IMI Regulatory News (IMI)

8 November 2022

Strategic execution delivering sustainable, profitable growth

Full year EPS guidance increased to 103p - 106p

IMI, the specialist engineering company, issues the following Interim Management Statement which covers results for the third quarter from 1 July to 30 September 2022.

Roy Twite, Chief Executive, commented:

"Our unifying purpose-led strategy [Breakthrough Engineering for a better world] continues to underpin sustainable, profitable growth. We are creating value by increasing customer intimacy, driving market-led innovation and reducing complexity. These actions have allowed us to generate strong growth in the order book and revenues as well as improved margins year to date. Given the continued momentum in the business, based on current market conditions, we are upgrading our EPS guidance for the full year to 103p to 106p and remain confident in delivering our Group growth targets and operating margin target of 20% through the cycle over time."

Continued momentum in Q3

IMI has delivered another strong performance with its seventh consecutive quarter of organic growth. Third quarter Group organic revenue growth was up 4% compared to the same period last year and 10% higher on an adjusted basis.

Good momentum in our Growth Hub and Sprint Teams continues to drive growth and cultural alignment through the business. We now expect to deliver over £40m of orders from these projects in 2022.

Integration of our recent acquisitions is progressing well, delivering synergies in line with our business cases.

Our restructuring programmes remain on track to deliver £10m of benefits for the full year, £20m of benefits in 2023 and £20m in future years, with no changes to expected delivery costs.

We remain confident in delivering our Group growth targets and operating margin target of 20% through the cycle over time.

Divisional overview

IMI Precision's organic revenue growth was 3% in the third quarter and adjusted revenue growth was 16% versus the same period in 2021. Precision Fluid OEM delivered strong third quarter organic growth of 9%, with Industrial Automation and Transportation organic growth both 1%.

IMI Critical's order book at the end of the period was 11% higher than the same period last year, reflecting strong demand in LNG, Oil & Gas, and Power. Organic order intake in the period was up 21% on prior year, up 10% year to date, driven by continued strength in Aftermarket and improved Oil & Gas activity within New Construction. Aftermarket orders increased 24% in the period with strong growth in Refining & Petrochemical. IMI Critical organic revenue in the three months to the end of September was up 6% compared to the third quarter of 2021.

IMI Hydronic revenue in the third quarter was 3% higher on an organic basis, when compared to the third quarter of last year.

Heatmiser acquisition

IMI today announced the proposed acquisition of Heatmiser UK Ltd ("Heatmiser") for an enterprise value of £110m, with up to a further £8m based on Heatmiser's future financial performance. Heatmiser will become part of IMI Hydronic.

The proposed acquisition of Heatmiser is fully aligned with IMI's strategy and purpose of [Breakthrough Engineering for a better world] and represents an opportunity to accelerate our growth in smart buildings. Adjacent to IMI Hydronic's existing HVAC product offerings, Heatmiser will provide an attractive entry point into connected residential thermostatic control, a fast-growing market where Heatmiser is already a UK leader. There are significant opportunities to leverage IMI Hydronic's strong brand and market presence to scale Heatmiser's offering across Europe, as well as leverage Heatmiser's proven connected technology capabilities across existing and new IMI products.

In the financial year to December 2022, Heatmiser is expected to generate revenues of c.£22.5m. The headline enterprise value represents c.12x 2022 estimated adjusted EBITDA and is expected to deliver returns in line with IMI's strict acquisition criteria. Closing is expected before year end.

Exchange rates

If average exchange rates for October 2022 of US$1.13 and €1.15 remain constant for the remainder of the year, they would positively impact both revenue and adjusted operating profit by 4% in the 2022 full year when compared to 2021.

Outlook

Given the continued momentum in the business, based on current market conditions, we now expect 2022 full year adjusted EPS to be in the range of 103p to 106p.

We continue to expect IMI Precision and IMI Hydronic 2022 organic revenues to be higher than in 2021, with IMI Precision margins higher and IMI Hydronic margins slightly higher. We now expect that IMI Critical's 2022 adjusted revenue will be slightly higher than in 2021, with margins in line with 2021.

Net Debt / EBITDA is estimated to be around 1.8x at the year end.

Preliminary results

IMI looks forward to presenting its preliminary results announcement for the year ending 31 December 2022 on 3 March 2023.

Enquiries

A conference call for analysts and investors will be held at 08:30 GMT today to discuss this statement. To access the call, please register using the link:

https://www.netroadshow.com/events/login?show=07816f99&confId=43248

Notes

IMI plc, the specialist engineering company, designs, manufactures and services highly engineered products that control the precise movement of fluids. Its innovative technologies, built around valves and actuators, enable vital processes to operate safely, sustainably, cleanly, efficiently and cost effectively. IMI employs around 10,000 people, has manufacturing facilities in 19 countries and operates a global service network. The Company is listed on the London Stock Exchange and is a constituent of the FTSE4Good Index. Further information is available at www.imiplc.com.

References to adjusted figures reflect figures as reported to management and do not include the impact of adjusting items. References to organic changes are on a constant currency basis and exclude disposals and acquisitions.

IMI plc is registered in England No. 714275. Its legal entity identifier ('LEI') number is 2138002W9Q21PF751R30.