TIDMIMI
RNS Number : 1895M
IMI PLC
07 May 2020
7 May 2020
IMI plc ("IMI" or "the Group")
Interim Management Statement and Coronavirus update
IMI, the specialist engineering company, issues the following
Interim Management Statement, which covers results for the first
quarter from 1 January to 31 March 2020.
Coronavirus update
Our highest priority remains the protection of our people, our
communities and our customers. Following our last update on 30
March, we can report a total of 26 confirmed cases of Coronavirus
across IMI. We are pleased to say that 12 have fully recovered and
14 are on the road to recovery.
Roy Twite, Chief Executive said "I would like to pay tribute to
the way IMI employees around the world have responded to the global
Coronavirus pandemic. Their commitment, collaboration and ingenuity
has been extraordinary and has further strengthened relationships,
both internal and external, across the globe. I have no doubt that
IMI will emerge an even stronger business as a result".
Given our 'Safety First' imperative, the strict adherence to
best practice, including social distancing and deep-cleaning
protocols deployed across the Group, will be continued as long as
they are needed to provide our employees with a safe workplace.
Business disruption, so far, has been reasonably modest, as a
result of our great operational teams around the globe. Across the
Group, we have over 90% plant availability, India being the only
territory where plants are closed, in line with government
instruction. Although our Italian facilities within IMI Critical
were impacted in April, they have all returned to production and so
we expect the backlog of product shipments to be addressed quickly.
Our facilities in China are currently operating at near normal
levels. Finally, supply chain disruptions have, so far, been minor
and managed. The few instances of parts shortages have been
addressed by alternative suppliers and contingency stocks. We
continue to work closely with our key customers to ensure
expectations are being met.
Current trading and outlook
Excluding the impact of acquisitions and exchange rate
movements, organic revenues for the three months to the end of
March were 5% lower when compared to the first quarter last year,
as expected. On an adjusted basis, revenues were 5% lower,
reflecting an exchange rate headwind partially offset by the
benefit of the PBM acquisition.
Profits, margins, and operating cash flow were all higher than
the same period in the prior year.
Overall orders for the Group in the first quarter were higher
versus 2019, supported by a temporary surge in orders within Life
Sciences as well as New Construction LNG in IMI Critical.
The Group's performance in April has experienced a more marked
impact from Coronavirus. In April organic sales were 9% lower than
the prior year, reflecting the steep decline in IMI Precision's
Commercial Vehicle segment and temporary construction site
restrictions affecting IMI Hydronic. We continue to accelerate our
cost reduction programs and now expect full year restructuring
benefits of GBP28m and a further GBP30m of other cost containment
initiatives.
Until sufficient time has passed to offer greater insight , we
refrain from offering guidance. However, we will continue to offer
updates as it becomes appropriate to do so , particularly should we
begin to see more clarity regarding the impact of Coronavirus on
the remainder of the year.
IMI Precision Engineering
IMI Precision organic revenues in the three months to the end of
March were 9% lower than the same period in 2019 and also 9% lower
on an adjusted basis.
As anticipated, the biggest driver of this reduction was within
the Commercial Vehicle segment, where sales to March were 23% lower
than the same period in the prior year. Since our last update,
industry expectations for heavy truck manufacturing have
deteriorated further. We continue to focus efforts on managing
costs in anticipation of that weakness whilst protecting
appropriate capacity for the recovery. Industrial Automation
revenue was 6% lower than the same period in 2019.
Sales in both Energy and Life Sciences were slightly higher than
the same period last year. Within Life Sciences, the sales of
ventilator components are making an important and growing
contribution. Our overwhelming priority is to assist manufacturers
in delivering this critical equipment to health facilities across
the world. In close coordination with our customers, we are
accelerating production as quickly and reliably as we can. Despite
the complexity involved, production rates for the most
sophisticated valves are already double historic levels, with work
continuing at pace to increase that output further.
In April, IMI Precision organic sales were 14% lower than in
April 2019, reflecting a further reduction in Commercial Vehicle
and Industrial Automation revenues, partially offset by higher
activity within our Life Sciences business.
IMI Critical Engineering
Overall, organic order intake was 10% ahead of the same period
last year. Good New Construction orders from LNG helped Oil &
Gas to be higher in the quarter. New Construction Power was also
higher, as the business secured a large concentrated solar order,
which offset lower coal activity. Aftermarket orders were lower in
most sectors in the quarter, partly impacted by rescheduled
customer maintenance outages and site access restrictions.
IMI Critical organic revenues in the three months to the end of
March were flat, and on an adjusted basis were 3% higher than the
same period last year due to the contribution of PBM, which more
than offset a currency headwind. The integration of PBM into IMI
Critical is progressing well, and despite the limitations brought
on by the pandemic, we are already seeing benefits across the Group
as the two organisations combine activities and leverage each
other's relationships.
The division continues its activities to transition into new,
more attractive growth markets, as well as its programmes to
address the structural changes within its markets. In light of
anticipated market weakness, the division now expects to accelerate
a number of activities into 2020, increasing its restructuring
charge from GBP10m to GBP15m in the year. Benefits are now
estimated at GBP8m, versus GBP5m previously.
In April, IMI Critical organic sales were 4% higher than in
April 2019, reflecting order phasing and some recovery as a result
of the reopening of our Italian facilities.
IMI Hydronic Engineering
IMI Hydronic revenues in the three months to the end of March
were flat on an organic basis and 1% lower on an adjusted basis,
when compared to the strong comparator in the first quarter of
2019.
Our expectation is for a marked reduction in demand in the
second quarter of this year, following the temporary closure of
construction sites across various territories in Europe. In areas
of lockdown, local installers are also finding it increasingly
difficult to gain access to premises and homes. In April, IMI
Hydronic organic sales were 17% lower than in April 2019.
The division is continuing its plans to consolidate
manufacturing and supply chain activities with Europe.
Financial position
During this period of uncertainty, we continue to maintain a
robust financial position. As at the end of April, the Group had
immediately available liquidity of GBP381m, comprising GBP30m of
available cash, GBP269m of undrawn committed bank facilities with
our six core relationship banks, and an additional GBP82m of
undrawn uncommitted facilities, resulting in net debt (including
lease liabilities) of GBP470m.
The Group's existing long-term debt, totalling GBP363m, was
raised through the US Private Placement market. This debt is at
fixed rates and, aside from GBP11m due in 2022, matures in 2025 and
beyond.
The financial covenants attached to our committed facilities are
that EBITDA should be no less than 4 times interest and net debt
should be no more than 3 times EBITDA. Those covenant ratios, at 31
December 2019, were 24.0 times and 1.2 times, respectively. Our
balance sheet position will be offered greater protection by the
actions we have taken over recent weeks to reduce costs and
preserve cash, including;
-- Suspension of the 2019 final dividend payment (GBP71m).
-- 20% salary reduction for the Board, Executive Committee and
members of our senior leadership team.
-- Continuing, successful initiatives in rationalisation,
value-pricing and material cost reduction.
-- Reduction in temporary workers, increase in short time
working, and tight controls on discretionary spending.
Exchange rates
The 2020 full year financial results will be impacted by
exchange rates which have fluctuated considerably in the first
months of the year. Should the average rates for the month of April
continue for the remainder of the year, results for both revenue
and profits in the full year would experience a limited currency
impact.
Interim results
IMI will issue its interim results announcement in respect of
the six months ending 30 June 2020 on 24 July 2020.
Enquiries to:
John Dean IMI Tel: +44 (0)121 717 3712
Gayden Metcalfe Teneo Tel: +44 (0)20 7420 3189
A conference call for analysts and investors will be held at
08:00 BST today to discuss this statement. To access the call,
please register using the link:
http://emea.directeventreg.com/registration/4928259
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, cleanly, efficiently and cost effectively. IMI employs
around 11,000 people, has manufacturing facilities in more than 20
countries and operates a global service network. The Company is
listed on the London Stock Exchange. Further information is
available at www.imiplc.com .
IMI plc is registered in England No. 714275. Its legal entity
identifier ('LEI') number is 2138002W9Q21PF751R30.
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END
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