IMI plc

Good morning everybody and welcome to IMI's 2025 interim results presentation. I am joined here as usual, but sadly for the last time by Dan Shook. I'd also like to extend a very warm welcome to Luke Grant, who many of you already know and is joining the presentation for the very first time. This slide covers the key messages in the presentation, and the first thing to say is that it was another good performance in the first half. We delivered 2% organic sales growth and 5% organic adjusted operating product growth. Adjusted operating margins were up another 30 basis points, and we delivered an outstanding £64 million of orders through our innovative growth hub. And I would like to express a personal thank you to everyone across IMI for their hard work and dedication during the first half. To deliver this performance amid the market uncertainty and to recover so quickly from the cyber incident reflects a tremendous effort from all of our people. I'm also pleased to report that the £200 million share buyback announced in February is now complete. and that we are once again raising the interim dividend by 10%, reflecting the continued confidence that we have in the business. With the completion of the buyback, we have now returned over £1 billion to shareholders since the start of 2019. The strategic review of transport is progressing. Our sector team is developing a detailed plan to accelerate improved financial returns and we continue to assess all strategic options. There is strong momentum in IMI heading into the second half, underpinned by a record order book in process automation, continued strong demand in climate, and improving trends and catch-up shipments in industrial automation, as well as supportive order books in both transport and life sciences and fluid control. I'm therefore pleased to reconfirm our guidance for 2025. We are on track to deliver our fourth consecutive year of mid-single-digit organic revenue growth, and we continue to expect that full-year adjusted basic earnings per share will be between 129 pence and 136 pence. With that, I'm going to hand over to Dan to talk through the first half results in more detail.

Thanks, Roy, and good morning, everyone. I'm pleased to be able to take you through our first half results today one more time. Here we go. As Roy mentioned, another good performance in the first half. Revenue increased by 2% organically, adjusted operating profit was up 5%, and our adjusted operating margin increased another 30 basis points. Adjusted basic EPS was 3% higher than the prior period as adverse currency and tax rate movements were offset by the reduction in outstanding shares. Operating cash conversion was very strong, and we are pleased to be increasing our proposed interim dividend by another 10%. So firstly, some more detail around our revenue and profit performance. We delivered 2% organic revenue growth, but due largely to a weaker U.S. dollar, our statutory revenue was slightly lower. Adjusted operating profit increased to 198 million pounds. Organic profits increased by 5%, which was again offset by FX. Looking at the income statement, as mentioned, we saw good growth in revenue and operating profit in the year. The net interest charge was broadly in line with last year at 8.6 million pounds, despite the share buyback, and the adjusted tax rate increased from around 24% to roughly 25%, in line with our guidance for the full year. Now, as I'm sure you are aware, IMI was subject to a very serious cyber attack in the first quarter. Thanks to the incredible efforts of our people, supported by industry experts, we were able to limit the impact to temporary operational disruption. The second quarter organic revenue growth of 6% reflects the catch-up on sales that we expect to complete in H2. As expected, we have recognized a one-off exceptional charge of $25.4 million in the first half. That covers IT system recovery, risk management, upgraded IT infrastructure, and advisory costs. Now, looking at the performance of the platforms and sectors, which was very much in line with our expectations. Starting with automation, automation delivered good growth with revenue up 3% organically and margins in line with the prior period at 18.4%. Process automation had an excellent first half, delivering strong order intake as shown at the bottom of the slide. Adjusting for the one-off multi-boat marine order last year, Orders were up 7% organically, with particular strength in power and nuclear. We made further progress in the high-margin aftermarket where organic orders were 10% higher than last year. Organic revenue was 8% higher than the prior period, and the order book was up another 5%. Industrial automation organic revenue was 4% lower than the same period in the prior year, reflecting the one-off impact from the cyber incident and softer industrial activity in Europe and the Americas. The business is rebuilding momentum. It was flat organically in Q2 and will benefit in the second half from further catch-up of shipments impacted by the cyber incident. And turning to life technology, as expected, organic revenue was 1% lower than the prior year. However, margins improved by 80 basis points to 17.8%, supported by the final benefits from our footprint optimization initiatives. Climate control delivered another strong performance in the first half, as we saw continued demand for our products that reduce energy consumption in buildings. including the benefit from our growing portfolio of smart, connected products. Organic revenue was 5% higher than the prior year period. Life science and fluid control organic revenue was 5% lower than the prior period. Now, the life science sales were only slightly down in the first half, with good order intake, with a book to bill in H1 was 1.1 times. The fluid control sales were more impacted by the cyber incident, but it is recovering well and also has a strong order book heading into the second half. Transport revenue was down 9% organically in the first half. This was in line with expectation given the 13% organic growth delivered in the first half of 2024. So continuing to cash flow, our adjusted operating cash flow was 21% higher than the prior period, supported by the strong profit performance and good working capital management. Inventory levels rose in the first half, but this is due to our normal seasonality plus investment to support the process automation order book growth. The inventory position reduced by 21 million versus the same point last year, despite the process automation order book increasing by over 45 million pounds. We are actively managing the position to ensure we reduce stocks in the second half while maintaining customer service levels. Free cash flow was lower than the prior period, largely due to the one-off exceptional costs associated with the cyber incident and a £26 million loan we have made to our UK pension scheme to support the final wind-up process. The loan is providing flexibility to the scheme as it manages its remaining illiquid investments. We expect it to be partially repaid in the second half. Now, when I joined IMI in 2015, our UK scheme had roughly £1.3 billion in liabilities. So to now be in the final wind-up stage is really great, and it reflects a tremendous effort from our team over the last 10 years. Our net debt has increased from £548 million at the beginning of the year to £738 million at the half-year. This principally reflects the successful execution of our $200 million share buyback and the $54 million dividend payment. Net debt to trailing 12-month EBITDA was 1.4 times, which continues to give us the capacity to invest in both organic and inorganic growth opportunities. So with that, let me hand over to Luke, who will be covering the outlook today. Thanks everyone.

Thanks Dan. As Roy mentioned, with the completion of our 200 million share buyback, I'm very pleased to report that we have now returned over 1 billion to shareholders since the start of 2019. This has been supported by significant improvements in our free cash flow and you can see on the slide that we see a clear pathway to delivering further improvements. We expect to deliver over one billion of free cash flow over the next three years, supported by further growth and the normalisation of working capital. We have an extremely disciplined approach to deploying this capital, prioritising investments in our people, processes and operations that accelerate organic growth. We will also pursue bolt-on acquisitions that enhance our position in attractive long-term growth markets and that deliver results in line with our strict financial criteria. maintaining a progressive dividend and we will look to return capital to shareholders should leverage fall sustainably below a one to two times net debt to EBITDA target range. At the end of the first half, net debt to EBITDA was 1.4 times towards the midpoint of that range. We are on track to deliver our fourth consecutive year of mid single digit organic growth in 2025. We continue to expect that full year adjusted basic EPS will be between £129 and £136. Our guidance assumes that the full year adjusted operating margin will be around 20% and that our interest charge will be slightly higher than our previous guidance. The tax rate is still expected to increase to around 25%, and we expect that the weighted average number of shares will reduce to $249 million at the year end. Exchange rates have been volatile in recent weeks, but as things stand, we see a 1.5% headwind to profits in the full year. We'll be keeping a close eye on how this develops in the second half. With that, I'm going to hand over to Roy, who will talk you through the strategy update.