IMI plc annual report 2012

ENGINEERINGADVANTAGECHAIRMAN ANDCHIEF EXECUTIVE’S STATEMENT‘‘SUMMARY• Delivered a resilient setof results in 2012• Organic revenue growthof 3%• Full year dividendincreased by 8%• Strong balance sheetwith net debt of £144mA high level ofconfidence in thefuture prospects ofthe Group lead theBoard to recommendthat the final dividendbe increased by 9%to 20.7p.’’www.imiplc.com/investorsResults overviewIn 2012 IMI delivered organic revenuegrowth of 3%, operating margins of17%, strong cash conversion andadjusted earnings per share of 84.3p,up 3% over last year despite currencyheadwinds associated with a strongersterling.This was an encouraging performance,with growth from new products andemerging markets more than offsettingthe impact of weaker economicconditions in the second half; and goodunderlying progress on margins in anumber of areas reflecting continuedimprovements in the quality anddifferentiation of our products.Our Fluid Controls business recordedorganic revenue growth of 3%, withdouble digit revenue growth in SevereService offsetting second half weaknessin Fluid Power and a flat year in IndoorClimate. Margins for the Fluid Controlsbusinesses reduced from 18.7% to17.7%, impacted primarily by theshipment of a large backlog of lowermargin projects within Severe Servicesecured in earlier years. As indicatedin the Interim Results, prospects goingforward are much improved, withmargins in the Severe Service orderbook at the year-end notably higher than12 months ago. Margins in Fluid Powerand Indoor Climate reflected pleasingresilience in the face of weakerend-markets, supporting increasedinvestments in emerging markets and innew products which continue to improvetheir differentiated positions.Within Retail Dispense we made furthergood progress in improving theunderlying quality of the BeverageDispense and Merchandisingbusinesses, accelerating thedevelopment of new products at highermargins and exiting low margin orcommoditised product lines. As a result,operating margins for the RetailDispense businesses increased to14.7% from 13.7% last year. Overallrevenues increased 2% on an organicbasis, despite a number of low marginproduct exits, pointing to a reasonablyhealthy level of underlying demand.Contributions from our two acquisitionsduring the year, Remosa and InterAtiva,were encouraging, with both businessesrecording an improvement in marginsand both providing scope forconsiderable growth over the comingyears.These results together with a strongperformance on cash conversion anda high level of confidence in the futureprospects of the Group lead the Boardto recommend that the final dividend beincreased by 9% to 20.7p. This makesa total dividend for the year of 32.5p,an increase of 8% over last year’s 30.0p.Accelerating our strategic plansOver the last few years we havedeveloped a very detailed understandingof the end-market niches that offerthe greatest scope for IMI in terms ofgrowth, margins and long-term resilience– our so-called ‘sweetspot’ of operation.12 Group operating review