IMI plc annual report 2012

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ENGINEERINGADVANTAGEOUR PERFORMANCEBusiness performance is measured against six elements of our strategy, through group-wide targetsand improvement measures.Each IMI business unit participates in an annual round of planning meetings with the Executive Committeeof the Board, during which performance and future plans for that business are reviewed and updated.These business plans are all aligned with the Group business strategy and include specific local, regionaland sector targets and Key Performance Indicators (KPIs). In addition, individual business reviews takeplace throughout the year on a regular basis enabling the Board to assess performance against tacticaland strategic milestones.N/A1055%1158%12Sweetspot convergenceOur strategy, which is described on page 6, is to increase the proportion of ourbusiness that sits in our ‘sweetspot’ of operation. For IMI this sweetspot is wherewe can deploy our differentiated fluid technologies in global market niches wherewe already have, or can aspire to, a leadership position and which benefit from aheightened exposure to the long-term mega-trends of climate change, resourcescarcity, urbanisation and an ageing population. We have set a long term objectiveto increase the percentage of our revenue which sits within this sweetspot to 75%.Having conducted a detailed bottom-up analysis of all of our operations we calculatethat in 2012 the sweetspot percentage was 58%. We will update shareholders onhow this percentage changes in future annual reports.6%105%113%12Organic revenue growthOrganic revenue growth excludes the impact of acquisitions, disposals and foreignexchange rate movements. The revenues from acquisitions are only included in thecurrent year for the period during which the revenues were also included in the priorperiod. In 2012, the Group’s revenue grew by 3% on an organic basis, reflectingmore challenging second half conditions in certain markets after the Group achievedorganic growth of 5% in the first half.17.5%16.7%10 1117.0%12Operating marginsOperating margins are defined as the ratio of segmental operating profit as apercentage of segmental revenues. IMI has a strong track record of improvingmargins over the last decade. In March 2011, we raised our long-term objectivefor operating margins to 20% for each of our Fluid Controls businesses whilstretaining a 15% target for each of our Retail Dispense businesses. In 2012, ourRetail Dispense businesses achieved a margin of 14.7% (2011: 13.7%) and theFluid Controls businesses achieved a margin of 17.7% (2011: 18.7%) mainlyreflecting the weaker performance in Severe Service. Overall, Group operatingmargins were 17.0% compared to 17.5% in 2011.10 Business overview
Economic value addedEconomic value added (EVA) is defined as the segmental operating profit (beforeexceptional items) after-tax less a capital charge. The capital charge is arrived atby applying the Group’s after-tax weighted average cost of capital of 8% to theaverage invested capital. Invested capital is net assets plus net debt, accumulatedacquired intangible amortisation previously written off, and the IAS19 pension deficit(net of deferred tax) and excluding exceptional items in the balance sheet (beingrestructuring provisions and net derivative liabilities). The 2012 EVA is £161.1m,which is a decrease of 1.5% over 2011 (£163.5m). The 2012 EVA has beencalculated on a different basis to previous years and prior year figures have thereforebeen restated. The major changes are in respect of the treatment of the accumulatedamortisation of acquired intangibles.Lost time accident ratesThe Group takes seriously its responsibility for the safety of all employees,contractors and visitors. In 2009 we set a target of reducing our lost time accident(LTA) rate to no more than 0.22 accidents per 100,000 hours worked. In 2012our three-day LTA rate was 0.11*, a 39% improvement compared to 0.18 in theprevious year and a performance well ahead of the target we set in 2009. As a resultof this encouraging performance, we have decided to report on two metrics, >3 dayLTAs and >1 day LTAs which will provide a more challenging target. Our new target isto achieve a 15% reduction on LTAs by the end of 2015.CO 2 emissionsOur CO 2 emissions in 2012 amounted to approximately 90,000 tonnes, a fall of2% on last year (2011: 92,000 tonnes). Normalised against hours worked, ourperformance improved to 3.1 CO 2 tonnes/1,000 hours worked* (2011: 3.3 CO 2tonnes/1,000 hours worked). This has mainly resulted from Project 20:20 whichbegan in 2011 and identified 20 best practice projects to implement across our top20 energy-using sites. This performance means that we have achieved our longerterm target to reduce this KPI to no more than 3.2 CO 2 tonnes/1,000 hours worked by2012. Given this good performance, we have set an ambitious new target to reduceour normalised CO 2 emissions by a further 7.5% to no more than 2.8 tonnes/1,000hours worked over the period 2012 to 2015. For this new target period we will beusing international CO 2 conversion factors which give a slightly lower normalisedfigure for 2012 of 3.0 tonnes/1,000 hours.* The 2012 figures exclude new subsidiaries acquired after the target baseline years. Including these newsubsidiaries, our gross and normalised CO2 figures for 2012 are 95,000 tonnes and 3.1 respectively and the LTArate is 0.16.£163.5m£129.4m10 110.250.1810 113.63.310 11£161.1m120.11123.112BUSINESS OVERVIEW GROUP OPERATING REVIEW RESPONSIBLE BUSINESS BOARD REPORTSFINANCIAL STATEMENTSIMI plc Annual Report 201211
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ENGINEERINGADVANTAGECOMPANY BALANCE
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IMI plcLakesideSolihull ParkwayBirm
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IMI plc annual report 2012

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