2018 Interim Results · IMI plc 2018 Interim Results IMI Critical Engineering Outlook In the second half, organic revenues are expected to show modest improvement when compared to

1

IMI plc2018 Interim Results

2

IMI plc 2018 Interim Results

Agenda

► Highlights Mark Selway – Chief Executive

► Financial review Daniel Shook – Finance Director

► Operational review Mark Selway – Chief Executive

► Q&A IMI Executive Team

3


Highlights

► Organic revenue 6% higher► Organic operating profit 13% higher► Statutory operating profit 7% higher► Adjusted basic EPS increased 16%► Proposed 3% increase in interim dividend► Bimba integration proceeding well

1. On an organic constant currency basis (OCC)2. Excluding adjusting items

Revenue

£915m Up 6% 1

Segmental operating profit

£120.0m Up 13%1

Segmental operating margin

13.1% Up 60 bps

Operating cash flow2

£68m Down 21%

Adjusted earnings per share

32.9p Up 16%

Dividend per share

14.6p Up 3%

4

Financial reviewDaniel Shook – Finance Director

5


£m

RevenueIMI Critical Engineering 319 319 4% 6% 308 (6) (2) 300 IMI Precision Engineering 449 (40) 409 16% 8% 388 (10) 378 IMI Hydronic Engineering 147 147 -2% -1% 150 (1) 149 Total 915 (40) 875 8% 6% 846 (17) (2) 827

Segmental operating profitIMI Critical Engineering 36.0 36.0 5% 7% 34.4 (1.1) 0.4 33.7 IMI Precision Engineering 75.0 (4.2) 70.8 23% 19% 61.2 (1.8) 59.4 IMI Hydronic Engineering 22.2 22.2 -7% -3% 23.9 (1.0) 22.9 Corporate costs (13.2) (13.2) (13.4) (13.4)Total 120.0 (4.2) 115.8 13% 13% 106.1 (3.9) 0.4 102.6

Segmental operating profit margin (%) 13.1% 13.2% 12.5% 12.4%

6 months to 30 June 2018 6 months to 30 June 2017

AdjustedAdjusted

growth (%)

Organic growth

(%)Adjusted Foreign

exchangeAcquisitions/

Disposals OrganicOrganicAcquisitions/Disposals

Organic revenue and operating profit

6


Income statement

► Net interest expense lower► Restructuring costs of £5m

lower by £9m► Continued de-risking of pension

schemes realises £4m of gains► Acquired intangible amortisation

increases due to Bimba

£m 2018 2017

Adjusted segmental operating profit 120.0 106.1 Restructuring costs (0.3) (1.3)Net interest expense (5.9) (6.6)Net pension finance expense (0.7) (0.7)Adjusted Profit Before Tax 113.1 97.5 IFRS 9 adjustment (2.6) 3.8 Restructuring costs - adjusting item (4.5) (13.8)Gain on disposal of subsidiaries 0.6 -Gains on special pension events 3.8 10.7 Acquired intangible amortisation/other (17.5) (9.6)Profit before tax 92.9 88.6 Taxation (18.7) (14.8)Total profit for the period 74.2 73.8

7


Operating cash flow

► Increased inventory to support Precision Engineering market growth

► Creditor movement reflects £15m lower advanced payments in Critical Engineering

► Capital expenditure of £23m represents 0.9x depreciation and amortisation

£m 2018 2017

EBITDA (from continuing operations) 146 129

Inventory (38) (21) Debtors (15) (13) Creditors (7) 14 Working capital (60) (20)

Capital expenditure (23) (27)Provisions and employee benefits (1) (1)Asset sales/other 6 5 Adjusted Operating cash flow 68 86

8


Net cash flow

► Adjusting items include £9m of restructuring spend, primarily in Critical Engineering

► Bimba acquired debt free for £138m

► Net debt includes adverse currency translation impact of £9m

£m 2018 2017Adjusted Operating cash flow 68 86 Adjusting items (13) (13)Statutory Operating cash flow 55 73 Interest (6) (6)Derivatives (3) (24)Tax paid (19) (20)Cash generation 27 23 Acquisitions (138) -Dividend (68) (67)Employee trust (purchases)/issues (3) 1 Special pension contributions/other (4) (2)Net cash flow (186) (45)

Opening net debt (265) (283)Cash/ acquired 1 -Foreign exchange (9) 9 Closing net debt (459) (318)

9


Balance sheet

► Net debt of £459m includes £138m acquisition of Bimbaand £68m dividend payment

► Weighted average debt maturity of 4.9 years, 90% at fixed rates

► Net Debt / EBITDA expected to reduce to around 1.2x by year end

Jun Dec Jun£m 2018 2017 2017

Shareholders' funds 620 607 581 Net debt 459 265 318 Gearing 74% 44% 55%

EBITDA* 146 288 129 Interest costs (excluding IAS19) 5.9 14.3 6.6

Net debt / EBITDA* 1.5x 0.9x 1.1xEBITDA* / interest 25x 20x 20x

* Before adjusting items

10

Operational ReviewMark Selway - Chief Executive

11

IMI plc 2018 Interim ResultsIMI plc 2018 Interim Results

IMI Critical Engineering

12


12%

17%

60%

5%6%

Western EuropeNorth AmericaEmerging MarketsUKRoW

*Organic basis

IMI Critical EngineeringOperational review

Revenue

£319mOperating profit

£36.0mOperating margin %

11.3%Number of employees

3,300

Controlvalves

Butterflyvalves

Actuation

Ballvalves

Slidevalves

FCCvalves

Order input H1 2018

£297mAftermarket

£164mOil & Gas

£54mPower

£36mPetrochemical

£17mNuclear Power

£3mOther

£23m

Performance in H1 2018

Revenue split by geography► Value Engineering delivers £78m

new orders► Order book margins 3.1% higher

than 30 June 2017► Restructuring benefits of £6m► Order input to significantly increase

in H2

Up 3%*

Down 10%*

Down 66%*

Down 74%*

Up 23%*

Up 5%

£m H1 2018

FX Disp Organic H1 2017

Revenue 319 (6) (2) 19 308

Organic growth % +6%

Operating profit 36.0 (1.1) 0.4 2.3 34.4

Operating margin % 11.3 11.2

Down 14%*

Up 10bps

Up 4% Down 12%*

Input by sector

13


IMI Critical EngineeringCreating tangible value

From tactical tool to ingrained discipline contributing c.50% of New Construction wins.

73% Divisional Lean score, up 49 points from first assessment.

1. Geographic footprintfor growth

Repositioning has placed the business at the centre of future markets.

People increased by 15% in the East

People decreased by 16% in the West

3. Value Engineeringnow fully integrated

2. Rationalisation deliveringtangible benefits

4. Lean improvingcompetitive advantage

Rationalisation has generated c.£58m of annualised benefit, with £6m delivered in 2018 H1.

H1 2016 H1 2017 H1 2018

£40m(25%)

£69m(38%)

£78m(60%)

VAVE (% Proportion of NC Orders)

2014 2015 2016 2017 2018 H1

Cum

ulat

ive

bene

fit £

m

24%

50%62%

68%73%

0%10%20%30%40%50%60%70%80%

First H1 2015 H1 2016 H1 2017 H1 2018

£58.4m

£20m

£40m

£60m

£80m

£100m

14


IMI Critical EngineeringOutlook

► In the second half, organic revenues are expected to show modest improvement when compared to the second half of 2017.

► The benefits of restructuring and phasing of the order backlog will deliver improved profits and margins in the second half of the year.

15


IMI Precision Engineering

16


39%

32%

19%

6%

4%

Western EuropeNorth AmericaEmerging MarketsUKRoW *Organic basis

Industrial Automation

£257mCommercial Vehicle

£98mEnergy

£36mLife Sciences

£37mRail

£21m

Pneumatic valves

Fluid control valves

Pneumatic actuators

Air preparation

Product Photo

Product Photo

Product Photo

Product Photo

Product PhotoPneumatic fittings

Electric actuators

Pinch Valves

Vacuum products

IMI Precision EngineeringOperational review

► Industrial Automation up 6%, good progress in North America & Asia

► Commercial Vehicle related sales up 9%, good market globally

► Strong H1 performance in Energy, Life Sciences and Rail

► Bimba integration on-track; planning in final stages

Up 6%*

Up 9%*

Up 12%*

Up 19%*

Revenue




6,000

Up 16%

Up 23%

Performance in H1 2018£m H1 2018

FX Organic Acq. H1 2017

Revenue 449 (10) 31 40 388

Organic growth % +8%

Operating profit 75.0 (1.8) 11.4 4.2 61.2

Operating margin %

16.7 15.8

Revenue split by geography Up 13%*Up 90bps

Sales by sector

17


IMI Precision EngineeringCreating tangible value

1. Growth across allmajor verticals

3. Low cost manufacturing plants

2. New Product Development


Healthy growth across all markets. 33 new products in pipeline with process well established.

Making further progress towards world-class, with some plants already there.

Low cost plants also give local access. New India Plant opens 2018 H2.

Industrial Automation

Commercial Vehicles

Energy

Life Sciences

Rail 2018 H1Up 19%

Up 12%

Up 13%

Up 9%

Up 6%

Verticalslead

Engineeringlead

Sales & Marketinglead

Mexico

Czech Republic

India

China

33%

53%62%

67%72%

0%10%20%30%40%50%60%70%80%

First H1 2015 H1 2016 H1 2017 H1 2018

£21m

£37m

£36m

£98m

£257m

Sales & Marketinglead

18


Bimba integrationOn track

► Bimba contributed £40m of sales and £4m of operating profit to Precision’s half year results in its maiden five months

► We remain confident that the synergy benefits are in line with acquisition assumptions

Extends product range, no overlap

Doubles presence in Industrial Automation in North America

✓✓

+

MassachusettsPennsylvania

Brookville

ChicagoMinneapolis

SeattleLittleton

Las VegasConcord, CA

Tijuana, Mex

Queretaro, Mex

19


IMI Precision EngineeringOutlook

► On an organic basis, revenues, profits and margins are expected to improve when compared with the second half of 2017.

► Full year revenue growth is expected to be good although slightly lower than that achieved in the first half, reflecting the comparatively stronger second half of last year. Full year margins are expected to be slightly ahead of last year.

20


IMI Hydronic Engineering

21


► Repositioning of the business progressing well

► Q2 revenues substantially recovered 4% decline in Q1

► 22% of revenues delivered by new products

► On-track for a marked improvement in H2

71%

7%

18%

3% 1%

Western EuropeNorth AmericaEmerging MarketsUKRoW *Organic basis

IMI Hydronic EngineeringOperational review

Revenue




1,800

TA

£73mHeimeier

£46mPneumatex

£19mOther

£9m

Up 3%*

Down 7%*

Up 4%*

Down 6%*

Down 7%

£m H1 2018

FX Organic H1 2017

Revenue 147 (1) (2) 150

Organic growth % -1%

Operating profit 22.2 (1.0) (0.7) 23.9

Operating margin % 15.1% 15.9%

Manualbalancing

ControlValves &Actuators

ThermostaticControls

Pressurization& Water Quality

Performance in H1 2018

Revenue split by geography

Down 80bps

Down 2%

Sales by business unit

22


IMI Hydronic EngineeringCreating tangible value


Operations continue to improve, from a very strong base.

New Product Development continues to be an important driver.3. New Product

Development

TA-Modulator & TA Slider Eclipse & Halo Compresso & Zeparo

2. Reducing complexity Renewed focus on profitability reveals further opportunities to sharpen focus.

Sales (£m)

Operating margin (£m)

Top 6 markets: 67% profit

Input cost inflation to be substantially recovered to protect margins.

1. Economic recoveries

____________________Source: Bloomberg as at 20 July 2018. Copper 200-Day moving average

USD/lb

$3.11+40.0%

2.02.22.42.62.83.03.2

Copper price

37%

65%73% 77% 79%

0%

20%

40%

60%

80%

100%

First H1 2015 H1 2016 H1 2017 H1 2018

23


IMI Hydronic EngineeringOutlook

► In the second half, on an organic basis, we expect our self-help initiatives to deliver significantly improved profits from modestly higher revenues, when compared to the same period in 2017.

24


IMI plc summary

Group revenues, profits and margins were ahead of 2017 H1.

Critical Engineering delivered good financial progress, despite continued tough markets. Value Engineering contributing hugely to competitiveness and win rate.

Precision Engineering enjoying good markets and delivered growth in revenue, profit and margins. Bimba contribution and opportunity on track.

Hydronic Engineering successfully undertook commercial, operational and restructuring actions necessary to deliver significant improvement in 2018 H2.

✓✓

✓

✓

25


Group outlook► The trading outlook for the Group remains positive and in the second half of

2018 we expect organic revenue and profits to show good improvement compared to the same period in 2017. The improved results will be supported by market growth in Precision Engineering, rationalisation benefits in Critical Engineering and a stronger performance from Hydronic Engineering.

► Based on current market conditions, we anticipate full year 2018 results will be slightly ahead of current market expectations.

26

Q&A

27

Appendices

28


Pensions

► UK scheme remains in surplus while we continue to de-risk the position

► Proactive management of schemes in Switzerland

Jun Dec Jun£m 2018 2017 2017

Total Position: Liabilities (1,012) (1,080) (1,136) Assets 962 1,002 1,075 Deficit (50) (78) (61)

UK Schemes: Liabilities (856) (917) (966) Assets 884 918 984 Surplus 28 1 18

Overseas Schemes: Liabilities (156) (163) (170) Assets 78 84 91 Deficit (78) (79) (79)

29


Foreign exchange

H1 2018 H1 2017 Change

Average ratesEuro 1.14 1.16 2%US dollar 1.37 1.26 -9%

June2018

Dec2017 Change

Closing ratesEuro 1.13 1.13 0%US dollar 1.32 1.35 2%

Year over year impact Revenue -2%Operating Profit -4%

Projection for FY2018*: Revenue -2%Operating Profit -2%

Sensitivity to +/- 1 cent move in: Revenue Operating Profit

Euro +/- £7.3m +/- £1.1m

US dollar +/- £3.3m +/- £0.6m

*Compares the impact of projecting 16 July 2018 average exchange rates (US$1.32 and €1.13) for the full year and applying to our 2017 results.

Ready reckoner for translation impact of movement in FX rates on 2018 FY performance

This document 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 statement. 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.

Documents

2018 Interim Results · IMI plc 2018 Interim Results IMI Critical Engineering Outlook In the second half, organic revenues are expected to show modest improvement when compared to