REG - IMI PLC - Preliminary Results
01/03/2024 07:00
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RNS Number : 0666F IMI PLC 01 March 2024
1 March 2024
Accelerating Better World growth
Strong organic growth, margin progression and cash generation
Expect further progress in
2024
Preliminary results, year ended 31 December 2023
Adjusted(1) Statutory
2023 2022 Change Organic(4) 2023 2022 Change
Revenue £2,196m £2,049m +7% +6% £2,196m £2,049m +7%
Operating profit £411m £364m +13% +10% £319m £298m +7%
Operating margin 18.7% 17.8% +90bps 14.5% 14.6% -10bps
Profit before tax £387m £346m +12% £302m £285m +6%
Basic EPS 116.8p 105.5p +11% 91.5p 87.6p +4%
Operating cash flow(2) £366m £290m +26% £439m £336m +31%
Dividend per share 28.3p 25.7p +10% 28.3p 25.7p +10%
Return on invested capital(3) 13.1% 12.7% +40bps
(1 Excluding the effect of adjusting items as reported in the income
statement. See Note 1 for definitions of alternative performance measures.)
(2 Adjusted operating cash flow, as described in Note 1 to the financial
statements. Statutory measure is Cash generated from operations as shown on
the cash flow statement.)
(3) (Post-tax return on invested capital, as described in Note 1 to the
financial statements.)
(4) (After adjusting for acquisitions, disposals and exchange rates (see Note
1).)
Key points
· 7% sales growth, 12% adjusted profit before tax growth
· Adjusted basic earnings per share 11% higher than 2022
· Complexity reduction programme delivered £20m of incremental benefits
· Adjusted operating margin up 90bps to 18.7%
· Statutory profit before tax increased by 6%
· Significant growth in operating cash flow to £366m
· Return on invested capital increased to 13.1%
· Record Process Automation order book provides momentum into 2024
· Proposed final dividend of 19.2p, increased by 10%
· Unified IMI under one brand
Roy Twite, Chief Executive, said:
"We continued to make significant progress in 2023 as we delivered our fourth
consecutive year of profit and adjusted operating margin growth. Our
purpose-led strategy, Breakthrough engineering for a better world, is
accelerating performance as we continue to help our customers become safer,
more sustainable, and more productive. We have a resilient portfolio with
around 45% of sales now generated from the aftermarket, and our sectors are
aligned to attractive growth markets supported by long-term global
macroeconomic trends. Both our operating platforms increased revenues and
margins in the year.
By harnessing our engineering expertise, addressing customer challenges,
fostering market-led innovation, and reducing complexity in our business, we
are creating real value.
Based on the strong 2023 results and current market conditions we expect 2024 full year adjusted EPS to be between 120p and 126p."
Enquiries to:
Luke Grant IMI Tel: +44 (0)7866 148 374
Matt Denham Headland Tel: +44 (0)7551 825 496
A live webcast of the analyst meeting taking place today at 8:30am (GMT) 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 May
2024.
Results overview
IMI delivered another strong financial performance in 2023. Organic revenue
increased by 6% and organic adjusted operating profit increased by 10%. Group
adjusted operating margin increased by 90bps to 18.7% and both platforms
increased margins in the year. Statutory operating margin reduced by 10bps to
14.5% as we accelerated our complexity reduction programme in the year.
Statutory profit before tax increased by 6%. Cash conversion was strong at 89%
(2022: 80%) and the Group's return on invested capital increased to 13.1%
(2022: 12.7%). Our adjusted basic earnings per share increased by 11% to
116.8p (2022: 105.5p).
Everyone at IMI was pleased to see the Company rejoin the FTSE 100 index
during the year. The sustainable improvements in financial performance that
are being delivered are testament to the hard work of all our people. It is an
important milestone in the continued delivery of our strategy.
As we unite our people and business around our purpose, it is time for the
next step in our journey. We are consolidating under a unified IMI master
brand while maintaining strong product brands within our sectors, all
presented through a singular visual identity. This approach will simplify our
engagement with customers, support our growth ambitions, unite us as one team
and help us to attract top talent. Great things happen when we come together
as one - finding the best ways of solving customer problems with breakthrough
solutions that help build a better world.
Dividend
The Board is recommending a 2023 final dividend of 19.2p per share (2022: 17.4p per share). Payment will be made on 17 May 2024 to shareholders on the register at the close of business on 5 April 2024.
Outlook
Based on current market conditions, we expect 2024 full year adjusted basic
EPS to be between 120p and 126p.
This guidance reflects strong growth in our Automation platform from the
record order book in Process Automation and continued resiliency in our
Industrial Automation sector as the competitive labour market drives
investment. The Life Technology platform is expected to be broadly flat in the
full year, reflecting continued demand for our energy efficient products in
Climate Control, offset by softer performance in Life Science & Fluid
Control and Transport. We expect that Life Technology revenue will be down in
the first half.
We expect continued margin progression in 2024 towards our 20% through-cycle
target, supported by the benefits from the complexity reduction programme.
Our guidance assumes a net interest charge of £17m, that our tax rate will
increase to 24% and a weighted average number of shares of 260.5m. Foreign
exchange rates are expected to have an adverse impact on sales and profits of
c.2%.
Strategic progress
Accelerating Better World growth
Our purpose-led strategy, Breakthrough engineering for a better world, is
accelerating growth as we continue to help our customers to operate more
efficiently, safely and sustainably. We are aligned to attractive growth
markets and are creating real value for all our stakeholders through a focus
on customer satisfaction, market-led innovation and complexity reduction.
There is great momentum in our business, and I am delighted that we have
delivered another strong financial performance in 2023. We have seen
exceptionally strong growth in our Process Automation sector, where our focus
on growing the aftermarket is showing tangible results, and global investments
in energy security have led to a significant increase in demand for our
solutions. Our focus on hydrogen as a sustainable fuel is also delivering
results, and I am pleased to report that hydrogen orders doubled to £15m in
2023 (2022: £7m). The integration of Heatmiser, acquired in December 2022 and
now part of our Climate Control sector, is progressing well and we
successfully launched its innovative range of smart control products in
Germany and France during the year.
I would like to thank everyone across IMI for contributing to another
impressive year. We would not be where we are today without your dedication,
collaboration, innovation and expertise.
Our new structure
In July 2023, we announced a new business structure as the next step in our
purpose-led strategy, Breakthrough engineering for a better world. To build on
the opportunities for growth, IMI has been organised into five market-focused
sectors operating within two business platforms, Automation and Life
Technology.
Platform 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
Our five market-focused sectors bring us even closer to our customers and
align with long-term macro trends that will support our sustainable,
profitable growth in the years to come.
Customer satisfaction
Understanding our customers and providing world-class engineering expertise is
crucial to the delivery of our strategy. We continue to invest in our people
and processes to strengthen the customer experience further, and are achieving
industry-leading customer satisfaction scores across the Group. We thank our
customers and partners for their business and look forward to continuing these
partnerships which contribute to a better world.
Market-led innovation
We are accelerating market-led innovation by embracing our Growth Hub culture
and processes. We are developing breakthrough solutions to solve key industry
problems and support our customers with their most complex engineering
challenges. Our innovation pipeline remains strong, with exciting projects
across IMI. Supported by selective M&A, this is delivering Better World
growth. The integration of recent acquisitions is progressing well, giving us
further exposure to attractive end markets.
Complexity reduction
During the year, we have continued to identify and execute opportunities to
reduce complexity and drive more efficient, resilient operations. As forecast,
our restructuring programmes delivered £20m of incremental annual benefits in
2023. We now expect to deliver a further £15m of benefits in 2024 and £7m in
2025. Our complexity reduction investment is expected to complete in 2024.
We have also progressed initiatives focused on reducing the complexity and
increasing the resilience of our supply chains. We are strengthening
relationships with key suppliers whilst dual-sourcing components where
appropriate to ensure we can continue to serve our customers' needs.
Environmental, Social and Governance (ESG)
Our purpose, Breakthrough engineering for a better world, continues to focus
our actions and create real energy across our organisation.
Empowering people
Ensuring all our employees feel safe at work has always been our number one
priority. The Total Recordable Incident Frequency Rate (TRIFR) in 2023 was
0.44 (2022: 0.35), which despite remaining in the top quartile for our
industry, was a disappointing outcome. We remain focused on identifying and
reducing workplace hazards and are committed to the ambition of an
accident-free workplace.
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 now at 50% as at 1 February 2024. Women in
management, a key metric for improving gender balance in leadership roles,
remained at 22% (2022: 22%).
Our continued focus on empowering people and on creating an inclusive,
diverse, and safe workplace is being recognised. Our employee engagement
remains high, with 77% of employees seeing IMI as a great place to work (2022:
80%). We were pleased to see an increase in survey participation.
Sustainable solutions
IMI's solutions support 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 overall ESG
positioning and performance 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 involve supporting customers in developing solutions for
a zero-carbon future.
In particular, we are developing solutions for many aspects of the hydrogen
value chain, including electrolysis, liquid storage, refuelling and heavy-duty
trucks. We delivered £15m of hydrogen-related orders in 2023 (2022: £7m)
and expect further growth in 2024.
Climate action
We improved our CO(2) intensity by 5% in 2023. Both platforms are progressing actions that will further reduce our Scope 1, 2 and 3 emissions as we make meaningful progress towards our net-zero targets. We committed to setting science-based targets during the year and have submitted both a near-term and net-zero target to the Science Based Targets initiative for validation. We continue to improve our metrics regarding water withdrawal and non-recyclable waste generation.
We also agreed our first sustainability linked revolving credit facility in
June 2023 and used this as a template for a further revolving credit facility
in the second half of the year.
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)
.
Roy Twite
Chief Executive Officer
29 February 2024
Financial review
Key highlights
Adjusted(1) Statutory
2023 2022 Change Organic(4) 2023 2022 Change
Revenue £2,196m £2,049m +7% +6% £2,196m £2,049m +7%
Operating profit £411m £364m +13% +10% £319m £298m +7%
Operating margin 18.7% 17.8% +90bps 14.5% 14.6% -10bps
Profit before tax £387m £346m +12% £302m £285m +6%
Basic EPS 116.8p 105.5p +11% 91.5p 87.6p +4%
Operating cash flow(2) £366m £290m +26% £439m £336m +31%
Dividend per share 28.3p 25.7p +10% 28.3p 25.7p +10%
Return on invested capital(3) 13.1% 12.7% +40bps
( )
(1 Excluding the effect of adjusting items as reported in the income
statement. See Note 1 for definitions of alternative performance measures.)
(2 Adjusted operating cash flow, as described in Note 1 to the financial
statements. The statutory measure is cash generated from operations as shown
on the cash flow statement.)
(3) (Post-tax return on invested capital, as described in Note 1 to the
financial statements.)
(4) (After adjusting for acquisitions, disposals and exchange rates (see Note
1).)
Certain alternative performance measures ('APMs') have been included within
this press release. These APMs are used by the Executive Committee to monitor
and manage the performance of the Group, in order to ensure that the decisions
taken align with the Group's long-term interests. Movements in revenue and
adjusted operating profit are given on an organic basis (see definition in
Note 1) so that assessment of performance is not distorted by acquisitions,
disposals and movements in exchange rates. Further rationale for the use of
APMs, their definition, and a reconciliation of APMs to statutory measures is
included in Note 1.
Delivering sustainable, profitable growth
The Group delivered a strong financial result in the year, as revenue, profit
and adjusted operating margin improved. Revenue increased by 7% to £2,196m
(2022: £2,049m). Organic revenue was 6% higher than the prior year, after
adjusting for acquisitions, disposals and exchange rate movements. Exchange
rate adjustments had an immaterial impact.
Adjusted operating profit of £411m (2022: £364m) was 13% higher than last
year. On an organic basis, adjusted operating profit increased by 10%.
Group adjusted operating margin was 18.7% (2022: 17.8%). Both platforms grew
adjusted margins in the year as we continue to progress towards our 20% margin
target. Statutory operating profit was £319m (2022: £298m), which increased
by 7%. The Group statutory operating margin was 10bps lower than last year,
largely reflecting an increase in restructuring costs recognised in 2023.
Adjusted net financing costs on net borrowings of £22.7m (2022: £19.2m) was
higher as a result of acquisitions completed in 2022 and increases in base
rates and includes the impact of £2.9m (2022: £2.8m) interest cost on
leases. Statutory net finance costs were £16.2m compared to £12.8m in 2022,
largely reflecting the higher interest rate environment.
Adjusted net financing costs on borrowings were covered 22 times (2022: 24
times) by adjusted earnings before interest, tax, depreciation, amortisation,
impairment and adjusting items of £503m (2022: £457m). Net pension financing
interest expense under IAS 19 was £0.5m (2022: £1.5m income).
Adjusted profit before taxation was £387m (2022: £346m), which was 12%
higher than 2022. Statutory profit before taxation increased 6% to £302m
(2022: £285m) reflecting growth in the year and the Group's continued
execution of restructuring activities to improve customer satisfaction and
long-term competitiveness. The total statutory profit for the period after
taxation was £237m (2022: £226m).
Platform results
Automation
Automation specialises in the design and manufacture of motion and fluid
control solutions that enable a diverse range of industries, to operate more
efficiently, safely and sustainably. Our Process Automation sector supports
vital process and energy industries whilst Industrial Automation helps create
the smart, safe and sustainable factories, production lines and warehouse
operations of the future.
£m Adjusted Statutory
2023 2022 Change Organic(1) 2023 2022 Change
Revenue
Process Automation 807 713 +13% +14% 807 713 +13%
Industrial Automation 543 535 +1% 0% 543 535 +1%
Total Revenue 1,350 1,248 +8% +8% 1,350 1,248 +8%
Operating profit 257 225 +14% +14% 202 188 +7%
Operating margin 19.1% 18.1% +100bps 15.0% 15.1% -10bps
( )
(1) (After adjusting for acquisitions, disposals and exchange rates (see Note
1).)
Process Automation (£m) 2023 2022 Change Organic(1)
Closing order book 760 627 +21%
Order intake:
Aftermarket 561 458 +22% +23%
New Construction 390 354 +10% +10%
Total order intake 951 812 +17% +18%
( )
(1) (After adjusting for acquisitions, disposals and exchange rates (see Note
1).)
Automation delivered strong organic revenue growth of 8%, with revenue also up
8% on a reported basis.
Process Automation had an excellent year, with strong order intake and
continued organic growth. Orders were up 18% organically, with a 23% increase
in Aftermarket. Organic revenue was 14% higher than 2022 and 13% higher on an
adjusted basis. We have benefitted from our self-help initiatives in the
Aftermarket and continued investments in energy security and have seen
particular strength in LNG, Nuclear and downstream Oil & Gas.
Industrial Automation delivered a good performance, despite uncertain markets.
Organic revenue was in line with the prior year, and was up 1% on an adjusted
basis. We see continued demand for solutions that automate processes in a
competitive labour market.
Adjusted operating profit increased by 14% on an organic basis and the
adjusted operating margin improved by 100bps to 19.1%. This was a strong
performance, reflecting a further shift towards higher-margin Aftermarket
opportunities and the continued execution of footprint optimisation
initiatives, which delivered £15m of incremental benefits in 2023. Statutory
operating profit increased by 7% to £202m in the year.
We expect to deliver good growth in 2024, following on from the strong order
book in Process Automation and continued resiliency in our Industrial
Automation sector as the competitive labour market drives investment. We
expect margins to increase, supported by the continued delivery of our
complexity reduction programme.
Life Technology
Life Technology develops motion and flow control solutions that enhance and
improve the quality of life across three key sectors. Climate Control's
innovative solutions help customers optimise heating and cooling systems,
reduce energy consumption and improve building comfort. Life Science &
Fluid Control develops solutions that empower our Life Science customers to
enhance patient-focused critical care and diagnose disease earlier, and our
Fluid Control customers to accelerate the safety, reliability and performance
of everyday activities. Transport is at the heart of advancing commercial
vehicles, our cutting-edge technology helps manufacturers to radically reduce
emissions and improve vehicle safety.
£m Adjusted Statutory
2023 2022 Change Organic(1) 2023 2022 Change
Revenue
Climate Control 386 350 +10% +3% 386 350 +10%
Life Science & Fluid Control 276 289 -4% -5% 276 289 -4%
Transport 184 162 +14% +14% 184 162 +14%
Total Revenue 846 801 +6% +2% 846 801 +6%
Operating profit 153 139 +11% +3% 116 110 +6%
Operating margin 18.1% 17.3% +80bps 13.7% 13.7% -
( )
(1) (After adjusting for acquisitions, disposals and exchange rates (see Note
1).)
Life Technology delivered a resilient performance, despite some significant
market uncertainty. Revenue was up 6% and 2% on an organic basis.
Climate Control saw good demand for its energy-saving products, with revenue
up 10% when compared to 2022 and 3% higher on an organic basis. Whilst trends
in the European construction market did impact sales in the second half, the
sector continues to perform resiliently due to the strong retrofit demand for
products that improve energy efficiency in buildings. The integration of
Heatmiser, acquired in December 2022, has progressed well as we look to
accelerate our growth in smart buildings.
Life Science & Fluid Control revenue was 4% lower than in 2022 and 5%
lower on an organic basis. We saw customer destocking and reduced demand in
the second half and expect this to continue into 2024. The long-term
fundamentals of this sector are strong, and we remain excited about the
opportunities for growth.
Transport revenue was up 14% when compared to 2022, and 14% higher
organically. We saw growth across all regions in the year as supply chains
recovered. We have benefitted from particularly strong demand in China and
India.
Adjusted operating margin for the year was 18.1%, 80bps higher than the prior
year. The platform continues to advance complexity reduction initiatives,
delivering £5m of incremental benefits in the year. Statutory operating
profit increased by 6% to £116m in the year.
We expect Life Technology to be broadly flat in 2024 reflecting continued
demand for our energy-efficient products in Climate Control, offset by softer
performance in Life Science and Transport. We expect margins to increase,
supported by the continued delivery of our complexity reduction programme.
Adjusting items
£m 2023 2022
Reversal of net economic hedge contract losses/(gains) (8) 3
Restructuring costs (48) (26)
Acquired intangible amortisation and other acquisition items (34) (34)
Exit from Russia (2) (9)
Gains on instruments measured at fair value through profit or loss 7 5
Tax in connection with the above adjusting items 19 15
Total adjusting items (66) (46)
Adjusting items that are excluded from adjusted profit before tax are listed
below:
· 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 item
reverses this treatment at an operating profit level, leading to a loss of
£8m (2022: £3m gain).
· Restructuring costs: Restructuring costs of £48m were incurred
in 2023, with a breakdown of these costs by platform, alongside expected
benefits provided below. Further details on 2023 projects are included in Note
6.
· Acquired intangible amortisation and other acquisition items:
Acquired intangible amortisation is excluded from adjusted profits, to allow
for comparability of the performance across platforms. Acquired intangible
amortisation increased to £32m (2022: £30m). Other acquisition costs of £2m
(2022: £4m) were incurred relating to a Heatmiser IFRS 3 fair value inventory
adjustment.
· Exit from Russia: During 2023, changes were made to the legal
structure of a customer which resulted in a £2m write-off. In 2022, the
Group's decision to end all new business in Russia resulted in a charge of
£9m.
· Gains on instruments measured at fair value through profit or
loss: A gain arose on the revaluation of financial instruments and derivatives
under IFRS 9 of £7m (2022: £5m gain).
· Taxation: The tax effect of the above items has been recognised
as an adjusting item and amounts to a £19m gain (2022: £15m gain).
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
tables provide a summary of progress on our restructuring programme:
£m 2023 2024* 2025*
Restructuring charge
Automation (31) (27) -
Life Technology (17) (12) -
Total charge (48) (39) -
Cash impact (40) (27) (5)
( )
£m 2023 2024* 2025*
Incremental annual benefits
Automation 15 6 6
Life Technology 5 9 1
Total benefits 20 15 7
(*Future-looking forecast information.)
Both platforms advanced their significant multi-year restructuring projects in
2023, recognising a total charge of £48m.
The restructuring programme contributed £20m of benefits in the year.
Including 2023, the programme has cost £192m to date and has delivered annual
benefits of £104m.
We continue to expect that the programme will complete in 2024, although the
Group will always seek and execute on opportunities that improve its
competitive position.
Taxation
The adjusted effective tax rate for the Group increased to 21.8% (2022:
21.3%), reflecting the increase in the UK statutory rate of corporation tax
from 19% to 25% with effect from 1 April 2023. The tax rate in 2023 also
benefitted from favourable resolutions of certain historic tax cases. The
total adjusted tax charge for the year was £85m (2022: £74m) and the
statutory effective tax rate was 21.5% (2022: 20.7%). The Group seeks to
manage its tax affairs within its core tax principles of compliance, fairness,
value and transparency, in accordance with the Group's Corporate Tax Strategy
which is available on the Group's corporate website. We are expecting the
adjusted effective tax rate to increase to around 24% in 2024, due in part to
higher UK corporation tax rates and new minimum tax legislation.
Adjusted basic earnings per share increased by 11%
The average number of shares in issue during the period was 259m (2022: 258m),
resulting in adjusted basic earnings per share of 116.8p (2022: 105.5p), an
increase of 11%. Statutory basic earnings per share increased by 4% at 91.5p
(2022: 87.6p) and statutory diluted earnings per share increased by 5% at
91.2p (2022: 87.2p).
Maintaining continued cash discipline
Movement in net debt 2023 2022
£m £m
Adjusted EBITDA* 503.2 457.0
Working capital movements (31.3) (85.1)
Capital and development expenditure (79.9) (71.3)
Provisions and employee benefit movements** (2.7) 1.5
Principal elements of lease payments (29.0) (32.3)
Other 6.0 20.2
Adjusted operating cash flow *** 366.3 290.0
Adjusting items (43.1) (52.6)
Interest (22.7) (19.2)
Derivatives 9.8 (8.6)
Tax paid (76.1) (48.6)
Additional pension scheme funding - (3.5)
Free cash flow before corporate activity 234.2 157.5
Dividends paid to equity shareholders (68.8) (62.2)
Acquisition/disposal of subsidiaries 0.5 (213.3)
Net issuance/(purchase) of own shares 0.6 (18.8)
Net cash flow (excluding debt movements) 166.5 (136.8)
Reconciliation of net cash to movement in net debt
Net increase in cash and cash equivalents excluding foreign exchange 17.7 11.0
Less: cash acquired/disposed 0.4 (10.0)
Net repayment/(drawdown) of borrowings excluding foreign exchange and net debt 148.4 (137.8)
disposed/acquired
Decrease/(increase) in net debt before acquisitions, disposals and foreign 166.5 (136.8)
exchange
Net cash acquired/disposed (0.4) 10.0
Currency translation differences 1.8 (50.6)
Movement in lease liabilities 5.5 (11.8)
Movement in net debt in the year 173.4 (189.2)
Net debt at the start of the year (812.0) (622.8)
Net debt at the end of the year (638.6) (812.0)
(*Adjusted profit after tax (£302.9m) before interest (£23.2m), tax
(£84.5m), depreciation (£74.8m), amortisation (£17.6m) and impairment
(£0.2m).)
(**Movement in provisions and employee benefits as per the statement of cash
flows (£0.9m) adjusted for the movement in restructuring provisions
(£3.6m).)
(***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; a reconciliation is
included in Note 9.)
Adjusted operating cash flow was £366m (2022: £290m). This represents a
conversion rate of total Group adjusted operating profit to adjusted operating
cash flow of 89% (2022: 80%), largely reflecting good working capital
management during 2023. There was a £43m cash outflow from adjusting items
(2022: £53m outflow) primarily related to restructuring costs.
Net working capital balances increased by £31m, with a £58m increase in
payables in line with growth offset by a £57m increase in receivables and a
£32m increase in inventory, with investments in stock to support the Process
Automation order book offsetting the strategic reduction of inventory in other
sectors. The £85m increase in 2022 was due to a £39m increase in receivables
and a £47m increase in inventory, partly offset by an increase in payables of
£1m.
Cash spent on property, plant and equipment and other non-acquired intangibles
in the year was £80m (2022: £71m), which was equivalent to 1.3 times (2022:
1.2 times) depreciation and amortisation thereon. The Group continues to
deploy capital to support growth and improve the efficiency of its operations,
including projects that support our net-zero carbon target.
Research and development spend, including capitalised intangible development
costs of £6m (2022: £6m), totalled £72m (2022: £68m), representing 3.3%
(2022: 3.3%) of sales. The Group continues to support investment in growth,
with this spend focused on delivering Better World solutions. As this measure
focuses primarily on the efforts of the engineering function, it does not
fully capture the cross-functional support in Growth Hub initiatives - a
significant further investment alongside our research and development spend.
In 2023, the Group paid cash tax of £76m (2022: £49m), which was 117% (2022:
82%) of the statutory tax charge for the year.
Free cash flow before corporate activity increased significantly to £234m
(2022: £158m).
Dividends paid to shareholders totalled £69m (2022: £62m), and there was a
cash inflow of £1m associated with the issue of share capital for employee
share schemes (2022: £19m outflow).
Overall net debt reduced by £173m in 2023 (2022: £189m increase).
Strong balance sheet offers strategic flexibility
Net debt at the year-end was £639m, compared to £812m at the end of the
previous year. The reduction reflects the strong cash generation in the year.
The net debt is composed of a cash balance of £107m (2022: £133m), a bank
overdraft of £66m (2022: £94m), interest-bearing loans and borrowings of
£580m (2022: £746m) and lease liabilities of £100m (2022: £105m).
The year-end net debt to adjusted EBITDA ratio was 1.3 times (2022: 1.8
times). At the end of 2023, loan notes totalled £532m (2022: £546m), with a
weighted average maturity of 3.6 years (2022: 4.6 years), and other loans
including bank overdrafts totalled £114m (2022: £294m). Total committed bank
loan facilities available to the Group at the year-end were £300m (2022:
£300m), of which £nil (2022: £100m) was drawn.
At 31 December 2023, the value of the Group's intangible assets, including
goodwill, was £958m (2022: £1,014m restated).
The net book value of the Group's property, plant and equipment at 31 December
2023 was £300m (2022: £299m). Capital expenditure on property, plant and
equipment amounted to £60m (2022: £57m), with the main capital expenditure
focused on production facility investment to support operational efficiency
and growth. Including capitalised intangible assets, total capital expenditure
was £80m (2022: £71m) and was 1.3 times (2022: 1.2 times) the depreciation
and amortisation charge (excluding acquired intangible amortisation and lease
asset depreciation) for the year of £63m (2022: £60m).
The net deficit for defined benefit obligations at 31 December 2023 was £49m
(2022: £19m deficit). The UK deficit was £4m (2022: £28m surplus), with the
liabilities fully bought-in in 2022. The deficit in the overseas funds as at
31 December 2023 was £45m (2022: £47m deficit).
Return on invested capital ('ROIC')
The Group uses ROIC as an indication of IMI's ability to deploy capital
effectively. The Group's definition of ROIC is adjusted operating profit after
tax divided by average capital invested. Capital invested is defined as net
assets adjusted to remove net debt, derivative assets/liabilities, defined
pension position (net of deferred tax) and to reverse historical impairments
of goodwill and amortisation of acquired intangibles.
ROIC was 13.1% in 2023 (2022: 12.7%), which increased by 40bps, reflecting the
strong trading performance and the full year profit impact of acquisitions
completed in 2022.
Return on invested capital 2023 2022
£m £m
Adjusted operating profit 410.6 363.8
Notional tax charge (89.5) (77.5)
Net adjusted operating profit after tax 321.1 286.3
Net assets 1,030.2 905.6
Adjusted for:
Net debt 638.6 812.0
Restructuring provision 20.9 17.8
Net derivative assets/liabilities (1.2) (1.9)
Net defined pension benefit 48.9 18.9
Deferred tax on employee benefits (13.5) (5.0)
Previously written-off/impaired goodwill 346.9 346.9
Acquired intangibles amortisation 387.6 366.5
Closing capital invested 2,458.4 2,460.8
Opening capital invested 2,460.8 2,039.6
Average capital invested 2,459.6 2,250.2
Return on invested capital 13.1% 12.7%
Disposals
On 2 October 2023 the Group disposed of IMI Aero-Dynamiek for proceeds of
£0.8m resulting in a gain on disposal of £0.7m. The business contributed
revenue of £4m and operating profit of £nil prior to disposal.
Foreign exchange
The income statements of overseas operations are translated into Sterling at
average rates of exchange for the year, balance sheets are translated at
year-end rates. The most significant currencies are the Euro and the US Dollar
- the relevant rates of exchange were:
Average Rates Balance Sheet Rates
2023 2022 2023 2022
Euro 1.15 1.17 1.15 1.13
US Dollar 1.24 1.24 1.27 1.21
The movement in average exchange rates between 2022 and 2023 had no material
impact on both revenue and adjusted operating profit in the full year when
compared to 2022.
If exchange rates as at 16 February 2024 of US$1.27 and €1.17 were projected
for the full year and applied to our 2023 results, it is estimated that both
revenue and adjusted operating profit would be 2% lower.
Treasury
IMI has a centralised Treasury function that provides treasury services to
Group companies including funding liquidity, credit, foreign exchange,
interest rate and base metal commodity management. The Group Treasury function
manages financial risks in compliance with Board-approved policies.
Disciplined approach to capital allocation
The Board has a clear and disciplined framework for capital allocation.
The Group will look to prioritise opportunities to deliver incremental organic
growth as it continues to invest in its people and operations. Capital
expenditure was 1.3x depreciation during the year (2022: 1.2x) with R&D
expenditure at 3.3% of sales (2022: 3.3%), in line with a target to maintain
spend above 3.0% of sales.
IMI will continue to pursue strategic acquisitions to further enhance the
portfolio. These acquisitions must be in attractive, better world markets, and
must deliver returns in line with our strict financial criteria, delivering
returns above the Group weighted average cost of capital by year three and
must not be materially dilutive to the Group return on invested capital by
year five.
The Group is committed to a progressive dividend policy and would consider the
appropriate mechanism to return additional surplus capital should the Group's
net debt to adjusted EBITDA fall sustainably below our 1.0x - 2.0x target
range.
There is significant headroom to current funding covenants of 3.0x net debt to
adjusted EBITDA.
The Group remained highly cash generative in 2023, with free cash flow before
corporate activity increasing 48% to £234m in the year (2022: £158m). Net
debt reduced to 1.3x adjusted EBITDA (2022: 1.8x), comfortably within our
target range.
At 31 December 2023, IMI plc (the parent company) had distributable reserves
of £304m (2022: £282m).
Daniel Shook
Chief Financial Officer
29 February 2024
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
2023 2022
Adjusted Adjusting items Statutory Adjusted Adjusting items Statutory
(Note 1) (Note 1)
Notes £m £m £m £m £m £m
Revenue 1 2,196 2,196 2,049 2,049
Cost of sales (1,182.1) (1.6) (1,183.7) (1,110.9) (1.2) (1,112.1)
Gross profit 1,013.9 (1.6) 1,012.3 938.1 (1.2) 936.9
Net operating costs (603.3) (90.4) (693.7) (574.3) (64.4) (638.7)
Operating profit 1 410.6 (92.0) 318.6 363.8 (65.6) 298.2
Financial income 3 8.1 8.1 4.6 4.6
Financial expense 3 (30.8) (30.8) (23.8) (23.8)
Gains on instruments measured at fair value
through profit or loss (Note 1) 7.0 7.0 4.9 4.9
Net financial (expense)/income relating to
defined benefit pension schemes 8 (0.5) (0.5) 1.5 1.5
Net financial (expense)/income (23.2) 7.0 (16.2) (17.7) 4.9 (12.8)
Profit before tax 387.4 (85.0) 302.4 346.1 (60.7) 285.4
Taxation 4 (84.5) 19.4 (65.1) (73.7) 14.6 (59.1)
Profit after tax 302.9 (65.6) 237.3 272.4 (46.1) 226.3
Earnings per share 5
Basic - from profit for the year 91.5p 87.6p
Diluted - from profit for the year 91.2p 87.2p
All activities relate to continuing operations and are all attributable to the
owners of the Company.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
2023 2022
£m £m £m £m
Profit for the year 237.3 226.3
Items that will not subsequently be reclassified to profit and loss
Re-measurement loss on defined benefit plans (33.7) (82.7)
Related taxation effect 8.6 20.4
(25.1) (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 (7.5)
(Loss)/gain on exchange differences on translation of foreign operations net
of
funding revaluations (41.1) 40.9
(Gain)/loss on exchange differences reclassified to income statement on
disposal of
operations (0.2) 0.6
Related tax credit/(charge) on items that may subsequently be reclassified
to profit and loss 1.8 (0.3)
(32.8) 33.7
Other comprehensive loss for the year, net of taxation (57.9) (28.6)
Total comprehensive income for the year, net of taxation 179.4 197.7
Attributable to:
Equity holders of the parent 179.4 197.7
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
Share capital Share premium account Capital redemption reserve Translation reserve Retained earnings Total
Notes £m £m £m £m £m £m
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) 34.0 (82.7) (48.7)
excluding related taxation effect
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 year 237.3 237.3
Other comprehensive expense (34.6) (33.7) (68.3)
excluding related taxation effect
Related taxation effect 1.8 8.6 10.4
Total comprehensive (expense)/income (32.8) 212.2 179.4
Issue of share capital 0.6 0.6
Dividends paid 7 (68.8) (68.8)
Share-based payments (net of tax) 13.4 13.4
As at 31 December 2023 78.6 17.0 177.6 11.0 746.0 1,030.2
CONSOLIDATED BALANCE SHEET
FOR THE YEAR ENDED 31 DECEMBER 2023
2023 2022
(Restated
Note 1)
£m £m
Assets
Goodwill 680.3 697.4
Other intangible assets 277.4 316.7
Property, plant and equipment 300.4 299.2
Right of use assets 99.6 107.0
Employee benefit assets 1.7 28.5
Deferred tax assets 22.7 24.2
Other receivables 2.3 2.6
Total non-current assets 1,384.4 1,475.6
Inventories 437.3 417.7
Trade and other receivables 523.9 483.9
Derivative financial assets 12.1 15.7
Current tax 4.5 1.9
Investments 1.7 2.0
Cash and cash equivalents 106.5 133.0
Total current assets 1,086.0 1,054.2
Total assets 2,470.4 2,529.8
Liabilities
Trade and other payables (470.3) (438.0)
Bank overdraft (66.3) (93.8)
Interest-bearing loans and borrowings (47.2) (150.1)
Lease liabilities (25.2) (25.8)
Provisions (28.7) (27.2)
Current tax (73.0) (70.4)
Derivative financial liabilities (10.9) (13.8)
Total current liabilities (721.6) (819.1)
Interest-bearing loans and borrowings (531.4) (595.4)
Lease liabilities (75.0) (79.9)
Employee benefit obligations (50.6) (47.4)
Provisions (13.0) (15.3)
Deferred tax liabilities (33.3) (59.2)
Other payables (15.3) (7.9)
Total non-current liabilities (718.6) (805.1)
Total liabilities (1,440.2) (1,624.2)
Net assets 1,030.2 905.6
Share capital 78.6 78.6
Share premium 17.0 16.4
Other reserves 188.6 221.4
Retained earnings 746.0 589.2
Total equity 1,030.2 905.6
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
2023 2022
Notes £m £m
Cash flows from operating activities
Operating profit for the year 318.6 298.2
Adjustments for:
Depreciation and amortisation 124.4 122.2
Impairment/(reversal of impairment) of property, plant and equipment 5.2 (1.6)
and intangible assets
(Profit)/loss on disposal of subsidiaries 12 (0.7) 4.8
Loss on sale of property, plant and equipment 0.5 1.7
Equity-settled share-based payment expense 12.9 11.7
Increase in inventories (32.3) (47.6)
Increase in trade and other receivables (56.5) (38.8)
Increase in trade and other payables 57.5 1.3
Decrease in provisions (0.1) (16.0)
Increase in employee benefits 1.0 2.2
Settlement of transactional derivatives 8.8 (2.3)
Cash generated from operations 439.3 335.8
Income taxes paid 4 (76.1) (48.6)
Cash generated from operations after tax 363.2 287.2
Additional pension scheme funding - (3.5)
Net cash from operating activities 363.2 283.7
Cash flows from investing activities
Interest received 3 8.1 4.6
Proceeds from sale of property, plant and equipment 1.6 2.9
Settlement of effective net investment hedge derivatives 1.0 (6.3)
Acquisitions of subsidiaries net of cash 11 - (201.2)
Acquisition of property, plant and equipment and non-acquired intangibles (79.9) (71.3)
Proceeds from disposal of subsidiaries net of cash 12 0.1 (2.1)
Net cash from investing activities (69.1) (273.4)
Cash flows from financing activities
Interest paid 3 (30.8) (23.8)
Shares acquired for employee share scheme trust - (20.0)
Proceeds from issue of share capital for employee share schemes 0.6 1.2
Drawdown of borrowings 9 - 259.1
Repayment of borrowings 9 (148.4) (121.3)
Principal elements of lease payments (29.0) (32.3)
Dividends paid to equity shareholders 7 (68.8) (62.2)
Net cash from financing activities (276.4) 0.7
Net increase in cash and cash equivalents 17.7 11.0
Cash and cash equivalents at the start of the year 39.2 29.1
Effect of exchange rate fluctuations (16.7) (0.9)
Cash and cash equivalents at the end of the year 40.2 39.2
Reconciliation of cash and cash equivalents
Cash and cash equivalents 106.5 133.0
Bank overdraft (66.3) (93.8)
Cash and cash equivalents at the end of the period 40.2 39.2
Reconciliation of net cash to movement in net borrowings appears in Note 9.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Segmental information
Segmental information is presented in the consolidated 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.
On 28 July 2023, the Group announced a structure change where the existing
divisional structure, including IMI Critical Engineering, IMI Precision
Engineering and IMI Hydronic Engineering now reports by two platforms,
Automation and Life Technology to better align IMI to its key sectors and to
help position IMI to accelerate growth.
Automation
The Automation business leverages deep automation technology and applications
expertise to improve productivity, safety and sustainability in the Process
Automation and Industrial Automation sectors.
Life Technology
The Life Technology business focuses on technologies that enhance and improve
everyday life, particularly in the areas of health, sustainability and comfort
across the Climate Control, Transport and Life Science and Fluid Control
sectors.
Performance is measured by the Executive Committee based on adjusted operating
profit and organic revenue growth which are defined in Note 1. These two
measures represent the two short-term key performance indicators for the
Group.
Businesses enter 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.
Restatements
2022 comparatives have been restated to reflect the impact of the following
items:
Adjustments arising on prior year acquisitions
In finalising the accounting for the 2022 acquisitions of CorSolutions LLC and
Heatmiser UK Ltd, 2022 goodwill was decreased by £36.3m at 31 December 2022
and allocated to Other intangible assets (increase of £46.2m), Inventories
(increase of £1.4m), Trade and other receivables (decrease of £1.0m), Trade
and other payables (decrease of £1.7m), Deferred tax (decrease of £11.6m)
and Current tax (decrease of £0.4m). Refer to Note 11 which shows a
reconciliation between the 2022 Consolidated Balance Sheet and the restated
2022 Consolidated Balance Sheet as disclosed on page 29.
Adjustments arising on changes in the structure
As discussed in the Segmental information section above, the Group will report
by two platforms, Automation and Life Technology.
Industrial Automation (formerly part of the IMI Precision Engineering
division) and Process Automation (formerly IMI Critical
Engineering) forms the Automation platform and Climate Control (formerly IMI
Hydronic Engineering), Transport and Life Science & Fluid Control (both
formerly part of the IMI Precision Engineering division) forms the Life
Technology platform. Rail, which was previously reported under Transportation,
has been re-presented within Industrial Automation. As part of the 2022
restatement, corporate costs of £15.5m have been allocated to Automation and
£9.9m has been allocated to Life Technology. Refer to Note 1 which shows the
restated segmental analysis under the two new platforms.
1. Segmental information (continued)
Alternative Performance Measures ('APMs')
Certain alternative performance measures ('APMs') have been included within
this announcement and discussed further in Note 6. These APMs are used by the
Executive Committee to monitor and manage the performance of the Group.
Movements in revenue and adjusted operating profit are given on an organic
basis (see definition below) so that performance is not distorted by
acquisitions, disposals and movements in exchange rates.
References to EPS, unless otherwise stated, relate to adjusted basic EPS i.e.
after adjustment for the per share after tax impact of adjusted items. The
directors' commentary discusses these alternative performance measures 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. The table below details the
definition of each APM and a reference to where it can be reconciled to the
equivalent statutory measure.
APM Definition Reconciliation to statutory measure
Adjusted profit before tax Adjusted profit before tax is statutory profit before tax before adjusting See income statement on page 14.
items as shown on the income statement.
See income statement on page 14.
Adjusted net interest cost is statutory net interest costs before adjusting
items as shown on the income statement.
Adjusted net interest cost See Note 5.
Adjusted earnings per share is defined within the table in Note 5.
The adjusted effective tax rate is the tax impact on adjusted profit before See Note 4.
tax divided by adjusted profit before tax.
Adjusted earnings per share
See Note 9.
This measure reflects adjusted profit after tax before interest, tax,
depreciation, amortisation and impairment.
Adjusted effective tax rate
Adjusted EBITDA
Adjusted operating profit Adjusted operating profit is statutory operating profit before adjusted items
as shown on the income statement.
Adjusted operating margin is adjusted operating profit divided by revenue.
Adjusted operating margin
Adjusted net financing costs is interest received and interest paid including
the impact on interest costs on leases before gains on instruments measured at
fair value through profit or loss (other economic hedges) and net financial
Adjusted net financing costs income relating to defined benefit pension schemes. See income statement on page 14 and segmental reporting in Note 1.
These two measures remove the impact of adjusting items, acquisitions,
disposals and movements in exchange rates.
Organic revenue growth
Organic adjusted operating profit
Adjusted operating cash flow This measure reflects cash generated from 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 See Note 9.
adjusting items.
1. Segmental information (continued)
APM Definition Reconciliation to statutory measure
Net debt Net debt is defined as the cash and cash equivalents, overdrafts, See Note 9.
interest-bearing loans and borrowings and lease liabilities.
Net debt divided by adjusted EBITDA as defined above.
Net debt: adjusted EBITDA
This measure is a sub-total 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 excluding dividends, share buybacks and the purchase
Free cash flow before and issuance of own shares. See Note 9.
corporate activity
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 assets and liabilities, defined benefit pension
position (net of deferred tax) and to reverse historical impairments of
goodwill and amortisation of acquired intangible assets.
Return on invested capital (ROIC)
See page 12.
Cash conversion is the adjusted operating cash flow as a percentage of the
adjusted operating profit.
Cash conversion See page 10.
The following table shows a reconciliation of platform adjusted operating
profit to statutory operating profit. 2022 results have been restated to
reflect the structure change described above.
Automation Life Technology Total
2023 2022 2023 2022 2023 2022
(Restated) (Restated) (Restated)
£m £m £m £m £m £m
Revenue 1,350 1,248 846 801 2,196 2,049
Adjusted operating profit 257.3 225.3 153.3 138.5 410.6 363.8
Adjusted operating profit margin 19.1% 18.1% 18.1% 17.3% 18.7% 17.8%
Reconciliation to statutory operating profit:
Reversal of net economic hedge contract losses/(gains) (7.5) 1.0 (0.8) 2.0 (8.3) 3.0
Restructuring costs (30.6) (15.9) (17.5) (10.0) (48.1) (25.9)
Acquired intangible amortisation and other (14.9) (16.2) (18.7) (17.5) (33.6) (33.7)
acquisition items
Exit from Russia (2.0) (5.9) - (3.1) (2.0) (9.0)
Statutory operating profit 202.3 188.3 116.3 109.9 318.6 298.2
Statutory operating margin (%) 15.0% 15.1% 13.7% 13.7% 14.5% 14.6%
Net financial expense (16.2) (12.8)
Statutory profit before tax 302.4 285.4
1. Segmental information (continued)
The following table illustrates how revenue and adjusted operating profit have
been impacted by movements in foreign exchange, acquisitions and disposals
compared to 2022. 2022 results have been restated to reflect the structure
change described above.
Year ended 31 December 2022 (Restated) Year ended 31 December 2023
Revenue As adjusted Disposal Exchange Organic As adjusted Acquisitions Organic Adjusted growth (%) Organic growth (%)
Automation 1,248 (6) (1) 1,241 1,350 (6) 1,344 8% 8%
Life Technology 801 (3) 4 802 846 (26) 820 6% 2%
Total 2,049 (9) 3 2,043 2,196 (32) 2,164 7% 6%
Adjusted operating profit
Automation 225.3 (0.6) (0.6) 224.1 257.3 (1.1) 256.2 14% 14%
Life Technology 138.5 - 1.8 140.3 153.3 (8.4) 144.9 11% 3%
Total 363.8 (0.6) 1.2 364.4 410.6 (9.5) 401.1 13% 10%
Adjusted operating profit margin (%) 17.8% 17.8% 18.7% 18.5%
The following table shows a geographical analysis of how the Group's revenue
is derived by destination:
2023 2022
£m £m
UK 117 93
Germany 280 265
Rest of Europe 557 520
Total Europe 954 878
USA 525 536
Rest of Americas 140 91
Total Americas 665 627
China 174 179
Rest of Asia Pacific 296 271
Total Asia Pacific 470 450
Middle East & Africa 107 94
Total revenue 2,196 2,049
1. Segmental information (continued)
The Group's revenue streams are disaggregated in the table below. The 2022
results have been restated as a result of the changes to the Group's
structure, which now reports under two Platforms, Automation and Life
Technology, as discussed above.
2023 2022
Revenue Revenue (Restated)
£m £m
Industrial Automation 543 535
Aftermarket 483 411
New Construction 324 302
Process Automation 807 713
Automation 1,350 1,248
Climate Control 386 350
Life Science & Fluid Control 276 289
Transport 184 162
Life Technology 846 801
Total revenue 2,196 2,049
Sale of goods 2,115 1,977
Sale of services 81 72
Total revenue 2,196 2,049
2. Discontinued operations
There was no profit or loss from discontinued operations in 2023 or 2022.
3. Net financing costs
2023 2022
Interest Financial Total Interest Financial Total
Instruments Instruments
Recognised in the income statement £m £m £m £m £m £m
Interest income on bank deposits 8.1 8.1 4.6 4.6
Financial income 8.1 - 8.1 4.6 - 4.6
Interest expense on interest-bearing loans and borrowings (27.9) (27.9) (21.0) (21.0)
Interest expense on leases (2.9) (2.9) (2.8) (2.8)
Financial expense (30.8) - (30.8) (23.8) - (23.8)
Recognised in other comprehensive income
Gains on instruments measured at fair value through profit or loss:
Other economic hedges 7.0 7.0 4.9 4.9
Net financial (expense)/income relating to defined benefit pension schemes (0.5) (0.5) 1.5 1.5
Net financial (expense)/income (23.2) 7.0 (16.2) (17.7) 4.9 (12.8)
Included in financial instruments are current year trading gains and losses on
economically effective transactions which for management reporting purposes
are included in adjusted revenue and operating profit (see Note 1). For
statutory purposes, these are shown within net financial income and expense
above. Gains or losses for future year transactions are in respect of
financial instruments held by the Group to provide stability of future trading
cash flows.
4. Taxation
The tax charge before adjusting items is £84.5m (year ended 31 December 2022:
£73.7m) which equates to an adjusted effective tax rate of 21.8% compared to
21.3% for the year ended 31 December 2022. The statutory tax charge is £65.1m
(year ended 31 December 2022: £59.1m) which equates 21.5% compared to 20.7%
for the year ended 31 December 2022. Taxes of £76.1m (2022: £48.6m) were
paid in the year. The Group seeks to manage its tax affairs within its core
tax principles of compliance, fairness, value and transparency, in accordance
with the Group's Tax Policy.
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 portion of the Group's business being in the UK. The rate of
corporation tax in the UK for the year ended 31 December 2023 is 23.5% (year
ended 31 December 2022: 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.
During 2023, the UK government substantively enacted the OECD Inclusive
Framework agreement for a global minimum corporate income tax rate of 15%. For
IMI, this takes effect from 1 January 2024. The event does not therefore
affect IMI's results for 2023. IMI is evaluating the impact that this will
have on future accounting periods but expects that its entities in most
territories will not be impacted by this minimum tax requirement. To the
extent top-up taxes are required, the impact on IMI's results is expected to
be minimal. However, further evaluation will be undertaken as additional
guidance becomes available.
5. Earnings per ordinary share
2023 2022
Key million million
Weighted average number of shares for the purpose of basic earnings per share A 259.3 258.3
Dilutive effect of employee share options 1.0 1.2
Weighted average number of shares for the purpose of diluted earnings per B 260.3 259.5
share
£m £m
Statutory profit for the year C 237.3 226.3
Total adjusting items charges included in profit before tax 85.0 60.7
Total adjusting items credits included in taxation (19.4) (14.6)
Earnings for adjusted EPS D 302.9 272.4
Statutory EPS measures
Statutory basic EPS C/A 91.5p 87.6p
Statutory diluted EPS C/B 91.2p 87.2p
Adjusted EPS measures
Adjusted basic EPS D/A 116.8p 105.5p
Adjusted diluted EPS D/B 116.4p 105.0p
6. Adjusting items
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 revenue and adjusted
operating profit of the relevant business segment. The adjusting items at the
operating 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.
Restructuring costs
Restructuring costs of £48.1m were recognised in 2023. The Automation
platform incurred costs of £30.6m related to the rationalisation of three
facilities. The Life Technology platform incurred costs of £17.5m related to
the Customer First reorganisation project, which transformed the structure
into customer led sectors (across a number of businesses), and the
rationalisation of three 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 of £25.9m were recognised in 2022. These primarily
related to Automation and were for the Customer First project, across a number
of businesses and the rationalisation of four facilities.
Acquired intangible amortisation and other acquisition items
The acquired intangible amortisation charge was £32.0m (2022: £29.5m), which
largely relates to the amortisation of the intangible assets recognised on the
acquisition of Adaptas Solutions, Heatmiser UK Ltd and Bimba Manufacturing
Company. Other acquisition costs of £1.6m for the year ended 31 December
2023, related to the unwind of the inventory fair value uplift adjustment for
Heatmiser. Other acquisition costs of £4.2m 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.
Exit from Russia
During 2023, changes were made to the legal structure of a customer which
resulted in a £2.0m write-off. In 2022, the Group's decision to end all new
business in Russia resulted in a charge of £9.0m. The Group recorded a loss
on disposal of its Russian subsidiary of £4.8m. In addition, the exit
resulted in a £4.2m impairment of assets related to Russian contracts.
Taxation
The tax effect of the above items has been recognised as an adjusting item and
amounts to £19.4m (2022: £14.6m).
7. Dividend
The directors recommend a final dividend of 19.2p per share (2022: 17.4p)
payable on 17 May 2024 to shareholders on the register at close of business on
5 April 2024, which will cost approximately £49.9m (2022: £45.1m). Together
with the interim dividend of 9.1p (2022: 8.3p) per share paid in September
2023, this makes a total distribution of 28.3p per share (2022: 25.7p per
share). In accordance with IAS10 'Events after the Balance Sheet date', this
final proposed dividend has not been reflected in the 31 December 2023 balance
sheet.
8. Employee Benefits
The Group has 70 (2022: 70) defined benefit obligations in existence as at 31
December 2023. The Group recognises there is a funding and investment risk
inherent within defined benefit arrangements and seeks to continue its
programme of closing overseas defined benefit plans where possible and
providing in their place appropriate defined contribution arrangements.
The net deficit for defined benefit obligations at 31 December 2023 was
£48.9m (2022: £18.9m). The UK deficit was £3.7m (2022: surplus of £28.4m)
and constituted 68% (2022: 70%) of the total defined benefit liabilities and
76% (2022: 80%) of the total defined benefit assets. The deficit in the
overseas funds as at 31 December 2023 was £45.2m (2022: £47.3m).
UK Overseas Total
£m £m £m
Net defined benefit surplus/(obligation) at 1 January 2023 28.4 (47.3) (18.9)
Movement recognised in:
Income statement 1.3 (5.5) (4.2)
Other comprehensive income (33.4) (0.3) (33.7)
Cash flow statement - 6.9 6.9
Exchange - 1.0 1.0
Net defined benefit obligation at 31 December 2023 (3.7) (45.2) (48.9)
9. Cash flow and net debt reconciliation
Reconciliation of net cash to movement in net debt 2023 2022
£m £m
Net increase in cash and cash equivalents excluding foreign exchange 17.7 11.0
Less: cash acquired/disposed 0.4 (10.0)
Net repayment/(drawdown) of borrowings excluding foreign exchange and net debt 148.4 (137.8)
disposed/acquired
Decrease/(increase) in net debt before acquisitions, disposals and foreign 166.5 (136.8)
exchange
Net cash acquired/disposed (0.4) 10.0
Currency translation differences 1.8 (50.6)
Movement in lease liabilities 5.5 (11.8)
Movement in net debt in the year 173.4 (189.2)
Net debt at the start of the year (812.0) (622.8)
Net debt at the end of the year (638.6) (812.0)
Movement in net debt 2023 2022
£m £m
Adjusted EBITDA* 503.2 457.0
Working capital movements (31.3) (85.1)
Capital and development expenditure (79.9) (71.3)
Provisions and employee benefit movements** (2.7) 1.5
Principal elements of lease payments (29.0) (32.3)
Other 6.0 20.2
Adjusted operating cash flow *** 366.3 290.0
Adjusting items (43.1) (52.6)
Tax paid (76.1) (48.6)
Interest (22.7) (19.2)
Settlement of derivatives 9.8 (8.6)
Additional pension scheme funding - (3.5)
Free cash flow before corporate activity 234.2 157.5
Dividends paid to equity shareholders (68.8) (62.2)
Acquisition of subsidiaries - (213.3)
Disposal of subsidiaries 0.5 -
Net purchase of own shares 0.6 (18.8)
Net cash flow (excluding debt movements) 166.5 (136.8)
*Adjusted profit after tax £302.9m before interest £23.2m, tax £84.5m,
depreciation £74.8m, amortisation £17.6m and impairment on property, plant
and equipment and non-acquired intangible assets £0.2m.
**Movement in provisions and employee benefits as per the statement of cash
flows £0.9m adjusted for the movement in the restructuring provisions £3.6m.
***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.
Reconciliation of adjusted operating cash flow to cash flow statement 2023 2022
£m £m
Cash generated from operations 439.3 335.8
Principal lease payments (29.0) (32.3)
Settlement of transactional derivatives (8.8) 2.3
Acquisition of property, plant and equipment and non-acquired intangibles (79.9) (71.3)
Adjusting items 43.1 52.6
Proceeds from sale of property, plant and equipment 1.6 2.9
Adjusted operating cash flow 366.3 290.0
10. Exchange rates
The income statements of overseas operations are translated into sterling at
average rates of exchange for the year, balance sheets are translated at year
end rates. The most significant currencies are the euro and the US dollar -
the relevant rates of exchange were:
Average Rates Balance Sheet Rates
2023 2022 2023 2022
Euro 1.15 1.17 1.15 1.13
US Dollar 1.24 1.24 1.27 1.21
The movement in average exchange rates between 2022 and 2023 had no material
impact on both revenue and adjusted operating profit in the full year when
compared to 2022.
If exchange rates as at 16 February 2024 of US$1.27 and €1.17 were projected
for the full year and applied to our 2023 results, it is estimated that both
revenue and adjusted operating profit would be 2% lower.
11. 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
Fair value at
23 December 2022
£m
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 67.6
Purchase consideration 117.5
On 23 December 2022 the Group acquired 100% of the share capital, and
associated voting rights, of Heatmiser for initial cash consideration of
£117.5m, with up to a further £8.0m 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 and the
accounting, including the purchase price allocation, has been finalised during
the year. After updating the assumptions, deferred consideration recognised is
£nil. 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 £2.0m were recognised in the income statement in 2022.
11. Acquisitions (continued)
b) CorSolutions
Fair value at
27 October 2022
£m
Other intangible assets 8.8
Inventories 0.6
Deferred taxation -
Total identified net assets at fair value 9.4
Goodwill arising on acquisition -
Total consideration 9.4
Of which relates to deferred consideration 1.3
Purchase consideration 8.1
On 27 October 2022 the Group acquired 100% of the share capital, and
associated voting rights, of CorSolutions for initial cash consideration of
£7.5m, an additional payment of £0.6m made in 2023 as part of the closing
consideration, with up to a further £3.6m payable based on future financial
performance. CorSolutions is a leading innovator in micro-fluid flow control
and is based in Ithaca, New York.
This acquisition was accounted for as a business combination. The acquisition
accounting has been finalised and changes were made to the provisional fair
value amounts recognised in the 2022 Annual Report & Accounts in respect
of the deferred consideration and identified assets acquired and liabilities
assumed. This resulted in a decrease of £1.7m from the 2022 Annual Report
& Accounts, bringing the goodwill position to £nil. The expected earn-out
payout has decreased from £3.6m as at 31 December 2022 to £1.3m.
c) Bahr
On 9 June 2022 the Group acquired 100% of the share capital, and associated
voting rights, of 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 was 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 & 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 £36.3m was made to include
acquired intangibles and corresponding deferred tax, adjust working capital
and other payables. This resulted in a decrease in goodwill of £36.3m.
The adjustment is material and as such the comparative balance sheet has been
restated, as follows:
Balance Sheet Allocation of Heatmiser and CorSolutions goodwill Restated
(as Reported) Balance Sheet
2022
£m
2022 2022
£m £m
Non-current assets
Goodwill 733.7 (36.3) 697.4
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 9.9 2,529.8
Non-current liabilities
Deferred tax liabilities (47.9) (11.3) (59.2)
Other payables (9.9) 2.0 (7.9)
Current liabilities
Trade and other payables (437.7) (0.3) (438.0)
Current tax (70.1) (0.3) (70.4)
Total liabilities (1,614.3) (9.9) (1,624.2)
12. Disposals
Disposals in 2023
The Group disposed of its Dutch subsidiary IMI Aero-Dynamiek BV on 2 October
2023 for proceeds of £0.8m resulting in a gain on disposal for the Group of
£0.7m after disposing of £nil of net assets and incurring £0.3m of
associated disposal costs.
This disposal is not disclosed as a discontinued item because it did not
represent a separate major line of business.
2 October
2023
£m
Sale consideration 0.8
Net assets disposal -
Costs of disposal (0.3)
Foreign exchange gain reclassified on disposal 0.2
Gain on disposal 0.7
Net cash flow arising on disposal
Sale consideration 0.8
Cash costs of disposal (0.3)
Net cash flow arising on disposal of operations 0.5
Disposals in 2022
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
£4.8m after disposing of £3.3m of net assets and incurring £0.9m of
associated disposal costs. In addition, the exit resulted in a £4.2m
impairment of assets related to Russian contracts.
The exit from Russia is presented in the income statement as an adjusting item
in 2022 but it was not disclosed as a discontinued item because it did not
represent a separate major line of business.
27 May
2022
£m
Sale consideration -
Net assets disposed (3.3)
Costs of disposal (0.9)
Foreign exchange loss reclassified on disposal (0.6)
Loss on disposal (4.8)
Net cash flow arising on disposal
Sale consideration -
Cash costs of disposal (0.9)
Net cash flow arising on disposal of operations (0.9)
13. Financial information
The preliminary statement of results was approved by the Board on 29 February
2024. The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2023 or 2022 but
is derived from the 2023 accounts, which are prepared on the same basis as the
2022 accounts. Statutory accounts for 2022 have been delivered to the
registrar of companies and those for 2023 will be delivered in due course.
Deloitte LLP has reported on the 2023 and 2022 accounts. Their reports were
(i) unqualified, (ii) did not include references to any matters to which the
auditor drew attention by way of emphasis without qualifying its reports and
(iii) did not contain statements under section S498(2) or S498(3) of the
Companies Act 2006.
This announcement may contain forward-looking statements that may or may not
prove accurate. For example, statements regarding expected revenue growth and
operating margins, market trends and our product pipeline are forward-looking
statements. It is believed that the expectations reflected in these statements
are reasonable, but they may be affected by a number of risks and
uncertainties that are inherent in any forward-looking statement which could
cause actual results to differ materially from those currently anticipated.
Any forward-looking statement is made in good faith and based on information
available to IMI plc as of the date of the preparation of this announcement.
All written or oral forward-looking statements attributable to IMI plc are
qualified by this caution. IMI plc does not undertake any obligation to update
or revise any forward-looking statement to reflect any change in circumstances
or in IMI plc's expectations. Nothing in this preliminary announcement should
be construed as a profit forecast.
This preliminary statement has been prepared for the Group as a whole and
therefore gives greater emphasis to those matters which are significant to IMI
plc and its subsidiaries when viewed as a whole.
References in the commentary to revenue, adjusted operating profit and
adjusted operating margins, unless otherwise stated, relate to amounts on an
adjusted basis before adjusting items as noted on the face of the consolidated
income statement.
References to EPS, unless otherwise stated, relate to adjusted basic EPS i.e.
after adjustment for the per share after tax impact of adjusting items in Note
6.
Alternative Performance Measures ('APMs') are used in discussions with the
investment analyst community and by the Board and management to monitor the
trading performance of the Group. We consider that the presentation of APMs
allows for users to better assess period-on-period trading performance of the
Group. The APMs presented in the Annual Report and Accounts to 31 December
2023 are defined in Note 1.
References to organic growth exclude the impact of exchange rate translation
and acquisitions or disposals that are included in adjusted growth figures.
The organic growth is derived from excluding any contribution from acquired
businesses to revenues or profits in the current period until the first
anniversary of their acquisition. It also excludes the contribution to
revenues or profits in both the current and comparative period from any
business that has been disposed of. These organic revenues or profits will
then be compared to the organic revenue or profits for the prior period after
their re-translation at the current period average exchange rates to provide
the organic growth rate. The impact on revenue and adjusted operating profit
of movements in foreign exchange, acquisitions and disposals is set out in
Note 1.
IMI plc is registered in England No. 714275. Its legal entity identifier
('LEI') number is 2138002W9Q21PF751R30. The person responsible for releasing
this announcement on behalf of the Board is Louise Waldek, Company Secretary
and Group Legal Director.
The Company's 2023 Annual Report and Notice of the forthcoming Annual General
Meeting will be posted to shareholders on 28 March 2024.
Notes to editors
IMI plc is a FTSE100 global specialist engineering company that designs,
manufactures and services highly engineered products to control the precise
movement of fluids. Its innovative motion and flow control technologies, built
around valves and actuators, enable vital sectors to become safer, more
sustainable and more productive. IMI combines world class applications
engineering expertise with a continued focus on customer satisfaction,
market-led innovation and complexity reduction to solve its customers most
acute engineering problems. IMI employs approximately 10,000 people, has
manufacturing facilities in 18 countries and operates a global service
network. The Company is listed on the London Stock Exchange. Further
information is available at www.imiplc.com (http://www.imiplc.com) .
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