IMI PLC Coronavirus update (9560H)

TIDMIMI

RNS Number : 9560H

IMI PLC

30 March 2020

30 March 2020

Coronavirus update

Given the current and rapidly changing developments regarding Coronavirus, IMI plc ('IMI'), the specialist

engineering group , issues the following update.   This announcement contains inside information . 

Protecting our people

Even before the outbreak of the Coronavirus pandemic, our primary concern has always been the safety and well-being of our people, our wider communities, our customers and partners.

Over recent weeks, this commitment has assumed even greater relevance. All of our facilities have implemented additional personal protection measures, intensified hygiene, and social distancing protocols that meet or exceed local and international guidelines. Employees who are able have been working from home for some time . Factory operations have been managed safely and intensively to maximise business continuity and to support our customers.

A crisis response team comprising both divisional leadership and members of the Group Executive meets at least three times per week to closely monitor the situation and co-ordinate our response. We also communicate regularly with all our employees, keeping them informed about the evolving situation and offering guidance on how they can best keep themselves and their colleagues safe.

Financial position

We have entered this period of uncertainty in a strong financial position. As at the end of February, the Group had immediately available liquidity of GBP393m, comprising GBP19m of available cash, GBP293m of undrawn committed bank facilities with our six core relationship banks, and an additional GBP81m of undrawn uncommitted facilities.

The Group's existing long-term debt, totalling GBP363m, was raised through the US Private Placement market . This debt is at fixed rates and, aside from GBP11m due in 2022, matures in 2025 and beyond.

The financial covenants attached to our committed facilities are that EBITDA should be no less than 4 times interest and net debt should be no more than 3 times EBITDA. Th ose covenant ratios, at 31 December 2019, were 24.0 times and 1.2 times , respectively.

Recent trading

The disruption from Coronavirus to our businesses in the first two months of the year has been relatively modest - with sales and orders being slightly ahead of our earlier guidance . Margins and cash flow remained strong.

The majority of our sites remain at or near normal capacity. Some facilities, which support IMI Precision Engineering's Life Science sector, have received special dispensation to accelerate activity, in order to ramp-up production of key valve components for the world's ventilator manufacturers.

Our operations in China were disrupted for two weeks in early February, but have since returned to normal operations. However, in some locations, including in Italy and India, sites have had to close temporarily in line with the direction of the authorities. It is expected that site and supply chain disruptions will likely increase in the short-term before global industrial activity returns to normal.

Protecting our future

Whilst we look forward to, and remain confident of, a return to normal trading, we are actively preparing for the short-term disruptions and expected macroeconomic declines brought about by this pandemic. Mitigating actions have already been taken in anticipation of tougher conditions, including a hiring freeze in all but exceptional circumstances, reduced discretionary spending, and reductions to capital expenditure unless vital for health and safety or operations continuity. The Board and Executive Committee members have agreed to a 20% salary reduction, effective 1 May, for at least the next three months.

Further cost reduction initiatives are being developed in order to enable the organisation to align its cost base with any reduced market demand. Our leadership is in close communication with key customers around the world to provide them with our support and expertise, and to minimise misalignment as we progress the year.

Dividend

Although we remain confident in the strength of our financial position, given the unprecedented business uncertainty brought about by the pandemic, the Board has decided to withdraw its recommendation to pay a final dividend at the AGM in May, thereby preserving GBP71m of funds to support the long-term position of the Group. This is recognised as a significant decision and one that will be reviewed later in the year, once the trading environment and outlook become clearer.

Outlook and guidance

When we presented our 2019 preliminary results on 28 February, we offered guidance for the first half of 2020, subject to the evolving Coronavirus situation. Although the impact on our trading to date has been relatively modest, given the significant volatility within our market environment, we believe it is now prudent to withdraw that guidance. We will continue to offer updates as it becomes appropriate and helpful to do so. Our next formal communication will be the Interim Management Statement planned for release on 7 May 2020.

Roy Twite, Chief Executive said "I am incredibly proud and humbled by the commitment, courage and professionalism shown by all our employees as we face this unprecedented disruption to our communities and businesses. It is my firm belief that, by continuing to act decisively, IMI will deliver on its ambitious strategy once this global, human tragedy has been resolved."

Enquiries to:

 
John Dean        IMI    Tel: [phone] 
Gayden Metcalfe  Teneo  Tel: [phone] 
 

The Annual Report is available on the IMI plc website and will be issued along with the Notice of Meeting to shareholders on 2 April 2020.

Notes to editors

IMI plc, the specialist engineering company, designs, manufactures and services highly engineered products that control the precise movement of fluids. Its innovative technologies, built around valves and actuators, enable vital processes to operate safely, cleanly, efficiently and cost effectively. The Group works with industrial customers across a range of high growth sectors, including energy, transportation and infrastructure, all of which are benefiting from the impact of long-term global trends including climate change, urbanisation, resource scarcity and an ageing population. IMI employs around 11,000 people, has manufacturing facilities in more than 20 countries and operates a global service network. The Company is listed on the London Stock Exchange. Further information is available at www.imiplc.com .

IMI plc is registered in England No. 714275. Its legal entity identifier ('LEI') number is 2138002W9Q21PF751R30.

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March 30, 2020 02:00 ET (06:00 GMT)