1.4) (1.4) (1.4) (2.8) (2.8)
Financial expense (9.1) - (9.1) (7.2) - (7.2) (14.5) - (14.5)
Recognised in other comprehensive income
(Losses)/gains on instruments measured at fair value through profit or loss:
Other economic hedges* (2.3) (2.3) 4.9 4.9 5.2 5.2
Net financial income relating to
defined benefit pension schemes 0.8 0.8 0.3 0.3 1.0 1.0
Net financial (expense)/income (5.8) (2.3) (8.1) (5.4) 4.9 (0.5) (11.1) 5.2 (5.9)
*Financial instruments at fair value through profit or loss' were previously
reported separately under 'Financial income' and 'Financial expense'. These
amounts are now reported under 'Net financial income/(expense) relating to
financial instruments at fair value through profit or loss for consistency
against prior year as they relate to the same underlying transactions.
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 3). 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 £32.3m (year ended 31 December 2021:
£61.4m) which equates to an adjusted effective tax rate of 21.0% compared to
21.0% for the comparative six-month period in the prior year and 20.0% for the
year ended 31 December 2021. The normalised rate of 21.0% has been calculated
using the full year projections and has been applied to adjusted profit before
tax for the period ended 30 June 2022.
As IMI's head office and parent company is domiciled in the UK, the Group
references its effective tax rate to the UK corporation tax rate, despite only
a small proportion of the Group's business being in the UK. The rate of
corporation tax in the UK for the year ending 31 December 2021 is 19.0% (year
ended 31 December 2020: 19.0%). The Group's effective tax rate remains
slightly above the UK tax rate due to the Group's overseas profits being taxed
at higher rates.
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
2022. For the year ended 31 December 2021, adjusting items also included a
tax charge of £18.6m (six months ended 30 June 2021: £18.0m) relating to the
recognition of timing differences as a result of a substantively enacted
change in the UK corporation tax rate which will apply from 1 April 2023, and
a credit of £16.6m (six months ended 30 June 2021: £5.2m) due to the
release of provisions in respect of exposures related to prior years which are
no longer expected to arise.
The statutory tax charge of £26.3m (year ended 31 December 2021: £48.3m)
equates to an effective tax rate of 21.8%. This compares to a rate of 31.0%
for the six months ended 30 June 2021 and 19.7% for the year ended 31 December
2021. The main reasons for the difference in rate for 2022 relates to the
effects of the UK rate change and the resolution of the tax authority audits
during 2021 as detailed above.
7. Dividends
The final dividend relating to the year ended 31 December 2021 of 15.8p per
share (2020: 15.0p) was paid in May 2022 amounting to £40.8m (2021: £40.7m).
In addition, the directors have declared an interim dividend for the current
year of 8.3p per share (2021: 7.9p per share) amounting to £21.4m which will
be paid on 16 September 2022 to shareholders on the register on 12 August
2022. 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 £33.3m
(2021: £18.2m), the majority of which was in respect of plant and equipment
(including those under construction).
Capital expenditure on non-acquired intangible assets in the period was £7.0m
(2021: £4.0m). This included £2.8m (2021: £0.5m) in respect of capitalised
development costs and £4.2m (2021: £3.5m) in respect of other non-acquired
intangible assets (including those under construction).
9. Employee benefits
The net defined benefit pension surplus at 30 June 2022 was £81.5m (31
December 2021: liability of £62.5m); made up of assets of £551.3m (31
December 2021: £719.7m) and liabilities of £469.8m (31 December 2021:
£657.2m). The UK net surplus in the Funds decreased to £123.2m (31 December
2021: £129.0m). The decrease is a result of unfavourable movements in the
actuarial assumptions.
The net deficit in respect of the total overseas obligations decreased to
£41.7m (31 December 2021: £66.5m) due to increases in the discount rates.
The Trustee Payment Plan has reached a full solvency funding position and a
review was performed of the existing Trustee Payment Plan arrangements as at
31 March 2022. As a result of the review, the scheduled payments, of £7.0m
per annum, due from the Scottish Limited Partnerships has ceased. The last
contribution made by the Group was £3.5m in February 2022 prior to the
review.
10. Fair value hierarchy
Set out below is an overview of the Group's financial instruments held at fair
value.
30 June 2022 31 December 2021
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
£m £m £m £m £m £m £m £m
Financial assets measured
at fair value
Equity instruments* 2.0 2.0 2.9 - 2.9
Foreign currency forward contracts 8.0 8.0 10.0 10.0
2.0 8.0 - 10.0 2.9 10.0 - 12.9
Financial liabilities measured
at fair value
Foreign currency forward contracts (13.5) (13.5) (6.3) (6.3)
- (13.5) - (13.5) - (6.3) - (6.3)
*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 £8.0m and £13.5m, 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.
The fair values of all financial assets and liabilities in the balance sheet
as at 30 June 2022, 31 December 2021 and 30 June 2021 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*
£m £m
30 June 2022 546.9 537.4
31 December 2021 352.6 369.4
30 June 2021 352.4 374.8
*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 30 June to 30 June to 31 Dec
2022 2021 2021
£m £m £m
Net increase/(decrease) in cash and cash equivalents* 5.6 (18.9) (86.7)
Reverse cash acquired (2.6) - (1.8)
Net drawdown of borrowings excluding foreign exchange and
net debt disposed/acquired (125.3) - (208.0)
Increase in net debt* (122.3) (18.9) (296.5)
Net debt acquired/(disposed) 2.6 - -
Movement in lease liabilities 2.6 (5.3) (5.6)
Currency translation differences (20.4) 1.9 (4.5)
Movement in net debt in the period (137.5) (22.3) (306.6)
Net debt at the start of the period (622.8) (316.2) (316.2)
Net debt at the end of the period** (760.3) (338.5) (622.8)
*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 30 June to 30 June to 31 Dec
2022 2021 2021
£m £m £m
Adjusted EBITDA* 202.4 185.5 403.5
Working capital movements (77.7) (41.3) (50.6)
Capital and development expenditure (40.3) (22.2) (57.5)
Provisions and employee benefit movements** (0.7) 0.4 (0.5)
Principal elements of lease payments (13.8) (13.5) (30.0)
Other 9.0 1.9 9.0
Adjusted operating cash flow*** 78.9 110.8 273.9
Adjusting items (20.8) (21.2) (35.6)
Tax paid (20.0) (27.9) (50.9)
Interest (6.6) (5.7) (12.1)
Derivatives (1.3) 26.8 26.4
Additional pension scheme funding (3.5) (3.5) (7.0)
Free cash flow before corporate activity 26.7 79.3 194.7
Dividends paid to equity shareholders (40.8) (40.7) (61.8)
Acquisition of subsidiaries (88.3) - (203.9)
Disposal of subsidiaries - - 0.1
Share buyback programme - (60.5) -
Net (purchase)/issue of own shares and share buyback programme (19.9) 3.0 (225.6)
Net cash flow (excluding debt movements) (122.3) (18.9) (296.5)
* Adjusted profit after tax (£121.7m), before interest (£5.8m), tax
(£32.3m), depreciation (£34.1m) and amortisation (£8.5m).
** Movement in provisions and employee benefits as per the interim statement
of cash flows (£5.1m) adjusted for the movement in restructuring provisions
(£4.4m).
*** 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.
11. Cash flow reconciliation (continued)
Reconciliation of adjusted operating cash flow to cash flow statement
6 months 6 months Year
to 30 June to 30 June to 31 Dec
2022 2021 2021
£m £m £m
Cash generated from operations 111.2 127.7 327.1
Principal lease payments (13.8) (13.5) (30.0)
Settlement of transactional derivatives (0.3) (4.1) (5.9)
Acquisition of property, plant and equipment and non-acquired intangibles (40.3) (22.2) (57.5)
Adjusting items 20.8 21.2 35.6
Proceeds from sale of property, plant and equipment 1.3 1.7 4.6
Adjusted operating cash flow 78.9 110.8 273.9
Reconciliation of cash and cash equivalents
6 months 6 months Year
to 30 June to 30 June to 31 Dec
2022 2021 2021
£m £m £m
Cash and cash equivalents in current assets 133.2 145.6 94.6
Bank overdraft in current liabilities (83.0) (38.1) (65.5)
Cash and cash equivalents 50.2 107.5 29.1
Reconciliation of net cash flow (excluding debt movements)
6 months
to 30 June
2022
6 months
to 30 June
2021
Year
to 31 Dec
2021
£m
£m
£m
Adjusted EBITDA*
202.4
185.5
403.5
Working capital movements
(77.7)
(41.3)
(50.6)
Capital and development expenditure
(40.3)
(22.2)
(57.5)
Provisions and employee benefit movements**
(0.7)
0.4
(0.5)
Principal elements of lease payments
(13.8)
(13.5)
(30.0)
Other
9.0
1.9
9.0
Adjusted operating cash flow***
78.9
110.8
273.9
Adjusting items
(20.8)
(21.2)
(35.6)
Tax paid
(20.0)
(27.9)
(50.9)
Interest
(6.6)
(5.7)
(12.1)
Derivatives
(1.3)
26.8
26.4
Additional pension scheme funding
(3.5)
(3.5)
(7.0)
Free cash flow before corporate activity
26.7
79.3
194.7
Dividends paid to equity shareholders
(40.8)
(40.7)
(61.8)
Acquisition of subsidiaries
(88.3)
-
(203.9)
Disposal of subsidiaries
-
-
0.1
Share buyback programme
-
(60.5)
-
Net (purchase)/issue of own shares and share buyback programme
(19.9)
3.0
(225.6)
Net cash flow (excluding debt movements)
(122.3)
(18.9)
(296.5)
* Adjusted profit after tax (£121.7m), before interest (£5.8m), tax
(£32.3m), depreciation (£34.1m) and amortisation (£8.5m).
** Movement in provisions and employee benefits as per the interim statement
of cash flows (£5.1m) adjusted for the movement in restructuring provisions
(£4.4m).
*** 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.
11. Cash flow reconciliation (continued)
Reconciliation of adjusted operating cash flow to cash flow statement
6 months
to 30 June
2022
6 months
to 30 June
2021
Year
to 31 Dec
2021
£m
£m
£m
Cash generated from operations
111.2
127.7
327.1
Principal lease payments
(13.8)
(13.5)
(30.0)
Settlement of transactional derivatives
(0.3)
(4.1)
(5.9)
Acquisition of property, plant and equipment and non-acquired intangibles
(40.3)
(22.2)
(57.5)
Adjusting items
20.8
21.2
35.6
Proceeds from sale of property, plant and equipment
1.3
1.7
4.6
Adjusted operating cash flow
78.9
110.8
273.9
Reconciliation of cash and cash equivalents
6 months
to 30 June
2022
6 months
to 30 June
2021
Year
to 31 Dec
2021
£m
£m
£m
Cash and cash equivalents in current assets
133.2
145.6
94.6
Bank overdraft in current liabilities
(83.0)
(38.1)
(65.5)
Cash and cash equivalents
50.2
107.5
29.1
12. Share capital
Ordinary shares of 28 4/7 p each
Number (m) Value (£m)
In issue at the start of the period 274.9 78.6
Issued to satisfy employee share schemes - -
In issue at the end of the period 274.9 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 6 months Year 30 June 30 June 31 Dec
to 30 June to 30 June to 31 Dec 2022 2021 2021
2022 2021 2021
Euro 1.19 1.15 1.16 1.16 1.17 1.19
US dollar 1.30 1.39 1.38 1.22 1.38 1.35
14. Acquisitions
Acquisitions in 2022
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
£88.3m. 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. The
provisional fair value amounts recognised in respect of the identified assets
acquired and liabilities assumed are set out in the table below:
Fair value at
9 June 2022
£m
Property, plant and equipment 5.2
Inventories 3.1
Trade and other receivables 1.5
Cash and cash equivalents 4.7
Trade and other payables (1.5)
Current taxation (0.7)
Total identified net assets at fair value 12.3
Goodwill arising on acquisition 76.0
Purchase consideration transferred 88.3
Due to the timing of the acquisition, the analysis of acquired intangibles has
not yet been completed so all of the purchase price aside from the operating
balance sheet is allocated to goodwill as permitted when an acquisition is
close to a period end. The provisional purchase price allocation will be
completed in the second half of 2022. 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 £0.9m were recognised in the
income statement in 2022.
The revenue and adjusted operating profit included in the income statement for
2022 contributed by Bahr were £1.0m and £0.2m respectively. If the
acquisition had taken place on 1 January 2022, Bahr would have contributed
revenue and adjusted operating profit of £7.8m and £2.8m respectively.
Acquisitions in 2021
On 20 December 2021 the Group acquired 100% of the share capital, and
associated voting rights, of Adaptas Solutions (Adaptas) for cash
consideration of £203.9m. Adaptas is a manufacturer of mission critical mass
spectrometry subsystems and components and is based in North America with
facilities in the UK, Australia and China.
This acquisition has been accounted for as a business combination. There are
no changes to the provisional fair value amounts recognised in the 2021 Annual
Report and Accounts in respect of the identified assets acquired and
liabilities assumed. Our accounting remains provisional and will be finalised
in the second half of 2022.
15. Disposals
The Group disposed of its Russian subsidiary IMI International LLC on 27 May
2022 for proceeds of £nil resulting in a loss on disposal for the Group of
£4.5m after disposing of £3.3m of net assets and incurring £0.7m of
associated disposal costs. In addition, the exit resulted in a £4.7m
impairment of assets related to Russian contracts.
The exit from Russia is presented in the 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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