IMI Plc Annual Report 2012 ENGINEERING ADVANTAGE
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ENGINEERING ADVANTAGE IMI plc Annual Report 2012 ENGINEERING ADVANTAGE CONTENTS BUSINESS OVERVIEW Results in brief 1 At-a-glance 2 Expanding our global activities 4 Our strategy 6 Differentiated flow control technologies 7 Leadership in chosen niches 8 Focusing on long-term global growth drivers 9 Our performance 10 GROUP OPERATING REVIEW Chairman and Chief Executive’s statement 12 Fluid Controls 16 Retail Dispense 19 Financial review 20 RESPONSIBLE BUSINESS The IMI Way 26 Our responsible business priorities 27 Community 29 Talent development and engagement 30 BOARD REPORTS Principal risks and uncertainties 32 Board of directors 34 Directors’ report 36 Chairman’s governance letter 40 The Board’s corporate governance report 41 Letter from the Chairman of the Remuneration Committee 48 Remuneration report 49 Statement of directors’ responsibilities 70 FINANCIAL STATEMENTS Independent auditor’s report (Group) 71 Consolidated income statement 72 Consolidated statement of comprehensive income 73 Consolidated balance sheet 74 Consolidated statement of changes in equity 75 Consolidated statement of cash flows 76 Notes to the financial statements 77 Independent auditor’s report (Company) 131 Company balance sheet 132 Company notes to the financial statements 133 Subsidiary undertakings 138 Five year summary 140 Shareholder information 142 General information 143 Index 144 Find out more about IMI For more information about us, visit our regularly updated website www.imiplc.com We have used the following icon through the report to help you navigate to further information. BUSINESS OVERVIEW IMI is a global engineering group focused on the precise control and movement of fluids in critical applications. It delivers innovative REVIEW OPERATING GROUP solutions, built around valves and actuators, custom engineered for leading international companies to help them respond to global trends such as climate change, resource scarcity, urbanisation and ageing populations. It has manufacturing facilities in more than 20 countries and a worldwide service network. IMI employs over 15,000 people, is listed on the London Stock Exchange and is a member of the FTSE100. Our goal is to become the world leading engineering company in each of the global niche markets we serve and to be admired for our RESPONSIBLE BUSINESS innovation, applications expertise and global service. Revenue Adjusted basic earnings per share2 £2,190m +3% 84.3p +3% 2011 £2,131m 2011 81.5p BOARD REPORTS BOARD Adjusted profit before tax1 Segmental operating margin £366.3m +1% 17.0% 2011 £363.4m 2011 17.5% Reported profit before tax Total dividend for year £317.0m +5% 32.5p +8% 2011 £301.4m 2011 30.0p FINANCIAL STATEMENTS 1 before exceptional items (restructuring costs, acquired intangible amortisation, financial instruments, net credit on special pension events, other acquisition-related costs) totalling £49.3m (2011: £62.0m) and including economic hedge contract gains and losses totalling £6.8m (2011: £4.1m) 2 before the after-tax cost of exceptional items totalling £37.4m (2011: £57.9m) IMI plc Annual Report 2012 1 ENGINEERING ADVANTAGE IMI AT-A-GLANCE IMI comprises five platform businesses with leadership positions in a number of well defined niche markets. Listed on the London Stock Exchange since 1966, IMI plc is the ultimate holding company of the Group and as at 31 December 2012, had a market value of £3.5bn and shareholders’ funds of £636m. The five businesses, which are described below, include a strong portfolio of brands which are leaders in their specialist fields. Segmental Segmental PLATFORM BUSINESSES revenue operating profit SEVERE SERVICE Highly engineered valvesGroup revenue and Severe Service Severe Service controls, used in critical applications and extreme operating environments,Group revenue enabling Severe Service Severe Service vital industrial and energy production processes to operate Operating profit Group revenue SeveFluidr ePower Service SeveFluid rPowere Service safely, cleanly and more efficiently. 31% £686m 26% £96.3m Operating profit FLUID POWER Specialists in motion Groupand revenue fluid SeveFluidr ePower Service SeveFluid rPowere Service control technologies, both pneumatic and electric,Operating profit Group revenue SeveFluidr ePower Service SeveFluid rPowere Service custom engineered for Indoor Climate Indoor Climate critical applications requiring precision, speed and Operating profit Fluid Power Fluid Power reliability. 33%Indoor £717m Climate 38%Indoor £142.3m Climate Operating profit Fluid Power Fluid Power INDOOR CLIMATE Experts in hydronic BeverageIndoor Climate Dispense BeverageIndoor Climate Dispense distribution systems and room temperature control which deliver optimal and energy BeverageIndoor Climate Dispense BeverageIndoor Climate Dispense efficient indoor climate systems. BeverageIndoor Climate Dispense BeverageIndoor Climate Dispense 14%Merchandising £293m 17%Merchandising £61.5m BEVERAGE DISPENSE Specialists in innovative MerchandisingBeverage Dispense MerchandisingBeverage Dispense beverage cooling and dispense solutions that Beverage Dispense Beverage Dispense contribute to increased sales Merchandising Merchandising and lower operating costs. 14%Merchandising £313m 12%Merchandising £45.0m Merchandising Merchandising MERCHANDISING Specialists in bespoke permanent point of sale merchandising solutions and technologies which improve retailer and brand owner profitability by driving impulse purchase. 8% £183m 7% £27.9m 2 Business overview BUSINESS OVERVIEW Group revenue Severe Service Severe Service Group segmental revenue Segmental operating profit The Company is headquartered in Birmingham, England. £2,192mGroup revenue £373.0mOperatingSevere Service profit Severe Service Its trading activitiesFluid Power are conducted throughFluid Power subsidiary companies that sit within the platform businesses. Retail Retail Dispense Dispense More than 15,000 employees provide innovative 22% 19% knowledge based engineering solutions for market Fluid Fluid leading customers worldwide. Controls Controls 78% 81% REVIEW OPERATING GROUP Segmental Segmental Operating Operating profit revenue operating profit margin Factfile Fluid Power Fluid Power Indoor £mClimate £m Indoor Climate % 686 Key brands CCI, BTG, IMI Nuclear, Orton, Truflo Rona, STI, Z&J, THJ, Remosa, InterAtiva 572 Main markets 452 Fossil power; nuclear power; liquefied natural gas (LNG); iron & steel; 88.9 96.3 petrochemical and refining. 78.4 Major operational locations 17.3 15.5 Belgium, Brazil, China, Czech Republic, Germany, Italy, Japan, South Korea, 14.0 Sweden, Switzerland, UK and USA. Indoor Climate Indoor Climate Employees 4,350 Beverage Dispense Beverage Dispense 10 11 12 10 11 12 10 11 12 767 717 RESPONSIBLE BUSINESS Key brands 685 150.5 Norgren, FAS, Kloehn, Herion, Buschjost, Maxseal 142.3 Main markets 113.7 Commercial vehicles; food and beverage; life sciences; rail; energy and industrial pneumatic applications. 19.6 19.8 Major operational locations 16.6 Brazil, China, Czech Republic, Germany, Mexico, BeverageSwitzerland, Dispense UK and USA.Beverage Dispense Merchandising Merchandising Employees 5,950 10 11 12 10 11 12 10 11 12 Key brands 310 TA Hydronics, Heimeier, Pneumatex, FDI 296 293 Main markets Water based heating; cooling systems for commercial buildings; and 70.3 68.2 61.5 temperature control for residential buildings. Merchandising Merchandising 23.8 22.0 21.0 Major operational locations REPORTS BOARD Germany, Poland, Sweden, Switzerland and USA. Employees 1,950 10 11 12 10 11 12 10 11 12 Key brands 315 317 313 Cornelius, 3Wire Main markets 45.0 Cooling for soft drinks, health and wellness drinks and alcoholic beverages; 41.1 and dispense and point of sale equipment for bars, restaurants and retail 32.0 13.0 14.4 outlets. 10.2 Major operational locations China, Germany, Mexico, UK and USA. Employees 2,250 10 11 12 10 11 12 10 11 12 FINANCIAL STATEMENTS Key brands 183 Artform, Cannon Equipment, DCI Marketing, Display Technologies* 169 169 Main markets Global brand owners and retail sales outlets. 25.4 27.9 Major operational locations 25.3 15.0 15.0 15.2 UK and USA. Employees 850 10 11 12 10 11 12 10 11 12 * with effect from 1 January 2013, the beverage activities of Display Technologies were transferred to Beverage Dispense. IMI plc Annual Report 2012 3 ENGINEERING ADVANTAGE EXPANDING OUR GLOBAL ACTIVITIES We are already a firmly established global organisation, working with leading international companies in Western over 50 countries. Our goal is to become the world leading engineering company in each of the global Europe Emerging niche markets we serve and to be admired for our innovation, applications expertise and global service. Markets We are accelerating our investments in sales and engineering to increase our exposure to the higher growth emerging markets. HIGHLIGHT IMI Company: InterAtiva Location: Brazil In 2012 IMI Severe Service expanded its presence in one of its key growth markets, Brazil, through the acquisition of InterAtiva. Founded in 1992, InterAtiva is based in Sorocaba and supports key accounts in Brazil (such as Petrobras) and a number of niche sectors including Petrochemical & Refining and Oil & Gas. InterAtiva is already working with other companies within IMI Severe Service including Orton, who together with InterAtiva resolved a critical valve issue for Anglo Gold Ashanti. Competitor valves were unable to withstand the harsh environment and 750°C temperatures within Anglo Gold Ashanti’s production process. Orton and InterAtiva together