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Share Name Share Symbol Market Type Share ISIN Share Description
Imi Plc LSE:IMI London Ordinary Share GB00BGLP8L22 ORD 28 4/7P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  17.50 1.78% 1,000.00 1,004.00 1,006.00 1,012.00 988.50 1,006.00 836,969 16:35:00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Industrial Engineering 1,873.0 189.3 57.6 17.4 2,722

IMI PLC Annual Financial Report

31/03/2020 4:45pm

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TIDMIMI

RNS Number : 2969I

IMI PLC

31 March 2020

31 March 2020

Annual Financial Report of IMI plc (LEI: 2138002W9Q21PF751R30)

IMI plc (the "Company") announces that copies of the Annual Report and Accounts for the year ended 31 December 2019 are available on the Company's website www.imiplc.com and may be viewed and downloaded online at www.imiplc.com/investors (click on Annual Reports). The Notice of Annual General Meeting for 2020 will be available from 2 April 2020 on the Company's website as outlined above.

Hard copy documents will be posted to shareholders who have elected to receive them and are also available from the Company Secretary at the Company's registered office at Lakeside, Solihull Parkway, Birmingham Business Park, Birmingham, B37 7XZ.

Copies of the above documents, together with the form of proxy for the 2020 Annual General Meeting will be submitted to the National Storage Mechanism and will shortly be available for inspection at: www.morningstar.co.uk/uk/nsm on 2 April 2020.

The Company's 2020 Annual General Meeting will be held at the Crowne Plaza Hotel, Pendigo Way, Marston Green, Birmingham on Thursday 7 May 2020, commencing at 10am.

The Company's preliminary results announcement of 28 February 2020 contained a management report as well as the audited financial statements which were prepared in accordance with the applicable accounting standards. The Annual Report and Accounts submitted to the National Storage Mechanism today also contains information regarding the Company's principal risks and uncertainties and a responsibility statement relating to the content of the Annual Report and Accounts (from the Directors in office as at 27 February 2020); an extract of this information is provided below as required under paragraph 6.3.5 of the DTR, however this material should be read in conjunction with and is not a substitute for reading the preliminary results announcement of 28 February 2020.

This announcement should be read in conjunction with and is not a substitute for reading the full Annual Report and Accounts.

There are no related party transactions requiring disclosure.

Page and note references in the text below refer to page numbers and notes in the Annual Report and Accounts.

Statement of Directors' Responsibilities

The following statement is repeated here solely for the purpose of complying with DTR 6.3.5. This statement relates to and is extracted from page 101 of the Annual Report and Accounts and is signed by order of the Board by John O'Shea, Company Secretary. Responsibility is for the full Annual Report and Accounts and not the extracted information presented in this announcement or the preliminary results announcement.

Directors' responsibility statement under the Disclosure and Transparency Rules

Each of the directors, as at the date of this report, confirms that:

-- the Group and parent company financial statements in this Annual Report, which have been prepared in accordance with applicable UK law and with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

-- the Annual Report (which includes the Directors' Report and the Strategic Report) includes a fair review of the development and performance of the business and the position of the Company and the Group taken as a whole, together with a description of the principal risks and uncertainties that they face.

Our risk management framework

The Board has overall responsibility for ensuring that we manage our risk exposure appropriately to achieve our strategic objectives and build sustainable shareholder value. This involves assessment of principal risks and emerging risks

The Board determines our risk appetite and monitors and reviews the risk management processes we operate. The Board delegates responsibility for implementing and monitoring internal controls and other elements of risk management to the Chief Executive and the Executive Committee. The Board has also tasked its committees with responsibility for key areas of risk, as follows:

>> oversight of financial reporting, internal financial controls and assurance processes - the Audit Committee;

   >>   talent and succession risk - the Nominations Committee; and 
   >>   remuneration and incentive structure risk - the Remuneration Committee 

Our risk appetite

In determining the nature and level of risk we are prepared to accept to achieve our strategic objectives, the Board takes into account a number of factors including our strategic opportunities, the risks that could affect our business and our ability to mitigate their impact. During the year we updated our risk appetite ratings as follows:

 
 Risk appetite                  Definition 
  rating 
-----------------------------  ----------------------------------------------------- 
                   Very         No/very low tolerance to risk, regardless of the 
                    Prudent      cost of the required controls. 
-----------------------------  ----------------------------------------------------- 
                   Prudent      A low risk approach via sufficient and proportional 
                                 controls and mitigation, in the knowledge this 
                                 will limit any potential reward. 
-----------------------------  ----------------------------------------------------- 
                   Balanced     Applied in circumstances where there is a high 
                                 chance of success, equal consideration is given 
                                 to the achievement of strategic objectives and 
                                 potential negative risk impact. 
                                 Risk reduction not carried out in instances of 
                                 disproportional cost. 
-----------------------------  ----------------------------------------------------- 
                   Receptive    Elevated levels of risk accepted in the case of 
                                 opportunities that offer improved returns. 
-----------------------------  ----------------------------------------------------- 
                   Very         High levels of risk accepted in the case of unproven 
                    receptive    or new projects that offer significant returns 
                                 or growth potential. 
-----------------------------  ----------------------------------------------------- 
 

How we approach risk management

Across the Group we operate a "top-down, bottom-up approach" to risk management which is illustrated in the graphic below. This approach allows the Board and the Executive Committee to actively assess strategic risks and monitor the measures used to mitigate, transfer or avoid such risks. It also ensures that operational risks are identified and managed at multiple levels and that key risk information is communicated effectively across the Group.

Our risk management process is embedded in all our businesses and is a core element of our strategy review and monthly operational meetings. It provides guidance in relation to the identification, evaluation and management of risks, including emerging risks, which could impact our performance and our ability to implement our strategy.

 
 Strategic risk management                             Operational risk management process 
  process 
---------------------------------------  -----------  --------------------------------------- 
 >> Determines risk appetite.             Board        >> Reviews bi-annually a detailed 
  >> Reviews principal risks.                           analysis of the Group's risk profile 
  >> Monitors and reviews risk                          including supporting divisional 
  management processes.                                 data and the actions undertaken. 
                                                        >> Reviews annually the effectiveness 
                                                        of the Group's internal controls. 
---------------------------------------  -----------  --------------------------------------- 
 >> Responsible for ensuring              Divisional   >> Develops bi-annually a detailed 
  risk management culture is               and Group    Group and divisional risk profile 
  integrated across their division         Executive    which is based on information 
  and aligned to the Group's                            uploaded to the Group intranet 
  objectives.                                           by each manufacturing operation. 
  >> Determines principal risks                         This profile analyses each division's 
  and mitigation strategies.                            most significant risks and outlines 
  >> Monitors changes in the                            mitigation strategies. 
  risk profile.                                         >> Horizon scans for new emerging 
  >> Monitors quality and effectiveness                 risks using a number of mechanisms 
  of business level risk management                     including divisional strategic 
  processes.                                            and monthly reviews and market, 
                                                        competitor and product developments. 
                                                        >> Publish risk profiles for each 
                                                        manufacturing operation to the 
                                                        Group intranet either once or 
                                                        twice a year depending on the 
                                                        operation's risk profile. 
---------------------------------------  -----------  --------------------------------------- 
 >> Operates and monitors an              Operating    >> Maintains an up-to-date risk 
  active and effective risk                companies    profile which identifies the key 
  management process.                                   risks facing the business, assesses 
  >> Operates reporting systems                         mitigating processes and controls, 
  that increase management ownership                    operates key performance indicators 
  and accountability.                                   to validate the effectiveness 
                                                        of those controls and identifies 
                                                        areas for improvement. 
                                                        >> Provides monthly updates on 
                                                        key risks, mitigation and controls 
                                                        through incorporation of risk 
                                                        profile data in monthly management 
                                                        reporting process. 
---------------------------------------  -----------  --------------------------------------- 
 

Our principal risks

The principal risks facing the Group are shown in order of priority in the table below. This analysis covers how each risk could impact our strategy, our risk appetite to the particular risk, how our assessment has changed during 2019 and explains what we are doing to monitor and mitigate each risk area.

 
 Risk, link to strategy             Change                         Risk mitigation including specific 
  and risk appetite                                                 2019 actions 
---------------------------------  -----------------------------  ----------------------------------------- 
 1. Global economic                 Increased                      Our divisions ensure their 
  or political uncertainty           IMI Critical continues         forecasting processes provide, 
  The Group operates                 to face highly                 whenever possible, early indications 
  in diverse global markets          competitive markets            of reduced customer demand 
  and demand for our                 and a continued                to allow proactive management 
  products is dependent              slow-down in the               of plant output. 
  on economic and sector-specific    new construction               We have managed the economic 
  environments. A downturn           fossil power sector.           instability during the year 
  in the global or a                 Whilst still in                through restructuring programmes 
  regional economy, brought          a strong position,             and footprint changes. IMI 
  on by economic cycles,             IMI Precision has              Precision is engaged in a significant 
  political instability,             also seen a decline            cost restructuring programme. 
  health or environmental            in markets, particularly       IMI Critical is continuing 
  emergencies, could                 industrial automation          to right-size its business 
  impact end market demand           and predominately              and reduce administrative and 
  and as a result negatively         in its largest                 manufacturing overheads. The 
  impact revenue and                 European market.               division has also introduced 
  our ability to deliver             IMI Hydronic has               a flatter regional management 
  our strategy and achieve           seen some growth               structure which will enable 
  market expectations.               opportunities but              it to be more efficient and 
  Link to strategy                   is operating in                agile. 
  Growth acceleration                relatively flat                While IMI Hydronic's markets 
  Commercial excellence              markets.                       are less sensitive to global 
  Risk appetite                      Health or climate              macro-economic factors, the 
  Balanced                           emergencies can                division is continuing to challenge 
                                     impact regional                its cost structure and grow 
                                     or global economic             market share through commercial 
                                     demand and disrupt             and technology partnerships 
                                     supply and delivery            and by focusing on faster growth 
                                     chains.                        adjacent markets (for example 
                                     Although the UK                radiant heating and control/actuation). 
                                     formally exited                We maintain a balanced portfolio 
                                     the EU in January,             operating across a range of 
                                     uncertainty remains            markets, sectors and geographies 
                                     regarding the long-term        with no single dependency. 
                                     economic arrangements.         We undertake enhanced stress 
                                                                    testing and sensitivity analysis 
                                                                    of business plans and regularly 
                                                                    review key market and sector 
                                                                    metrics. 
                                                                    We have fine-tuned our Brexit 
                                                                    mitigation and established, 
                                                                    ahead of the event, Brexit 
                                                                    contingency stock. Developments 
                                                                    are being monitored and further 
                                                                    mitigation actions may be taken 
                                                                    as appropriate. 
---------------------------------  -----------------------------  ----------------------------------------- 
 2. Competitive markets             Increased                      We monitor competition risk 
  Increased competition              In 2019 we saw                 via selected indicators during 
  in our core markets,               a sales downturn               the monthly operational reviews 
  from both existing                 in the industrial              undertaken by each of our businesses. 
  and new competitors,               markets (in particular         Our Growth Accelerator programme 
  including new entrants             Industrial Automation          (see page 17) aims to create 
  from markets in decline            and Commercial                 significant customer-pull by 
  as a result of economic            Vehicle) and continued         solving industry problems through 
  slowdown. This could               margin pressure                applications engineering. 
  create strong pricing              in the Fossil Power            Our Value Engineering activities 
  pressures, potentially             sector.                        in all of our divisions are 
  resulting in lost sales                                           helping us deliver more competitive 
  and reduced profits.                                              products. 
  Link to strategy                                                  We continue to develop our 
  Customer focus                                                    market leading applications 
  Growth acceleration                                               engineering expertise and, 
  Operational excellence                                            in particular, our Valve Doctors 
  Commercial excellence                                             in IMI Critical, our Hydronic 
  Risk appetite                                                     College and Engineering Advantage 
  Receptive                                                         teams in IMI Precision. 
---------------------------------  -----------------------------  ----------------------------------------- 
 3. Failure to deliver              Increased                      We have deep and extensive 
  major transformational             With the recent                restructuring and integration 
  projects on time and               acquisition of                 expertise. 
  on budget                          PBM and the initiation         We operate robust and proven 
  The Group is continually           of significant                 processes to manage and monitor 
  evolving and taking                restructuring programmes,      major projects, including setting 
  opportunities in response          project execution              clear and measurable milestones 
  to external conditions             risks have increased           which are reviewed regularly 
  and market pressures.              in 2019, particularly          by our Executive Committee 
  Our current strategy               given the pressure             and divisional management teams. 
  includes large restructuring       that these projects            Divisional restructuring costs 
  programmes and complex             impose on management           and the associated benefits 
  IT system installations.           capacity and resources.        are tracked against targets 
  Failure to deliver                                                on a monthly basis. 
  the expected objectives                                           Standarised documentation and 
  on time and on budget,                                            core processes underpin all 
  could have an adverse                                             IT projects to support efficient 
  revenue and profit                                                ERP system roll out. 
  impact on the Group. 
  Link to strategy 
  Customer focus 
  Growth acceleration 
  Operational excellence 
  Commercial excellence 
  Risk appetite 
  Prudent 
---------------------------------  -----------------------------  ----------------------------------------- 
 4. Quality issues leading          No change                      Across our operational platform 
  to product recall,                 Inherent risk in               we have well embedded Lean 
  warranty issues, injury,           this area has increased        Assessment quality improvement 
  damage or disruption               primarily due to               programmes, Obeya reviews and 
  to customers' business             the sale of more               Advanced Product Quality Planning 
  Developing innovative              products with greater          processes. Our most critical 
  and technologically                complexity across              projects include extensive 
  advanced products is               a larger geographic            testing of the finished product 
  at the heart of IMI.               footprint. If unmanaged        and customer sign-off. 
  The quality and safety             this could result              IMI Hydronic is focusing on 
  of our products and                in products being              developing a smaller number 
  services is of the                 sold in territories            of new products to ensure its 
  highest importance                 without the necessary          product development and engineering 
  and failure to deliver             in-depth sales                 resources are not overburdened. 
  the quality required               support and experience, 
  could result in negative           which could lead 
  financial and reputational         to higher warranty 
  damage.                            claims. 
  Link to strategy                   However, year on 
  Customer focus                     year, the risk 
  Growth acceleration                profile remains 
  Operational excellence             similar due to 
  Commercial excellence              a continuing focus 
  Risk appetite                      on product quality 
  Very prudent                       and detailed mapping 
                                     of our engineering 
                                     resources across 
                                     our customers and 
                                     geographies. 
---------------------------------  -----------------------------  ----------------------------------------- 
 5. Failure to integrate            No change                      We have in-house M&A expertise 
  acquisitions successfully          The acquisition                and, as highlighted previously, 
  and deliver the required           of PBM (which gives            operate a proven structured 
  synergies                          us access to the               integration process. 
  Underperforming acquisitions       Pharmaceutical                 The Annual Strategic review 
  deliver below expectation          and Food Processing            process helps identify value 
  synergies and reduced              markets) in the                enhancing acquisitions which 
  profit. If material,               year was completed             would align with the Group's 
  this can significantly             quickly and efficiently.       strategy. Once identified, 
  impact shareholder                 PBM and divisional             a formalised acquisition approval, 
  value.                             integration management         due diligence and integration 
  Link to strategy                   teams are well                 process is followed. Upon completion, 
  Growth acceleration                resourced and the              a detailed 100-day process 
  Operational excellence             integration process            is used to ensure adequate 
  Commercial excellence              is progressing                 resources are in place, progress 
  Risk appetite                      well.                          is on schedule and the identified 
  Receptive                          The recent integration         synergies (both hard and soft) 
                                     of Bimba (which                are being realised. 
                                     is on track to 
                                     deliver its acquisition 
                                     case) and the phased 
                                     roll out of divisional 
                                     ERP systems demonstrates 
                                     that we have effective 
                                     integration experience 
                                     and processes in 
                                     place. 
---------------------------------  -----------------------------  ----------------------------------------- 
 6. Unauthorised access             No change                      We have a well-developed IT 
  to our IT systems                  During 2019, we                security strategy, which is 
  Unapproved access to               continued to detect,           reviewed monthly. We continue 
  our IT systems could               block and remediate            to implement improvements to 
  result in loss of intellectual     threats on an ongoing          our IT infrastructure to keep 
  property, fraudulent               basis. These included          abreast of new threats. 
  activity, theft and                malware, ransomware,           We continue to strengthen our 
  business interruption.             attempted data                 security baseline through the 
  As the digital and                 theft, credential              enablement of automated global 
  security threat environment        theft, phishing                software updates and automatic 
  is quickly evolving                and external hacking           lockdown capabilities. We have 
  we cannot guarantee                attempts.                      also strengthened our digital 
  that our actions are               The complexity                 forensic capabilities and remediation 
  keeping pace with the              and the frequency              processes in the event of a 
  constantly evolving                of the speculative             cyber security incident occurring. 
  threat environment.                attacks observed               We regularly test our disaster 
  Link to strategy                   increased in 2019,             recovery plans to ensure we 
  Operational excellence             although we have               have stringent system back 
  Commercial excellence              no evidence that               up procedures in place. 
  Risk appetite                      we were specifically 
  Very prudent                       targeted. 
                                     To counter the 
                                     increase in threat 
                                     activity in 2019 
                                     we have continued 
                                     the significant 
                                     investment in our 
                                     detective and preventative 
                                     IT measures by: 
                                     >> further improving 
                                     our Group-wide 
                                     Security Operations 
                                     Centre ("SOC") 
                                     monitoring service, 
                                     which operates 
                                     24 hours a day; 
                                     >> rolling out 
                                     a wide programme 
                                     of new IT security 
                                     protocols across 
                                     the Group's infrastructure; 
                                     and 
                                     >> holding security 
                                     compliance workshops 
                                     and IT security 
                                     awareness programmes 
---------------------------------  -----------------------------  ----------------------------------------- 
 7. Failure to comply               No change                      Integrity is a cornerstone 
  with legislation or                We continue to                 of our culture. It is one of 
  a breach of our own                operate in similar             our core values and underpins 
  high standards of ethical          markets as last                everything we do. Read more 
  behaviour                          year, with no significant      about our culture on pages 
  We have established                changes in legislation         26 to 35. 
  a framework which demands                                         Dedicated resources at both 
  the highest standards                                             the Group and Divisional level 
  of ethics and regulatory                                          ensure employees are provided 
  compliance across all                                             with the necessary training, 
  of our businesses.                                                guidelines and standard operating 
  As we expand our operations                                       policies to ensure that everybody 
  to achieve growth,                                                is aware of the conduct expected 
  it is essential that                                              from them, in particular in 
  we maintain these standards.                                      relation to the key risk areas 
  A breach of legislative                                           of anti-bribery & corruption, 
  requirements in relation                                          anti-trust and economic & trade 
  to tax, anti-bribery,                                             sanctions. During the year 
  fraud and competition                                             our Code of Conduct was updated 
  law could result in                                               (see page 24). 
  financial and reputational                                        Each division assesses its 
  damage. The markets                                               own compliance risk and formulates 
  in which IMI operates,                                            an annual divisional compliance 
  particularly in IMI                                               plan which is implemented by 
  Critical, make the                                                each Division's General Counsel, 
  risk of regulatory                                                who report to the respective 
  breach an area of focus.                                          Divisional Managing Director. 
  Link to strategy                                                  Due diligence on third parties, 
  Customer focus                                                    trade sanctions and customers 
  Growth acceleration                                               are the subject of standard 
  Risk appetite                                                     operating procedures and carried 
  Very prudent                                                      out by the divisions using 
                                                                    Group-wide software. In 2019 
                                                                    around half of the entire workforce 
                                                                    - some 5,635 employees - completed 
                                                                    online training modules on 
                                                                    third party risk via eLearning. 
                                                                    In addition, detailed training 
                                                                    is given to staff in more commercial 
                                                                    roles who have significant 
                                                                    autonomy to contract with customers 
                                                                    and suppliers. 
                                                                    We operate a confidential independent 
                                                                    hotline to report concerns 
                                                                    (see page 25). 
---------------------------------  -----------------------------  ----------------------------------------- 
 8. New Product Development         No change                      Each division has a New Product 
  Failure to deliver                 While we continue              Development strategy which 
  market leading products,           to introduce new               is regularly reviewed, with 
  on time and on budget,             products, launches             divisional engineering teams 
  could impact our ability           are planned to                 reporting on the performance 
  to grow.                           avoid new product              of our existing products and 
  Link to strategy                   concentration risk             new market or competitor developments. 
  Customer focus                     and timed to ensure            We implement a robust New Product 
  Growth acceleration                relevant teams                 Development Process which covers 
  Commercial excellence              have the bandwidth             market analysis, design, prototyping, 
  Risk appetite                      to deliver effectively         testing and costing. 
  Receptive                                                         We have established centres 
                                                                    of design and technological 
                                                                    excellence across our businesses. 
                                                                    Our Growth Accelerator programme, 
                                                                    previously mentioned, is enhancing 
                                                                    our innovation and development 
                                                                    capabilities. 
 

Enquiries to:

   John O'Shea                  Company Secretary                  Tel:            0121 717 3700 
   John Dean                     Investor Relations                      Tel:            0121 717 3700 

End.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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