IMI plc Annual Report & Accounts 2021
Breakthrough
Engineering
for a better
world.
We are a specialist engineering company that designs,
manufactures and services highly engineered products
that control the precise movement of fluids. We aim to
deliver great solutions that tackle the most demanding
challenges. We help some of the world’s leading industrial
companies operate their processes safely, sustainably,
and more productively.
We work as one big team but operate through three
divisions – IMI Precision Engineering, IMI Critical
Engineering and IMI Hydronic Engineering – and employ
approximately 10,000 people in over 50 countries around
the world.
Find out more:
www.imiplc.com
Our purpose
Our purpose is our reason for being.
It’s what motivates us all and
makes us proud to work for IMI.
Breakthrough
Engineering
for a better
world.
Local COVID-19 protocols were always strictly
adhered to during the photoshoots that took
place throughout 2021, hence why some people
and locations can be seen using masks, and others
not. IMI remains fully committed to ensuring the
safety of its people and all visitors to its sites.
Front cover image
IMI Precision Engineering –
Farmington, USA
01
Introduction
Group overview
Chair’s statement
Strategic Report
Corporate Governance
Financial Statements
Independent Auditor’s Report
Primary statements
Notes to the consolidated
financial statements
138
148
152
02
04
Chief Executive’s review
Strategy & business model
Value Today
Value Tomorrow
Hydrogen.Ready
Environmental, Social &
Governance
Our stakeholders
Operational review – IMI Precision
Operational review – IMI Critical
Operational review – IMI Hydronic
Financial review
Key Performance Indicators
How we manage risk
Viability statement
Board of Directors
Chair’s governance letter
Corporate Governance Report
Section 172(1) statement
Audit Committee Report
Nominations Committee Report
Statement from the Chair of the
Remuneration Committee
Annual Directors’
Remuneration Report
Directors’ Report
Non-Financial Information
Statement
Statement of directors’
responsibilities
82
84
86
97
102
108
112
114
130
134
136
12
16
18
22
30
32
54
58
60
62
64
68
70
80
Our values
Customer intimacy
A mindset where the customer is at the
heart of everything we do.
Playing to win
A growth mindset that is innovative
and open to learning.
One big team
Leveraging IMI’s diversity in every sense,
whether this is the diversity of talent,
knowledge and experience that we
have with our people, or the diversity of
technologies, processes and end markets
across our businesses.
Integrity
Being true to who we are and doing the
right thing at all times.
We deliver our sustainable,
customer-focused
solutions ever mindful of
our responsibilities to our
employees, our suppliers,
our wider communities, and
the environment. We also
constantly reference and
reinforce IMI’s core values
throughout our business.
More on our values:
Turn to page 52
Introduction Strategic Report Corporate Governance Financial Statements 02
Group overview
Revenue by
geography
Revenue by
division
4
3
2
3
1
2
2021 highlights
1
Adjusted revenue*
Statutory revenue
£1,866m
£1,866m
2%
2%
1 Europe 45%
2 Americas 28%
1 IMI Precision Engineering 45%
2 IMI Critical Engineering 37%
3 Asia Pacific 22%
3 IMI Hydronic Engineering 18%
4 Middle East & Africa 5%
Gender mix across the Group**
Adjusted profit before tax*
Statutory profit before tax
12%
£307m 14%
£245m
Board
Executive
Direct
reports to
Executive
Leadership
group
All
employees
Female Female % Male Male %
Adjusted operating margin*
Statutory operating margin
3
3
8
38%
43%
18%
5
4
62%
57%
36
82%
140bps
17.0%
100bps
13.4%
19
14%
119
86%
Adjusted basic EPS*
Statutory basic EPS
3,269
29% 7,964
71%
15%
92.0p
17%
73.5p
** Including agency and contractors.
» Good progress towards sustainable, profitable growth
and Group adjusted operating margins of 18% - 20%
» 7% organic sales growth, 18% organic adjusted operating
profit growth
» Increased organic revenues, adjusted profits and margins
in all three divisions
» Statutory operating profit increased 10%
» Statutory profit before tax increased 14%
» Growth Hub and Sprint Teams delivered £23m orders,
with momentum building
» Adaptas acquisition completed in attractive
Life Sciences market
» ESG agenda gaining pace
» Accelerated benefits and complexity reduction from
restructuring supports margin improvement
* Please refer to Note 3 for definitions of the Group’s Alternative Performance Measures. Please note there were no adjustments to revenue in the year.
IMI plc Annual Report & Accounts 2021 03
IMI Precision Engineering specialises in
developing motion and fluid control
technologies for applications where
precision, speed and reliability are essential.
IMI Critical Engineering’s highly specialised
valves and actuators help control the flow
of steam, gas and liquids in some of the
world’s harshest environments. Our
engineered solutions are designed to
withstand extreme temperatures and
pressures, as well as intensely abrasive or
corrosive cyclical operations.
IMI Hydronic Engineering is a leading
global supplier of products and solutions
for HVAC systems. We deliver optimal
and energy efficient heating and cooling
solutions to the residential and commercial
building sector.
Operational review:
Turn to page 58
Operational review:
Turn to page 60
Operational review:
Turn to page 62
Key brands
Norgren, Bimba, Buschjost, FAS, Herion, Kloehn,
Adaptas
Key brands
IMI Bopp & Reuther, IMI CCI, IMI Fluid Kinetics,
IMI NH, IMI Orton, IMI PBM, IMI Remosa, IMI STI,
IMI TH Jansen, IMI Truflo Italy, IMI Truflo Marine,
IMI Truflo Rona, IMI Z&J, IMI Zikesch, Maxseal
Key brands
IMI Pneumatex, IMI TA, IMI Flow Design,
IMI Heimeier, IMI Aero-Dynamiek
Revenue
3%
Revenue
£836m
2%
£691m
Revenue
11%
£339m
Adjusted operating profit*
Adjusted operating profit*
Adjusted operating profit*
8%
£149m
4%
£125m
22%
£68m
Statutory operating profit
Statutory operating profit
Statutory operating profit
18%
£100m
35%
£111m
27%
Number of employees
Number of employees
Number of employees
53%
5,400
29%
2,900
18%
Revenue by
geography
1 Europe 45%
2 Americas 37%
3 Asia Pacific 18%
Middle East & Africa 0%
3
2
Revenue by
geography
4
1
Revenue by
geography
1
1 Europe 25%
2 Americas 28%
3 Asia Pacific 35%
4 Middle East & Africa 12%
3
1 Europe 88%
2 Americas 8%
3 Asia Pacific 4%
Middle East & Africa 0%
2
£64m
1,800
3
2
1
2021 revenue by market
2021 revenue by market
2021 revenue by market
Industrial Automation
£413m
Precision Fluid OEM
£210m
Transportation
£213m
Refining & Petrochemical
£213m
Fossil Power
£210m
Oil & Gas
£122m
Nuclear
£60m
Marine
£33m
Pharmaceutical
£12m
Balancing & Control
£159m
Thermostatic Control
£106m
Pressurisation & Water Quality
£61m
1 Industrial Automation 49%
3
2 Precision Fluid OEM 25%
3 Transportation 26%
2
1
1 Refining &
Petrochemical 31%
2 Fossil Power 30%
3 Oil & Gas 18%
4 Nuclear 8%
5 Marine 5%
6 Pharmaceutical 2%
7 Other 6%
7
6
5
4
3
2
1 Balancing & Control 47%
1
2 Thermostatic Control 31%
3 Pressurisation
& Water Quality 18%
4 Other 4%
4
3
2
1
Introduction Strategic Report Corporate Governance Financial Statements 04
Chair’s statement
2021:
progress on
many fronts
2020 revealed the quality and
resilience of the IMI business.
2021 demonstrated how
culture and purpose can fuel
sustainable, profitable growth.
IMI plc Annual Report & Accounts 2021 05
Strategy
During the year, the company hosted
two Capital Markets Events, designed
to inform analysts and investors of our
capabilities across the Group – with
a particular focus on what drives our
confidence in our ability to deliver
sustainable, profitable growth. As well as
describing the importance of our business
model and Growth Hub, the events
highlighted the shift in culture, which
has already started to deliver results.
M&A
In December, IMI acquired Adaptas
Solutions (‘Adaptas’) – a US specialist
engineering business manufacturing
components and solutions for mass
spectrometry instruments. Adaptas
provides an attractive adjacency to
our existing Life Sciences business.
I’m delighted to add my welcome to the
team, as we look forward to an exciting
future together. Additional commentary
on the transaction is in the Chief
Executive’s review on page 12 of this
Annual Report – or on the IMI plc website,
imiplc.com.
Creating value – for all
As with all organisations, our stakeholders
fall into many groups, each of them with
different expectations for our business
– whether they be employees, investors,
communities, customers or suppliers.
Throughout this report, you will read
about how we address these different
groups, and advance our strategy with
all stakeholders considered. For more
information about our stakeholders and
our Section 172(1) statement, please
go to pages 56 and 97 respectively.
The Board
During the year, Carl-Peter Forster retired
from the Board after nine years of service
and significant contribution for which my
colleagues and I are greatly appreciative.
We were delighted to welcome Dr Ajai
Puri to the Board in March. Dr Puri brings
extensive experience in the food
manufacturing industry to IMI.
I would like to thank all my colleagues
on the Board for their commitment
and counsel throughout the year.
Dividend and balance
sheet
IMI enjoys strong cash-flows and
maintains a healthy balance sheet – even
after the recent acquisition. As economic
conditions improved in early 2021, the
Board decided to commence a share
buyback scheme, totalling £200m in
the full year. The buyback enabled us
to maintain strong but efficient finances,
without compromising our ability to
invest for growth – as evidenced by
our acquisition of Adaptas.
The Board is recommending a 2021 final
dividend of 15.8p per share (2020: 15.0p
per share). Payment will be made on 13
May 2022 to shareholders on the register
at the close of business on 8 April 2022.
People
In what has been another testing year,
IMI employees have remained dedicated
to serving our customers while keeping
our sites and communities safe. On behalf
of the Board, I thank them all.
Lord Smith of Kelvin
Chair
Culture, values and
purpose
One key objective of IMI’s strategy is to
ensure that everyone in the organisation
is included and actively participates as
we pursue our unifying purpose:
[Breakthrough Engineering for a better
world]. So, it was encouraging when
the One Big Voice survey of employee
attitudes reflected high levels of
engagement in the business. For more
information on this, please see page 44.
In 2021, IMI introduced a brand new
internal communications platform that
connects with all our employees. The
knowledge-sharing, collaboration and
values-affirming actions that have
already been apparent through its rapid
and widespread adoption will support
further improvement in engagement.
Coronavirus, and other
challenges
The global economic recovery from
Coronavirus has brought new challenges.
Supply chain pressures have been apparent
across industry, and cost inflation has
reached levels not seen in decades. But the
impact of each has been largely mitigated
by IMI through astute procurement and
close relationships with customers. We
remain vigilant to the continued threat
from Coronavirus, maintaining our
protective protocols across the globe.
Environmental, Social &
Governance (ESG)
In 2020, we set out our ambitions for ESG
and how we are approaching a subject
that is of great importance to us all. In
this Annual Report, we show how we have
taken this forward, with more detail on
our objectives. For example, halving our
total CO2 intensity by 2030 and continuing
to be a more inclusive and diverse
employer. As we plan how we will meet
our ambitions, we have spent time this
year engaging with our stakeholders to
gauge their priorities. We have considered
the sustainability of our product portfolio.
And we have evaluated the risks and
opportunities posed by climate change
to see how we can drive most effectively
towards delivering a better world.
Introduction Strategic Report Corporate Governance Financial Statements 06
A better world
...for our customers.
We build trusting and collaborative
relationships with our customers to
identify and implement innovative
solutions for their biggest problems.
Our deep engineering and applications
expertise accelerate value creation and
help our customers become safer, more
sustainable and more productive. We
are respected for the quality of what
we do and the care with which we do it.
IMI Precision Engineering –
Shanghai, China
IMI plc Annual Report & Accounts 2021 07
Introduction Strategic Report Corporate Governance Financial Statements 08
A better world
...for our people.
We build IMI to be a truly inclusive
organisation, where all our employees
can contribute and grow – connecting
as ‘one big team’ to solve some of the
world’s largest industry and society
problems. We all share a strong set
of core values that guide how we
think and act. We actively support the
development of all our people and invest
where we see the biggest opportunities
to create a better world together.
IMI Precision Engineering –
Irwin, USA
IMI plc Annual Report & Accounts 2021 09
Introduction Strategic Report Corporate Governance Financial Statements 10
A better world
...for our communities.
We focus our products, services and solutions
so that our customers improve sustainability
to support their ambitions for a better
world. We seek to continuously optimise our
operations to minimise our impact on the
environment and the communities in which
we operate. Our Growth Hub initiatives
ensure we always invest and innovate to
make a positive difference.
IMI Critical Engineering –
Pittsburgh, USA
IMI plc Annual Report & Accounts 2021 11
Introduction Strategic Report Corporate Governance Financial Statements 12
Chief Executive’s Review
In 2021 we have made excellent
progress with our accelerated
growth strategy through
increasing customer intimacy,
market-led innovation and
reducing complexity.
The Growth Hub and Sprint Teams continue to
lead important cultural change, as well as increasing
orders. We also completed the acquisition of
Adaptas in the attractive Life Sciences market
and concluded a £200m share buyback programme.
In 2022, we expect further progress towards our
ambition of sustainable profitable growth and
Group margins of 18% to 20%.
IMI plc Annual Report & Accounts 2021 13
Investment
case
» Clear customer-focused
strategy delivering
[Breakthrough Engineering
for a better world]. Solving
acute industry problems with
market-leading expertise,
strong brands and the
best people
» Increasing exposure to
attractive global markets,
supported by our Growth
Hub programme and
targeted M&A
» Robust social and governance
policies, for a stronger, more
responsible and more inclusive
organisation
» Differentiated environmental
profile – led by our customer
solutions that enable energy
efficiency, sustainability
and safety
» A clear business model
committed to delivering
sustainable value to all our
stakeholders, through Value
Today and Value Tomorrow
strategies and the increasing
use of digital capabilities
» Strong balance sheet offering
strategic flexibility alongside
disciplined financial objectives
Find out more:
www.imiplc.com/investors/investment-case
Along with investments into our future
growth, IMI continues to identify and
execute on opportunities to drive more
efficient operations. The following
provides a summary of progress on
our restructuring programmes:
£m
2021
2022*
Future
years*
Restructuring
charge
(including
impairment losses)
IMI Precision
Engineering
IMI Critical
Engineering
IMI Hydronic
Engineering
Total charge
Cash impact
Benefits
IMI Precision
Engineering
IMI Critical
Engineering
IMI Hydronic
Engineering
Total benefits
(36)
(29)
(35)
(1)
(3)
(40)
(33)
7
15
3
25
(13)
(1)
(43)
(38)
6
4
-
10
-
-
(35)
(62)
26
-
1
27
* Future looking forecast information.
All divisions advanced their programmes
which provided £25m of benefits in the
year, exceeding the earlier reported target
of £22m. The projects are expected to run
until 2024. The Group will continue to seek
out and execute projects to improve its
competitive advantage.
Results overview
During 2021 IMI delivered a strong
performance, benefitting from positive
market conditions within key business
segments including Industrial
Automation, Commercial Vehicle and
Construction. New products are playing
an increasing role in the Group’s growth,
with our Growth Hub and Sprint Teams
well embedded across the Group.
Like most industrials, IMI has experienced
supply chain constraints for certain
components as well as increased inflation,
creating continuing pressure for the
sector and IMI. This pressure continues
to be well managed, minimising the
impact on service levels to our customers
and protecting our financial returns.
Strategic progress
IMI launched our purpose, [Breakthrough
Engineering for a better world], in late
2019, and set out our strategy to
accelerate business performance and
drive sustainable, profitable growth by
solving acute customer problems at pace.
Our strong financial performance reflects
the progress being made and the
engagement created with our employees.
The number of Growth Hub teams is
increasing, and many initiatives are now
delivering tangible results. The shift in
culture necessary to deliver that Value
Tomorrow ambition has been swift
and effective.
The other key ambition of our business
model – to deliver Value Today – has
helped improve returns across the
business through greater customer
intimacy, operational efficiency, and
complexity reduction, despite the
pressures and market volatility of
the pandemic.
With the acquisition of Adaptas,
the Group has demonstrated IMI’s
commitment to using its balance sheet
to good effect by moving our business
further into the attractive Life Sciences
market. The completion of the £200m
share buyback was further confirmation
of IMI’s desire to maintain an efficient
balance sheet.
Introduction Strategic Report Corporate Governance Financial Statements 14
Chief Executive’s Review
Environmental, Social &
Governance (ESG)
Our purpose, [Breakthrough Engineering
for a better world], continues to drive
our actions and create real energy across
our organisation. Many of IMI’s solutions
enhance the safety, sustainability, and
productivity of our customers’ products
and operations, and often contribute
directly to the delivery of their carbon
reduction targets. When considering
investments, we ensure the impact
on IMI’s overall ESG ambitions is a
prime consideration.
IMI sees a natural link between pursuing
our ESG objectives with vigour and our
wider ambitions for improved growth
and profitability. Many of our best growth
opportunities are supporting customers
in developing solutions for a zero
carbon future.
We continue to develop clear plans to
reduce the environmental impact of our
facilities and operations, and progressed
actions in 2021 that will contribute to our
goal of halving our CO2 intensity by 2030.
We are also committed to be net zero
by 2040.
Our Inclusion and Diversity activities are
helping us build a more dynamic and
innovative organisation. We launched
a Group-wide communications platform
in May that enables all employees to
share activity and collaborate across the
Group. The platform is both accelerating
business initiatives by identifying and
leveraging previously untapped resource
and expertise, as well as supporting
IMI’s core value of One Big Team.
Ensuring all our employees feel safe
at work is central to our strategy and
culture and we have a continued focus
on identifying and reducing workplace
hazards. In 2021, we also introduced
the IMI HSE Excellence Framework –
an enhanced management system
that assesses our HSE standards
against areas such as distributed
workforce (field service), environment
(air, water, waste), leadership
engagement and risk assessment.
More information about our ESG
credentials and initiatives, including
our policies and practices, can be found
on our website: www.imiplc.com.
Coronavirus update
The protection of our employees, our
operations and our broader communities,
wherever in the world they may be,
remains an absolute priority. The
Coronavirus response team continues
to support employee welfare and help
mitigate disruption in our supply chains.
We continue to keep particularly close
to our customers, to support them as
they incur challenges brought on by
the pandemic.
People
In 2021, the commitment, ingenuity
and positive impact of our people across
the Group has been clear to see. I’d like
to offer my sincere congratulations to
all of our employees for another great
performance that we can all be proud of.
Outlook
Based on current market conditions we
expect 2022 full year adjusted EPS to
exceed 100p. This guidance includes the
full year impact of the completed £200m
share buyback on our average share
position (2022 forecast: 259m average
shares; 2021: 267m). Guidance assumes
foreign exchange rates will create a
headwind of 1% on sales and profits.
Roy Twite
Chief Executive
Executive Committee
Roy Twite
Chief Executive
Daniel Shook
Finance Director
Beth Ferreira
Divisional Managing Director
IMI Precision Engineering
Jackie Hu
Divisional Managing Director
IMI Critical Engineering
Phil Clifton
Divisional Managing Director
IMI Hydronic Engineering
Liz Rose
Group Human
Resources Director
Louise Waldek
Group General Counsel and
Company Secretary
IMI plc Annual Report & Accounts 2021 15
Introduction Strategic Report Corporate Governance Financial Statements 16
A purpose driven strategy
Who we are – Our ambition
IMI’s purpose, [Breakthrough Engineering for a better world], is at the heart of everything we do, it is why we exist. We are
committed to achieving profitable growth on a sustainable long-term basis while creating a better world for everyone we engage
with – our customers, our employees, the communities we serve and operate in, and our shareholders.
Our Values are an important part of who we are, as they provide a culture and collective mindset for our entire organisation.
These Values – Customer intimacy, One big team, Playing to win, and Integrity – underpin all that we do, and ensure we maintain
the foundations that have enabled IMI’s success throughout its 150-year heritage.
Where we play – Our priorities
We focus on serving those markets that have sustainable growth characteristics, and where our proven engineering expertise can
develop solutions for the most acute industry problems. This provides us with a platform for long-term profitable growth as we
help our customers become safer, more sustainable, and more productive.
We target those fluid and motion control applications where our expertise is most valued. Within IMI Precision, this includes
Industrial Automation, Transportation, Life Sciences and Process Industries. IMI Critical has an established leadership position
in the most severe process applications within the Power and Oil & Gas industries, which continues to generate a significant
aftermarket opportunity through parts, service, and upgrade solutions. Given the longer-term challenges in these markets,
IMI Critical is increasingly developing and growing its presence in markets with greater growth potential, including Naval Marine,
Pharmaceutical, and the fast-developing Hydrogen economy. Finally, IMI Hydronic has an established suite of products serving the
hydronic heating and cooling markets, enabling customers around the world to improve energy efficiency and comfort in buildings.
Across all these chosen markets and applications, our products and services are increasingly incorporating digitally enhanced
solutions. These solutions often increase operational intelligence so customers can drive further productivity, or they enhance
IMI’s connections with customers to improve service levels and allow faster innovations for their most pressing issues.
How we win – Our differentiators
The common thread which underpins IMI’s success is its deep engineering knowledge and applications expertise, developed over
decades of supporting our customers and end markets. This has built a brand and market reputation position that our peers
cannot match. Our customers trust IMI to support their most difficult fluid and motion processes, which has increasingly led to
developing full system solutions. This fully utilises our engineering expertise, builds even stronger connections with customers,
and increases opportunities for future sales into the installed base.
We deliver ‘Value Today’ by continuously improving how we serve our customers, nurturing fantastic relationships that enhance
trust, and simplifying the way we organise and operate our business.
We create ‘Value Tomorrow’ by focusing our energy towards the greatest challenges our customers and society will face,
developing creative and innovative solutions at pace. This includes growing and investing in our digital capabilities.
While continuing to serve and grow our well-established markets, IMI will take our deep expertise into new markets, particularly
into those industries and applications that are helping to deliver a better and more sustainable world. Areas like hydrogen
production and distribution, personalised pharmaceuticals, and end of arm tooling automation are just some examples where
our knowledge and expertise can accelerate an improved quality of life for us all. We fully believe this will enable IMI to deliver
an even greater positive contribution to society, build a more sustainable and profitable business, and fulfill our purpose:
[Breakthrough Engineering for a better world].
IMI plc Annual Report & Accounts 2021 17
Our purpose
[Breakthrough Engineering for a better world]
Our business model
Growth Hub
Value
Tomorrow
Generating growth
through market-led
innovation
Value
Today
Improving returns
through greater
customer intimacy,
reduced complexity
and continuous
improvement
Customer
satisfaction
Continuous
improvement
The Core
Engineering &
Applications
Expertise
Talent
Development
& Employee
Engagement
Environmental,
Social &
Governance
Digital
Our values
Customer intimacy
One big team
Playing to win
Integrity
More on our values:
Turn to page 52
Introduction Strategic Report Corporate Governance Financial Statements 18
Value
Today
We deliver ‘Value Today’ by continuously improving
how we serve our customers, nurturing great
relationships that enhance trust, and by simplifying
the way we organise and operate our business.
IMI Critical Engineering –
Kobe, Japan
IMI plc Annual Report & Accounts 2021 Value Today
IMI Precision Engineering
19
Helping warehouses meet
increasing demand
Supporting farmers in
protecting the environment
The need for more advanced warehouse
automation has increased significantly
since the pandemic due to labour
shortages and additional complexity from
increased online commerce. One global
technology customer brought their
challenge to us to improve the longevity
of the robots provided to their customer’s
warehouse, to save cost and waste.
The product sorting robots travel
excessive distances at high speeds, often
shifting considerable weight in both cold
and ambient temperatures. The customer
required a more durable and reliable
system to handle the necessary speed
and quick direction changes.
IMI Precision’s design concept is based
on a standard pneumatic actuation
platform. We were able to meet the
tough performance requirements as
well as the customer’s size constraints.
Our product provides greater reliability
and reduces the waste and inefficiency
created by regularly replacing worn
out components.
The use of fertilisers is vital to productive
farming, but too much or too little use
can have consequences for crop yields
and the environment.
Standard spraying systems deliver a
constant stream of fertiliser which has
to be manually controlled, creating
inaccuracies and inefficiencies. Through
advances in GPS controlled systems,
a comprehensive map of the field can be
created and fertilisation needs precisely
calculated. Using our valve technology,
an accurate control of fertiliser flow can
be achieved at the exact points that
require more or less treatment. This helps
reduce overall usage, saving cost and
protecting the environment from excess
spraying, while reducing unnecessary
fuel consumption and delivering higher
crop yields.
Cleaner air through
Commercial Vehicle
customer intimacy
The next steps in legislation for stricter
and broader pollutant controls (Euro 7/VII,
US 2027) are creating a number of
challenges for Commercial Vehicle
manufacturers who must further
optimise their engines to meet these
targets. IMI Precision Engineering have
worked with one of the largest truck
builders to develop a valve block to
provide precise control of the exhaust
gas systems, a key to meeting these
higher standards.
Through close customer intimacy built
up over decades, we have supported
the development of their engine control
strategy. Our customised solution,
created under our New Product
Development Ignite and Foresight
Programmes, integrates electronics
and software into a new valve platform.
After several successful sample deliveries,
customer satisfaction is excellent, and we
are now targeting a global rollout across
other vehicle platforms.
Introduction Strategic Report Corporate Governance Financial Statements 20
Value Today
IMI Critical Engineering
Competitive upgrade
success story
A competitor valve installed at a chemical
plant was suffering internal leaking due
to a build-up of deposits in the base unit.
To solve the problem, and reduce the
cost of continuous maintenance and
component replacements, IMI Critical
Engineering proposed using one of its
specifically engineered ball valves.
IMI Critical’s solution required less
maintenance due to its cavity free
design, delivering better operability and
performance. The customer ultimately
chose to replace the entire valve, rather
than just the internal components, as
our valve was clearly more suitable for this
application. The customer was very happy
with the much improved outcome and the
technical expertise provided by the
engineering team.
EroSolve Wet Steam &
Metamorphic Trim
Clients in the energy industry have long
suffered from expensive valve failures
and operational problems from erosion
caused by the corrosive nature of their
processes. A specific customer, losing
over £2m annually through this issue,
had their problem solved by IMI Critical
Engineering’s EroSolve Metamorphic Trim,
the world’s first self-cleaning valve trim
of its kind.
Additionally, IMI Critical Engineering’s
advanced EroSolve Wet Steam valve
has demonstrated 21 months of leak-free
service, having replaced a bypass valve
that had leaks after just six months
of installation.
Our specialist solutions succeeded in
saving clients time and money by
addressing their problem with innovative
design, erosion resistant materials, and
expert installation support and aftercare.
IMI Insyt
Industries all over the world need to
analyse their unique operational set-up
and make decisions about valve suitability
and safety to avoid accidents, failures,
and leaks. In response, IMI Critical
Engineering launched IMI Insyt, our first
Prescriptive Engineering Service that
identifies potential mis-operation, design
flaws, and inadequate maintenance to
improve plant safety and performance.
Our new preventative analytical software
evaluates plant operations from top to
bottom, using the wealth of expertise
from our highly qualified Valve Doctors®.
They diagnose root causes of system
problems, often preventing failures
before they occur.
IMI plc Annual Report & Accounts 2021
Value Today
IMI Hydronic Engineering
21
Simplified footprint
enhances customer service
By reducing operational complexity,
IMI Hydronic Engineering has enhanced
its customer responsiveness and market
competitiveness.
Previously, the division had six
manufacturing plants and three inventory
hubs. Plant utilisation was below 60%,
and distribution was complex due to
processes that were not standardised.
Today distribution is centralised at a
single Polish facility and manufacturing
has been reorganised into five facilities
that focus on specific elements of our
manufacturing processes.
As a result, plant utilisation and
flexibility has increased, operational
costs have reduced, and delivery times
have shortened. Most importantly,
customer experience and service
levels have improved.
Sustainable customer-
focused operations
To support our journey to zero carbon
emissions and enhance customer service,
IMI Hydronic Engineering is continuing
to upgrade its Ljung-based Swedish
manufacturing facility.
Recent enhancements at the plant
include the installation of three new,
energy-efficient die-casting machines
with greater flexibility that enables
faster product changeover. A dedicated
Customer & Innovation Centre
showcasing the division’s technologies
and full product range has also been
established. In collaboration with R&D
teams across IMI, this facility will work
closely with customers to fully understand
their needs and quickly develop solutions
to key industry problems.
Effective collaboration
enhances customer offering
By operating as ‘one big team’ and
capitalising on the diversity of talent,
knowledge and experience across our
businesses, we are expanding our offering
and creating new market opportunities.
IMI Hydronic Engineering and IMI Precision
Engineering are working together to offer
customers ‘integrated solutions’ using
technologies from both divisions. For
example, IMI Precision Engineering’s
market leading solenoid valves are now
an integral component within IMI
Hydronic Engineering’s heating and
cooling control and shut off technologies.
This collaborative approach ensures we
remain at the forefront of technical
innovation and continue to solve acute
industry problems, adding value for all
our stakeholders.
Introduction Strategic Report Corporate Governance Financial Statements 22
Value
Tomorrow
We create ‘Value Tomorrow’ by focusing our
energy towards the greatest challenges our
customers and society will face, developing
creative and innovative solutions at pace.
This includes growing and investing in our
digital capabilities.
IMI Precision Engineering –
Bad Oeynhausen, Germany
IMI plc Annual Report & Accounts 2021 23
Introduction Strategic Report Corporate Governance Financial Statements 24
Value Tomorrow
IMI Precision Engineering case study
IMI Precision’s revolutionary Adaptix
universal soft jaw solves this key
problem and delivers incredible and
measurable benefits to our customers.
Adaptix’s pinch system is the first
universal jaw that adjusts to virtually
any part with pinpoint accuracy while
providing the force needed to hold it
safely and securely.
As part of this launch, IMI Precision
Engineering is also deploying new digital
sales techniques that are reaching more
new customers and prospects through
non-traditional channels, including social
media and industry influencers.
Key benefits
» IMI Precision Engineering’s Adaptix
universal soft jaw saves time, cost
and space for manufacturers
machining parts.
» Adaptix will protect the environment
by reducing metal scrap, energy and
the need for raw materials.
» The new digital approach to sales
and marketing makes the purchasing
process simpler for customers and
is also driving global awareness
and excitement.
Adaptix
Challenge
How do we save time, money and space
lost through the machining of multiple
parts in the manufacturing process?
Solution
Traditional aluminium ‘soft jaw’
parts are an important element of the
machining process. They provide quality
and safety by holding objects securely
during machining.
For workshops that machine many
different part specifications every day,
creating and installing new soft jaws for
each new part adds cost and inefficient
downtime. Making and managing soft
jaws is time consuming, and other
factors such as securing materials,
non-productive machine time, and
programming time, all add to the
complexity. Machine shops also need
lots of storage space to hold all their
soft jaws for potential future use.
IMI Precision Engineering –
Irwin, USA
IMI plc Annual Report & Accounts 2021 25
Introduction Strategic Report Corporate Governance Financial Statements 26
Value Tomorrow
IMI Critical Engineering case study
Hydrogen
Challenge
How does an established industrial gas
provider identify and secure the essential
expertise required for a new liquid
hydrogen storage facility?
Solution
One of the world’s largest provider’s
of industrial gases is building the first
large-sized hydrogen liquefaction plant
in China. The largest of its kind in Asia,
the facility needed cryogenic valves
that could handle liquid hydrogen
temperatures of -253°C, which require
highly specialist materials and
sophisticated engineering expertise.
The client was facing the challenge of
finding a qualified and reliable vendor
for the job.
IMI Critical Engineering had the solution,
with the team proposing one of their
specifically engineered cryogenic ball
valves. IMI’s technology had already
been successfully deployed earlier into
hydrogen propulsion systems for space
travel. The solution met the strict
certification required by the local
regulatory body and importantly could
perform within specifications during
liquid helium cryogenic testing at -269°C.
The client was delighted with the
solution and support, and subsequently
placed orders of this product to support
their growing venture into the hydrogen
market. The IMI Critical Engineering
team are excited to contribute to the
development of a greener and cleaner
energy landscape for the future.
Key benefits
» An important, and potentially large,
new market segment supporting the
global energy transition now underway,
benefitting from proven know-how
previously adopted into a very
specialist, demanding application.
» As a key, enabling component within
an important sector, the opportunities
with other potential customers and
other applications within this market
are significant.
IMI Critical Engineering –
Piacenza, Italy
IMI plc Annual Report & Accounts 2021 27
Introduction Strategic Report Corporate Governance Financial Statements 28
Value Tomorrow
IMI Hydronic Engineering case study
Creating solutions through customer collaboration
Challenge
How does an established business
like IMI Hydronic Engineering explore
longer-term opportunities efficiently
and effectively?
Solution
Customer collaboration, as always,
is key. The Growth Hub is focused on
driving faster, sustainable and profitable
growth at IMI. As part of the Growth
Hub structure, Foresight teams have
been established across the Group to
take a ‘longer’ view of potential market
developments and opportunities,
anticipating where IMI may add the
greatest value for our stakeholders.
These Foresight teams are tasked with
being open minded and ambitious as
they thoroughly investigate emerging
trends and identify where an evolving
industry is most likely to face challenges
that IMI can help resolve – and scale.
This is a significant change compared
with the past when much of the focus
was more near-term. This new approach
actively encourages free-thinking and
IMI Hydronic Engineering –
Ljung, Sweden
the embodiment of a growth mindset,
recognising that the threats,
opportunities – and disruptors – of today
may well be unrecognisable in the future.
Markets will certainly change and IMI’s
success will be determined by how well
we support customers as their
industries develop.
To rapidly assess the technical and
commercial feasibility of such solutions,
one of IMI Hydronic Engineering’s
Foresight teams proposed the
establishment of a customer-focused
‘living lab’ dedicated to championing
market-led innovation, and out-of-the-
box thinking.
Within this unique innovation centre,
which is housed at the division’s facility
in Sweden, IMI Hydronic Engineering
and its customers work together to
better understand the toughest heating,
ventilation and air conditioning (HVAC)
challenges. Potential solutions are then
rapidly brought to life using experimental
concepts which are tested and further
developed based on customer feedback.
Key benefits
» The lab has dedicated R&D and
machining specialists. To ensure the
journey from concept to commercial
product is accelerated.
» The lab’s location, within the
facility’s development and production
operations gives customers full visibility
of all stages of the process, including
the division’s modern and sustainable
production.
» The dedicated experimental space
also provides opportunities to build
and develop relationships across
the broader innovation ecosystem,
including universities, research
institutes and other venture partners.
IMI plc Annual Report & Accounts 2021 29
Introduction Strategic Report Corporate Governance Financial Statements 30
Hydrogen.Ready
The mission to significantly reduce carbon emissions globally,
underpinned by regulatory pressures, is creating an exciting
and fast-paced hydrogen economy. The race to scale hydrogen
production, distribution, and application across many
industries is well underway.
At IMI, we’re already working with engineers, consultants, and
R&D teams in some of the world’s biggest companies to help
solve the challenges of today to build the hydrogen economy
of tomorrow. Our approach to solving customer problems,
and our heritage of being a trusted partner for 150 years,
means we are well placed to help navigate the complexity
in the move towards a carbon emission free future.
IMI plc Annual Report & Accounts 2021 31
Transformative solutions
Across our divisions and across every
stage of the hydrogen value chain, we’re
developing the transformative solutions
our customers need. Our Breakthrough
Engineering means we can offer bespoke
hydrogen ready solutions used in water
electrolysis, hydrogen storage and
pipeline transportation. Our proven
expertise is already seeing our innovative
components used in refuelling
infrastructure and mobility use cases,
including fuel cell technology for the
Commercial Vehicle market. Our
sustainable solutions are additionally
ready to support the HVAC industry as
it transitions to a low carbon future.
IMI in action
Hydrogen production
IMI Critical Engineering’s control and
isolation valve solutions cover the entire
process including hydrogen production,
storage, transportation, and utilisation.
We are committed to using our
engineering heritage, technical expertise,
spirit of innovation, and industry
understanding to make a positive
contribution to unearthing the carbon
reduction solutions the world needs.
Our exploration in this field currently
includes improving the efficiency of
electrolysis and exploring carbon capture
and utilisation. We are also investigating
how to store and transport hydrogen
effectively and safely with different
carrier technologies.
Hydrogen refuelling – high pressure
solutions for hydrogen
infrastructure
IMI Precision offers an extensive range
of high-quality components and
complete system solutions to tackle the
biggest challenges currently facing
hydrogen infrastructure development.
IMI Precision’s hydrogen portfolio
includes a complete range of fluid and
process control components specifically
designed with hydrogen in mind. Suitable
for storage, compression and dispensing
applications, our products are designed
to provide leading performance and
maximum safety for pressures up to
1050 bar. We help to reduce complexity,
simplify assembly and improve safety
in hydrogen stations.
Hydrogen fuel cells
Hydrogen is set to play an increasing
role in helping the Commercial Vehicle
industry address its environmental
ambitions, particularly achieving net
reductions in CO2 emissions within heavy
duty trucks and buses. The developments
of hydrogen fuel cell technology and
performance will offer a pathway to
deliver zero emission vehicles successfully
going forward.
We help increase efficiency, manage
temperatures, and control the air supply
to fuel cells for optimal performance.
With over 35 years’ experience
partnering with global Commercial
Vehicle and Rail manufacturers, IMI
Precision has a long history of working
closely with customers to develop
solutions which solve their most acute
problems. We provide Breakthrough
Engineering solutions for transportation
applications that deliver improved
efficiency and safety.
Introduction Strategic Report Corporate Governance Financial Statements 32
Environmental, Social & Governance (ESG)
ESG is a small acronym for a topic of
such enormity. However, we welcome the
increased scrutiny this subject attracts as
it resonates with our Better World purpose
across all our businesses. In this section
we illustrate how our behaviour is driven
by ESG considerations and principles and
our ambition to deliver a better world.
Find out more:
www.imiplc.com/esg
IMI Precision Engineering –
Palézieux, Switzerland
IMI plc Annual Report & Accounts 2021 33
Doing the right thing, the right way
Inherent in our purpose is creating a
better world for our customers, our
communities and society. It permeates
all that we do. We are mindful of the
impact of our operations and our
products and we care about our people
and our external relationships. This
inspires us to strive for a future that
is more sustainable, inclusive
and responsible.
Better World team
The Better World team co-ordinates
the Group’s approach to ESG with
particular focus on these areas: our
carbon footprint, our products, our
policies and governance and our people.
Environmental –
Our sustainable
approach
Social –
Our wider
responsibilities
Governance –
Our ethical
standards
Turn to page 40
Turn to page 43
Turn to page 52
Introduction Strategic Report Corporate Governance Financial Statements 34
Road to net zero
We recognise the importance of taking strong action
to tackle climate change and have worked with the
global environmental consultancy, Ricardo, through 2021
to understand more clearly our emissions profile and
define a roadmap that is consistent with the level of
decarbonisation required to keep global temperature
increase to 1.5°C compared to pre-industrial temperatures.
Baseline
To set meaningful targets and focus
on the most impactful decarbonisation
measures, we conducted a thorough
analysis of our emissions using the year
2019 as a baseline – the latest year of
complete data with ‘usual’ business
operations. We are first focusing on
areas that we can directly influence
(Scope 1 & 2 emissions).
Emissions in the
value chain
We have estimated Scope 3 emissions
using the industry standard GHG
Protocol’s Scope 3 Evaluator Tool.
This exercise allowed us to identify
major sources of Scope 3 emissions
and understand their relative scale.
In 2022, we will engage with suppliers
and set a strategy for reduction of
Scope 3 emissions.
Decarbonisation
plans
We have undertaken a consultation
exercise with sites to develop detailed
site-specific decarbonisation plans
that are realistic, achievable and
implementable. These plans lay
out a roadmap showing how
decarbonisation targets will be met.
Our commitment...
To halve our total CO2 intensity (based on Scope 1 & 2
emissions) by 2030 from a 2019 baseline
What do we mean by
total CO2 intensity?
Our total CO2 intensity is our total
equivalent CO2 emissions (based
on Scope 1 & 2) per 1,000 hours
worked by our employees.
Scope 1, 2 and 3 explained
» Scope 1 emissions include direct emissions from company-owned and controlled
resources. This includes emissions from mobile combustion such as vehicles that we
own which burn fuel and emissions from our industrial processes in manufacturing
our products.
» Scope 2 emissions are indirect emissions from the consumption of purchased
electricity, steam, heat and cooling.
» Scope 3 emissions are all indirect emissions not included in Scope 2 that occur in
our value chain. For example, the emissions generated by our suppliers in producing
the raw materials we purchase.
IMI plc Annual Report & Accounts 2021 35
Reducing emissions
We have set a target of halving our
total CO2 intensity (based on Scope 1
& 2 emissions) by 2030 from a 2019
baseline (2019 emission intensity was
2.78 tCO2e per 1,000 hours worked).
This is in line with the level of ambition
required by the Paris Agreement. In
addition, our investment in developing
sustainable products and solutions
continues to align to our Better
World strategy.
Measure progress
We will monitor progress regularly
and report on progress annually,
allowing the Group to take advantage
of technological improvements and
to adjust targets and mitigation
measures accordingly.
Governance
We have established a clear structure
of responsibilities and accountabilities
to deliver our Better World strategy.
Our ambition...
To be net zero by 2040
What do we mean by net zero?
By 2040 we will have reduced all possible emissions across our operations and balanced remaining emissions to reach net zero.
Introduction Strategic Report Corporate Governance Financial Statements 36
Our ESG journey and future ambitions
On pages 40 to 53 we describe what Environmental, Social & Governance means
to IMI and how we approach key aspects of our ESG agenda. We are focused on
doing business in the right and responsible way. We seek to minimise or eliminate
any negative impact our businesses may have on our communities, our wider
stakeholders, and on the environment. We help our customers solve problems
to improve energy efficiency, reduce harmful emissions – and drive sustainability,
[Breakthrough Engineering for a better world].
Our ESG framework
During 2021, we reviewed and confirmed
what matters to IMI, and where we
believe we can have a positive impact.
We also refreshed our approach to
ESG, so that we may achieve our
purpose, effectively.
» Led by the Chair and the Chief
Executive, there is Board level
commitment to develop a strategy
covering how we best deliver
[Breakthrough Engineering for a better
world] and how we report on our
progress – for all our stakeholders.
» Thomas Thune Andersen was
appointed as the non-executive director
responsible for ESG matters at IMI.
As Chair of Ørsted, a company voted in
Corporate Knights as the world’s most
sustainable, his experience is significant
and relevant.
» The Board set ESG priorities, the
Executive Committee is fully engaged
with ESG matters and Louise Waldek,
Group General Counsel & Company
Secretary acts as the IMI Executive
sponsor for the Better World team.
» Our Head of Sustainability leads the
Better World team which is composed
of senior representation from around
the business, each with a different
perspective and expertise in ESG issues.
Area
Board
Roles
Chief Executive
ESG non-executive sponsor
Responsibility
Communicating
strategy through
the organisation
To ensure ESG issues are
considered as part of the
Group’s purpose, strategy
and objectives
Executive
Executive ESG sponsor
Divisional Managing Directors
Better
World
team
Head of Sustainability
IMI Precision divisional champion
IMI Critical divisional champion
IMI Hydronic divisional champion
Head of Health, Safety &
Environment
Head of Investor Relations
Head of Risk
Head of Engagement &
Communications
Head of Inclusion & Diversity
Head of Global Wellbeing
Communication
of activities and
initiatives
To set direction and ESG
focus areas relevant to IMI
To oversee ESG initiatives
and provide regular updates
to the Board
A cross-divisional and
functional team, co-
ordinating ESG initiatives
across the Group
Responsible for
recommending ESG
strategy, developing plans
for its implementation, and
establishing structures,
measures and validation
plans that deliver to Group
targets. Routinely reports to
Board and Executive
Developing external and
internal communication plans
in parallel to the above
Managing IMI’s relationships
with external consultants
and agencies
How we approach ESG
Across the Group we operate both a ‘top down and bottom up’ approach to the
ESG agenda, as illustrated above. This allows the Board and the Executive Committee
to actively review and assess ESG strategy and activities. It also ensures that ESG
progress and initiatives are managed at multiple levels and that key ESG information
is communicated effectively across the Group.
IMI plc Annual Report & Accounts 2021 ESG progress in 2021
To identify and prioritise sustainability issues across our value
chain we carried out a formal materiality assessment of
ESG factors based on the importance to our business and
stakeholders. We will use the findings to help inform our
Better World strategy and to determine which issues to
target and report on going forward. To do this we
implemented a four-step process:
37
1 Market analysis: Desk-based reviews, including megatrend
analysis, peer reporting, standards and policy reviews. These
helped us understand the key issues for now and the future.
2 Stakeholder engagement: Our process included internal and
external views on our impact for now and the future. The
engagement was used to rank issues in order of importance.
» This comprehensive process involved feedback from
institutional investors and a number of customers.
» We collected feedback from senior leaders across all three
divisions as part of a Group-wide engagement process,
utilising one-to-one and workshop formats.
3 Identifying and plotting 39 issue areas across multiple
dimensions of importance to stakeholders and
business success.
4 Prioritising and grouping the issue areas into an
ESG framework.
Environment
Our emissions
(Scope 1 & 2)
Achievements since 2019
Targets
Total CO2 intensity
reduction of 17% from
2.78tCO2e in 2019 to
2.30tCO2e per 1,000
hours worked
To reduce emission intensity
to 1.39tCO2e per 1,000
hours worked (50% of 2019
baseline) by 2030
Absolute CO2e emissions
reduction of 23% from
57,500t (in 2019) to
44,130t
To be net zero for Scope 1 &
2 emissions by 2040. A Scope
3 plan will be developed in
2022
Social
Employee
engagement
Employee
wellbeing
Diversity
Achievements
Targets
Employee engagement has
increased to 80% from 73%
in 2020 – employees see IMI
as a great place to work
Employee engagement score to
be >75%
Establishing a global
wellbeing framework
Development of this will continue
throughout 2022
38% female representation
on IMI Board
43% female representation
on Executive Committee
To continue to meet or exceed
the FTSE Women Leaders target
of >33% female representation
on our Board and Executive
Committee
One non-white Board
member
To continue to meet or exceed
the Parker Review for at least
one non-white Board member
One non-white Executive
Committee member
To continue to operate a diverse
Executive Committee
Task Force on Climate-related Financial Disclosures
We welcome the introduction of the Task Force on Climate-related Financial
Disclosures (TCFD) and are pleased to present our first report. We have
carried out an analysis using the TCFD framework to ensure compliance with
the requirements of LR 9.8.6R by including climate-related financial disclosures
consistent with the TCFD recommendations and recommended disclosures
required within the framework. In particular:
- conducting a climate materiality assessment to identify climate risks
related to physical and transition risks of: rising global temperatures,
climate-related policy, emerging technologies and market changes; and
- carrying out a deeper dive on the highest priority risks and opportunities
to identify next steps and actions. The highest priority climate-related risks
and opportunities for us have been identified.
Governance
» The Board has ultimate responsibility for climate-related risks and
opportunities and the oversight they have is described on pages 70-71.
» To support the Board, a Climate Risk Group has been established during
2021 working alongside external consultants in assessing and managing
climate-related risks, and opportunities. Further details of the Climate Risk
Group’s activities can be reviewed on page 72.
Strategy
» We have identified the main climate-related risks and opportunities over
the short, medium and long-term on page 73.
» The impact of these climate-related risks and opportunities on our areas
of business and strategy are highlighted on pages 72 to 73.
» Our strategy’s resilience to different climate-related scenarios is illustrated
on page 72 and includes:
- carrying out a scenarios analysis of the identified risks and opportunities
aligned with the TCFD methodology and seeking to quantify risks and
opportunities where possible. The analysis used internationally recognised
external reference scenarios that were selected for their relevance to our
operations. One is the EU ALLBANK scenario that assumes implementation
of intensive decarbonisation policies and is consistent with a 1.5˚C warming
trajectory, and the other is the EU BSL scenario that assumes regulations
will remain largely unchanged from today, and physical risks will intensify
(3˚C warming);
Risk Management
» Our robust process for identifying and assessing climate-related risks can
be viewed on page 72.
» Page 72 also describes our process for managing climate-related risks.
» Our process for identifying, assessing and managing climate-related risks
and how they are integrated into our overall risk management approach
is explained on pages 70-71.
Metrics and targets
» As described in the Environment table above and aligned with our Better
World purpose and strategy, we have developed two climate-related metrics
to assess risks and opportunities. These are:
- our total CO2 intensity (tonnes of CO2e per 1,000 hours worked); and
- absolute CO2e emissions.
» Page 42 explains and describes our Scope 1, Scope 2 and Scope 3
(for business travel only) and page 72 explains the related risks.
» The tables above highlight the climate-related achievements in 2021 and
future targets. Page 42 highlights our ongoing commitment to reducing CO2
emissions, with an analysis of the methodologies used and calculations for
the different scopes of Greenhouse Gas emissions. Page 73 highlights how
impact and likelihood are the main metrics used to assess climate-related
risks and opportunities.
Introduction Strategic Report Corporate Governance Financial Statements 38
To strengthen reporting and improve stakeholder
communications, it is important to provide comparable
and meaningful ESG data and information, aligned with
internationally recognised standards and disclosures. As such,
we are committed to developing a robust and transparent ESG
reporting framework, building on our strong foundations. Early
in 2021, we undertook a reporting gap analysis to understand
what data is currently being captured and reported, and this
will be mapped against what is deemed to be best-in-class.
We conducted a peer review to inform how leading organisations
from various sectors are reporting against ESG. We also
conducted a review of the criteria within leading sustainability
reporting standards.
Global Reporting Initiative (GRI)
To strengthen reporting and give a greater level of transparency,
we have decided to utilise the GRI standard for future reporting.
In the coming year we will develop a framework to capture the
required data across the various ESG categories to align with
the GRI standard. We will also continue to use the Carbon
Disclosure Project (CDP) to report Greenhouse Gas (GHG)
emissions as well as water security which we disclosed for
the first time in 2021. As detailed on page 72, we have also
undertaken climate scenario analysis to support our
TCFD disclosure.
We will adopt the GRI standards. We fully appreciate the
importance and data required to provide robust and transparent
reporting, and will work towards developing a full ‘in accordance’
report. We will start, in 2022, to disclose material issues that
are most important to our stakeholders as identified by the
materiality assessment, described on page 37 of this Annual
Report. We will continue to invest in systems and processes
to help us with our reporting requirements in this key area.
Product Portfolio Assessment
With increasing focus on sustainability there is a need for
organisations to fully understand and improve the environmental
and social impacts of their products and broader services.
We will continue to focus on the sustainability impact of our
products to guide decisions concerning their development, whilst
also working to increase our understanding of their sustainability
impact. Working with Ricardo, we have started to assess our
product portfolios evaluating sustainability at different stages
of the product life cycle (materials and design, production
and consumer use). The assessment will enable us to steer
our portfolio towards an improved sustainability impact for
our customers’ markets and operations. It will also help capture
risks and opportunities related to the products in our portfolio.
The insight will help shape our offering and steer us towards a
higher proportion of sustainable products and highlight products
that are of future concern, either because of their raw material
inputs or application and end of life costs.
Deeper insight: Life Cycle Assessment (LCA)
We have developed the assessment process to consider the
full life cycle of the products, which enables innovations to be
identified from cradle to grave. IMI Critical Engineering is utilising
LCA methodology to understand and quantify the sustainability
benefits of one of its key products – Retrofit3D.
IMI Precision Engineering –
Irwin, USA
IMI plc Annual Report & Accounts 2021 Delivering a better world
39
Our people are tasked with identifying and solving significant industry problems in attractive markets such that our businesses are
best placed to deliver our purpose: [Breakthrough Engineering for a better world]. Together with continued investment in innovation
and great customer service, these projects will contribute towards our sustainable, profitable growth objectives. A selection of these
projects are presented below, along with their respective links to the United Nations Sustainable Development Goals (UN SDGs),
with which they can most appropriately be compared.
Selected focus
areas
Applications
Link to UN SDGs
IMI Precision
Automation
Transportation
Life Sciences
Hydrogen
IMI Critical
Oil & Gas
Hydrogen
Carbon capture,
utilisation
and storage
IMI Hydronic
Climate within
buildings
Building services
Warehouse and
factory automation
solutions improving
worker safety and
increasing energy
efficiency
Solutions that help
Truck OEMs improve
emissions and enable
a shift to alternative
powertrains
Flow control
components for life
sciences devices
improving healthcare
for all
Flow control solutions
for hydrogen as
an enabler of the
transition to
net zero
Solutions to reduce
noise pollution and
emissions, and hence
increase the wellbeing
of communities living
close to industrial
process plants,
and reduce global
emissions
Flow control solutions
which support the
use of hydrogen as
an alternative fuel for
industrial applications
Solutions to help
reduce the carbon
footprint in industrial
applications
Solutions to improve
the energy used in
heating and cooling
buildings in which we
live and work
Solutions which help
reduce the carbon
footprint of buildings
Introduction Strategic Report Corporate Governance Financial Statements 40
Environmental, Social & Governance
Environmental –
Our sustainable approach
Progress in 2021:
» Total CO2 intensity reduction of 17% from
2.78 tCO2e in 2019 to 2.30 tCO2e.
» Absolute CO2e emissions reduction
of 23% from 57,500t (in 2019) to 44,130t.
IMI Precision Engineering –
Farmington, USA
IMI plc Annual Report & Accounts 2021 41
Reducing our impact
A better world encompasses living and
working in an environment that is clean,
safe and sustainable. At IMI we are
intent on reducing the impact on the
environment of both our operations and
the solutions we create for our customers.
This starts with minimising the impact
on the environment across our
manufacturing sites by reducing energy,
water use, pollution, waste and single
use plastics. We have set a goal of halving
our total CO2 intensity by 2030 (based
upon 2019 Scope 1 & Scope 2 emissions).
We monitor and report our environmental
performance at monthly Executive
Committee meetings, to ensure every
site is advancing actions to deliver this
reduction target.
In 2021, using the industry standard GHG
Protocol’s Scope 3 Evaluator Tool, we
estimated our Scope 3 emissions. This
exercise allowed us to identify major
sources of Scope 3 emissions and
understand their relative scale. In 2022,
we will engage with suppliers and plan for
how we will reduce our Scope 3 emissions.
Embracing the highest
standards
We hold ourselves to the highest
standards.
To underpin our commitment to reduce
our environmental impact, 22 of our
50 (44%) manufacturing facilities are
certified to ISO 14001 Environmental
Management and three are certified
to ISO 50001 Energy Management
standards.
At a Group level we have an established
cross-divisional environmental committee.
All divisions now have a dedicated ESG
lead or working group, and all of our
manufacturing sites have a nominated
environmental champion. This approach
allows working groups to develop and
share best practice easily across the
organisation, and to collate the site
and divisional project plans and monitor
progress. Progress is reported to and
monitored by the Better World Team
which routinely reports to the Executive
Committee and the Board.
In 2021, there were over 400
environmental initiatives undertaken
across the Group. These range from
quick wins such as ‘switch off’ campaigns
to significant capital investments such
as installing photovoltaic panels at our
IMI Hydronic manufacturing facility
in Germany.
Our new internal communication
platform includes a designated ‘Better
World’ group where all 10,000 employees
can share their ideas for reducing our
environmental impact. And we mark
key calendar dates such as World
Environment Day to raise awareness
on what more can be done to accelerate
our better world ambitions.
We have also developed an environmental
checklist that will be included in our
Health, Safety and Environmental
excellence framework audits.
Creating our workplaces of the future
We are currently building two new facilities for our IMI Critical Engineering business –
IMI Truflo Marine in the UK and IMI Remosa, in Sardinia – both of which embrace the
latest environmental technologies and have been designed in accordance with the
local sustainable codes of practise (for example BREEAM in the UK).
This includes the installation of photovoltaic cells, efficient heating and cooling
systems, intelligent LED lighting systems, point of use energy metering linked to
building management control systems, electric vehicle charging points, efficient
compressed air systems and process water reclamation.
IMI Truflo Marine has also implemented an employee transport plan to encourage the
use of the public transport network, car sharing and use of the cycling network with
an aim to reduce the number of single occupancy car journeys.
IMI Critical Engineering –
Sardinia, Italy
Introduction Strategic Report Corporate Governance Financial Statements 42
Environmental, Social & Governance
Promises made,
promises kept
Since 2016 we have reduced our CO2
emissions in line with our continuous
improvement culture and investment in
our operations. We continue to keep our
promise to halve total emissions by 2030.
We continue to support and disclose to
the Carbon Disclosure Project (CDP) which
outlines our risk management approach
to climate change and our emissions
performance. As part of the 2021 exercise
along with climate change, we also
undertook the water security disclosure.
Our 2021 CDP score for climate change
disclosure improved by 2 grading levels.
The adjacent table and supporting narrative
summarise the Streamlined Energy and
Carbon Reporting (SECR) disclosure in
line with the requirements for a quoted
company, as per The Companies (Directors’
Report) and Limited Liability Partnerships
(Energy and Carbon Report) Regulations
2018. 2021 is our second year of disclosure
and includes the prior year data as a
comparison. Projects and resources that
are contributing to our reduction in
emissions are summarised on page 41.
Methodology
The stated greenhouse gas emissions
estimates have been calculated to cover
all material sources of emissions from the
operations for which IMI plc is responsible.
The methodology used was that of the
Greenhouse Gas Protocol: A Corporate
Accounting and Reporting Standard
(revised edition, 2015). Responsibility for
emissions sources was determined using
the operational control approach. All
emissions sources required under The
Companies (Directors’ Report) and Limited
Liability Partnerships (Energy and Carbon
Report) Regulations 2018 are included.
The scope of emissions covers the
following sources:
» Scope 1 – emissions from the use of
natural gas, diesel, fuel oil, petrol and
liquified petroleum gas, and combined
heat and power (CHP);
» Scope 2 – emissions covers emission
from the purchase of electricity; and
» Scope 3 – emissions from business travel
in employee-owned or company vehicles.
The UL 360 Sustainability Software GHG
(Greenhouse Gas) emission tool was used
to calculate and consolidate the Scope 1
and Scope 2 emissions adopting a
location-based approach. The tool used
the following conversion factors:
» Scope 1 – UK Government’s GHG
Conversion Factors used for all sites
Location
Scope 1 and Scope 2
Emissions - tCO2e
Scope 1 - Natural Gas Usage
Scope 1 - Diesel Usage
Scope 1 - Fuel Oil Usage
Scope 1 - Petrol Usage
Scope 1 - Liquefied Petroleum Gas Usage
Scope 1 - Combined Heat and Power Usage
Scope 1 - Total
Scope 2 - Location-based
Total (Scopes 1, and 2)
Consumption - kWh
Scope 1 - Total
Scope 2 - Total
Current reporting year
1 January 2021 -
31 December 2021
Global
UK
Previous reporting year
1 January 2020 -
31 December 2020
Global
UK
768
83
0
0
6
0
857
1,770
2,627
8,786
2,545
743
553
311
20
12,958
31,172
44,130
840
1,918
2,758
12,465
33,033
45,498
4,548,860
64,917,809
4,423,632
61,951,252
8,339,185
106,856,592
8,227,092
103,870,105
Total (Scopes 1 and 2)
12,888,045
171,774,401
12,650,724
165,821,357
Hours Worked
1,862,769
19,176,514
1,938,683
18,811,012
Intensity ratio: tCO2e (gross Scope 1 and 2)
per 1,000 hours worked
1.41
2.30
1.42
2.42
Scopes 1, 2 and 3
Emissions - tCO2e
Scope 3 - Car Travel
Total (Scopes 1, 2 and 3)
Consumption - kWh
Scope 3 - Total
76
2,703
567
44,697
82
2,840
460
45,958
308,801
2,302,967
331,441
1,857,021
Total (Scopes 1, 2 and 3)
13,196,846
174,077,368
12,982,165
167,678,378
Intensity ratio: tCO2e (gross Scope 1, 2 + 3)
per 1,000 hours worked
1.45
2.33
1.46
2.44
» Scope 2 – UK Government’s GHG
Conversion Factors are used for UK sites
and the International Energy Agency’s
conversion factors are used for non UK
sites. For 2022, our ambition is to adopt a
market-based approach to our reporting
alongside the location-based approach.
Our currently reported Scope 3 emissions
were calculated by converting mileage
into emissions using the UK Government’s
GHG Conversion Factors for Company
Reporting 2021.
We are working to deliver a strategy
for identifying and reducing our Scope 3
emissions and this will be a key focus area
for 2022.
Scope 3 emissions currently only reflect
business travel in company cars or
employee-owned vehicles.
Our carbon reporting statistics
demonstrate that our recent
performance of tCO2e has continued
to improve particularly considering our
offices opened up during 2021 following
the prolonged closure of many sites
during 2020. On a like for like basis, we
continued our progress to keep emissions
at or below 2019 levels for 2021.
Of the 2021 total:
» our direct Scope 1 emissions of tCO2e
(essentially gas, diesel and fuel oil
consumed) amounted to 12,958 tonnes;
and
» our indirect Scope 2 emissions of tCO2e
(essentially the emissions generated on our
behalf to provide our electricity) amounted
to 31,172 tonnes.
The total (Scope 1 and Scope 2)
represents a 23% reduction compared
to 2019.
We report the intensity metric of gross
tCO2e per 1,000 hours worked as a unit
of comparison to reflect our operational
performance compared to carbon output
as we feel this provides a more reflective
measure of factory volumes and as a
result carbon intensity. Our 2021 intensity
ratio based on Scope 1 & 2 emissions is
2.30 tCO2e per 1,000 hours worked.
This compares to our 2019 baseline of
2.78 tCO2e per 1,000 hours worked.
We are on track to achieve our target of
1.39 tCO2e per 1,000 hours worked (50%
of the 2019 baseline intensity) by 2030.
IMI plc Annual Report & Accounts 2021
43
Social –
Our wider responsibilities
Progress in 2021:
» Employee engagement has increased
to 80% from 73% – employees see
IMI as a great place to work
» 43% female representation on
Executive Committee (increase
by 14%)
» Met the Parker Review for non-white
representation on our Board three
years early for FTSE250
» Reduction in total recordable
incidence frequency rate to 0.56
IMI Precision Engineering –
Versoix, Switzerland
Introduction Strategic Report Corporate Governance Financial Statements 44
Environmental, Social & Governance
At our core is doing the right thing, the right
way and being aware of the impact of our
decisions and actions. It is the responsibility of
us all and is how we will create a better world
for our customers and our communities through
our people, our products and our processes.
IMI Hydronic Engineering –
Ljung, Sweden
Our social achievements and targets
Turn to page 37
One big team
Employee engagement
We remain committed to engaging our
people to create our future together.
As ‘one big team’ we will fuel our growth
ambitions and collaborate to power
[Breakthrough Engineering for a
better world].
Measuring, and understanding, levels
of engagement to identify what more
we need to do to inspire our employees
is central to our employee engagement
approach. This year we launched our first
anonymised employee survey – One Big
Voice. This sought individual input from
across our sites and teams. We also
sourced input via a group worksheet
through our IMI Way Day activity, as
we have done historically.
71% of employees completed the
individual One Big Voice survey and
more than 9,000 written comments,
ideas and suggestions were submitted.
We also received nearly 1,000 completed
group worksheets.
Our overall engagement score is
measured through two questions:
“I see my business (IMI) as a great place
to work” and “I would recommend my
business (IMI) as a good employer to
friends and family”.
We are proud to share that against our
engagement scores from last year, the
IMI Way Day group worksheet survey
demonstrated that employee
engagement has increased to 80%
from 73% in 2020.
The anonymised individual responses also
indicate a strong engagement score of
73%. We are especially pleased with the
levels of engagement across the business,
given the challenging environment we
have all faced in the last year.
IMI Way Day 2021
IMI Way Day continues to be a highlight
in the IMI calendar – where all our people
come together with their teams, virtually
or in person to immerse in our purpose
and strategy, share their thoughts and
experiences to create a better working
world at IMI and take the time to
participate in community activities.
We know that it is a strong driver of
engagement – people welcome the
sentiment of the day and the opportunity
to connect and collaborate.
Culture and mindset
workstream
We know there is always more to do to
create a working environment where our
employees can thrive. This is particularly
important in the current working world
where we all continue to adapt to the
impact of a global pandemic. There is no
manual for us to learn from so it is even
more important that we listen and
respond. We also know that by creating
solutions that are ‘home grown’ we can
have a bigger impact.
During 2021, we established a ‘culture and
mindset’ working group with colleagues
from across the organisation to identify
where we could be better, and to ‘test
and learn’ ideas. Through qualitative
research we identified core themes
to focus on. These include supporting
employees through change, valuing
each other and advancing inclusion.
The Executive Committee endorsed these
findings and recommendations and IMI
is now introducing initiatives that can be
flexed across geographies and cultures.
These range from introducing ‘meeting
blackouts’ and ‘shift swaps’ to hosting
a ‘diversity wheel’ that encourages
greater connections and collaboration.
We look forward to continuing to listen
to our employees, and customising
solutions to demonstrate the value
we place on protecting and nurturing
a culture where all our people can thrive.
Insights from our
One Big Voice survey
» 90% feel free to try new things and
share ideas
» 85% believe their role uses their
skills well and feel trusted to put
their knowledge, skills and
experience into action
» 87% felt supported to work safely
and effectively during the pandemic
» 77% know how to access wellbeing
support and benefits
IMI plc Annual Report & Accounts 2021 45
Global wellbeing
programme
Supporting our people to be their best is
more important than ever. We know that
levels of anxiety have been heightened
during this pandemic and tuning in to our
mental health and wellbeing is important
for us all. IMI has committed to having
a broad programme of initiatives in place
so that people can access what is right
for them wherever they are, and at
whatever stage they are in their life.
Over the past year we have focused on
educating our employees to be alert to
the triggers of mental health issues such
as stress and burnout, and supporting
them to grow their levels of resilience so
that we all feel better able to cope with
life’s challenges. We have also created an
extended ‘virtual wellbeing’ offering that
people can access wherever they are.
We also recently conducted a
comprehensive wellbeing audit across our
offices and sites to assess reported levels
of employee wellbeing, and to understand
the diversity of programmes and policies
in place across the globe. The data is now
being used to create a global framework,
with the flexibility for all locations to
prioritise and customise a plan that
suits them.
Employee representation
We are committed to upholding strong
relationships, and engaging regularly,
with union bodies – these are represented
across many of our sites. We also host
an annual European Communications
Forum (ECF). This took place virtually
this year and was attended by employee
representatives from all of our key
European geographies. Securing
representation and appointing a
representative differs based on
employment laws set in each country.
The annual ECF is an important
opportunity to share an update on key
business and people initiatives as well
as respond to any questions or concerns.
We also meet with the forum members
every quarter to share updates and seek
their thoughts and feedback on key topics
arising in their geographies.
Thomas Thune Andersen is our Board
director with designated responsibility
for Employee Engagement. More
information about his role and activities
can be found on page 95 of the Corporate
Governance Report.
Leadership engagement
We want all our leaders to embrace their
engagement role – bringing to life our
business ambitions and ensuring our
people recognise their part in delivering
our growth and unlocking our purpose.
We equip our leaders in their engagement
role through regular connections and
channels. These include our quarterly calls
with our Chief Executive and leadership
community and our annual conference.
Although virtual this year, we still created
an open and engaging event where
leaders contributed to our strategic
objectives. We took the theme of one
of our core values – one big team –
and collaborated as a leadership team
to identify opportunities to accelerate
growth and fuel our purpose. Looking
ahead to our next conference, we are
taking the same sentiment and
immersing in another of our values –
Playing to Win for a better world.
We also invest in supporting onward
engagement and create channels and
assets for our leaders to use with their
own teams. We want all our people to
connect their part to creating our future.
IMI Hydronic Engineering –
Ljung, Sweden
Introduction Strategic Report Corporate Governance Financial Statements 46
Environmental, Social & Governance
‘One Big Team powered by Workplace’
Connecting and collaborating with colleagues from across our sites is how we
engender strong levels of engagement. We continue to invest in tools and channels,
including embracing digital, to open up conversations.
In May 2021, we launched our new internal communications platform that we refer
to as, ‘One Big Team powered by Workplace’ (Workplace). The platform has truly
transformed how we connect and bring in our employee voice. We are able to reach
each other in real time to share news and updates, and seek input in to our strategy
and performance. Most importantly, it is a great channel for celebrating our people
and their contribution across all geographies and levels. And to encourage people to
simply be who they want to be, through sharing their ideas and insights. It also
allows our employees to connect and communicate in their local language.
IMI Precision Engineering –
Bad Oeynhausen, Germany
An inclusive and
diverse culture
Continuing to advance an inclusive and
diverse culture where all our people can
be who they want to be is central to our
better world ambitions. We are a diverse
business – we operate in over fifty
countries, with many different end-
markets, industry sectors, technologies
and manufacturing processes. We want
to continue to bring diversity of thought
and experience to drive innovation and
to find solutions for some of the world’s
most challenging problems.
We have a passionate and committed
inclusion and diversity working group
who support us in delivering a real impact.
Results include the continued adoption
of Women in Science and Engineering
(WISE), and leveraging the community-
building power of Workplace where
employees can celebrate and engage with
each other. Internal campaigns in 2021
that marked events such as International
Womens’ Day, International Women in
Engineering Day, PRIDE Month, National
Inclusion Week and International Day
of People with Disabilities enabled IMI
to broaden our scope beyond gender. At
the core of all our campaigns is educating
ourselves on what more we can do.
We have also created internal capability
programmes to help managers tap into
the drivers for advancing inclusion and
diversity. Specific sessions on Inclusion
and Diversity are now a part of our
Leadership and Manager training
programmes. We are also running
specific topic training courses, such as
unconscious bias within IMI Precision.
Inclusion and Diversity policy:
www.imiplc.com/esg/social
Other highlights
from our One Big
Voice survey
» 88% of employees feel individual
differences are respected
» 87% feel treated fairly by colleagues
and 86% by their manager
» 79% feel a sense of belonging
(being their authentic self)
» 70% feel they have equal
opportunities to develop
and progress
» 73% are confident to speak up to
address concerns, and feel confident
in the process
» 69% consider we pro-actively
cascade communications across
all levels to highlight IMI’s strategy
and product updates
We know that transparency and
fairness are vital steps towards
harnessing the power of a diverse
workforce. We therefore introduced
certain protected characteristics in
our employee engagement survey
this year and we are currently
collecting on a voluntary basis
ethnicity data from our UK employees
to enable ethnicity pay gap reporting
for the first time in 2022 (at the same
time we report on the gender pay
gap). Our increased investment in
communications is demonstrated by
the launch of a new communications
platform, which is transforming how
we connect with employees.
IMI plc Annual Report & Accounts 2021 FTSE Women Leaders
review (previously
Hampton-Alexander)
We also sign-up to the highest standards
of governance. The FTSE Women Leaders
Review is an independent, business-led
framework supported by the
Government, which sets
recommendations for Britain’s largest
companies to improve the representation
of Women on Boards and in Leadership
positions. The FTSE Women Leaders
Review builds on the excellent work of
both the Hampton-Alexander and Davies
Reviews over the last 10 years, with the
33% target for Women on Boards being
achieved in the aggregate for the FTSE
350 at the end of 2020, and the
Leadership just falling short of the target
at 29%. We have just submitted IMI data
for the 2021 report which should be
published in February 2022. A new
five-year review has been announced by
the UK government with new leadership
being appointed to steer the review and
take forward new targets over the
coming years.
Our Board is already strong – with 38%
female membership against the
Hampton Alexander target of 33% female
representation and we have 43% female
membership on the Executive Committee.
As at 31 December 2021, 18% of direct
reports to the Executive Committee
are female.
UK Gender pay gap
We are committed to creating an inclusive
and diverse working environment and fair
treatment for all, including equal pay.
Overall, our statistics remain similar to the
sector in which we operate. In the UK we
have around 1,300 employees working for
9 companies where there is a 72% male,
28% female gender distribution which
is fairly typical in the engineering sector.
However, we have seen a significant
narrowing of the mean gap in 2021 as
a result of senior level appointments.
Mean gap
Median gap
2021
17.8%
17.4%
2020
25.1%
22.5%
47
Lord Parker
report update
The Parker Review, commissioned in 2017,
set the target for FTSE 100 boards to
have at least one director from an ethnic
minority background by 2021 – the
so-called ‘One by 2021’ target with FTSE
250 to follow suit in 2024. IMI met the
requirements of the Parker Review in 2021.
Inclusion & Diversity is a key part of our
Growth Hub programme. When we put
teams together, it is with cognitive
diversity in mind, and we have seen the
benefits of this approach.
We have also continued to have a strong
focus on the diversity of our graduates
with wide cultural diversity and 50:50
male: female split for the past few
intake years.
We will continue to encourage an inclusive
approach to resourcing, development, and
succession planning to help drive greater
diversity across the Group.
As at
31 Dec 2021
Board
Executive
Direct
reports to
Executive
Leadership
group
All
employees
Female Female % Male Male %
3
3
8
38%
43%
18%
5
4
62%
57%
36
82%
19
14%
119
86%
3,269
29% 7,964
71%
IMI Precision Engineering –
Palézieux, Switzerland
Introduction Strategic Report Corporate Governance Financial Statements 48
Environmental, Social & Governance
IMI Critical Engineering –
Piacenza, Italy
Customer intimacy
Our people are the custodians of our
future. We want all our people to bring
the very best of them to identify and solve
customer problems – creating a better
world for industry and society.
Diverse teams are at the heart of this
and we continue to bring more people
from right across the business into our
Growth Hub programme. Our teams
include people from all levels and parts
of the organisation who work together
in an exciting and fast-paced environment
to create solutions for customer
problems. Our One Big Voice survey
highlighted that 55% of employees feel
they have an opportunity to be involved
in growth initiatives (eg Foresight, New
Product Development Ignite and Growth
Hub teams).
We bring the tools, techniques and
growth mindset from our Growth Hub
programme in to our day to day. We know
the skills can create more dynamic and
efficient ways of working. For example,
IMI Precision has applied the concepts
to its recruitment practices. IMI Critical
has run a number of hackathons to
engage more people in idea generation
and to test and learn against customer
problems. It is also running a ‘Voice of the
Customer’ initiative across all sites –
highlighting how to ensure the customer
is front and centre of our decision-making.
And IMI Hydronic has introduced the
concept of Growth Hub buddies to bring
the tools and techniques into different
situations. It also recently hosted ‘failure
sessions’ to help people feel comfortable
with the concept of ‘failure is knowledge’.
Our HR function also embraced our
Growth Hub tools and methodologies
to ‘re-imagine HR’ and create a future-
focused people agenda.
IMI plc Annual Report & Accounts 2021 49
Integrity
Safety first
Ensuring all our employees feel safe
at work is central to our strategy and
culture. We promote an ethos of safety
first and set ourselves the highest
standards for Health, Safety and
Environment. It is integral to our IMI Way
and embedded in our Code of Conduct.
We also take a proactive approach to
review our performance and constantly
identify areas for improvement. Our
Group Head of Health, Safety and
Environment reports directly to the Chief
Executive who has ultimate responsibility
for Health and Safety. The Executive
Committee reviews Health and Safety
performance every month and regular
reports are presented to the Board.
One of the areas of focus in 2021 was
managing machinery safety. We created
a cross-divisional machinery safety group
who developed and introduced a ‘golden
rules’ campaign across our sites to ensure
a consistent approach. The Group also
analysed our fixed and handheld grinder
activity, an area of safety risk, and
resulted in the elimination of 329 grinders
with the remainder being more closely
controlled, and the introduction of a
dedicated IHASCO grinder safety training.
This training is available to all employees
via our IMI Learn portal and results in
a recognised IOSH certificate.
IMI Critical Engineering –
Kobe, Japan
Accountability
We expect all our leaders to lead our
Health and Safety agenda and to be
accountable for its implementation –
we want every employee and all visitors
to our sites to understand our procedures
and protocols.
The Coronavirus pandemic continued
to impact how we managed Health and
Safety throughout 2021. We spent time
explaining ‘personal accountability’ to our
employees using infographics illustrating
compound risks of certain activities,
whilst also encouraging ‘hands, face,
space’ at home and in work. We also
deployed innovative methods of virtual
Gemba safety inspections, using a mix
of technology and administrative tools,
which included a ‘validation’ self-audit
tool based on the COVID-19 protection
measures we deployed. During 2021 we
have undertaken 103 hours of virtual
Gemba across all three divisions, this is
in addition to the already established
safety Gemba tours undertaken each
week by local site leadership.
14 of our 50 manufacturing sites have
now transitioned and are accredited
with ISO:45001, the international
standard for Health & Safety
Management and 3 still retain the
former OHSAS:18001 standard.
In 2021, we also introduced the IMI HSE
Excellence Framework – an enhanced
management system that assesses our
HSE standards against areas such as
distributed workforce (field service),
environment (air, water, waste),
leadership engagement and risk
assessment. To introduce the framework,
we asked each manufacturing location to
undertake a self-audit using the
standardised audit tool. As travel
limitations eased between June and
November, Group and Divisional HSE
leaders could re-commence site visits,
and completed on-site audits at 24%
of our manufacturing locations. The
remaining locations are scheduled for
2022. This will formulate the HSE
Excellence benchmark across the
whole Group.
We have also begun to underpin
each element/sub-element of the
framework with standardised
processes and procedures.
Introduction Strategic Report Corporate Governance Financial Statements 50
Environmental, Social & Governance
Detailed training sessions are delivered for
each procedure across the Group. We will
continue to progress this throughout 2022
– ensuring all IMI locations have a clear
and consistent understanding and to
maintain a high expectation with regards
to HSE excellence implementation and
subject areas.
We continuously use our data to drive
focused activities to improve our safety
and environmental performance. As in
2020, in Q4 2021, we held a data analytics
workshop with collaboration from Group
and divisional operational / HSE leaders.
This gives us the ability to use our data to
objectively set goals and targets for the
forthcoming year. These will include
reductions in our lagging indicators but
also leading indicators such as increasing
hazard reporting, with a target of 90%
closure of these reports within 30 days.
As part of the analysis, we also evaluated
our HSE team members globally and
identified an opportunity to upskill certain
team members. We have agreed that the
minimum level of competence for all of
our site-based lead HSE professionals will
be the NEBOSH International Certificate
for Health and Safety (or local equivalent
certification). Those that require upskilling
will work towards certification by the end
of 2022.
In January 2021, we introduced a global
incident reporting standard operating
procedure (SOP) that includes a
requirement for all hazards to be reported
within 72 hours into our global digital
platform. We have subsequently seen
an increase of 90% of reported hazards
from 12,495 in 2020 to 23,816 in 2021.
Aligned with the revised incident reporting
SOP, we report and record every safety
incident and fully investigate those cases
classified as a recordable incident. A full
root cause analysis is presented and
reviewed with the relevant Divisional
Managing Director and Group Head of
Health, Safety & Environment. Following
this formal review, a remediation plan
is agreed, and countermeasures
implemented. In line with our excellence
framework, we have standardised our
Safety alerts which are issued to share
lessons learned and increase safety
awareness across the Group.
To align with the Global Reporting
Initiative (GRI), we now report Total
Recordable Incident Frequency Rate
(TRIFR) using the methodology based on
200,000 hours (equivalent to 100 full
time workers over a one year timeframe).
Total Recordable Incident
Frequency Rate (TRIFR)
=
Number of recordable
work-related injuries
Number of hours
worked
x
200,000
We measured the volunteering impact
of this year’s IMI Way Day and are proud
to share that 3,418 employees delivered
13,226 of volunteering hours. Most
importantly we are committed to building
long lasting meaningful relationships with
the charities we support to enhance our
social impact.
We are engaging our graduates in
creating a better world for our
communities. This year we partnered
with The Shining Light Project to
challenge our graduate intake to
design a 90 minute workshop to
deliver in schools around the world
for 15 to 16 year olds. Their ideas
were outstanding and included:
» The future of farming: Teaching
students the concepts of hydronics
and its role in creating a circular
economy. The students then
constructed a farm to understand
the transparency of how food will be
produced, while also inspiring young
people to plant their own food.
» Listening for a better world: The
students listened to the story of
a refugee, told in person. The goal
was to develop their empathy and
listening skills. The students then
built a ‘care package’ for the
refugee, based on what they
learned from the refugee’s story.
» Flowing towards a better world:
The students created a rudimentary
water filter to show the positive
environmental impact through
engineering.
» Create from crates: Students were
taught about the environmental
problems we face and then set
a task to upcycle crates.
The graduates took part in a further
day-long design sprint to pick the best
of the ideas to design and build the
full 90-minute workshop.
Our TRIFR (total recordable incidence
frequency rate) rate includes all work-
related injuries greater than first aid.
This is also in line with OSHA
(Occupational Safety and Health
Administration) and gives us the ability
to benchmark against our industry peers.
We include all employees, contractors and
visitors in our accident reporting statistics.
There were no fatalities during the year.
Our recordable accident cases are static
compared to prior full year 2020 at 53
injuries for both 2020 and 2021, this
includes 15 Lost Time Accidents in 2020
and 23 Lost Time Accidents in 2021.
The 2020 Lost Time Accident number
has been restated to 15, from 14 reported
in 2020, due to the reclassification of an
injury and follow up treatment. Our TRIFR
rate has improved slightly, decreasing
from 0.57 to 0.56 for the year, driven
by increased working hours across our
operations. IMI remains in the top quartile
of safety performance within the industry
sector, but remains committed to its
ambition of an accident free workplace.
Please see our TRIFR chart below.
TRIFR
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.48
0.60
0.59
0.57
0.56
0
2017
2018
2019
2020
2021
Community engagement
All our community activity is aligned to
the UN Sustainable development goals –
we want to make the biggest impact
we can through sharing our time, skills
and experiences. We also want it to be
a motivator for our employees which
is why we offer a broad range of
opportunities that connect with our
people’s personal values.
IMI plc Annual Report & Accounts 2021 51
IMI Critical Engineering –
Piacenza, Italy
Playing to win
Talent and succession
Our talent processes are well embedded
and reach far into the organisation.
We want our people to access a rich
variety of resources and experiences to
grow themselves and others, and fuel
our growth priorities.
A particular focus is on succession
planning to support internal talent
appointments – 69% of Leadership
Group roles have been appointed from
within the organisation in 2021.
We have a very strong graduate
programme and are focused on
graduate progression and early
careers development.
IMI Learn
Our online learning platform continues
to grow to be a valuable resource for all
our people. They can access a broad range
of modules to support both technical
as well as ‘soft’ skills. Key topics covered
include mental health and wellbeing,
mentoring, leading virtual teams,
personal development conversations
and communication.
We continue to invest in our leadership
development programmes to support
our leaders in executing our business
strategy. We want our leaders to create
the environment for our culture to thrive,
and to fuel the growth of our people and
business. We also continue to invest in
high potential talent through specialised
development programmes that promote
career acceleration and ensure a pipeline
of high calibre talent. Our leadership
catalyst development programme was
also launched in June. This sponsors high
potential talent.
The launch of Workplace has allowed for
internal job opportunities to be opened
up to all our employees right across our
business for all to apply and is helping
to promote an open and inclusive culture.
This approach is currently being enhanced
to further promote opportunities.
Flexible working practices have been
necessary as part of the pandemic and
are still being encouraged with a global
flexible working framework supporting
sites and leaders to enhance flexible
working whilst also delivering safe,
reliable operations.
Introduction Strategic Report Corporate Governance Financial Statements 52
IMI plc Annual Report & Accounts 2021
Environmental, Social & Governance
Founded on integrity
IMI’s values
Our purpose and values are all strongly
linked and are aligned with our strategy:
Our purpose is at the heart of everything
we do, it is why we exist.
[Breakthrough Engineering
for a better world].
Our values are an important part of
who we are, as they provide a culture
and collective mindset for our entire
organisation. They are fully aligned
with our purpose and vision.
Customer intimacy – a mindset where
the customer is at the heart of everything
we do.
One big team – leveraging IMI’s diversity
in every sense, whether this is the diversity
of talent, knowledge and experience that
we have with our people, or the diversity
of technologies, processes and end
markets across our businesses.
Playing to win – a growth mindset that
is innovative and open to learning.
Integrity – being true to who we are
and doing the right thing at all times.
The IMI values underpin all that we do,
and ensure we maintain the foundations
that have enabled IMI’s success through
its 150-year heritage.
Governance –
Our ethical standards
IMI Precision Engineering –
Shanghai, China
53
Our full Modern Slavery Act statement,
includes detail about steps we take to
ensure that slavery and human trafficking
do not take place within our supply chain
or any part of our business, is available on
our website. The other policies referred to
in this section, including our Anti-Bribery,
Compliance and Hotline policies, are also
available to all employees.
We have continued to work closely with
our suppliers throughout 2021 with a view
to further rationalise and simplify our
supply chain networks. In 2021, we also
updated our Supply Chain policy to
include our ambition on CO2 reduction
across our suppliers, in line with our
emerging Scope 3 emissions plan. This will
be further developed throughout 2022.
We are committed to addressing our
Scope 3 emissions and are working closely
within the Better World team to focus our
attention with a view to report more fully
in our 2022 Annual Report.
Actions speak louder than words.
We constantly strive to live our values in
everything we do. To pursue our purpose
[Breakthrough Engineering for a better
world] responsibly and sustainably. And
we do that because it is the outcomes
– for our business, our stakeholders, and
our world – that really motivate us.
Nonetheless, the outside recognition of
our intent – including our ‘AA’ rating in the
MSCI ESG survey and our membership
of the UK’s FTSE4Good Index – is
encouraging to see.
Code of Conduct
It is essential that we act with integrity
and at all times run our business in an
ethical and responsible way. Integrity
is one of our core values and underpins
everything we do.
It is a cornerstone of our culture. Our
Code of Conduct (the ‘IMI Code’) sets out
the standards we expect our employees
to adhere to. It covers a range of issues
including anti-bribery and anti-corruption
and is available in thirteen languages.
Every employee receives a copy of the IMI
Code upon joining the Group and specific
training about the IMI Code is provided
as part of our employee induction
programme. On an annual basis we
provide refresher training and updates
on specific compliance issues to relevant
employees. This year, we have rolled out
training on anti-bribery and corruption,
competition law and tax evasion.
The IMI Corporate
Governance Framework
Our governance framework and the
practical workings of our Board and
its committees are described in the
Corporate Governance Report on
pages 86 to 101.
Policies and procedures
We have a number of detailed standing
operating procedures underpinning the
IMI Code of Conduct and appropriate
compliance processes. A list of key policies
and procedures can be found in the
Non-financial Information Statement
on page 135 and include anti-bribery
and corruption policies. Around the
Group there are 31 legal and compliance
specialists supporting the businesses
with training and implementation of
compliance policies. Monitoring and
review procedures include Internal Control
Declarations, spot checks and regular
on-site legal and compliance reviews,
which are designed to help instil the
highest standards of regulatory
compliance. These policies and procedures
are embedded in our risk assessment
processes, further details of which are
provided on page 70.
We encourage all employees to report
any incident that is not in keeping with
our values and behaviours through a
confidential independent hotline in 12
languages, which allows anonymous
reporting. We have refreshed our Speak
Up policy this year and are in the process
of carrying out a Group-wide campaign
to enhance awareness of our hotline.
The Group’s Ethics and Compliance
Committee reviews hotline activity on
a monthly basis. Reports are investigated
thoroughly and, where required, action
is taken to resolve issues. The Executive
Committee monitors the operation of
the hotline and receives information
about any concerns raised. The Board also
monitors the operation of the hotline and
checks that commensurate investigation
and follow-up is carried out. During 2021,
39 cases were reported via the hotline
which compared to 33 in 2020.
Ethical conduct
Integrity is one of our four core values and
forms the basis of IMI’s decision-making,
including dealings with our stakeholders.
Whilst we commit to acting responsibly,
sustainably and with integrity, we expect
our extended supply chain to do the same.
We actively choose suppliers that respect
the environment, their employees and
adhere to our strict IMI Supply Chain
Code of Conduct. But our supply chains
are often long and complex, so we also
encourage our partners to adopt similar
working practices regarding their own
suppliers. We strive to positively influence
ethical and sustainable trading
throughout the world.
IMI is also committed to sourcing our raw
materials responsibly. This means that
we have a process to identify the origins
of conflict minerals in our supplies, and
are committed to ensuring they originate
from legal, audited mines. We ask all of
our suppliers of products containing
conflict minerals (specifically tin,
tantalum, tungsten and gold – otherwise
known as 3TG) to take immediate action
to identify the origins of 3TG in the
products they supply to us.
Introduction Strategic Report Corporate Governance Financial Statements 54
Our stakeholders
Building strong and positive
relationships with our key stakeholders
is critical to fulfilling IMI’s purpose,
delivering our strategy and achieving
long-term sustainable success.
We aim to engage with our key stakeholder groups to
develop and maintain positive and productive relationships.
Where we are making strategic decisions, we assess the
impact of the proposal on affected stakeholders, and where
appropriate, engage directly with them on the topic. By
taking a consistent approach to decision making and being
guided by our purpose and our strategic aims, we hope that
our stakeholders understand our decisions.
IMI Critical Engineering –
Piacenza, Italy
IMI plc Annual Report & Accounts 2021 55
The table below captures our two-way engagement process with key stakeholder groups.
Employees
Shareholders
Customers
Suppliers
Society &
Community
Government &
Regulators
Why engage?
We provide
stakeholder
with…
Stakeholder
provides us
with…
Trust &
transparency
Employee
advocacy
Attract, retain
and develop
talent fit for
today and
tomorrow
Career
development
Remuneration
Diverse, inclusive
and engaged
environment
A safe place
to work
Skills & expertise
Behaviours in
line with our
values
Ambassadors
for IMI
Trust and
confidence
Investment
Strong
relationships
Strong
relationships
Understand wider
impact
To be a good
corporate citizen
Trust & confidence
Trust & confidence
Business growth
Innovation
Value creation
Value creation
Support shared
goal of a better
world
Transparency
Sustainable
return on
investment in
the long-term
Quality products
and services and
related support
Value Today and
Tomorrow
Sustainable
relationships
Prompt payments
Fair terms
Support through
economic activity
and tax payment
Compliance
Taxes
Equity capital,
strategic
direction and
stewardship
Sustainable
relationships
Value creation
Growth
Quality products
and services and
related support
Innovation
Societal and
community
perspectives on
our activities
Level playing field
within which to
operate
Opportunities
to deliver new
products/solutions
which meet
evolving regulatory
standards
Introduction Strategic Report Corporate Governance Financial Statements
56
Our stakeholders
The table below shows our key stakeholder groups and summarises their principal issues and how we engage with them.
For information about how stakeholder interests are addressed by our business model, see page 17 and the Environmental,
Social and Governance section on pages 32 to 53.
Our statement pursuant to Section 172(1) of the Companies Act 2006, which references stakeholder considerations and other
factors in Board decision-making appears on pages 97 to 100.
Our
stakeholders
Their priorities
How we engage
Further information
Value enhancing
products & services
The Growth Hub programme involving hundreds of customer
interactions
Customers
New products to help
meet ESG requirements
Ongoing relationship management at strategic, sales and technical
engineering levels
Access to engineering
expertise
World-class customer
service
Long-term partnerships
Technical and product support, with access to our industry renowned
experts, such as through the Hydronic College and Valve Doctor
programmes
Increasing use of digital platforms to drive knowledge sharing, customer
networking and relationship building
Performance monitoring and improvement through customer driven
metrics such as on time delivery and net promoter score
Trade fair attendance and exhibition
Social media – including building customer communities
Participation in relevant trade associations & industry bodies
Our Growth Hub
programme –
see page 48
Examples of the use
of digital platforms to
drive knowledge sharing,
customer networking and
relationship building can be
found on pages 20 to 21
Employees
Health, wellbeing and
safety at work – where
our people can thrive
A positive and inclusive
culture – valuing the
unique contribution
of individuals and
supporting their diverse
working needs
An environment that
engages all employees
– involving them in
creating our future
Opportunities to
grow and develop –
supporting our people
to be their best
Rewarding contribution
– celebrating our people
for their part in our
growth
Comprehensive health, safety and wellbeing programmes that touch
all employees
Health and Safety –
see page 49
Annual Group-wide IMI Way Day and annual One Big Voice
employee survey
IMI Way Day –
see page 44
Employee engagement actions, integrated within business plans,
at every level
Employee engagement –
see page 44
Thomas Thune Andersen (our non-executive director with designated
responsibility for employee engagement) has an annual programme
of employee engagement events. Workforce engagement also takes
place by the Board and management. This includes staff representation
and Union participation. The European Communications Forum meets
annually, with representatives from our key European geographies
Training and development –
see page 51
Executive remuneration
reflective of remuneration
for the wider workforce –
see page 117
Appropriate engagement takes place at local level in relation to
restructuring changes affecting the workforce
A suite of face-to-face and online training and development
programmes, targeted at business and employee needs
Leadership calls, conferences, town hall meetings
Targeted individual, team and Group emails through our internal
communications platform
Independent confidential hotline
New online communications platform – One Big Team powered by
Workplace – connecting people across our sites and showcasing
customer wins, strategy updates & people initiatives. Media for annual
communications calendar of events
IMI Learn – access to face-to-face and online training and development
programmes targeted at business and employee needs
Corporate website
IMI plc Annual Report & Accounts 2021 57
IMI Precision Engineering –
Bad Oeynhausen, Germany
Our
stakeholders
Their priorities
How we engage
Further information
Trust
Annual General Meeting
Financial returns
Active Investor Relations programme
Shareholder engagement –
see page 96
Shareholders
Strategy & execution
Capital Markets Events
Sustainability
Investor and analyst engagement
Effective capital
allocation
Balance of long-term
versus short-term
results
Stewardship
Long-term
partnerships
Fair and timely
payment
Fair commercial terms
Collaborative
approach
Chair and Senior Independent Director available to shareholders
Investor communications and corporate website
Remuneration related consultation, in policy change year,
and as required
Ongoing commercial dialogue
Supplier audits & improvement action tracking
Supplier summits
Regular business reviews with preferred suppliers
Suppliers
Positive social impact
Obtain market insights from adviser – Ricardo
Society/
community
Employment
opportunities
Environmental impact
in the locations where
we operate and on the
global community
Employment
Tax income
Governments
& Regulators
Sustainable approach
to business
Plans to adopt reporting in line with the Global Reporting Initiative
Active tracking, management and reduction plans across IMI sites
for emissions
IMI Way Survey
Local community support and charitable activities
University partnerships and Graduate Programme
Active management of emissions and reduction plans across
IMI sites
Engagement in relation to specific issues on an ad hoc basis
Good corporate citizen with on time tax filings and other
submissions to regulators and governments
Supply chain management –
see page 53
Modern slavery statement, Supply
Chain Code of Conduct and
Responsible Minerals Sourcing
policy – see our website
Community activities –
see page 50
Environmental, Social &
Governance section –
see pages 32 to 53
Environmental performance –
see pages 40 to 42
Tax strategy on our website
www.imiplc.com/esg
Corporate Governance Compliance
statement on page 86
Introduction Strategic Report Corporate Governance Financial Statements 58
Operational review
IMI Precision Engineering
IMI Precision Engineering specialises in the
design and manufacture of motion and fluid
control technologies where precision, speed
and reliability are essential to the processes
in which they are involved. IMI Precision
Engineering operates across three principal
business units: Industrial Automation,
Precision Fluid OEM and Transport.
Further details on that segmentation, and comparison
with the 2020 results are available in Note 4.
Find out more:
www.imiplc.com/what-we-do/our-businesses/precision-engineering
Revenue
3%
£836m
Adjusted operating profit
8%
£149m
Statutory operating profit
18%
£100m
Please refer to Note 3 for definitions of the Group’s
Alternative Performance Measures.
The financial results for IMI Precision and IMI Critical
have been restated following the transfer of the
Energy business from IMI Precision to IMI Critical
during 2021. Details are included in Note 1.
IMI Precision Engineering –
Bad Oeynhausen, Germany
IMI plc Annual Report & Accounts 2021
Beth Ferreira
Divisional Managing Director
59
2021 performance
IMI Precision’s core end markets continue
to provide excellent new opportunities
for growth, as highlighted in the Capital
Markets Event held in September.
Outlook
Based on current market conditions,
IMI Precision Engineering 2022 organic
revenues and margins are expected to
be higher than in 2021.
Key achievements
» Strong underlying sales growth,
excluding ventilator surge, of 19%
» Acquisition of Adaptas
completed in attractive Life
Sciences sector
» Good early progress from
Customer First and Growth Hub
During the year, the division delivered
solid organic revenue growth of 7% as
recovering key markets more than offset
the reduction in Life Sciences revenue,
following the 2020 ventilator component
sales surge. If ventilator sales are
excluded, the underlying growth rate
was very strong at 19%. That progress
was driven by gains across all three
business segments: Industrial
Automation, Precision Fluid OEM, and
Transport. When compared with 2019,
the organic revenue growth was 4%.
Industrial Automation revenues were up
17% compared with 2020 on an organic
basis, with Transport revenues 26%
ahead on the same basis. Both of these
performances reflected strong recovery
in their respective markets, and were
supported by the division’s proactive
supply chain management which ensured
core products remained available despite
the challenges globally brought on by
the pandemic. Sales within Precision
Fluid OEM were down 18%, compared
with 2020 with good performance in
Process Control more than offset by the
non-repeat of the ventilator surge in
Life Sciences.
Adjusted operating margin in the division
improved in the period by 80 basis points
to 17.8%. The division continues to
advance complexity reduction initiatives
which will enable further improvements
in customer service and support progress
towards its margin targets.
Statutory operating profit reduced
by 18% due to the restructuring
programmes announced in the year
to increase customer focus and reduce
complexity in the division.
Introduction Strategic Report Corporate Governance Financial Statements 60
Operational review
IMI Critical Engineering
IMI Critical Engineering is a world-leading
provider of flow control solutions that
enable vital energy and process industries to
operate safely, reliably and more efficiently.
Our products control the flow of steam,
gas and liquids in harsh environments and
are designed to withstand temperature
and pressure extremes as well as intensely
abrasive or corrosive cyclical operations.
Further details on IMI Critical Engineering market
segmentation, and comparison with 2020, are available
in Note 4 of this statement.
Find out more:
www.imiplc.com/what-we-do/our-businesses/critical-engineering
Revenue
2%
£691m
Adjusted operating profit
4%
£125m
Statutory operating profit
35%
£111m
Please refer to Note 3 for definitions of the Group’s
Alternative Performance Measures.
The financial results for IMI Precision and IMI Critical
have been restated following the transfer of the
Energy business from IMI Precision to IMI Critical
during 2021. Details are included in Note 1.
IMI Critical Engineering –
Piacenza, Italy
IMI plc Annual Report & Accounts 2021
Jackie Hu
Divisional Managing Director
61
Outlook
Based on the division’s order book and
current market conditions, IMI Critical
Engineering 2022 organic revenues and
margins are expected to be slightly
higher when compared to 2021.
Key achievements
» Organic order intake up 3% in the
full year, organic order book up
3% year on year
» Margin increased to 18.1%
supported by increased
restructuring benefits
» Growth Hub delivered £20m
in orders
2021 performance
As is evidenced by the 2021 results,
IMI Critical Engineering is advancing
its strategy and deploying Growth Hub to
access new markets where its expertise
can support sustainable future growth.
The division’s Growth Hub and Sprint
Teams are already providing a significant
impact to the divisional results and
contributed £20m of orders in 2021,
vs £6m in 2020.
Organic order intake for 2021 was 3%
higher than in 2020. Aftermarket orders
grew 3%, with strong growth in Oil & Gas,
Refining & Petrochemical and Power
offsetting a reduction within Nuclear
due to the significant upgrade activity
in 2020. New Construction orders grew
4%, with good order growth in Refining &
Petrochemical and Marine offsetting the
expected decline in Oil & Gas and Power.
The closing order book at the end of the
period was 3% higher when compared
with 31 December 2020 on an organic
basis. Orderbook margins are also higher.
Organic revenues were 2% higher than
last year and 2% lower on an adjusted
basis. Aftermarket organic sales were 11%
higher than in 2020, largely due to growth
in the Refining & Petrochemical and
Power segments. New Construction
organic sales were 7% lower compared
with last year, largely due to lower
Refining & Petrochemical sales.
Organic adjusted operating profit was
10% higher than in 2020, another strong
result reflecting the hard work the division
has done to maximise the aftermarket
opportunity and optimise its operating
footprint for the future. Adjusted
operating margin for the year was 18.1%,
which was 120 basis points higher than
the prior year (2020: 16.9%).
Statutory operating profit increased by
35% due to the strong trading result
and the non-repeat of the prior year
restructuring costs.
Introduction Strategic Report Corporate Governance Financial Statements 62
Operational review
IMI Hydronic Engineering
IMI Hydronic Engineering is a leading
provider of technologies that deliver energy
efficient water-based heating and cooling
systems for the residential and commercial
building sectors.
Find out more:
www.imiplc.com/what-we-do/our-businesses/hydronic-engineering
Revenue
11%
£339m
Adjusted operating profit
22%
£68m
Statutory operating profit
27%
£64m
Please refer to Note 3 for definitions of the Group’s
Alternative Performance Measures.
IMI Hydronic Engineering –
Ljung, Sweden
IMI plc Annual Report & Accounts 2021
63
Phil Clifton
Divisional Managing Director
Outlook
Based on current market conditions,
IMI Hydronic Engineering 2022 organic
revenues are expected to be higher, with
margins slightly higher, when compared
to 2021.
Key achievements
» Strong organic sales growth
of 15%, reflecting 10% growth
vs 2019
» Operating margins of 20.1%
» Significant contribution from
new products, including new
connected products
2021 performance
With its strong brands and product
positioning, as well as the global
imperative to reduce energy consumption
in buildings, IMI Hydronic Engineering is
in a strong position to deliver sustainable,
profitable growth. The division’s
performance in 2021 reflects these good
market conditions as well as successful
delivery of key strategic projects and
growth from new products.
2021 revenues were 15% higher on an
organic basis when compared to the
prior year, and 10% ahead of 2019.
New products supported that growth,
with good orders secured within control
and actuation. Sales of our digitally
enabled products – including the TA-
Smart valve – continue to make
excellent progress.
Adjusted operating profit increased 27%
on an organic basis versus the prior year,
reflective of the quality of the business as
well as continued delivery of key efficiency
initiatives. The adjusted operating margin
improved to 20.1%, versus 18.3% in 2020.
Statutory operating profit increased by
27% due to the strong performance of
the business and the non-repeat of
one-off restructuring costs in 2020.
Introduction Strategic Report Corporate Governance Financial Statements 64
Financial review
IMI achieved a good financial
result in 2021, with increased
organic revenues, adjusted
operating profit and margins
in all divisions.
Key highlights
Adjusted1
Statutory
2021
2020
Change vs
2020
Organic3 vs
2020
Organic3 vs
20194
2021
2020
Change vs
2020
Change vs
2019
Revenue
£1,866m
£1,825m
Operating profit
Operating margin
Profit before tax
Basic EPS
Operating cash flow2
Dividend per share
Net debt
£318m
17.0%
£307m
92.0p
£274m
23.7p
£623m
£285m
15.6%
£274m
79.7p
£335m
22.5p
£316m
+2%
+12%
+140bps
+12%
+15%
-18%
+5%
+7%
+18%
+3%
+23%
£1,866m
£1,825m
£251m
13.4%
£245m
73.5p
£327m
23.7p
£227m
12.4%
£214m
62.7p
£377m
22.5p
+2%
+10%
0%
+23%
+100bps
+250bps
+14%
+17%
-13%
+5%
+29%
+28%
-10%
1 Excluding the effect of adjusting items as reported in the income statement. See
Note 3 for definitions of alternative performance measures.
2 Adjusted operating cash flow, as described in Note 19 to the financial statements.
Statutory measure is Cash generated from operations as shown on the cash flow
statement.
3 After adjusting for exchange rates, acquisitions and disposals (see Note 4).
4 Given the significant impact on business performance due to the pandemic in
2020, the results include comparative figures for 2019 and organic growth
compared to 2021. A reconciliation is provided in Note 4.
Results summary
Certain alternative performance measures (‘APMs’) have been
included within this Annual Report. These APMs are used by
the Executive Committee to monitor and manage the
performance of the Group, in order to ensure that decisions taken
align with the Group’s long-term interests. Movements in revenue
and adjusted operating profit are given on an organic basis
(see definition in Note 3) so that performance is not distorted by
acquisitions, disposals and movements in exchange rates. A table
summarising the reconciliation of adjusted measures to statutory
measures is included in Note 4.
The Group delivered a good financial result in the year, as
revenue and operating margin improved. Revenue increased by
2% to £1,866m (2020: £1,825m). The exchange rate adjustment
was adverse £72m. After adjusting for £4m of sales for the last
6 months of IMI InterAtiva in 2020 that were not in the
comparative period in 2021 and excluding £2m of revenue from
the recent acquisition of Adaptas, organic revenue was 7% higher
and reflects the recovery of economic markets as a result of the
global pandemic as well as early results from Growth Hub.
Adjusted operating profit of £318m (2020: £285m) was 12%
higher and after removing the £14m adverse impact of exchange
rates and the inorganic element of the IMI InterAtiva disposal
and Adaptas acquisition was higher by 18%.
The adjusted operating margin was 17.0% (2020: 15.6%).
All three divisions grew adjusted margins in the year, supported
by revenue growth, the benefits of ongoing restructuring
programmes, and value-pricing initiatives. Statutory operating
profit was £251m (2020: £227m), which increased 10%.
Adjusted net financing costs on net borrowings of £12.1m (2020:
£11.0m) was higher due to the non-repeat of a one-off tax
interest benefit in 2020 and includes the impact of £2.8m (2020:
£2.5m) interest cost on leases. Statutory net finance costs were
£5.9m compared to £12.5m in 2020 due primarily to a favourable
adjusting finance gain of £5.2m in 2021.
Adjusted net financing costs were covered 33 times (2020: 35
times) by adjusted earnings before interest, tax, depreciation,
amortisation, impairment and adjusting items of £404m (2020:
£380m) and included £28m (2020: £30m) of depreciation on our
leased assets. The net pension financing income under IAS 19 was
£1.0m (2020: £0.2m).
IMI plc Annual Report & Accounts 2021 65
Statutory profit before taxation increased 14% to £245m (2020:
£214m) as the Group continued its restructuring activities to
improve customer focus and long-term competitiveness.
Adjusted profit before taxation was £307m (2020: £274m),
which is higher by 12% compared to 2020. The total statutory
profit for the period after taxation was £196m (2020: £170m).
Adjusting items
Adjusting Items
Reversal of net economic hedge contract gains
Restructuring costs
Impairment losses
Loss on disposal of subsidiary
Acquired intangible amortisation and other acquisition items
Net financing income/(expense)
Tax in connection with the above adjusting items
Change in UK tax rate
Release of prior year provisions
2021
£m
2020
£m
(6)
(35)
(5)
(4)
(18)
5
15
(19)
17
(2)
(36)
(2)
-
(19)
(2)
13
-
-
Adjusting items that are excluded from adjusted profit before
tax are listed below:
» Changes in the fair value of economic hedges which are not
designated as hedges for accounting purposes, together with
the gains and losses on their settlements, are included in the
revenue and adjusted operating profit of the relevant business
segment with the net loss at £1m (2020: net loss of £4m),
which is the net of the reversal of net economic hedge contract
gains of £6m and the associated net financing income of £5m.
The adjusting item at the operating level reverses this
treatment. The net financing adjusting item reflects the
change in value or settlement of these contracts with the
financial institutions with whom they were transacted.
» Restructuring costs of £35m (2020: £36m) were the result of
a number of major restructuring projects across the Group.
These include costs of £31m within IMI Precision Engineering,
primarily for the closure of a factory in Europe, which is currently
under consultation with the Works Council, and the Customer
First project, which both simplify the structure of the division
and ensures the business structure is aligned to our customer
base. In IMI Critical Engineering there were costs of £1m relating
to the finalisation of projects announced in 2020. In IMI Hydronic
Engineering there were costs of £3m for the finalisation of the
ongoing projects in 2020 and a new project announced in 2021
to simplify finance processes through a shared service centre in
Poland. These restructuring projects are due to be completed in
2023. Restructuring provisions at the year end were £32m and
primarily related to expected payments to employees. Details
of 2020 projects are included in Note 3.
» In 2021, the Group recorded an adjusting impairment charge
of £5m (2020: £2m) associated with the restructuring
programmes ongoing in IMI Precision Engineering, and £2m
associated with the restructuring programmes ongoing in IMI
Critical Engineering in 2020.
» Acquired intangible amortisation is excluded from adjusted
profits, to allow for comparability of the performance across
divisions. This allows users of the financial statements to gain
a clearer understanding of the performance of the business,
with the impact of amortisation identified separately in line
with internal reporting to management. Acquired intangible
amortisation reduced to £15m (2020: £19m). Other acquisition
costs of £3m primarily relates to professional fees associated
with the acquisition of Adaptas in December 2021.
» A gain arose on the revaluation of financial instruments
and derivatives under IFRS 9 of £5m (2020: £2m loss).
» The tax effect of the above items has been recognised as
an adjusting item and amounts to a £15m gain (2020: £13m
gain). The UK Government announced an increase in the
corporation tax rate from 19% to 25%, with an effective date
of April 2023, which was substantively enacted on 24 May 2021.
The impact of this on the Group’s deferred tax liabilities of
£19m during the period has been recorded as an adjusting
item. A credit of £17m due to the release of provisions in
respect of exposures related to prior years which are no longer
expected to arise, including the closure of open years with tax
authorities has also been recorded as an adjusting item within
the income statement.
Taxation
The adjusted effective tax rate for the Group reduced to 20.0%
(2020: 21.0%) and benefitted from a one-off tax credit in the
year. The total adjusted tax charge for the year was £61m
(2020: £58m) and the statutory effective tax rate was 19.7%
(2020: 20.6%).
The Group seeks to manage its tax affairs within its core tax
principles of compliance, fairness, value and transparency,
in accordance with the Group’s Tax Policy which is available on
the Group’s corporate website.
Earnings per share
The average number of shares in issue during the period was
267m (2020: 271m), resulting in adjusted basic earnings per
share of 92.0p (2020: 79.7p), an increase of 15%. Statutory basic
earnings per share increased by 17% at 73.5p (2020: 62.7p) and
statutory diluted earnings per share increased by 17% at 73.2p
(2020: 62.6p).
Share buyback
In 2021, we successfully completed our planned £200m share
buyback with the purchase and cancellation of 11,653,829 shares.
Our average shares in issue for 2021 are 267m, and in 2022 are
expected to be 259m.
Introduction Strategic Report Corporate Governance Financial Statements 66
Financial review
Cash flow
Movement in net debt
Adjusted EBITDA*
Working capital movements
Capital and development expenditure
Provisions and employee benefit movements**
Principal elements of lease payments
Other
Adjusted operating cash flow***
Cash impact of adjusting items
Interest
Derivatives
Tax paid
Additional pension scheme funding
Free cash flow before corporate activity
Dividends paid to equity shareholders
2021
£m
403.5
(50.6)
(57.5)
(0.5)
(30.0)
9.0
273.9
(35.6)
(12.1)
26.4
(50.9)
(7.0)
194.7
(61.8)
Acquisition/disposal of subsidiaries
(203.8)
Net purchase of own shares and share buyback programme
(225.6)
Net cash flow (excluding debt movements)
(296.5)
2020
£m
379.5
14.6
(50.7)
8.5
(28.7)
11.3
334.5
(36.7)
(11.0)
(22.5)
(41.0)
(7.0)
216.3
(91.6)
-
(8.5)
116.2
Reconciliation of net cash to movement
in net borrowings
Net (decrease)/increase in cash and cash equivalents
excluding foreign exchange
Reverse cash acquired
Net (drawdown)/repayment of borrowings excluding
foreign exchange and net debt disposed/acquired
(Increase)/decrease in net debt before acquisitions,
disposals and foreign exchange
Net cash/(debt) acquired
Currency translation differences
Movement in lease creditors
Movement in net borrowings in the year
Net borrowings at the start of the year
Net borrowings at the end of the year
(86.7)
98.4
(1.8)
-
(208.0)
17.8
(296.5)
116.2
-
(4.5)
(5.6)
-
3.3
2.1
(306.6)
121.6
(316.2)
(437.8)
(622.8)
(316.2)
* Adjusted profit after tax (£245.6m) before interest (£11.1m), tax (£61.4m),
depreciation (£68.3m), amortisation (£16.2m) and impairment (£0.9m).
** Movement in provisions and employee benefits as per the statement of cash
flows (£1.8m) adjusted for the movement in restructuring provisions (£2.3m).
*** Adjusted operating cash flow is the cash generated from the operations shown
in the statement of cash flows less cash spent acquiring property, plant and
equipment, non-acquired intangible assets and investments; plus cash received
from the sale of property, plant and equipment and the sale of investments,
excluding the cash impact of adjusting items , a reconciliation is included in
Note 19.
Adjusted operating cash flow was £274m (2020: £335m).
This represents a conversion rate of total Group adjusted
operating profit to adjusted operating cash flow of 86% (2020:
117%). There was a £36m cash outflow from adjusting items
(2020: £37m outflow) primarily related to restructuring costs.
Net working capital balances increased £51m due to an increase
in receivables of £44m as a result of the growth and an increase
in inventory of £37m to maintain service levels to customers in
light of the global supply chain crisis, partly offset by an increase
in payables of £31m. The decrease in 2020 of £15m was due to
a decrease in receivables of £18m and an increase in payables
of £6m partly offset by an increase in inventory of £9m.
Cash spent on property, plant and equipment and other
non-acquired intangibles in the year was £58m (2020: £51m)
which was equivalent to 1.0 times (2020: 0.8 times) depreciation
and amortisation thereon. Capital spending in 2021 increased
toward historical levels after being curtailed during the
pandemic in 2020.
Research and development spend, including capitalised
intangible development costs of £5m (2020: £7m), totalled
£54m (2020: £46m) representing an increase year on year as
the Group continues to support investment in Growth Hub and
Sprint Teams. As this measure focuses primarily on the efforts
of the engineering function, it does not fully capture the cross-
functional support in Growth Hub initiatives with over 700
employees involved across the Group – a significant investment
alongside our research and development spend.
In 2021 the Group paid cash tax of £51m (2020: £41m) which
was 83% (2020: 71%) of the adjusted tax charge for the year.
Dividends paid to shareholders totalled £62m (2020: £92m),
reflecting the Group’s decision to reduce its distribution to
provide a dividend earnings cover baseline of three times
adjusted earnings per share, which will enable IMI to deliver
more effectively on its long-term growth ambitions.
In addition, there was a cash outflow of £200m in relation to the
share buyback programme (2020: £nil) and £26m (2020: £9m
outflow) for net share purchases to satisfy employee share options.
Balance sheet
Net debt at the year-end was £623m compared to £316m at the
end of the previous year. The increase reflects the share buyback
programme and the acquisition of Adaptas partly offset by the
cash generation in the year. The net debt is composed of a cash
balance of £95m (2020: £208m), a bank overdraft of £66m
(2020: £74m), interest-bearing loans and borrowings of £558m
(2020: £362m) and lease liabilities of £94m (2020: £88m).
The year-end net debt to adjusted EBITDA ratio was 1.5 times
(2020: 0.8 times). At the end of 2021, loan notes totalled £353m
(2020: £362m), with a weighted average maturity of 4.3 years
(2020: 5.3 years) and other loans including bank overdrafts totalled
£271m (2020: £74m). Total committed bank loan facilities
available to the Group at the year-end were £300m (2020:
£300m), of which £70m (2020: £nil) was drawn.
At 31 December 2021, the value of the Group’s intangible assets
was £768m (2020: £600m). The increase compared to the prior
year is primarily due to the acquisition of Adaptas.
The net book value of the Group’s property, plant and equipment
at 31 December 2021 was £268m (2020: £266m). Capital
expenditure on property, plant and equipment amounted to
£46m (2020: £38m), with the main capital expenditure focused
on production facility investment to support operational efficiency
and growth. Including capitalised intangible assets, total capital
expenditure was £58m (2020: £51m) and was 1.0 times (2020:
0.8 times) the depreciation and amortisation charge (excluding
acquired intangible amortisation and lease asset depreciation)
for the year of £56m (2020: £63m).
IMI plc Annual Report & Accounts 2021
67
The net surplus for defined benefit obligations at 31 December
2021 was £63m (2020: £22m deficit). The UK surplus was £129m
(2020: £69m surplus) and constituted 77% (2020: 77%) of the
total defined benefit liabilities and 88% (2020: 89%) of the total
defined benefit assets. The deficit in the overseas funds as at 31
December 2021 was £66m (2020: £91m deficit).
Return on invested capital (‘ROIC’)
The Group uses ROIC as an indication of IMI’s ability to deploy
capital effectively. This metric is the same as that presented in
2020, however it was previously referred to as Return on Capital
Employed and has been renamed to Return on Invested Capital
to better describe the metric. References to capital employed
have also been updated to capital invested.
The Group’s definition is Adjusted Operating Profit after tax
divided by Average Capital invested (previously referred to as
Average Capital employed). Capital invested (previously referred
to as capital employed) is defined as net assets adjusted to
remove net debt, derivative assets/liabilities, defined pension
position (net of deferred tax) and to reverse historical
impairments of goodwill and amortisation of acquired
intangibles. ROIC was 13.2% in 2021 (2020: 12.3%) which
increased by 0.9%. The acquisition of Adaptas adversely
impacted the metric by 0.7% due to its proximity to the year
end with incremental capital invested, but no corresponding
operating profit.
Disposals
On 23 July 2021 the Group disposed of IMI InterAtiva for
proceeds of £0.1m resulting in a loss on disposal of £3.8m.
Foreign exchange
The income statements of overseas operations are translated
into Sterling at average rates of exchange for the year, balance
sheets are translated at year end rates. The most significant
currencies are the Euro and the US Dollar – the relevant rates
of exchange were:
Foreign Exchange
Euro
US Dollar
Average
Rates
Balance Sheet Rates
2021
1.16
1.38
2020
1.13
1.28
2021
1.19
1.35
2020
1.12
1.37
The movement in average exchange rates between 2020 and
2021 resulted in a 4% reduction to our 2021 revenue and a 5%
decrease in adjusted operating profit, with both the Euro and
US Dollar weakening against Sterling.
If exchange rates as at 11 February 2022 of US$1.36 and €1.19
were projected for the full year and applied to our 2021 results,
it is estimated that both revenue and adjusted operating profit
would be 1% lower.
Return on invested capital
Adjusted Operating Profit
Notional Tax charge
Net Adjusted Operating Profit after tax
Net Assets
Adjusted for:
Net debt
Restructuring provision
Net derivative assets / liabilities
Net defined pension benefit
Deferred tax on employee benefits
Previously written-off / impaired goodwill
Acquired intangibles amortisation
Closing capital invested
Opening capital invested
Average capital invested
Return on invested capital
2021
£m
318.1
(63.6)
254.5
779.1
622.8
31.6
(3.7)
(62.5)
13.9
346.9
311.5
2020
£m
284.7
(59.8)
224.9
799.5
316.2
30.1
(6.1)
22.0
(7.0)
351.9
311.5
Treasury
IMI has a centralised Treasury function that provides treasury
services to Group companies including funding liquidity, credit,
foreign exchange, interest rate and base metal commodity
management. The Group Treasury function manages financial
risks in compliance with Board-approved policies. Further details
of the Group’s financial risk management are included in Note 18.
Capital allocation & dividend policy
The Board determines the appropriate capital structure for the
Group, specifically, how much cash is raised from shareholders
(equity) and how much is borrowed from financial institutions
(debt) in order to finance the Group’s activities both now and
in the future.
2,039.6
1,818.1
1,928.9
13.2%
1,818.1
1,832.3
1,825.2
12.3%
The Board considers the Group’s capital structure and dividend
policy at least twice a year ahead of announcing results in the
context of its ability to continue as a going concern and deliver
its business plan.
Acquisitions
On 20 December 2021 the Group acquired 100% of the share
capital, and associated voting rights, of Adaptas Solutions
(Adaptas) for cash consideration of £203.9m. Adaptas is a
manufacturer of mission critical mass spectrometry subsystems
and components and is based in North America with facilities
in the UK, Australia and China.
The Board is mindful that equity capital cannot be easily flexed
and raising new equity would normally be likely only in the context
of an acquisition. Debt can be issued and repurchased more
easily, but frequent changes lead to high transaction costs and
debt holders are under no obligation to accept repurchase offers.
At 31 December 2021, IMI plc (the company) had distributable
reserves of £294m (2020: £292m).
Daniel Shook
Finance Director
Introduction Strategic Report Corporate Governance Financial Statements 68
Key Performance Indicators
The Key Performance Indicators (‘KPIs’) set out below represent financial and non-
financial measures which are integral to the delivery of our strategy and are used to track
progress. In 2021, we have changed the Lost Time Accident Rate KPI to the Total Incident
Frequency Rate to align with the Global Reporting Initiative definition and added CO2
intensity reduction as a KPI, which aligns to our Better World strategy.
Total Recordable
Incident Frequency
Rate*
Employee
engagement
CO2 intensity
Organic sales
growth
Per
200,000
hours
1
0.8
0.6
0.4
0.2
%
100
75
50
25
Gross tCO2e
per 1,000
hours worked
4
3
2
1
%
10
5
0
-5
+7
-3
-4
0.59
0.57
0.56
74
73
86
2.78
2.42
2.30
2019
2020
2021
2019
2020
2021
2019
2020
2021
2019
2020
2021
Why is this a KPI?
Our purpose [Breakthrough
Engineering for a better world]
drives our strategy and our
ambition, including our
commitment to halve our total
CO2 intensity by 2030 (based
on 2019 Scope 1 and Scope
2 emissions).
Definition
We measure our progress in
this area by tracking our total
CO2 intensity. This is calculated
by looking at the ratio of total
Scope 1 and Scope 2 emissions
(tonnes CO2e) per 1,000
hours worked.
Performance
In 2021 our total CO2 intensity
reduced to 2.30, reflecting
the Group’s continued focus
on identifying and delivering
on projects to reduce our
carbon emissions.
Why is this a KPI?
Delivering consistent growth
is an important part of
building sustainable value
for shareholders.
Definition
Organic sales is stated at
constant exchange rates and
excludes the incremental effect
of acquisitions and disposals.
For 2021 that means we are
excluding the five months of
sales for IMI InterAtiva in 2020
where IMI InterAtiva was not
owned in 2021 and the results of
the recent acquisition, Adaptas,
for the 2 weeks of ownership in
December 2021 were excluded.
Performance
Organic sales growth was 7%
in 2021 due to the recovery
following the impact of the
pandemic last year and
included early results from
the Growth Hub.
Why is this a KPI?
The Health and Safety of all
who work at IMI is paramount.
Ensuring a safe working
environment is closely linked
to our business success,
including attracting and
retaining the best talent.
Definition
We measure our progress
in this area by tracking the
number of recordable
work-related injuries per
200,000 hours worked
(‘TRIFR rate’).
Performance
In 2021 our TRIFR rate
reduced to 0.56 with no
fatalities, reflecting the
Group’s continued focus
on identifying and reducing
workplace hazards.
* For 2021 reporting the Group
is using the Total Recordable
Incident Frequency Rates to
measure Health and Safety
performance as it is recognised
as an industry standard by the
Global Reporting Initiative
framework. Previously the
Group reported Lost Time
Accidents, for which the number
in 2020 was 15 and in 2021 was
23. The 2020 Lost Time Accident
number has been restated to 15,
from 14 reported in 2020, due to
the reclassification of an injury
and follow up treatment.
Why is this a KPI?
The engagement of our
employees is key to retaining
the existing skills and
promoting and attracting
employees who bring new
ideas and capabilities.
Definition
We carry out an annual
employee survey as part of
our ‘IMI Way Day’ and use
the response to the question
‘I would recommend my
business (IMI) as a good
employer to friends and
family’ as a gauge of employee
engagement – this is sourced
via a group worksheet as part
of the IMI Way Day activities.
For the first time in 2021 we
introduced an anonymised
individual survey – One Big
Voice. From next year we
will report the response to
this question from the
anonymised survey.
Performance
We continue to maintain a high
percentage of employees that
would recommend IMI as a
good employer to family
and friends.
IMI plc Annual Report & Accounts 2021 69
Our KPIs have been designed to drive the Group towards meeting our strategic
objectives outlined in our business model. See pages 16 and 17 for details. The
Alternative Performance Measures used as Key Performance Indicators (organic sales
growth, adjusted operating profit, adjusted earnings per share) are defined in Note 3.
Adjusted
operating profit
Cash conversion
Return on invested
capital**
Adjusted earnings
per share
£m
400
300
200
100
%
125
100
75
50
25
%
20
15
10
5
Pence
100
75
50
25
266.1
284.7
318.1
112
117
86
11.4
12.3
13.2
73.2
79.7
92.0
2019
2020
2021
2019
2020
2021
2019
2020
2021
2019
2020
2021
Why is this a KPI?
Growing our profits will
ultimately generate value for
our shareholders and create
more opportunity to invest
further.
Definition
The Group’s operating profit
before the adjusting items
described in Note 3, which
ensures a consistent basis
for comparison.
Performance
Adjusted operating profit
improved in 2021 reflective of
the commercial and operational
focus during the year. Adjusted
operating margin improved
140bps to 17.0%.
Why is this a KPI?
Cash generation supports
investment in our business and
enables the Group to provide
returns to shareholders
through dividends. Strong cash
generation also ensures a strong
balance sheet, giving customers
and suppliers confidence in
the future of the Group.
Definition
Cash conversion is the adjusted
operating cash flow as a
percentage of the adjusted
operating profit.
Performance
Cash conversion is calculated as
£273.9m of adjusted operating
cash flow divided by £318.1m of
adjusted operating profit and as
a result was 86% in 2021. Cash
conversion reduced year on year
partly due to growth and partly
because we maintained higher
inventories due to the global
supply chain challenges to
ensure service to customers
was maintained.
Why is this a KPI?
The measure provides an
indication of IMI’s ability to
deploy capital effectively.
Definition
Adjusted operating profit after
tax divided by average capital
invested. Capital invested
(previously capital employed)
is defined as net assets
adjusted to remove net debt,
derivative assets/liabilities,
defined benefit pension position
(net of deferred tax) and to
reverse historical impairments
of goodwill and amortisation
of acquired intangible assets.
See the calculation on page 67.
Performance
The Group’s Return on Invested
Capital improved in 2021 to
13.2%, reflecting the profit
improvement in the year despite
the adverse impact of the
acquisition of Adaptas
Solutions, which reduced the
metric by 0.7%.
** This metric is the same as that
presented in 2020, however it
was previously referred to as
Return on Capital Employed
and has been renamed to
Return on Invested Capital to
better describe the metric.
References to capital employed
have also been updated to
capital invested.
Why is this a KPI?
Creating consistent long-term
value for shareholders.
Definition
Adjusted profit after tax
divided by the weighted
average number of basic
ordinary shares.
Performance
Adjusted earnings per share
increased in the year to 92.0p.
Adjusted operating profit is
a target for the 2021 & 2022
annual bonus. Return on
Invested Capital and Adjusted
earnings per share are
performance targets for the
2020, 2021 & 2022 IIP. See page
128 for further details.
Introduction Strategic Report Corporate Governance Financial Statements 70
How we manage risk
Our risk management processes are embedded throughout
our businesses and are designed to identify, evaluate and
manage the risks which could impact our performance, our
reputation or our ability to execute successfully our strategy.
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, emerging risks and including climate-related
risks and opportunities.
The Board determines our risk appetite 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 team. 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.
Further information about the roles and responsibilities of
the Board and each Committee is set out on page 89.
How we approach risk management
Our risk management process is embedded in all our businesses,
utilising all three lines of defence and is a core element of our
strategy review and monthly operational meetings. It provides
guidance on the identification, evaluation and management
of risks, including emerging risks, which could impact our
performance and our ability to implement our strategy.
IMI’s three lines of defence
We review our risks and ensure we have mitigating controls
and processes in place utilising the three lines of defence model.
With each line of defence having a purpose, combined, they
help us provide confidence to the Board and ultimately our
shareholders. Our procedures provide robust assurance against
our principal risks set out on pages 74 to 79.
First line
Second line
The preventative and detective controls in place
managed by the operating sites and divisional
teams on a day-to-day basis
As part of the overall control environment further
detective processes, for example, via compliance
teams across multiple disciplines (Quality, Supply
Chain, Health & Safety, Legal & Compliance),
are in place to oversee further risk management
Third Line
Group and divisional assurance teams review
and report on the effectiveness of our risk
management
IMI plc Annual Report & Accounts 2021 71
Lines of
defence
Level
1
2
3
X
Board
X
X
IMI Executive
Committee
Regulators &
External Audit
X
Group Risk &
Assurance
X
Divisional
Leadership
X
X
X
X
Divisional
Assurance, Legal
& Compliance
Local & Regional
Management
X
Operating
Companies
Risk management process
Communicating
strategy through
the organisation
Approves the strategy, determines risk appetite and reviews biannually
principal risks and annually the effectiveness of internal controls.
Horizon scans for emerging risks
Monitors and reviews risk management processes and reviews bi-annually
a detailed analysis of the Group’s risk profile including supporting divisional
data and the actions undertaken
Brings a valuable perspective. Whilst not giving assurance, a number of key
3rd parties assist IMI in ensuring practices are up to date and reflect industry
best practice (eg external Growth Hub advisers)
Determines principal risks and mitigation strategies and reports on the
effectiveness of internal controls
Monitors changes in the risk profile and is responsible for ensuring risk
management culture is integrated across the division and aligned to the
Group’s objectives
Provides assurance on internal controls, operating systems and risk
management processes, including legal compliance matters
Communication
of the
effectiveness of
controls
Operates local internal control systems and provide monthly updates on
key risks, mitigation and controls through incorporation of risk profile data
in monthly management reporting process.
The operational teams provide the first line of defence by following defined
policies and ensuring the effective running of key operating systems, local
ownership and accountability of risk ownership and mitigation.
Previously the Board highlighted climate change as an emerging
risk. The section that follows highlights how we believe our
existing principal risks include elements of climate change risk.
With the assistance of external consultants, a significant
amount of work has been undertaken this year to understand
our climate change related risks and opportunities.
Emerging risks
The Board assesses the risks that could impact the Group which
have not yet occurred but are at an early stage of becoming
known and are expected to become more significant. All monitor
and review emerging risks as part of our monthly operational
performance reviews and Executive Committee meetings.
Consideration of emerging risks also forms part of our strategy
review process.
Emerging risks that could be relevant to our business include
geopolitical instability and greater isolationism (reducing the
previous trend of globalisation) and new technological advances
including artificial intelligence, robotisation and the ‘Internet of
Things’, in particular digital capabilities embedded in products
that enable predictive maintenance and reduce unplanned
downtime. These advances could impact our business model
particularly if we are slow to respond to customer demand.
Introduction Strategic Report Corporate Governance Financial Statements 72
How we manage risk
Climate change
In the 2020 Annual Report, we noted that climate change
creates potential disruption risks for our business, influences
the expectations of our key stakeholders, and continues to drive
demand for our products and services.
this potential scenario. Going forward, climate risk reviews will
be integrated into the ongoing risk management process and
be reported back to the Board on a regular basis.
The CRG identified two internationally recognised external
reference scenarios to be used in the climate risk review:
As opposed to creating one additional risk regarding climate
change, the Board believes there are several principal risks
which already cover the potential impact of climate change.
» Business disruption due to natural disasters – which covers
the physical risks of climate change
» Breach of legislation – including the risk that IMI were to
breach country specific legislation on carbon initiatives,
industry standards, material restrictions etc
» Talent risk/Reputational risk – the impact a poor ESG
strategy or reputational climate incidents would have on
the ability to retain and attract premium talent
» Supply chain – the impact on the cost, availability, and delivery
times of key components due to disruptive transition risks
towards low carbon energy efficient products
» New Product Development – the ability to adapt to
new customer problems and realise the climate
opportunities identified.
As noted on page 35, the Board have set a goal of halving IMI’s
total CO2 intensity by 2030 (based on Scope 1 & 2 emissions
from a 2019 baseline). Achieving this milestone will allow us
to fulfil our ambition to be net zero by 2040. In 2022, we will
engage with suppliers and set a strategy for the reduction
of Scope 3 emissions (see page 42 for further details of our
calculation of total greenhouse gas emissions). The Board
is ultimately responsible for assessing and managing climate-
related risks and opportunities (see page 36 for more
information on Better World governance). To review the resilience
of the Board’s strategy through the lens of climate change,
a Climate Risk Group (‘CRG’) was set up inviting key individuals
from across the Group (facilities, operations, legal and business
development), who, alongside our environmental consultants
Ricardo, carried out an analysis of climate risks and opportunities
for IMI using the TCFD framework. As with principal risks,
an analysis was performed of the impact (for example the
sensitivity of business units to climate events and their ability to
mitigate or take advantage of those events) and the probability
of the climate events occurring. Those risks highlighted on page
73 have a high impact and high likelihood in at least one of the
reference scenarios outlined in the column to the right.
The analysis looked at the resilience of the Board’s strategy over
the short (by 2025), medium (by 2030) and long-term (2040).
The analysis highlighted that climate change, regardless of the
scenarios used, will present IMI with risks, and also opportunities
in the future, but that none of the priority risks identified posed
a high impact risk to IMI’s strategy in the short-term. The
analysis does highlight the risk that by 2030 a decline in the oil
and gas sector could have a high impact on IMI unless successful
mitigating actions are taken. The Board’s strategy, particularly
within the IMI Critical Engineering division, already incorporates
Reference scenarios
EU ALLBANK - assumes implementation of intensive
decarbonisation policies and is consistent with a 1.5˚C
warming trajectory, and
EU BSL - assumes regulations will remain largely unchanged
from today and physical risks will intensify (3˚C warming).
The CRG did an initial horizon scan which identified 63 potential
climate-related risks and opportunities
Next, the CRG conducted climate materiality assessments to
identify climate risks related to physical and transition risks of rising
global temperatures, climate-related policy, emerging technologies
and market changes. This identified 20 key areas of focus.
The next step was to carry out a scenarios analysis of the identified
risks and opportunities aligned with the TCFD methodology and to
quantify risks and opportunities where possible. This identified the
highest priority climate-related risks and opportunities where the
analysis suggested a high impact and high likelihood in at least one
of the reference scenarios.
The CRG then carried out a deeper dive on the highest priority risks and
opportunities to identify next steps and actions. The highest priority
climate-related risks and opportunities have been identified and are
set out on the next page.
Our approach to assessing climate change risk
Initial scan with risk champions highlights
63 divisional climate risks and opportunities
Rated by priority, leading to
20 focus areas
Application of
climate scenarios
leads to
Climate
change
priorities
IMI plc Annual Report & Accounts 2021 73
TOP RISKS:
» Floods and extreme weather events
» Scarcity/high costs of materials (metal)
» Water scarcity
» Decline in Oil & Gas sector
TOP OPPORTUNITIES:
» Increased demand for energy efficient/low carbon products/
low emission technologies
» Hydrogen
» Circular Economy
Top Risks
Description
Mitigation
Floods and
extreme
weather
events
Should global temperatures rise, the frequency and
intensity of weather events will increase, which
may lead to floods or storms causing damage
and/or restricting operations. In the 3˚C warming
scenario, the peak impact of this could be seen as
early as 2050. This would result in reduced output,
high replacement costs, higher insurance premia
(assuming coverage remains available), the setting up
of back-up facilities and greater remote working.
The aggressive drive to phase out products like
plastics or metals may, by 2030, affect the availability
of material supply or the cost of certain products
(either due to the cost of upgrading equipment,
purchasing ‘cleaner’ materials or due to lost
revenues). In the worst-case scenario, manufacturing
of some products may need to be discontinued.
IMI is aware of which sites currently have an elevated risk to natural disasters.
Each IMI site has major incident plans with specific events (for example our Kobe
plant in Japan, practiced a full evacuation response for World Tsunami Awareness
Day 2021). In addition, the geographic spread of the businesses limits the impact
to our customers, with dual sourcing, alternative production protocols in place.
Over the short-term IMI will continue to study climate change models to determine
the expected probability and impact of storm/flood damage to our sites and ensure
business continuity plans are adapted accordingly, which may include in the medium
term upgraded facilities and defences. Future mitigation may also involve the use
of site-specific scenarios, to determine the expected probability to storm/flood
damage and ensure business continuity plans are adapted accordingly.
Engineering and procurement teams continue to review the components within
our products and where relevant gain certifications on more sustainable
components, reviewing sourcing policies to ensure good availability and pricing
on materials. In the medium-term product reviews will look at whether more
fundamental product redesigns will be required.
Regardless of the scenario used, some of IMI’s raw
materials such as plastic and steel could, in just a few
years, be susceptible to in-country water availability
issues; hydro-climatic extremes (such as drought or
flooding); and associated political, social, economic
and regulatory influences.
In the short-term IMI will continue to review the content of our products and
implement sourcing policies which take into account the potential availability and
pricing of key materials. In the medium-term IMI will review those materials that
are likely to face restrictions and look at the possibilities of redesigning products
to reduce or eliminate their content. Without mitigating measures, this could
have a high impact to IMI in the long-term.
With stricter climate-related regulation, in the
short-term, fossil fuel-related activities and the Oil &
Gas sector are likely to decline. Given that some IMI
products support technologies which rely on fossil
fuels, the phase out of those technologies may result
in the loss of business for the affected IMI products.
IMI is supporting our customers to reduce emissions, search for increased energy
efficiency and the ability to monitor Scope 1 & 2 emissions.
IMI is well placed to take advantage of new product opportunities and adjacent
alternative markets.
Scarcity/
high
costs of
materials
(metal)
Water
scarcity
Decline in
Oil & Gas
sector
Top Opportunities
Description
Increased demand for
energy efficient/low
carbon products/ low
emission technologies
With more demanding decarbonisation policies and standards, businesses looking to reduce their emissions and changing
consumer preferences the demand for highly energy efficient / low carbon products and/or the ability to monitor Scope 1 & 2
emissions will increase. IMI (in particular IMI Hydronic Engineering) is being positioned to provide such products on the market,
which is likely to result in increased sales and as a result higher revenue.
Hydrogen
IMI is well placed to provide products which support the transition to low carbon, for example, the increased use of hydrogen.
See page 30 for more information on IMI and hydrogen.
Circular Economy
IMI Critical Engineering uses certain technologies which allow for re-use of materials (for example, 3D printing). Increased policy
and consumer focus may increase demand for IMI products, as well as help reduce manufacturing costs.
Introduction Strategic Report Corporate Governance Financial Statements 74
Principal risks and uncertainties
Our principal risks
The Board also assesses the Group’s principal risks which are
detailed on pages 74 to 79. The principal risks facing the Group
are shown in order of priority in the table below. This analysis
covers how each risk (net of mitigating controls) could impact
our strategy, our risk appetite to the particular risk, how our
assessment has changed during 2021 and explains what we
are doing to monitor and mitigate each risk area.
Our risk appetite
Risk appetite
rating
Very prudent
Prudent
Balanced
Receptive
Very
receptive
Definition
No/very low tolerance to risk, regardless of the cost
of the required controls.
A low-risk approach via sufficient and proportional
controls and mitigation, in the knowledge this will
limit any potential reward.
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.
Elevated levels of risk accepted in the case of
opportunities that offer improved returns.
High levels of risk accepted in the case of unproven
or new projects that offer significant returns or
growth potential.
Description and change in year
Risk mitigation including specific 2021 actions
Risk rating & appetite, link to strategy
and key elements
1. Failure to manage the supply chain
(Operational Risk)
Risk rating
VERY HIGH
Failure to manage the supply chain could
have a material impact on our financial
performance and reputation.
Impact: High Likelihood: High
Increased
Increased economic demand, energy price
shocks, weather events, scarcity of some key
materials and the ongoing disruption caused by
COVID-19, has increased the risks associated
with receiving materials in the right place, at
the right quality and at the right time.
Risk appetite
Prudent
Link to strategy
Strengthening customer intimacy
Reducing complexity
Driving market-led innovation
Digital
Links to other risk elements
Macro-economic & geopolitical
Climate change/Natural Disasters
Poland leaving the EU
The procurement strategy is to get supply chain
teams working closer with production teams
to understand future demand with greater
accuracy. The divisional procurement teams
continue to perform thorough reviews of our
supplier base, signing framework agreements
where necessary, utilising tooling registers,
creating dual sourcing and working towards
diversification of supply chains, and looking at
moving the supply chain closer to our facilities
and creating safety stocks where needed.
Procurement teams assess specific Supplier
Code of Conduct risks across the divisional supply
chains and audit high risk suppliers for all aspects
of supply chain risk including Modern Slavery.
The teams also hold regular review meetings
with key suppliers, and as required, deploy
escalation meetings.
IMI plc Annual Report & Accounts 2021 75
Risk rating & appetite, link to strategy
and key elements
Description and change in year
Risk mitigation including specific 2021 actions
2. Global economic or
political uncertainty
(Operational Risk)
Risk rating
HIGH
Impact: High Likelihood: Moderate
Risk appetite
Balanced
Link to strategy
Strengthening customer intimacy
Reducing complexity
Driving market-led innovation
Links to other risk elements
Climate change/Natural Disasters
Poland leaving the EU
Poor forecasting accuracy
Foreign Currency fluctuations
Russia/Ukraine tensions
3. Business disruption /
Natural disasters
(Operational Risk)
Risk rating
HIGH
The Group operates in diverse global markets
and demand for our products is dependent
on economic and sector-specific
environments. A downturn in the global
or a regional economy, brought on by
economic cycles, political instability, health
or environmental emergencies, could impact
end market demand and as a result negatively
impact revenue and our ability to deliver our
strategy and achieve market expectations.
Increased
Given the current global macroeconomic
situation we consider this to have increased.
The strong economic recovery as the world
slowly comes to terms with the COVID-19
pandemic has reduced this risk from VERY
HIGH last year to HIGH. IMI Critical continues
to face highly competitive markets and faces a
structural decline in the new construction fossil
power sector. IMI Hydronic has seen strong
investment in new construction and
IMI Precision has benefited from strong
demand in several of its key sectors.
The Group, in particular IMI Hydronic, continue
to keep a watching brief on political tensions
between Poland and the EU.
Direct exposure to Russia and Ukraine are
limited and represented 2% of Group revenue
in 2021.
The risk to life or disruption to production
caused by large scale events such as,
pandemics, fires, floods, international
conflicts etc.
Impact: High Likelihood: Moderate
Decreased
Risk appetite
Very prudent
Link to strategy
Strengthening customer intimacy
Reducing complexity
Digital
Links to other risk elements
Climate change
Global pandemics
The impact of COVID-19 continued to be felt
all around the world in 2021. Whilst recognising
the potential impact continues to be material,
well tested disease control and contingency
measures alongside the global rollout of
vaccines has enabled us to reduce the
rating from last year’s VERY HIGH.
We compile annual strategic plans and maintain
a balanced portfolio operating across a range
of markets, sectors and geographies with
no single dependency.
Our divisions ensure their forecasting processes
include scenario stress testing, reviews of
sector metrics and early indications of reduced
customer demand to allow proactive and rapid
management of plant output.
Initiatives like ‘Voice of the Customer’ and
Growth Hub alongside existing key relationships
brings IMI closer to the customer and therefore
should allow greater ability to predict shifts
in demand.
We have continued to improve our performance
during the year through rationalisation and
restructuring programmes.
The disciplines from 2020 continued to be in
place throughout 2021. With the Executive
team, supported by a cross-function, cross-
divisional team leading mitigation measures with
monthly meetings supported by weekly updates.
Where possible IMI continues to support local
testing and vaccination programmes and has
retained robust infection control measures (social
distancing, provision of personal protection
equipment, thermal cameras) and promoted
greater flexibility in working arrangements.
Site risk assessments and response plans
continue to be tested regularly.
Through the work performed in 2021 alongside
external environmental consultants a greater
understanding of the physical risks posed by
climate change and the mitigating actions
required has been obtained. See pages 72 and 73.
Introduction Strategic Report Corporate Governance Financial Statements 76
Principal risks and uncertainties
Risk rating & appetite, link to strategy
and key elements
Description and change in year
Risk mitigation including specific 2021 actions
4. Competitive markets
(Operational Risk)
Risk rating
HIGH
Impact: Moderate Likelihood: High
Risk appetite
Receptive
Link to strategy
Strengthening customer intimacy
Reducing complexity
Driving market-led innovation
Digital
Links to other risk elements
Margin erosion
Competitive pressures
Loss of critical customers
5. Unauthorised access to
our IT systems
(Operational Risk)
Risk rating
HIGH
Impact: Moderate Likelihood: High
Risk appetite
Very prudent
Link to strategy
Reducing complexity
Digital
Competition in our core markets, from both
existing and new competitors could create
strong pricing pressures, potentially resulting
in lost sales and reduced profits.
No change
Even prior to the pandemic several of our
markets were seeing levels of reduced demand.
Transitional risks around climate change
could continue to see the decline in the Oil
& Gas sector.
We also have a M&A strategy which looks
to apply our expertise and ability to create
synergistic benefits in established, new and
adjacent market sectors. This has been
demonstrated through the recent purchase
of Adaptas Solutions.
Our Growth Hub, with its use of external advisory
boards, plus New Product Development Ignite
and Growth Accelerator programmes, aims to
create significant customer-pull and uncover
new opportunities by solving our customers
key problems through advanced applications
engineering, helping us deliver more competitive
products.
We monitor competition risk via selected
indicators during the monthly operational reviews
undertaken by each of our businesses. We also
defend our trademarks and brands and continue
to develop our market leading applications
engineering expertise.
As the digital and security threat environment
is quickly evolving, we cannot guarantee
that our actions are keeping pace with the
constantly evolving threat environment.
We have a well-developed multi-year IT
security strategy, which is reviewed monthly.
We continue to implement improvements to our
IT infrastructure to keep abreast of new threats.
Unapproved access to our IT systems
could result in loss of intellectual property,
fraudulent activity, theft and business
interruption.
We continue to make enhancements to IT
infrastructure and defences, digital forensic
capabilities and penetration testing.
We regularly test our disaster recovery plans
to ensure we have stringent system back-up
procedures in place.
Increased
During 2021, we continued to detect, block
and remediate threats on an ongoing basis
with a visible increase in the volume and
complexity of threats (including malware,
ransomware, attempted data theft, credential
theft, phishing and external hacking attempts).
IMI Precision Engineering was the subject
of such an attack in February 2021 and
the contingency plans were put into effect
successfully to minimise the disruption to
customers. IMI continues to look to increase
our investment in detective and preventative
IT measures.
IMI plc Annual Report & Accounts 2021 77
Risk rating & appetite, link to strategy
and key elements
Description and change in year
Risk mitigation including specific 2021 actions
6. Failure to deliver major
transformational projects
on time and on budget
(Operational Risk)
Risk rating
HIGH
Impact: Moderate Likelihood: High
Risk appetite
Prudent
Link to strategy
Strengthening customer intimacy
Reducing complexity
Digital
Links to other risk elements
IT/ERP project implementations
7. Talent
(Operational Risk)
Risk rating
HIGH
Impact: Moderate Likelihood: High
Risk appetite
Balanced
Link to strategy
Strengthening customer intimacy
Reducing complexity
Driving market-led innovation
Digital
Links to other risk elements
ESG
Global macro-economic uncertainty
Health & Safety
The Group is continually evolving and
taking opportunities in response to external
conditions and market pressures. Our
current strategy includes large restructuring
programmes and complex IT system
installations. Failure to deliver the expected
objectives on time and on budget, could have
an adverse revenue and profit impact on
the Group.
No change
Whilst both IMI Critical and IMI Hydronic
have recently successfully completed change
management programmes, IMI Precision are in
the middle of their Customer First and Fit For
Growth programmes, which are of significant
size and need to be managed proactively.
We have deep and extensive restructuring and
integration expertise.
We operate robust and proven processes to
manage and monitor major projects, including
setting clear and measurable milestones
which are reviewed regularly by our Executive
Committee and divisional management teams.
Divisional restructuring costs and the associated
benefits are tracked against targets on a
monthly basis.
Project management and governance processes
underpin all IT projects to support efficient ERP
system roll out.
The inability to attract talent or retain a
diverse set of employees with the required
set of skills and experience in the desired
territories.
The risk is regularly assessed by the proactive
monitoring by HR Business Partners of regretted
turnover, exit interviews, performance objectives
and succession plans.
External consultants are used to ensure the
appropriateness and competitiveness of
remuneration. There has also been a greater use
of flexible working and a wider range of voluntary
employee benefits.
The introduction of a new internal
communications platform, Workplace,
gives a broader and more direct communication
channel into employees and there is a continuing
increase in transparency and recognition for
greater inclusion and diversity and mental
health awareness.
Increased
The greater focus on new products, new
delivery channels and a different way of
working, places greater strains on current
employees and may require recruitment into
new areas (digital, entrepreneurial, product
development) where IMI has less experience.
The impact of the pandemic, the boost on
economic growth and employment from the
gradual opening of developed economies has
seen, in some geographies, wage inflation,
a potential scarcity in the desired skills and
therefore a significant premium for the type
of talent IMI seeks.
Introduction Strategic Report Corporate Governance Financial Statements 78
Principal risks and uncertainties
Description and change in year
Risk mitigation including specific 2021 actions
Risk rating & appetite, link to strategy
and key elements
8. Failure to comply with legislation or
a breach of our own high standards
of ethical behaviour
(Legal & Compliance Risk)
Risk rating
MEDIUM
Impact: High Likelihood: Low
Risk appetite
Very prudent
Link to strategy
Driving market-led innovation
Strengthening customer intimacy
Reducing complexity
Digital
Links to other risk elements
ESG/Climate change
Health & Safety
Tax compliance
We have an established framework which
demands the highest standards of ethics
and regulatory compliance across all our
businesses. As we expand our operations
to achieve growth, it is essential that we
maintain these standards. A breach of
legislative requirements in relation to tax,
anti-bribery, fraud and competition law
could result in financial and reputational
damage. The markets in which IMI operates,
particularly in IMI Critical, make the risk of
regulatory breach an area of focus.
No change
We continue to operate in similar markets
as last year, with no significant changes
in legislation.
9. Quality issues leading to product
recall, warranty issues, injury,
damage or disruption to
customers’ business
(Operational Risk)
Risk rating
MEDIUM
Impact: Moderate Likelihood: Moderate
Risk appetite
Very prudent
Link to strategy
Strengthening customer intimacy
Reducing complexity
Driving market-led innovation
Digital
Links to other risk elements
Reputation
Developing innovative and technologically
advanced products is at the heart of IMI.
The quality and safety of our products and
services is of the highest importance and
failure to deliver the quality required could
result in negative financial and
reputational damage.
Decreased
This area continues to be a key focus for our
businesses, by minimising the cost of quality
and warranty claims. During the year, IMI
Critical performed a Value Analysis and Value
Engineering exercise on all recent new products
and no issues were noted. Quality trends in
2021 especially with IMI Hydronic and IMI
Precision continue to be very positive.
Each division assesses its own compliance risk
and formulates an annual divisional compliance
plan which is implemented by each Division’s
General Counsel, who report to the respective
Divisional Managing Director. Due diligence on
third parties, trade sanctions and customers
are the subject of standard operating procedures
and carried out by the divisions using
Group-wide software.
The wider reach of the new expanded intranet
now gives employees a much greater depth
of information on the key areas. In addition,
dedicated resources at both the Group and
divisional level ensure employees are provided
with the necessary training, guidelines and
standard operating policies to ensure that
everybody is aware of the conduct expected from
them, in particular in relation to the key risk areas
of anti-bribery and corruption, anti-trust and
economic and trade sanctions.
In 2021, we distributed two online training
modules, one on anti-bribery & corruption and
another on competition law for select employees
to complete, with completion percentages
rigorously monitored. 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 53).
We have a continuing focus on product quality
and detailed mapping of our engineering
resources across our customers and geographies.
Across our operational platform we have
well embedded Lean Assessment quality
improvement programmes, Obeya reviews
and Advanced Product Quality Planning
processes. Our most critical projects include
extensive testing of the finished product
and customer sign-off.
IMI Precision have also widened their quality
training during the year, for example by
broadening its FMEA (Failure Mode & Effects
Analysis) training and ensuring all quality
leads receive Problem Solving training.
IMI plc Annual Report & Accounts 2021 79
Risk rating & appetite, link to strategy
and key elements
Description and change in year
Risk mitigation including specific 2021 actions
10. Failure to integrate acquisitions
successfully and deliver the
required synergies
(Operational Risk)
Underperforming acquisitions deliver below
expectation synergies and reduced profit.
If material, this can significantly impact
shareholder value.
Risk rating
MEDIUM
Impact: Moderate Likelihood: Moderate
No change
IMI acquired Adaptas in December 2021 and
the acquisitions of PBM in 2019, and Bimba
in 2017. We track these acquisitions to ensure
they deliver value, planned synergies and that
IMI provides ongoing support and training for
the local management teams.
Risk appetite
Receptive
Link to strategy
Reducing complexity
Digital
Links to other risk elements
Competitive markets
Global economic uncertainty
11. New product development
(Operational Risk)
Failure to deliver market leading products on
time and on budget, could impact our ability
to grow.
Risk rating
MEDIUM
Impact: Moderate Likelihood: Moderate
No change
We have in-house M&A expertise and,
as highlighted previously, operate a proven,
structured integration process.
The strategic review process helps identify
value enhancing acquisitions which would align
with the Group’s strategy. Once identified,
a formalised acquisition approval, due diligence
and integration process is followed. Upon
completion, a detailed 100-day process is used
to ensure adequate resources are in place,
progress is on schedule and the identified
synergies (both hard and soft) are being realised.
The Board carries out a review in year 3 after
each acquisition.
The use of the IMI Growth Advisory Board and
the expansion of the Growth Hub, including
the use of external experts, aims to ensure
appropriate processes and governance are in
place to avoid new product concentration risk,
projects are scalable and relevant teams have
the bandwidth to deliver successful new
products/services effectively.
Risk appetite
Receptive
Link to strategy
Strengthening customer intimacy
Reducing complexity
Driving market-led innovation
Digital
Links to other risk elements
Competitive pressures
Global macro-economic uncertainty
ESG/Climate change
One of our core values is customer intimacy,
ensuring unmet and emerging customer
needs are at the core of our operations. The
Growth Hub programmes, rather than starting
with existing products, aim to start with the
customer, working with them to understand
their problems and find the solution together.
The use of the New Product Development
Ignite process allows a much shorter validation
window to determine if the proposed solution to
a customer problem has a viable business and
value proposition. This shorter timetable allows
efficient use of resources to ensure only the most
appropriate solutions are developed.
We have established centres of design and
technological excellence across our businesses.
Each division has a New Product Development
strategy which is regularly reviewed, with
divisional engineering teams reporting on the
performance of our existing products and new
market or competitor developments.
Introduction Strategic Report Corporate Governance Financial Statements 80
Viability statement
Viability statement
The directors have assessed the viability of the Group over
a relevant period, taking into account the Group’s financial
and trading position as summarised in this Annual Report,
the principal risks and uncertainties set out on pages 74 to 79,
the Group’s going concern assessment set out on page 153 and
the five-year business plan reviewed by the Board in September
2021. Based on this assessment, and other matters considered
and reviewed by the Board, the directors confirm that they
have a reasonable expectation that the Company will be able
to continue in operation and meet its liabilities as they fall due
over the period from the date of this Annual Report to 31
December 2026.
The directors determined that the period to 31 December
2026 constituted an appropriate period over which to make
its assessment of viability. Whilst the directors have no reason
to believe the Company will not be viable over a longer timing
horizon, the five-year period to 31 December 2026 was chosen
as it was aligned with the Company’s business and strategic
planning timing horizon and is a sensible period for such an
assessment. It is believed this period provides readers of the
Annual Report with an appropriately long-term view with which
to assess the Company’s prospects although future outcomes
cannot be predicted with certainty.
The Board has considered the long-term prospects of the
Company based on the strategy, markets and business model
as outlined previously within this report. In the Strategic review
of the Group, the Board highlights a number of factors that
underpin its long-term prospects and viability. These include:
» Clear customer-focused strategy delivering [Breakthrough
Engineering for a better world]. Solving acute industry problems
with market-leading expertise, strong brands and the best people;
» Increasing exposure to attractive global markets, supported
by our Growth Hub programme and targeted M&A;
» Robust social and governance policies, for a stronger,
more responsible and more inclusive organisation;
» Differentiated environmental profile – led by our customer
solutions that enable energy efficiency, sustainability and safety;
» A clear business model committed to delivering sustainable
value to all our stakeholders, through Value Today and
Value Tomorrow strategies and the increasing use of
digital capabilities; and
» Strong balance sheet offering strategic flexibility alongside
disciplined financial objectives.
The business plan was used to assess the headroom on the
Company’s facilities and to model stress tests for ongoing
covenant compliance under scenarios where its principal risks
materialise. The analysis considered both ‘running business’ risks,
such as reducing revenues and margins, as well as one-off ‘event’
risks such as product recalls.
The scenarios considered were as follows:
Scenario 1: A modest global macroeconomic recession in 2022 representing
a 5% reduction in revenues.
Link to principal risks: global economic or political uncertainty.
Scenario 2: A product recall with a one-off cost of £200m.
Link to principal risks: Quality issues leading to product recall, warranty
issues, injury, damage or disruption to customers’ business.
Scenario 3: A severe global macroeconomic recession in 2022 representing
a 15% reduction in revenues.
Link to principal risks: failure to manage the supply chain; global economic
or political uncertainty; business disruption/natural disasters.
Scenario 4: This scenario considers the combined impact of scenario 2 and
3, both a £200m product recall and a 15% reduction in revenues due to
macroeconomic recession.
Link to principal risks: Quality issues leading to product recall, warranty
issues, injury, damage or disruption to customers’ business; global economic
or political uncertainty, business disruption/natural disasters.
Finally, the Board considered a reverse stress test which
demonstrated that a breach of covenants would not occur
unless there was an extreme unforeseen event causing
a revenue reduction of greater than 34% in the 12 months
following approval of the Annual Report and Accounts.
Mitigating actions considered for this reverse stress test include,
but are not limited to, reducing working capital, restricting
capital expenditure, reducing overhead spend and employee
costs and cutting or suspending dividend payments to
shareholders. The mitigating actions do not assume any special
governmental support other than normally available schemes
such as short-term working in certain countries.
The Board considered the Group’s liquidity, available banking
facilities and banking covenants, details of which are included
in the going concern statement on page 153. The Board also
considered the Company’s ability to raise capital in the future,
as well as both the ongoing actions undertaken to prevent
occurrence and the potential actions to mitigate the impact
of any particular risk. In making its assessment, the Board
recognised the principal risks facing the Company, including
those that would threaten its business model, future
performance, solvency or liquidity. A summary of these risks
can be found on pages 74 to 79.
The directors’ assessment also recognised a number of
key features of the Group’s operations. The Group’s wide
geographical and sector diversification, and the spread of
activities across many production sites, help minimise the risk
of serious business interruption. Furthermore, our business model
is structured so that the Group is not overly reliant on a few large
customers. Our largest customer constitutes only 3% of Group
revenue and our top 20 customers account for just under 16%
of Group revenue. In addition, our ability to flex our cost base
reduces our exposure to sudden adverse economic conditions.
IMI plc Annual Report & Accounts 2021 81
Going concern
After making enquiries, the directors have a reasonable
expectation that the Company and the Group have adequate
resources to continue in operational existence for the
foreseeable future and for a period of at least twelve months
(25 February 2023) following the approval of the Annual Report
& Accounts. Accordingly, they continue to adopt the going
concern basis in preparing the financial statements. Further
details are included within Note 1 to the financial statements.
IMI Critical Engineering –
Kobe, Japan
Introduction Strategic Report Corporate Governance Financial Statements 82
Board of Directors
Nationality
Committee
membership
Date of
appointment
Expertise
Key external
appointments
Specific
contribution
British
Nominations
Committee – Chair
2015
Significant UK and
international board
experience
Extensive knowledge of
both engineering and
manufacturing
Strong track record in
private equity, mergers
and acquisitions
Specialist capability in
finance
Non-executive Chair of
Scottish Enterprise
Non-executive Chair of
the British Business
Bank plc
Extensive international
business, sector and
board level experience
enables Lord Smith’s
valuable leadership of
the Board and drives
his commitment to
robust corporate
governance
British
Executive
Committee
2019 as Chief
Executive
and 2007
as director
Proven organisational and
engineering expertise
Non-executive director
of Halma plc*
Management capability
having run all of IMI’s divisions
Extensive knowledge of end-
markets and customer base
Drawing on his general
management and
operational experience,
Roy brings clear
strategic leadership and
a deep understanding of
the engineering sector,
the Group’s divisions and
stakeholders to lead and
inspire the Group
American
British
Executive
Committee
2015
Extensive financial
management experience
Extensive knowledge
of complex process
manufacturing across a
range of industrial sectors
Strong international
perspective, having worked in
a number of key geographies
during his time with two
leading global businesses
Non-executive director
and Chair of Audit
Committee of Ultra
Electronics Holdings plc*
Daniel contributes his
considerable global,
financial and business
development experience
from large multinational
companies to drive
strong financial
leadership and support
the growth of the Group
Lord Smith
of Kelvin
Chair
Roy Twite
Chief Executive
Daniel Shook
Finance Director
Danish
2018
Nominations
Committee
Audit Committee
Non-executive
director responsible
for employee
engagement and
ESG matters
Thomas Thune
Andersen
Senior independent
non-executive director
* Listed company directorship.
Experienced international
business leader in sectors
including oil, energy, marine
and critical infrastructure
Broad experience as a non-
executive director of various
public companies
Special interest in ESG
matters in particular
corporate governance and
climate change issues
Chair of Lloyds Register
Group
Chair of Orsted A/S*
Non-executive director
of Green Hydrogen
Systems*
Member of the Danish
Committee for Good
Corporate Governance
Non-executive director
of BW Group Ltd
Chair of VRK Holdings
A/S
Thomas brings a wealth
of international business
and board level
experience to his role as
Senior Independent
Director and draws on
his broad knowledge
and personal interest in
sustainability and
culture when performing
his designated employee
engagement and ESG
activities
IMI plc Annual Report & Accounts 2021 83
Nationality
Committee
membership
Date of
appointment
Expertise
Key external
appointments
Specific
contribution
British
2015
Audit Committee –
Chair
Nominations
Committee
Considerable accounting,
audit, governance and
transactions experience
including time as a member
of the UK Accounting
Standards Board and the
Reporting Review Panel
Worked with many
international businesses
on strategy, risk and
sustainability matters
Non-executive director
and Audit Committee
Chair of The Bankers
Investment Trust PLC*
Member of the
International Advisory
Board at Edinburgh
University Business
School
Isobel contributes her
extensive financial
experience and a
strong understanding
of the audit and
regulatory landscape
to chair the Audit
Committee effectively
and bring a strong
focus on governance
Irish
2020
Nominations
Committee
Remuneration
Committee - Chair
Non-executive director of
DCC plc*
Non-executive director of
Tyndall National Institute
Non-executive director of
CRH plc*
Successful executive career
in the technology sector
with an industry-leading
Fortune Global 500
company with operations in
30 countries
Senior executive leadership
roles across international
operations including
supporting complex supply
chains
Caroline brings
substantial, global board
level experience and
expertise in digital,
technology and supply
chain management.
Her experience serving
on remuneration
committees enables
her to chair the
Remuneration
Committee effectively
British
2018
Nominations
Committee
Remuneration
Committee
Senior executive experience
in major oil companies and
investment banking
Specialist knowledge of the
Oil & Gas sector
Excellent corporate finance
experience including
mergers and acquisitions
Executive Vice President
Acquisition, Divestment and
New Business Development
at Shell plc
Drawing on her broad,
international business
and executive
experience, Katie shares
valuable insights on
strategy, M&A and new
business development
American
British
Audit Committee
2021
Nominations
Committee
Remuneration
Committee
Experienced in international
business
Expert in innovation,
science and technology and
marketing
Holds a PhD in Food Science
Worked for The Coca-Cola
Company in a variety
of roles in research and
development, innovation,
consumer marketing and
general management, rising
to Senior Vice President
Non-executive director
of Britannia Industries
Limited, India*
Non-executive director
of Olam International
Limited and member of
Audit, Capital and
Investment, Corporate
Responsibility and
Sustainability
Committee
Ajai brings significant
global business and
board level experience,
as well as expertise in
driving innovation and
developing new business
to support delivery of
the Group’s strategy
Isobel Sharp
Independent non-
executive director
Caroline Dowling
Independent non-
executive director
Katie Jackson
Independent non-
executive director
Dr Ajai Puri
Independent non-
executive director
Public company
board
International
business
Engineering &
manufacturing
Finance & Risk M&A
ESG
75% 50% 88% 50% 50% 63% 38% 39%
Growing new
business
IMI focus
sectors
Strong level of
experience as
recorded in our new
board skills matrix
Introduction Strategic Report Corporate Governance Financial Statements 84
Chair’s Governance Letter
Leadership & strategy
Throughout 2021, we have been guided by our purpose –
[Breakthrough Engineering for a better world] – as we strive for
sustainable, profitable growth whilst generating value for all our
stakeholders, including our wider communities. As I mentioned
on page 5, the Board has been delighted by progress made to
define further our ESG and Better World strategy with the
introduction of new, stretching targets. More information can
be found in the ESG section from page 32 and on our website
www.imiplc.com. Our first report against the requirements of
the Task Force on Climate-related Financial Disclosures (TCFD)
can be found on page 37, with more information on page 72.
Additionally, we have enhanced our alignment of executive
remuneration with the introduction of a new sustainability
target as part of our long-term incentive plan. See page 113
for more information.
In December 2021, Adaptas Solutions joined the Group, bringing
with it significant, adjacent opportunities to IMI Precision
Engineering. Fully aligned with IMI’s strategy and purpose, this
acquisition represents a highly attractive opportunity to deepen
IMI Precision Engineering’s Life Sciences offering. Integration
is progressing well and I am pleased that the team are highly
engaged and motivated.
Board members regularly attend Growth Hub meetings during
which ideas for new products or opportunities are described.
These discussions provide an excellent way for both the Growth
Hub teams and Board members to share insights and
experience. I am delighted that meaningful progress has
been made in our Growth Hub projects and 2021 has seen
another year of progress – both in terms of orders generated
by them and in the number of employees who have had
direct involvement in how a growth mindset works. Growth
Hub continued to provide an excellent framework to enable
the long-term strategic goals of the Group to be managed
and realised.
Culture
The Board routinely assesses and monitors culture, and ensures
it is aligned with the Group’s purpose, values and strategy.
This year, the Board received insights from the One Big Voice
Survey and considered a new dashboard of cultural indicators
aligned with our values, which together enhanced how the Board
monitors culture. More information about the outcomes of the
One Big Voice Survey can be found on page 44 and the culture
dashboard is described in more detail on page 94.
Demonstrating integrity is a key value at IMI, underlining the
importance of our ethics and compliance agenda, and the
workforce is encouraged to ‘speak up’ and raise any concerns
they may have. The Board regularly receives details about the
number and nature of reports made to our hotline. More
information is contained on page 53.
Dear Shareholder
Guided by our purpose [Breakthrough
Engineering for a better world], the Board has
focused on:
» Safe and engaging working environments for
our people and our partners
» Excellent customer service for our customers
» Sustainable, profitable growth
In addition to overseeing the Group’s response
to the ongoing pandemic, we have also supported
the Executive team as they navigate an external
environment disrupted by a number of additional
challenging situations including highly competitive
labour markets, uncertain supply chains and
rising inflation. We have reviewed developments
in corporate governance and evolving investor
and sustainability expectations, actioning change
where appropriate.
In 2021, the Board has had a full agenda and
has participated in an uninterrupted meeting
schedule. When it was safe to do so, the Directors
enjoyed the opportunity to meet one another
in person and, for a second year, online meeting
tools have continued to play an important
role. I’m pleased that engagement levels have
remained high and we are confident that our
governance has continued to be robust.
IMI plc Annual Report & Accounts 2021 85
Developing our relationships with
stakeholders
During the year the Board reviewed the Group’s key stakeholders
and the processes we operate to engage with them. Clearly, we
cannot engage directly with everyone and so we have enhanced
our review of direct and indirect stakeholder engagement
processes to ensure that we maintain effective channels and
that we are cognisant of their key concerns.
Board level engagement is conducted with shareholders (see
page 96) and employees (see page 95). We have a designated
non-executive director for employee engagement and ESG
matters. Management regularly updates the Board about the
state of relations and engagement with key stakeholders,
including customers and suppliers. There are active feedback
processes in place which form part of the Board’s strategic
review activity. The Group’s key stakeholders and engagement
channels are summarised on page 97.
Division of responsibilities
The IMI Governance Framework is summarised on page 88.
It contains the Schedule of Matters Reserved for the Board,
roles and responsibilities for key Board roles, and the Terms
of Reference for each Board Committee. A complete copy
is stored on our website.
Independence
Following a review by the Board, I am pleased to report that all
non-executive directors meet independence criteria and display
objective judgement. I was considered independent on
appointment.
Diversity
I am delighted to report that we have enhanced diversity on
the Board and on the Executive Committee during the year
(see page 109 for more information). During 2021, the Board
approved a Board Diversity Policy (see page 110) and approved
diversity targets which are set out on page 37.
Composition, succession and evaluation
The Board performs effectively and there is open and
constructive dialogue with the Executive team. It is well
balanced, with the skills and experience to drive strategy, ensure
governance and manage risk. Quality discussions take place
and our diverse group of non-executive directors make valuable
contributions. The effectiveness of the Board was confirmed by
this year’s internal performance evaluation which is described
on page 100.
In our 2020 Annual Report we reported that, following an
extensive search process, Dr Ajai Puri would join the Board in
March 2021. We are delighted to have Ajai on the Board and
more information about the appointment process is contained
on page 108. In August 2021, after serving nine years on the
Board and making a significant contribution, Carl-Peter Forster
stepped down. The Board implemented its succession plans and
Thomas Thune Andersen became Senior Independent Director,
Caroline Dowling became Chair of the Remuneration Committee
and Dr Ajai Puri joined the Audit Committee.
You can find biographies containing details about all of our
directors on pages 82 and 83. I am pleased to confirm that all
directors are standing for re-election at the 2022 Annual General
Meeting. We are planning for our 2022 AGM to be a physical
meeting in the usual manner. We will keep our shareholders
informed of our AGM arrangements via our website.
As we look forward to 2022, our focus as a Board will be to help
Roy and the team to:
» minimise disruption for our customers from supply chain
challenges
» successfully develop new products and penetrate new markets
through Growth Hub activities
» successfully embed the Adaptas acquisition into IMI
» retain key talent
I would like to thank my Board colleagues, our people and our
stakeholders for their ongoing support and contribution to the
long-term success of IMI.
Lord Smith of Kelvin
Chair
24 February 2022
Introduction Strategic Report Corporate Governance Financial Statements 86
Corporate Governance Report
Code Compliance Statement
The Board is committed to maintaining good governance and confirms that, throughout the year ended 31 December 2021, it is
satisfied the Company has applied the principles contained in the 2018 UK Corporate Governance Code (the ‘Code’) and complied
with its provisions, with the exception of Provision 38. At the time of the introduction of the new Code, the Company had already
signed a contract with the Finance Director that entitled him to a pension contribution equal to 20% of his annual salary. This was
higher than the pension contribution available to the workforce. However, despite contractual obligations, the Remuneration
Committee has discussed this issue with the Finance Director and an agreement has been reached whereby a phased reduction by
3% every year of the Finance Director’s pension will be implemented. Therefore, since the introduction of Provision 38, the Company
has been non-compliant for the above reason. During 2020, the Remuneration Committee engaged with principal shareholders,
explained the reasons for non-compliance and assured them of the intention to be fully compliant by 2023. During 2021, the
Finance Director received a cash allowance of 17% of salary. From 1 January 2023, the Finance Director will receive a cash allowance
equivalent to 11% of base salary which is consistent with the average global employee pension opportunity for employees. Please see
page 116 for more information. Our reporting on the application of the principles and against the provisions is contained in this Report
and key cross references are summarised below. Further details appear in the Directors’ Report and other cross-referenced sections
of this Annual Report, all of which are incorporated by reference into this Report. A copy of the Code can be found at www.frc.org.uk.
Code
Supporting disclosures and cross-references
Board leadership &
Company purpose
» The Board promotes the long-term success of the Company. We work within our governance structure which is described
in the IMI Governance Framework. This is summarised on page 88 and is located on our website. We have a programme of
business which focuses on financial and operational performance, strategic initiatives, our Better World agenda, people and
leadership matters and risk management. We hold an annual strategy day. For more information about the Group’s strategy,
see the Strategic Report from pages 12 to 81.
» Our Business Model is displayed on pages 16 and 17. Reporting on our purpose, values, strategy and culture is set out
on page 94.
» Our Board is made up of a diverse group of skilled and experienced individuals. Director biographies are shown on pages
82 to 83. Individual role descriptions can be found on pages 88 and 132 to 133.
» The Board ensures that the necessary resources are in place for the Company to meet its objectives and measures
performance against them. The Board has established a framework of controls which enables risk to be assessed and
managed. For more information on risk management and the risks faced by the Group, see the Risk Report from page 70.
» IMI has multiple stakeholders who are all important to our business. A description of engagement processes in place with
shareholders, employees and other key stakeholders is contained on pages 56 to 57 and 95 to 97. Where engagement is not
direct, it takes place via feedback from individual Directors and members of management. The relevance of each stakeholder
group will depend on the particular matter requiring Board decision. Our Section 172(1) Statement is contained on pages 97
to 100. This demonstrates how the Board promotes the long-term sustainable success of the Company.
» Further information about our Better World strategy and how we impact wider society and contribute to society can
be found in the ESG section of the Strategic Report on pages 32 to 53.
» Our Code of Conduct sets out our values and the standards of behaviour we expect from everyone at IMI. We encourage
people to report any breaches of the Code and other concerns through our IMI hotline. The Board reviews the operation
of and reports from the IMI hotline. Details of key policies in place at IMI are listed on page 135. Details of our Speaking Up
whistleblowing hotline arrangements are contained on page 53.
» The Board has a formal system in place for directors to declare a conflict or a potential conflict of interest. A statement
of Directors’ interests in Company shares is set out on page 125.
Division of
responsibilities
» A description of the different Board roles and responsibilities is set out on page 88. The outcomes of the reviews of
independence of the non-executive directors and time commitments are set out on page 93 and page 109 respectively.
» Board composition (including an assessment of independence) is displayed on page 93. No non-executive director
has served for more than nine years.
» A summary of the process and findings of the 2021 Board evaluation is on page 100.
» Led by the Senior Independent Director, the Chair’s performance was reviewed. See page 100 for more information.
The performance of all directors was reviewed by the Chair. For more information, please see page 100.
» The Company Secretary supports the effective and efficient operation of the Board and its Committees. All directors have
access to the Company Secretary for advice, as well as access to independent professional advice at the Company’s expense.
IMI plc Annual Report & Accounts 2021 87
Code
Supporting disclosures and cross-references
Composition, succession
and evaluation
» Succession planning process for the Board and certain senior management roles is described in the Nominations
Committee Report on page 109.
» Board composition is presented on page 93. Details of the new Board skills matrix, to ensure the Board and its
Committees have a combination of right skills, experience and knowledge necessary to oversee and support the
management team in the execution of the Company’s strategy, is on page 109.
» The formal, rigorous and transparent Board appointment process is described in the Nominations Committee Report
on pages 108 to 109. The Group’s induction programme for newly appointed directors is described on page 110.
» A description of how the Company is progressing its Inclusion and Diversity agenda is described in the Nominations
Committee Report on page 109 and in the Strategic Report on page 46. The new Board Diversity Policy is set out in full
on page 110.
» The outcome of the 2021 Board and Committee internally-facilitated annual evaluation, including agreed areas of focus
for 2022, are set out on pages 100, 107, 111 and 129.
» All directors are standing for re-election and further information (including details of their individual contribution to the
long-term success of the Company) can be found on page 6 in the Notes to the AGM Notice.
Audit, risk & internal
control
» The Board reviews the main features and effectiveness of the Company’s internal control and risk management
framework. The Audit Committee’s work in relation to internal financial controls is summarised on page 103.
» At least twice a year, the Board reviews the principal and emerging risks which apply to the Group. This is to ensure that
they remain current and that, to the extent possible, there are mitigations in place to manage those risks in accordance
with the Board’s risk appetite to support the delivery of the Group’s long-term strategic priorities. Our reporting on our risk
management systems and information about the risks and uncertainties that relate to our business are detailed on pages
70 to 79 of the Strategic Report.
» Our Audit Committee Report, describing how it is composed and how it has discharged its responsibilities, is contained on
pages 102 to 107. A description of Group’s internal audit function is set out on page 106 and a report on the independence
and effectiveness of the external auditors, Deloitte, can be found on pages 106 and 107.
» The ‘fair, balanced and understandable statement’ is contained on page 104.
Remuneration
» Our Remuneration Committee Report is contained on pages 112 to 129.
» Following consultation with major shareholders, our Directors’ Remuneration Policy was approved by shareholders in May
2021. The full Directors’ Remuneration Policy can be found from page 85 of the 2020 Annual Report.
» Page 123 of the Remuneration Committee Report describes any discretion applied by the Remuneration Committee in
the course of its work. No director or member of senior management is involved in determining his or her own pay.
» The views of a cross-section of employees on executive remuneration were obtained by Thomas Thune Andersen, our
non-executive director with designated responsibility for employee engagement, during routine engagement activities.
Feedback received was shared with the Board and the Remuneration Committee.
Introduction Strategic Report Corporate Governance Financial Statements 88
Corporate Governance Report
IMI Governance Framework
The Board has delegated certain roles and responsibilities to its principal Board Committees in accordance with the Code. While
the Board retains overall responsibility, the Committees carry out deep dives into their areas of responsibility. Committee Chairs
report back to the Board on the matters discussed, decisions taken, and, where appropriate, make recommendations to the Board
on matters requiring its approval. Minutes of all Committee meetings are made available to all directors. The IMI Governance
Framework sets out the Schedule of Matters Reserved for the Board and the Terms of Reference for each principal Board Committee.
The IMI Governance Framework also describes the responsibilities of key positions on the Board and the Company Secretary.
A complete copy is located on our website. More information is contained on pages 132 of the Directors’ Report. We review
this regularly and will update it to reflect developments in corporate governance and best corporate practice.
IMI plc Board
Lord Smith of Kelvin (Company Chair)
Matters Reserved for the Board are contained in the IMI Governance Framework (see our website)
A summary of key board activity in 2021 can be found on pages 91 and 92
Audit Committee
Isobel Sharp (Chair)
Board Chair
Lord Smith of Kelvin
Audit Committee Report on page 102
Role description on page 132
Nominations Committee
Senior Independent Director
Lord Smith of Kelvin (Chair)
Thomas Thune Andersen
Nominations Committee Report
on page 108
Role description on page 133
Remuneration Committee
Caroline Dowling (Chair)
Remuneration Committee Report
on page 112
Non-executive director with designated
responsibility for Employee Engagement
Thomas Thune Andersen
Role description on page 95. Report on page 95
Committee Terms of
Reference are contained in the
IMI Governance Framework
Find out more:
www.imiplc.com/esg/governance/
board-and-committee
Non-executive director with designated
responsibility for ESG Matters
Thomas Thune Andersen
Role description on page 133
Chief Executive
Roy Twite
Executive Committee
Roy Twite (Chair)
Role description on page 133. Chief Executive
Report on page 12
Role description on page 94. Members of the
Executive Committee are shown on page 14
Company Secretary
Louise Waldek
Role description on page 133
IMI plc Annual Report & Accounts 2021 89
Audit Committee
Nominations Committee
Remuneration Committee
Isobel Sharp
Chair
Lord Smith of Kelvin
Chair
Caroline Dowling
Chair
Membership
Thomas Thune Andersen
Dr Ajai Puri
Membership
Thomas Thune Andersen
Caroline Dowling
Katie Jackson
Dr Ajai Puri
Isobel Sharp
Membership
Katie Jackson
Dr Ajai Puri
Main responsibilities
Main responsibilities
Main responsibilities
» Oversight role in relation to financial
» Board and committee composition
statements
» Reviewing significant areas of judgement
and accounting policies
» Reviewing the proposed statements on
going concern and viability to appear in
the Annual Report
» Oversight of succession plans for the
Board and the Executive Committee
» Search for and recommendation of
candidates for appointment as non-
executive directors, Chief Executive and
other executive director positions
» Advising the Board on whether the draft
» Diversity policy, promotion of diversity
and monitoring of progress
Annual Report is fair, balanced and
understandable
» Monitoring announcements in respect
of financial performance
» Monitoring the effectiveness of internal
financial controls
» Reviewing financial risks including fraud risk
» Oversight of internal audit and other key
processes for monitoring internal financial
control
» Overseeing the external audit process,
its objectivity, effectiveness and cost with
responsibility for setting the audit fee
» Making recommendations to the Board for
the appointment of the auditor including
oversight of any audit tender process
» Define and recommend the Remuneration
Policy for the Chair and members of the
Executive Committee
» Determine the individual remuneration
packages for the Chair and members of
the Executive Committee within the policy
approved by shareholders
» Set annual and long-term incentive
metrics and awards and determine the
outcomes for the members of the Executive
Committee
» Report on remuneration matters and
constructively engage with shareholders
» Assess risk in respect of remuneration
and incentive structures in particular
Audit Committee Report
Turn to page 102
Nominations Committee Report
Turn to page 108
Remuneration Committee Report
Turn to page 112
Introduction Strategic Report Corporate Governance Financial Statements 90
Corporate Governance Report
Board & Committee attendances
During the year, the Board met on six occasions to cover scheduled business and there were four additional special Board meetings
arranged for specific projects. The table below shows the number of scheduled meetings attended and the maximum number of
scheduled meetings that the directors could have attended. Only in exceptional circumstances would directors not attend Board
and Committee meetings. Scheduled meetings are normally held in person but a number have been held virtually via video
conference in 2021 due to COVID-19 restrictions.
Director
Thomas Thune Andersen
Caroline Dowling
Carl-Peter Forster**
Katie Jackson
Dr Ajai Puri***
Isobel Sharp
Lord Smith of Kelvin
Daniel Shook
Roy Twite
Board
10/10
9/10*
6/6
10/10
8/8
10/10
10/10
10/10
10/10
% eligible
attendance
Audit
Committee
% eligible
attendance
Nominations
Committee
% eligible
attendance
Remuneration
Committee
% eligible
attendance
100
100
100
100
100
100
100
100
100
4/4
n/a
3/3
n/a
1/1
4/4
n/a
n/a
n/a
100
n/a
100
n/a
100
100
n/a
n/a
n/a
4/4
4/4
2/2
4/4
3/3
4/4
4/4
n/a
n/a
100
100
100
100
100
100
100
n/a
n/a
n/a
3/3
2/2
3/3
2/2
n/a
n/a
n/a
n/a
n/a
100
100
100
100
n/a
n/a
n/a
n/a
* Caroline was unable to join a specially convened Board meeting on short notice due to urgent business and instead submitted comments to the Chair in advance of the meeting.
** Carl-Peter Forster stepped down on 31 August 2021.
*** Dr Ajai Puri was appointed as a board director and a member of the Nominations and Remuneration Committees with effect from 1 March 2021. He was appointed a member
of the Audit Committee with effect from 1 September 2021.
To date in 2022, the Board and each Committee has met once with all members in attendance.
IMI plc Annual Report & Accounts 2021 91
Summary of 2021 Board activity
Activities
Strategy:
Outcomes
More Information
Held a full day meeting to consider the Group’s long-term strategic
plans and priorities
Reaffirmed purpose and values. Approved strategy and key
milestones
Pages 16 and 17 of the
Strategic Report
Discussed and reviewed better world strategy, progress and proposals
to set ESG related targets
With the support of Thomas Thune Andersen in his capacity as
the non-executive director with designated responsibility for ESG
matters, the Board provided direction on development of better
world targets and ambitions. ESG related targets on page 37
were approved by the Board in February 2022
Pages 32 to 53 set out
ESG progress in 2021
and targets
Received regular updates about strategic matters such as M&A
transactions and business structuring decisions
Finance, Risk & Operations:
Reviewed financial results during 2021
After consideration, approved new ‘Customer First’ operating
model for IMI Precision Engineering, related simplification projects
and footprint optimisation plans
After consideration, concluded the review of 20%-30% of IMI
Critical Engineering’s business and approved the retention
of the majority of those businesses following performance
improvements and new opportunities aligned to the better world
strategy
Page 98
Page 98
After consideration, approved the proposed acquisition of
Adaptas Solutions
Page 98
Approved the 2020 year-end results (including Annual Report &
Accounts), 2021 half-year results and related announcements
Reviewed dividend proposals
Approved final and interim dividends
Page 130
Reviewed draft going concern and long-term viability statement
Approved the going concern and long-term viability statement
Pages 80 and 81
Reviewed share buyback proposal
Approved share buyback programme
Pages 5 and 131
Reviewed budgets and quarterly forecasts
Approved the 2022 budget
Reviewed and debated the overall risk profile of the Group, including
the principal risks, emerging risks and risk appetite
Approved the updates to the principal risks as shown in the
Strategic Report including the new risk assessment on
climate change
Pages 70 to 79
Conducted a deep dive into IT security and cyber-crime risk
Oversight of activities to enhance the effectiveness of the Group’s
IT security controls
Page 76
Following the recommendation of the Audit Committee, approved
the proposed appointment of Deloitte as external auditor
The resolution was put to shareholders at the 2021 AGM and
received 99.99% of votes in favour
Page 102
Reviewed the effectiveness of risk management systems and
internal controls
Risk management and internal control systems were considered
to be effective
Page 87
Reviewed the annual treasury update
Reviewed tax strategy
Approved Treasury Policy
Approved Tax Strategy
Page 67
Page 65
Received regular Executive reports
Monitored performance and progress
Virtual site visits to IMI Hydronic’s facility in Poland, IMI Critical’s
facility in PBM Inc, USA and IMI Precision’s Farmington, USA site
Enhanced the non-executive directors’ knowledge of the Group.
Engaged with local teams
Page 97
Introduction Strategic Report Corporate Governance Financial Statements
92
Corporate Governance Report
Summary of 2021 Board activity (cont’d)
Activities
Leadership, People & Culture:
Outcomes
More Information
Reviewed Health and Safety activities and performance
Reviewed HSE performance and ongoing Group-led initiatives to enhance the
safety culture and performance of the Group
Pages 49, 50 and 68
Reviewed progress made to further our inclusion and diversity
ambitions including dashboard of diversity, inclusion and
equity indicators
Met the recommendations of the Parker Committee Review on ethnic diversity
on the Board and the recommendations of the FTSE Women Leaders Review
(formerly the Hampton-Alexander Committee Review) on gender diversity on
the Executive Committee. Approved a new Board Diversity Policy. Diversity
targets shown on page 37 were approved by the Board in February 2022
Pages 109 and 110
Reviewed a dashboard of cultural indicators and related
information
Monitored and assessed culture and agreed it was aligned with the Company's
purpose, values and strategy
Page 94
Reviewed succession plans for the Board, Executive Committee
and wider leadership group
Succession plans for the appointment of a new non-executive director on the
Board and related changes to Board roles and responsibilities were implemented
Pages 85 and 109
The Executive Committee succession plan for the appointment of a new Group
General Counsel & Company Secretary was enacted
Received recommendations from Nominations Committee
regarding Board and Committee appointments
Appointment of Dr Ajai Puri as a director, and a member of all Board
Committees. Appointment of Thomas Thune Andersen as Senior Independent
Director. Appointment of Caroline Dowling as Remuneration Committee Chair
Reviewed the outcome of the new One Big Voice Engagement
Survey and received a report from Thomas Thune Andersen
in relation to his activities as the non-executive director with
designated responsibility for employee engagement
Informed about the key themes from the One Big Voice Survey
Thomas Thune Andersen gave a formal report on his activities as the non-
executive director with designated responsibility for employee engagement and
contributed relevant insight to boardroom discussions throughout the year
Page 85
Page 84
Page 95
Shareholders:
Received and discussed investor updates from the Investor
Relations team and the Company’s brokers
Governance:
Provided the Board with an indirect view of investor priorities and perceptions
Page 96
Reviewed methods of stakeholder engagement
Effective direct and indirect stakeholder engagement affirmed
Pages 54 to 57,
96 and 97
Reviewed and discussed the internal evaluation of the Board, its
principal Board Committees and individual directors
Identified key findings, focus areas for 2022 and any training needs
Page 111
Reviewed the terms of reference of each principal Board
Committee and the role descriptions of key roles
The review concluded in February 2022 and resulted in the Board approving
a revised IMI Governance Framework to take effect from 1 March 2022
www.imiplc.com
Reviewed the approach and progress of work to identify areas
where there is any risk of modern slavery occurring in our supply
chains
Approved the 2021 modern slavery and human trafficking statement
www.imiplc.com
Reviewed the effectiveness of the whistleblowing policies and
processes and incidents under investigation and noted the
activities within the business to prevent and detect fraud
Received summaries of reports received via the IMI Hotline and reviewed
updated ‘Speaking Up’ policy wording. Concluded that the ‘Speaking Up’
whistleblowing policies and processes were effective and noted the activities
within the business to protect and detect fraud
Page 134
Refresher training on Market Abuse Regulations
Ensured that the Board remained up to date
Page 111
Reviewed director conflicts of interest, significant external
appointments and time commitments
Effective board processes for conflicts of interest and taking on additional
external appointments were affirmed
Page 86, 109
and 133
No concerns were raised regarding director time commitments
Reviewed 2021 AGM notice
Approved 2021 AGM notice
Received legal and company secretary reports
Board apprised of key legal and governance matters across the Group
Reviewed fees paid to the non-executive directors
The decision to determine fees to be paid to the non-executive directors was
delegated to the Chair and the Chief Executive to ensure that no director was
involved in decisions in respect of their own remuneration. Ordinary resolution
proposed for the 2022 AGM to increase the maximum fees of Directors
permitted under Article 60 of the Company’s articles of association
See AGM Notice &
single figure table on
pages 124 and 135
IMI plc Annual Report & Accounts 2021
93
Independence of non-executive directors
The Board has reviewed the independence of each non-executive
director and considers that each non-executive director is free
from any business or other relationship which could impair
the exercise of their independent judgement. The Chair was
regarded as independent at the date of his appointment and
is considered by the other members of the board to be objective
in his leadership.
Dates of appointment
Length of tenure at 31 December 2021
Thomas Thune Andersen
Caroline Dowling
Dr Ajai Puri
Katie Jackson
Isobel Sharp
Lord Robert Smith
1
2
3
4
5
6
0
Years
Date of first
appointment
Date of current letter
of appointment
Thomas Thune Andersen
1 July 2018
1 September 2021
Caroline Dowling
1 January 2020
1 September 2021
Dr Ajai Puri
Katie Jackson
Isobel Sharp
1 March 2021
1 September 2021
1 July 2018
25 February 2021
1 September 2015
25 February 2021
Lord Robert Smith
7 May 2015
25 February 2021
Board composition
The Board is currently composed of eight directors: the Chair; the
Chief Executive; five independent non-executive directors and the
Group Finance Director. Dr Ajai Puri joined the board on 1 March
2021 and Carl-Peter Forster was a director until 31 August 2021. All
continuing directors will stand for re-election at each Annual General
Meeting. Detailed biographies of each current director, including the
specific reasons why the contribution of each director is, and
continues to be, important to the Company’s long-term sustainable
success can be found on pages 82 to 83. A summary of key areas
of Board experience can be found at the bottom of page 83.
Board diversity
The non-executive directors are a diverse group from different
backgrounds and nationalities and bring with them a wide range of
skills and experience in commerce, finance and industry from around
the world. The Board meets the targets set out in the FTSE Women
Leaders (formerly Hampton-Alexander) and Parker Reviews. Our
approach to diversity is set out in more detail on pages 46, 47, 109
and 110 and our Board Diversity Policy is set out in the Nominations
Committee Report on page 110. The charts below represent the
Board membership as at the date of this Annual Report.
Non-executive /
executive directors*
2
Gender
3
5
5
5 Independent non-executive directors
2 Executive directors
5 Male
3 Female
* Under the 2018 Code, the Chair is excluded when considering the independent
non-executive composition of the Board.
Nationality
4
Age
1
4
3
1 40-49
3 50-59
4 60+
4
7
4 Other
4 British born
Ethnicity
1
7 White
1 Asian
Introduction Strategic Report Corporate Governance Financial Statements 94
Corporate Governance Report
Executive Committee
The Executive Committee is chaired by the Chief Executive
and the other members are shown on page 14. It is the senior
management body for the Group, and takes its authority
from the Chief Executive and is not a committee of the Board.
It is well balanced, experienced and diverse. It is 43% female
(meeting the requirements of the FTSE Women Leaders Review
(formerly Hampton-Alexander Review)) and is composed of
three nationalities. The Committee meets monthly and more
often as may be required. As part of the broad remit set by the
Chief Executive it monitors and manages business performance,
reviews progress against strategic objectives and formulates
budgets and proposals on strategy and resource allocation for
consideration by the Board. It plays a key part in risk assessment
and risk management and monitoring processes and receives
regular reports on ESG matters, human resources, Health and
Safety, internal audit, compliance, legal, investor relations and
other corporate affairs.
Purpose, Values & Culture
The Board endorses our purpose of [Breakthrough Engineering
for a better world] and sets the strategy for the Group to align
with this purpose. IMI’s purpose is at the heart of everything
we do, it is why we exist. We are committed to achieving
profitable growth on a sustainable long-term basis while
creating a better world for everyone we engage with – our
customers, our employees, the communities we serve and
operate in, and our shareholders. For more information about
our purpose, please see page 16 of the Strategic Report.
Our values are an important part of who we are, as they provide
a culture and collective mindset for our entire organisation.
These values underpin all that we do, and ensure we maintain
the foundations that have enabled IMI’s success throughout
its 150-year heritage. For more information, please see page
52 of the Strategic Report.
Gender
3
4 Male
3 Female
Ethnicity
1
7 White
1 Asian
Tenure
2
2
3 0-5 years
2 6-10 years
2 11 years+
Nationality
1
Customer intimacy
One big team
4
2
4
4 British
2 American
1 Singaporean
Age
1
3
3 40-49
3 50-59
1 60+
3
7
3
Playing to win
Integrity
We have developed a dashboard of cultural indicators to
support the Board’s responsibility to monitor culture and ensure
alignment with purpose, values and strategy. The dashboard
comprises more than 20 metrics linked to the IMI values which
individually and collectively provide cultural insights. These include
customer net promoter scores, employee engagement scores,
regretted turnover information, number of employees involved
in our Growth Hub activities and details of hotline reports
received. The dashboard is designed to help the Board identify
any factors which indicate a negative culture or matters which
could impede our ability to deliver our strategic objectives.
The metrics in our culture dashboard will remain under review.
The Board reviewed the culture dashboard and related
information, monitored and assessed our culture. In addition,
there were a number of touchpoints in the annual cycle during
which reports and presentations were provided to the Board
and its Committees allowing for further consideration of
these cultural indicators. Thomas Thune Andersen, in his role
as non-executive director with designated responsibility for
employee engagement, provided insights into the Group’s
culture based on his interactions with employees across the
Group. Following a detailed review of culture which included
considerations of the Group’s values and insights from our
non-executive director with designated responsibility for
employee engagement, together with the annual review of
our purpose and strategy, the Board affirmed that culture was
aligned with IMI’s purpose, values and strategy. We will continue
to nurture our culture and ensure monitoring culture plays a key
role in Thomas’ employee engagement activities.
IMI plc Annual Report & Accounts 2021 95
Board level employee engagement
Thomas Thune Andersen has been nominated as the
non-executive director with designated responsibility
for employee engagement.
The purpose of this role is to enhance the Board’s understanding
of the views of the IMI workforce, supporting the directors’
collective responsibility to consider a wide range of stakeholder
perspectives when arriving at Board decisions. It includes the
following responsibilities:
» Developing a balanced view of the issues and concerns of
employees through various feedback channels such as Board
site visits, employee forum groups, IMI Way Day focus groups
and reverse mentoring for example, ensuring feedback is
obtained from all divisions, all levels and all geographies
» Sharing employee views learned in Board meetings on an
ongoing basis and in written format at least once per year
» Ensuring that the Board take appropriate steps to evaluate
the impact of proposals and developments on employees
» Where relevant and appropriate, providing feedback to
employees on board decisions and direction during the
engagement process
» Soliciting the views of employees about executive
remuneration and sharing feedback obtained with
the Remuneration Committee
This role does not take on the responsibilities of an executive
director, the Executive Committee, the HR team or act as a proxy.
Although Board members actively and directly engage with our
workforce through activities such as site visits and attendance
at Growth Hub pitches, the Board felt that having a non-
executive director with designated responsibility for employee
engagement would enhance its ability to gather the views of
the workforce in a more structured way, and enable a more
focused approach to understanding the culture of the Group.
In 2021, Thomas has joined various programmes such as the
Graduate Induction and Growth Accelerator pitches, met with
the Better World team, Global Wellbeing and the Inclusion and
Diversity team attended the European Communications Forum
(ECF). Given the current COVID-19 pandemic, the ECF was held
virtually and was attended by employee representatives from
all our key European geographies and provides an opportunity
for management (including the Chief Executive and Group HR
Director) to update on progress on key business and human
resource issues, as well as field a wide range of questions
from the representatives on key matters of employee concern.
A cross-divisional team working on Inclusion and Diversity invited
Thomas to meet with them and Thomas will continue to take
an active role with this forum and give insights into employee
engagement and inclusion and diversity initiatives.
“
During the year, I have interacted with small groups of
employees based all over the world. I have been involved with
graduates and am being reverse-mentored by a small group
of employees. I would like to thank all those I spoke with for
their openness, enthusiasm and transparency. In addition
to giving me feedback, their approach has provided me with
valuable insight into culture. Overall, relationships between
the group and employees are good and we continue to work
on matters raised to enhance engagement.
Thomas Thune Andersen
Focus areas for 2022 include:
» Increased exposure to different pipelines of key talent across
the organisation
» Participation in the IMI Way Day
» Participation in the European Communication Forum
» Participation in Growth Hub pitches
» Participation in the Graduate Induction
» Board lunches & site visits
Speaking Up
Details of the Group’s speaking up arrangements are contained
on page 53 of the Strategic Report and page 134 of the
Directors’ Report. The Board monitors operation of the Group’s
hotline and checks that appropriate investigation and follow up
is carried out.
Introduction Strategic Report Corporate Governance Financial Statements
96
Corporate Governance Report
Shareholder engagement
The Board oversees shareholder engagement and maintains
a balanced understanding of the issues and concerns of major
shareholders. The Chief Executive and Finance Director have
primary responsibility at Board level for investor relations and
they, and the Head of Investor Relations, report to the Board
on shareholder issues at every Board meeting during the year.
Financial analysts’ notes are circulated to the directors, and
the Board receives regular investor feedback reports from the
Company’s brokers and public relations advisers as well as from
management. The understanding of investor views resulting
from this feedback helps inform the Board’s decision-making.
Dialogue is maintained with the principal shareholders, and the
executive directors and/or the Head of Investor Relations meet
regularly with institutional investors. Virtual meetings were
arranged in 2021 to ensure appropriate engagement with
major investors. As in previous years, we maintained a significant
programme of such interactions, with existing and potential
shareholders, throughout the year. In 2021 these included two
Capital Markets Events, each designed to facilitate a better
understanding of the Group’s strategy and ambitions – as well
as the reasons why IMI is confident of achieving them. Smaller
– often private – investors also have full and timely access to all
IMI’s presentations via the Group’s website. The Chair and the
Senior Independent Director also are available to shareholders
as needed.
Consultation with our larger investors is very much concerned
with the performance and strategy of the Group. Their feedback
is shared with the Board so that it can be taken into account
in Board discussions. Institutional investors have shown
increasing interest in ESG matters and these are becoming
a more common theme in investor relations meetings and
information requests. We are also increasingly engaged in
completing ESG rating questionnaires and surveys, of particular
interest to our investors. More information on ESG matters
appears on pages 32 to 53.
Due to the impact of COVID-19 on the conduct of the Annual
General Meeting, a minimalist meeting with three shareholders
present was held at the registered office with the Chief
Executive being the only Board member present. Notice of the
Annual General Meeting was issued more than twenty working
days in advance of the meeting and the level of votes lodged for
and against each resolution, together with details of
abstentions, are shown on the IMI website. The Board values
the support of shareholders and the poll results for all resolutions
proposed at the Annual General Meeting were well above 90%
in favour in every case except for 87.31% Authority to allot shares
and 89.46% Notice of general meetings.
In addition to the Annual Report, the Company issues preliminary
results and half-year results announcements, as well as two
interim management statements between results
announcements. The IMI website includes recordings of results
presentations made by senior management, recent annual and
half-year reports, interim management statements, other
corporate announcements, and links to the websites of the
Group’s businesses. Two trading updates were issued in 2021.
Outcome of 2021 AGM
At the 2021 AGM, votes were cast in relation to approximately
83.50 per cent of the issued share capital (2020: 84.02 per cent;
2019: 82.24 per cent). All 22 resolutions proposed by the Board
were passed by the required majority. There were no significant
votes cast against the Board’s recommendations. Votes cast
in favour of the re-appointment of the Board directors were
as follows:
Director
Lord Smith of Kelvin
Roy Twite
Daniel Shook
Carl-Peter Forster
Isobel Sharp
Thomas Thune Andersen
Katie Jackson
Caroline Dowling
Dr Ajai Puri
Votes
95.28%
99.89%
99.09%
91.47%
99.73%
99.52%
99.93%
99.93%
98.60%
Stakeholder engagement
The Board is committed to engaging with key stakeholders,
developing positive relationships with them, and making a
positive contribution to the environment and local communities
in which we operate. Although the Group has many stakeholders,
the Board considers key stakeholders to be employees,
customers, shareholders, suppliers, society & community
and government & regulators.
A summary of how we engage with key stakeholders is set out
on pages 54 to 57. The Board conducts a formal review of
engagement processes with key stakeholders annually, and
there are other touchpoints during the year. As part of this
process, the Board drew on expertise from across the Group.
The stakeholder assessment process considered the following,
in relation to each key stakeholder:
» why the stakeholder was an important stakeholder for
the Group
» the interests and concerns of the key stakeholder
» strength of relationship (using relevant key
performance indicators)
» market dynamics, trends, risks and opportunities that could
impact the relationship over the short, medium and long-term
» recent interaction outcomes
» priorities going forward
» feedback mechanisms used & frequency
IMI plc Annual Report & Accounts 2021 97
The review also considered how the Board supported engagement with each key stakeholder:
Stakeholder
Board engagement
The Board engages directly and indirectly with the workforce. A description of the activities of Thomas Thune Andersen (non-executive
director with designated responsibility for employee engagement) is on page 95. The Board approves the Group Engagement Plan pursuant
to which all Board members engage directly with the workforce via non-executive director site visits, attendance at Growth Hub pitches
and other activities. The Board also receives reports from management on employee engagement activities and has access to our employee
engagement platform, Workplace.
The Board receives updates on key customer interactions, including any material quality or other relationship issues. Through participation
in Growth Hub pitches, the Board receives information about customer relationships.
Details of our shareholder engagement activities are in the left hand column of page 96.
The Board receives regular updates on material supplier performance and key areas of engagement to deliver supply chain resilience.
The Board also receives reports on how supply chain risks associated with modern slavery, human trafficking and conflict minerals are
managed and approves a statement detailing our approach. A copy of our statement can be found on our website.
As the non-executive director with designated responsibility for ESG matters, Thomas Thune Andersen has engaged with the Better World
Team on a range of ESG related issues. For more information about our community activities, please see from page 50 of the Strategic
Report. The Board is currently considering how to enhance the impact of its community support and ensure alignment with its ESG and
broader strategic aims.
The Board receives regular updates on legal and compliance matters and approves the Group’s tax strategy and ESG strategy.
Employees
Customers
Shareholders
Suppliers
Society &
Community
Government &
Regulators
Following this review of key stakeholder engagement processes and activities, the Board determined that effective and appropriate
engagement takes place with key stakeholders.
Stakeholder voice and Section 172(1) statement
This statement is made to explain how our Board of Directors, both individually and together, have acted in the way they consider,
in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole and having
regard (amongst other matters) to factors set out in Section 172(1) (a) to (f) of the Companies Act 2006 in the decisions taken
during the year ended 31 December 2021.
The IMI Governance Framework describes Board level governance and how the Board delegates its authority. All Board decisions
are made with the Group’s long-term success in mind and, as can be seen from this Annual Report, the Board has regard to a broad
range of matters including the voice of stakeholders. The oversight and monitoring activity of the Board includes maintaining an
understanding of key stakeholders and being receptive to the voice of stakeholders.
In the table below, some of the key decisions made by the Board over the year are described. There is an explanation of how the
Directors engaged with, or in relation to, the different key stakeholder groups and how stakeholder interests were considered over
the course of decision-making. By taking a consistent approach to decision making and being guided by our purpose and our strategic
aims, we hope that our stakeholders understand our decisions.
Introduction Strategic Report Corporate Governance Financial Statements
98
Corporate Governance Report
Stakeholder key
Shareholders
Customers
Employees
Suppliers
Community
Key Board
Decisions
in 2021
Acquisitions
Acquisition
of Adaptas
Solutions for
$271m
Distributions to
shareholders
» 7.9p per
share interim
dividend paid
» £200m
returned to
shareholders
through the
share buyback
Restructuring
projects
» IMI Precision
Engineering’s
Customer
First
Programme
» Retention of
the 20-30% of
‘under review’
IMI Critical
Engineering
businesses
Our Decision Process
Stakeholders
The Board receives regular updates about acquisition pipeline and approved the presentation of binding bids for targets.
In the highly competitive M&A environment, the Group successfully completed one acquisition.
In line with the Group’s purpose [Breakthrough Engineering for a better world], the Board approved the acquisition of
Adaptas Solutions, a business operating in the high growth and attractive Life Sciences sector, a sector which the Board
considers to be aligned with its Better World strategy (see page 39 for alignment with the UN Sustainable Development
Goals). As part of the decision-making process, the Board considered commercial opportunities, potential synergies and
financial benefits of the acquisition. The Board also considered the longer-term growth prospects of the enlarged Group and
potential returns. The views of our stakeholders, particularly the expected reactions of employees, customers and suppliers,
as well as our brokers’ opinions on the expected reactions from the market, were taken into account. The Board noted that
IMI’s enlarged life sciences business would provide employees with broader career development opportunities and would
take this into account during the integration phase of the transaction. The Board considered that the combined product
portfolio of IMI and Adaptas would provide customers with a larger range of solutions which would increase revenues and
likely enhance IMI’s contribution to a better world. It was agreed that teams from IMI and Adaptas should engage with key
customers to understand their requirements and consider how the broader IMI portfolio could support them. The Board
had regard to the opportunity for suppliers to increase their business with IMI, which could deliver synergies for IMI.
During the year, the Board assessed the payment and rate of dividend per share payable to shareholders as well as the
introduction of a share buyback programme. As part of decision-making, the Board considered how best to allocate capital,
balancing the short-term impact on shareholders of receiving funds (dividend or return of capital) against the longer-term
impact of using excess free cash flow to invest in acquisitions or growth projects, thus furthering the Group’s strategic aims.
Details of our capital allocation policy & dividend policy can be found on page 67.
The Board assessed the proposal for an interim dividend, taking into account our brokers’ opinions on the likely investor
reaction as well as the impact on shareholders given the share buyback programme. There was also consideration of
the impact on EPS, cash flow and distributable reserves.
In making the decisions to initiate and continue with the share buyback programme, the Board considered investor
expectations and potential M&A activity. The desire to maintain an effective capital structure was considered and it
was important that shareholders benefit from delivery of the strategy in an efficient and attractive way.
The Group’s budget and strategy, approved by the Board, sets the allocation of capital to deliver our growth strategy
through investment in innovation, operational improvement and acquisitions. The weighting of each is determined by our
strategic priorities and the rationalisation of the Group’s manufacturing footprint plays an important part of our operational
improvement plans.
Optimising the manufacturing footprint, business simplification and increased margins are key considerations in deciding
to invest in rationalisation. The Board seeks to balance investment in short-term operational improvement with investments
in medium and long-term growth initiatives. Appropriate engagement takes place at local level in relation to restructuring
changes affecting the workforce. The views of our stakeholders, particularly the expected reactions of shareholders,
employees and customers, as well as our brokers’ opinions on the expected reactions from the market, were taken into
account. The Board carefully considered the negative effect on our employees but determined that taking action now
would help IMI’s long-term business performance, supporting future growth and employment prospects.
The Board approved IMI Precision Engineering’s ‘Customer First’ programme, a restructuring of the division into three
platforms, aligned to customer segments. In reaching the decision, the Board considered the enhanced customer focus,
reduced complexity, savings/cost and impact on the workforce. The Board understood the impact this would have on
employment for some of the workforce, and was assured by management that relevant groups would be consulted fairly
in line with IMI’s values. The Board agreed with management’s assessment that the change will benefit the Group over the
long-term by creating a more efficient and customer-focused organisation.
20-30% of IMI Critical Engineering was placed under review in 2020 and, as a result, a small business in Brazil, InterAtiva,
was sold to management in July 2021. Following a detailed review of the remaining business, the Board received
management’s proposal in relation to retention and development as there had been developed a clear path to achieving
division target returns and long-term growth potential. The Board was supportive and in reaching this decision, considered
current business performance and outlook and received information about business performance improvements and new
opportunities. The views of our stakeholders, particularly the expected reactions of shareholders, employees and customers,
as well as our brokers’ opinions on the expected reactions from the market, were taken into account. The Board recognised
the positive effect on our employees and was encouraged by early orders secured in the attractive growth market of liquid
hydrogen processing, a target market segment which could enhance IMI’s contribution to a better world (see page 39 for
alignment with the UN Sustainable Development Goals). The Board also considered alternatives to penetrate this focus
market area including acquisition.
IMI plc Annual Report & Accounts 2021 99
When making decisions, each Director ensures that he/she acts in the way he/she considers, in good faith, would most likely promote
the Company’s success for the benefit of its members as a whole, and in doing so have regard (among other matters) to:
a) the likely consequences of any decision in the long-term
The Board has adopted an established business planning process
and sets strategy with a view to long-term success, to deliver our
purpose – [Breakthrough Engineering for a better world]. The
strategic emphasis is on creating great value through innovation
processes such as the Growth Hub programme, through which
we are building a pipeline of new products for the future success
of the Group. Further information about this key strategic
programme is included on pages 22 to 31. Our Better World
strategy, including our ESG ambitions and targets are described
on page 37. During strategy discussions, long-term considerations
and alignment with our purpose had a particular influence when
assessing which are the most attractive businesses and markets
for IMI to target for investment. When considering any potential
acquisition, the Board assesses the likely business performance
of the enlarged Group over the short, medium and long-term
time horizons, and alignment with our purpose.
b) the interests of the Company’s employees
The Group depends on its employees for its success and invests
considerable time and resources on employee engagement,
training and development as summarised on page 51.
Thomas Thune Andersen is the non-executive director with
designated responsibility for employee engagement, which
includes gathering the views of the workforce on behalf of
the Board. Please see page 95 for more information about
his role and activities. Due to the restrictions in place to
manage COVID-19 transmission risk, most engagement
activities have been conducted via video teleconference.
The Board considers employees views gathered through
engagement mechanisms and potential impacts on the
workforce when it makes key decisions, with Thomas and
other directors (where relevant), contributing any relevant
employee insights during board discussion.
As a Group, we also engage with our workforce through our
recently launched internal communications platform, Workplace.
The platform has truly transformed how we connect and bring
in our employee voice. We are able to reach each other in real
time to share news and updates, and seek input in to our
strategy and performance. Most importantly, it is a great
channel for celebrating our people and their contribution across
all geographies and levels. We encourage people to simply be
who they want to be, through sharing their ideas and insights.
It also allows our employees to connect and communicate in their
local language. All Board members have access to the platform
and can view information shared by employees. For more
information, please see page 46.
We conducted an all employee survey this year to understand
the views of our people. Results from the survey are contained
in the Strategic Report on pages 44 and 46. Focus groups have
been established to review findings, conduct deep dives into key
topics and consult on proposed follow up actions. The Board has
received details of the survey findings and actions underway.
Investment decisions including rationalisation and relocation
of activities are considered with due regard to the interests
of employees. Consultations with employees are conducted
in relation to the significant site closures and headcount
reductions which are underway as part of the active and
proposed rationalisation projects. The Board approves and tracks
the progress of these programmes with regular updates being
provided at Board meetings.
Health and Safety of our employees is of paramount importance
and receives appropriate Board and management attention
and investments. Reflecting the importance of safety, we
measure and track our performance. See pages 49 to 50 for
an update on our performance in this area.
Group pension scheme participants benefit from the Group’s
approach to pension provision and financial prudence in reducing
the funding deficit in relation to defined benefit obligations.
Further information on employee benefits and pensions is
on page 67.
c) the need to foster business relationships with suppliers,
customers and others
Customer service and value are at the core of our business
model and strategy. The Board monitors indicators of the
customer experience and welcomes the increased emphasis
on the customer which management is building. For example,
the Board has attended presentations and received regular
updates on our Growth Accelerator programme. Locating
facilities nearer to customers in the most attractive growth
markets is a key element in the Board’s thinking about the
footprint of the businesses, as reflected in the Strategic Report.
Our businesses work collaboratively with partners including
suppliers, distributors and agents who are closely managed from
a commercial and compliance perspective. Further information
can be found on pages 53 and 135.
The Board is committed to fair treatment and payment of
suppliers. Information about key suppliers is provided to the
Board by the executive Directors when relevant to Board
discussions and the Board reviews prompt payment
performance. Following a review of arrangements in place,
the Board reviews updates and approves the Group’s Modern
Slavery Act Statement, which can be found on our website.
The Board receives a monthly operating cash flow statement
and commentary explaining working capital movements including
creditor movements that would highlight payment issues.
The Board receives a cash flow forecast each quarter and yearly
Budget, which includes cash flows in relation to payments and
would act as a highlight in case of significant unexplained
creditor movements representing inflows. Supplier payment
performance data is provided to the Board for certain UK
companies and certain other areas of the Group.
Introduction Strategic Report Corporate Governance Financial Statements
100
Corporate Governance Report
d) the impact of operations on the community and
the environment
Our business units are positive contributors to their local
communities as employers and through apprenticeships
and employee training and community activities including
the annual IMI Way Day, charitable activity and donations.
The Group supports such community involvement, more detail
on which can be found on page 44.
The Board approves and monitors the Group policy on minimising
our impact on the environment, which is outlined on pages 40 to
42. Our continued progress depends upon the Board driving ESG
initiatives and channelling investment to projects with due regard
for the environment. During the year, the Board received updates
on ESG matters and Thomas Thune Andersen, non-executive
director for ESG matters, supported the Better World Team and
worked closely with the newly appointed Head of Sustainability
to support the next phase of planning around the positive
contribution of our products to a better world and improving the
environmental impact of our operations. Further information on
ESG matters appears on pages 32 to 53.
e) the desirability of maintaining a reputation for high standards
of business conduct
The Board takes care of the reputation of the Group and its
decisions reflect this and the great importance attached to
the Group’s reputation by all key stakeholders. The Board
demands high standards of conduct from all directors and
Group employees and expects management to be mindful of
how and with whom business is conducted. For example, the
Group has declined to have dealings with third parties who
display poor business conduct or do not pass our onboarding
checks. Further information about how we ensure we operate
ethically at all times and our purpose, values and culture, can be
found on pages 16 and 52 to 53. Similarly, our ESG initiatives are
consistent with building our standing as a good corporate citizen
looking to have a positive impact on the world.
f)
the need to act fairly between shareholders
of the Company
The Directors act fairly between shareholders of the Company
but are not required to balance the Company’s interests with
those of other stakeholders. This sometimes results in the
Company’s interests not being fully aligned with those of
certain stakeholders.
Evaluation of the effectiveness of the
Board, its principal Committees, the
Chair & the directors
The Chair arranged an internally facilitated evaluation process
in 2021 which was supported by the Company Secretary.
Questionnaires were created to gather information about the
effectiveness of the Board and its committees. Draft conclusions
were discussed with the Chair and they were subsequently
reviewed with the whole Board at its meeting in December 2021.
The Directors were satisfied that the Board is fulfilling its
responsibilities appropriately, that the Board and its
Committees were efficient and effective and that each director
demonstrated a valuable contribution and a commitment
to their role.
There were no material evaluation actions reported in the 2020
Annual Report. In the 2021 evaluation, progress during the year
was described in the following areas:
» The Board celebrated progress made on diversity
» The Board recognised improvements in the way culture is
assessed, monitored and how it is aligned with the Group’s
purpose, values and strategy
» The Board acknowledged more effective shareholder and
stakeholder engagement
Following discussion of the report, the Board noted a small
number of areas to consider in 2022 to enhance the Board’s
operation. The main recommendation was to review the Board
agenda to ensure it continued to meet increasing regulatory
expectations and evolving best practice. A review of the timing
of key Board discussion matters in the annual cycle was also
suggested to ensure such discussions were scheduled most
effectively. It was also agreed to review Committee scope
and membership.
The chairs of the three principal Board Committees each
received a report from the internal evaluation exercise and
reviewed that with their Committee. All were found to be
operating effectively and minor suggestions to improve
performance were noted.
The Senior Independent Director, Thomas Thune Andersen
conducted a review of the Chair’s performance with the other
non-executive directors which found that the Chair’s leadership
of the Board was highly efficient and effective. The results of
this review were shared with the Chair.
The Chair also met with the non-executive directors to review
the performance of the Chief Executive. The Chair passed on
to the Chief Executive appropriate feedback from the review
of his performance.
The Chair conducted performance reviews of each individual
director. Each director was found to be performing effectively,
discharging his or her duties, and making a valuable contribution
to the Board.
Details of the personal contribution of each board member
can be found in the director biographies on pages 82 and 83.
Approved by the Board and signed on its behalf by:
Louise Waldek
Group General Counsel and Company Secretary
24 February 2022
IMI plc Annual Report & Accounts 2021
101
IMI Precision Engineering –
Irwin, USA
Introduction Strategic Report Corporate Governance Financial Statements 102
Audit Committee Report
Dear Shareholder
I am pleased to give my report as Chair of
the Audit Committee. The Committee’s
principal responsibilities are to monitor the
integrity of the Group’s financial reporting
and financial statements, to review the
effectiveness of internal financial controls,
to monitor and review the effectiveness of
internal audit, and to make recommendations
to the Board on the appointment of an
external auditor. The Committee acts in
an oversight role for Annual Reports,
financial statements and announcements
with extended financial content, all of which
are prepared by management. The full terms
of reference of the Committee, which were
reviewed during the year, can be found in the
IMI Corporate Governance Framework on
the Company’s website.
In addition to our regular cycle of challenge
and oversight activity, we have focused this
year on the operation of the Company’s second
line of defence and on the ongoing impacts
of COVID-19 on the business and our Group
Assurance programme for the year. We have
challenged detailed aspects of the Group’s
policy for treatment of adjusting items in
relation to Alternative Performance Measures
(‘APMs’). We have reviewed the significant
restructuring spend and the provisions for
rationalisation at the year end and satisfied
ourselves that the treatment of those
disclosed as adjusting items is appropriate.
The provisional accounting for the acquisition
of Adaptas was also on the agenda. Following
our recommendation to appoint Deloitte
as auditor for the 2021 year end audit, the
Committee has monitored the auditor
transition during 2021 to ensure external
auditor effectiveness remains at the highest
level and welcomed the fresh challenges
from the new auditors.
IMI plc Annual Report & Accounts 2021 103
Members of the Audit Committee
Thomas Thune Andersen and I were members of the Audit
Committee throughout the year. Dr Ajai Puri joined the
Committee on 1 September 2021, following the retirement
of Carl-Peter Forster on 31 August 2021. All of the Committee
members are regarded by the Board as independent non-
executive directors and details of our experience are included
on pages 82 to 83. I have chaired the Audit Committee since 1
October 2017 and became a member on 1 September 2015.
I spent my early career in the accounting and audit profession
and the Committee, and the Board, are satisfied that I have
significant recent and relevant financial experience. I also
currently chair the Audit Committee at The Bankers Investment
Trust PLC. In my role as Chair, I have significant interactions
with the Finance Director and other key senior executives,
review in advance papers and agendas for meetings of the
Committee and meet with our external auditor prior to
Committee meetings.
The Board is also satisfied that the Committee members
have experience at Audit Committee level and collectively the
Committee has the financial, commercial and auditing skills,
experience and objectivity to be an effective Audit Committee.
Furthermore, Committee members attend as appropriate
external training sessions to update our knowledge and in 2021
Deloitte delivered a training and skills update session tailored for
the Committee, with a particular focus on the ‘Restoring trust in
audit and corporate governance: proposals on reforms’ issued by
the UK Department for Business, Energy & Industrial Strategy.
The Committee invites the following to join appropriate parts of
its meetings: the Chief Executive, the Finance Director, the Group
Financial Controller, the Director of Group Assurance and the
external auditor. In addition, the Chair and other non-executive
directors are welcome to attend, and usually join, the meetings.
The Committee meets alone with the external auditor and
with the Director of Group Assurance. The Committee has the
power to call on any employee to attend. In 2021, one of the
three Divisional Finance Directors (IMI Hydronic) attended a
committee meeting to discuss financial and internal control
matters including more use of shared services facilities. In
addition, members of the Committee met separately with the
Divisional Finance Directors, together with members of their
teams, in IMI Precision and IMI Critical to understand better the
digital analytic and control tools available to them. The Secretary
to the Committee is the Company Secretary.
Main areas of activity
The Audit Committee met four times in 2021, each time by video
conference. For two meetings the focus was on the forthcoming
results reporting and for the other two the focus was on
planning and review matters.
All meetings included a review of current accounting matters
within the Group, internal audit reports and external audit
matters. These activities are detailed in the following sections.
During the year, the Committee reviewed the proposed
amendments for the treatment of adjusting items relating to
Alternative Performance Measures (‘APMs’). It challenged one
particular aspect on which amendment was made and
welcomed the comments from the external auditor on this topic.
At its meeting in February 2022 the provisional accounting for
the acquisition of Adaptas was reviewed and approved.
The Committee continues to seek out with management
constructive opportunities for improvement in the effectiveness
of internal financial controls. A number of relevant initiatives
were implemented in 2021, including the simplification of
monthly reporting requirements and the ongoing IT investment
and infrastructure programme, which facilitates improvements
in both external audit efficiency and internal controls.
In 2021, the Committee made a deep dive into the control
environment of the Group, with a review of the Internal Control
Declaration (ICD) and the associated evidence binder which
sites maintain. This review helped the Committee gain additional
comfort around the quality of the finance function within the
Group. Management has worked to strengthen finance teams
and refreshed the talent pipeline for succession planning.
The Committee monitors changes in senior finance roles
and challenges management to ensure continuity of financial
reporting standards following team changes. In 2021,
management achieved successful internal transitions of key
senior finance roles. The Committee also welcomed the overall
improvement in the ICD evaluations and the actions being taken
in those areas where there is scope for improvement.
An update on tax affairs and compliance from the Head of
Group Tax was received by the Committee and the Corporate
Tax Strategy included in this Annual Report on page 171 was
approved by the Committee.
This year’s discussion with the Group Treasurer focused on the
challenges for the treasury function arising from replacement
of LIBOR with SONIA as the risk-free rate and the associated
update of documentation and processes.
The Committee reviewed management’s approach to preparing
the Annual Report and Accounts with the European Single
Electronic Format (‘ESEF’) tagging. Management chose to
use an outsourced provider with expertise to complete the initial
tagging prior to finalisation internally.
Introduction Strategic Report Corporate Governance Financial Statements 104
Audit Committee Report
The Committee reviewed and approved for submission to the
Board the statements on going concern and viability, which
are on page 153 and 80 respectively. During 2021, this involved
regular assessment of the impact of the pandemic and the
associated uncertainties and included the effect of the share
buyback programme. The Committee was satisfied with the
going concern and viability statements taking comfort in
particular from the resilience of its businesses demonstrated
in the past periods, the strength of the Company’s balance
sheet and the borrowing facilities in place.
The Committee advises the Board on the fair, balanced and
understandable requirements for the Annual Report and half
year results statement. In the Annual Report, the fair, balanced
and understandable criteria are also a review area for the
external auditor who has not reported any exceptions. The
Statement of directors’ responsibilities on page 136 includes
confirmation by the Board that it considers this Annual Report,
taken as a whole, to be fair, balanced and understandable.
As noted above, Deloitte was appointed to be the Group’s
external auditor for the year ended 31 December 2021.
The Committee reviewed the audit transition process
with management and the external auditor at each
meeting in 2021 and were satisfied the audit transition
was completed effectively.
Significant judgements and estimations
in the financial statements
In preparing the accounts, there are a number of areas requiring
the exercise by management of judgement and estimation.
These matters were the subject of appropriate detailed analysis
and commentary in papers and reports to the Committee from
management and the external auditor. The Committee reviewed
the most significant accounting areas involving such judgements
and estimates and these are described below.
Revenue recognition
The Committee discussed the timing of revenue recognition
on some of the Group’s larger contracts. In addition, this is a
key audit matter on which the external auditor reported to
the Committee. Having reviewed management’s process and
the external auditor’s comments, the Committee concluded
that revenues were appropriately reflected in the financial
statements. Note 2 to the financial statements provides
further information.
Adjusting items
The Committee considered both the items treated as adjusting
and their application in APMs. In addition, this is a key audit
matter on which the external auditor reported to the
Committee. The Committee reviewed all adjusting items,
in particular the treatment of restructuring costs, acquired
intangible amortisation and tax related adjustments.
The Committee reviewed the amounts and appropriateness of
restructuring costs of £35.1m and provisions of £31.6m disclosed
as adjusting items. It reviewed the restructuring costs incurred
by project to seek confirmation that they were non-recurring.
The Committee reviewed tax related adjusting items, including
the impact of the UK corporation tax rate change that resulted
in a one-off charge of £18.6m, and concluded management’s
treatment was appropriate.
The Committee concluded there had been adherence to the
company’s adjusting items policy.
Impairment of goodwill and intangibles arising
from acquisitions
The Committee considered the level of goodwill and intangible
assets held on the Group’s balance sheet in respect of a number
of recent and past acquisitions and whether, given the future
prospects of these businesses, the carrying value in each case
remained appropriate.
The year end balance sheet includes goodwill of £533.6m and
intangible assets arising on acquisitions of £157.4m.
During 2021, prompted by questions from the external auditor,
the Committee considered management’s proposed
amendments to the methodology used to calculate the discount
rate for the purposes of impairment testing and concluded this
was appropriate.
Impairment was also a key audit matter for the external auditor
who reported its findings to the Committee and also concurred
with the assessment that no impairments were required. Note 11
to the financial statements provides details regarding the
Group’s intangible assets and goodwill.
IMI plc Annual Report & Accounts 2021 105
Inventory valuation
The year end balance sheet includes inventories of £335.2m
after £46.2m of provisions. The Committee reviewed the
judgements applied to standard costing valuations and
provisions against excess and obsolete inventory and
concurred with management’s assessment.
Inventory valuation was a key audit matter for the external
auditor, in respect of which it reported to the Committee that
inventory valuation across the Group is considered appropriate.
Note 15 to the financial statements provides details of
inventory valuation.
Other judgement areas – tax and pensions
The Committee reviewed the adequacy of taxation provisions
for uncertain matters. Further details on these areas can be
found in Notes 3 and 9 respectively.
The Committee also reviewed the appropriateness of the
accounting treatment in respect of pension scheme liabilities,
including the actuarial assumptions used and the impact of
one-off special pension events. The Committee also received
a report reflecting appropriate expert input from the external
auditor, which concluded that the accounting for pensions
proposed by management was not materially misstated.
The Committee supported management’s ongoing efforts
to de-risk the Group’s pension obligations. Further details can
be found in Note 14.
Control environment
The Committee reviewed the overall control environment during
the year and considered the different responsibilities for site,
region, divisional and Group teams. The Committee welcomed
the implementation of electronic evidence binders to provide
automated documentation of controls to facilitate remote
review. The Committee considered the existing control framework
both in the context of the ‘Restoring trust in audit and corporate
governance: proposals on reforms’ issued by the UK Department
for Business, Energy & Industrial Strategy and in determining
what was right for the Group and supported management’s
decision to establish a project team. The Committee supported
management’s decision to pilot in 2022 an automated balance
sheet reconciliation tool, to assess how best to advance
automation solutions across the Group over the coming years.
Divisional Financial Directors
Sukhjit Purewal
IMI Precision
Engineering
Roby Buyung
IMI Critical
Engineering
Alex Hunt
IMI Hydronic
Engineering
Introduction Strategic Report Corporate Governance Financial Statements 106
Audit Committee Report
Internal audit
The Committee received reports from, and monitored the
work of, the Group’s internal audit function, known as Group
Assurance. Group Assurance has a direct reporting line to the
Committee and also reports through the Finance Director to
the Chief Executive. Group Assurance work is primarily directed
towards financial control audits but also covers other selected
areas including project planning and implementation for major
business changes and internal control declarations.
In addition to the sites reviewed in the year, the principal projects
assured in 2021 focused on the Group’s increasing use of digital
tools and included: central review of the Group-wide travel and
expenses system; IT system implementation within the Divisions;
and Capital and Rationalisation project reviews. Group Assurance
works closely with the divisions to implement monitoring and
review processes to complement the internal and external
audit coverage.
Locations to be reviewed each year are selected on a risk
assessed basis, discussed and agreed with the Committee and
take account of the external audit plan. In 2021, as in any other
year, the plan is adjusted to meet changes in the business and
one audit was cancelled due to an internal restructuring. The
completion of actions arising from internal audits and reviews
is monitored by the Committee and the track record for timely
completion of actions is excellent.
During the year, 37 internal audit reviews were completed with
28 of these supported by divisional finance managers. As in 2020,
in response to the pandemic, a flexible approach and greater use
of remote audit procedures were used to deliver the internal audit
plan in 2021, with the Audit Committee being consulted on the
amendments at all of its meetings. The involvement of divisional
financial managers in the internal audit process continues to be
great value to cope with travel restrictions.
Group Assurance continues to use technology and automation
to facilitate remote reviews, making use of the Group’s improved
ERP and data warehouse systems.
The Group Assurance team is led centrally by experienced, senior
internal audit professionals and across the Group there are over
100 staff trained to conduct internal financial control audits.
The annual plan and resourcing for internal audit were approved
by the Committee and take account of the enhanced monitoring
and review activity within the divisions. The scope of internal
audits covers certain operational and commercial risks in addition
to financial controls. Experienced financial managers from the
divisions work on combined audits covering financial, operational
and commercial matters. Group Assurance has trained divisional
finance managers in financial control auditing skills and provided
a toolkit to enable them to carry out financial control audits at
other sites in their division. Financial control evidence binders have
been introduced across the Group to help improve internal
controls and to make internal audits more efficient. The binders
also support transition and continuity in the event of any changes
in finance staff.
The Committee reviewed the effectiveness of Group Assurance
with management and received input from the external auditor.
The Committee supports the co-sourcing model, with the Group
Assurance team working together with experienced financial
managers from the divisions to enhance the effectiveness of
assurance processes. An area for improvement in 2022 which was
identified for the Group Assurance team is to develop further its
capability to carry out operational and commercial risk reviews.
The improvement actions for 2021 were made, most notably with
the advancement of electronic evidence binders including sharing
of best practice examples for key controls from the best sites.
The Committee has welcomed the way in which staff involved
in Group Assurance activities have coped with the challenging
circumstances of 2021 so that the level of assurance gained from
its activities during the year is equivalent to previous years.
External audit independence and
performance review
The Committee approved the proposed external audit approach
and its scope based on the size and level of risk of the entities
concerned. The Group and the external auditor take a risk-based
approach to audit and other assurance activity. The key audit
matters identified by Deloitte are set out in its report on pages
138 to 147 and were reviewed by the Committee in approving the
audit scope and plan.
The Committee considered the independence and objectivity
of the external auditor to be satisfactory. In assessing auditor
independence, the Committee had regard to the Financial
Reporting Council’s (FRC) best practice guidance for audit
committees. In addition, the external auditor confirmed that its
ethics and independence policies complied with the requirements
of the FRC’s Ethical Standard. To maintain the objectivity of the
audit process, the external audit partner responsible for the
Group is rotated within the audit firm at least every five years
and the current Senior Statutory Auditor, Dean Cook, was first
appointed for the 2021 audit.
The policy on the engagement of the external auditor for
non-audit work reflects regulatory requirements. It requires
approval by the Committee Chair for any non-audit engagement
for which the estimated fees exceed £10,000. The Finance
Director monitors any proposed non-audit engagements of
Deloitte and refers to the Chair for approval as appropriate.
The policy does not allow work to be placed with the auditor if
it could compromise auditor independence, such as functioning
in the role of management. Non-audit fees paid to the auditor
were £0.1m (2020: £0.1m), which represents 4% of the audit
fee and demonstrates the tight control which is maintained in
this area. The only significant non-audit engagement during
the year was in respect of the interim results review, which is
technically not statutory audit work but is typically placed
with the audit firm and was approved by the Committee.
The Committee considers the level and nature of non-audit work
to be modest and not to compromise the independence of the
external auditor. The Committee is satisfied that Deloitte is fully
independent from management and free of conflicts of interest.
IMI plc Annual Report & Accounts 2021 107
Pursuant to the power granted at the 2021 Annual General
Meeting, the Committee reviewed and approved the proposed
audit fee payable to Deloitte.
The Committee formally reviewed the effectiveness of the 2020
external audit process. As in other years, a questionnaire, sent
to over 25 business unit finance directors and interviews with
members of the Committee and selected executives were used
to review the effectiveness of the external audit process. Based
on the results of the questionnaire and feedback received, the
Committee believes the 2020 external audit process has been
good and effective. To enhance further the external audit process,
certain improvement actions were identified, and plans were
put in place by Deloitte to address these during the 2021 audit.
Following the 2020 review of EY’s effectiveness, Deloitte made
improvements in key action areas by increasing the use of digital
analytics tools to improve the effectiveness of the audit. The
Committee also reviewed the FRC’s Audit Quality Review report
regarding both EY and Deloitte as firms in this transition year.
Statement of compliance
IMI confirms that it was in compliance with the provisions of
The Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitor Tender Processes
and Audit Committee Responsibilities) Order 2014 during the
year ended 31 December 2021.
Audit tendering
Current legislation will require an audit tender by not later than
2031 and the Company retains the freedom to tender earlier.
The Committee considers it would be appropriate to conduct
an external audit tender process commencing in the year before
any change of auditor is made and therefore not later than 2030
in any event.
Committee attendance and evaluation
Director
Thomas Thune Andersen
Carl-Peter Forster*
Dr Ajai Puri*
Isobel Sharp (Chair)
Audit Committee
meetings
% attended where
eligible
4/4
3/3
1/1
4/4
100
100
100
100
* Carl-Peter Forster retired on 31 August 2021 and Dr Ajai Puri joined on
1 September 2021.
The Committee reviewed its own performance and terms
of reference. It received positive feedback on its performance,
with no recommended changes, from the internally facilitated
evaluation exercise carried out for the Board and each of its
standing committees. Minor amendments were made to
the terms of reference which are available on the Group’s
website. The Committee is aware of the current external
debates on the roles and responsibilities of auditors and audit
committees. It is vigilant in reviewing its work to meeting
changing business needs as well as external developments.
The Committee approved this report on its work.
Yours faithfully
Isobel Sharp
Chair of the Audit Committee
24 February 2022
Introduction Strategic Report Corporate Governance Financial Statements 108
Nominations Committee Report
Dear Shareholder
I am pleased to make my report as Chair of
the Nominations Committee. This report is
intended to give an account of the Committee
and its activities. The core responsibilities
of the Committee include reviewing Board
composition, overseeing the development
of a diverse pipeline for succession, leading
search processes, making recommendations
for appointments at Board level and oversight
of appointments to the Executive Committee.
The full terms of reference of the Committee
can be found in the IMI Corporate Governance
Framework on the Company’s website.
Composition
Thomas Thune Andersen, Caroline Dowling, Katie Jackson, Isobel
Sharp and I were members of the Committee throughout the
year. Dr Ajai Puri joined the Committee on 1 March 2021 and
Carl-Peter Forster retired on 31 August 2021. The composition
of the Committee meets the requirement of the Code that
a majority of members should be independent non-executive
directors. All of the non-executive directors on the Committee
are regarded as independent non-executive directors.
Attendance
Director
Thomas Thune Andersen
Caroline Dowling
Carl-Peter Forster*
Katie Jackson
Dr Ajai Puri**
Isobel Sharp
Lord Smith of Kelvin (Chair)
Nomco
% attended
where eligible
4/4
4/4
2/2
4/4
3/3
4/4
4/4
100
100
100
100
100
100
100
* Carl-Peter Forster retired on 31 August 2021.
** Dr Ajai Puri was appointed to the Committee on 1 March 2021.
The Company Secretary and the Group HR Director attend all
meetings of the Committee.
The Chief Executive is not a member of the Committee but
is invited to attend all meetings. Neither the Chair, nor the
Chief Executive, would participate in the recruitment of their
own successor.
The Committee reviewed and refreshed its own Terms of
Reference and the descriptions of key board roles, which were
approved by the Board to take effect from 1 March 2022.
Main areas of activity
Board changes and recommendations for election
and re-election
In our 2020 Annual Report we reported that Carl-Peter Forster
would complete nine years as a director in October 2021.
We reported that the Committee had already engaged Audeliss
to search for a new non-executive director to help enrich
diversity at Board level. Audeliss has no other connection with
the Company or any individual director. A formal, rigorous and
transparent selection process took place which was supported
by the Group Human Resources Director Liz Rose. Core
competencies for the role were scoped and agreed by the
Committee, a long list of potential candidates was reviewed
and the short listed candidates were interviewed. Following this
process, the Committee recommended the appointment of Dr
Ajai Puri, which was approved by the Board. Ajai joined the Board
and became a member of the Nominations and Remuneration
Committees with effect from 1 March 2021. He received a virtual
induction which is described in more detail on page 110.
IMI plc Annual Report & Accounts 2021 109
Following Carl-Peter Forster’s retirement and with effect from
1 September 2021, Thomas Thune Andersen became Senior
Independent Director and Caroline Dowling became the Chair
of the Remuneration Committee. Dr Ajai Puri joined the Audit
Committee. These appointments were recommended by the
Committee and approved by the Board.
All of the directors standing are recommended for re-election
at the Annual General Meeting following Board approval of
the recommendations made by the Committee in this regard.
Further information (including a description of the personal
contribution of each director) can be found in the Notes to the
AGM Notice or in the director biographies on pages 82 and 83.
Composition & succession planning
The Committee has undertaken a comprehensive review of
Board composition supported by the development of a new
skills and experience matrix. The annual evaluation found that
the Board was considered to be well balanced, composed of
an appropriate balance of skills and experience to support the
Group’s strategic objectives, with no major gaps. Please see
a summary of key board skills and experience on pages 82 and
83 and more detail on individual aspects of board composition
such as diversity, ethnicity, nationality, age and tenure is located
on page 93.
Board succession planning features on the agenda at every
Committee meeting. The Committee has evolved the Board’s
succession plan to provide more detail about the anticipated
timescales for changes in board positions (taking into account
tenure), plans for interim cover and in the short to medium term.
As part of future succession planning and to ensure a diverse
board is maintained, the Committee will also take into account
any critical experience, skills or expertise to ensure achievement
of the strategy using the board skills and experience matrix, the
Board Diversity Policy (on page 110) and performance against
diversity targets (see page 37).
The Committee supported succession planning for the Executive
Committee in the year which resulted in the appointment of
Louise Waldek as Group General Counsel & Company Secretary,
following the retirement of John O’Shea.
The Committee reviewed talent development and succession
planning for the top 184 roles in the Group with the support
of the Chief Executive and Group Human Resources Director.
The Committee was encouraged to see that significant progress
continues to be made in terms of cultivating a stronger pipeline
of high-calibre talent, as demonstrated by the increasing
proportion of internal appointments now running at 69%.
Details of our leadership development and succession planning
processes are set out in the Environmental, Social & Governance
section on page 51.
Review of time commitments and contributions
The appointments of the Chair and non-executive directors are
made on the basis of a formal letter of appointment including a
stated minimum time commitment judged appropriate by the
Committee. In accepting their appointment to the Board of IMI,
non-executive directors confirm they are able to allocate
sufficient time to discharge their duties effectively. No director
has raised concerns over the time commitment required of them
to fulfil their duties. Details of other significant appointments of
each director are contained in the biographies on pages 82 to 83.
Prior to accepting additional external positions, non-executive
directors are asked to confirm they can continue to meet their
time commitment and discharge their obligations to IMI.
The Committee considers that the time given to IMI by each
non-executive director is sufficient and the Board is satisfied
that no director is overcommitted and unable to fulfil his or her
responsibilities. The Board is satisfied that I have the necessary
time to devote to my role as Chair. Details of the individual
contribution of each director can be found in the biographies
on pages 82 and 83.
Inclusion and diversity
Diversity and inclusion continues to be an area of focus,
and feedback received as part of the annual Board evaluation
acknowledged improvements have been made in diversity at
Board and Executive Committee levels. The Board considers
diversity in its broadest sense to ensure a range of views are
given during discussions and the decision-making process.
The Board is committed to gender and ethnic diversity, and its
membership reflects the recommendations of the FTSE
Women Leaders Review (formerly Hampton-Alexander Review
Committee) and the Parker Review Committee respectively.
The diversity of our Board is shown on page 93. Our diversity
related targets are contained on page 37.
We have strengthened our gender diversity at Executive
Committee level in the year - we now have 43% female
membership on the Executive Committee. The Executive
Committee includes three nationalities. 18% of direct reports to
the Executive Committee were female as at 31 December 2021.
The Committee recognises the benefits a diverse pool of talent
can bring to a boardroom and remains committed to increasing
diversity across IMI. We will continue to review the composition
of the Board and the Executive Committee to ensure that we
have the right mix of skills and experience while maintaining our
effectiveness and execution capabilities. The Committee’s
oversight role in relation to inclusion and diversity was enhanced
this year through the development of a dashboard which
reported on performance and progress against relevant equity,
diversity and inclusion targets. Indicators on the dashboard
included gender pay gap metrics, equal pay confirmations,
and performance against external gender and ethnicity targets.
The dashboard also collated relevant scores from the IMI Way
Day survey which provided insights into equity and inclusion.
The Committee was pleased with progress made and endorsed
management’s proposal to put in place the framework for UK
Ethnicity Pay Gap reporting and improve diversity at the
leadership level.
This year, the Committee reviewed the following Diversity Policy,
which was approved by the Board.
Introduction Strategic Report Corporate Governance Financial Statements
110
Nominations Committee Report
Despite making meaningful progress in the year, there is more
work for us to do. Further information about the initiatives we
are implementing to increase inclusion and diversity across the
Group are detailed in the Environmental, Social & Governance
section on pages 46 to 47.
Non-executive director induction
A formal induction process for new non-executive directors is
well established and is the responsibility of the Chair with
support from the Chief Executive and Company Secretary.
Business familiarisation is at the core of induction and continuing
development for non-executive directors at IMI and is centred
around gaining an understanding of the business and getting to
know the wider management team. In normal circumstances,
non-executive directors are expected to visit business units
around the Group and to meet face-to-face with senior
operating management and key corporate staff. Site visits
allow business familiarisation and are also a good opportunity
to engage with a wider range of employees. Virtual Board site
visits were arranged but due to the Coronavirus pandemic
individual travel has been impractical for most of 2021.
The induction process for Dr Ajai Puri is summarised below:
» Ajai spent time (both virtually and face-to-face where possible)
with all members of the Executive Committee and the auditor.
» Ajai received a governance induction which included a briefing
on key matters relevant to each committee.
» Ajai attended a corporate induction day alongside new
leadership colleagues. This is an immersive and dynamic
induction focused on IMI’s core values and how we can achieve
our purpose by focusing on solving key industry problems in
attractive markets. There is an integrity between the delivery
method and IMI’s renewed focus on a growth mindset and
an innovative approach to problems.
» Ajai has actively participated in a number of Growth
Accelerator events, where innovation working groups present
new product and business ideas, engaging with the diverse
teams involved from the businesses.
» As part of a Board event, Ajai attended a virtual site visit to IMI
Critical’s PBM site.
Board Diversity Policy
The Company acknowledges the value of diversity in its
widest sense and its contribution towards effective Board
operations and decisions.
The Group operates an Inclusion and Diversity Policy which
is reviewed each year and provides the framework for
productive working relationships.
Taking account of its changing strategic needs, the Board
will ensure:
» The Board and its Committees have the appropriate
balance, composition and mix of skills, experience,
independence and knowledge to ensure their continued
effectiveness, having regard to external guidance
on diversity;
» A pipeline is maintained promoting diversity for
succession to the Board, Executive Committee
and Leadership Group positions;
» Only executive search consultancies who have signed
up to the voluntary code of conduct for executive search
firms on gender diversity on corporate boards are
engaged when seeking appointments to the Board
so that the selection processes provide access to a
diverse range of candidates;
» Appointments to the Board are made on the basis of
merit, with regards for suitability for role, Board balance
and composition and the required mix of skills,
background and experience – diversity will be a
consideration;
» Policies adopted by the Group promote diversity in
the broadest sense;
» Adequate and appropriate disclosure of:
– This Policy and diversity and inclusion initiatives
the Group has in place and the steps it is taking
to promote diversity at Board level and across the
Company including a description of progress made;
– The composition and structure of the Board;
– The gender balance of those in the Executive
Committee, their direct reports and the Leadership
Group; and
– The process of appointments to the Board; and
» This policy is reviewed from time to time to monitor
progress being made to assess its effectiveness.
IMI plc Annual Report & Accounts 2021
111
Committee evaluation
This year, supported by the Company Secretary, the Committee
reviewed its own performance using anonymous self-assessment
questionnaires. Feedback received was positive and the
Committee was considered to operate effectively and focus
on the right things. The Committee valued improvements made
in diversity at the Board and Executive Committee. Under the
leadership of the Chair, the board appointment process was
considered to have been successful and effectively run by the
Chair. The Committee also recognised the support provided by
the Group Human Resources team in relation to strong talent
development and talent acquisition planning.
There were no material evaluation actions reported in the 2020
Annual Report. Following discussion of the Committee
evaluation report, the Committee agreed to:
» maintain current levels of gender and ethnic diversity on the
Board and Executive Committee (adopting new measurable
objectives to reflect any changes in corporate practice);
» continue its emphasis on succession planning in 2022; and
» enhance its exposure to high potential individuals across the
Group to support the next level of succession candidates
and pipeline.
Details of the evaluation of the effectiveness of the Board,
Board Committees, the Chair and individual directors conducted
in 2021 can be found on page 100.
The Committee approved this report on its work.
Yours faithfully
Lord Smith of Kelvin
Chair of the Nominations Committee
24 February 2022
“
Having served on several international Boards, I can
honestly say that IMI’s onboarding process for NEDs is
amongst the best. I was able to spend quality time with
Roy, Dan, Liz and the Divisional Managing Directors. These
meetings gave me an excellent understanding of IMI’s
strategy, innovation agenda, key markets and customers.
Besides strategy, it is also important for a newly appointed
NED to get a feel for the culture at a Company. My onboarding
was most helpful in this regard. I loved the approach of
building the corporate induction session around ‘solving
a customer problem’ which provided a very stimulating,
engaging, and uplifting experience.
Dr Ajai Puri
Following Caroline Dowling’s appointment as chair of the
Remuneration Committee, induction meetings were held with
Willis Towers Watson (remuneration advisers), the Group Human
Resources Director and the Group General Counsel & Company
Secretary. To support Thomas Thune Andersen in his
appointment as Senior Independent Director, a briefing session
was held with the Group General Counsel & Company Secretary.
Board continuing development
Appropriate training and other continuing professional
development is available to all non-executive directors and
regular updates are given during the year where relevant to the
business arising at Board and committee meetings. For example,
tailored best practice updates were provided to the Audit and
Remuneration Committees during 2021 and the Board received
a refresher on UK Market Abuse Regulations. Non-executive
directors are encouraged to undertake appropriate external
training and most did attend external training during the year.
Introduction Strategic Report Corporate Governance Financial Statements
112
Statement from the Chair of the
Remuneration Committee
Pay for performance
Our focus this year has been to implement the changes
introduced in our new Policy, and to ensure our remuneration
arrangements remain appropriate with a strong pay for
performance relationship between the Policy and its
implementation. A high proportion of our executive directors’
remuneration remains closely tied to business performance.
The Committee select performance measures that align to
our purpose and the strategy, and when setting stretching
performance targets take into account a number of factors,
including the strategic plan, annual budget, analysts’ forecasts,
alignment with the wider workforce, and economic conditions.
Our objective is always to set stretching targets while at the
same time ensuring that strong underlying performance,
which can sometimes be obscured by external macro-economic
conditions, is recognised.
When assessing the level of performance achieved, the
Committee takes into account wider circumstances to ensure
incentive outcomes are a fair reflection of actual performance.
Further information about the process we follow when setting
targets and assessing performance is set out on page 118.
Key strategic and performance highlights in 2021 include:
» Group revenue of £1,866m increased by 2% and adjusted
operating margin increased by 140bps, statutory operating
margin increased by 110bps
» Group adjusted profit before tax increased from £274m to
£307m, statutory profit before tax increased from £214m
to £245m
» Adjusted Basic EPS increased from 79.7p to 92.0p
» £200m share buyback completed in the year and shareholders
will receive a total dividend of 23.7p – subject to approval at
the Annual General Meeting
The Alternative Performance Measures referred to above
are defined in Note 3.
Incentive outcomes
Annual incentives paid to executive directors in respect of
performance in 2021 were based on achievement of stretching
targets relating to Group adjusted profit before tax and
strategic and personal objectives, incorporating ESG metrics.
The Committee determined annual incentive outcomes ranging
between 97.6% and 97.8% of maximum for the executive
directors, which fairly reflects business, individual performance
and is aligned with the wider stakeholder experience.
The 2019 IMI Incentive Plan (‘IIP’) award which was subject to
stretching Return on Capital Employed, Group adjusted profit
before tax (PBT) growth and relative Total Shareholder Return
(TSR) targets measured over three financial years will vest at
75.3% in March 2022.
On behalf of the Board, I am pleased
to present the Annual Directors’
Remuneration Report for the year ended
31 December 2021. This is my first report as
Remuneration Committee Chair following
my appointment on 1 September 2021.
Remuneration in 2021
Context
2021 was Roy Twite’s second full year as Chief Executive and we
continue to make excellent progress to deliver on our strategy.
Our efforts are balanced on Value Today – delivering improved
returns through greater customer intimacy, operational
efficiency, and complexity reduction; and on Value Tomorrow –
investing in our future growth through engineering and market-
led innovation. The Committee is confident that its decisions
have been well judged and meaningful in ways that ensure that
the success of the Company fairly cascades down throughout
the organisation and aligns the wider workforce with the
Chief Executive.
Last year, the Committee completed its review of IMI’s executive
Remuneration Policy which was presented for approval at
the Annual General Meeting. The Committee was pleased
to see that 93.4% of shareholder votes supported the
new Remuneration Policy and 95.61% of votes supported
the Committee’s implementation of the current
Remuneration Policy.
Economic environment
Our stretching 2021 annual incentive targets were set with the
ambition to achieve significant growth on 2020 results, which
included the temporary surge in ventilator valve demand, and
there has been no cause to adjust targets as a result of any
economic downturn caused by the COVID-19 pandemic.
IMI plc Annual Report & Accounts 2021 113
As part of its determination of incentive outcomes, the
Committee considered the underlying performance of the
business, external factors such as macro-economic conditions
and shareholder experience during the performance period.
The Committee also considered the impact of the Adaptas
acquisition in December 2021 which, if included, would have
resulted in a slightly lower vesting outcome for the ROCE metric.
In line with the principles of our Remuneration Policy relating to
corporate transactions, the Committee concluded that the
acquisition of Adaptas should not lead to an adverse impact on
remuneration outcomes, and have therefore excluded Adaptas
from the 2019 IIP award outcome. In addition, Group Assurance
performed an internal assurance review of the annual incentive
and the 2019 IIP award outcomes.
The Committee concluded that the above outcomes were a fair
reflection of performance and did not consider it necessary to
exercise its discretion to adjust the level of incentives payable
according to the performance targets. Full details on the targets
set and performance against them can be found on pages 118
to 121 in respect of the annual incentive and page 122 for
the 2019 IIP award.
Remuneration in 2022
Policy implementation
Consistent with prior years, salary increases effective 1 January
2022 considered a range of factors including the increases for
the wider workforce, the financial performance of the Group
and prevailing economic conditions. For 2022 the Chief Executive
received a 4% base salary increase which is aligned to the general
increase applied to UK employees. The base salary for the Chief
Executive will be increased to £760,000 in 2022. Consistent with
the approach taken for other high performing employees, the
Committee awarded the Finance Director a 9% base salary
increase in recognition of his outstanding performance in role
and taking into account the competitiveness of salary and total
package relative to peers. The base salary for the Finance
Director will be increased to £506,300 in 2022. The Chair and
non-executive director fees were also reviewed and increased
by 4%, with effect from 1 January 2022.
Environmental, Social and Governance
The Committee reviewed the metrics that applied to the annual
bonus and IIP awards and considered whether any changes were
appropriate in accordance with the policy to further align
incentive arrangements to our Better World strategy.
Given the existing linkage of incentives to IMI’s sustainability
agenda (see pages 120 and 121), the Committee has determined
that annual bonus for 2022 will continue to be contingent on
a PBT growth metric alongside strategic and personal objectives
for each executive director. Each Director will continue to have
specific, measurable Environmental, Social and Governance
(ESG) targets built into their Strategic and Personal Objectives.
Furthermore, the ESG underpin will also remain in place
taking into account any relevant Health and Safety,
environmental, social or regulatory matters when
determining remuneration outcomes.
During 2021, the Committee reviewed the Company’s long-term
incentive plan with a view to further strengthening its linkage to
our purpose [Breakthrough Engineering for a better world] and
the successful delivery of our long-term strategy. With Better
World at the core of this review, and in particular, our impact
on the Environment, the Committee unanimously agreed to
introduce a metric focusing on the reduction of our CO2 emissions
(Scope 1 & 2). This new ESG metric will be the reduction of total
CO2 intensity (Scope 1 & 2) when compared to the 2019 base year
(2.78 tCO2e per 1,000 hours worked) as at the end of the vesting
period of the award. This aligns to our announcement in 2021
of halving our total CO2 intensity (Scope 1 & 2) by 2030. The
threshold target will equate to a total reduction of CO2 intensity
(Scope 1 & 2) of 40% by the end of 2030 (1.67 tCO2e per 1,000
hours worked) when compared to the 2019 base year with
maximum target proposed to be equal to a total reduction of
55% by the end of 2030 (1.25 tCO2e per 1,000 hours worked)
when compared to the 2019 base year. Vesting at threshold
will equal 25% with maximum vesting equalling 100%. This new
metric will be introduced into the IIP from 2022 and have a
10% weighting.
In light of wider, continued global economic uncertainty the
Committee considered whether the performance metrics for
LTIP awards remain appropriate before concluding that the
existing metrics of TSR, EPS and Return on Capital Invested
(ROIC*), remain aligned with strategy and with the creation
of shareholder value and each will have a 30% weighting.
* This metric is the same as that presented in 2020, however it was previously
referred to as Return on Capital Employed and has been renamed to Return on
Invested Capital to better describe the metric. References to capital employed
have also been updated to capital invested
The Committee believes that with the introduction of the new
long-term incentive metric, there is now clear alignment for
both short and long-term incentives with our Better World
purpose which also promotes the long-term sustainable
success of the strategy.
Finally, I would like to take the opportunity to thank my
predecessor Carl-Peter Forster for his excellent stewardship
of the Committee as demonstrated by the high level of
shareholder support we received for both the renewal of
Directors’ Remuneration Policy and its implementation at
the 2021 AGM.
Yours faithfully
Caroline Dowling
Chair of the Remuneration Committee
on behalf of the Board
24 February 2022
Introduction Strategic Report Corporate Governance Financial Statements 114
Annual Directors’
Remuneration Report
On behalf of the Board, the Remuneration
Committee (the ‘Committee’) presents the
Annual Directors’ Remuneration Report,
which will be put to shareholders for an
advisory (non-binding) vote at the Annual
General Meeting to be held on 5 May 2022.
The report includes details of the work of
the Committee, the pay received during the
year in accordance with our current Directors’
Remuneration Policy, approved by shareholders
at the Annual General Meeting in May 2021.
A copy of the approved Directors’
Remuneration Policy is included in the 2020
Annual Report which can be found on the
IMI website.
The Committee
Composition
The members of the Committee throughout the year were
Carl-Peter Forster (outgoing Chair), Caroline Dowling (incoming
Chair), Katie Jackson and Dr Ajai Puri. In accordance with the
Code, all the non-executive directors are regarded by the Board
as independent. As previously noted, Carl-Peter Forster stood
down from the Board on 31 August 2021 and Caroline Dowling
became Chair of the Committee from 1 September 2021. Dr Ajai
Puri joined the Board and Committee on 1 March 2021. Caroline
Dowling meets the requirements of the Corporate Governance
Code having more than 12 months’ previous experience on a
remuneration committee before being appointed Remuneration
Committee Chair.
Responsibility
The Committee determines the Remuneration Policy and
rewards for the executive directors and other members of
the Executive Committee and the Chair. The Committee
also considers the levels of pay and benefits across the Group.
A copy of the Committee’s terms of reference (which were
reviewed and refreshed in 2021) are included in the IMI Corporate
Governance Framework and are available on our website.
Internal advisers to the Committee
During the year, the Committee consulted the Chief Executive,
regarding the packages of members of the Executive
Committee. It also received support from the Finance Director,
the Group Human Resources Director, the Head of Group
Reward and the Company Secretary, who is also secretary
to the Committee. None of these individuals were involved
in determining their own remuneration.
External advisers to the Committee
Independent remuneration consultant, Willis Towers Watson,
is formally appointed by the Committee and provided advice
on executive remuneration to the Committee in 2021.
The Committee noted that the firm are actuaries and
administrators for IMI’s UK Pension arrangements.
The Committee is comfortable that these activities do
not represent a conflict of interest and that objective and
independent advice continues to be received by the Committee
from the dedicated team servicing it at Willis Towers Watson.
The fees charged by Willis Towers Watson in respect of advice
and services to the Committee totalled £102,250 in 2021.
Willis Towers Watson are signatories to the Remuneration
Consultants’ Code of Conduct in the UK.
IMI plc Annual Report & Accounts 2021 115
A summary of the Committee’s activities
during 2021
The Committee had three formal meetings during the year;
attendance can be viewed in the table adjacent. The principal
agenda items were as follows:
» final review and approval of the Directors’ Remuneration Policy
presented at the 2021 AGM;
Attendance
Director
Caroline Dowling (Chair)
Dr Ajai Puri1
Carl-Peter Forster2
Katie Jackson
Remuneration
Committee meetings
% attended where
eligible
3
2
2
3
100
100
100
100
» a review of total compensation packages of the members of
the Executive Committee alongside a deep dive into the wider
workforce remuneration and related policies;
1 Dr Ajai Puri joined the Remuneration Committee on 1 March 2021.
2 The July 2021 meeting was Carl-Peter Forster’s last meeting before he stood
down from the Board.
Annual General Meeting voting outcomes
The following table summarises the details of votes cast for and
against the 2020 Annual Directors’ Remuneration Report along
with the number of votes withheld. The Committee will continue
to consider the views of, and feedback from, shareholders when
determining and reporting on remuneration arrangements.
Voting item
Votes for
Votes against
Votes withheld
Directors’
Remuneration
Report
Directors’
Remuneration
Policy
95.61%
4.39%
93.40%
6.60%
0.6%
1.0%
» approval of achievements and outcomes under the
incentive plans;
» consideration of the fees for the Chair;
» approval of the 2021 share awards to members of the
Executive Committee;
» prospective review of the performance metrics and targets
for the 2021 incentive cycle;
» consideration of prevalence of ESG within strategy and current
linkage to incentives, paying particular attention to clarity,
simplicity, risk, predictability, proportionality and alignment
to culture;
» development of a proposal to link the Better World strategy
to the Long-Term Incentive Plan structure by including a CO2
Intensity metric for 2022;
» review of IMI’s gender pay gap data for 2021 against the prior
years’ data;
» review of IMI’s pay ratio of the Chief Executive to UK employees
and underlying calculation methodology;
» review of a report presented to the Board by Thomas Thune
Andersen in his role as non-executive director with responsibility
for employee engagement. Consideration of how Director pay
aligns with that of the wider workforce;
» receipt of an update on the UK corporate governance and
regulatory environment, and updated reporting regulations;
» review of the performance of the independent remuneration
consultants to the Committee;
» review of risks as they relate to executive compensation;
» review of the Committee’s own performance, constitution
and terms of reference; and
» review of executive director’s service agreements.
Introduction Strategic Report Corporate Governance Financial Statements 116
Annual Directors’ Remuneration Report
Executive single figure table (audited)
Fixed pay
(£000)
Annual
variable pay
(£000)
Long-term
variable pay
(£000)
Other items in the nature
of remuneration
(£000)
Director
See page
Roy Twite
Daniel Shook
Base
salary1
Pension2
Taxable
benefits
Annual incentive
bonus
IMI Incentive
Plan (‘IIP’)
All-employee
share plans
Total
(£000)
Page 117
Page 117
Page 117 Pages 118 to 121
Page 122
Page 124
Total
fixed
pay
(£000)
Total
variable
pay
(£000)
2021
2020
2021
2020
731
684
465
435
80
75
79
87
25
23
47
35
1,427
1,051
681
500
1,709
618
948
428
6
4
7
4
3,978
2,455
2,227
1,489
836
782
591
557
3,142
1,673
1,636
932
1 On 30 March 2020, the Board announced that both the Chief Executive and Finance Director agreed to a 20% salary reduction, effective 1 May, for three months ended on
31 July 2020. Pension allowance as a percentage of salary remained the same, and hence reduced in absolute terms, in line with the salary reduction.
2 Daniel Shook continued to receive a pension allowance of 20% of salary during 2020. As previously stated, Daniel Shook’s pension allowance will reduce as per the following
schedule: from 1 January 2021: 17% of salary; from 1 January 2022: 14% of salary; and from 1 January 2023: 11% of salary.
Roy Twite served on the Board of Halma plc during the year and received fees of £58,500 in respect of this appointment,
which he retained.
Daniel Shook served on the Board of Ultra Electronics Holdings plc during the year and received fees of £67,625 in respect of his
appointment, which he retained.
These figures have been calculated as follows:
Base salary and fees:
the actual salary receivable for the year.
Share price assumptions: for shares vesting in 2022, that related to performance
Pension:
the cash allowance paid in lieu of pension.
Taxable benefits:
Annual incentive bonus:
IMI Incentive Plan (‘IIP’):
the gross value of all taxable benefits (or benefits that
would be taxable for a person tax resident in the UK)
received in the year.
the value of the annual incentive payable for
performance in respect of the relevant financial year
(up to half is automatically delivered in the form of
deferred bonus share awards, when the executive
director does not meet their share ownership
requirement), however, the plan rules permit payments
to be made wholly in cash.
the value on vesting of the nil cost options that were
subject to performance conditions over the three-year
period ending on 31 December in the relevant financial
year (see share price assumptions below).
in the three years to 31 December 2021, the average
share price over the final three months of 2021
(1,720.83 pence) is used to estimate the value of shares
on vesting. The value of the award shown in the table
that is attributable to share price appreciation is nil.
All-employee share plans: the value of free shares at award and dividends under
the Employee Share Ownership Plan in the relevant
financial year and the intrinsic value of Save as You
Earn share options on the date of grant in the relevant
financial year (applying a 10% discount as permitted
under the Save as You Earn Share Plan).
Total fixed pay:
Sum of fixed pay columns.
Total variable pay:
Sum of annual incentive bonus, IMI Incentive Plan (‘IIP’),
all-employee share plans, and dividend equivalent
payments (if applicable).
IMI plc Annual Report & Accounts 2021 117
Executive remuneration received in respect of 2021
Benefits
During the year the executive directors received several
benefits, which are summarised below.
Roy Twite
Daniel Shook
2021
2020
2021
2020
Non-cash benefits
(£000)
Company car and fuel
allowance (£000)
Allowances and
reimbursement (£000)
Total
5
20
-
25
3
20
-
23
33
14
-
47
21
14
-
35
In addition to the above benefits and allowances that are
included in the single figure table (refer to table on page 116),
the executive directors are also beneficiaries of company
policies that have no taxable value, including directors’ and
officers’ insurance, death in service cover, travel insurance
and personal accident cover.
Base salary
Consistent with prior years, salary increases effective 1 January
2021 considered a range of factors including the increases for
the wider workforce, the financial performance of the Group and
prevailing economic conditions. The average increase for employees
in 2021 was 2.3%.
For 2021 the Chief Executive received 1.5% and the Finance Director
received 1.5%. Base salary levels were set at £730,800 for the Chief
Executive and £464,500 for the Finance Director.
Pension
Effective from the date of his appointment as Chief Executive,
Roy Twite received a cash allowance equivalent to 11% of base
salary which is consistent with the average global employee
pension opportunity for employees.
Daniel Shook, Finance Director received a cash allowance of 17%
of salary. His allowance will reduce 3% p.a. until 1 January 2023
where he will receive a cash allowance equivalent to 11% of base
salary which is consistent with the average global employee
pension opportunity for employees.
Pension benefits for past service
Roy Twite was previously an active member of the defined
benefit IMI Pension Fund, the assets and liabilities under which
were transferred to either the IMI 2014 Pensioner Fund or the
IMI 2014 Deferred Fund (‘the Fund’) in 2014. He opted out with
effect from 1 February 2007, before he became an executive
director, and as a result he retains past pensionable service up
to that date in the Fund.
The key elements of the benefits in the Fund are
summarised below:
» the normal retirement age under the Fund is 62 and Roy Twite
may retire from employment with IMI any time after age 60
without an actuarial reduction applied to his pension.
» on death after retirement, a dependant’s pension is provided
equal to 50% of the member’s pension.
» should he die within the first five years of retirement, the
dependant’s pension is increased to 100% of the member’s
pension for the remainder of the five-year period.
» pensions in payment more than any guaranteed minimum
pension, are increased each year in line with price inflation up
to a maximum of 5% in respect of pension built up before
1 January 2006, and 2.5% in respect of pension built up after
1 January 2006.
Accrued pension in the Fund
as at 31 December 2021
Accrued pension in the Fund
as at 31 December 2020
Roy Twite
£000pa
79
£000pa
78
Introduction Strategic Report Corporate Governance Financial Statements 118
Annual Directors’ Remuneration Report
Annual incentive bonus
In setting targets and assessing performance the following process is adopted by the Committee:
1. Set performance
measures aligned
with strategy
and budget
2. Set stretching
performance
targets
3. Assess
performance
4. Take account
of wider
circumstances
5. Apply discretion
if required
As per the Policy, the Committee reviews and selects
performance measures, targets and ranges annually, which take
account of the economic conditions, strategy and the priorities
of IMI at the time.
1. Set performance measures aligned with
strategy and budget
The Committee reviewed and selected performance
measures for 2021 that were fully aligned to the business
strategy and the annual budget as approved by the Board
in December 2020. The 2021 annual incentive bonus focused
on just one financial metric and non-financial metric.
These included:
» Group adjusted profit before tax (80%)
» Strategic and personal objectives (20%)
Free cash flow was also monitored and, if it materially
underperformed against budget, the Committee were
required to automatically consider applying
downward discretion.
There was also an Environmental, Social & Governance
(ESG) underpin to provide discretion for the Committee
to take into account any relevant ESG matters when
determining bonus outcomes.
For 2022, see page 128 for information regarding the
financial metric.
2. Set stretching performance targets
In setting stretching performance targets the Committee
considered a range of influencing factors that included
the strategic plan, the annual budget, analysts’ forecasts,
economic conditions including the ongoing impact of
COVID-19, individuals’ areas of responsibilities and the
Committee’s expectations over the relevant period.
Notwithstanding stretching targets are set at the outset,
the Committee will also consider the application of
discretion at the end of the performance period if relevant.
The performance target range itself was established
based on the annual budget and required significant
outperformance for executive directors to achieve
the maximum.
3. Assess performance
Results were ahead of expectations given the downward
economic and market headwinds:
» Group revenue of £1,866m increased by 2% and adjusted
operating margin increased by 140bps, statutory operating
margin increased by 110bps
» Group adjusted profit before tax increased from £214m to
£307m, statutory profit before tax increased from £227m
to £245m
» Adjusted Basic EPS increased from 79.7p to 92.0p
» £200m share buyback completed in the year and
shareholders will receive a total dividend of 23.7p –
subject to approval at the Annual General Meeting
The Alternative Performance Measures referred to above are
defined in Note 3.
4. Take account of wider circumstances
The Committee believes that the range of measures used
to assess performance of the annual incentive bonus ensures
that performance is assessed using a balanced approach,
that is fully aligned with the business strategy.
The Committee also considers the wider workforce
remuneration and policies when making decisions on
executive remuneration. Given the performance noted above
and wider operational achievements, the Committee is
comfortable that the 2021 annual incentive bonus outcomes
represent a fair reward for performance delivered.
5. Discretion to override formulaic outcomes and
to apply malus and clawback
Depending on the circumstances, the Committee may
exercise judgement in assessing performance and
determining the level of achievement.
The Committee has full discretion to override formulaic
outcomes and to reduce the amount of any annual bonus,
to reduce the number of shares subject to any form of share
award and/or to require a repayment to the Company in the
event it is discovered that the Company has misstated its
financial results, there has been an error or miscalculation in
respect of an award, there has been gross misconduct, there
is erroneous or misleading data or in any other circumstances
as the Committee sees fit. Such other circumstances may
include, but are not limited to, serious reputational damage
or corporate failure.
The Committee has considered the position and determined
that for 2021 it is not appropriate for any reason to exercise
the discretion to override formulaic outcomes or recover
amounts previously awarded.
IMI plc Annual Report & Accounts 2021
119
Summarised in the table below is the achievement against Group targets applicable for Roy Twite and Daniel Shook.
Director
Measure
All executive
directors
Group adjusted
profit before tax1
Strategic and
personal objectives
Maximum
opportunity
(% of bonus
opportunity)
Performance targets
Threshold
Target
Maximum
Actual
performance
(£m)
Actual
performance
(% out of 100)
Actual performance as
a percentage of metric
weighting
80%
£263.0m
£276.8m
£290.6m
£323.9m
100%
80%
20%
See table on pages 120 and 121
100%
1 Adjusted Group profit before tax, as set out in the Consolidated Income Statement on page 148, adjusted for the impact of foreign exchange, acquisitions
and disposals.
Strategic and personal objectives
As part of the strategic growth plan, the Committee sets each executive director several strategic and personal objectives each year.
Performance against these objectives is assessed using a combination of quantitative and qualitative reference points to ensure a
robust assessment process. Mid-way through the year the executive is reviewed against their progress towards achieving the strategic
and personal objectives with a full review undertaken by the Committee at the end of the performance period. As well as performance
against strategic and personal objectives, the Committee considers the wider performance of the Group.
Introduction Strategic Report Corporate Governance Financial Statements 120
Annual Directors’ Remuneration Report
A summary of the strategic and personal objectives set for 2021 and the performance against them is provided in the table below.
Director
2021 Strategic and personal objectives
Commentary
Weighting
(% of
maximum)
Performance
achieved
(% of
maximum)
Roy
Twite
Strategic growth: Fully embed a culture of market-led
innovation across IMI to accelerate profitable growth.
Execute major strategic projects on time and to budget.
Continue to develop acquisition options and relationships
across all three divisions, ensuring successful acquisitions
have robust integration planning, financial controls
and resourcing.
Strengthen organisation: Drive succession plan and
develop the depth of talent in the organisation across all
management roles. Continue to build the IMI Executive
team and accelerate its performance. Further improve
employee communication and engagement.
Deliver projects: Focus the entire management team on
profitable growth, ensuring each part of the organisation
is designed most appropriately to achieve this. Optimize
each division’s performance to deliver the strategic plan.
» Our Better World strategy of customer focus, market-led
20.0%
88%
innovation and complexity reduction was deployed effectively
in 2021.
» Growth Hub orders trebled to £23m and over 700 employees were
involved in Growth Accelerator initiatives.
» IMI Precision Engineering‘s ‘Customer First’ organisational
restructuring programme was completed with more simplification
to follow.
» IMI Hydronic Engineering structures were simplified with the
consolidation of manufacturing and warehouses.
» The acquisition of Adaptas was completed in late December 2021.
» IMI Executive team performance continues to improve. The
recruitment of Louise Waldek enhances the diversity of the
Executive team.
» Chief Executive and executive succession pipeline was
strengthened with strong candidates identified and undergoing
rapid development programmes.
» Employee engagement scores improved significantly with 80% of
employees ‘recommending IMI as a good employer to friends and
family’ compared to 73% in 2020.
» Employee engagement improved significantly through quarterly
Executive video calls to the Leadership Group and our new
communications platform; Workplace.
» The IMI Executive Committee and Leadership Group all focused
their efforts on profitable growth to create a better world.
» IMI Precision Engineering was reorganised around its end-markets
through the ‘Customer First’ initiative, with stronger business unit
leadership put in place.
» IMI Critical Engineering won £20m in new business from Growth
Hub initiatives, and continued to grow its after-market business.
» IMI Hydronic Engineering structure was simplified to enable
growth by restructuring manufacturing.
Environment: Focus on elevating the visibility of IMI’s
progress, further developing metrics and targets. Advance
‘FTSE4Good’ scores to ensure entry in the next two years.
Continue to monitor and review that HSE, quality and risk
improvement plans are robust and delivered across the
three divisions.
» Risk mitigation actions in the supply chain have proved effective
so far in the pandemic. Total Recordable Incident Frequency Rate
decreased from 0.57 to 0.56.
» IMI re-entered FTSE4Good in 2021 which was achieved ahead
of schedule.
Social: Drive a proactive diversity and inclusion culture
throughout the organisation. Ensure that IMI’s values
are lived by and any breaches are investigated with any
resultant improvements plans implemented.
» Total CO2e emissions have also been reduced by 23% since 2019.
» IMI Executive Committee now includes three female members out
of a total of seven.
» Half of graduates recruited were female for the second year
running.
» Employee engagement scores have improved further and 87% of
employees now feel that they are treated fairly and with respect
compared to 80% a year ago.
Governance: Ensure IMI’s financial controls and reporting
integrity are maintained at the highest level. Continue to
regularly update our key shareholders.
Financial controls improved in the year as per external auditors
assessment. Over 100 interactions with institutional and other
shareholders took place including meeting with 80%
of top 20 shareholders.
IMI plc Annual Report & Accounts 2021 121
Director
2021 Strategic and personal objectives
Commentary
Weighting
(% of
maximum)
Performance
achieved
(% of
maximum)
Daniel
Shook
Strengthen finance organisation: Ensure finance
leadership changes are successful and enhance internal
succession options. Develop a strong, diverse pipeline of
talent and maintain high levels of engagement within
the finance function.
Deliver projects: Deliver new employee engagement
project to create a dedicated internal communications
platform. Advance the use of automation within the
finance function, ensuring no control degradation. Reduce
financial reporting complexity, delivering 50% reduction
in monthly reporting data. Actively engage and support
the delivery of divisional Growth Accelerator and new
product development targets.
» Finance leadership team changes were implemented
20.0%
89.0%
effectively with a strong and committed team now in place.
» Strong recruitment has improved the talent pipeline and
enhanced succession planning for senior finance roles.
» Workplace, the new employee communications platform was
successfully launched in May 2021 and has transformed the
way IMI is able to communicate effectively with employees.
» Financial reporting simplification programme was
completed in 2021 with a 50% reduction in monthly
reporting data achieved.
» A new automated reporting tool was successfully piloted
during 2021 with further development plans in place
for 2022.
Environment: Ensure ESG activity and reporting is
delivered to a high standard. Support initiatives to
advance progress to enter ‘FTSE4Good’.
» Achieved re-entry to FTSE4Good earlier than anticipated
in 2021.
Social: Ensure IMI has a diverse list of candidates on
the short list for all open Finance positions.
» New hiring protocols have been embedded during 2021 to
ensure IMI has a diverse list of candidates for open positions.
Governance: Effectively manage the audit transition
process to ensure a quality and efficient audit from
Deloitte in 2021.
» More new hires into the Finance team have been female,
continuing to improve the diversity of the team.
» The new audit team have transitioned successfully and the
onboarding process has been smooth. Early insights provided
by Deloitte supporting the decision to make
the appointment.
Performance under the financial metric (80% of the total annual incentive bonus achievement) and the strategic and personal
objectives (20% of the total annual incentive bonus achievement) and the total achievement (% of maximum) is set out below:
Director
Roy Twite
Daniel Shook
Actual performance of
financial metrics (%)
Performance achieved under the
strategic and personal objectives (%)
2021 maximum bonus achieved
(% of maximum)
80%
80%
17.6%
17.8%
97.6%
97.8%
Based on the performance described above, the annual incentive bonus outcomes for 2021 are set out below:
Director
Roy Twite
Daniel Shook
2021 maximum
bonus opportunity
(% of salary)
2021 maximum
bonus achieved
(% of maximum)
Total bonus
awarded
(£000)
Total bonus
awarded
(% of salary)
Achievement of share
ownership guidelines
at 31 Dec 20211
Bonus delivered
in form of cash
(£000)
Bonus delivered
in form of share
awards (£000)1
200%
150%
97.6%
97.8%
1,427
681
195%
147%
191%
166%
1,427
681
-
-
1 Deferred bonus share awards are made where the executive director is yet to reach their share ownership guidance. Details of the share ownership guidelines can be found on
page 123.
Introduction Strategic Report Corporate Governance Financial Statements 122
Annual Directors’ Remuneration Report
Awards vesting under the IIP
In March 2019, performance share awards were made to the executive directors under the IIP. The vesting of the awards was
subject to the achievement of three independent performance conditions as described below, measured over the three-years
ended 31 December 2021. The 2019 IIP award will vest in March 2022 at 75.3% of maximum.
Director
Initial award
Value on date of
award¹ (£000)
Number of initial
shares vesting
Additional dividend
equivalent shares
Total shares vesting
Value of shares on
vesting2 (£000)
Roy Twite
Daniel Shook
120,758
66,962
1,214
673
90,930
50,422
8,386
4,650
99,316
55,072
1,709
948
1 The three-day average mid-market price on the date of award was 1,005.00 pence
2 The price on vesting is unknown at this time and so the total number of shares vesting is valued at the average price over the last quarter of 2021 1,720.83 pence
Group adjusted profit before tax growth
50% of the award was subject to the achievement of the
Group adjusted profit before tax growth measure. This measure
is defined as the profit before tax before adjusting items as
shown in the audited accounts of the Group, adjusted for
any exceptional items, including significant acquisition and
disposal and foreign exchange movements, at the
Committee’s discretion.
Adjusted profit before tax growth is a key measure for IMI
as it gives an indication of the strength of the Group’s financial
performance and shows the amount available to reinvest into
the business and pay a return to shareholders through dividends.
For growth of less than 2.5% per annum, no award under this
element will vest. 25% of the award will vest for growth of 2.5%
per annum rising on a straight-line basis to full vesting for
growth of 7.5% per annum.
Over the three-year performance period ended 31 December
2021, IMI delivered Group profit before tax growth of 6.9%.
The resultant vesting outcome for this element of the award
is 45.6%.
Deferred bonus share awards
In March 2019, deferred bonus share awards were also made
under the IIP which vest in March 2022. These are the form
of share award used for mandatory bonus deferral into shares
of up to 50% of annual bonus payable, where the executive
director is yet to reach their share ownership guideline.
Return on capital employed (ROCE)
25% of the award was subject to the achievement of ROCE.
This measure is defined as adjusted operating profit as a
percentage of the average capital employed during the
financial year ended 31 December 2021. Capital Employed being
Intangible Assets (excluding Acquired Intangibles and Goodwill),
Property, Plant and Equipment and Working Capital. It compares
the earnings of the Group with the Capital employed. ROCE was
chosen as a measure as it represents how well the Group has
used its investment made by shareholders and capital from
creditors to generate a profit.
The portion of the share award that will vest related to
ROCE performance in the final year of the performance period.
For ROCE of less than 40% no award under this element will
vest. 25% of the award will vest for ROCE of 40%, rising on
a straight-line basis to full vesting for ROCE of 50%. At the
end of the performance period return on capital employed
was 47.7% resulting in this element vesting at 20.7%.
Total Shareholder Return (TSR)
25% of the award was subject to the achievement of
a relative TSR performance measure against a defined
group of companies adjusted during the performance period,
to take account of merger and acquisition activity during the
performance period in line with the Committee’s established
guidelines. TSR is defined as the movement in share price during
the performance period, measured in local currency, with
adjustment to take account of changes in capital structure
and dividends, which are assumed to be reinvested in shares
on the ex-dividend date. TSR was chosen as a measure as it is
an external, relative benchmark for performance that aligns
executives’ rewards with the creation of shareholder value.
The portion of the award that will vest related to TSR depends
on where IMI ranks in the comparator group. For a TSR rank that
is below median, no award under this element will vest. 25%
of the award will vest for median TSR, rising on a straight- line
basis to full vesting for upper quartile TSR. At the end of the
three-year performance period, the Group ranked 9th of the
peer group. The resultant vesting outcome for this element of
the award 9.0%.
IMI plc Annual Report & Accounts 2021 123
Share interests granted to executive
directors during 2021 (audited)
Grants made under the IIP
Performance share award grants under the IIP were made on
22 March 2021 in the form of nil-cost options. Awards are due
to vest on 22 March 2024, subject to performance in three core
areas aligned to our longer-term strategic priorities: Adjusted
EPS growth (⅓), relative TSR (⅓), and ROIC (⅓). After vesting,
a holding period of two years applies subject to the sale of shares
as required to meet tax liabilities arising on vesting.
The performance targets, which consider the Group’s approach
to implementing accounting changes under IFRS 16, and vesting
scale that apply to the 2021 IIP awards are as follows:
Adjusted
EPS
Relative TSR
ROIC
Threshold
Maximum
Weighting
3%
Median
7.5%
Upper quartile
⅓
⅓
11.5%
13.5%
⅓
Level of
vesting
25%
100%
The following performance share award grants were approved
and made in 2021:
IIP shares
awarded
139,288
53,119
Value on date of
award1
(£000)
Award as a
percentage of
salary
1,827
697
250%
150%
Roy Twite
Daniel Shook
1 The three day average mid-market price on the date of award was 1,311.67 pence.
The IIP is also used to grant deferred bonus awards exercisable
after three years to satisfy bonuses delivered in the form of
shares. Details of these additional IIP awards made in 2021
are shown in the table on page 125 under the ‘without
performance conditions’ column. No performance conditions
apply to these awards.
Discretion to override formulaic outcomes
and to apply malus and clawback
Depending on the circumstances, the Committee may exercise
judgement in assessing performance and determining the level
of achievement.
The Committee has full discretion to override formulaic
outcomes and to reduce the amount of any IIP award, to reduce
the number of shares subject to any form of share award and/or
to impose an obligation to make a payment to the Company in
the event:
» the Company misstated financial results;
» the Company suffers serious reputational damage;
» if there was an error or miscalculation in determining the size
of the award;
» gross misconduct by an executive; and/or
» the Remuneration Committee has made decisions using
erroneous or misleading data; or
» in such other circumstances as the Committee sees fit.
The Committee has considered the position and determined that
for 2021 it is not appropriate for any reason to exercise the
discretion to override the formulaic outcome of the 2019 IIP
awards or recover amounts previously awarded.
Share ownership guidelines
It is a requirement of the Policy that executive directors are
subject to guidelines which require them to build a shareholding
in IMI worth at least 250% of salary for Roy Twite and 200% of
salary for Daniel Shook.
The Policy permits the Committee discretion to determine
that up to 50% of any annual bonus earned is deferred into
shares until the share ownership guideline is achieved together
with 50% of any vested share awards. Each executive is then
required to maintain this share ownership guideline (subject to
allowances for share price fluctuations and changes in base
salary thereafter).
When assessing compliance with this guideline the Committee
reviews both the level of beneficial share ownership and vested
but unexercised share incentive awards on a post-tax basis.
The Committee has determined that as both Roy Twite and
Daniel Shook have met their guidelines (as at 31 December 2021)
as outlined above, their entire 2021 bonus will be delivered
in cash.
Introduction Strategic Report Corporate Governance Financial Statements 124
Annual Directors’ Remuneration Report
For share awards granted in 2021 the TSR group included 18 companies to ensure 2021 alignment with our peers and comparison
to companies with similar products, customers and global spread. The 2021 peer group includes the following companies which is
broadly consistent with our 2020 peer group (changes in bold), and in line with the Committee’s guidelines:
TSR comparator group companies
Belimo
Circor
Curtiss-Wright
Eaton
Emerson Electric
Flowserve
Ingersoll-Rand US Inc
ITT
Morgan Advanced Materials
Parker-Hannifin
Rockwell Automation
Rotork
SMC
Smiths Group
Spectris
Spirax Sarco
SPX
The Weir Group
All-employee share plans
Executive directors are eligible to participate in the all-employee share plans on the same terms as other eligible employees at IMI.
All Employee Share Ownership Plan
IMI Sharesave Scheme
Number of shares
awarded
Value of free
share award1
(£000)
Number of options
awarded
Value of
options2
(£000)
Dividends
(£000)
Total value under the
all-employee share
plans (£000)
Roy Twite
Daniel Shook
2021
2020
2021
2020
259
436
259
436
4
4
4
4
1,542
-
2,571
-
2
-
3
-
-
-
-
-
1 In 2021 free shares were awarded at a share price of 1,389.33 pence (824.97 pence in 2020).
2 In 2021 SAYE awards were made at a 10% discount and the value shown is the intrinsic gain at the date of grant, calculated in accordance with the single figure
requirements (on page 116).
Chair’s and non-executive directors’ single figure table (audited)
The following table summarises the total fixed fees and benefits paid to the Chair and non-executive directors in respect of the
financial years ended 31 December 2021 and 31 December 2020.
Director
2021 (£000)
Base fees
Additional
fees
Taxable
benefits2
Lord Smith of Kelvin8
Carl-Peter Forster3,4
Birgit Nørgaard5
Isobel Sharp6
Thomas Thune Andersen7
Katie Jackson
Caroline Dowling4
Dr Ajai Puri
311
45
-
68
68
68
68
57
-
19
-
17
14
-
6
-
3
-
-
2
5
2
3
6
Total
Base fees1
314
317
64
-
87
87
70
77
63
63
11
63
63
63
63
-
2020 (£000)
Additional
fees
Taxable
benefits2
-
24
4
16
4
-
-
-
1
2
-
1
1
1
2
-
6
4
7
4
Total
318
89
15
80
68
64
65
-
1 On 30 March 2020 the Board agreed to a 20% salary reduction in fees, effective
1 May 2020, for the three months ended on 31 July 2020.
2 Taxable benefits includes travel and hotel expenses plus tax costs associated
with Board meetings held at IMI HQ.
3 Includes fee for Senior Independent Director (pro-rated).
4 Includes fee for being Chair of the Remuneration Committee (pro-rated).
5 Includes fee for being Chair of the Remuneration Committee (pro-rated) and
the non-executive director with responsibility for employee engagement.
6 Includes fee for being Chair of the Audit Committee.
7 Includes fee for Senior Independent Director (pro-rated) and non-executive
director with responsibility for employee engagement and for ESG matters.
8 As a consequence of the Company being near to its Articles’ of Association limit
on payments it may make to Directors, the Chair, Lord Smith of Kelvin agreed
to a £27,778 underpayment of his £338,500 fee in 2021. The Chair will be repaid
in 2022. We shall be seeking shareholder approval at the 2022 AGM to increase
the payment limit within our Articles’ of Association.
IMI plc Annual Report & Accounts 2021 125
Directors’ shareholdings and share interests (audited)
The following table summarises the share interests of any director who served during the year as at 31 December 2021 or at the
date of leaving the Board.
During the period 31 December 2021 to 24 February 2022 there were no changes in the interests of any current director from those
shown save for purchases within the IMI All Employee Share Ownership Plan on 11 January 2022 of 9 shares on behalf of Roy Twite
and 8 shares on behalf of Daniel Shook at 1,679.00 pence per share, and 8 February 2022 of 9 shares on behalf of Roy Twite and 8
shares on behalf of Daniel Shook at 1,645.00 pence per share.
Director
Total
interests
Beneficial
interests
Scheme interests
Nil-cost options
Roy Twite
Daniel Shook
Lord Smith of Kelvin
Carl-Peter Forster
Isobel Sharp
Thomas Thune Andersen
Katie Jackson
Caroline Dowling
Dr Ajai Puri
726,213
329,227
14,300
2,625
3,000
2,625
2,846
1,714
3,000
189,345
80,143
14,300
2,625
3,000
2,625
2,846
1,714
3,000
1 Vesting dates of share awards are shown in Note 6, page 166.
With performance conditions
Without performance conditions
(deferred bonus share awards)
Unvested1
506,716
216,078
-
-
-
-
-
-
-
Vested but
unexercised
-
-
-
-
-
-
-
-
-
Unvested
20,995
30,260
-
-
-
-
-
-
-
Vested but
unexercised
-
-
-
-
-
-
-
-
-
All-employee
share plans
9,157
2,746
-
-
-
-
-
-
-
Relative importance of spend on pay
The following information is intended to provide additional
context regarding the total remuneration for executive directors.
Dividends
Total employment costs for Group
(see Note 5 on page 165)
2021
(£m)
61.8
2020
(£m)
91.6
Change
-32.5%
593.7
583.2
1.8%
Relative percentage change in
remuneration for the Chief Executive
The Committee actively considers any increases in base pay
for the Chief Executive relative to the broader IMI employee
population. Benefits and bonus payments are not typically
comparable given they are driven by a broad range of factors,
such as geographical location, local practices, eligibility, individual
circumstances and role.
In 2021, the total dividend for the year of 23.7p represented an
increase of 5% year over year. The share buyback programme
returned £200.0m to shareholders in the year.
Base salary
Benefits
Annual bonus
Chief Executive
Employees1
6.9%
8.7%
35.8%
4.4%
3.6%
68.8%
1 All UK head office employees. This comparison excludes our international
workforce which we feel would not provide a true comparison given differing
local market factors.
Introduction Strategic Report Corporate Governance Financial Statements 126
Annual Directors’ Remuneration Report
Historical performance and remuneration
In addition to considering executive remuneration in the context
of internal comparisons, the Committee reviews historical
outcomes under the variable pay plans.
The graph compares IMI’s TSR to the FTSE100 and FTSE250
over the last ten years. We compare performance to the
FTSE100 as IMI has been included in the index in the past
and it is a position where IMI aspires to be.
TSR measures the returns that a company has provided for its
shareholders, reflecting share price movements and assuming
reinvestment of dividends (source: CapIQ), with data averaged
over the final 30 days of each financial year.
As the graph adjacent illustrates, IMI’s absolute and relative
TSR performance has been strong over the last ten years.
Value of a hypothetical £100 investment
IMI
FTSE100
FTSE250
£350
£300
£250
£200
£150
£100
£50
£0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
The following table summarises the total remuneration for the Chief Executive over the last ten years, and the outcomes of short
and long-term incentive plans as a percentage of maximum.
Financial year ended 31 December
20121
20131
20141
20152
20162
20172
20182
20193
20203
20213
Total remuneration (single figure, £000)
7,954
6,688
1,567
1,667
1,901
2,773
3,047
1,707
2,455
3,978
Annual variable pay (% of maximum)
47%
62%
36%
40%
50%
95%
75%
43%
73%
98%
Long-term variable pay (% of maximum)
- Share Matching Plan
100%
100%
Long-term variable pay (% of maximum)
- Performance Share Plan
100%
82.6%
Long-term variable pay (% of maximum)
- IMI Incentive Plan
-
-
-
-
-
-
-
-
-
3.5%
-
-
-
-
-
-
-
-
-
-
-
6.55%
29.2%
47.1%
58.8%
75.3%
1 Represents remuneration for Martin Lamb, who was Chief Executive from before 2010 until 31 December 2013.
2 Represents remuneration for Mark Selway, who was appointed Chief Executive on 1 January 2014.
3 Represents remuneration for Roy Twite, who was appointed Chief Executive on 9 May 2019.
The following table summarises the annual percentage change of each director’s remuneration compared to:
» The annual percentage change of the average remuneration of the Group’s employees, calculated on a full-time equivalent basis
» The performance of the Group over the same preceding financial year
Executive Directors
Roy Twite
Daniel Shook
Chair
Lord Smith of Kelvin
Non-executive directors
Carl-Peter Forster1
Birgit Nørgaard
Isobel Sharp
Thomas Thune Andersen
Katie Jackson
Caroline Dowling
Dr Ajai Puri1
Annual Salary/Fees
Benefits
Annual bonus
Annual Salary/Fees
Benefits
Annual bonus
2020
2021
7.5%
-3.1%
-23.3%
-14.6%
103.7%
101.6%
6.9%
6.9%
8.7%
34.3%
35.8%
36.2%
-3.1%
-85.7%
13.0%
-82.8%
-3.7%
1.5%
-4.5%
-80.0%
-50.0%
-87.5%
-75.0%
-1.9%
200.0%
-26.4%
-100.0%
7.6%
22.4%
7.9%
17.5%
100.0%
400.0%
100.0%
Average Pay of UK HQ employees
3.75%
0.1%
92.0%
4.40%
3.6%
68.8%
1 Dr Ajai Puri was appointed to the Board on 1 March 2021 and Carl-Peter Forster stepped down from the Board on 31 August 2021. Fees represented pro-rated amounts.
IMI plc Annual Report & Accounts 2021 127
Pay ratio reporting
Pay ratio legislation requires quoted companies with 250 or more employees to publish information on the pay ratio of the Group
Chief Executive to UK employees. In line with the new regulatory requirements, the table below sets out the ratio at median, 25th
and 75th percentile of the total remuneration received by the Group Chief Executive compared to the total remuneration received
by our UK employees – as well as comparing to base salary only. Total remuneration reflects all remuneration received by an individual
in respect of the relevant years, and includes salary, benefits, pension, and value received from incentive plans.
Financial year
Methodology
P25 (Lower Quartile)
P50 (Median)
P75 (Upper Quartile)
2021
2020
2019
Option C
Option C
Option C
116:1
85:1
83:1
95:1
67:1
62:1
63:1
45:1
45:1
Total remuneration
» The 2021 Chief Executive single figure is calculated considering the Chief Executive’s remuneration calculation includes base salary,
fees, pension, taxable benefits, annual bonus and shares paid during 2021.
» As is permitted by Option C of the regulations, the Gender Pay Gap data for 2021 based on a snapshot in April 2021 was used to
identify our three quartile employees, P25, P50 and P75. Having identified P25, P50 and P75, we chose to review the single figure
data for an additional ten employees at each of the quartiles for the full year ended on 31 December 2021.
» The remuneration calculation included base salary, allowances, pension, taxable benefits, annual bonus and shares. This method
provides a like-for-like comparison with the Chief Executive’s single figure total for the 2021 calendar year. Gathering data on more
than three employees provides a better opportunity to capture all pay and benefits of employees to get a true median value at each
of the three bandings.
» Our principles for pay setting and progression in our wider workforce are the same as for our executives – total reward being
sufficiently competitive to attract and retain high-calibre individuals without over-paying and providing the opportunity for individual
development and career progression, to attract and retain great talent. The pay ratios reflect how remuneration arrangements
differ as accountability increases for more senior roles within the organisation and the ratios reflect the weighting towards long-
term value creation and alignment with shareholder interests for the Chief Executive.
» We are satisfied that the median pay ratio reported this year is consistent with our wider pay, reward and progression policies for
employees. All IMI employees receive competitive pay and benefits and have the opportunity for annual pay increases and career
progression and development opportunities.
» Changes to the ratio in 2021 compared to 2020 are largely attributable to the improved performance of the business and the
subsequent impact on improved variable pay.
The total pay and benefits and base salary component of the total pay and benefits figures are as follows:
2021
Chief Executive remuneration
25th Percentile employee
50th Percentile employee
75th Percentile employee
Base salary (£)
Total pay and benefits (£)
730,800
22,472
30,352
51,538
3,977,072
34,398
41,902
62,657
Introduction Strategic Report Corporate Governance Financial Statements 128
Annual Directors’ Remuneration Report
Application of the Policy for 2022
Executive director fixed pay
Consistent with prior years, salary increases effective 1 January
2022 considered a range of factors including the increases for
the wider workforce, the financial performance of the Group
and prevailing economic conditions.
For 2022 the Chief Executive received a 4% base salary increase
which is aligned to the general increase applied to UK employees.
The base salary for the Chief Executive will be increased to
£760,000 in 2022. As noted in the Chair’s letter, the Committee
awarded the Finance Director a 9% base salary increase. The
base salary for the Finance Director will be increased to £506,300
in 2022. The Finance Director will have his pension entitlement
reduced by 3%. As such he will receive a cash allowance of 14%
of base salary. Other elements of fixed pay (benefits and
allowances) will remain unchanged, although pension
allowances are a fixed percentage of salary.
Incentive pay
Annual bonus
During 2021 the Committee reviewed the appropriateness of
continuing with the metrics that applied to the 2021 annual
bonus to ensure alignment with IMI’s strategy.
The Committee determined that the 2022 annual bonus will
be contingent on a Profit Before Tax growth target alongside
strategic and personal objectives for each executive director.
There will be a weighting of 80% to financial metrics and 20%
to strategic and personal objectives.
Free cash flow, if it should materially underperform against
budget, will continue to be considered as an explicit reason for
the Committee to apply downward discretion. The ESG underpin
will continue to be considered to allow the Committee to take
into account any relevant ESG matter when determining
remuneration outcomes.
The Committee will continue to monitor the underlying
performance of the business when determining bonus outcomes.
Due to the commercially sensitive nature of the financial targets
and strategic and personal objectives, they will be disclosed
retrospectively in next year’s report along with performance
against them.
The maximum bonus opportunity will be set at 200% of salary
for Roy Twite. The annual bonus opportunity for Daniel Shook will
be set at 150% of base salary. On-target bonus is set at 50% of
maximum bonus opportunity.
Performance share awards under the IIP
At the same time as the review of annual bonus metrics,
the Committee also reviewed those attached to IIP awards.
The Committee continues to believe that this will ensure that
executives are only rewarded if underlying earnings are increased
over the performance period and shareholder returns
outperform peers.
2022 awards will be set at 250% for Roy Twite and 150% for
Daniel Shook and will be subject to a two-year post-vesting
holding period, extending the total time horizon to five years
from grant.
During 2021, the Committee reviewed the Company’s long-term
incentive plan with a view to further strengthening its linkage to
our purpose [Breakthrough Engineering for a better world] and
the successful delivery of our long-term strategy. With Better
World at the core of this review, and in particular, our impact
on the Environment, the Committee unanimously agreed
to introduce a metric focusing on the reduction of our CO2
emissions (Scope 1 & 2). This new ESG metric will be the
reduction of total CO2 intensity (Scope 1 & 2) when compared
to the 2019 base year (2.78 tCO2e per 1,000 hours worked)
as at the end of the vesting period of the award. This aligns
to our announcement in 2021 of halving our total CO2 intensity
(Scope 1 & 2) by 2030. The threshold target will equate to a total
reduction of CO2 intensity (Scope 1 & 2) of 40% by the end of
2030 (1.67 tCO2e per 1,000 hours worked) when compared to
the 2019 base year with maximum target proposed to be equal
to a total reduction of 55% by the end of 2030 (1.25 tCO2e per
1,000 hours worked) when compared to the 2019 base year.
Vesting at threshold will equal 25% with maximum vesting
equalling 100%. This new metric will be introduced into the
IIP from 2022 and have a 10% weighting.
In light of wider, continued global economic uncertainty the
Committee considered whether the performance metrics for
LTIP awards remain appropriate before concluding that the
existing metrics of TSR, EPS and Return on Invested Capital
(ROIC*), remain aligned with strategy and with the creation
of shareholder value and each will have a 30% weighting.
TSR metrics remain unchanged but having taken into account
internal budgets and analyst consensus estimates available at
the time the targets were set the Committee decided that the
maximum target for EPS should be increased from 7.5% in 2021
to 10.0%. The Committee feels that given economic uncertainty,
increasing tax rates and a historic 10 year EPS CAGR of 3.6%,
the increased maximum remains appropriately stretching.
EPS threshold will remain the same as 2021 at 3.0%. In addition,
the Committee decided that both the maximum and threshold
target for ROIC should be lower that the targets set for 2021
by 0.5%. The Committee believes that despite this reduction
the maximum target for ROIC remains appropriately stretching
in the context of the current operating environment and well
above the Company’s WACC of 7.0%. Further, the Committee
retains discretion to determine, should the 2022 LTIP vest,
whether the formulaic outcome is a fair reflection of underlying
business performance and consistent with the shareholder
experience over the performance period and if not, to adjust
the formulaic outcome accordingly.
* This metric is the same as that presented in 2020, however it was previously
referred to as Return on Capital Employed and has been renamed to Return on
Invested Capital to better describe the metric. References to capital employed
have also been updated to capital invested.
IMI plc Annual Report & Accounts 2021 129
The performance targets that will apply to the 2022 IIP awards
are as follows:
Relative
TSR
Adjusted
EPS
ROIC
Total
CO2 intensity
Level of
vesting
Threshold
Median
3%
11%
2019 base -17%
25%
(2.31 tCO2e
per 1,000 hours
worked)
Maximum
Upper
quartile
10%
13%
2019 base -32%
100%
(1.89 tCO2e
per 1,000 hours
worked)
Weighting
30%
30%
30%
10%
Service contracts
The unexpired terms of the non-executive directors’ service
contracts can be reviewed in the Board’s Corporate Governance
Report on page 93.
Fees for the Chair and non-executive directors
The Chair and non-executive directors’ remuneration increased
by 4% with effect from 1 January 2022 which is aligned to the
general increase applied to UK employees.
Committee evaluation
The Committee reviewed its own performance and terms of
reference and received positive feedback, with no recommended
changes, from the evaluation exercise carried out in respect of
the Board and each of its committees.
The Committee approved this report on its work.
Caroline Dowling
Chair of the Remuneration Committee
for and on behalf of the Board
24 February 2021
Introduction Strategic Report Corporate Governance Financial Statements 130
Directors’ Report
Statutory & Other Information
The directors present their management
report, including the Strategic Report, together
with the audited financial statements of IMI
plc (the Company) and its subsidiaries
(together, the Group), for the year ended
31 December 2021.
Strategic Report
The Strategic Report on pages 12 to 81 is incorporated
by reference.
Results and dividend
The directors recommend a final dividend of 15.8p per
ordinary share for the year ended 31 December 2021. Subject to
shareholder approval by our shareholders at our Annual General
Meeting on 5 May 2022, the final dividend will be paid on 13 May
2022 to shareholders on the register at the close of business on
8 April 2022. Together with the interim dividend of 7.9p per
ordinary share paid on 12 August 2021, this gives a total
dividend for the 2021 financial year of 15.8p per ordinary share.
The interim and final dividends paid in respect of the 2020
financial year were 7.5p per ordinary share and 15.0p per
ordinary share respectively (2020 total dividends paid of 22.5p).
Research and development
See Note 5 to the financial statements on page 165 for an
indication of research and development activities of the Group.
More information about our investment in Growth Hub projects
can be found on page 66.
Share capital
As at 31 December 2021, the Company’s issued share capital
was £78,549,911.70 divided into 274,924,691 ordinary shares of
28 4/7p each. Details of the share capital of the Company are
set out in Note 22 to the financial statements on page 205.
The Company’s ordinary shares are listed on the London
Stock Exchange.
The Company has a Level 1 American Depositary Receipt (‘ADR’)
programme for which Citibank, N.A. acts as depositary.
See page 220 for further details.
As at 31 December 2021, 1,823,819 shares were held in an
employee trust for use in relation to certain executive incentive
plans representing 0.7% of the issued share capital (excluding
treasury shares) at that time. The independent trustee of the
trust has the same rights as any other shareholder other than
as specifically restricted in the governing trust deed. The trust
has agreed to waive any right to all dividend payments now and
in the future. Participants in option schemes do not hold any
voting rights on the shares until the date of exercise.
During 2021, 104,849 new ordinary shares were issued under
employee share schemes: 104,849 under save as you earn plans
and nil under executive share plans. Shares acquired through
Company share schemes and plans rank equally with the
shares in issue and have no special rights.
Pursuant to the Company’s articles of association a tracing
exercise was conducted in an attempt to match beneficiaries
with shares held by shareholders who had not claimed or cashed
a single dividend payment from the Company over a period of
at least the last twelve consecutive years. All shares held in the
names of such shareholders and which are not matched with
beneficiaries, will be forfeited and sold in November 2021 with
sale proceeds being retained by the Company.
The rights and obligations attaching to the Company’s ordinary
shares are set out in the Company’s articles of association, copies
of which can be obtained from Companies House in the UK, from
the Company’s website or by writing to the Company Secretary.
Changes to the articles of association must be approved by
a special resolution of the shareholders (75% majority required)
in accordance with the legislation in force at the time. Subject
to applicable statutes, shares may be issued with such rights and
restrictions as the Company may by ordinary resolution decide or
(if there is no such resolution or so far as it does not make specific
provision) as the Board may decide.
Holders of ordinary shares are entitled to receive the Company’s
report and accounts, to attend, speak and vote at general
meetings of the Company, and to appoint proxies to exercise
their rights. Holders of ordinary shares may receive a dividend
and in a liquidation, may share in the assets of the Company.
Subject to meeting certain thresholds, holders of ordinary shares
may requisition a general meeting of the Company or propose
resolutions at Annual General Meetings. Voting rights for
ordinary shares held in treasury are suspended and the treasury
shares carry no rights to receive dividends or other distributions
of assets.
There are no restrictions on the transfer of ordinary shares in the
Company other than:
» certain restrictions as may from time to time be imposed
by laws and regulations (for example insider trading laws,
in accordance with the Companies Act 2006, Listing Rules
or the City Code on Takeover and Mergers); and
» pursuant to the Company’s share dealing code whereby the
directors and certain employees of the Company require
approval to deal in the Company’s shares.
The Company is not aware of any arrangements between
shareholders that may result in restrictions on the transfer of
ordinary shares or on voting rights. None of the ordinary shares
carry any special rights with regard to control of the Company.
The only restrictions on voting rights are those that apply to
the ordinary shares held in treasury. Electronic and paper proxy
appointments and voting instructions must be received by the
Company’s registrars not later than 48 hours (excluding any
non-working days) before a general meeting, or (subject to the
Company’s articles of association) any adjournment thereof.
IMI plc Annual Report & Accounts 2021 131
Purchase of own shares
The Company was granted authority at the Annual General
Meeting held on 6 May 2021 to purchase up to 27,200,000 of
its ordinary shares. This authority will expire at the conclusion
of the next Annual General Meeting to be held on 5 May 2022,
where shareholders will be asked to give a similar authority,
details of which will be given in the Notice of Annual General
Meeting. The Company commenced a share buyback
programme on 26 April 2021 and in the period to 23 November
2021, the Company purchased 11,653,829 ordinary shares of
28 4/7p each totalling £200,026,665.39 including dealing costs,
all of which have been cancelled.
Treasury shares
As at 31 December 2021, 14,248,836 ordinary shares (nominal
value £4,071,096) were held in treasury representing 5% of the
issued share capital (excluding treasury shares) at that time.
The number of shares held in treasury during the year ended 31
December 2021 was constant.
Major shareholdings
Information provided to the Company pursuant to the
Disclosure Guidance and Transparency Rules is published on
a regulatory information service and on the Company’s website.
As at 31 December 2021, the following voting interests in the
ordinary share capital of the Company, disclosable under the
Disclosure Guidance and Transparency Rules, had been notified
to the Company:
Name of shareholder
Per cent of issued
share capital
Direct or indirect
nature of holding
Massachusetts Financial
Services Company
Ameriprise Financial Inc.
Standard Life Investments
(Holdings) Limited
BlackRock, Inc.
Norges Bank
Legal & General Group plc
9.89
5.58
4.97
4.90
3.05
3.03
Indirect
Direct
Indirect
Direct
Direct
Direct
Between 31 December 2021 and the date of this Annual Report,
no changes in the voting interests have been notified to the
Company in accordance with the Disclosure Guidance and
Transparency Rules save for notifications received from
BlackRock, Inc on 25 January 2022 that its interests totalled 5%
and on 9 February 2022 that its interests totalled below 5%.
Related party transactions
Details of related party transactions are in Note 26 on page 207.
Corporate governance
The Corporate Governance Report on pages 86 to 100 is
incorporated into this Directors’ Report by reference and
includes details of our compliance with the 2018 UK Corporate
Governance Code (which can be found on the Financial
Reporting Council’s website - www.frc.org.uk).
Information about our diversity policy, as well as our diversity
objectives, activities and performance, are set out on pages
46 to 47.
An explanation of the Board’s activities in relation to culture
is set out on page 94.
Employee matters
Details of how we engage with our workforce, provide them
with relevant information and take account their interests in
decision-making can be found on pages 97 to 99. Our approach
to investing in and rewarding the workforce is set out on page 99.
Our Section 172(1) statement can be found on pages 97 to 100.
A description of how our directors have engaged with the
workforce is set out on pages 95 and 97.
Every effort is made to ensure that applications for employment
from disabled employees are fully and fairly considered and that
disabled employees have equal opportunity in training, succession
planning and promotion. Further disclosures relating to employee
diversity, employee engagement and related policies are set out
on pages 43 to 47.
Details of employee share schemes are set out in Note 6 of
the financial statements on pages 166 to 168.
Details of the arrangements in place under which employees
can raise any matter of concern are set out on pages 53 and 134.
Our business relationships
A summary of how the Company has engaged with suppliers,
customers and other third parties can be found on pages 53, 54
to 57, and 96 to 100. Details of how the Directors have had
regard to the need to foster the Company’s business
relationships with suppliers, customers and others, and the
effect of that regard on the principal decisions taken by the
Company during the financial year are contained in the section
172(1) statement on pages 97 to 100. Further information on
our payment practices with suppliers can be found on the
government’s reporting portal. Our statement on slavery and
human trafficking can be found on our website at https://www.
imiplc.com/sites/imi-corp/files/2021-Modern-Slavery-Act-
Statement.pdf
Health, safety and the environment
Details of our approach to operating as a responsible business
is set out in the Strategic Report on pages 32 to 53 and are
incorporated into this Director’s Report by reference. The effect
of our regard towards the environment, social and community
matters in relation to the decisions taken during the financial
year is included in our Section 172(1) Statement on pages 97
to 100.
Our TCFD reporting includes our energy and carbon report on
pages 37, 40 to 42, and 72 to 73 and is hereby incorporated by
reference into this Directors’ Report.
Introduction Strategic Report Corporate Governance Financial Statements 132
Directors’ Report
Political donations
No political donations were made during the year.
Directors
The membership of the Board and biographical details of the
directors are given on pages 82 and 83 and are incorporated
into this report by reference. In addition, Carl-Peter Forster
was a director until 31 August 2021.
The rules for the appointment and replacement of directors
are set out in the Company’s articles of association. Each new
appointee to the Board is required to stand for election at the
next Annual General Meeting following their appointment.
In addition, the Company’s articles of association require
each director to stand for re-election every year.
Branches
The Company does not have any branches outside the UK.
Qualifying indemnity provisions and
liability insurance
The Company maintains directors’ and officers’ liability insurance
and all directors of the Company benefit from qualifying third
party indemnity provisions which were in place during the financial
year. At the date of this Annual Report there are such indemnity
arrangements with each director in respect of the costs of
defending civil, criminal and regulatory proceedings brought
against them, as a director or employee, subject always to
the limitations set by the Companies Act 2006.
The Group operates pension schemes in the UK which provide
retirement and death benefits for employees and former
employees of the Group. The corporate trustee of the pension
schemes is IMI Pensions Trust Limited, a subsidiary of the
Company. Qualifying pension scheme indemnity provisions, as
defined in section 235 of the Companies Act 2006, were in force
for the financial year ended 31 December 2021 and remain in force
for the benefit of each of the directors of the corporate trustee
of the pension schemes. These indemnity provisions cover, to the
extent permitted by law, certain losses or liabilities incurred as a
director or officer of the corporate trustee of the pension schemes.
The Group also has in place third party qualifying indemnity
provisions, as defined in section 234 of the Companies Act 2006,
in favour of certain employees who discharge responsibilities for
various wholly-owned subsidiary companies and these indemnities
are given on a similar basis to the above.
Role of the Board
The Board provides strategic and entrepreneurial
leadership for the Group. It is responsible for:
» promoting the long-term success of the Company for the
benefit of its shareholders;
» generating value for shareholders and contributing to
wider society;
» demonstrating ethical leadership, high standards of behaviour
and overseeing good governance;
» ensuring effective engagement with and encouraging
participation from shareholders and key stakeholders;
» setting and monitoring the Group’s values, purpose and
strategy and ensuring that these and its culture are aligned;
» ensuring that the necessary resources are in place for the
Group to meet its objectives and measure performance
against them;
» setting a framework of prudent and effective controls,
which enable risk to be assessed and managed;
» ensuring the Group is appropriately managed, operates
responsibly, with effective controls in place;
» ensuring that workforce policies and practices are consistent
with the Group’s values and support its long-term sustainable
success; and
» reviewing management performance and the operating and
financial performance of the Group.
The Company’s articles of association set out the Board’s
powers. In the IMI Corporate Governance Framework, the Board
has clearly defined in writing those matters which are reserved
to it and the respective delegated authorities of its committees
and it has also set written limits of authority for the Chief
Executive. The Group has a clear organisational structure and
well-established reporting and control disciplines. Managers
of operating units assume responsibility for and exercise a high
degree of autonomy in running day-to-day trading activities.
They do this within a framework of clear rules, policies and
delegated authorities regarding business conduct, approval
of proposals for investment and material changes in operations
and are subject to regular senior management reviews of
performance. The Company’s articles of association and the IMI
Corporate Governance Framework can be found on our website.
Division of responsibilities amongst directors
There is a clear division of responsibility between the Chair
and Chief Executive, which is reflected in the IMI Corporate
Governance Framework approved by the Board. In summary,
the Chair is responsible for the leadership and effectiveness
of the Board but does not have any executive powers
or responsibilities. The Chief Executive leads the Executive
Committee in running the businesses and implementing
operational and strategic plans under authority delegated
by the Board.
The responsibilities of the Chair include:
» creating the conditions for overall Board and individual
director effectiveness
» promoting a culture of openness and debate
» setting a board agenda primarily focused on strategy,
performance, value creation, culture, stakeholders
and accountability
» ensuring the Board has effective decision-making processes
and applies sufficient challenge to major proposals
» fostering constructive relations between executive and
non-executive directors based on trust, mutual respect and
open communications
IMI plc Annual Report & Accounts 2021 133
» encouraging all Board members to engage in Board and
Committee meetings by drawing on their skills, experience
and knowledge
» developing a productive working relationship with the Chief
Executive, providing support and advice, while respecting
executive responsibility
» leading the annual Board evaluation, with support from the
Senior Independent Director as appropriate, and acting on
the results
» ensuring the Board listens to the views of shareholders,
the workforce, customers and other key stakeholders
The Chair is supported by the Company Secretary, who also
assists in ensuring that the Board operates in accordance
with good corporate governance under the Code and relevant
regulatory requirements. The Company Secretary acts as
secretary to all of the standing committees of the Board.
The Board has a recognised procedure for any director to
obtain independent professional advice at the Company’s
expense and all directors have access to the Company
Secretary who is a solicitor.
The responsibilities of the Chief Executive include:
» running of the business and corporate affairs of the Group
under the authority delegated by the Board
» proposing Company strategy and annual budgets
» delivering the strategy as agreed by the Board
» leading the Executive team
» developing a productive working relationship with the Chair
» implementing Board decisions
» communicating to those working for the Group expectations
in respect of the Group’s culture, values and behaviours,
and leading by example
» ensuring that operational policies and practices drive
appropriate behaviour
» ensuring that effective business and financial controls and risk
management processes are in place
» ensuring management provides the Board with accurate,
timely and clear information
There is a nominated Senior Independent Director.
The responsibilities of the Senior Independent Director include:
» acting as a sounding board for the Chair
» leading the evaluation of the Chair
» ensuring an orderly succession planning process for the Chair,
working with the Nominations Committee
There is a designated non-executive director for employee
engagement and ESG matters whose role descriptions can be
found in the IMI Corporate Governance Framework on our website.
Directors’ powers
The powers of the directors are determined by UK legislation and
the articles of association of the Company in force from time to
time. The directors were authorised to allot and issue ordinary
shares and to make market purchases of the Company’s
ordinary shares by resolutions of the Company passed at its
Annual General Meeting held on 6 May 2021 by the passing
of new resolutions. The current authorities will expire at the
conclusion of the next Annual General Meeting to be held on
5 May 2022, at which new authorities will be sought.
Further details of authorities the Company is seeking for the
allotment, issue and purchase of its ordinary shares will be
set out in the separate Notice of Annual General Meeting.
Directors’ interests
Details of the interests in the Company’s shares held by our
directors and persons connected with them (including interests
under share option and incentive schemes), are shown in the
Directors’ Remuneration Report on page 125 and are hereby
incorporated by reference into this Directors’ Report.
Management of conflicts of interest
The Company’s articles of association include certain provisions
relevant to the activity of the Board and its committees and
can be viewed on the Company’s website. These provisions
include requirements for disclosure and approval by the Board
of potential conflicts of interest. These procedures apply, inter
alia, to external directorships and it is the Board’s view that they
operated effectively during 2021.
Each director has a duty under the Companies Act 2006 to avoid
a situation in which they have or may have a direct or indirect
interest that conflicts or possibly may conflict with the interests
of the Company. This duty is in addition to the duty that they
owe to the Company to disclose to the Board any interest in
any transaction or arrangement under consideration by the
Company. If any director becomes aware of any situation which
may give rise to a conflict of interest, that director informs the
rest of the Board and the Board is then permitted under the
articles of association to decide to authorise such conflict.
The information is recorded in the Company’s register of
conflicts and a conflicts authorisation letter is issued to the
relevant director.
Change of control
The Company and its subsidiaries are party to a number
of agreements that may allow the counterparties to alter
or terminate the arrangements on a change of control of the
Company following a takeover bid, such as commercial contracts
and employee share plans. Other than as referred to in the next
paragraph, none of these is considered by the Company to be
significant in terms of its likely impact on the Group as a whole.
In the event of a change of control of the Company, the Group’s
main funding agreements allow the lenders to renegotiate terms
or give notice of repayment for all outstanding amounts under
the relevant facilities.
The Company does not have agreements with any director or
employee that would provide compensation for loss of office or
employment specifically resulting from a takeover, although the
provisions of the Company’s share schemes include a discretion
to allow awards granted to directors and employees under such
schemes to vest in those circumstances.
Introduction Strategic Report Corporate Governance Financial Statements 134
Directors’ Report
Through the procedures outlined here, the Board has considered
the effectiveness of all significant aspects of internal control
for the year 2021 and up to the date of this Annual Report.
The Board believes that the Group’s system of internal control,
which is designed to manage rather than eliminate risk, provides
reasonable but not absolute assurance against material
misstatement or loss.
Financial reporting processes
The use of the Group’s accounting manual and prescribed
reporting requirements for finance teams throughout the
Group are important in ensuring that the Group’s accounting
policies are clearly established and that information is
appropriately reviewed and reconciled as part of the reporting
process. The use of a standard reporting package by all entities
in the Group ensures that information is presented in a
consistent way that facilitates the production of the
consolidated financial statements.
Financial instruments
Our risk management objectives and policies in relation to the
use of financial instruments can be found on Note 17 on pages
193 to 194.
Compliance hotline
During 2021, the Board reviewed the operation of the independent
compliance hotline for reporting concerns, reviewed the more
significant reports received and considered how these are
investigated and followed up. The Board believes that the hotline
process and investigations are effective and that proportionate
action is taken by management in response. Further information
in relation to the hotline appears on page 53.
Statements on viability and going concern
The statements on viability and going concern on pages 80
and 81 respectively, are incorporated by reference in this
Directors’ Report.
Non-financial information statement
We aim to comply with the Non-Financial Reporting
requirements contained in sections 414CA and 414CB of
the Companies Act 2006. The table set out on page 135,
and the information it refers to, is intended to help stakeholders
understand our position on key non-financial matters.
Information to be disclosed under Listing
Rule 9.8.4R
Listing Rule statement
Detail
Note reference of financial
statements/page number
9.8.4R (1-2)(6-14)
Not applicable
9.8.4R (4)
9.8.4R (5)
Long-term incentive
schemes
Directors’ waiver of
emoluments
-
pages 128 to 129
pages 116 and 124
Internal control
The Board has responsibility for oversight of the Group’s system
of internal control and confirms that the system of internal
control takes into account the Code and relevant best practice
guidance including the Financial Reporting Council’s September
2014 publication, ‘Guidance on Risk Management, Internal
Control and Related Financial and Business Reporting’.
All operating units prepare forward plans and forecasts which
are reviewed in detail by the Executive Committee and
consolidated for review by the Board. Performance against
forecast is continuously monitored at monthly meetings of the
Executive Committee and, on a quarterly basis, by the Board.
Minimum standards for accounting systems and controls, which
are documented and monitored, are promulgated throughout
the Group. Certified annual reports are required from senior
executives of operating units, confirming compliance with
Group financial reporting requirements. The internal audit
function, Group Assurance, operates a rolling programme of
internal assurance on site reviews at selected operating units.
Additionally, visits to operations are carried out by senior
Group finance personnel. These internal assurance processes
are supplemented with the activity of the Company’s
external auditor.
Capital investments are subject to a clear process for investment
appraisal, authorisation and post-investment review, with major
investment proposals referred for consideration by the Executive
Committee and, according to their materiality, to the Board.
In addition, the Executive Committee regularly reviews the
operation of corporate policies and controls including those
relating to ethics and compliance matters, treasury activities,
environmental issues, Health and Safety, human resources and
taxation. Compliance and internal audit reports summaries are
made available to the Board, the Audit Committee and the
Executive Committee, to enable control issues and developments
to be monitored.
Control processes are dynamic and continuous improvements
are made to adapt them to the changing risk profile of
operations and to implement proportionate measures to
address any identified weakness in the internal control system.
More information in relation to risk is given on pages 70 to 79.
The internal control declaration process is fully embedded and
enables improvement in control. Action plans to improve controls
as a result of these assessments are being tracked and reported
to the Audit Committee.
IMI plc Annual Report & Accounts 2021 135
Reporting
requirement
Environmental
matters
Policies and standards which
govern our approach
Additional
information
Environmental policy
Pages 40 to 42
Employees
IMI Code of Conduct
Speaking Up (Hotline for
reporting concerns)
Page 53
Page 53
Health and Safety policy
Pages 49 to 50
Inclusion and Diversity policy
Pages 37, 46, 47
and 110
Page 53
Page 44
Page 17
Page 50
Page 53
Human rights
Modern Slavery Act
Social matters
IMI Way Day
Anti-corruption and
anti-bribery
Our purpose
Contributing to communities
Compliance policies supplementing
our IMI Code of Conduct which
includes our policy statements on
(1) no bribery and corruption
(2) no facilitation payments
(3) no political donations
(4) appropriate charitable
donations, gifts, hospitality &
entertainment
(5) know your customer checks
(6) dealing with third parties
(7) managing conflicts of interest
Description of
principal risks
Description of the
business model
Stakeholder
engagement
-
-
-
Pages 70 to 79
Pages 16 and 17
Pages 54 to 57 and
95 to 100
Disclosure of information to the auditor
Each director confirms that, so far as they are each aware, there
is no relevant audit information of which the Company’s auditor
is unaware and each director has taken all the steps that he or
she ought to have taken as a director to make himself or herself
aware of any relevant audit information and to establish that
the Company’s auditor is aware of that information.
Important events since 31 December 2021
There have been no important events affecting the Company or
any member of the Group since 31 December 2021.
Annual General Meeting
The Annual General Meeting will be held on 5 May 2022.
Full details of the resolutions to be proposed to our shareholders,
and accompanying explanatory notes are contained in our Notice
of the Annual General Meeting, a copy of which will be published
on our website.
At our 2022 AGM, resolutions will be proposed, among other
matters:
» to receive the Annual Report & Accounts;
» to approve the Directors’ Remuneration Report;
» to declare a final dividend;
» to reappoint Deloitte LLP as auditor and set the
auditor’s remuneration;
» to approve the directors’ general authority to allot shares;
» to grant the authority to issue shares without first applying
statutory rights of pre-emption;
Carbon emissions reporting
Page 42
» to authorise the Company to make market purchases of its
Pages 44 to 48
own shares;
Employee engagement survey
results
Diversity reporting
Pages 37, 46, 47
and 110
Health and Safety reporting
Pages 49. 50 and 68
Customer satisfaction surveys
Carbon emissions reporting and monitoring
Scrap and waste reduction measurement
» to authorise the making of limited political donations by the
Company and its subsidiaries;
» to increase the maximum fees of directors permitted under
Article 60 of Company’s Articles of Association from £750,000
to £1,250,000;
» to adopt the US Stock Purchase Plan following expiry of the
previous plan; and
Outcome of non-
financial policies and
standards
Due diligence
processes
implemented
in pursuance of
promoting non-
financial policies and
standards
Monitoring of expenses, hospitality and entertainment
» to enable the Company to continue to hold general meetings
Monitoring employee engagement surveys
All employees receive the IMI Code of Conduct
Hotline reports reviewed by the Board
Health and Safety reporting and monitoring
Modern slavery training and risk assessments
Compliance training
Compliance risk assessments and tailored programmes
by division
on not less than 14 clear days’ notice.
Approved by the Board and signed on its behalf by:
Louise Waldek
Company Secretary
24 February 2022
Compliance implementation reviews and internal audits
IMI is registered in England No. 714275
Know your customer policy and due diligence reviews
Third party agent and distributors policy and due
diligence reviews
Internal control declarations and compliance declarations
Introduction Strategic Report Corporate Governance Financial Statements 136
Statement of directors' responsibilities
Statement of directors’ responsibilities in respect of the Annual Report and
the financial statements.
The directors are responsible for preparing the Annual Report,
which includes the Directors’ Report, the Strategic Report,
Remuneration Report and Corporate Governance Statement,
and the Group and parent company financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors are required to prepare the Group financial
statements in accordance with International Financial
Reporting Standards as adopted pursuant to Regulation (EC)
No. 1606/2002 as it applies in the European Union and the
parent company financial statements in accordance with
International Accounting Standards in conformity with the
requirements of the Companies Act 2006 as applied in
accordance with section 408 of the Companies Act 2006.
Under company law the directors must not approve the
financial statements unless they are satisfied that they present
fairly the financial position, financial performance and cash
flows for that period. In preparing those financial statements,
the directors are required to:
» select suitable accounting policies and then apply
them consistently;
» make judgements and estimates that are reasonable;
Directors’ responsibility statement under
the Disclosure and Transparency Rules
We confirm that to the best of our knowledge:
» 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.
The directors are responsible for preparing the Annual Report
in accordance with applicable laws and regulations. Having
taken advice from the Audit Committee, the Board considers
the report and accounts, taken as a whole, are fair, balanced
and understandable and provide the information necessary
for shareholders to assess the Group’s performance, business
model and strategy.
» present information, including accounting policies,
By order of the Board
Roy Twite
Chief Executive
Daniel Shook
Group Finance Director
24 February 2022
24 February 2022
in a manner that provides relevant, reliable, comparable
and understandable information;
» state whether applicable UK Accounting Standards have
been followed, subject to any material departures disclosed
and explained in the financial statements; and
» state for the parent company financial statements whether
applicable International Accounting Standards in conformity
with the requirements of the Companies Act 2006 as applied
in accordance with section 408 of the Companies Act 2006.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Group and the parent company
and enable them to ensure that the Group and parent
company financial statements comply with the Companies
Act 2006 and International Financial Reporting Standards
adopted pursuant to Regulation (EC) No. 1606/2002 as it
applies to the European Union, as appropriate. They are also
responsible for safeguarding the assets of the Group and the
parent company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
IMI plc Annual Report & Accounts 2021 Financial Statements contents
137
138
Independent Auditor’s Report to
the Members of IMI plc
148 Consolidated income statement
149
149
Consolidated statement of
comprehensive income
Consolidated statement of
changes in equity
191 15. Inventories
192
16. Trade and other receivables
193
17. Financial assets and liabilities
195 18. Financial risk management
199 19. Net debt
203 20. Provisions
150 Consolidated balance sheet
204
21. Trade and other payables
151
Consolidated statement of
cash flows
205 22. Share capital
206 23. Acquisitions
206 24. Disposals
152 1. Basis of preparation
154
2. Significant accounting policies
157
3. Alternative Performance Measures
(‘APMs’) & adjusting items
207 25. Contingent liabilities
207
26. Related party transactions
207 27. Subsequent events
160 4. Segmental information
165 5. Operating costs
166 6. Share-based payments
169
7. Earnings per ordinary share
170 8. Net financing costs
171 9. Taxation
175 10. Dividends
176 11. Intangible assets
180
12. Property, plant and equipment
181 13. Leases
184 14. Retirement benefits
208 Company balance sheet
209
210
Company statement of changes
in equity for the year
Company notes to the
financial statements
213 Subsidiary undertakings
217
Geographic distribution
of employees
218 Five year summary
220
Shareholder and general
information
Introduction Strategic Report Corporate Governance Financial Statements 138
Independent Auditor’s Report
to the Members of IMI plc
Report on the audit of the financial statements
1. Opinion
In our opinion:
• the financial statements of IMI plc (the ‘parent company’) and its subsidiaries (the ‘Group’) give a true and fair view of the state of the Group’s and of the parent
company’s affairs as at 31 December 2021 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with United Kingdom adopted International Accounting Standards;
• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including
Financial Reporting Standard 101 'Reduced Disclosure Framework'; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
• the consolidated income statement;
• the consolidated statement of comprehensive income;
• the consolidated and parent company statements of changes in equity;
• the consolidated and parent company balance sheets;
• the consolidated cash flow statement;
• the related Notes 1 to 27 for the consolidated financial statements; and
• the related Notes C1 to C10 for the parent company.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law, and United Kingdom adopted International
Accounting Standards. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and
United Kingdom Accounting Standards, including FRS 101 'Reduced Disclosure Framework' (United Kingdom Generally Accepted Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are
further described in the auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the Group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in
the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. The non-audit services provided to the Group and parent company for the year are disclosed in Note 5 to
the financial statements.
We confirm that we have not provided any non-audit services prohibited by the FRC’s Ethical Standard to the Group or the parent company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
• inventory valuation – provision for excess and obsolete inventory in IMI Critical and IMI Precision;
• overstatement of revenue throughout inappropriate cut-off in IMI Critical; and
• the classification of adjusting items.
Materiality
Scoping
The materiality that we used for the Group financial statements was £13.0m which was determined on the basis of approximately
5% of pre-tax profit adjusted for restructuring costs.
Full scope audit work was performed on 8 reporting components, and specified audit procedures were undertaken on a further 39
reporting components. Our full scope and specified audit procedures covered 73% of Group revenue and 77% of Group operating
profit. Group operating profit has been calculated on an absolute basis, reflecting the nature of certain individual business units that
are loss making or cost centres.
IMI plc Annual Report & Accounts 2021
139
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial
statements is appropriate.
Our evaluation of the directors’ assessment of the Group’s and parent company’s ability to continue to adopt the going concern basis of accounting included:
• obtaining an understanding of the Group’s financing facilities including the nature of facilities, repayment terms and covenants;
• challenging the assumptions used in the Board approved forecasts by reference to historical performance and other supporting evidence such as market data;
• recalculating the amount of headroom in the forecasts (in liquidity terms and against the relevant covenant limits);
• assessing the appropriateness of the sensitivity analysis and reverse stress tests performed by management; and
• assessing the appropriateness of the disclosures made by management.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast
significant doubt on the Group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements
are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to
the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and
include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the
greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
5.1. Inventory valuation – provision for excess and obsolete inventory in IMI Critical and IMI Precision
Key audit matter
description
The Group’s provision for excess or obsolete (E&O) inventory as at 31 December 2021 was £46.2m (FY20: £42.8m), relative to gross
inventory of £381.4m (FY20: £336.1m), as described in Note 15.
The Group’s provision policy for E&O inventory is determined by considering expected usage levels of inventory, based on historical sales,
as well as forward looking judgements such as forecast sales associated with new products. Where local management judgement is applied,
Group level review and approvals are required.
There is a risk that the policy applied for E&O inventory may not be appropriate based on the specific conditions and market trends prevalent
across the various locations in which the Group operates.
There is also a risk, either due to fraud or error, that the Group’s reporting components are not correctly applying the Group accounting policy
when provisioning inventory; either due to local differences in historical sales trends or calculation error.
The key audit matter we identified in respect of the E&O provision was pinpointed to:
• the appropriateness and application of the expected usage period applied in the calculation of the excess inventory provision,
• the judgements made by management to calculate the provision associated with new products; and
• where management judgement is undertaken in overrides applied to the policy.
Based on the quantums involved, our work was further pinpointed to the E&O inventory provisions in IMI Critical and IMI Precision.
How the scope of our
audit responded to
the key audit matter
We have performed the following procedures to address this key audit matter:
• obtained an understanding of the relevant controls relating to the E&O provision;
• challenged the appropriateness of the usage period applied to calculate the inventory that isn’t provided against based on historical data;
• challenged the assumptions underpinning the provision levels applied to new products, including an assessment of market success to date
and forecast sales;
• challenged the management judgements applied in instances of override to the formulaic application of the policy, including testing the
specific instances of approved overrides to the policy; and
• assessed whether the approach to E&O inventory provisioning is being applied consistently across the Group in line with
policy requirements.
Key observations
Based on our procedures performed, we are satisfied that the valuation of inventory as at 31 December 2021 is appropriate.
Introduction Strategic Report Corporate Governance Financial Statements
140
Independent Auditor’s Report
to the Members of IMI plc
5.2. Overstatement of revenue through inappropriate cut-off in IMI Critical Engineering
Key audit matter
description
The Group recognised revenue of £1,866m (FY20: £1,825m), principally through the provision of goods and services accounted
for under IFRS 15, as described in Note 2c.
We have performed a detailed risk assessment of the Group’s revenue streams to understand the revenue cycles across each business.
During this assessment we considered whether any non-standard revenue terms, such as bill and hold arrangements or contracts where
percentage of completion accounting was applied, were sufficiently material or judgemental in nature to give rise to a key audit matter.
We identified a key audit matter in relation to the risk, either due to fraud or error, of inappropriate cut-off of revenue in IMI Critical
(see Note 4) owing to the fact that more revenue is generated towards the year-end across the division when compared to other periods
in the year.
How the scope of our
audit responded to
the key audit matter
We have performed the following procedures to address this key audit matter:
• obtained an understanding of the relevant controls over revenue, and specifically controls that address the cut-off risk; and
• tested a sample of transactions around the year end to assess whether revenue is being recognised in the wrong period.
Key observations
We consider the year-end cut-off of revenue recognised in IMI Critical is appropriate.
5.3. Classification of adjusting items
Key audit matter
description
The Group has recognised net costs of £67.6m (FY20: £57.9m) which are presented as adjusting items within operating profit, as well
as an income of £5.2m (FY20: expense of £1.7m) within net financial expense/income and a net credit of £13.1m (FY20: £13.4m) within
the taxation charge. These amounts are aligned to the Group’s policy for classification of adjusting items as described in Note 3. The Audit
Committee’s challenge and assessment of these items is also noted on page 104.
The identification of adjusting items is subjective and judgement is required in the determination of what items are identified as 'adjusting'
to ensure consistency with the Group’s accounting policy.
A further challenge exists to ensure that equal prominence is provided to statutory measures in order to provide the user of the financial
statements with clarity in understanding performance year on year, aligned to the ESMA and FRC guidance regarding disclosure of
Alternative Performance Measures.
There is a risk that items are incorrectly presented as adjusting that distort the view of performance in the year and give rise to a potential
fraud risk as adjusted performance is linked to key executive remuneration schemes.
The classification of adjusting items has been determined to be a key audit matter based on the quantums identified within Note 3.
We have performed the following procedures to address this key audit matter:
• challenged management to better document their policy to provide greater clarity on the definition of what may be considered to be
an adjusting item by reference to benchmarking performed against comparable companies;
• obtained an understanding of the relevant controls over classification of adjusting items;
• challenged the nature and quantum of the items identified by reference to the substance of the underlying transaction to obtain assurance
that amounts being adjusted meet the Group’s policy and the quantum is appropriate; and
• assessed whether the disclosure of the adjusting items identified during the year is consistent with the nature of the underlying
transactions and aligned to the ESMA and FRC guidance regarding disclosure of Alternative Performance Measures, see Note 3.
How the scope of our
audit responded to
the key audit matter
Key observations
Based on our procedures performed, we are satisfied with the classification of adjusting items.
IMI plc Annual Report & Accounts 2021 141
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable
person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Parent company financial statements
Materiality
£13.0m
£10.9m
Basis for determining
materiality
Approximately 5% of pre-tax profit adjusted for restructuring costs.
2% of net assets.
Rationale for the
benchmark applied
Profit before tax is a key metric for users of the financial
statements and reflects the way business performance is reported
and assessed by external users of the financial statements.
The Parent company does not generate external sales therefore
we have determined net assets for the current year to be the
appropriate basis.
The Group has incurred significant restructuring costs as an
adjusting item therefore we believe appropriate to adjust for
these costs in determining an appropriate level of materiality.
PBT adjusted for restructuring costs
Group materiality
PBT adjusted for
restructuring costs £280m
Group materiality £13m
Component materiality range
£2m to £6m
Audit Committee reporting
threshold £0.26m
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the
materiality for the financial statements as a whole.
Performance
materiality
Basis and rationale
for determining
performance
materiality
Group financial statements
70% of Group materiality
Parent company financial statements
70% of parent company materiality
In determining performance materiality for the Group and parent company, we considered the following factors:
• the control environment in place across the Group;
• the level of oversight from both a Group and Divisional level over the local entity financial reporting processes;
• the low level of corrected and uncorrected misstatements identified in the prior year audit by the predecessor auditor; and
• the stability and experience of key management personnel in senior roles at Group and Divisional levels.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £260,000, as well as differences below that threshold
that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall
presentation of the financial statements.
Introduction Strategic Report Corporate Governance Financial Statements 142
Independent Auditor’s Report
to the Members of IMI plc
7. An overview of the scope of our audit
7.1. Identification and scoping of components
The Group operates in over 50 locations across the world. Our Group audit was scoped by obtaining an understanding of the Group and its environment,
including Group-wide controls, and assessing the risks of material misstatement at the Group and component level.
Based on that assessment, we focused our Group audit scope across all three divisions: IMI Critical, IMI Precision and IMI Hydronic.
These three divisions comprise of many individual reporting components, which represent the lowest level at which management prepares financial information that
is included in the Financial Statements. The Parent company is located in the UK and is audited directly by the Group audit team.
We have considered reporting components based on their contribution to Group revenue and profit, as well as qualitative considerations such as results of recent internal
audit reviews undertaken by the Group Assurance function, and an understanding of any recent or projected restructuring or relocation activities in specific locations.
Full scope audit work was completed on 8 components and specified audit procedures were undertaken at a further 39 components. Each reporting component in scope
was subject to an audit materiality level between £2m and £6m.
Our full scope and specified audit procedures covered 73% of Group revenue and 77% of Group operating profit. Group operating profit has been calculated on
an absolute basis, reflecting the nature of certain individual business units that are loss making or cost centres.
Revenue
Operating profit
27% Review at Group level
15%
Full audit scope
23% Review at Group level
13%
Full audit scope
58%
Specified audit procedures
64%
Specified audit procedures
7.2. Our consideration of the control environment
The Group uses a number of different IT systems across the reporting components and we worked with our IT specialists to obtain an understanding of the general IT
controls for relevant systems. Following this, we focused our testing on the three core systems that underpin the three divisions and which the majority of entities either
utilise or plan to migrate to in the future.
Our testing highlighted that the control environment is decentralised and reliant on manual processes with improvements required to the IT environment, as well as
in the wider business controls framework, in order for us to adopt a controls reliance approach to our audit.
Where control improvements were identified, both in the IT environment and more broadly across the business, these have been reported to management and the Audit
Committee as appropriate. As management develops and completes their controls improvement programme of work in future years, we expect our audit approach to
evolve alongside these developments to the internal control environment.
IMI plc Annual Report & Accounts 2021 143
7.3. Our consideration of climate-related risks
In planning our audit, we have considered the potential impact of climate change on the Group’s business and its financial statements.
As noted on page 72 the Group has assessed the risk and opportunities relevant to climate change and whilst has not created a separate principal risk in relation to
the potential risk of climate change, they note that this is incorporated into several existing principal risks.
We have obtained management’s climate-related risk assessment and held discussions with those charged with governance to understand the process of identifying
climate-related risks, the determination of mitigating actions and the impact on the Group’s financial statements.
We performed our own qualitative risk assessment of the potential impact of climate change on the Group’s account balances and classes of transactions, and did
not identify any additional risks of material misstatement. Our procedures included reading disclosures included in the Strategic Report to consider whether they are
materially consistent with the financial statements and our knowledge obtained in the audit.
7.4. Working with other auditors
The audit work on all components was performed by Deloitte member firms. The component work was performed under the direction and supervision of the Group audit
team. At a Group level, further substantive audit work was performed over the consolidation and analytical review procedures were performed over all components not
in scope.
The audit plan which we designed as part of our involvement in the component auditors’ work was delivered over the course of the Group audit.
The extent of our involvement which commenced from the planning phase included;
• setting the scope of the work to be performed by the component auditor and assessment of their independence;
• designing the audit procedures for all significant risks to be addressed by the component auditors and issuing Group audit instructions detailing the nature and form
of the reporting required by the Group engagement team;
• providing direction on enquiries made by the component auditors through online and telephone conversations; and
• a risk-based approach to the review of specific component auditors’ engagement files by senior members of the Group engagement team.
In response to the COVID-19 pandemic, which limited our ability to make component visits, frequent calls were held between the Group and component teams and
remote access to relevant documents was provided. Given the pandemic, most of our year-end audit was performed in a remote working environment.
Introduction Strategic Report Corporate Governance Financial Statements 144
Independent Auditor’s Report
to the Members of IMI plc
8. Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor’s report thereon. The directors are
responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any
form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the course of the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the
financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact.
We have nothing to report in this regard.
9. Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the parent company’s ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the parent
company or to cease operations, or have no realistic alternative but to do so.
10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or
error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
IMI plc Annual Report & Accounts 2021 145
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above,
to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including
fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered
the following:
• the nature of the industry and sector, control environment and business performance including the design of the Group’s remuneration policies, key drivers for directors’
remuneration, bonus levels and performance targets;
• results of our enquiries of management, Group Assurance, and the Audit Committee about their own identification and assessment of the risks of irregularities;
• any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:
– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; and
– the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations.
• the matters discussed among the audit engagement team including significant component audit teams and relevant internal specialists, including tax, valuations,
pensions, and IT specialists regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential
for fraud in the following areas: inventory valuation – provision for excess and obsolete inventory in IMI Critical and IMI Precision, overstatement of revenue through
inappropriate cut-off in IMI Critical, and classification of adjusting items. In common with all audits under ISAs (UK), we are also required to perform specific procedures
to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on provisions of those laws and regulations that had
a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included
the UK Companies Act, Listing Rules, pensions legislation and tax legislation in all relevant jurisdictions where the Group operates.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which may
be fundamental to the Group’s ability to operate or to avoid a material penalty.
11.2. Audit response to risks identified
As a result of performing the above, we identified inventory valuation – provision for excess and obsolete inventory in IMI Critical and IMI Precision, overstatement of
revenue through inappropriate cut-off in the IMI Critical, and classification of adjusting items as key audit matters related to the potential risk of fraud. The key audit
matters section of our report explains the matters in more detail and also describes the specific procedures we performed in response to those key audit matters.
In addition to the above, our procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described
as having a direct effect on the financial statements;
• enquiring of management, the Audit Committee and in-house legal counsel concerning actual and potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;
• reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence with HMRC; and
• in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether
the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are
unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including significant component audit teams
and internal specialists and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Introduction Strategic Report Corporate Governance Financial Statements
146
Independent Auditor’s Report
to the Members of IMI plc
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the
financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent company and their environment obtained in the course of the audit, we have not
identified any material misstatements in the strategic report or the directors’ report.
13. Corporate Governance Statement
The Listing Rules require us to review the directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement
relating to the Group’s compliance with the provisions of the UK Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially
consistent with the financial statements and our knowledge obtained during the audit:
• the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out
on page 81;
• the directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the period is appropriate set out on page 80;
• the directors' statement on fair, balanced and understandable set out on page 136;
• the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 74;
• the section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 70; and
• the section describing the work of the Audit Committee set out on page 102.
14. Matters on which we are required to report by exception
14.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if, in our opinion, certain disclosures of directors’ remuneration have not been made or the part of the
directors’ remuneration report to be audited is not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
IMI plc Annual Report & Accounts 2021
147
15. Other matters which we are required to address
15.1. Auditor tenure
Following the recommendation of the Audit Committee, we were appointed by the Board of Directors at the Annual General Meeting on 6 May 2021 to audit the
financial statements for the year ended 31 December 2021 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals
and reappointments of the firm is one year, covering the year ended 31 December 2021.
15.2. Consistency of the audit report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).
16. Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.14R, these financial statements form part of the European
Single Electronic Format (ESEF) prepared Annual Financial Report filed on the National Storage Mechanism of the UK FCA in accordance with the ESEF Regulatory
Technical Standard ((‘ESEF RTS’). This auditor’s report provides no assurance over whether the annual financial report has been prepared using the single electronic
format specified in the ESEF RTS.
Dean Cook MA FCA
Senior statutory auditor
For and on behalf of Deloitte LLP, Statutory Auditor
London, United Kingdom
24 February 2022
Introduction Strategic Report Corporate Governance Financial Statements
148
Consolidated income statement
For the year ended 31 December 2021
Adjusted
Notes
£m
Revenue
Cost of sales
Gross profit
Operating costs
Operating profit
Financial income
Financial expense
Net financial income relating to defined benefit pension schemes
Net financial (expense)/income
Profit before tax
Taxation
Profit after tax
Earnings per share
Basic – from profit for the year
Diluted – from profit for the year
All activities relate to continuing operations.
4
5
8
8
14
9
7
2021
Adjusting
items
(Note 3)
£m
(0.3)
(0.3)
(67.3)
(67.6)
5.2
5.2
(62.4)
13.1
Statutory
Adjusted
£m
£m
1,866
(1,004.6)
1,825
(1,008.8)
861.4
(610.9)
816.2
(531.5)
250.5
7.6
(14.5)
1.0
(5.9)
244.6
(48.3)
284.7
3.8
(14.8)
0.2
(10.8)
273.9
(57.5)
2020
Adjusting
items
(Note 3)
£m
-
(57.9)
(57.9)
(1.7)
(1.7)
(59.6)
13.4
Statutory
£m
1,825
(1,008.8)
816.2
(589.4)
226.8
3.8
(16.5)
0.2
(12.5)
214.3
(44.1)
1,866
(1,004.3)
861.7
(543.6)
318.1
2.4
(14.5)
1.0
(11.1)
307.0
(61.4)
245.6
(49.3)
196.3
216.4
(46.2)
170.2
73.5p
73.2p
62.7p
62.6p
IMI plc Annual Report & Accounts 2021
Consolidated statement of comprehensive income
For the year ended 31 December 2021
149
Profit for the year
Items that will not subsequently be reclassified to profit and loss
Re-measurement gain on defined benefit plans
Related taxation effect
Effect of taxation rate change on previously recognised items
Items that may be reclassified to profit and loss
Gain/(loss) arising on hedging instruments designated in hedges of the
net assets in foreign operation (Note 1)
Exchange differences on translation of foreign operations net of funding revaluations
Exchange differences reclassified to income statement on disposal of operations
Related tax effect on items that may subsequently be reclassified to profit and loss
Other comprehensive income for the year, net of taxation
Total comprehensive income for the year, net of taxation
Attributable to:
Equity holders of the parent
2021
2020
Notes
£m
£m
£m
£m
196.3
170.2
4.3
(2.1)
5.7
68.3
7.9
14
9
9
17
9
70.9
(18.4)
15.8
20.0
(33.8)
0.1
1.2
(19.4)
21.4
-
(0.7)
(12.5)
55.8
252.1
252.1
Consolidated statement of changes in equity
For the year ended 31 December 2021
As at 1 January 2020
Profit for the year
Other comprehensive income excluding related taxation effect
Related taxation effect
Notes
Share
capital
£m
81.8
Total comprehensive income
Issue of share capital
Dividends paid
Share-based payments (net of tax)
Shares acquired for:
employee share scheme trust
As at 31 December 2020
Changes in equity in 2021
Profit for the year
Other comprehensive (expense)/income
excluding related taxation effect
Related taxation effect
Total comprehensive (expense)/income
Issue of share capital
Dividends paid
Share-based payments (net of tax)
Cancellation of Treasury shares
Shares acquired for:
employee share scheme trust
share buyback programme
As at 31 December 2021
22
10
6
22
10
6
22
22
Share
premium
account
£m
Capital
redemption
reserve
£m
Translation
reserve
(Note 1)
£m
Retained
earnings
£m
14.1
174.4
21.3
2.0
(0.7)
1.3
-
0.2
81.8
14.3
174.4
22.6
418.3
170.2
4.3
3.6
178.1
(91.6)
10.3
(8.7)
506.4
196.3
196.3
(13.7)
1.2
70.9
(2.6)
(12.5)
264.6
(61.8)
15.0
57.2
(1.4)
252.1
0.9
(61.8)
15.0
-
-
0.9
(3.2)
3.2
78.6
15.2
177.6
10.1
(26.6)
(200.0)
497.6
(26.6)
(200.0)
779.1
1.3
9.2
179.4
179.4
Total
equity
£m
709.9
170.2
6.3
2.9
179.4
0.2
(91.6)
10.3
(8.7)
799.5
Introduction Strategic Report Corporate Governance Financial Statements
150
Consolidated balance sheet
At 31 December 2021
Assets
Goodwill
Other intangible assets
Property, plant and equipment
Right of use assets
Employee benefit assets
Deferred tax assets
Other receivables
Total non-current assets
Inventories
Trade and other receivables
Derivative financial assets
Current tax
Investments
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Trade and other payables
Bank overdraft
Interest-bearing loans and borrowings
Lease liabilities
Provisions
Current tax
Derivative financial liabilities
Total current liabilities
Interest-bearing loans and borrowings
Lease liabilities
Employee benefit obligations
Provisions
Deferred tax liabilities
Other payables
Total non-current liabilities
Total liabilities
Net assets
Share capital
Share premium
Other reserves
Retained earnings
Total equity
Approved by the Board of Directors on 24 February 2022 and signed on its behalf by:
Lord Smith of Kelvin
Chairman
Notes
2021
£m
2020
£m
11
11
12
13
14
9
15
16
17
17
19
21
19
19
13
20
17
19
13
14
20
9
21
22
533.6
234.5
267.7
91.5
129.0
39.7
1.9
1,297.9
335.2
414.0
10.0
14.2
2.9
94.6
870.9
2,168.8
(400.4)
(65.5)
(127.7)
(23.9)
(38.1)
(66.0)
(6.3)
(727.9)
(430.3)
(70.0)
(66.5)
(18.3)
(70.2)
(6.5)
(661.8)
(1,389.7)
779.1
78.6
15.2
187.7
497.6
779.1
449.5
150.3
266.0
85.6
69.1
36.3
3.4
1,060.2
293.3
378.9
10.8
3.3
3.1
207.9
897.3
1,957.5
(371.9)
(73.5)
-
(26.3)
(43.9)
(66.3)
(4.7)
(586.6)
(362.3)
(62.0)
(91.1)
(15.1)
(33.9)
(7.0)
(571.4)
(1,158.0)
799.5
81.8
14.3
197.0
506.4
799.5
IMI plc Annual Report & Accounts 2021
Consolidated statement of cash flows
For the year ended 31 December 2021
Cash flows from operating activities
Operating profit for the year
Adjustments for:
Depreciation and amortisation
Impairment of property, plant and equipment and intangible assets
Loss on disposal of subsidiaries
(Profit)/loss on sale of property, plant and equipment
Equity-settled share-based payment expense
Increase in inventories
(Increase)/decrease in trade and other receivables
Increase in trade and other payables
Increase in provisions and employee benefits
Settlement of transactional derivatives (Note 1)
Cash generated from operations
Income taxes paid
Cash generated from operations after tax
Additional pension scheme funding
Net cash from operating activities
Cash flows from investing activities
Interest received
Proceeds from sale of property, plant and equipment
Settlement of effective net investment hedge derivatives
Acquisitions of subsidiaries net of cash
Acquisition of property, plant and equipment and non-acquired intangibles
Proceeds from disposal of subsidiaries net of cash
Net cash from investing activities
Cash flows from financing activities
Interest paid
Shares acquired for employee share scheme trust
Share buyback programme including acquisition expenses
Proceeds from the issue of share capital for employee share schemes
Repayment of borrowings
Drawdown of borrowings
Principal elements of lease payments
Dividends paid to equity shareholders
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the start of the year
Effect of exchange rate fluctuations
Cash and cash equivalents at the end of the year
Reconciliation of cash and cash equivalents
Cash and cash equivalents
Bank overdraft
Cash and cash equivalents at the end of the period
Notes to the cash flow appear in Note 19.
151
Notes
2021
£m
2020
£m
250.5
226.8
11, 12, 13
11, 12
24
12
6
15
16
21
14, 20
17
9
14
8
12
17
23
11, 12
24
8
22
22
19
19
13
10
19
19
99.5
5.5
3.8
(1.3)
12.0
(37.3)
(44.0)
30.7
1.8
5.9
327.1
(50.9)
276.2
(7.0)
269.2
2.4
4.6
20.5
(202.1)
(57.5)
0.1
(232.0)
(14.5)
(26.6)
(200.0)
1.0
-
208.0
(30.0)
(61.8)
(123.9)
(86.7)
134.4
(18.6)
29.1
111.1
4.0
-
2.3
10.3
(8.8)
17.2
6.2
7.9
0.2
377.2
(41.0)
336.2
(7.0)
329.2
3.8
0.2
(22.7)
-
(50.7)
-
(69.4)
(14.8)
(8.7)
-
0.2
(17.8)
-
(28.7)
(91.6)
(161.4)
98.4
28.1
7.9
134.4
94.6
(65.5)
29.1
207.9
(73.5)
134.4
Introduction Strategic Report Corporate Governance Financial Statements
152
Notes to the consolidated financial statements
1. Basis of preparation
Introduction
Basis of accounting
IMI plc (the ‘Company’) is a company incorporated and domiciled in the United
Kingdom. The consolidated financial statements of the Company comprise
the Company and its subsidiaries (together referred to as the ‘Group’).
The Company financial statements present information about the Company
as a separate entity and not about the Group. The consolidated financial
statements have been prepared in accordance with International Financial
Reporting Standards as adopted by the UK. The Company financial statements
have been prepared in accordance with International Accounting Standards
in conformity with the requirements of the Companies Act 2006 as applied in
accordance with section 408 of the Companies Act 2006 and these are presented
on pages 208 to 209. The financial statements were approved by the Board of
Directors on 24 February 2022.
The financial statements are presented in Pounds Sterling (which is the Company’s
functional currency), rounded to the nearest hundred thousand, except revenues,
which are rounded to the nearest whole million. They are prepared on the historical
cost basis except for derivative financial instruments; financial assets classified
as fair value through profit and loss or other comprehensive income; assets and
liabilities acquired through business combinations, which are stated at fair value
and retirement benefits. Non-current assets and liabilities held for sale are stated
at the lower of their carrying amounts and their fair values less costs to sell.
The accounting policies described in the notes to the financial statements have
been applied consistently throughout the Group for the purposes of
these consolidated financial statements.
(i) New or amended UK Endorsed Accounting Standards
adopted by the Group during 2021
Noted below are the amended and new International Financial Reporting
Standards which became effective for the Group as of 1 January 2021,
none of which have a material impact on the financial statements:
• IFRS 4, IFRS 7, IFRS 9, IFRS 16 and IAS 39 – amendments to Interest Rate
Benchmark Reform (Phase 2)
• IAS 38 ‘Intangible Assets’ – guidance regarding expenditure associated with
cloud computing arrangements
(ii) New accounting standards in issue but not yet effective
New standards and interpretations that are in issue but not yet effective are
listed below:
• Amendments to IAS 16: Property, Plant and Equipment – Proceeds before
intended use
• Annual improvements to IFRS Standards 2018-2020
• Amendments to IFRS 3: Reference to the Conceptual Framework
• Amendments to IAS 37: Onerous Contracts – Costs of fulfilling a contract
• IFRS 7 Insurance Contracts
• Amendments to IAS 1: Classification of Liabilities as current or non-current
• Amendments to IFRS 4: Extension of the Temporary Exemption from
Applying IFRS 9
• Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of
accounting estimates
The adoption of the above standards and interpretations is not expected to lead
to any changes to the Group’s accounting policies or have any other material
impact on the financial position or performance of the Group.
IMI plc Annual Report & Accounts 2021 153
Going concern
Changes in presentations
The following re-presentations have been included in the following financial
statements in the current year and as a result, 2020 comparatives have been
re-presented accordingly:
Consolidated statement of changes in equity
Within the Statement of changes in equity, the Hedging reserve and Translation
reserve have been merged to reflect better the impact of matching the gains and
losses on the hedged items with the gains and losses on the hedging instruments.
Prior year comparatives have been re-presented.
Consolidated statement of comprehensive income
‘Change in fair value of unsettled effective net investment hedge derivatives’ and
‘Settled effective net investment hedge derivatives’ disclosed in the Consolidated
statement of comprehensive income in the prior year are now disclosed as the
‘Gain/(loss) arising on hedging instruments designated in hedges of the net
assets in foreign operation’. Prior year comparatives have been re-presented.
Consolidated statement of cash flows
The ‘Settlement of transactional derivatives’ previously recorded within ‘Cash flows
from investing activities’ are now disclosed as ‘Cash flows from operating activities’
within the ‘Consolidated statement of cash flows’ following an internal review of
the policy. Prior year comparatives have been re-presented.
Segmental information – Energy Transfer
During the year, the Energy business of IMI Precision Engineering division was
transferred into the IMI Critical Engineering division. The resulting impact has
increased IMI Critical Engineering revenue by £63m (2020: £64m) and operating
profit £9.1m (2020: £13.3m) with the equal and opposite impact reducing the
results of IMI Precision Engineering. Prior year comparatives have been re-presented
in Note 4 to reflect this.
Accounting standards require that directors satisfy themselves that it is reasonable
for them to conclude whether it is appropriate to prepare financial statements
on a going concern basis. The Group’s business activities, together with the factors
likely to affect its business development, performance and position are set out
in the Strategic Report. Principal risks are detailed on pages 74 to 79. The financial
position of the Group, its cash flows, liquidity position and borrowing facilities
are described in these financial statements. In addition, Note 18 includes the
Group’s objectives, policies and processes for managing its capital; its financial risk
management objectives; details of its financial instruments and hedging activities;
and its exposures to credit risk and liquidity risk. Note 14 to the financial statements
addresses the management of the funding risks of the Group’s employee
benefit obligations.
After making enquiries, the directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in operational
existence for the foreseeable future and for a period of at least twelve months
(25 February 2023) following the approval of the Annual Report & Accounts.
Accordingly, they continue to adopt the going concern basis in preparing the
financial statements.
The directors have considered the ongoing macroeconomic uncertainty resulting
from the pandemic. Business disruption, so far, has been reasonably modest as the
Group is well diversified and maintains a balanced portfolio operating across a range
of markets, sectors and geographies with no single dependency. Performance in each
of IMI’s three divisions has been robust during the year.
Across the Group, all sites are continuing at normal levels of production. Supply chain
disruptions have been minimal and alternative suppliers or contingency stocks have
addressed the few instances of part shortages.
During this period of uncertainty, the Group continues to maintain a robust financial
position. At 31 December 2021, the group had cash and cash equivalents of £29m
and undrawn committed facilities of £230m in the form of Revolving Credit Facilities
(RCF), of which £50m is due for renewal in 2022, £95m in 2023, £12m in 2024 and
£72m in 2025. Forecasts indicate that the Group can operate within the level of
facilities in place without the need to obtain any new facilities in the twelve-month
period following the approval of the Annual Report & Accounts.
The directors have assessed the viability of the Group and reviewed detailed cash
flow forecasts for a period of at least twelve months following the date of approval
of the Annual Report & Accounts. These forecasts factored in a decline in revenue
based on slowdowns in various end markets, experiencing tough trading conditions.
After applying a reverse stress test on the Group’s banking covenants and making
comparisons to the detailed forecasts, the directors have a reasonable expectation
that the financial headroom will not be exhausted during this period.
Covenant compliance reviews are undertaken to ensure that the Group remains
fully within the covenant limits. Funding covenants currently require EBITDA to
be no less than 4.0 times interest and net debt to be no more than 3.0 times
EBITDA. Those covenant ratios, at 31 December 2021, were 33.3x times and
1.5x times, respectively.
A reverse stress test shows that for there to be a breach of covenants during the
twelve-month period following the approval of the Annual Report & Accounts,
forecast revenue would need to fall by 34% and forecast EBITDA by 65% after
taking into account the mitigating actions that would be undertaken in these
circumstances. The mitigating actions include, but are not limited to, reducing
working capital, restricting capital expenditure, reducing overhead spend and
employee costs, cutting or suspending dividend payments to shareholders.
Introduction Strategic Report Corporate Governance Financial Statements 154
2. Significant accounting policies
Where appropriate, the significant accounting policies are presented in the note to which it applies to aid the reader’s understanding of their application. Set out below
are the significant accounting policies which do not have a specific note.
A. Subsidiaries
The Group financial statements consolidate the financial statements of IMI plc
and the entities it controls (its subsidiaries) for the year to 31 December 2021.
The Group has no significant interests which are accounted for as associates
or joint ventures.
Subsidiaries are consolidated from the date of their acquisition, being the date
on which the Group obtains control, and continue to be consolidated until the date
that such control ceases. Control comprises the power to govern the financial
and operating policies of the investee so as to obtain benefit from its activities
and is achieved through direct or indirect ownership of voting rights, currently
exercisable or convertible potential voting rights or by way of contractual
agreement. The financial statements of subsidiaries used in the preparation
of the consolidated financial statements are prepared for the same reporting
year as the parent company and are based on consistent accounting policies.
All intragroup balances and transactions, including unrealised profits arising
from them, are eliminated in full.
A change in the ownership interest of a subsidiary, without loss of control,
is accounted for as an equity transaction. If the Group loses control over
a subsidiary, it:
• derecognises the assets (including any goodwill relating to the subsidiary) and
liabilities of the subsidiary;
• derecognises the carrying amount of any non-controlling interest;
• derecognises the cumulative translation differences recorded in equity;
• recognises the fair value of the consideration received;
• recognises the fair value of any investment retained;
• recognises any surplus or deficit in profit or loss; and
iii. Changes in critical judgements and key sources of
estimation uncertainty
Management has reassessed the critical judgements and key sources of
estimation uncertainty presented in the 2020 Annual Report & Accounts and
concluded that, in the current year, we no longer consider there to be key sources
of estimation uncertainty associated with inventory or goodwill impairment.
C. Revenue recognition
Revenue is recognised when obligations under the terms of a contract with our
customer are satisfied. This generally occurs when the goods are transferred,
or the services are provided, to our customer. Revenue is measured as the amount
of consideration we expect to receive in exchange for transferring goods or
providing services. Sales and other taxes collected from customers are excluded
from revenue. The nature of the equipment, valve and other contracts into which
the Group enters means that:
• the contracts usually contain distinct performance obligations, each of which
transfers control of the goods to the customer. Where such distinct performance
obligations are present, revenue is recognised on each element in accordance
with the policy on the sale of goods; and
• the service element of the contract is usually insignificant in relation to the total
contract value and is often provided on a short-term or one-off basis. Where this
is the case, revenue is recognised when the service is complete.
As a result of the above, the significant majority of the Group’s revenue is
recognised on a sale of goods basis. Each of the divisional revenue streams
set out in Note 4 can consist of the sale of goods, the provision of services or
a combination of the two. The specific methods used to recognise the different
forms of revenue earned by the Group are set out below:
• reclassifies the parent’s share of components previously recognised in other
comprehensive income to profit or loss or retained earnings, as appropriate.
i. Sale of Goods
Taxation on the above accounting entries would also be recognised,
where applicable.
B. Use of critical judgements and key sources of
estimation uncertainty
The preparation of financial statements requires management to make
judgements, estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
i. Critical judgements
The critical judgements are disclosed in Notes 3 and 13.
ii. Key sources of estimation uncertainty
The Group bases its assumptions and estimates on information available
when the consolidated financial statements are prepared. Market changes
or circumstances arising beyond the control of the Group are reflected in the
assumptions and estimates when they occur. Revisions to accounting estimates
are recognised in the period in which the estimate is revised and in any future
periods affected. The key sources of estimation uncertainty concerning the
future and other sources of estimation uncertainty are disclosed in Note 14
‘Retirement benefits’.
Revenue from the sale of goods is recognised in the income statement net of
returns, trade discounts and volume rebates when control has been transferred to
our customer. No revenue is recognised where recovery of the consideration is not
probable or there are significant uncertainties regarding associated costs, or the
possible return of goods.
In IMI Hydronic, the amount of consideration received and the revenue recognised
varies in line with discounts and promotions offered to our customers and
their customers. The level of estimation uncertainty associated with variable
consideration is minimal, as discounts and rebates are accounted for at the
point of sale and adjusted as required at each financial year end.
The timing of the transfer of control to our customer varies depending on the
nature of the products sold and the individual terms of the contract of sale.
Sales made under internationally accepted trade terms, Incoterms 2020, are
recognised as revenue when the Group has completed the primary duties required
to transfer control as defined by the International Chamber of Commerce Official
Rules for the Interpretation of Trade Terms. Sales made outside Incoterms 2020
are generally recognised on delivery to the customer. In limited instances,
a customer may request that the Group retains physical possession of an
asset for a period after control has been transferred to the customer. In these
circumstances, the Group provides this storage as a service to the customer
and therefore revenue is recognised prior to delivery of the asset.
IMI plc Annual Report & Accounts 2021 155
ii. Rendering of services
Servicing relates to repairs and maintenance activity that is completed at our
customer sites within our installed base. Revenue from the rendering of services
is usually insignificant in relation to the total contract value and is generally
provided on a short-term or one-off basis. Accordingly, revenue is usually
recognised when the service is complete.
Where this is not the case, revenue from services rendered is recognised in
proportion to the stage of completion of the service at the balance sheet date.
The stage of completion is assessed by reference to the contractual performance
obligations with each separate customer and the costs incurred on the contract
to date in comparison to the total forecast costs of the contract. Revenue
recognition commences only when the outcome of the contract can be reliably
measured. Installation fees are similarly recognised by reference to the stage of
completion on the installation unless they are incidental to the sale of the goods,
in which case they are recognised when the goods are sold.
iii. Combined services and goods
When a transaction combines a supply of goods with the provision of a significant
service, distinct performance obligations are identified and recognised in line with
the applicable policy. Revenue from a service that is incidental to the supply of
goods is recognised at the same time as the revenue from the supply of goods.
D. Foreign currencies
i. Foreign currency transactions
Monetary assets and liabilities denominated in foreign currencies have been
translated into sterling at the rates of exchange ruling at the balance sheet date.
Foreign exchange differences arising on translating transactions at the exchange
rate ruling on the transaction date are reflected in the income statement.
Non-monetary assets and liabilities that are measured at historical cost in
a foreign currency are translated using the exchange rates at the date of
the transaction. Non-monetary assets and liabilities denominated in foreign
currencies that are stated at fair value are translated into sterling at foreign
exchange rates ruling at the balance sheet date.
ii. Foreign operations
The income statements of overseas subsidiary undertakings are translated at the
appropriate average rate of exchange for the year and the adjustment to year end
rates is taken directly to reserves.
The assets and liabilities of foreign operations, including goodwill and fair value
adjustments arising on acquisition, are translated at foreign exchange rates ruling
at the balance sheet date.
Foreign exchange differences arising on retranslation are recognised directly
as a separate component of equity. Since 1 January 2004, the Group’s date of
transition to IFRSs, such differences have been recognised in the translation
reserve. When a foreign operation is disposed of, in part or in full, the relevant
amount in the translation reserve is transferred to profit or loss.
E. Financial instruments and fair value hedging
Financial instruments are initially recorded at fair value plus directly attributable
transaction costs unless the instrument is a derivative not designated as
a hedge (see below). Subsequent measurement depends on the designation
of the instrument, which follows the categories in IFRS 9:
• short-term borrowings and overdrafts are classified as financial liabilities
at amortised cost;
• derivatives, comprising interest rate swaps, foreign exchange contracts and
options, metals futures contracts and any embedded derivatives, are classified
as ‘fair value through profit or loss’ under IFRS 9, unless designated as hedges.
Derivatives not designated as hedges are initially recognised at fair value;
attributable transaction costs are recognised in profit or loss when incurred.
Subsequent to initial recognition, changes in fair value of such derivatives
and gains or losses on their settlement are recognised in net financial income
or expense;
• long-term loans and other interest bearing borrowings are generally held at
amortised cost using the effective interest rate method. Where the long-term
loan is hedged, generally by an interest rate swap, and the hedge is regarded
as effective, the carrying value of the long-term loan is adjusted for changes
in fair value of the hedge;
• trade receivables are stated at cost as reduced by appropriate impairment
allowances for expected irrecoverable amounts;
• trade payables are stated at cost;
• financial assets and liabilities are recognised on the balance sheet only when
the Group becomes a party to the contractual provisions of the instrument; and
• fair value through other comprehensive income financial instruments are
carried at fair value with gains and losses being recognised in equity,
and represent investments.
i. Derecognition of financial instruments
The Group derecognises a financial asset only when the contractual rights to the
cash flows from the asset expire, or when it transfers the financial asset and
substantially all the risks and rewards of ownership of the asset to another entity.
If the Group neither transfers nor retains substantially all of the risks and rewards
of ownership and continues to control the transferred asset, the Group recognises
its retained interest in the asset and an associated liability for amounts it
may have to pay. If the Group retains substantially all the risks and rewards
of ownership of a transferred financial asset, the Group continues to recognise
the financial asset and also recognises a collateralised borrowing for the
proceeds received.
On derecognition of a financial asset measured at amortised cost, the difference
between the asset's carrying amount and the sum of the consideration received
and receivable is recognised in profit or loss. In addition, on derecognition
of an investment in a debt instrument classified as fair value through other
comprehensive income (FVTOCI), the cumulative gain or loss previously
accumulated in the investments revaluation reserve is reclassified to profit or loss.
In contrast, on derecognition of an investment in an equity instrument which the
Group has elected on initial recognition to measure at FVTOCI, the cumulative
gain or loss previously accumulated in the investments revaluation reserve is not
reclassified to profit or loss, but is transferred to retained earnings.
The Group derecognises financial liabilities when, and only when, the Group’s
obligations are discharged, cancelled or have expired. The difference between the
carrying amount of the financial liability derecognised and the consideration paid
and payable is recognised in profit or loss.
Introduction Strategic Report Corporate Governance Financial Statements 156
2. Significant accounting policies (continued)
When the Group exchanges with the existing lender one debt instrument into
another one, with substantially different terms, such exchange is accounted for
as an extinguishment of the original financial liability and the recognition of a
new financial liability. Similarly, the Group accounts for substantial modification
of terms of an existing liability or part of it as an extinguishment of the original
financial liability and the recognition of a new liability. It is assumed that the terms
are substantially different if the discounted present value of the cash flows under
the new terms, including any fees paid net of any fees received and discounted
using the original effective interest rate is at least 10 per cent different from the
discounted present value of the remaining cash flows of the original financial
liability. If the modification is not substantial, the difference between: (1) the
carrying amount of the liability before the modification; and (2) the present
value of the cash flows after modification is recognised in profit or loss
as the modification gain or loss within other gains and losses.
ii. Derecognition of hedging arrangements
The Group discontinues hedge accounting only when the hedging relationship
(or a part thereof) ceases to meet the qualifying criteria (after rebalancing,
if applicable). This includes instances when the hedging instrument expires or is
sold, terminated or exercised. The discontinuation is accounted for prospectively.
Any gain or loss recognised in other comprehensive income and accumulated in
cash flow hedge reserve at that time remains in equity and is reclassified to profit
or loss when the forecast transaction occurs. When a forecast transaction is
no longer expected to occur, the gain or loss accumulated in the cash flow hedge
reserve is reclassified immediately to profit or loss.
F. Other hedging
i. Hedge of monetary assets and liabilities, financial commitments or
forecast transactions
Where a derivative financial instrument is used as an economic hedge of the
foreign exchange or metals commodity price exposure of a recognised monetary
asset or liability, financial commitment or forecast transaction, but does not meet
the criteria to qualify for hedge accounting under IFRS 9, no hedge accounting is
applied and any gain or loss resulting from changes in fair value of the hedging
instrument is recognised in net financial income or expense.
Where such a derivative is a formally designated hedge of a forecast transaction
for accounting purposes, movements in the value of the derivative are recognised
directly in other comprehensive income to the extent the hedge is effective.
The Group assesses the effectiveness of the hedge based on the expected
fair value of the amount to be received and the movement in the fair value of
the derivative designated as the hedge.
For segmental reporting purposes, changes in the fair value of economic hedges
that are not designated hedges, which relate to current year trading, together
with the gains and losses on their settlement, are allocated to the operating profit
of the relevant business segment.
ii. Hedge of net investment in foreign operations
Where a foreign currency liability or derivative financial instrument is a formally
designated hedge of a net investment in a foreign operation, foreign exchange
differences arising on translation of the foreign currency liability or changes in the
fair value of the financial instrument are recognised directly in equity via other
comprehensive income, to the extent the hedge is effective. The Group assesses
the effectiveness of its net investment hedges based on fair value changes of its
net assets, including relevant goodwill designated as foreign currency assets,
and the fair value changes of both the debt designated as a hedge and the
relevant financial instrument.
G. Investments not held for trading
Investments that are designated as being not held for trading are initially
recognised at fair value. Subsequently, the fair value of the investment is
reassessed at each balance sheet date with movements in the fair value
recognised in other comprehensive income. In contrast, on derecognition of
an investment in an equity instrument which the Group has elected on initial
recognition to measure at fair value through other comprehensive income,
the cumulative gain or loss previously accumulated in the investments revaluation
reserve is not reclassified to profit or loss, but is transferred to retained earnings.
H. Discontinued operations
When the Group has assets and liabilities that have been sold in the year or
are likely to be sold rather than being held for continuing use, these assets
and liabilities are included in current assets and liabilities and denoted ‘held
for sale’ rather than in their usual categories. They are recognised at the lower
of carrying amount and fair value less costs to sell. Impairment losses on the
initial classification of assets held for sale are included in the income statement,
even for assets measured at fair value, as are impairment losses on subsequent
remeasurement and any reversal thereof. Once classified as held for sale, assets
are no longer depreciated or amortised.
If they represent a significant enough proportion of the Group, they are also
treated as discontinued operations. A discontinued operation is a component of
the Group’s business that represents a separate major line of business that has
been disposed of, is held for sale or is a subsidiary acquired exclusively with a view
to re-sale. This means that their trading performance, i.e. their revenues, costs
and other items of income and expense, are no longer reported within the headline
figures in the income statement and are instead reported in a separate line, net
of tax, called ‘discontinued operations’. These amounts no longer form part of
continuing earnings per share. Comparative figures are re-presented to be shown
on the same basis.
This enables the income statement for the current and prior year to be presented
on a consistent basis and to convey a more forward-looking version of the results
for the year.
IMI plc Annual Report & Accounts 2021 3. Alternative Performance Measures (‘APMs’)
& adjusting items
157
Accounting Policy
The Group’s policy is to exclude items from underlying performance that are considered to be significant in nature (i.e. outside of the normal course of business)
and/or quantum and where treatment as an adjusted item provides stakeholders with additional useful information to assess period-on-period trading
performance of the Group.
The Group believes Alternative Performance Measures (‘APMs’), which are not considered to be a substitute for, or superior to, IFRS measures, provide stakeholders
with additional helpful information on the performance of the business. These APMs are consistent with how the business performance is planned and reported
within the internal management reporting to the Board and Executive Committee. Some of these measures are also used for the purpose of setting remuneration
targets and for banking covenants.
The adjusting items in the income statement and the reasons these are considered to be adjusting items are detailed below:
• Costs associated with major restructuring projects – These costs are reported as adjusting items on the basis that they are significant in quantum, relate to
specific, approved strategic initiatives following reviews of our organisation structure during the period and to provide stakeholders with comparability of
underlying results from one period to the next. Restructuring costs which are not considered to be major or one-off are included within underlying results
in the consolidated income statement.
• Impairment losses – Impairment losses treated as adjusting items include those which are large in quantum or one-off in nature and as a result are not considered
to be usual operating costs of the Group. In addition to this, impairment losses associated with major restructuring projects are considered to be part of the
overall project and therefore follow the same treatment as restructuring projects, as described above. Impairment losses incurred, which are not significant or
do not form part of a major restructuring project are recorded as adjusted items. All impairment losses recorded as adjusting items in the current and prior period
relate to restructuring projects treated as adjusting items.
• Gains and losses on property disposals – Significant in quantum gains and losses on property disposals are not considered to relate to the underlying trading of
the business and are therefore treated as adjusting items. All gains and losses on property disposals associated with major restructuring projects are considered
to be part of the overall project and therefore follow the same treatment as restructuring projects, as described above.
• Acquired intangible amortisation – The amortisation charge is not considered to be related to the underlying performance of the Group and can fluctuate
materially period-on-period as new businesses are acquired. All acquired intangible amortisation is treated as an adjusting item due its nature. The trading results
of acquired businesses are included in the adjusted results.
• Gains and losses on disposal of subsidiaries – Due to their one-off nature and large quantum, gains and losses on disposals are treated as adjusting items.
If these gains or losses are not considered to be one-off or material, these amounts would be included within underlying results.
• The reversal of gains and losses on economic hedges – Gains and losses on economic hedges are treated as an adjusting item on a qualitative basis. The adjusting
item reverses the treatment taken locally by the Group’s businesses, where the impact of foreign currency forwards and commodity hedges are booked at the
hedged rate in the adjusted results of the local businesses. In compliance with IFRS 9 ‘Financial Instruments’, these do not meet the requirement of an effective
hedge and are therefore adjusted to be booked at the spot rate. The recognition of the gain and losses on the hedged items is recorded as a financing item,
including any unrealised gains and losses.
• Other acquisition costs – For an acquired business, the acquisition costs which are primarily advisor and legal fees and the one-off write-off of the inventory uplift
to fair value do not reflect trading performance and so are treated as adjusting items to ensure consistency between periods.
• Special pension events – Due to their one-off nature and typically large quantum, special pension events are treated as adjusting items. Special pension events
which are not significant are recorded as adjusted items. There are no special pension events recorded as adjusting items in the current or prior period.
• Tax effect on adjusting items above – Any tax effect of the above items is treated as an adjusting item.
• Other tax items – An assessment is made, on a case-by-case basis, for one-off tax items which significantly impact the Group’s results to determine whether
the item should be treated as an adjusting item.
The policies outlined above are consistent with the policies adopted in the previous period.
Movements in adjusted revenue and adjusted operating profit are given on an organic basis (see definition below) so that performance is not distorted by
acquisitions, disposals and movements in exchange rates.
The directors’ commentary discusses these APMs to remove the effects of items of both income and expense that are considered different in nature from
the underlying trading and normal quantum and where treatment as an adjusting item provide stakeholders with additional information to assess
period-on-period trading.
Critical Judgement
Management has applied judgement in the selection of the APMs used in the Annual Report & Accounts. The APMs presented are used in discussions with the
investment analyst community and by the Board and management to monitor the trading performance of the Group.
Introduction Strategic Report Corporate Governance Financial Statements
158
3. Alternative Performance Measures ('APMs') & adjusting items (continued)
The table below details the definition of each APM and a reference to where it can be reconciled to the equivalent statutory measure.
APM
Definition
Adjusted profit before tax
Adjusted net interest cost
Adjusted profit before tax is statutory profit before tax before adjusting items
as shown on the income statement.
Reconciliation to statutory measure
See income statement on page 148.
Adjusted net interest cost is statutory net interest costs before adjusting
items as shown on the income statement.
See income statement on page 148.
Adjusted earnings per share
Adjusted earnings per share is defined within the table in Note 7.
Adjusted effective tax rate
The adjusted effective tax rate is the tax impact on adjusted profit before tax
divided by adjusted profit before tax.
Adjusted EBITDA
This measure reflects adjusted profit after tax before interest, tax,
depreciation and amortisation.
See Note 7.
See Note 9.
See Note 19.
Adjusted operating profit
Adjusted operating profit is statutory operating profit before adjusting items
as shown on the income statement.
Adjusted operating margin
Adjusted operating margin is adjusted operating profit divided by revenue.
Organic revenue growth
Organic adjusted operating profit
These two measures remove the impact of adjusting items, acquisitions,
disposals and movements in exchange rates and are reconciled in Note 4.
See income statement on page 148 and
segmental reporting in Note 4.
Adjusted operating cash flow
This measure reflects cash generated from operations as shown in the
statement of cash flows less cash spent acquiring property, plant and
equipment, non-acquired intangible assets and investments; plus cash received
from the sale of property, plant and equipment, the sale of investments less the
repayment of principal amounts of lease payments excluding the cash impact of
adjusting items.
See Note 19.
Net debt
Net debt is defined as the cash and cash equivalents, overdrafts, interest-
bearing loans and borrowings and lease liabilities.
See Note 19.
Free cash flow before
corporate activity
This measure is a sub-total in the reconciliation of adjusted EBITDA to Net
debt and is presented to assist the reader to understand the nature of
the current year’s cash flows excluding dividends, share buybacks and the
purchase and issuance of own shares.
See Note 19.
IMI plc Annual Report & Accounts 2021
159
Key
2021
£m
2020
£m
a)
b)
c)
d)
e)
a)
f)
f)
f)
(6.0)
(35.1)
(3.8)
(4.6)
(18.1)
(67.6)
(1.5)
(36.1)
-
(1.6)
(18.7)
(57.9)
5.2
(1.7)
15.1
(18.6)
16.6
13.1
13.4
-
-
13.4
(c) Loss on disposal of subsidiary – following the disposal of IMI Interativa in July
2021, the Group recorded a loss on disposal of £3.8m. Further details are
included in Note 24.
(d) Impairment losses – in 2021, the Group recorded an adjusting impairment
charge of £4.6m associated with the restructuring programmes ongoing
in IMI Precision Engineering and £1.6m associated with the restructuring
programmes ongoing in IMI Critical Engineering in 2020.
(e) Acquired intangible amortisation and other acquisition items – acquired
intangible amortisation is excluded from adjusted profits, to allow for better
comparability of the performance across divisions. This allows users of the
financial statements to gain an understanding of the performance of the
business, with the impact of amortisation identified separately in line with
internal reporting to management. Acquired intangible amortisation reduced
to £15.0m (2020: £18.7m), which largely relates to the amortisation of the
intangible assets recognised on the acquisition of Bimba in 2018.
Other acquisition costs of £3.1m primarily relates to professional fees
associated with the acquisition of Adaptas in December 2021.
(f) Taxation – the tax effect of the above items has been recognised as an
adjusting item and amounts to a credit of £15.1m (2020: £13.4m). In addition,
there are two tax items which have been treated as adjusting due to their
large size: a charge of £18.6m due to the effect of the forthcoming increase in
the UK corporation tax rate on timing differences recognised for deferred tax
purposes, and a credit of £16.6m due to the release of provisions in respect
of exposures related to prior years which are no longer expected to arise,
including the closure of open years with tax authorities.
Outlined below are the adjusting items impacting the current and prior year results.
Recognised in arriving at operating profit
Reversal of net economic hedge contract gains
Restructuring costs
Loss on disposal of subsidiary
Impairment losses
Acquired intangible amortisation and other acquisition items
Recognised in net financial expense
Financial income/(expense)
Recognised in taxation
Tax impact of adjusting items above
Change in UK tax rate
Release of prior year provisions
(a) Reversal of net economic hedge contract losses/gains – for segmental
reporting purposes, changes in the fair value of economic hedges which are not
designated as hedges for accounting purposes, together with the gains and
losses on their settlement, are included in the revenue and adjusted operating
profit of the relevant business segment. The adjusting items at the operating
level reverse this treatment. The financing adjusting items reflect the change
in value or settlement of these contracts with the financial institutions with
whom they were transacted.
(b) Restructuring costs – the restructuring costs of £35.1m were the result of
a number of major restructuring projects across the Group. These include
costs of £31.0m within IMI Precision Engineering, primarily for the closure
of a factory in Europe, which is currently under consultation with the Works
Council, and the Customer First project, which both simplify the structure
of the division and ensures the business structure is aligned to our customer
base. In IMI Critical Engineering there were costs of £0.8m relating to the
finalisation of the ongoing projects announced in 2020. In IMI Hydronic
Engineering there were costs of £3.3m for the finalisation of the ongoing
projects announced in 2020 and a new project announced in 2021 to
simplify finance processes through a shared service centre in Poland. These
restructuring projects are due to be completed in 2023. The cash effect of
restructuring costs incurred during the year was £32.8m and restructuring
provisions at the year end were £31.6m. See Note 20 for further details.
Restructuring costs of £36.1m were recognised in 2020. These included
the continuation of a cost and footprint rationalisation programme within
IMI Precision Engineering, £4.8m in Europe and £2.5m in the Americas,
which included the closure of a manufacturing site in each region. In IMI
Critical Engineering, adjusted restructuring costs related to a restructuring
programme in the EMEA region of £22.4m, which included the closure of
manufacturing at two Italian sites and restructuring at two German sites, and
£2.1m in the Americas to right size the workforce. In IMI Hydronic Engineering,
there were costs of £5.1m related to closure of a manufacturing site in
Slovenia and consolidation of the Swedish and German distribution hubs
into one hub in Poland. There was a provision release of £0.8m related to the
Corporate HQ following the closure of matters relating to previous projects.
Introduction Strategic Report Corporate Governance Financial Statements
160
4. Segmental information
Segmental information is presented in the consolidated financial statements for each of the Group's operating segments. The operating segment reporting format
reflects the Group's management and internal reporting structures and represents the information that was presented to the chief operating decision-maker, being the
Executive Committee. As described on page 3, each of the Group’s three divisions has a number of key brands across its main markets and operational locations. For the
purposes of reportable segmental information, operating segments are aggregated into the Group’s three divisions, as the nature of the products, production processes
and types of customer are similar within each division. Inter-segment revenue is insignificant.
Segmental information – Energy Transfer
During 2021, the Energy business of the IMI Precision Engineering division was transferred into the IMI Critical Engineering division. The resulting impact has increased
IMI Critical Engineering revenue by £63m (2020: £64m) and operating profit £9.1m (2020: £13.3m) with the equal and opposite impact reducing the results of IMI
Precision Engineering. Prior year comparatives have been re-presented in Note 4 to reflect this.
IMI Precision Engineering
IMI Precision Engineering specialises in the design and manufacture of motion and fluid control technologies where precision, speed and reliability are essential to the
processes in which they are involved.
IMI Critical Engineering
IMI Critical Engineering is a world-leading provider of flow control solutions that enable vital energy and process industries to operate safely, cleanly, reliably and more
efficiently. Our products control the flow of steam, gas and liquids in harsh environments and are designed to withstand temperature and pressure extremes as well as
intensely abrasive or corrosive cyclical operations.
IMI Hydronic Engineering
IMI Hydronic Engineering is a leading provider of technologies that deliver operational and energy efficient water-based heating and cooling systems for the residential
and commercial building sectors.
Performance is measured by the Executive Committee based on adjusted operating profit and organic revenue growth which are defined in Note 3. These two measures
represent the two short-term key performance indicators for the Group.
Businesses enter into forward currency and metal contracts to provide economic hedges against the impact on profitability of swings in rates and values in accordance
with the Group's policy to minimise the risk of volatility in revenues, costs and margins. Adjusted operating profits are therefore charged/credited with the impact of
these contracts. In accordance with IFRS 9, these contracts do not meet the requirements for hedge accounting and gains and losses are reversed out of operating profit
and are recorded in net financial income and expense for the purposes of the consolidated income statement.
The following table illustrates how the results for the segments reconcile to the overall results reported in the income statement.
IMI Precision Engineering
IMI Critical Engineering
IMI Hydronic Engineering
Corporate costs
Total adjusted revenue/operating profit and margin
Reversal of net economic hedge contract gains
Restructuring costs
Loss on disposal of subsidiary
Acquired intangible amortisation and other acquisition items
Impairment losses
Statutory revenue/operating profit
Net financial expense
Statutory profit before tax
Revenue
Operating profit
Operating margin
2021
£m
836
691
339
2020*
£m
813
707
305
1,866
1,825
2021
%
17.8%
18.1%
20.1%
2020*
%
17.0%
16.9%
18.3%
17.0%
15.6%
2021
£m
148.9
125.0
68.1
(23.9)
318.1
(6.0)
(35.1)
(3.8)
(18.1)
(4.6)
2020*
£m
138.1
119.8
55.7
(28.9)
284.7
(1.5)
(36.1)
-
(18.7)
(1.6)
1,866
1,825
250.5
226.8
(5.9)
244.6
(12.5)
214.3
* 2020 results for IMI Precision and IMI Critical have been restated to reflect the Energy business transfer.
IMI plc Annual Report & Accounts 2021
161
The following table shows a reconciliation of divisional adjusted operating profit to statutory operating profit:
IMI Precision
Engineering
IMI Critical
Engineering
IMI Hydronic
Engineering
Corporate
Total
Revenue
Adjusted operating profit
2021
£m
836
148.9
2020*
£m
813
138.1
2021
£m
691
125.0
2020*
£m
707
119.8
Reconciliation to statutory operating profit:
Reversal of net economic hedge contract gains
Restructuring costs
Loss on disposal of subsidiary
Acquired intangible amortisation and other acquisition items
Impairment losses
(3.4)
(31.0)
(10.3)
(4.6)
(0.9)
(7.3)
(7.7)
(1.9)
(0.8)
(3.8)
(7.8)
(0.6)
(24.5)
(11.0)
(1.6)
2021
£m
339
68.1
(0.7)
(3.3)
2020
£m
305
55.7
2021
£m
2020
£m
(23.9)
(28.9)
(5.1)
0.8
2021
£m
1,866
318.1
(6.0)
(35.1)
(3.8)
(18.1)
(4.6)
2020
£m
1,825
284.7
(1.5)
(36.1)
-
(18.7)
(1.6)
Statutory operating profit
99.6
122.2
110.7
82.1
64.1
50.6
(23.9)
(28.1)
250.5
226.8
Statutory operating margin (%)
11.9%
15.0%
16.0%
11.6%
18.9%
16.6%
13.4%
12.4%
* 2020 results for IMI Precision and IMI Critical have been restated to reflect the Energy business transfer.
The following table illustrates how revenue and adjusted operating profit have been impacted by movements in foreign exchange, acquisitions and disposals compared to
2020 by restating 2020 to the 2021 full year average rates and removing the impact of Adaptas from the 2021 results, and removing InterAtiva from the final six months of
2020 as the business was disposed of in July 2021:
Year ended 31 December 2020*
Year ended 31 December 2021
Revenue
IMI Precision Engineering
IMI Critical Engineering
IMI Hydronic Engineering
Total
Adjusted operating profit
IMI Precision Engineering
IMI Critical Engineering
IMI Hydronic Engineering
Corporate costs
Total
Adjusted operating profit margin (%)
As
adjusted
813
707
305
1,825
138.1
119.8
55.7
(28.9)
284.7
15.6%
Exchange
Disposals
Organic
adjusted Acquisitions
Organic
As
Adjusted
Organic
growth (%) growth (%)
(36)
(27)
(9)
(72)
(6.7)
(5.6)
(2.0)
-
(14.3)
(4)
(4)
(0.5)
(0.5)
777
676
296
1,749
131.4
113.7
53.7
(28.9)
269.9
836
691
339
1,866
148.9
125.0
68.1
(23.9)
318.1
15.4%
17.0%
(2)
-
-
(2)
-
834
691
339
1,864
148.9
125.0
68.1
(23.9)
318.1
17.1%
3%
-2%
11%
2%
8%
4%
22%
7%
2%
15%
7%
13%
10%
27%
12%
18%
* 2020 results for IMI Precision and IMI Critical have been restated to reflect the Energy business transfer.
Introduction Strategic Report Corporate Governance Financial Statements
162
4. Segmental information (continued)
Given the significant impact on the business performance due to the pandemic in 2020, comparative figures for 2019 are shown below. The following table illustrates how
revenue and adjusted operating profit have been impacted by movements in foreign exchange, acquisitions and disposals compared to 2019 by restating 2019 to the 2021
full year average rates and removing the impact of Adaptas from the 2021 results, removing the impact of PBM from the 2021 results for the first nine months of the year
as the business was not owned by IMI until September 2019, and removing InterAtiva from the final six months of 2019 as the business was disposed of in July 2021:
Year ended 31 December 2019
Year ended 31 December 2021
Revenue
IMI Precision Engineering*
IMI Critical Engineering*
IMI Hydronic Engineering
Total
Adjusted operating profit
IMI Precision Engineering*
IMI Critical Engineering*
IMI Hydronic Engineering
Corporate costs
Total
Adjusted operating profit margin (%)
As
adjusted
841
717
315
1,873
134.4
103.7
56.7
(28.7)
266.1
14.2%
Exchange
Disposals
Organic
adjusted Acquisitions
Organic
As
Adjusted
Organic
growth (%) growth (%)
(37)
(29)
(8)
(74)
(5.0)
(5.0)
(0.5)
(4)
(4)
(0.2)
(10.5)
(0.2)
804
684
307
1,795
129.4
98.5
56.2
(28.7)
255.4
836
691
339
1,866
148.9
125.0
68.1
(23.9)
318.1
14.2%
17.0%
(2)
(17)
(19)
(3.4)
(3.4)
834
674
339
1,847
148.9
121.6
68.1
(23.9)
314.7
17.0%
-1%
-4%
8%
0%
11%
21%
20%
4%
-1%
10%
3%
15%
23%
21%
20%
23%
* 2019 results for IMI Precision and IMI Critical have been restated to reflect the Energy business transfer.
The following table illustrates how the segmental assets and liabilities reconcile to the overall total assets and liabilities reported in the balance sheet:
IMI Precision Engineering*
IMI Critical Engineering*
IMI Hydronic Engineering
Total segmental assets/liabilities (including lease liabilities)
Corporate items
Employee benefits
Investments
Net debt items (excluding lease liabilities)
Net taxation and others
Total assets and liabilities in Group balance sheet
Assets
Liabilities
2021
£m
916.1
714.6
233.5
1,864.2
24.2
129.0
2.9
94.6
53.9
2,168.8
2020
£m
630.2
764.6
224.7
1,619.5
18.3
69.1
3.1
207.9
39.6
1,957.5
2021
£m
202.4
231.2
90.9
524.5
39.0
66.5
-
623.5
136.2
1,389.7
2020
£m
150.5
260.2
84.8
495.5
35.4
91.1
-
435.8
100.2
1,158.0
* 2020 results for IMI Precision and IMI Critical have been restated to reflect the Energy business transfer.
The following table includes other information to show how certain costs are allocated between the segments of the Group:
IMI Precision Engineering*
IMI Critical Engineering*
IMI Hydronic Engineering
Corporate costs
Total
Adjusting
restructuring costs
Capital expenditure
Amortisation**
Depreciation ***
2021
£m
31.0
0.8
3.3
35.1
35.1
2020
£m
7.3
24.5
5.1
36.9
(0.8)
36.1
2021
£m
29.9
9.8
17.8
57.5
2020
£m
28.0
11.4
11.3
50.7
2021
£m
11.2
14.7
5.3
31.2
2020
£m
11.7
17.8
5.5
35.0
57.5
50.7
31.2
35.0
2021
£m
32.7
20.5
14.3
67.5
0.8
68.3
2020
£m
36.8
23.5
15.0
75.3
0.8
76.1
* 2020 results for IMI Precision and IMI Critical have been restated to reflect the Energy business transfer.
**
The amortisation figures above include the amortisation of acquired intangibles. £7.2m (2020: £7.7m) is included in respect of IMI Precision Engineering, £7.8m
(2020: £11.0m) is included in respect of IMI Critical Engineering and £nil (2020: £nil) is included in respect of IMI Hydronic Engineering.
*** The depreciation figures above include the impact of IFRS 16 'Leases': £0.6m in respect of Corporate (2020: £0.6m), £12.3m in respect of IMI Precision Engineering
(2020: £12.5m), £8.5m in respect of IMI Critical Engineering (2020: £9.6m) and £6.9m in respect of IMI Hydronic Engineering (2020: £7.0m).
IMI plc Annual Report & Accounts 2021
163
2021
£m
83
238
520
841
410
116
526
165
244
409
2020
£m
88
222
486
796
443
102
545
156
234
390
90
1,866
94
1,825
Middle East & Africa
5%
Europe
44%
The following table shows a geographical analysis of how the Group’s revenue is derived by destination:
UK
Germany
Rest of Europe
Total Europe
USA
Rest of Americas
Total Americas
China
Rest of Asia Pacific
Total Asia Pacific
Middle East & Africa
Total revenue
Revenue by geography (2021)
Revenue by geography (2020)
Asia Pacific
22%
Americas
28%
Middle East & Africa
5%
Asia Pacific
21%
Europe
45%
Americas
30%
The following table shows a geographical analysis of the location of the Group’s intangible assets, property, plant and equipment and right of use assets:
UK
Germany
Rest of Europe
USA
Asia Pacific
Rest of World
Total
2021
£m
78.4
202.4
224.9
487.9
104.1
29.6
1,127.3
2020
£m
74.2
232.2
279.5
279.8
47.6
38.1
951.4
Introduction Strategic Report Corporate Governance Financial Statements
164
4. Segmental information (continued)
The Group's revenue streams are disaggregated in the table below:
Sector
IMI Precision Engineering*
Industrial Automation
Process Control
Life Sciences
Precision Fluid OEM
Commercial Vehicle
Rail
Transport
Total IMI Precision Engineering
IMI Critical Engineering**
Power
Refining & Petrochemical
Nuclear
Oil & Gas
Marine
Other
Aftermarket
Oil & Gas
Refining & Petrochemical
Power
Marine
Nuclear
Other
New Construction
Total IMI Critical Engineering
IMI Hydronic Engineering
TA
Heimeier
Pneumatex
Other
Total IMI Hydronic Engineering
Total revenue
Sale of goods
Sale of services
Total revenue
2021
Revenue
£m
2020
Revenue
£m
413
119
91
210
180
33
213
836
144
105
57
45
11
17
379
77
108
66
22
3
36
312
691
159
106
61
13
339
369
102
165
267
140
37
177
813
134
94
46
49
19
17
359
71
126
69
25
6
51
348
707
146
95
51
13
305
1,866
1,825
1,806
60
1,866
1,762
63
1,825
* The IMI Precision Engineering sector segmentation has been restated to reflect the new business structure as part of the Customer First restructuring project (see
Note 3 for further details). In addition, the 2020 figures have been restated for the impact of the Energy transfer with £64m of revenue moved to IMI Critical from
IMI Precision (see Note 1).
** The IMI Critical Engineering sector segmentation has been re-ordered to display Aftermarket and New Construction totals for the division, and includes a £10m
reclassification from New Construction to Aftermarket for Petrochemical for 2020, with the total of each segment included in the table consistent with the prior
year. In addition, the 2020 figures have been restated for the impact of the Energy transfer with £64m of revenue moved to IMI Critical from IMI Precision
(see Note 1).
IMI plc Annual Report & Accounts 2021
5. Operating costs
Operating profit is stated after charging/(crediting):
Net foreign exchange (gains)/losses included in operating profit
Research and development expense
Amortisation of intangible assets
Impairment of intangible assets treated as adjusting items
Impairment of intangible assets
Depreciation of owned property, plant and equipment
Impairment of owned property, plant and equipment treated as adjusting items
Impairment/(reversal of impairment) of owned property, plant and equipment
Depreciation of right of use assets
Cost of inventories recognised as an expense
(Profit)/loss on disposal of property, plant and equipment
165
2021
£m
(5.1)
49.7
31.2
-
0.1
40.0
4.6
0.8
28.3
1,004.6
(1.3)
2020
£m
0.6
38.7
35.0
1.6
2.7
44.4
-
(0.3)
29.7
1,008.8
2.3
Operating costs by function
The following table shows how much of the operating costs disclosed in the
income statement relate to selling and distribution costs and
administrative expenses:
Research and development expenditure
The cost of research and development expenditure charged directly to the income
statement was £49.7m (2020: £38.7m), included within this is amortisation of
capitalised intangible development costs which amounted to £7.1m (2020: £7.0m)
and across the Group a further £4.6m (2020: £6.9m) was capitalised in the year.
Exchange on operating activities net of hedging arrangements
The transactional foreign exchange gains in the Group were £5.1m (2020: losses
of £0.6m).
Audit fees
The Group engages its auditor, Deloitte (2020 auditor: EY), to perform other
assurance assignments in addition to their statutory audit duties where their
expertise, experience and knowledge of the Group should enable them to perform
these assignments more efficiently than other similar service providers.
The Group’s policy on such assignments is set out in the Audit Committee Report on
page 106. Fees earned by Deloitte (2020 auditor: EY) and its associates during the
year are set out below:
Fees earned by the Company’s auditor for the audit of
the Company’s Annual Accounts
The audit of the Company’s subsidiaries,
pursuant to legislation
Other assurance services
Total
2021
£m
0.2
2.5
0.1
2.8
2020
£m
0.2
2.9
0.1
3.2
Selling and distribution costs
Administrative expenses
Employee information
2021
£m
(233.1)
(310.5)
(543.6)
2020
£m
(222.5)
(309.0)
(531.5)
The average number of people employed by the Group during the year was:
IMI Precision Engineering
IMI Critical Engineering
IMI Hydronic Engineering
Corporate
Total Group
2021
5,740
3,117
1,969
90
10,916
2020*
5,547
3,402
1,899
95
10,943
* 2020 Employee information has been re-presented to include agency staff and
contractors to show comparable year on year figures.
The aggregate employment cost charged to operating profit for the year was:
Wages and salaries
Share-based payments
Social security costs
Pension costs*
Total
2021
£m
491.9
12.0
80.3
9.5
593.7
2020
£m
489.9
10.3
77.4
5.6
583.2
* There are no special pension events included in 2021 pension costs (2020: £nil,
see Note 3).
The aggregate gains made by directors on the exercise of share options was
£1.6m (2020: £0.6m). The remuneration, as defined in the Companies Act 2006
Schedule 5, for the executive directors' comprises fixed and annual variable pay
as set out in the table on page 116 of the Remuneration Report. For details
of the non-executive directors’ remuneration please refer to page 124 of the
Remuneration Report.
Introduction Strategic Report Corporate Governance Financial Statements
166
6. Share-based payments
The Group operates a number of equity and equity-related compensation benefits to reward its employees. The estimated cost of awarding these share options is
charged to the income statement over the period that the Group benefits from the employees’ services. This cost is then added back to retained earnings, to reflect
that there is no overall impact on the Group’s balance sheet until the shares are issued to the employees when the options are exercised.
The individual share option schemes, the number of options outstanding under each of them, the estimated cost of these options recognised in the income statement
and the assumptions used in arriving at this estimated cost are described below.
Accounting policy
The fair value of the employee services received in exchange for the grant of the options is recognised as an expense each year. The total amount to be expensed
over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example,
profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to become
exercisable. The fair value of the options is determined based on the Monte Carlo and Black-Scholes option-pricing models.
At each balance sheet date, the Group revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision of original
estimates, if any, in the income statement.
For newly issued shares, the proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium
when the options are exercised.
Outstanding share options
At 31 December 2021, options to purchase ordinary shares had been granted to, but not yet exercised by, participants of IMI share option schemes as follows:
IMI Sharesave Scheme
Purchase Plans
IMI Incentive Plan
IMI Share Option Plan
Total
Date of
grant
29.04.16
21.04.17
04.04.18
04.04.19
02.04.20
02.04.21
10.08.20
07.05.15
09.03.16
09.03.17
12.03.18
18.03.19
16.03.20
22.03.21
22.03.10
04.05.12
12.03.13
22.10.13
11.03.14
Number
of shares
1,557
4,631
13,095
127,551
61,467
72,327
280,628
38,071
38,071
1,042
8,174
12,594
66,941
609,752
1,175,903
830,351
2,704,757
37,500
85,300
9,000
87,350
219,150
3,242,606
Price
Dates from which exercisable
845.10p
1106.00p
1012.68p
884.16p
904.66p
1166.58p
956.07p
-
-
-
-
-
-
-
645.00p
980.67p
1322.70p
1518.33p
1467.00p
01.08.19 or 01.08.21
01.08.20 or 01.08.22
01.08.21 or 01.08.23
01.08.22 or 01.08.24
01.08.23 or 01.08.25
01.08.24 or 01.08.26
10.08.22
07.05.17 or 07.05.18
09.03.18 or 09.03.19
09.03.19 or 09.03.20
12.03.20 or 12.03.21
18.03.21 or 18.03.22
16.03.23
22.03.24
22.03.13
04.05.15
12.03.16
22.10.16
11.03.17
IMI plc Annual Report & Accounts 2021
167
Schemes under which options
are outstanding
The options in the adjacent table relate to the following share-based
payment schemes:
IMI Sharesave Scheme (‘SAYE’)
This scheme is open to the majority of the Group’s UK employees, including
the executive directors, and allows the grant of options to all participants at a
discount of up to 20% below the market price. Such schemes are not subject to
performance conditions and offer tax incentives to encourage employees to use
their own money to purchase IMI shares. SAYE options may be exercised within six
months of the date they first become exercisable.
Global Employee Share Purchase Plans (‘GESPP’)
These plans were introduced in 2011 for the US and Germany. The German and
US GESPP’s offer the opportunity to buy shares in IMI at a fixed price at a future
date. The German GESPP mirrors the UK Sharesave Scheme, with a minimum/
maximum savings limit per month and contract duration of three to five years.
The US GESPP also operates in a similar way to the UK Sharesave Scheme, with
a minimum/maximum savings limit per month, but the contract duration is for a
fixed period of two years and different taxation conditions apply for the exercise
period. No further awards are intended to be granted under the German GESPP.
IMI Share Option Plan (‘SOP’)
Share option awards were made from 2009 to selected senior managers
and certain other employees under the SOP. These awards are not subject to
performance conditions, but are subject to a three year vesting period. The
purpose of the SOP is to give selected IMI employees (who are not executive
directors of the Company) the opportunity to share in the benefits of share price
growth and to increase their IMI shareholding.
Options granted during the year
Other share-based payment arrangements
The Group also operates the following employee share plans:
Share Incentive Plan (‘SIP’)
The SIP is open to the majority of the Group’s UK employees, including the
executive directors. This scheme covers two separate opportunities for employees
to share in IMI’s success as follows:
• Partnership shares – allows employees to invest up to the statutory maximum
from pre-tax pay, which is used to buy IMI shares.
• Free shares – allows a grant of shares to employees each year, up to the
statutory maximum.
Shares acquired or awarded under the SIP are not subject to performance
conditions and offer tax incentives to encourage employees to build up their
shareholdings with the Company.
The IMI Incentive Plan (‘IIP’)
In light of the expiry in 2015 of both the PSP and SMP, the IIP was introduced to
act as the Company’s sole senior executive long-term incentive plan. The IIP acts
as an umbrella plan which allows the Company to grant different types of awards
to different employee groups in an efficient way. The IIP is to be used annually to
grant ‘Performance Share Awards’ in respect of ordinary shares to the executive
directors and other members of senior management subject to performance
conditions. The IIP will also be used annually to grant ‘Bonus Share Awards’ below
board level. The IIP also gives the Company the ability to grant ‘Restricted Stock
Unit Awards’ and ‘Share Options’. It is currently intended that Restricted Stock
Unit Awards and share options will only be granted in response to specific
business requirements.
SAYE
2019
2020
2021
GESPP
2019
2020
IIP
2019
2020
2021
Number of
options
granted
(thousand)
Weighted
average
option
price
Normal
exercisable
date
200
68
75
33
43
845
1,466
891
884p 2022-2025
905p 2023-2026
1167p 2024-2027
903p
956p
2021
2022
- 2021-2022
- 2022-2023
- 2023-2024
Introduction Strategic Report Corporate Governance Financial Statements
168
6. Share-based payments (continued)
Movement in outstanding options in the year
Outstanding at 1 January 2020
Exercisable at 1 January 2020
Granted
Exercised
Lapsed
Outstanding at 31 December 2020
Exercisable at 31 December 2020
Granted
Exercised
Lapsed
Outstanding at 31 December 2021
Exercisable at 31 December 2021
Options not granted at nil cost 1
Number of
options
(thousand)
Weighted
average
option prices option price
Range of
1,490
1,067
110
88
546
966
586
75
395
108
538
222
645-1518p
645-1518p
905-956p
645-1467p
845-1518p
845-1518p
971-1518p
1167p
845-1467p
845-1467p
845-1518p
845-1518p
1173p
1264p
925p
1046p
1254p
1098p
1216p
1167p
1085p
1101p
1116p
1325p
Options
granted at
nil cost 2
Number of
options
(thousand)
Total
Number of
options
(thousand)
2,692
202
1,567
540
671
3,048
167
978
500
461
3,065
272
4,182
1,269
1,677
628
1,217
4,014
753
1,053
895
569
3,603
494
1 Options not granted at nil cost include options granted under the following schemes: IMI Sharesave Scheme, Global Employee Share Purchase Plans and IMI Share
Option Plan.
2 Options granted at nil cost are those granted under the Performance Share Plan, Share Matching Plan and IMI Incentive Plan.
Share-based payment charge for the year
Other share-based payment disclosures
The total expense recognised for the year arising from share-based payments was
£12.0m (2020: £10.3m) which comprises a charge of £15.3m (2020: £13.5m) for
the year offset by a credit of £3.3m (2020: £3.2m) in respect of lapses.
£2.5m (2020: £2.3m) of the total charge and £0.7m (2020: £1.0m) of the total
credit is in respect of options granted to directors.
The weighted average remaining contractual life for the share options outstanding
as at 31 December 2021 is 7.08 years (2020: 6.70 years) and the weighted average
fair value of share options granted in the year at their grant date was £12.18
(2020: £7.58).
The weighted average share price at the date of exercise of share options exercised
during the year was £14.84 (2020: £9.29).
Share-based payment valuation methodology
The fair value of services received in return for share options granted are
measured by reference to the fair value of share options granted, based on
Black-Scholes and Monte Carlo option pricing models. The assumptions used for
grants in 2021 included a dividend yield of 1.7% (2020: 2.4%), expected share
price volatility of 25% (2020: 28%), a weighted average expected life of 3.5 years
(2020: 3.4 years) and a weighted average interest rate of 0.1% (2020: 0.1%).
The expected volatility is wholly based on the historical volatility (calculated based
on the weighted average remaining life of the share options), adjusted for any
expected changes to future volatility due to publicly available information.
IMI plc Annual Report & Accounts 2021
7. Earnings per ordinary share
169
Earnings per share (‘EPS’) is the amount of post-tax profit attributable to each share (excluding those held in the Employee Benefit Trust or by the Company).
Basic EPS measures are calculated as the Group profit for the year attributable to equity shareholders divided by the weighted average number of shares in issue during
the year. Diluted EPS takes into account the dilutive effect of all outstanding share options priced below the market price, in arriving at the number of shares used in
its calculation.
Both of these measures are also presented on an adjusted basis to assist the reader of the financial statements and provide insight into the performance of the Group.
The note below demonstrates how this calculation has been performed.
Weighted average number of shares for the purpose of basic earnings per share
Dilutive effect of employee share options
Weighted average number of shares for the purpose of diluted earnings per share
Statutory profit for the year
Total adjusting items charges included in profit before tax
Total adjusting items credits included in taxation
Earnings for adjusted EPS
Statutory EPS measures
Statutory basic EPS
Statutory diluted EPS
Adjusted EPS measures
Adjusted basic EPS
Adjusted diluted EPS
Key
A
B
Key
C
D
2021
million
266.9
1.1
268.0
2020
million
271.4
0.5
271.9
£m
£m
196.3
62.4
(13.1)
245.6
170.2
59.6
(13.4)
216.4
Key
2021
2020
C/A
C/B
D/A
D/B
73.5p
73.2p
62.7p
62.6p
92.0p
91.6p
79.7p
79.6p
Introduction Strategic Report Corporate Governance Financial Statements
170
8. Net financing costs
Accounting policy
Financial income comprises interest receivable on funds invested, income from investments and gains on hedging instruments that are recognised in the income
statement. Interest income is recognised in the income statement as it accrues, taking into account the effective yield on the asset. Dividend income is recognised
in the income statement on the date that the dividend is declared.
Financial expense comprises interest payable on borrowings calculated using the effective interest rate method, the interest related element of derivatives and
losses on financial instruments that are recognised in the income statement. The interest expense component of lease payments is recognised in the income
statement applying territory specific incremental borrowing rates.
Net finance expense relating to defined benefit pension schemes represents the assumed interest on the difference between employee benefit plan liabilities and
the employee benefit plan assets.
The finance income or expense on mark-to-market movements on interest and foreign exchange derivatives and other financing costs are excluded from
adjusted earnings.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for
its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs
consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
Recognised in the income statement
Interest income on bank deposits
Financial instruments at fair value through profit or loss:
Other economic hedges
Financial income
Interest expense on interest-bearing loans and borrowings
Interest expense on lease arrangements
Financial instruments at fair value through profit or loss:
Other economic hedges
Financial expense
Net financial income relating to defined benefit pension schemes
Net financial (expense)/income
2021
Financial
instruments
£m
5.2
5.2
-
5.2
Interest
£m
2.4
2.4
(11.7)
(2.8)
(14.5)
1.0
(11.1)
2020
Financial
instruments
£m
-
(1.7)
(1.7)
(1.7)
Total
£m
2.4
5.2
7.6
(11.7)
(2.8)
(14.5)
1.0
(5.9)
Interest
£m
3.8
3.8
(12.3)
(2.5)
(14.8)
0.2
(10.8)
Total
£m
3.8
3.8
(12.3)
(2.5)
(1.7)
(16.5)
0.2
(12.5)
Included in financial instruments are current year trading gains and losses on economically effective transactions which for management reporting purposes are included
in adjusted revenue and operating profit (see Note 3). For statutory purposes, these are shown within net financial income and expense above. Gains or losses for future
year transactions are in respect of financial instruments held by the Group to provide stability of future trading cash flows.
Recognised in other comprehensive income
Gain/(loss) arising on hedging instruments designated in hedges of the net assets in foreign operations
Exchange differences on translation of foreign operations net of funding revaluations
Exchange differences reclassified to income statement on disposal of operations
Income tax on items recognised in other comprehensive income
Total items recognised in other comprehensive income (net of tax)
Recognised in statement of changes in equity
Translation reserve
2021
£m
20.0
(33.8)
0.1
1.2
(12.5)
2020
£m
(19.4)
21.4
(0.7)
1.3
(12.5)
1.3
IMI plc Annual Report & Accounts 2021
9. Taxation
171
Tax laws are often complex, which can lead to inconsistent interpretations
by different stakeholders. Where this occurs, IMI may reduce uncertainty and
controversy through various actions, including proactive discussion with the fiscal
authorities to obtain early resolution and securing external tax advice to ensure
the robust interpretation of tax laws and practices.
The Group Tax Policy is fully aligned with the Group’s Code of Conduct, which
requires the Group and its employees and agents to act in compliance with
applicable laws and with fairness and integrity in all of its business dealings.
IMI has a zero-tolerance approach to tax evasion and the facilitation of tax
evasion. Consideration of UK legislation regarding third party tax evasion has
also been incorporated into the Group’s prevention procedures, including
employee training.
Fairness: IMI seeks to record its profits across the subsidiary companies around
the world on an arm’s length basis in accordance with internationally accepted
best practices, recognising the relative contributions of people, assets, intellectual
property and risks borne by the various businesses. The resulting allocation of
profits is regularly tested for compliance with this standard.
IMI has taken action to ensure that it meets the enhanced transfer pricing
disclosures and documentation requirements by tax authorities as a result of
the Base Erosion & Profit Shifting (commonly referred to as 'BEPS') initiative
by the OECD.
Value: IMI manages the impact of taxation on its businesses in a responsible
manner by only adopting legitimate and commercial positions. In doing so,
the Group may make use of legitimate tax incentives, exemptions and statutory
alternatives offered by governments and will look to ensure that it is not taxed
more than once on the same profit. As a UK Headquartered group, IMI’s profits
are ultimately subject to UK taxation, although as the Group pays significant taxes
overseas, the overall effective tax rate for the Group is marginally above
the UK statutory tax rate.
Transparency: IMI aims to build positive working relationships with tax authorities
by co-operating in a constructive, open and timely manner. IMI seeks to disclose
its tax affairs in its published accounts and taxation returns fully in accordance
with the applicable standards and, where appropriate, will supplement its tax
disclosures with further information to better inform, and to be transparent to,
its stakeholders.
Risk: IMI engages external support to manage tax risks and achieve the strategic
objectives outlined above. Tax risks are regularly assessed for all companies within
the Group, promptly addressed and reported so that they may be appropriately
provided and disclosed in the relevant accounts and tax returns. To the extent that
identified tax risks are material they will be reported to the Executive Committee
through the Group’s process for strategic risk management as described on
page 70.
UK Corporation tax
The weighted average rate of corporation tax in the UK for the 2021 calendar
year was 19.0% (2020: 19.0%). In the Spring Budget of 2021, the UK Government
announced that from 1 April 2023 the UK corporation tax rate will increase
from 19% to 25%. This new law was substantively enacted on 24 May 2021.
UK deferred tax assets and liabilities have therefore been calculated using a
rate of 25% (2020: 19%).
IMI operates through subsidiary companies all around the world that pay many
different taxes such as corporate income taxes, VAT, payroll withholdings, social
security contributions, customs import and excise duties. This note aggregates only
those corporate income taxes that are or will be levied on the profits of IMI plc and
its subsidiary companies for periods leading up to and including the balance sheet
date. The profits of each company are subject to certain adjustments as specified
by applicable tax laws in each country to arrive at the tax liability that is expected
to result on its tax returns. Where these adjustments have future tax impact then
deferred taxes may also be recorded.
Accounting policy
Current tax payable/receivable represents the expected tax payable/receivable
on the taxable profits for the year, using tax rates enacted or substantively
enacted at the balance sheet date and taking into account any adjustments
in respect of prior years.
Deferred tax is provided, using the balance sheet method, on temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred
tax is not recognised for the following temporary differences: the initial
recognition of goodwill, the initial recognition of assets or liabilities in a
transaction that is not a business combination and that affects neither
accounting nor taxable profit, and differences relating to investments in
subsidiaries to the extent that the timing of the reversal of the differences
can be controlled and it is probable that the differences will not reverse in
the foreseeable future. Deferred tax is measured at the tax rates that are
expected to apply when the temporary differences reverse, based on the
tax laws that have been enacted or substantively enacted by the balance
sheet date.
A deferred tax asset is recognised to the extent that it is probable that future
taxable profit will be available against which the temporary difference
can be utilised.
Tax governance, risk and strategy
IMI recognises its corporate responsibility to ensure that all businesses within
the IMI Group follow responsible tax practices to enhance long-term shareholder
value whilst also contributing to the public expenditure and the overall welfare of
the communities in which it operates. Accordingly, the IMI Tax Policy sets the core
principles of compliance, fairness, value and transparency for the management of
the Group’s tax affairs.
This Policy has been approved by the Board, fully communicated to subsidiary
businesses and is reviewed to ensure responsible business practices across the
Group are maintained. The Group Finance Director has primary responsibility for
all tax matters and keeps the Board appraised of any significant issues or changes
to the Tax Policy. A robust tax governance framework has also been established
under which the Executive Committee and the IMI Board are appraised on a
regular basis of any material or significant tax matters, so that appropriate
action can be effected. Through IMI Workplace and Knowledge Library, the Group
communicates policies, procedures, guidance and best practices to improve the
management of taxation across its subsidiary companies worldwide.
Compliance: IMI pays and collects significant amounts of taxes around the world
as a result of its business activities. It seeks to manage its taxation obligations
worldwide in compliance with all applicable tax laws and regulations, as well as
fully in line with the Group’s Code of Conduct. Accordingly, the tax contribution
by the individual businesses is monitored and robust standard tax compliance
processes operate together with appropriate financial controls to ensure that
all tax returns are complete, accurate and filed on a timely basis with the tax
authorities around the world and the declared taxes paid on time. Furthermore,
the preparation and filing of the corporate income tax returns for IMI subsidiary
companies worldwide have been largely outsourced to one tax advisory firm.
Introduction Strategic Report Corporate Governance Financial Statements
172
9. Taxation (continued)
Tax payments
Recognised in the income statement
During the year, the Group made payments of corporate income tax of £50.9m
(2020: £41.0m), principally arising as follows:
This section sets out the current and deferred tax charges, which together
comprise the total tax charge in the income statement.
2021
£m
53.9
(11.1)
42.8
5.5
48.3
2020
£m
43.9
2.7
46.6
(2.5)
44.1
Jurisdiction of companies making corporate income tax payments:
Italy £0.4m
Japan £3.6m
Current tax charge
Current year charge
Adjustments in respect of prior years
Deferred taxation
Origination and reversal of temporary differences
Total income tax charge
Switzerland £5.1m
UK £14.6m
Italy £(0.1)m
Japan £1.2m
Switzerland £3.4m
UK £19.5m
2021 £50.9m
2020 £41.0m
US £1.7m
Germany £3m
Other £6m
Singapore £1.7m
India £1.9m
South Korea £2.3m
Czech £2.3m
China £3.4m
Austria £1.4m
Sweden £3.5m
US £4.2m
Germany £1.4m
Other £4.2m
Singapore £1.9m
India £0.8m
South Korea £1m
Czech £1.2m
China £0.3m
Austria £1.1m
Sweden £0.9m
There is normally an element of volatility in the annual payments of corporate
income taxes due to the timing of assessments, acquisitions and disposals, adjusting
items and payments on account in the many countries in which the Group operates.
Changes in the jurisdictions in which profits are earned can have an impact on cash
flow levels which may take time to be reflected in the tax cash flow.
The level of payments made during 2021 increased significantly compared to 2020.
Payments in Sweden increased due to restructuring undertaken in earlier years.
Other larger increases, such as in Germany, Japan, China, Korea and Switzerland
reflect more normal levels of payments having recovered tax debtors in earlier periods,
whilst payments in Italy had previously reduced as a result of claiming tax credits on
patents and R&D. The UK payments decreased significantly due to a change in rules
regarding the timing of payments resulting in additional payments in 2020 which were
not required in 2021. Other territorial changes in payments largely reflect changes in
trading profits in those territories.
In addition, the Group makes substantial other tax payments relating to employment,
consumption, procurement and investment to tax authorities around the world.
IMI plc Annual Report & Accounts 2021
173
Reconciliation of effective tax rate
As IMI's head office and parent company is domiciled in the UK, the Group references its effective tax rate to the UK corporation tax rate, despite only a small portion of
the Group's business being in the UK. Therefore, the following tax reconciliation applies the UK corporation tax rate for the year to profit before tax, both before and after
adjusting items. The resulting tax charge is reconciled to the actual tax charge for the Group, by taking account of specific tax adjustments as follows:
Profit before tax
Income tax using the Company's domestic rate of tax of 19.00% (2020: 19.00%)
Effects of:
Non-deductible items
Non taxable loss on disposal of businesses
Utilisation of losses on which no deferred tax had been recognised
Current year losses for which no deferred tax asset has been recognised
Recognition of deferred tax asset on previously unprovided timing differences
Change in future tax rate on deferred tax
Differing tax rates
Adjustments to prior year current and deferred tax charges
Total tax in income statement
Income tax expense reported in the consolidated income statement
Effective rate of tax:
Events after the reporting period
2021
Adjusting
items
£m
(62.4)
(11.9)
0.8
0.7
-
0.1
-
18.6
(4.8)
(16.6)
(13.1)
(13.1)
Statutory
£m
Adjusted
£m
2020
Adjusting
items
£m
Statutory
£m
244.6
46.4
273.9
52.0
(59.6)
(11.3)
214.3
40.7
2.2
0.7
(0.4)
0.4
(2.8)
18.6
1.4
(18.2)
48.3
48.3
19.7%
0.8
-
(0.3)
0.2
(8.1)
6.5
4.2
2.2
57.5
57.5
21.0%
0.2
-
-
0.1
-
-
(2.4)
-
(13.4)
(13.4)
1.0
-
(0.3)
0.3
(8.1)
6.5
1.8
2.2
44.1
44.1
20.6%
Adjusted
£m
307.0
58.3
1.4
-
(0.4)
0.3
(2.8)
-
6.2
(1.6)
61.4
61.4
20.0%
In January 2022, the UK Government reconfirmed its intention to introduce legislation to give effect to the OECD Inclusive Framework agreement that there should be
a global minimum corporate income tax rate of 15%, taking effect in 2023. This event does not affect IMI's results for 2021 and is not expected to have a material impact
on IMI's financial statements for subsequent years. However, the exact impact will depend on the precise rules adopted in individual countries which are not known at
this time.
Recognised outside of the income statement
In addition to amounts charged to the income statement, some current tax and deferred tax is charged/(credited) directly to equity or through other comprehensive
income, which can be analysed as follows:
Deferred tax:
On equity-settled transactions
On re-measurement gains and on defined benefit plans
Effect of rate change on previously recognised items
Current tax:
On change in value of effective net investment hedge derivatives
On equity-settled transactions
Of which the following amounts are charged/(credited):
to the statement of comprehensive income
to the statement of changes in equity
2021
£m
2020
£m
(2.5)
18.4
(15.8)
0.1
(1.2)
(0.5)
(1.6)
1.4
(3.0)
(1.6)
(0.4)
2.1
(5.7)
(4.0)
0.7
0.4
(2.9)
(2.9)
-
(2.9)
Introduction Strategic Report Corporate Governance Financial Statements
174
9. Taxation (continued)
Recognised deferred tax assets and liabilities
Deferred taxes record the tax consequences of temporary differences between the accounting and taxation recognition of certain items, as explained below:
Intangible and tangible fixed assets
Inventories
Revaluation of derivatives
Pension, employee benefits and provisions
Other tax assets
Offsetting within tax jurisdictions
Total deferred tax assets and liabilities
Assets
Liabilities
Net
2021
£m
11.1
4.5
0.1
39.2
12.9
67.8
(28.1)
39.7
2020
£m
7.5
4.3
-
39.0
11.8
62.6
(26.3)
36.3
2021
£m
(59.8)
(1.2)
(0.7)
(36.6)
-
(98.3)
28.1
(70.2)
2020
£m
(38.8)
(2.2)
(1.1)
(18.1)
-
(60.2)
26.3
(33.9)
2021
£m
(48.7)
3.3
(0.6)
2.6
12.9
(30.5)
-
(30.5)
2020
£m
(31.3)
2.1
(1.1)
20.9
11.8
2.4
-
2.4
The movement in the net deferred tax balances has been recognised in the financial statements as analysed below:
Recognised
in the
income
statement
£m
Recognised
outside the
income
statement
£m
Balance at
1 Jan 21
£m
(31.3)
2.1
(1.1)
20.9
11.8
2.4
12.3
1.0
0.5
(18.8)
(0.5)
(5.5)
(0.1)
(0.1)
Recognised
in the
income
statement
£m
Recognised
outside the
income
statement
£m
Balance at
1 Jan 20
£m
(31.4)
1.4
(0.6)
23.6
1.7
(5.3)
(0.6)
0.7
(0.5)
(7.2)
10.1
2.5
4.0
4.0
Acquisitions /
disposals
£m
Exchange
£m
Balance at
31 Dec 21
£m
0.6
(0.1)
(0.9)
(0.4)
(0.8)
(30.3)
0.3
1.5
2.0
(26.5)
(48.7)
3.3
(0.6)
2.6
12.9
(30.5)
Acquisitions /
disposals
£m
Exchange
£m
Balance at
31 Dec 20
£m
0.7
0.5
1.2
(31.3)
2.1
(1.1)
20.9
11.8
2.4
Intangible and tangible fixed assets
Inventories
Revaluation of derivatives
Pension, employee benefits and provisions
Other tax assets/(liabilities)
Net deferred tax asset/(liability)
Intangible and tangible fixed assets
Inventories
On revaluation of derivatives
Pension, employee benefits and provisions
Other tax assets
Net deferred tax (liability)/asset
All exchange movements are taken through the translation reserve.
Unrecognised deferred tax assets and liabilities
Deferred tax assets of £46.7m (2020: £40.6m) have not been recognised in respect of tax losses of £51.8m (2020: £65.2m), interest of £13.2m (2020: £nil) and capital
losses of £118.9m (2020: £118.9m). The majority of the tax losses have no expiry date. No deferred tax asset has been recognised for these temporary differences due to
the uncertainty over their offset against future taxable profits and therefore their recoverability. In some instances, these balances are also yet to be accepted by the tax
authorities and could be challenged in the event of an audit.
It is likely that the majority of unremitted earnings of overseas subsidiaries would qualify for the UK dividend exemption. However, £128.4m (2020: £94.4m) of those
earnings may still result in a tax liability principally as a result of withholding taxes levied by the overseas jurisdictions in which those subsidiaries operate. These tax liabilities
are not expected to exceed £7.5m (2020: £7.2m) of which £2.2m (2020: £3.3m) has been provided on the basis that the Group expects to remit these amounts.
IMI plc Annual Report & Accounts 2021
10. Dividends
175
Accounting policy
Dividends are recognised as a liability in the period in which they are approved by shareholders.
Dividends
After the balance sheet date the following dividends were proposed by the directors. The dividends have not been provided for and there are no income tax consequences.
Current year final dividend - 15.8p per qualifying ordinary share (2020: 15.0p)
The following dividends were declared and paid by the Group during the year:
Prior year final dividend paid - 15.0p per qualifying ordinary share (2020 final year dividend: 26.2p)
Current year interim dividend paid - 7.9p per qualifying ordinary share (2020: 7.5p)
2021
£m
40.9
2021
£m
40.8
21.0
61.8
2020
£m
40.7
2020
£m
71.2
20.4
91.6
Dividend policy and share buybacks
As part of the capital management process, the Group ensures that adequate reserves are available in IMI plc in order to meet proposed shareholder dividends,
the purchase of shares for employee share scheme incentives and any on-market share buyback programme.
The Group does not have a formal dividend policy or pay out ratio. In 2020, the Group reset the dividend with the intention that it will be covered by at least three times
adjusted earnings, from an aim of two times adjusted earnings in previous years. In future years the Group’s aim is to continue with progressive dividends which typically
increase at a steady rate for both the interim and final dividend payments. In the event that the Board cannot identify sufficient investment opportunities through
capital expenditure, organic growth initiatives and acquisitions, the return of funds to shareholders through share buybacks or special dividends will be considered.
It should be noted that a number of shares are regularly bought in the market by an employee benefit trust in order to hedge the exposure under certain management
incentive plans. Details of these purchases are shown in Note 22 to the financial statements.
Introduction Strategic Report Corporate Governance Financial Statements
176
11. Intangible assets
Accounting policy
Intangible assets are disclosed as acquired intangible assets and non-acquired intangible assets. Amortisation of acquired intangible assets is treated as an
adjusting item as described in Note 3 as the impact of any acquisitions, which are clearly identifiable, can materially impact the net book value, from period
to period.
i. Goodwill
Goodwill is initially measured at cost being the excess of the aggregate of the acquisition date fair value of the consideration transferred over the net
identifiable amounts of the assets acquired and the liabilities assumed for the business combination. After initial recognition, goodwill is measured at cost less
any accumulated impairment losses. The value of the goodwill can arise from a number of sources, but in relation to our more recent acquisitions, it has been
represented by post-acquisition synergies and the skills and knowledge of the workforce.
ii. Research and Development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the income
statement as an expense as incurred.
Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and
processes, is capitalised provided benefits are probable, cost can be reliably measured and if, and only if, the product or process is technically and commercially
feasible and the Group has sufficient resources and intention to complete development. The expenditure capitalised includes the cost of materials, direct labour
and directly attributable overheads. Other development expenditure is recognised in the income statement as an expense as incurred. Capitalised development
expenditure is stated at cost less accumulated amortisation (see below) and impairment losses (see accounting policy ‘Impairment’) and is included in the other
acquired or other non-acquired category of intangible assets depending on its origin.
iii. Software development costs
Software applications and systems that are not an integral part of their host computer equipment are capitalised on initial recognition as intangible assets at
cost. Cost comprises the purchase price plus directly attributable costs incurred on development of the asset to bring it into use. Following initial recognition,
software development costs are carried at cost less any accumulated amortisation (see below) and accumulated impairment losses (see accounting policy
‘Impairment’) and are included in the other acquired or other non-acquired category of intangible assets depending on their origin.
iv. Customer relationships and other acquired intangible assets
Customer relationships and other intangible assets that are acquired by the Group as part of a business combination are stated at their fair value calculated by
reference to the net present value of future benefits accruing to the Group from utilisation of the asset, discounted at an appropriate discount rate.
Expenditure on other internally generated intangible assets is recognised in the income statement as an expense as incurred.
v. Amortisation of intangible assets other than goodwill
Amortisation is charged to the income statement on a straight-line basis (other than for customer relationships and order book, which are charged on a sum of
digits basis) over the estimated useful lives of the intangible assets. Amortisation commences from the date the intangible asset becomes available for use.
The estimated useful lives for:
• Capitalised development costs are the life of the intangible asset (usually a maximum of 15 years)
• Software development costs are the life of the intangible asset (up to 10 years)
• Customer relationships are the life of the intangible asset (up to 10 years)
• Other intangible assets (including order books, brands and software) are the life of the intangible asset (up to 10 years)
The Group splits its intangible assets between those arising on acquisitions and those which do not, because the amortisation of acquired intangibles is recognised
as an adjusting item in the income statement.
IMI plc Annual Report & Accounts 2021
177
Acquired
customer
relationships
£m
Other
acquired
intangibles
£m
Goodwill
£m
Other non-
acquired
intangibles*
£m
Non-acquired
intangibles
under
construction
£m
Other
intangible
assets
£m
480.4
7.0
240.3
3.7
129.8
2.5
487.4
(14.7)
97.4
244.0
(7.9)
132.3
(5.2)
109.6
(0.5)
569.6
(3.6)
232.5
(0.3)
236.4
36.3
1.6
186.4
4.1
99.2
3.1
14.3
204.8
(7.7)
4.4
106.7
(3.7)
(3.3)
(0.3)
10.5
204.3
39.2
28.2
4.5
107.2
25.6
129.2
37.9
(1.9)
36.0
449.5
533.6
154.9
5.8
5.6
13.5
(9.6)
170.2
(3.0)
4.5
6.9
(6.4)
172.2
80.3
3.0
(9.4)
4.3
16.3
94.5
(0.9)
(5.9)
0.1
16.2
104.0
75.7
68.2
15.6
0.5
7.2
(13.5)
9.8
(0.8)
6.8
(6.9)
8.9
-
9.8
8.9
540.6
12.5
12.8
-
(9.6)
556.3
(16.9)
109.6
11.3
-
(10.3)
650.0
365.9
10.2
(9.4)
4.3
35.0
406.0
(12.3)
(9.5)
0.1
31.2
415.5
150.3
234.5
Analysis of intangible assets
Cost
As at 1 January 2020
Exchange adjustments
Additions
Transfers from assets in the course of construction
Disposals
As at 31 December 2020
Exchange adjustments
Acquisitions (Note 23)
Additions
Transfers from assets in the course of construction
Disposals
As at 31 December 2021
Amortisation
As at 1 January 2020
Exchange adjustments
Disposals
Impairment
Amortisation for year
As at 31 December 2020
Exchange adjustments
Acquisitions
Disposals
Impairment
Amortisation for year
As at 31 December 2021
Net book value at 31 December 2020
Net book value at 31 December 2021
* Other non-acquired intangibles includes capitalised development costs with a carrying value of £34.5m (2020: £40.1m) and capitalised software costs with a carrying
value of £33.7m (2020: £35.6m).
Introduction Strategic Report Corporate Governance Financial Statements
178
11. Intangible assets (continued)
Goodwill impairment testing
Accounting policy
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating
units (or groups of ’CGUs’). The composition of CGUs reflects both the way in which cash inflows are generated and the internal reporting structure. Where our
businesses operate closely with each other we will continue to review whether they should be treated as a single CGU. Each unit or group of units to which goodwill
is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes and shall not be larger than an
operating segment before aggregation.
Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in
the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based
on the relative values of the operation disposed of and the portion of the CGU retained.
Impairment
The carrying values of the Group’s non-financial assets other than inventories and deferred tax assets, are reviewed at each balance sheet date to determine
whether impairment indicators exist.
If indicators exists, the recoverable amount of the asset or all assets within its CGU is estimated. An impairment loss is recognised whenever the carrying amount
of an asset or its CGU unit exceeds its recoverable amount. Impairment losses are recognised in the income statement.
For goodwill and assets that are not yet available for use, the recoverable amount is evaluated at each balance sheet date.
The recoverable amount of non-financial assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, an individual assessment
is made of the estimated future cash flows generated for each CGU derived from the Group’s long-term forecasts for the next five years. These are discounted
to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
Management believe that this approach, including the use of the indefinite cash flow projection, is appropriate based upon both historical experience and because
it is one of the bases management utilise to evaluate the fair value of investment opportunities. For an asset that does not generate largely independent cash
inflows, the recoverable amount is determined for the smallest cash generating unit to which the asset belongs.
Reversals of impairment
Impairments of goodwill are non-reversible. In respect of other assets, an impairment loss is reversed if at the balance sheet date there are indications that the loss
has decreased or no longer exists following a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss
had been recognised.
IMI plc Annual Report & Accounts 2021
The Group has 13 (2020: 12) cash generating units to which goodwill is allocated.
2021
Goodwill
179
Discount
rate
%
Growth
rate
%
10.9
10.8
10.9
10.9
10.9
12.2
2.0
2.0
1.7
2.1
2.1
1.8
CGU
IMI Critical – Petrochemical & Isolation
IMI Critical – Control Valves
IMI Precision Americas – Fluid Technologies
2020
CGU
IMI Critical – Petrochemical & Isolation
IMI Critical – Control Valves
IMI Precision Americas – Fluid Technologies
£m
110.6
95.9
59.0
117.1
94.0
58.1
Sensitivity to changes in assumptions
The key estimates reflect the combination of assumptions used, including the long-
term growth rates and the discount rate applied to forecast cash flows in addition
to the achievement of the forecasts themselves.
The Directors do not consider that any reasonably possible changes to the key
assumptions would cause the carrying amount to exceed the recoverable amount
of the CGU.
The aggregate amount of goodwill arising from acquisitions prior to 1 January 2004
which had been deducted from the profit and loss reserves and incorporated into
the IFRS transitional balance sheet as at 1 January 2004, amounted to £364m.
The cumulative impairment recognised in relation to goodwill is £41m (2020: £41m).
The recoverable amount of a CGU is the higher of its fair value less costs to sell
and its value in use. Value in use is determined using cash flow projections from
financial budgets, forecasts and plans approved by the Board covering a five-year
period and include a terminal value multiple. The projected cash flows reflect the
latest expectation of demand for products and services, including consideration
of the future impacts of climate change which is considered as part of the Group’s
five-year strategic planning process.
The key assumptions in these calculations are the long-term growth rates and the
discount rates applied to forecast cash flows in addition to the achievement of the
forecasts themselves. Long-term growth rates are based on long-term economic
forecasts for growth in the manufacturing sector in the geographical regions in
which the cash generating unit operates. Pre-tax discount rates specific to each
cash generating unit are calculated by adjusting country and region-specific post-
tax weighted average cost of capital (‘WACC’) for specific country risk premium,
the Group’s size risk premium and tax rate relevant to the jurisdiction in which
the cash flows are generated. The basis on which the discount rates are derived
has changed during the year. During 2020, pre-tax discount rates specific to each
cash generating unit were calculated by adjusting the Group post-tax WACC of
7% for the tax rate relevant to the jurisdiction before adding risk premia for the
size of the unit, the characteristics of the segment in which it resided, and the
geographical regions from which the cash flows were derived.
This exercise resulted in the use of the following ranges of values for the
key assumptions:
Discount rate
Long-term growth rate
2021
%
2020
%
7.3 – 11.2
1.5 – 2.0
9.2 – 10.7
1.3 – 2.1
For the purpose of assessing the significance of CGUs, the Group uses a threshold
of 10% of the total goodwill balance. The recoverable amount of the CGUs is
determined from a value in use calculation and the key assumptions used in
this calculation are the discount rate, growth rate and operating cash flows.
These estimates are determined using the methodology discussed above and
for those CGUs considered to be significant; outlined in the table adjacent:
Introduction Strategic Report Corporate Governance Financial Statements
180
12. Property, plant and equipment
This note details the physical assets used by the Group to generate revenues and profits, in addition to those disclosed in Note 13. These assets include manufacturing,
distribution and office sites, and equipment used in the manufacture of the Group’s products. The cost of these assets represents the amount initially paid for them.
Accounting policy
Freehold land and assets in the course of construction are not depreciated.
Items of property, plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses (see Note 11).
Where an item of property, plant and equipment comprises major components having different useful lives, they are accounted for as separate items of property,
plant and equipment. Costs in respect of tooling owned by the Group for clearly identifiable new products are capitalised net of any contribution received from
customers and are included in plant and equipment.
Depreciation is charged to the income statement, from the date the asset is brought in to use, on a straight-line basis (unless such a basis is not aligned with the
anticipated benefit) so as to write down the cost of assets to residual values over the period of their estimated useful lives within the following ranges:
• Freehold buildings - 25 to 50 years
• Plant and equipment - 3 to 20 years
Assets in the course of construction comprise assets which are not currently ready to be brought in to use. Assets under construction are not depreciated.
If there has been a technological change or decline in business performance the directors review the value of the assets to ensure they have not fallen below their
depreciated value. If an asset’s value falls below its depreciated value, a one-off impairment charge is made against profit.
Cost
As at 1 January 2020
Exchange adjustments
Additions
Transfers from assets in the course of construction
Disposals
As at 31 December 2020
Exchange adjustments
Acquisitions (Note 23)
Additions
Transfers from assets in the course of construction
Disposals
As at 31 December 2021
Depreciation
As at 1 January 2020
Exchange adjustments
Disposals
(Reversal of impairment)/Impairment charge
Depreciation
As at 31 December 2020
Exchange adjustments
Disposals
Impairment charge
Depreciation
As at 31 December 2021
NBV at 31 December 2020
NBV at 31 December 2021
Land &
buildings
£m
Plant &
equipment
£m
Assets in the
course of
construction
£m
179.9
6.0
1.6
3.1
(1.0)
189.6
(5.6)
4.1
1.1
1.8
(4.3)
186.7
90.4
3.1
(0.5)
(0.4)
4.4
97.0
(0.6)
(2.6)
3.1
3.7
100.6
92.6
86.1
668.8
16.6
17.7
18.7
(23.6)
698.2
(27.3)
5.0
20.6
12.1
(33.9)
674.7
506.6
15.3
(22.3)
0.1
42.0
541.7
(28.3)
(32.3)
2.3
36.3
519.7
156.5
155.0
19.6
1.0
18.6
(21.8)
(0.5)
16.9
(1.4)
0.5
24.5
(13.9)
26.6
-
16.9
26.6
Total
£m
868.3
23.6
37.9
-
(25.1)
904.7
(34.3)
9.6
46.2
-
(38.2)
888.0
597.0
18.4
(22.8)
(0.3)
46.4
638.7
(28.9)
(34.9)
5.4
40.0
620.3
266.0
267.7
An impairment charge of £5.4m occurred during the year (2020: £0.3m net reversal of impairment). The recoverable amount of these assets has been determined using
their fair value less costs to sell, estimated by both internal and external valuation specialists.
Group contracts in respect of future capital expenditure which had been placed at the balance sheet date amounted to £3.4m (2020: £5.6m).
IMI plc Annual Report & Accounts 2021
13. Leases
181
Accounting policy
The Group leases various properties, plant, equipment and cars. Rental contracts are negotiated individually and have a range of initial terms and may have
extension options. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease
payment is allocated between the liability and finance cost. The finance cost is charged to the income statement over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life
and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of:
i.
fixed payments less any lease incentives receivable;
ii.
variable lease payments that are based on an index or a rate;
iii. amounts expected to be payable by the Group under residual value guarantees;
iv.
the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and
v. payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the entity’s incremental borrowing rate is used,
being the rate that the entity would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar
terms and conditions.
Right-of-use assets are measured at cost comprising:
i.
the amount of the initial measurement of lease liability;
ii. any lease payments made at or before the commencement date less any lease incentives received; and
iii.
restoration costs.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term
leases are leases with a lease term of 12 months or less. Low-value assets comprise IT-equipment and small items of office furniture.
Extension and termination options - Extension and termination options are included in a number of property and equipment leases across the Group. These terms
are used to maximise operational flexibility in terms of managing contracts. The majority of extension and termination options held are exercisable only by the
Group and not by the respective lessor.
Critical judgement
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not
exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be
extended (or not terminated). Potential future cash outflows of £nil have not been included in the lease liability because it is not reasonably certain that the leases
will be extended (or not terminated).
The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the control of
the Group. During the current financial year, the financial effect of revising lease terms to reflect the effect of exercising extension and termination options was
an increase in recognised lease liabilities and right-of-use assets of £11.0m (2020: £5.3m).
Introduction Strategic Report Corporate Governance Financial Statements
182
13. Leases (continued)
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:
As at 1 January 2020
Additions
Extensions
Payment changes
Terminations
Depreciation expense
Exchange
As at 31 December 2020
Additions
Acquisitions
Extensions
Payment changes
Terminations
Depreciation expense
Exchange
As at 31 December 2021
Set out below are the carrying amounts of lease liabilities and the movements during the period:
As at 1 January 2020
Additions
Extensions
Payment changes
Terminations
Accretion of interest
Payments
Exchange
As at 31 December 2020
Additions
Acquisitions
Extensions
Payment changes
Terminations
Accretion of interest
Payments
Exchange
As at 31 December 2021
Current
Non-current
Land &
buildings
£m
Plant &
equipment
£m
75.3
12.3
6.3
1.2
(1.1)
(21.5)
0.1
72.6
14.9
3.8
12.4
0.5
(1.5)
(20.9)
(0.9)
80.9
14.8
6.0
0.8
0.1
(0.7)
(8.2)
0.2
13.0
5.0
0.1
0.7
0.1
(0.4)
(7.4)
(0.5)
10.6
Land &
buildings
£m
Plant &
equipment
£m
75.7
12.8
6.3
1.8
(1.1)
2.2
(22.6)
0.4
75.5
14.6
3.8
12.1
(0.8)
(1.5)
2.6
(22.3)
(0.8)
83.2
18.4
64.8
14.7
6.0
0.8
0.1
(0.6)
0.3
(8.6)
0.1
12.8
5.1
0.1
0.7
0.1
(0.3)
0.2
(7.7)
(0.3)
10.7
5.5
5.2
Total
£m
90.1
18.3
7.1
1.3
(1.8)
(29.7)
0.3
85.6
19.9
3.9
13.1
0.6
(1.9)
(28.3)
(1.4)
91.5
Total
£m
90.4
18.8
7.1
1.9
(1.7)
2.5
(31.2)
0.5
88.3
19.7
3.9
12.8
(0.7)
(1.8)
2.8
(30.0)
(1.1)
93.9
23.9
70.0
IMI plc Annual Report & Accounts 2021
183
2021
£m
(28.3)
(2.8)
(31.1)
2020
£m
(29.7)
(2.5)
(32.2)
The following are the amounts recognised in the income statement:
Depreciation expense of right-of-use assets
Interest expense on lease liabilities
Total amount recognised in profit or loss
Practical expedients applied
The Group has used the following practical expedients permitted by the standard:
i. the use of a single discount rate to a portfolio of leases with reasonably similar characteristics
No practical expedient has been applied in relation to short-term leases and low value assets and is not expected to be used in subsequent periods.
Future cash outflows that the Group is potentially exposed to in relation to the measurement of lease liabilities which have not been reflected is £nil (2020: £nil).
Introduction Strategic Report Corporate Governance Financial Statements
184
14. Retirement benefits
Accounting policy
i. Defined contribution (‘DC’) pension plans
Arrangements where the employer pays fixed contributions into an external fund on behalf of the employee (who is responsible for making the investment decision
and therefore assumes the risks and rewards of fund performance).
Contributions to defined contribution pension plans are recognised as an expense in the income statement as incurred.
ii. Defined benefit (‘DB’) pension plans
A defined benefit pension plan is a pension arrangement in which the employer promises a specified annual benefit on retirement that is pre-determined by a
formula based on the employee's earnings history, tenure of service and age, rather than depending directly on individual investment returns. In some cases, this
benefit is paid as a lump sum on leaving the Company or while in the service of the Company rather than as a pension. The Group underwrites one or more risks in
meeting these obligations and therefore any net liability or surplus in these arrangements is shown on the Group balance sheet.
The Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that
employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any
plan assets are deducted. Past service costs are recognised in profit or loss on the earlier of the date of the plan amendment or curtailment, and the date that the
Group recognises restructuring-related costs. The discount rate is the yield at the balance sheet date on high quality corporate bonds of the appropriate currency
that have durations approximating those of the Group’s obligations. The calculation is performed by a qualified actuary using the projected unit credit method.
At each year end the Company and the local actuaries consider whether the plans are affected by the asset ceiling requirements. When the calculation results in
a net asset to the Group, the recognised asset is limited to the present value of any future refunds from the plan or reductions in future contributions to the plan
and restricted by any relevant asset ceiling. Any deduction made by the tax authorities in the event of a refund of a surplus would be regarded by the Group as an
income tax.
When the benefits of a plan are improved, the expense is recognised immediately in the income statement. Re-measurement gains and losses are recognised
immediately in equity and disclosed in the statement of comprehensive income.
iii. Long-term service and other post-employment benefits
The Group’s net obligation in respect of long-term service and other post-employment benefits, other than pension plans, is the amount of future benefit that
employees have earned in return for their service in the current and prior periods. The obligation is calculated using the projected unit credit method and is
discounted to its present value and the fair value of any related assets is deducted. The discount rate is the yield at the balance sheet date on high quality bonds
of the appropriate currency that have durations approximating those of the Group’s obligations.
Key source of estimation uncertainty
The present value of the Group’s defined benefit pension plans and other post-employment benefits are determined using actuarial valuations. An actuarial
valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate,
inflation, future salary increases, mortality rates and future pension increases. The assumptions used and analysis of their sensitivity are set out on pages 188
and 189. Due to the complexity of the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions.
IMI plc Annual Report & Accounts 2021
185
Summary information
Net pension surplus: £62.5m (2020: deficit of £22.0m)
The assets and liabilities of the defined benefit schemes are aggregated, recognised in the consolidated balance sheet and shown within non-current liabilities or in non-
current assets if a scheme is in surplus and it is deemed recoverable.
Number of DB arrangements: 70 (2020: 71)
The movement in the year is the result of the removal of two Mexican schemes where the opening liability was nil and the costs are recognised when occurred and an
additional scheme in Germany.
The following table shows a summary of the geographical profile of the Group’s defined benefit schemes:
Quantity
2021
Quantity
2020
Assets
£m
Liabilities
£m
Net surplus/
(deficit)
Australia
Austria
France
Germany
India
Italy
Mexico
Spain
Switzerland
UAE
US*
UK
3
6
3
30
6
6
5
2
5
1
2
1
70
3
6
3
29
6
6
7
2
5
1
2
1
71
(0.4)
(3.2)
(0.9)
(55.9)
(1.0)
(3.1)
(0.6)
-
(83.9)
(1.0)
(4.3)
(502.9)
(657.2)
0.2
7.0
80.6
631.9
719.7
£m
(0.4)
(3.2)
(0.7)
(48.9)
(1.0)
(3.1)
(0.6)
-
(3.3)
(1.0)
(4.3)
129.0
62.5
* The US deficit above excludes £1.8m of assets relating to unqualified plans classified as investments (see Note 17).
As at 31 December 2021, the Group has recognised a net defined benefit asset of £129.0m (2020: £69.1m) for the UK Deferred Fund. No asset ceiling has been applied
to the net surplus recognised since the Group has an unconditional right to a refund of surplus assets following the settlement of the liabilities.
The Group provides pension benefits through a mixture of funded and unfunded DB and DC arrangements. Assessments of the obligations of the defined benefit plans
are carried out by actuaries, based on the projected unit credit method. A historical split of the types of defined benefit schemes in operation is as follows:
Type of scheme
2021
Final salary*
Cash balance**
Jubilee Awards***
Other
Total
2020
Final salary*
Cash balance**
Jubilee Awards***
Other
Total
Qty
No.
Assets
£m
%
of total
assets
Liabilities
£m
%
of total
liabilities
25
12
14
19
70
26
12
14
19
71
632.5
80.6
-
6.6
719.7
638.8
73.2
-
6.8
718.8
88%
11%
0%
1%
100%
89%
10%
0%
1%
100%
(549.2)
(87.1)
(3.0)
(17.9)
(657.2)
(624.4)
(93.8)
(3.2)
(19.4)
(740.8)
84%
13%
0%
3%
100%
84%
13%
0%
3%
100%
* Final salary scheme: The pension available to a member in a final salary
arrangement will be a proportion of the member’s salary at or around their
retirement date. This proportion will be determined by the member’s length of
pensionable service, their accrual rate and any particular circumstances under
which the member retires (for example early ill-health retirement).
** Cash balance: A cash balance scheme is a form of defined benefit pension
under which the member has the right to a defined lump sum on retirement
rather than a defined amount of pension receivable. For example a cash
balance plan may have minimum or guaranteed rates of return on pension
contributions. The amount of pension to which that lump sum may be
converted is determined by the annuity rates prevailing at the time of
conversion.
*** Jubilee Awards: Jubilee plans provide for cash award payments which are
based on completed lengths of service. These payments are often made on
cessation of service with the company, subject to a minimum period of service.
Introduction Strategic Report Corporate Governance Financial Statements
186
14. Retirement benefits (continued)
Asset profile of schemes
The UK Funds
The United Kingdom constitutes 77% (2020: 77%) of total defined benefit
liabilities and 88% (2020: 89%) of total defined benefit assets. Historically, the IMI
Pension Fund offered final salary benefits to UK employees until it closed to new
entrants in 2005 and to future accrual on 31 December 2010. In December 2014,
winding-up procedures commenced and those members who were not eligible
or did not take up the offer of a single cash lump sum transferred to one of two
new Funds (IMI 2014 Pensioner Fund or the IMI 2014 Deferred Fund – ‘the UK
Funds’). Ongoing pension benefits in the UK are provided via the Trustee’s defined
contribution plan - The IMI Retirement Savings Plan. All UK pension assets are run
on behalf of the Trustee by the Board of the IMI Common Investment Fund.
The Trustee has determined an investment objective to achieve, over time,
a position of self-sufficiency, defined using a discount rate of gilts +0.25%.
Liability management
In 2021, the Group completed a bulk insurance buy-in exercise in relation to certain
members of the UK Deferred Fund during the year. The difference between the
value of the liabilities insured and the cost of the premium to insure them of
£26.4m was recognised as a loss in other comprehensive income.
Contributions
The March 2021 Valuation was completed in December 2021 and the Funds’
Actuary certified that no deficit funding contributions would be required over and
above the projected investment returns and the scheduled payments, of £7.0m
per annum, due from the Scottish Limited Partnerships until the earlier of full
funding of the UK Deferred Fund or 2030.
The following table sets out the profile of the overall assets of the schemes (to
give an indication of their risk profile), the comparative amounts of the funded
and unfunded defined benefit liabilities ('DBOs') and a split of the balance sheet
impact between schemes with a net pension surplus and a net pension deficit.
Quoted equities
Quoted bonds
Total quoted assets
Unquoted equities
Insurance policies*
Property
Other**
Total unquoted assets
Fair value of assets
DBOs for funded schemes
DBOs for unfunded schemes
Surplus/(deficit) for DBOs
Schemes in net pension deficit
Schemes in net pension surplus
2021
£m
27.8
256.8
284.6
120.8
254.7
20.0
39.6
435.1
719.7
(598.1)
(59.1)
62.5
(66.5)
129.0
2020
£m
25.7
423.2
448.9
121.5
68.3
18.6
61.5
269.9
718.8
(672.1)
(68.7)
(22.0)
(91.1)
69.1
* The value of the insurance policies match the value of the IAS 19
liabilities insured.
** 'Other' assets primarily consists of cash, currency swaps and UK commercial
real estate debt.
The overseas assets of £87.8m (2020: £80.6m) comprise equities of £27.8m (2020:
£25.7m), bonds of £20.2m (2020: £17.8m), insurance of £4.1m (2020: £7.4m),
property of £19.2m (2020: £17.6m) and other assets of £16.5m (2020: £12.1m).
Funded: The majority of the Group defined benefit and other post-employment
benefit arrangements are funded, which means they are linked to specific plan
assets that have been segregated in a trust or foundation.
Unfunded: Plans that are not funded are those that are not backed by segregated
assets. These include some pension plans but also a number of other long-term
arrangements for the benefit of our employees, with benefits payable while they
are employed by the Group but more than 12 months after the related service
is rendered. Actuarial gains and losses on other long-term arrangements are
recognised in the income statement in the period in which they arise.
Average duration by geography
The following table shows the weighted average number of years (or duration)
over which pension benefits are expected to be paid.
Location
UK*
Switzerland
US
Eurozone
* UK Fund excluding buy-ins
2021
21.7
16.8
5.5
14.6
2020
21.9
18.3
5.7
15.2
IMI plc Annual Report & Accounts 2021
187
Specific effect on the financial statements
The table below reconciles the movement in the UK and overseas net defined
benefit surplus/(obligation) between 1 January 2021 and 31 December 2021.
The corresponding entries for increases and decreases in the net pension surplus
reported in the balance sheet are reflected as follows.
i. Cash flow statement: When the Group makes cash contributions to fund
the pension surplus/deficit they are reflected in the cash flow statement and
reduce the net deficit/increase the net surplus.
ii. Income statement: Movements in the overall net pension surplus/deficit are
recognised in the income statement when they relate to changes in the overall
pension promise, due to either an additional period of service (known as ‘current
service cost’), changes to pension terms in the scheme rules (known as ‘past
service cost’), or closure of all or part of a scheme (known as settlements and
curtailments). The interest charge/income on the net deficit/surplus position
is also recognised in the income statement.
iii. Other comprehensive income (OCI): Movements in the overall net pension
surplus/deficit are recognised through OCI when they relate to changes in
actuarial assumptions or the difference (‘experience gain or loss’) between
previous assumptions and actual results.
Net defined benefit surplus/(obligation)
at 1 January 2021
Movement recognised in:
Income statement
OCI
Cash flow statement
Exchange movements
Net defined benefit surplus/(obligation)
at 31 December 2021
UK
£m
Overseas
£m
Total
£m
69.1
(91.1)
(22.0)
2.0
50.9
7.0
-
(6.5)
20.0
6.8
4.3
(4.5)
70.9
13.8
4.3
129.0
(66.5)
62.5
Risks faced by the schemes
The main risks that the Group face in respect of the UK Deferred Fund, which makes up 77% of the Group’s liabilities, are:
Risk
Description/mitigation
Interest rate risk
Under IAS 19, the discount rate should be set with reference to the yield on high quality corporate bonds (typically taken to mean those
rated AA) of term appropriate to the duration of the liabilities.
A decrease in corporate bond yields and therefore the resulting discount rate, leads to a higher value being placed on the pension liabilities.
The Trustees’ investment strategy for the UK Deferred Fund includes investing in liability-driven investments and bonds whose values
increase with decreases in interest rates. The Trustees have a target to hedge 100% of interest rate risk. The Trustee’s investment managers
measure and monitor the hedging arrangements in place and the latest performance report shows this target is being met.
Note that the Scheme hedges interest rate risk on a scheme funding basis (relative to gilts) whereas AA corporate bonds are implicit in the
IAS 19 discount rate and so there is some mismatching risk to the Group should yields on gilts and corporate bonds diverge. The Scheme’s
exposure to corporate bonds mitigates this risk to some extent.
Inflation risk
In the UK Deferred Fund, a large proportion of the benefits are linked to inflation. Therefore, an increase in inflation would lead to higher
benefits being paid than expected.
To mitigate this risk, the UK Deferred Fund aims to hedge 100% of the Fund’s liabilities against inflation risk. The Trustee’s investment
managers measure and monitor the hedging arrangements in place and the latest performance report shows this target is being met.
Investment risk
The UK Deferred Fund holds investments in asset classes, such as private equity and property, which have volatile market values. These
assets are expected to provide better returns than Government bonds over the long-term. However, the short-term volatility can cause
additional funding to be required, if a deficit emerges. As these investments make up around 20% of the total assets, the risk to the
Group is relatively small.
Mortality risk
The majority of the plans’ obligations are to provide benefits for the life of each retired member and his/her spouse, so increases in life
expectancy result in an increase in the plans’ liabilities.
An increase of one year in life expectancy for the UK Deferred Fund would act to increase liabilities by c.£17.9m.
The Group has an objective to insure benefits as members retire in order to reduce mortality risk.
Introduction Strategic Report Corporate Governance Financial Statements
188
14. Retirement benefits (continued)
Cash flow impacts
Amounts from employees
Amounts from employers
Benefits and settlements paid directly by the Group
Total
2021
Overseas
£m
2.2
2.7
4.1
9.0
UK
£m
-
7.0
-
7.0
Total
£m
2.2
9.7
4.1
16.0
2020
Overseas
£m
2.2
2.7
4.1
9.0
UK
£m
-
7.0
-
7.0
Total
£m
2.2
9.7
4.1
16.0
The expected contributions to the DB arrangements in 2022 are £2.6m of normal employer contributions and £2.1m of normal employee contributions, both in relation
to overseas pension funds. Additional contributions of £7.0m will be made in the UK in 2022.
Other comprehensive income
Movements in pension assets and liabilities that arise during the year from changes in actuarial assumptions, or because actual experience is different from the
actuarial assumptions, are recognised in equity via other comprehensive income. These movements are analysed below:
Change in discount rate
Change in inflation
Change in other assumptions
Actuarial experience - Liabilities
Asset experience
Actuarial gains/(losses) in the year
Exchange gains/(losses)
Gains/(losses) recognised through equity
2021
2020
Overseas
post
employment
£m
Overseas
non-post
employment
£m
8.0
-
3.2
1.4
7.4
20.0
4.0
24.0
0.3
0.3
UK
£m
49.9
(16.0)
5.4
3.6
8.0
50.9
50.9
Total
£m
57.9
(16.0)
8.6
5.0
15.4
70.9
4.3
75.2
UK
£m
(78.5)
4.7
(1.0)
5.7
82.5
13.4
13.4
Overseas
post
employment
£m
Overseas
non-post
employment
£m
(7.2)
0.4
-
(0.7)
(1.6)
(9.1)
(3.2)
(12.3)
(0.1)
(0.1)
Total
£m
(85.7)
5.1
(1.0)
5.0
80.9
4.3
(3.3)
1.0
IMI takes advice from actuaries regarding the appropriateness of the assumptions used to determine the present value of the defined benefit obligations. These
assumptions include the discount rate applied to the assets and liabilities, the life expectancy of the members, their expected salary and pension increases and inflation.
The assumptions used for this purpose in these financial statements are summarised below:
Inflation – RPI
Inflation – CPI (pre-2030)
Inflation – CPI (post-2030)
Discount rate
Expected salary increases
Rate of pension increases
* Assumptions based on 31 December 2021 UK market conditions excluding buy-ins.
Weighted Averages
31 Dec 2021
31 Dec 2020
31 Dec 2019
UK*
% pa
Overseas
% pa
UK
% pa
Overseas
% pa
UK
% pa
Overseas
% pa
3.4
2.4
3.4
1.9
n/a
3.3
n/a
1.3
1.3
0.8
1.7
0.7
3.1
2.1
3.1
1.4
n/a
3.1
n/a
1.3
1.3
0.4
1.6
0.7
3.1
2.1
2.1
2.0
n/a
3.1
n/a
1.4
1.4
0.7
n/a
0.6
IMI plc Annual Report & Accounts 2021
Life expectancy at age 65 (IMI Pension Fund only)
Current male pensioners
Current female pensioners
Future male pensioners
Future female pensioners
2021
Years
21.8
24.1
23.1
25.6
2020
Years
21.8
24.6
23.5
26.4
189
2019
Years
21.8
24.8
23.4
26.6
The mortality assumptions used for the UK Funds above reflect its scheme specific experience, together with an allowance for improvements over time. The experience
was reviewed as part of the formal triennial actuarial valuation carried out as at 31 March 2021. The assumptions used as at 31 December 2021 have been based on the
results of this review.
The table below illustrates how the UK Funds’ net pension surplus would decrease
(excluding the impact of inflation rate and interest rate hedging), as at 31 December
2021, in the event of the following reasonable changes in the key assumptions above.
The table below shows how the net pension deficit for IMI’s non-UK plans would
increase, in the event of the following reasonable changes in the key
assumptions above.
UK
Discount rate 0.1% pa lower*
Inflation-linked pension increases 0.1% pa higher
Increase of one year in life expectancy from age 65
10% fall in non-bond-like assets**
2021
£m
11.0
9.0
18.0
37.0
2020
£m
13.0
10.0
21.0
57.0
Non-UK
Discount rate 0.1% pa lower
Salary increases 0.1% higher
Increase of one year in life expectancy at age 65
2021
£m
2.5
0.3
4.2
2020
£m
2.9
0.4
4.6
* Due to the volatility of the discount rate year on year, sensitivities using a
percentage of 0.1% are shown to provide the users of the accounts the ability
to adjust the sensitivities as they consider necessary.
** Fund assets excluding cash, bonds, insurance policies and the Funds’ interest in
the IMI Scottish Limited Partnerships.
In each case all other assumptions are unchanged.
Income statement
In accordance with IAS 19, pension costs recorded through the income statement primarily represent the increase in the DBO based on employee service during the
year and the interest on the net liability or surplus for DBOs in respect of employee service in previous years. The table below shows the cost reported in the income
statement in respect of pension obligations (excluding defined benefit contributions):
Current service cost
Past service cost/(credit)
Settlement/curtailment gain
Pension (income)/expense – operating costs
Interest on DBO
Interest on assets
Interest (income)/expense – financing costs
2021
2020
Overseas
post
employment
£m
Overseas
non-post
employment
£m
UK
£m
5.1
0.8
(0.4)
(0.4)
9.0
(10.6)
(1.6)
5.1
0.6
(0.1)
0.5
0.8
0.1
0.1
Total
£m
5.9
-
(0.4)
5.5
9.7
(10.7)
(1.0)
UK
£m
-
0.2
-
0.2
9.9
(10.9)
(1.0)
Overseas
post
employment
£m
Overseas
non-post
employment
£m
4.6
1.1
4.6
1.0
(0.3)
0.7
(0.2)
0.9
0.1
-
0.1
Total
£m
5.7
0.2
(0.2)
5.7
11.0
(11.2)
(0.2)
Introduction Strategic Report Corporate Governance Financial Statements
190
14. Retirement benefits (continued)
Overall reconciliation of changes in the net surplus/(liability) for DBOs
2021
2020
Brought forward at start of year
Income statement (charges)/credits
Current service cost
Past service cost – plan amendments
Settlements
Net interest (cost)/income on net DB (liability)/asset
Immediate recognition of gains/(losses) –
other long-term benefits
Total charged to income statement
Remeasurements recognised in other
comprehensive income
Actuarial gain/(loss) due to actuarial experience
Actuarial gain/(loss) due to financial
assumption changes
Actuarial gain/(loss) due to demographic
assumption changes
Return on plan assets* less than discount rate
Total remeasurements recognised in other
comprehensive income
Cash flows in the year
Employer contributions
Employee contributions
Benefits paid directly by the Company
Benefits paid from plan assets
Net cash inflow/(outflow)
Other movements
Changes in exchange rates
Total other movements
Carried forward at end of year
* Net of management costs.
DBO
£m
Assets
£m
Net DB
asset/
(liability)
£m
DBO
£m
Assets
£m
Net DB
asset/
(liability)
£m
(740.8)
718.8
(22.0)
(654.9)
623.6
(31.3)
(5.9)
25.3
(9.7)
(24.9)
10.7
9.7
(14.2)
(5.9)
-
0.4
1.0
-
(4.5)
(5.7)
(0.2)
(11.0)
11.2
0.2
(16.7)
11.2
5.0
41.9
8.6
5.0
4.9
41.9
(80.5)
15.4
8.6
15.4
(1.0)
80.9
(5.7)
(0.2)
-
0.2
0.2
(5.5)
4.9
(80.5)
(1.0)
80.9
55.5
15.4
70.9
(76.6)
80.9
4.3
(2.2)
4.1
10.8
12.7
5.7
5.7
(657.2)
9.7
2.2
(10.8)
1.1
(1.4)
(1.4)
719.7
9.7
-
4.1
-
13.8
4.3
4.3
62.5
(2.2)
4.1
13.0
14.9
9.7
2.2
(13.0)
(1.1)
9.7
-
4.1
-
13.8
(7.5)
(7.5)
(740.8)
4.2
4.2
718.8
(3.3)
(3.3)
(22.0)
IMI plc Annual Report & Accounts 2021
15. Inventories
191
Accounting policy
Inventories are valued at the lower of cost and net realisable value. Due to the varying nature of the Group’s operations, both first in, first out and weighted average
methodologies are employed. In respect of work in progress and finished goods, cost includes all direct costs of production and the appropriate proportion of
production overheads.
The Group sells a wide range of highly technical products and whilst they are designed and engineered to a high degree of precision and to customer specifications,
there is a risk of products requiring modification, which can lead to excess or obsolete inventory. The amount of inventory provision recognised is disclosed below:
Inventories
Raw materials and consumables
Work in progress
Finished goods
Inventories are stated after:
Allowance for impairment
2021
£m
135.4
107.0
92.8
335.2
2020
£m
100.3
112.5
80.5
293.3
46.2
42.8
In 2021, the cost of inventories recognised as an expense (being segmental cost of sales) amounted to £1,004.3m (2020: £1,008.8m).
In 2021, the write-down of inventories to net realisable value amounted to £0.4m (2020: £20.0m). The reversal of write-downs amounted to £nil (2020: £6.2m).
Write-downs and reversals in both years relate to ongoing assessments of inventory obsolescence, excess inventory holding and inventory resale values across all
of the Group’s businesses.
Introduction Strategic Report Corporate Governance Financial Statements
192
16. Trade and other receivables
Accounting policy
The recoverable amount of the Group’s receivables other than financial assets held at fair value is calculated as the present value of expected future cash flows,
discounted at the original effective interest rate inherent in the asset. Receivables with a short duration of less than one year are not discounted.
The expected credit loss is calculated based on the ageing of individual customers receivables, giving consideration to the geographical location in which they
operate, historical collectability and the customer’s financial position, where this information is known.
Trade and other receivables
The maximum exposure to credit risk for trade receivables at the reporting date by
segment was as follows:
Current
Trade receivables
Other receivables
Prepayments and accrued income
Receivables are stated after:
Allowance for impairment
Credit risk
2021
£m
2020
£m
325.4
58.7
29.9
414.0
305.5
49.9
23.5
378.9
IMI Precision Engineering
IMI Critical Engineering
IMI Hydronic Engineering
Carrying amount
2021
£m
153.8
128.3
43.3
325.4
2020
£m
152.4
111.5
41.6
305.5
15.7
19.5
Impairment provisions for trade receivables
The ageing of trade receivables at the reporting date was:
Credit risk is the risk of financial loss to the Group if a customer or counterparty to
a financial instrument fails to meet its contractual obligations, and arises principally
from the Group’s receivables from customers, cash and cash equivalents held by
the Group’s banks and other financial assets. At the end of 2021 these totalled
£446.0m (2020: £516.4m).
Managing credit risk arising from customers
The Group’s exposure to credit risk is influenced mainly by the individual
characteristics of each customer. The demographics of the Group’s customer base,
including the default risk of the industry and country in which customers operate,
have less of an influence on credit risk. Our largest single customer accounted for
3% of our 2021 revenues (2020: 2%).
Geographically there is no unusual concentration of credit risk. The Group’s contract
approval procedure ensures that large contracts are signed off at executive director
level at which time the risk profile of the contract, including potential credit and
foreign exchange risks, is reviewed. Credit risk is minimised through due diligence on
potential customers, appropriate credit limits, cash flow management and the use
of documentary credits where appropriate.
Exposure to credit risk in respect of trade receivables
UK
Germany
Rest of Europe
USA
Asia Pacific
Rest of World
Carrying amount
2021
£m
12.9
24.9
83.3
62.5
93.4
48.4
325.4
2020
£m
8.9
23.6
78.4
59.0
81.2
54.4
305.5
2021
2020
Gross
£m
Impairment
£m
Gross
£m
Impairment
£m
285.8
24.5
9.2
21.6
341.1
(0.3)
(1.0)
(1.1)
(13.3)
(15.7)
266.9
24.4
11.3
22.4
325.0
(0.2)
(1.5)
(1.9)
(15.9)
(19.5)
Not past due
Past due 1-30 days
Past due 31-90 days
Past due over 90 days
Total
The net movement in the allowance for impairment in respect of trade receivables
during the year was as follows:
Net balance at 1 January
Acquisitions
Utilised during the year
Charged to the income statement
Released
Exchange
Net balance at 31 December
2021
£m
19.5
(0.1)
(3.0)
1.7
(1.3)
(1.1)
15.7
2020
£m
13.7
-
(3.1)
9.9
(1.2)
0.2
19.5
The net impairment charge of £0.4m (2020: charge of £8.7m) relates to the
movement in the Group's assessment of the risk of non-recovery from a range of
customers across all of its businesses.
Managing credit risk arising from counterparties
A group of relationship banks provides the bulk of the banking services, with
pre-approved credit limits set for each institution. Financial derivatives are
entered into with these core banks and the credit exposure to these instruments
is included when considering the credit exposure to the counterparties. At the end
of 2021, credit exposure including cash deposited did not exceed £15.8m with any
single institution (2020: £30.0m).
IMI plc Annual Report & Accounts 2021
17. Financial assets and liabilities
193
Financial instruments included in the financial statements are measured at either fair value or amortised cost. The measurement of this fair value can in some cases be
subjective, and can depend on the inputs used in the calculations. The Group generally calculates its own fair values using comparable observed market prices and
a valuation model using the respective and relevant market data for the instrument being valued.
The table below sets out the Group's accounting classification of each class of financial assets and liabilities, and their fair values at 31 December 2021 and 31
December 2020. Under IFRS 9, all derivative financial instruments not in a hedge relationship are classified as derivatives at fair value through the income statement.
The Group does not use derivatives for speculative purposes and transacts all derivatives with suitable investment grade counterparties. All transactions in derivative
financial instruments are undertaken to manage the risks arising from the Group’s business activities.
2021
Cash and cash equivalents
Bank overdrafts
Borrowings due within one year
Borrowings due after one year
Lease liabilities
Trade and other payables**
Trade receivables
Investments
Other current financial assets/(liabilities)
Derivative assets***
Derivative liabilities****
Total
2020
Cash and cash equivalents
Bank overdrafts
Borrowings due after one year
Lease liabilities
Trade and other payables**
Trade receivables
Investments
Other current financial assets/(liabilities)
Derivative assets***
Derivative liabilities****
Total
Fair value
Other
derivatives
at fair value
£m
Designated
at fair value
£m
Financial
assets at
fair value*
£m
At
amortised
cost
£m
Total
carrying
value
£m
Fair value
if different
£m
4.9
4.9
5.1
(6.3)
(1.2)
94.6
2.9
(65.5)
(127.7)
(430.3)
(93.9)
(406.9)
325.4
97.5
(798.9)
207.9
3.1
(73.5)
(362.3)
(88.3)
(378.9)
305.5
5.4
5.4
5.4
(4.7)
0.7
211.0
(597.5)
(128.3)
(446.6)
(394.3)
94.6
(65.5)
(127.7)
(430.3)
(93.9)
(406.9)
325.4
2.9
10.0
(6.3)
(697.7)
207.9
(73.5)
(362.3)
(88.3)
(378.9)
305.5
3.1
10.8
(4.7)
(380.4)
*
This classification includes items for which the movement in fair value will be recognised in both profit and loss and other comprehensive income.
**
Trade and other payables exclude corporation tax and include liabilities of £6.5m (2020: £7.0m) falling due after more than one year.
*** Includes £0.1m (2020: £0.2m) falling due after more than one year.
**** Derivative liabilities include liabilities of £0.2m (2020: £0.1m) falling due after more than one year: £0.1m in 1-2 years and £0.1m in 2-3 years (2020: £0.1m in 1-2
years). Derivative liabilities designated at fair value represent the fair value of unsettled net investment hedge derivatives. The decrease in value of net investment
hedge derivatives in the year of £0.5m is shown in the consolidated statement of comprehensive income.
The decrease in other derivative assets and liabilities at fair value of £1.9m is recognised in the income statement and consists of £2.0m decrease of unsettled net
foreign currency and metal forward contracts, which are not designated as hedges for accounting purposes offset by an increase of £0.1m of forward contracts to
be utilised against specific trade receivables and trade payables.
There are no other financial liabilities included within payables disclosed above.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
Introduction Strategic Report Corporate Governance Financial Statements
194
17. Financial assets and liabilities (continued)
The following table shows the Group's financial instruments held at fair value (excluding cash):
As at 31 December 2021
Financial assets measured at fair value
Equity instruments*
Foreign currency forward contracts
Financial liabilities measured at fair value
Foreign currency forward contracts
As at 31 December 2020
Financial assets measured at fair value
Equity instruments*
Foreign currency forward contracts
Financial liabilities measured at fair value
Foreign currency forward contracts
Quoted prices in
active markets
for identical
assets and
liabilities
Level 1
£m
Significant
other
observable Unobservable
inputs
Level 3
£m
inputs
Level 2
£m
2.9
2.9
3.1
3.1
10.0
10.0
(6.3)
(6.3)
10.8
10.8
(4.7)
(4.7)
Total
£m
2.9
10.0
12.9
(6.3)
(6.3)
3.1
10.8
13.9
(4.7)
(4.7)
* Equity instruments primarily relate to investments in funds in order to satisfy long-term benefit arrangements.
Valuation techniques for level 2 inputs
Derivative assets and liabilities of £10.0m and £6.3m respectively are valued by level 2 techniques. The valuations are derived from discounted contractual cash flows
using observable, and directly relevant, market interest rates and foreign exchange rates from market data providers.
Valuation techniques for level 3 inputs
At 31 December 2021, the Group held one external investment at fair value using significant unobservable (level 3) inputs. The valuation is derived using the cash flows
of the investment which indicate a fair value of £nil.
Valuation methodology
Cash and cash equivalents, bank overdrafts, trade payables and trade receivables are carried at their book values as this approximates to their fair value due to the
short-term nature of the instruments.
Long-term and short-term borrowings, apart from any which are subject to hedging arrangements, are carried at amortised cost as it is the intention that they will not
be repaid prior to maturity, where this option exists. The fair values are evaluated by the Group based on parameters such as interest rates and relevant credit spreads.
Long-term borrowings which are subject to hedging arrangements are valued using appropriate discount rates to value the relevant hedged cash flows.
Derivative assets and liabilities, including foreign exchange forward contracts, interest rate swaps and metal hedges, are valued using comparable observed market
prices and a valuation model using foreign exchange spot and forward rates, interest rate curves and forward rate curves for the underlying commodities.
IMI plc Annual Report & Accounts 2021
18. Financial risk management
195
Overview
The Group’s activities expose it to a variety of financial risks: interest rate, foreign
exchange and base metal price movements in addition to funding and liquidity
risks. The financial instruments used to manage these risks themselves introduce
exposure to market risk and liquidity risk.
The Board has overall responsibility for the establishment and oversight of the
Group’s risk management framework. As described in the Corporate Governance
Report on page 87 the Executive Committee monitors risk and internal controls
and the Audit Committee monitors financial risk, while the other Board
committees also play a part in contributing to the oversight of risk.
The Audit Committee oversees how management monitors compliance with
the Group’s financial risk management policies and procedures and reviews the
adequacy of the risk management framework in relation to the financial risks
faced by the Group. The Group Assurance department undertakes both regular
and ad-hoc reviews of risk management controls and procedures, the results of
which are reported to the Audit Committee.
The following sections discuss the management of specific financial risk factors in
detail, including market risk, foreign exchange risk, interest rate risk, commodity
risk and liquidity risk. The management of credit risk is disclosed in Note 16.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange
rates, interest rates and commodity prices will affect the Group’s income and
cash flows or the value of its financial instruments. The objective of market
risk management is to manage and control market risk exposures within
acceptable parameters.
Under the management of the central Treasury function, the Group enters into
derivatives in the ordinary course of business and also manages financial liabilities
in order to mitigate market risks. All such transactions are carried out within
the guidelines set by the Board and are undertaken only if they relate to
underlying exposures.
Foreign exchange risk
The Group publishes consolidated accounts in sterling but conducts much of its
global business in other currencies. As a result it is subject to the risks associated
with foreign exchange movements affecting transaction costs (‘transactional
risk’), translation of foreign profits (‘profit translation risk’) and translation of
the underlying net assets of foreign operations (‘asset translation risk’).
Management of transactional risk
The Group’s wide geographical spread both in terms of cost base and customer
locations helps to reduce the impact on profitability of swings in exchange
rates as well as creating opportunities for central netting of exposures. It is the
Group’s policy to minimise risk to exchange rate movements affecting sales and
purchases by economically hedging or netting currency exposures at the time of
commitment, or when there is a high probability of future commitment, using
currency instruments (primarily forward exchange contracts). A proportion of
forecast exposures are hedged depending on the level of confidence and hedging
is periodically adjusted following regular reviews. On this basis over 50% of the
Group’s annual exposures to transactional risk are likely to be hedged at any point
in time and the Group’s net transactional exposure to different currencies varies
from time to time.
Management of profit translation risk
The Group is exposed to the translation of profits denominated in foreign
currencies into the sterling-based income statement. The interest cost related
to the currency liabilities hedging the asset base provides a partial hedge to this
exposure. Short-term currency option contracts may be used to provide limited
protection against sterling strength on an opportunistic basis. The translation
of US dollar and euro-based profits represent the most significant translation
exposures for the Group.
Management of asset translation risk
The Group hedges its net investments in its major overseas operations by way
of external currency loans and forward currency contracts. The intention is to
manage the Group's exposure to gains and losses in Group equity resulting
from retranslation of currency net assets at balance sheet dates.
To the extent that an instrument used to hedge a net investment in a foreign
operation is determined to be an effective hedge, the gain or loss arising is
recognised directly in the translation reserves. Any ineffective portion is
recognised immediately in the income statement.
The Group have designated £360m (2020: £157m) of loans in a net investment
hedge of USD net assets and £193m (2020: £205m) of EUR net assets.
No ineffectiveness was recorded (2020: nil) and a loss of £0.5m (2020: £3.3m
gain) was taken to the translation reserve. The amount accumulated in this
reserve in respect of gains/losses arising on hedging instruments designated
in net investment hedges up to 31 December 2021 was an accumulated profit
of £7.6m (2020: accumulated profit of £8.0m).
Introduction Strategic Report Corporate Governance Financial Statements
196
18. Financial risk management (continued)
Currency profile of assets and liabilities
Sterling
US dollar
Euro
Other
Total
* Cash is stated net of overdrafts.
Assets and
liabilities
subject
to interest
rate risk
2021
£m
Lease
liabilities
2021
£m
Exchange
contracts
2021
£m
Other
net assets**
2021
£m
Total
net assets
2021
£m
Total
net assets
2020
£m
(17)
(11)
(15)
(51)
(94)
321
-
(232)
(89)
-
(1)
(175)
(399)
(48)
(623)
208
353
562
279
1,402
207
178
163
231
779
510
196
-
94
800
Cash*
2021
£m
(302)
196
41
94
29
Debt
2021
£m
(3)
(360)
(193)
(2)
(558)
** Other net assets includes leased assets: £16.5m Sterling (2020: £13m), £10.6m US Dollar (2020: £10m), £15.5m Euro (2020: £20m) and £48.9m other
(2020: £43m).
Exchange contracts and non-sterling debt are financial instruments used as currency hedges of overseas net assets.
Interest rate risk
The Group is exposed to a number of global interest rates through assets and liabilities denominated in jurisdictions to which these rates are applied, most notably US,
Eurozone and UK rates. The Group is exposed to these because market movements in these rates will increase or decrease the interest charge recognised in the Group
income statement.
Management of interest rate risk
The Group adopts a policy of maintaining a portion of its liabilities at fixed interest rates and reviewing the balance of the floating rate exposure to ensure that if
interest rates rise globally the effect on the Group’s income statement is manageable.
Interest rates are managed using fixed and floating rate debt and financial instruments including interest rate swaps. Floating rate liabilities comprise short-term debt
which bears interest at short-term bank rates and the liability side of exchange contracts where the interest element is based primarily on three-month inter-bank rates.
All cash surpluses are invested for short periods and are treated as floating rate investments.
Non-interest bearing financial assets and liabilities including short-term trade receivables and payables have been excluded from the following analysis.
IMI plc Annual Report & Accounts 2021
197
Interest rate risk profile
The following table shows how much of our cash, interest-bearing liabilities and exchange contracts attract both fixed and floating rate interest charges, and how this is
analysed between currencies:
Sterling
US dollar
Euro
Other
Total
Debt and
exchange
contracts*
2021
£m
Cash and
exchange
contracts
2021
£m
(20)
(371)
(440)
(142)
(973)
19
196
41
94
350
* Net of lease liabilities; £17m Sterling, £11m US Dollar, £15m Euro and £51m other.
Sterling
US dollar
Euro
Other
Total
Debt and
exchange
contracts**
2020
£m
Cash and
exchange
contracts
2020
£m
(14)
(167)
(401)
(236)
(818)
453
-
44
5
502
Assets
subject
to interest
rate risk*
2021
£m
(1)
(175)
(399)
(48)
(623)
Assets
subject
to interest
rate risk**
2020
£m
439
(167)
(357)
(231)
(316)
Floating
rate
2021
£m
(1)
(15)
(206)
(48)
(270)
Floating
rate
2020
£m
453
-
(132)
(187)
134
Weighted
average
fixed
interest rate
%
Fixed
rate
2021
£m
Weighted
average
period
for which
rate is fixed
years
4.1
1.4
4.4
4.3
Weighted
average
fixed
interest rate
%
Weighted
average
period
for which
rate is fixed
years
4.1
1.4
5.4
5.3
(160)
(193)
(353)
Fixed
rate
2020
£m
(14)
(167)
(225)
(44)
(450)
** Net of lease liabilities; £14m Sterling, £10m US Dollar, £20m Euro and £44m other.
Market risk sensitivity analysis on financial instruments
In estimating the sensitivity of the financial instruments all other variables are held constant to determine the impact on profit before tax and equity. The analysis is for
illustrative purposes only, as in practice market rates rarely change in isolation.
The values shown in the table below are estimates of the impact on financial instruments only. Actual results in the future may differ materially from these estimates.
As such this table should not be considered as a projection of likely future gains and losses in these financial instruments.
Sensitivity table
The outputs from the sensitivity analysis are estimates of the impact of market risk assuming that the specified changes occur only to the financial derivatives and
do not reflect the opposite movement from the impact of the specific change on the underlying business that they are designed to hedge.
At 31 December 2021
Impact on income statement: (loss)/gain
Impact on equity: (loss)/gain
At 31 December 2020
Impact on income statement: (loss)/gain
Impact on equity: (loss)/gain
1%
decrease
in interest
rates
£m
1%
increase
in interest
rates
£m
10%
10%
weakening strengthening
in sterling
in sterling
£m
£m
10%
decrease in
base metal
costs
£m
10%
increase in
base metal
costs
£m
2.0
-
-
-
(2.0)
-
-
-
(11.3)
(53.7)
(12.4)
(67.2)
11.3
53.7
12.4
67.2
0.2
-
(0.3)
-
(0.2)
-
0.3
-
Introduction Strategic Report Corporate Governance Financial Statements
198
18. Financial risk management (continued)
Commodity risk
Capital base
The Group’s operating companies purchase metal and metal components and are
therefore exposed to changes in commodity prices.
The Group manages this exposure through a centralised process hedging copper,
zinc and aluminium using a combination of financial contracts and local supply
agreements designed to minimise the volatility of short-term margins.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial
obligations as they fall due.
Management of liquidity risk
The Group’s approach to managing liquidity is to ensure, as far as possible, that
it will always have adequate resources to meet its liabilities when they fall due,
with sufficient headroom to cope with abnormal market conditions. This position
is reviewed on a quarterly basis.
Funding for the Group is co-ordinated centrally by the treasury function and
comprises committed bilateral facilities with a core group of banks, and a series
of US loan note issues. The level of facilities is maintained such that facilities and
term loans exceed the forecast peak gross debt of the Group over a rolling 12
month view by an appropriate amount taking into account market conditions
and corporate activity, including acquisitions, organic growth plans and share
buybacks. In addition, we undertake regular covenant compliance reviews to
ensure that we remain fully within those covenant limits. At the end of 2021 the
Group had undrawn committed facilities totaling £230m (2020: £300m) and
was holding cash and cash equivalents of £95m (2020: £208m). There are no
significant seasonal funding requirements or capital intensive investment areas
for the Group.
Capital management
Overview
Capital management concerns the decision as to how the Group’s activities are
financed and specifically, how much of the Group capital is provided by borrowings
(or debt) and how much of it is financed with equity raised from the issue of
share capital.
The Board’s policy is to maintain a balance sheet with a broad capital base and the
strength to sustain the future development of the business including acquisitions.
The capital base of the Group includes total equity and reserves and net debt.
Employee benefit obligations net of deferred tax form part of the extended
capital base. Management of this element of the capital base is discussed further
in Note 14 of the financial statements. Undrawn committed funding facilities
are maintained as described in Note 19 to provide additional capital for growth
(including acquisitions and organic investments) and liquidity requirements as
discussed above.
Total equity
Gross debt including overdrafts
Gross cash
Capital base
Employee benefits and deferred tax assets
Extended capital base
Undrawn funding facilities
Available capital base
2021
£m
779
624
(95)
1,308
169
1,477
230
1,707
2020
£m
800
436
(208)
1,028
105
1,133
300
1,433
Part of the capital base is held in currencies to broadly match the currency base
of the assets being funded as described in the asset translation risk section.
Debt or equity
The balance between debt and equity in the capital base of the Group is
considered regularly by the Board in light of market conditions, business forecasts,
growth opportunities and the ratio of net debt to adjusted EBITDA. Funding
covenants currently limit net debt to a maximum of 3.0 times EBITDA. The net
debt to EBITDA ratio at the end of 2021 was 1.5 times (2020: 0.8 times). Through
the life of our five-year plan, the Board would consider appropriate acquisitions
that could take net debt up to 2.5 times EBITDA on acquisition, provided that a
clear plan exists to reduce this ratio back to under 2.0 times. It is expected that
at these levels our debt would continue to be perceived as investment grade.
The potential benefits to equity shareholders of greater leverage are offset by
higher risk and the cost and availability of funding. The Board will consider raising
additional equity in the event that it is required to support the capital base of
the Group.
Weighted average cost of capital
The Group currently uses a post-tax weighted average cost of capital (‘WACC’) of
7% (2020: 7%) as a benchmark for investment returns. This is reviewed regularly
in the light of changes in market rates. The Board tracks the Group’s return on
invested capital and seeks to ensure that it consistently delivers returns in excess
of the WACC.
IMI plc Annual Report & Accounts 2021
19. Net debt
199
Net debt is the Group’s key measure used to evaluate total outstanding debt, net of the current cash resources. Some of the Group’s borrowings (and cash) are held in
foreign currencies. Movements in foreign exchange rates affect the sterling value of the net debt. Cash and cash equivalents comprise cash balances and call deposits.
Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents
for the purpose of the statement of cash flows.
Movement in net debt
Adjusted EBITDA*
Working capital movements
Capital and development expenditure
Provisions and employee benefit movements**
Principal elements of lease payments
Other
Adjusted operating cash flow***
Cash impact of adjusting items
Interest
Derivatives
Tax paid
Additional pension scheme funding
Free cash flow before corporate activity
Dividends paid to equity shareholders
Acquisition of subsidiaries
Disposal of subsidiaries
Net purchase of own shares and share buyback programme
Net cash flow (excluding debt movements)
2021
£m
403.5
(50.6)
(57.5)
(0.5)
(30.0)
9.0
273.9
(35.6)
(12.1)
26.4
(50.9)
(7.0)
194.7
(61.8)
(203.9)
0.1
(225.6)
(296.5)
2020
£m
379.5
14.6
(50.7)
8.5
(28.7)
11.3
334.5
(36.7)
(11.0)
(22.5)
(41.0)
(7.0)
216.3
(91.6)
-
-
(8.5)
116.2
*
Adjusted profit after tax (£245.6m) before interest (£11.1m), tax (£61.4m), depreciation (£68.3m), amortisation (£16.2m) and impairment on property, plant and
equipment and non-acquired intangible assets (£0.9m).
** Movement in provisions and employee benefits as per the statement of cash flows (£1.8m) adjusted for the movement in the restructuring provisions (£2.3m).
*** Adjusted operating cash flow is the cash generated from the operations shown in the statement of cash flows less cash spent acquiring property, plant and
equipment, non-acquired intangible assets and investments; plus cash received from the sale of property, plant and equipment and the sale of investments,
excluding the cash impact of adjusting items. This measure best reflects the operating cash flows of the Group.
Reconciliation of net cash to movement in net borrowings
Net (decrease)/increase in cash and cash equivalents excluding foreign exchange
Reverse cash acquired
Net (drawdown)/repayment of borrowings excluding foreign exchange and net debt disposed/acquired
(Increase)/decrease in net debt before acquisitions, disposals and foreign exchange
Currency translation differences
Movement in lease creditors
Movement in net borrowings in the year
Net borrowings at the start of the year
Net borrowings at the end of the year
2021
£m
(86.7)
(1.8)
(208.0)
(296.5)
(4.5)
(5.6)
(306.6)
(316.2)
(622.8)
2020
£m
98.4
17.8
116.2
3.3
2.1
121.6
(437.8)
(316.2)
Introduction Strategic Report Corporate Governance Financial Statements
200
19. Net debt (continued)
Reconciliation of adjusted operating cash flow to cash flow statement
Cash generated from operations
Principal lease payments
Settlement of transactional derivatives
Acquisition of property, plant and equipment and non-acquired intangibles
Cash impact of adjusting items
Proceeds from sale of property, plant and equipment
Adjusted operating cash flow
Reconciliation of cash and cash equivalents
Cash and cash equivalents in current assets
Bank overdraft in current liabilities
Cash and cash equivalents
Analysis of net debt
Borrowings and
finance leases due
Cash and cash
equivalents
£m
within
after more
one year than one year
£m
£m
2021
£m
327.1
(30.0)
(5.9)
(57.5)
35.6
4.6
273.9
2021
£m
94.6
(65.5)
29.1
2020
£m
377.2
(28.7)
(0.2)
(50.7)
36.7
0.2
334.5
2020
£m
207.9
(73.5)
134.4
Lease
creditors
£m
Total
net debt
£m
At 1 January 2020
Lease additions, extensions, terminations and payment changes
Lease payments and interest
Cash flow excluding settlement of currency derivatives hedging balance sheet
and net cash disposed of/acquired
Settlement of currency derivatives hedging balance sheet
Currency translation differences
At 31 December 2020
Lease additions, extensions, terminations and payment changes
Lease payments and interest
Cash flow excluding settlement of currency derivatives hedging balance sheet
and net cash/debt disposed of/acquired
Cash/debt acquired
Settlement of currency derivatives hedging balance sheet
Currency translation differences
At 31 December 2021
Undrawn committed facilities
28.1
(17.6)
(357.9)
121.1
(22.7)
7.9
134.4
17.8
(0.2)
(4.4)
(362.3)
(90.4)
(26.1)
28.7
(0.5)
(88.3)
(33.9)
27.2
(122.2)
1.8
20.5
(5.4)
29.1
(126.7)
(1.8)
(81.3)
0.8
(127.7)
13.3
(430.3)
1.1
(93.9)
(437.8)
(26.1)
28.7
138.9
(22.7)
2.8
(316.2)
(33.9)
27.2
(330.2)
20.5
9.8
(622.8)
The Group has various undrawn committed borrowing facilities. The facilities available at 31 December in respect of which all conditions precedent had been met were
as follows:
Expiring between one and two years
Expiring after more than two years
Total
The weighted average life of these facilities is 1.7 years (2020: 2.0 years).
2021
£m
145.4
84.2
229.6
2020
£m
150.0
150.0
300.0
IMI plc Annual Report & Accounts 2021
201
Terms and debt repayment schedule
The terms and conditions of cash and cash equivalents, outstanding loans, lease liabilities and derivative financial liabilities were as follows:
2021
Cash and cash equivalents
Revolving credit facilities
Term loan 2024
Acquired loan
US loan notes 2022
US loan notes 2025
US loan notes 2026
US loan notes 2027
US loan notes 2028
Bank overdrafts
Lease liabilities
Derivative financial liabilities
Total
2020
Cash and cash equivalents
US loan notes 2022
US loan notes 2025
US loan notes 2026
US loan notes 2027
US loan notes 2028
Bank overdrafts
Lease liabilities
Derivative financial liabilities
Total
Effective
interest rate
%
Carrying Contractual
cash flows
£m
value
£m
0 to
<1 year
£m
1 to
<2 years
£m
2 to
<3 years
£m
3 to
<4 years
£m
4 to
<5 years
£m
5 years
and over
£m
Floating
Floating
Floating
7.17%
1.39%
3.86%
3.92%
1.53%
Floating
Various
Floating
7.17%
1.39%
3.86%
3.92%
1.53%
Floating
Various
94.6
(70.3)
(133.3)
(1.8)
(11.1)
(126.1)
(92.6)
(55.6)
(67.2)
(65.5)
(93.9)
(6.3)
(629.1)
207.9
(10.9)
(133.9)
(91.3)
(54.7)
(71.5)
(73.5)
(88.3)
(4.7)
(320.9)
94.6
(70.3)
(133.3)
(1.8)
(12.7)
(133.3)
(110.6)
(68.8)
(74.2)
(65.5)
(93.9)
(6.3)
(676.1)
207.9
(12.5)
(142.1)
(109.6)
(68.0)
(79.3)
(73.5)
(88.3)
(4.7)
(370.1)
94.6
(70.3)
(44.4)
(1.8)
(12.7)
(1.8)
(3.6)
(2.2)
(1.0)
(65.5)
(23.9)
(6.1)
(138.7)
207.9
(0.8)
(1.9)
(3.5)
(2.1)
(1.1)
(73.5)
(26.3)
(4.6)
94.1
(44.4)
(44.5)
(1.8)
(3.6)
(2.2)
(1.0)
(18.3)
(0.1)
(71.4)
(11.7)
(1.9)
(3.5)
(2.1)
(1.1)
(19.7)
(0.1)
(40.1)
(1.8)
(3.6)
(2.2)
(1.0)
(14.0)
(0.1)
(67.2)
(127.9)
(3.6)
(2.2)
(1.0)
(96.2)
(2.2)
(1.0)
(57.8)
(69.2)
(9.2)
(7.4)
(21.1)
(143.9)
(106.8)
(148.1)
(1.9)
(3.5)
(2.1)
(1.1)
(1.9)
(3.5)
(2.1)
(1.1)
(134.5)
(3.5)
(2.1)
(1.1)
(92.1)
(57.5)
(73.8)
(13.9)
(9.6)
(5.6)
(13.2)
(22.5)
(18.2)
(146.8)
(236.6)
Contractual cash flows include undiscounted committed interest cash flows and, where the amount payable is not fixed, the amount disclosed is determined by
reference to the conditions existing at the reporting date.
Introduction Strategic Report Corporate Governance Financial Statements
202
19. Net debt (continued)
Changes in liabilities arising from financing activities
The table below details changes in the Group's liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from
financing activities are those for which cash flows were, or future cash flows will be, classified in the Group's consolidated cash flow statement as cash flows
from financing activities.
1 Jan 2021
£m
Financing
Acquisition
cash flows* of subsidiary
£m
£m
Non-cash changes
New
leases
£m
Exchange
£m
Other**
£m
31 Dec 21
£m
2021
Revolving credit facilities
Term loan 2024
Acquired loan
US loan notes
Bank overdrafts
Lease liabilities
Total
2020
Revolving credit facilities
US loan notes
Bank overdrafts
Lease liabilities
Total
-
-
-
(362.3)
(73.5)
(88.3)
(524.1)
(71.7)
(136.2)
8.0
30.0
(169.9)
(1.8)
(1.8)
(33.9)
(33.9)
1.4
2.9
9.7
1.1
15.1
(70.3)
(133.3)
(1.8)
(352.6)
(65.5)
(93.9)
(717.4)
(2.8)
(2.8)
1 Jan 2020
£m
Financing
Acquisition
cash flows* of subsidiary
£m
£m
Non-cash changes
New
leases
£m
Exchange
£m
Other**
£m
31 Dec 20
£m
(17.6)
(357.9)
(60.1)
(90.4)
(526.0)
17.8
(12.8)
31.2
36.2
(0.2)
(4.4)
(0.6)
(0.5)
(5.7)
-
(362.3)
(73.5)
(88.3)
(524.1)
(2.5)
(2.5)
(26.1)
(26.1)
-
* Financing cash flows exclude the impact of interest paid
** Includes IFRS 16 interest payments
Interest-bearing loans and borrowings
The Group borrows money from financial institutions in the form of bonds and other financial instruments. These generally have fixed interest rates and are for a fixed
term or are drawn from committed borrowing facilities that generally have floating interest rates. For more information about the Group’s exposure to interest rate and
foreign currency risk, see Note 18.
Current liabilities
Unsecured loan notes and other loans
Lease liabilities
Total
Non-current liabilities
Unsecured loan notes and other loans
Lease liabilities
Total
2021
£m
127.7
23.9
151.6
430.3
70.0
500.3
2020
£m
-
26.3
26.3
362.3
62.0
424.3
IMI plc Annual Report & Accounts 2021
20. Provisions
203
Accounting policy
A provision is recorded instead of a payable when uncertainty exists over the timing and amount of the cash outflow. Provisions are recognised when: the Group
has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the
amount can be reliably estimated. Provisions are valued at management’s best estimate of the amount required to settle the present obligation at the balance
sheet date.
A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and the restructuring has either commenced or
has been announced publicly.
The recognition of a provision requires estimation. The principal estimates made in respect of the Group’s provisions using the best estimate methodology
(with the exception of provisions indemnities as noted below) concern the timing and amount of payments required to:
- cover the costs of known restructuring projects;
- reimburse customers for potential product warranty claims;
- ensure that current and former manufacturing sites meet relevant environmental standards;
- reflect the estimated outcome of ongoing legal disputes; and
- provide against indemnities following the disposal of subsidiaries.
Analysis of the Group’s provisions:
Current
Non-current
At 1 January 2021
Arising during the year
Released during the year
Utilised during the year
Exchange adjustment
At 31 December 2021
Current
Non-current
Restructuring
Restructuring
£m
Trade Environmental
& legal
£m
warranties
£m
30.1
-
30.1
36.8
(1.7)
(32.8)
(0.8)
31.6
27.8
3.8
31.6
13.4
8.5
21.9
2.0
(0.4)
(4.4)
(0.6)
18.5
9.9
8.6
18.5
0.4
6.6
7.0
-
(0.2)
(0.5)
-
6.3
0.4
5.9
6.3
Total
£m
43.9
15.1
59.0
38.8
(2.3)
(37.7)
(1.4)
56.4
38.1
18.3
56.4
The restructuring provision reflects residual amounts committed but not spent in relation to a number of specific projects that are discussed further in Note 3, where
the cost is a reliable estimate of the obligation. The opening balance of £30.1m relates to restructuring costs booked in prior periods. The utilised balance includes
£32.8m of cash settlements and the balance released during the year of £1.7m relates to amounts not required following completion of projects. Arising during the
year primarily relates to the announced closure of a factory in Europe, which is currently under consultation with the Works Council, within our IMI Precision Engineering
division and the Customer First project, which both simplify the structure of the division and ensures the business structure is aligned to our customer base. The
provision as at 31 December 2021 of £31.6m primarily relates to the expected redundancy payments for the facility closure with the majority of the resulting outflow
expected during 2022 and remainder expected during 2023.
Trade warranties
The Group sells a wide range of highly technical products and whilst they are designed and engineered to a high degree of precision and to customer specifications,
there is a risk of products requiring modification, which can lead to warranty claims. Trade warranties are given in the normal course of business and cover a range of
periods, typically one to two years, with the expected amounts falling due in less than and greater than one year separately analysed above. The provision represents
the Directors’ best estimate of the Group’s liability based on past experience.
Environmental & legal
Environmental and legal provisions recognise the Group's obligation to remediate contaminated land at a number of current and former sites, together with current
legal cases for which a settlement is considered probable. Due to the long-term nature of the liabilities, the timescales are uncertain and the provisions represent the
directors' best estimates of these costs.
Introduction Strategic Report Corporate Governance Financial Statements
204
21. Trade and other payables
Current
Trade payables
Social security and other taxation
Other payables, accruals and deferred income
Progress billings and advance payments from customers*
Non-current
Other payables
* Prior year numbers have been reclassified to correctly reflect the comparators for the current year.
2021
£m
2020*
£m
120.3
27.1
179.8
73.2
400.4
6.5
406.9
112.5
22.4
159.7
77.3
371.9
7.0
378.9
IMI plc Annual Report & Accounts 2021
22. Share capital
205
The movement in the number of ordinary shares of 28 4/7p each issued by IMI plc is as follows:
Number and value of shares
In issue at the start of the year
Issued to satisfy employee share schemes
Share cancellations
In issue at the end of the year
All issued share capital at 31 December 2021 and 2020 is fully paid and conveys the same rights.
Share movements in the year
Movements in shares due to share issues and purchases during the year were as follows:
In issue at 31 December 2020
New issues to satisfy employee share scheme awards
Market purchases
Share cancellations
Shares allocated under employee share schemes
At 31 December 2021
2021
2020
Ordinary Shares
28 4/7p per share
Ordinary Shares
28 4/7p per share
Number (m)
Value (£m) Number (m) Value (£m)
286.5
0.1
(11.7)
274.9
81.8
-
(3.2)
78.6
286.4
0.1
-
286.5
81.8
-
-
81.8
Number of ordinary shares of 28 4/7p each (million)
Employee
Benefit Trust
Treasury
Other
Total
1.1
1.7
(1.0)
1.8
14.3
11.7
(11.7)
14.3
271.1
0.1
(13.4)
1.0
258.8
286.5
0.1
-
(11.7)
-
274.9
During the year 0.1m (2020: 0.1m) shares were issued under employee share schemes realising £1.0m (2020: £0.2m).
Employee Benefit Trust
The Employee Benefit Trust made market purchases of a total of 1.7m (2020: 0.8m) shares with an aggregate market value of £30.0m (2020: £9.0m) and a nominal
value of £0.5m (2020: £0.2m). Associated transaction costs amounted to £nil (2020: £nil).
Share options exercised in 2021 were settled using the shares in the Group's Employee Benefit Trust. In 2021, 1.0m (2020: 0.8m) shares were issued for cash of
£3.4m (2020: £0.2m).
Of the 16.1m (2020: 15.4m) shares held within retained earnings, 1.8m (2020: 1.1m) shares with an aggregate market value of £27.9m (2020: £13.4m) are held
in trust to satisfy employee share scheme vesting.
Share buyback
On-market purchases of 11.7m shares were conducted relating to the share buyback programme. The aggregate market value of these shares at the dates of purchase
were £200.0m, which includes dealing costs related to these purchases of £1.9m.
Introduction Strategic Report Corporate Governance Financial Statements
206
23. Acquisitions
24. Disposals
During the year, the Group disposed of Interativa Industria, Comercio e
Representacoes Ltda.
This disposal resulted in a loss of £3.8m and is presented in the income
statement as an adjusting item as it meets our definition of adjusting items
based on its nature and quantum. The loss on disposal is not disclosed within
discontinued operations because this business did not represent a separate
major line of business.
A summary of the proceeds received, assets disposed and resulting loss on
disposal is included in the table below:
Sale consideration
Net assets disposed
Costs of disposal
Foreign exchange loss reclassified on disposal
Loss on disposal
Net cash flow arising on disposal
Sale consideration
Cash costs of disposal
Net cash flow arising on disposal of operations
There were no disposals of subsidiaries during 2020.
23 July 2021
£m
0.2
(3.8)
(0.1)
(0.1)
(3.8)
0.2
(0.1)
0.1
Key Estimate
In accounting for business combinations, the identifiable assets, liabilities
and contingent liabilities acquired have to be measured at their fair values.
In particular, an estimate has been made of the forecast future sales under
pre-existing commercial relationships which have been discounted at an
appropriate discount rate to value the commercial relationships and
brand intangibles.
On 20 December 2021 the Group acquired 100% of the share capital, and
associated voting rights, of Adaptas Solutions (Adaptas) for cash consideration
of £203.9m. Adaptas is a manufacturer of mission critical mass spectrometry
subsystems and components and is based in North America with facilities in
the UK, Australia and China.
This acquisition has been accounted for as a business combination. The provisional
fair value amounts recognised in respect of the identified assets acquired and
liabilities assumed are set out in the table below:
Intangible assets
Property, plant and equipment
Leased assets
Inventories
Trade and other receivables
Cash and cash equivalents
Interest-bearing loans and liabilities
Lease liabilities
Trade and other payables
Current taxation
Deferred taxation
Total identified net assets at fair value
Goodwill arising on acquisition
Purchase consideration transferred
Fair value at
20 December 2021
£m
109.6
9.6
3.9
15.7
8.4
1.8
(1.8)
(3.9)
(9.4)
(0.9)
(26.5)
106.5
97.4
203.9
The goodwill recognised above includes certain intangible assets that cannot
be separately identified and measured due to their nature. This includes control
over the acquired business, the skills and experience of the assembled workforce,
the increase in scale, synergies and the future growth opportunities that the
businesses provide to the Group’s operations. Acquisition costs of £2.8m were
recognised in the income statement in 2021.
The revenue and adjusted operating profit included in the income statement for
2021 contributed by Adaptas were £2.0m and £nil respectively. If the acquisition
had taken place on 1 January 2021, Adaptas would have contributed revenue and
adjusted operating profit of £58.0m and £9.2m respectively.
There were no acquisitions during 2020.
IMI plc Annual Report & Accounts 2021
207
25. Contingent liabilities
27. Subsequent events
Events that occur in the period between 31 December and the date of
approval of the Annual Report can be categorised as adjusting or non-
adjusting depending on whether the condition existed at 31 December.
If the event is an adjusting event, then an adjustment to the results is made.
If a non-adjusting event after the year end is material, non-disclosure
could influence decisions that readers of the financial statements make.
Accordingly, for each material non-adjusting event after the reporting period
we disclose the nature of the event and an estimate of its financial effect,
or a statement that such an estimate cannot be made.
There were no adjusting or non-adjusting subsequent events after the balance
sheet date of 31 December 2021.
A contingent liability is a liability that is not sufficiently certain to qualify for
recognition as a provision because significant subjectivity exists regarding
its outcome.
Group contingent liabilities relating to guarantees in the normal course of business
and other items amounted to £112m (2020: £142m).
26. Related party
transactions
Related parties include the key management personnel. The Board, including the
non-executive directors are considered to be the key management personnel of
the Group.
Short-term employee benefits*
Share-based payments**
Total
2021
£m
4.3
1.8
6.1
2020
£m
3.6
1.3
4.9
* Short-term employee benefits comprise salary, including employers' social
contributions, benefits earned during the year and bonuses awarded for the
year.
** For details of the shared based payment charge for key management personnel,
see Note 6.
Transactions with associated companies
Sales to associated companies
Purchases from associated companies
Accounts receivable
Accounts payable
Total
There are no other related party transactions.
2021
£m
0.5
-
-
-
0.5
2020
£m
0.9
-
-
-
0.9
Introduction Strategic Report Corporate Governance Financial Statements
208
Company balance sheet
At 31 December 2021
Fixed assets
Investments
Current assets
Debtors
Deferred tax assets
Cash at bank and in hand
Creditors: amounts falling due within one year
Other creditors
Net current assets
Total assets less current liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Profit and loss account
Equity shareholders' funds
* See Note C5.
The Company reported a profit for the financial year ended 31 December 2021 of £276.0m (2020: £78.2m).
Approved by the Board of Directors on 24 February 2022 and signed on its behalf by:
Lord Smith of Kelvin
Chairman
2021
£m
2020
£m
Restated*
Note
C5
C6
C7
C8
C9
547.0
547.0
540.4
540.4
12.1
6.8
2.0
20.9
(2.2)
18.7
565.7
565.7
78.6
15.2
177.6
294.3
565.7
11.9
3.2
10.4
25.5
(3.5)
22.0
562.4
562.4
81.8
14.3
174.4
291.9
562.4
IMI plc Annual Report & Accounts 2021
Company statement of changes
in equity for the year
At 1 January 2020
Retained profit for the year
Dividends paid on ordinary shares
Shares issued in the year
Share-based payments
Shares acquired for:
employee share scheme trust
At 31 December 2020
Retained profit for the year
Dividends paid on ordinary shares*
Shares issued in the year
Share-based payments
Cancellation of Treasury shares
Shares acquired for:
employee share scheme trust*
share buyback programme
At 31 December 2021
209
Parent
equity
£m
573.6
78.2
(91.6)
0.2
10.7
(8.7)
562.4
276.0
(61.8)
0.9
14.8
-
Share
capital
£m
81.8
Share Redemption
reserve
£m
premium
£m
Retained
earnings
£m
14.1
174.4
303.3
78.2
(91.6)
10.7
(8.7)
291.9
276.0
(61.8)
14.8
-
0.2
81.8
14.3
174.4
-
0.9
(3.2)
3.2
78.6
15.2
177.6
(26.6)
(200.0)
294.3
(26.6)
(200.0)
565.7
* Details of treasury and employee trust share scheme movements are contained in Note 22 of the Group financial statements and details of dividends paid and
proposed in the year are shown in Note C4.
All of the retained earnings held at both 31 December 2021 and 31 December 2020 are considered to be distributable reserves.
Introduction Strategic Report Corporate Governance Financial Statements
210
Company notes to the financial statements
C1. Significant accounting policies
The following accounting policies have been applied consistently in dealing with
items considered material in relation to the financial statements, except where
otherwise noted below:
Basis of accounting
The financial statements were prepared in accordance with Financial Reporting
Standard 101 ‘Reduced Disclosure Framework’ (‘FRS 101’).
The Company has not presented a separate profit and loss account as permitted
by Section 408 of the Companies Act 2006.
The Company has taken advantage of the following disclosure exemptions under
FRS 101:
a) the requirements of paragraphs 45(b) and 46-52 of IFRS 2 ‘Share-based
Payment’;
b) the requirements of IFRS 7 ‘Financial Instruments’;
c) the requirements of paragraphs 91-99 of IFRS 13 ‘Fair Value Measurement’;
d) the requirement in paragraph 38 of IAS 1 ‘Presentation of Financial
Statements’ to present comparative information in respect of paragraph 79(a)
(iv) of IAS 1;
e) the requirements of paragraphs 10(d), 10(f) and 134-136 of IAS 1;
f) the requirements of IAS 7 ‘Statement of Cash Flows’;
g) the requirements of paragraphs 30 and 31 of IAS 8 ‘Accounting Policies,
Changes in Accounting Estimates and Errors’;
h) the requirements of paragraph 17 of IAS 24 ‘Related Party Disclosures’; and
i) the requirements in IAS 24 ‘Related Party Disclosures’ to disclose related
party transactions entered into between two or more members of the Group,
provided that any subsidiary which is party to the transaction is wholly
owned by such a member. Related party transactions with the Company’s key
management personnel are disclosed in the Remuneration Report on pages 114
to 129 and in Note 26 on page 207 of the Group financial statements.
Critical judgements and key sources of estimation uncertainty
The preparation of financial statements requires management to make
judgements, estimates and assumptions that affect the amounts reported for
assets and liabilities as at the balance sheet date and the amounts reported for
income and expenses during the year. However, the nature of estimation means
that actual outcomes could differ from those estimates.
There were no critical judgments or key sources of estimation uncertainty applied
in 2021 or in 2020.
Foreign currencies
The Company’s functional currency and presentation currency is sterling.
Transactions in foreign currencies are recorded using the rate of exchange ruling
at the date of transaction.
Monetary assets and liabilities denominated in foreign currencies have been
translated into sterling at the rates of exchange ruling at the balance sheet date
and the gains or losses on translation are included in the profit and loss account.
Investments
Investments in subsidiaries are accounted for at cost less any provision for
impairment. The Company’s cost of investments in subsidiary undertakings is
stated at the aggregate of (a) the cash consideration and either (b) the nominal
value of the shares issued as consideration when Section 612 of the Companies
Act 2006 applies or (c) in all other cases the market value of the Company’s shares
on the date they were issued as consideration.
Taxation
The charge for taxation is based on the profit for the year and takes into account
taxation deferred because of temporary differences between the treatment of
certain items for taxation and accounting purposes.
Deferred tax is recognised in respect of all temporary differences between the
treatment of certain items for taxation and accounting purposes which have
arisen but not reversed by the balance sheet date, except as otherwise required by
IAS 12 ‘Income Taxes’. Deferred tax is measured at the tax rates that are expected
to apply when the temporary differences reverse, based on the tax laws that have
been enacted or substantively enacted by the balance sheet date. A deferred tax
asset is recognised to the extent that it is probable that future taxable profit will
be available against which the temporary difference can be utilised.
Equity and equity-related compensation benefits
The Company operates a number of equity and equity-related compensation
benefits as set out in Note 6 to the Group financial statements. The fair value
of the employee services received in exchange for the grant of the options is
recharged in full to the principal employing company and accordingly, there is
no net charge recorded in the Company’s financial statements. The recharged
amount is recognised as a debtor falling due for payment within one year.
The total amount recharged over the vesting period is determined by reference
to the fair value of the options granted, excluding the impact of any non-market
vesting conditions (for example, profitability and sales growth targets). Non-
market vesting conditions are included in assumptions about the number of
options that are expected to become exercisable. The fair value of the options
at the date of grant is determined based on the Monte Carlo and Black-Scholes
option-pricing model.
At each balance sheet date, the Company revises its estimate of the number
of options that are expected to vest. It recognises the impact of the revision of
original estimates, if any, in the amount recharged to subsidiary undertakings.
For newly issued shares, the proceeds received, net of any directly attributable
transaction costs are credited to share capital (nominal value) and share premium
when the options are exercised.
Treasury shares
The consideration paid by the Company on the acquisition of treasury shares
is charged directly to retained earnings in the year of purchase. Consideration
received for the sale of such shares is also recognised in equity, with any difference
between the proceeds from sale and the original cost taken to share premium.
If treasury shares are subsequently cancelled the nominal value of the cancelled
shares is transferred from share capital to the capital redemption reserve. No gain
or loss is recognised on the purchase, sale or cancellation of treasury shares.
Dividends
Dividends unpaid at the balance sheet date are only recognised as a liability
at that date to the extent that they are authorised and are no longer at the
discretion of the Company. Unpaid dividends that do not meet these criteria
are disclosed in the notes to the financial statements.
C2. Remuneration of directors
The detailed information concerning directors’ emoluments, shareholdings and
options are shown in the audited section of the Remuneration Report on pages
114 to 129, Note 5 and Note 26 of the Group financial statements.
C3. Staff numbers and costs
The number of people employed by the Company, including directors, during
the year was 18 (2020: 17) all of whom were employed in administrative roles.
The costs associated with them were borne by a subsidiary undertaking.
The Company participates in the IMI UK Funds, which are defined benefit schemes
in which the assets are held independently. The total net defined benefit costs of
these Funds are borne by a subsidiary undertaking and therefore in accordance
with IAS 19, no net defined benefit costs are recognised in the Company’s
financial statements. Note 14 to the Group financial statements provides
further details regarding the defined benefit schemes.
IMI plc Annual Report & Accounts 2021 211
2021
£m
40.8
21.0
61.8
2020
£m
71.2
20.4
91.6
C4. Dividends
The aggregate amount of dividends comprises:
Prior year final dividend paid - 15.0p per qualifying ordinary share (2020: 26.2p)
Current year interim dividend paid - 7.9p per qualifying ordinary share (2020: 7.5p)
Aggregate amount of dividends paid in the financial year
Dividends paid in the year of £61.8m represent 22.9p per share (2020: 33.7p).
After the balance sheet date the following dividends were proposed by the directors. The dividends have not been provided for and there are no income tax consequences.
Current year final dividend - 15.8p per qualifying ordinary share (2020: 15.0p)
2021
£m
40.9
2020
£m
40.7
Dividends proposed after the balance sheet date may differ from the final dividend paid. This is a result of the final number of qualifying shares entitled to dividends
differing from those in issue at the balance sheet date.
C5. Fixed assets – investments
Investments in subsidiary undertakings
Loans owed by subsidiary undertakings
2021
£m
173.2
373.8
547.0
2020
£m
Restated
173.2
367.2
540.4
Details of subsidiary undertakings as at 31 December 2021 are shown on pages 213 to 216.
The loan due from subsidiary undertakings is due for repayment on the 31 December 2022. The loan is unsecured and attracts interest at EURIBOR +0.25%.
Restatement of prior period balance
In the prior year, amounts owed by subsidiary undertakings of £367.2m were classified as a current asset, falling due after one year. However, although the amount is
contractually due for repayment on the 31 December 2022, the loan provides financing on a continuing basis to the borrower and the agreement is likely to be extended
and therefore it should be classified as a fixed asset.
C6. Debtors
Falling due for payment within one year:
Amounts owed by subsidiary undertakings
* Refer to Note C5.
2021
£m
12.1
12.1
2020
£m
Restated*
11.9
11.9
Introduction Strategic Report Corporate Governance Financial Statements
212
Company notes to the financial statements (continued)
C7. Deferred tax
The deferred tax included in the balance sheet is as follows:
Employee benefits and share-based payments
Deferred tax asset included in the balance sheet
Reconciliation of movement in deferred tax asset:
At 1 January 2021
Adjustment in respect of prior years
Deferred tax credit in the profit and loss account
Deferred tax charge in equity
At 31 December 2021
2021
£m
2020
£m
6.8
6.8
3.2
0.1
1.1
2.4
6.8
3.2
3.2
2.7
-
0.2
0.3
3.2
The average weighted rate of corporation tax in the UK for the 2021 calendar year was 19.0% (2020: 19.0%). In the Spring Budget of 2021, the UK Government
announced that from 1 April 2023 the rate of UK corporation tax will increase from 19% to 25%. This new law was substantively enacted on 24 May 2021. UK deferred
tax assets and liabilities have therefore been calculated at a rate of 25% (2020:19%).
C8. Other creditors falling due within one year
Corporation tax
Other payables
C9. Share capital
Issued and fully paid
274.9m (2020: 286.5m) ordinary shares of 28 4/7p each
C10. Contingencies
2021
£m
1.3
0.9
2.2
2020
£m
2.5
1.0
3.5
2021
£m
2020
£m
78.6
81.8
Contingent liabilities relating to guarantees in the normal course of business and other items amounted to £22.1m (2020: £13.7m).
There is a right of set-off with three of the Company's bankers relating to the balances of the Company and a number of its wholly-owned UK subsidiaries.
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its Group, the Company considers these to
be insurance arrangements, and accounts for them as such. In this respect, the Company treats the guarantee contract as a contingent liability until such time as it
becomes probable that the Company will be required to make a payment under the guarantee.
IMI plc Annual Report & Accounts 2021
Subsidiary undertakings
213
A full list of the Group’s subsidiary undertakings and registered/principal offices as at 31 December 2021 is included below. Except where indicated, the share capital
consists of ordinary shares only. The principal country in which each subsidiary operates and has its registered/principal office is the country of incorporation. IMI plc’s
effective interest in the undertakings listed is 100%, except where indicated, and is held in each case by a subsidiary undertaking, except for IMI Group Limited and IMI
Deutschland Verwaltungs GmbH which are held directly by IMI plc.
The Group has an interest in two partnerships, The IMI Scottish Limited Partnership and The IMI 2017 Scottish Limited Partnership, which are both fully consolidated
into these Group accounts. The Group has taken advantage of the exemption conferred by regulation 7 of the Partnerships (Accounts) Regulations 2008 and has,
therefore, not appended the accounts of these qualifying partnerships to these accounts. Separate accounts for the partnerships are not required to be and have
not been filed at Companies House.
Charles Baynes Netherlands B.V.,
FCX Pension Trustees Limited,
Holford Estates Limited,
IMI CIF Trustee Limited,
IMI Components Limited,
IMI Deutschland Limited,
IMI Euro Finance Limited,
IMI Fluid Controls (Finance) Limited,
IMI Germany Limited,
IMI Group Limited,
IMI Kynoch Limited,
IMI Marston Limited,
IMI Overseas Investments Limited,
IMI Pensions Trust Limited,
IMI plc,
IMI Precision Engineering Limited,
IMI Property Investments Limited,
IMI Refiners Limited,
IMI Retirement Savings Trust Limited,
IMI Sweden Finance Limited,
IMI Vision Limited,
Liquick 211 Limited,
Truflo Group Limited,
Truflo International Limited,
Truflo Investments Limited
Finch Land Management LLC,
IMI Americas LLC,
IMI Fluid Controls Holdings Inc,
IMI Norgren LLC,
Norgren LLC
IMI Critical Engineering Holding GmbH,
IMI Deutschland II GmbH & Co KG,
IMI Deutschland Verwaltungs GmbH,
IMI Germany Holding B.V. & Co. KG,
Norgren GmbH
Adaptas Acquisition Co.,
Adaptas Acquisition Holdings, LLC
Adaptas Solutions, LLC
Heimeier GmbH,
IMI Hydronic Engineering Deutschland Gmbh,
THJ Holding GmbH
IMI Australia Pty Ltd,
IMI Critical Engineering (PAC) Pty Ltd,
IMI Lakeside Australia Pty Ltd
IIMI Finance SA,
IMI Finance USD SA,
IMI Hydronic Engineering International SA
Adaptas Solutions Pty Ltd,
DeTech Australia Holdings Pty Ltd
IMI Aero-Dynamiek BVBA,
IMI Hydronic Engineering NV
CCI Italy S.R.L,
IMI Holding Italy S.R.L.,
Orton S.R.L.
Lakeside, Solihull Parkway, Birmingham Business Park, Birmingham,
West Midlands B37 7XZ, United Kingdom
5400 South Delaware Street, Littleton, CO 80120, United States
Bruckstrasse 93, 46519 Alpen, Germany
Palmer Industrial Park, 9 Second Street, Palmer, MA 01069, United States
Voellinghauser Weg 2, 59597 Erwitte, Germany
33 South Corporate Avenue, Rowville VIC 3178, Australia
Route de Crassier 19, Lake Geneva Business Park, 1262 Eysins, Switzerland
2-8 Martha Street, Clyde NSW 2142, Australia
Boomsesteenweg 28, B 2627 Schelle, Belgium
Via Larga 6, 20122 Milan, Italy
Introduction Strategic Report Corporate Governance Financial Statements 214
Subsidiary undertakings (continued)
IMI Hydronic Engineering A/S,
Norgren A/S
IMI Hydronic Engineering AS,
Norgren AS
IMI Hydronic Engineering BV,
IMI Netherlands Holdings BV
IMI Scotland Limited,
The IMI Scottish Limited Partnership,
The IMI 2017 Scottish Limited Partnership
Lakeside Finance Unlimited Company,
Lakeside Treasury Unlimited Company
Norgren Co Limited,
Norgren Manufacturing Co Ltd
Valves Holding GmbH,
Z & J Technologies GmbH
Acro Associates LLC
Vesterlundvej 18, 2730 Herlev, Denmark
Glynitveien 7, Ski, N-1400, Norway
Röntgenweg 20, Alphen aan den Rijn, NL-2408 AB, Netherlands
15 Atholl Crescent, Edinburgh EH3 8HA, United Kingdom
1 Stokes Place, St Stephens Green, Dublin 2, Ireland
Building 3, No. 1885, Duhui Road, Minhang District, Shanghai, China
Bertramsweg 6, 52355 Düren, Germany
1990 Olivera Rd., Sta. A Concord, CA 94520, United States
Adaptas Solutions China Co, Ltd
No. 1588 Xinhong Road, Qidong City, Nantong, Jiangsu, China
Applied Kilovolts Limited
Bimba LLC
Woods Way, Goring By Sea, Worthing, West Sussex, BN12 4QY
25150 S. Governors Hwy, University Park, IL 60484, United States
Bopp & Reuther Valves GmbH
Carl-Reuther Str. 1, 68305 Mannheim, Germany
Brookvale International Insurance Limited
Clarendon House, Church Street, Hamilton, HM11, Bermuda
Buschjost GmbH
CCI AG
Detmolder Strasse 256, 32545 Bad Oeynhausen, Germany
Fabrikstrasse 10, 8370 Sirnach, Switzerland
CCI America do Sul Comercio de Equipamentos Industriais Ltda
Rua Itapeva, 286 cjs 95/96/97, Bela Vista, Sao Paulo, 01332-000, Brazil
CCI Czech Republic s.r.o.
K Letišti 1804/3, Šlapanice, 62700, Brno, Czech Republic
CCI Flow Control (Shanghai) Co Ltd
Room 108, Unit 15, 159 Tian Zhou Road, Cao He Jing Development Zone, Shanghai, 200233, China
CCI International Limited
CCI Valve Technology AB
CCI Valve Technology GmbH
Control Component India Pvt Limited
Control Components Inc
FAS Medic SA
Unit A3 Brookside Business Park, Greengate, Middleton, Manchester, M24 1GS, United Kingdom
Industrigatan 1-3, Box 603, 661 29 Säffle, Sweden
Lemböckgasse 63/1, 1230 Wien, Austria
Ground, 1st & 2nd Floor, Tower 4, SJR i park, Plot # 13 14&15, EPIP Zone Phase 1, Whitefield Road,
Bangalore 560066, India
22591 Avenida Empresa, Rancho Santa Margarita CA 92688, United States
Route de Bossonnens 2, 1607, Palézieux, Switzerland
Fluid Automation Systems GmbH
Stuttgarter Straße 120, 70736 Fellbach, Germany
Herion Systemtechnik GmbH
IMI Aero-Dynamiek BV
Untere Talstrasse 65, 71263 Weil der Stadt, Germany
Havenstraat 9, 3861 VS, Nijkerk, Netherlands
IMI Critical Engineering (APAC) Pte. Ltd
29 International Business Park, ACER Building, Tower A, #04-01, Singapore, 609923, Singapore
IMI Critical Engineering (AUS) Pty Ltd
C/-, 21-22 Greenhill Road, Wayville SA 5304, Australia
IMI Critical Engineering (Shanghai) Company Limited
IMI Critical Engineering Korea
IMI Critical Engr PBM LLC
IMI Critical Engr Z&J LLC
IMI Critical FZE
IMI Deutschland B.V.
IMI Engineering Sdn. Bhd.
IMI France SARL
Building 3, No. 1-5, Lane 800, Yewang Road, Yexie Town, Songjiang District,
Shanghai, 201609, China
14 Dangdong 2-ro, Munsan-eup, Paju-si, Gyeonggi-do, 10816, Republic of Korea
1070 Sandy Hill Road, Irwin, PA 15642, United States
4525 Kennedy Commerce Drive, Houston, TX 77032, United States
Office No. FZJOA1308, FZJ0A1310, FZJ0A1307A, Jebel Ali Free Zone, PO Box 17827, Dubai, UAE
Versterkerstraat 6, 1322 AP Almere, Netherlands
K-7-5 & K-7-6, Solaris Kirara, Soho, Jalan Solaris Mont Kiara, 50480 Kuala Lumpur, Malaysia
52 Boulevard de Sébastopol, 75003 Paris, France
IMI Hidronik Muhendislik Iklimlendirme Sistemleri Ltd Sti
Atasehir Bulvari Ata Carsi no. 50-59, Atasehir, Istanbul, Turkey
IMI plc Annual Report & Accounts 2021 215
IMI Holdings LLC
IMI Hydronic Engineering AB
IMI Hydronic Engineering China
101 Broadway Street West, Suite 204, Osseo, MN 55369, United States
Annelund, SE-524 80, Ljung, Sweden
Room 360, Xin Mao Building, No 2 Tai Zhong Nan Road, Pilot Free Trade Zone,
Shanghai, 200131 China
IMI Hydronic Engineering France S.A.
13, rue de la Perdrix – Les Flamants 8, 93290 Tremblay-en-France, France
IMI Hydronic Engineering FZE
Office 1307-10 Jafza One, JAFZA (PO Box 262611), Dubai, United Arab Emirates
IMI Hydronic Engineering GesmbH
Industriestrasse 9, Objekt 5, 2353, Guntramsdorf, Austria
IMI Hydronic Engineering Inc
IMI Hydronic Engineering Limited
IMI Hydronic Engineering Ltda
IMI Hydronic Engineering OY
IMI Hydronic Engineering Pte Ltd
IMI Hydronic Engineering S.A.
8908 Governors Row, Dallas, TX 75247, United States
Hat House Third Floor, 32 Guildford Street, Luton, Bedfordshire, LU1 2NR, United Kingdom
Av Fagundes Filho, 134 cj 43, S. Judas, Sao Paulo, 04304-010, Brazil
Robert Huberin tie 7, Vantaa FI-01510, Finland
223 Mountbatten Road #03-01, Singapore 398008, Singapore
9, rue des 3 Cantons, Windhof, L-8399, Luxembourg
IMI Hydronic Engineering (Spain) SAU
Calle Orduña 3 Planta Baja, 28034 Madrid, Spain
IMI Hydronic Engineering S.R.L.
Via Roma, 108 – Edificio F/2, 20051 Cassina de Pecchi (MI), Italy
IMI Hydronic Engineering Switzerland AG
Mühlerainstrasse 26, 4414 Füllinsdorf, Switzerland
IMI Hydronic Engineering UAB
A.Juozapaviciaus 27-5, Kaunas, LT – 45258, Lithuania
IMI International Co Srl
IMI International d.o.o.
IMI International d.o.o.
Str. Aristide Pascal nr.36, Sector 3, Bucuresti, 031445, Romania
Alpska cesta 37b, Lesce, 4248, Slovenia
Slavonska avenija 17, Zagreb, 10040, Croatia
IMI International d.o.o. Beograd
Milutina Milankovica 1b, Novi Beograd, 11070, Serbia
IMI International Kft.
IMI International LLC
IMI International s.r.o.
IMI International Sp. z.o.o.
IMI Japan K.K.
Kunigunda Útja 60, Budapest, HU-1037, Hungary
Leninskaya Sloboda Street 19 b2, 115280, Moscow, Russian Federation
Central Trade Park D1, c.p.1573, Humpolec, 396 01, Czech Republic
Olewin 50 A, PL-32300, Olkusz, Poland
7-3-6 Minatojima Minamimachi, Chuo-ku, Kobe, Hyogo 650-0047, Japan
IMI Norgren Herion PVT Limited
B-30A Sector 85, Noida, Uttar Pradesh 201305, India
IMI Norgren Limited
137a Slaney Close, Dublin Industrial Estate, Finglass Road, Dublin 11, Ireland
IMI Norgren SA (Sociedad Unipersonal)
Calle Colom, 391, 2 Edif. Tecno, 08223, Terrassa, Spain
IMI Saudi Industry LLC
3826 unit No. 7, Street 122, Second Industrial City, Post 34325-7535, Dammam, Saudi Arabia
Industrie Mecanique Pour Les Fluides SA
15 Avenue des Cures, 95580, Andilly, France
Kynoch Sweden Holding AB
Mead Fluid Dynamics, Inc.
Newman Hattersley Limited
Norgren AG
c/o IMI Hydronic Engineering AB, 52 480 Ljung, Sweden
4114 North Knox Avenue, Chicago, IL 60641, United States
151 Superior Blvd, Unit 14, Mississauga ON L5T 2L1, Canada
Fabrikstrasse 10, 8370 Sirnach, Switzerland
Norgren Automation Solutions LLC
2871 Bond Street, Rochester Hills, MI 48309, United States
Norgren BV
Norgren Co Limited
Norgren Finland OY
Norgren Ges.m.b.H
Versterkerstraat 6, 1322 AP Almere, Netherlands
120/34 M.12, Rachadhewa, Bangplee, Samutprakarn, 10540, Thailand
Robert Huberin Tie 7, Fl-015 10 Vantaa, Finland
Industriezentrum NÖ Süd, Straße 2a, Objekt M39/1, A-2355, Wiener Neudorf, Austria
Norgren GT Development LLC
425 “C” Street NW, Suite 100, Auburn, WA 98001, United States
Norgren Kloehn LLC
Norgren Limited
Norgren Limited
IMI Webber Limited,
Norgren Limited
10000 Banburry Cross Drive, Las Vegas, NV 89144, United States
6/F Benson Tower, 74 Hung To Road, Kwun Tong, Kowloon, Hong Kong
15A Vestey Drive, Auckland, 1060, New Zealand
Blenheim Way, Fradley Park, Lichfield, Staffordshire, WS13 8SY, United Kingdom
Introduction Strategic Report Corporate Governance Financial Statements 216
Subsidiary undertakings (continued)
Norgren Ltda
Av. Eng. Alberto de Zagottis, 696-B, Sao Paulo SP, 04675-085, Brazil
Norgren Manufacturing (Suzhou) Co., Ltd
No. 975, Xinzi Road, Wujiang Economic & Technological Development Zone, Jiangsu Province, China
Norgren Manufacturing de Mexico S.A. de C.V.
Norgren S.A. de C.V.
Norgren NV
Norgren Pte. Limited
Norgren SAS
Norgren Srl
Norgren Sweden AB
Norgren Taiwan Co Limited
Pneumadyne LLC
Remosa S.R.L.
SAIC CCI Valve Co Ltd (44%)*
Avenida de la Montaña # 120, Parque Industrial Querétaro, Santiago De Querétaro,
Querétaro, CP 76220, México
Avenida de la Montaña # 120, Santa Rosa Jauregui, Santiago De Querétaro,
Querétaro, CP 76220, México
F Walravensstraat 84, B.1651 Lot, Belgium
16 Tuas Street, Singapore 638453, Singapore
1, rue de Lamirault 77090 Collégien, France
Via trieste 16, Vimercate, 20871, Milan, Italy
Box 14001, Ventilgatan 6, S-200 24 Malmo, Sweden
3F, No. 540 Sec. 1, Minsheng N. Rd., Guishan Dist., Taoyuan City , 333, Taiwan
14425 23rd Ave North, Plymouth, MN 55447, United States
Viale Pula 37, 09123 sede e stabilimento stradario, 03608, Cagliari, Sardinia, Italy
Block B, 123 Chongming Xiushan Road, Chengqiao Town, Chongming County, Shanghai,
202150 China
Shanghai CCI Power Control Equipment Co Ltd
229C, 2F, No 11, Lane 465, Tengyue Road, Yangpu District, Shanghai, 200090, China
STI S.R.L.
TA Regulator d.o.o.
TH Jansen Armaturen GmbH
Thompson Valves Limited
Truflo Rona S.A.
Truflo Marine Limited
Vaccon Company, Inc.
Via dei Caravaggi 15, 24040, Levate (BG), Italy
Orliska Ulica13, Brezice, SI-8250, Slovenia
Blucherstrasse 47, 66386 Sankt Ingbert, Germany
17 Balena Close, Creekmoor, Poole, Dorset, BH17 7EF, United Kingdom
3e avenue, 16, Parc Industrial des Hauts Sarts, 4040 Herstal, Belgium
Westwood Road, Birmingham, B6 7JF, United Kingdom
9 Industrial Park Road, Medway, MA 02053, United States
Z & J High Temperature Equipment (Shanghai) Co Ltd
819 Yinchun Road, Minhang District, Shanghai, 201109, China
* Treated as external investments.
Subsidiary audit exemptions
IMI plc has issued guarantees over the liabilities over the following companies at 31 December 2021 under Section 479C of Companies Act 2006 and these entities are
exempt from the requirements of the Act relating to the audit of individual accounts by virtue of Section 479A of the Act:
Company name
Applied Kilovolts Limited
CCI International Limited
Holford Estates Limited
IMI Components Limited
IMI Deutschland Limited
IMI Euro Finance Limited
IMI Fluid Controls (Finance) Limited
IMI Germany Limited
IMI Hydronic Engineering Limited
IMI Kynoch Limited
IMI Marston Limited
IMI Overseas Investments Limited
Company number
Company name
Company number
02101051
00259162
01181406
01640862
07843551
07929408
08528502
07843576
02945254
00713735
00155987
00209251
IMI Precision Engineering Limited
IMI Refiners Limited
IMI Scotland Limited
IMI Sweden Finance Limited
IMI Vision Limited
IMI Webber Limited
Norgren Limited
Thompson Valves Limited
Truflo Group Limited
Truflo International Limited
Truflo Investments Limited
Truflo Marine Limited
01687068
00148305
SC378424
07272731
04421176
01416237
00564656
02791464
04430846
00164822
04430927
00993167
IMI plc Annual Report & Accounts 2021 Geographic distribution of employees*
The following table shows the geographic distribution of employees as at 31 December 2021 and is not required to be audited.
United Kingdom
Continental Europe
Americas
Asia Pacific
Rest of World
Total
* Includes agency and contractors.
217
1,338
5,692
2,873
1,282
48
11,233
Introduction Strategic Report Corporate Governance Financial Statements
218
Five year summary*
Revenue £m
Adjusted profit before tax* £m
Group revenue by geography 2021
7
0
9
1
,
3
7
8
1
,
5
2
8
1
,
6
6
8
1
,
1
5
7
1
,
.
0
7
0
3
.
9
3
7
2
.
2
1
5
2
.
7
0
5
2
.
1
4
2
2
Total
APAC
22%
Middle East &
Africa
5%
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
* On an adjusted basis.
Income statement
Revenue
Adjusted operating profit
Adjusted profit before tax
Special pension events
Restructuring costs
Acquired intangible amortisation and impairment
Other acquisition items
(Loss)/gain on disposal of subsidiaries
Financial instruments excluding economic hedge contract gains/(losses)
Profit before tax
Adjusted EBITDA
Group sales by destination
UK
Germany
Rest of Europe
Total Europe
Total Americas
Total Asia Pacific
Middle East and Africa
Revenue
Total
Europe
45%
Total Americas
28%
2017
£m
1,751
239.2
224.1
10.8
(34.6)
(17.5)
(2.0)
(2.3)
2.4
180.9
288
2017
£m
79
260
519
858
405
355
133
1,751
2018
£m
1,907
265.5
251.2
6.8
(12.4)
(27.1)
(3.7)
0.6
(2.5)
212.9
320
2018
£m
90
288
519
897
515
357
138
1,907
2019
£m
1,873
266.1
250.7
8.6
(51.8)
(21.0)
(1.6)
-
4.4
189.3
357
2019
£m
90
234
494
818
538
404
113
1,873
2020
£m
1,825
284.7
273.9
-
(36.1)
(20.3)
-
-
(3.2)
214.3
380
2020
£m
88
222
486
796
545
390
94
1,825
2021
£m
1,866
318.1
307.0
-
(35.1)
(19.6)
(3.1)
(3.8)
(0.8)
244.6
404
2021
£m
83
238
520
841
526
409
90
1,866
IMI plc Annual Report & Accounts 2021
219
2021
92.0p
73.5p
23.7p
2021
£m
1,340
(32)
(529)
779
2017
2018
2019
2020
65.3p
53.6p
39.4p
73.2p
62.5p
40.6p
73.2p
56.6p
41.1p
79.7p
62.7p
22.5p
2017
£m
1,027
(155)
(265)
607
2018
£m
1,220
(149)
(405)
666
2019
£m
1,168
(111)
(347)
710
2020
£m
1,124
(96)
(228)
800
2017
2018
2019
2020
2021
13.8%
23.4%
21.0%
224.0p
43.7%
0.9
20
14.0%
21.8%
21.0%
245.8p
60.7%
1.3
25
14.2%
22.8%
21.0%
262.2p
48.9%
1.2
24
15.6%
25.3%
21.0%
294.9p
39.5%
0.8
35
17.0%
23.7%
20.0%
301.0p
79.9%
1.5
33
Earnings and dividends
Adjusted basic earnings per share
Statutory basic earnings per share
Ordinary dividend per share
Balance sheet
Segmental net assets (including lease liabilities)
Other net non-operating liabilities excluding borrowings (gross)
Net debt (excluding lease liabilities)
Net assets
Statistics
Adjusted operating profit as a percentage of revenue
Adjusted operating profit as a percentage of segmental net assets
Effective tax rate on adjusted profit before tax
Net assets per share (excluding treasury and EBT shares)
Net debt as a percentage of shareholders' funds
Net debt: Adjusted EBITDA
Adjusted EBITDA: Interest
* The five year summary is not required to be audited.
Introduction Strategic Report Corporate Governance Financial Statements
220
Shareholder and general information
Announcement of trading results
Corporate website
Headquarters and registered office
The trading results for the Group for the first half of
2022 will be announced on 29 July 2022. The trading
results for the full year ending 31 December 2022 will
be announced in February 2023.
Interim management statements will be issued in
May and November 2022.
The IMI plc website provides a wealth of useful
information for shareholders and should be your
first port of call for general queries relating to the
Company and your shares. As well as providing share
price data and financial history, the site also provides
background information about the Company.
Lakeside
Solihull Parkway
Birmingham Business Park
Birmingham
B37 7XZ
Telephone: +44 121 717 3700
Expected dividend payments
Final: 13 May 2022
Interim: September 2022
Share prices and capital gains tax
The closing price of the Company’s ordinary shares
on the London Stock Exchange on 31 December 2021
was 1,736.0p (2020: 1,165.0p). The market value of
the Company’s ordinary shares on 31 March 1982,
as calculated for capital gains tax purposes, was
53.5p per share.
The Company’s SEAQ number is 51443.
Enquiries about shareholdings
For enquiries concerning shareholders’ personal
holdings, please contact the Company’s Registrar:
Equiniti (contact details appear to the right).
Please remember to tell Equiniti if you move house,
change bank details or if there is any other change
to your account information.
Managing your shares online
Shareholders can manage their holdings online
by registering with Shareview, the internet based
platform provided by Equiniti. Registration is a
straightforward process and allows shareholders to:
• help us to reduce print, paper and postage costs
and the associated environmental impact of these;
• cast your AGM vote electronically;
• receive an email alert when important shareholder
documents are available online such as Annual
Reports and Notices of General Meetings;
• access details of your individual shareholding
quickly and securely;
• set up a dividend mandate online; and
• change your registered postal address or your
dividend mandate details.
To find out more information about the services
offered by Shareview and to register, please visit:
www.shareview.co.uk.
Shareholders are also encouraged to sign up to
receive news alerts by email in the Investors section
of the website. These include all of the financial
news releases from throughout the year that are
not sent to shareholders by post. You can access the
corporate website at: www.imiplc.com.
Annual General Meeting 2022
This year’s AGM will be held on 5 May 2022.
For further information, please refer to the Notice
of Meeting which is on the corporate website.
Individual Savings Account (ISA)
IMI‘s ordinary shares can be held in an ISA. For
information about the ISA operated by our Registrar,
Equiniti, please call the Equiniti ISA helpline on 0345
300 0430. Lines are open from 8.30am to 5.30pm,
Monday to Friday (excluding public holidays in
England and Wales).
Share dealing service
Managed by Equiniti, the Company’s registrar, the
IMI plc Share dealing service provides shareholders
with a simple way of buying and selling IMI ordinary
shares. Telephone: 0345 603 7037. Full written
details can be obtained from Equiniti (contact details
appear to the right).
Share fraud
Share fraud includes scams where investors are
called out of the blue and offered shares that often
turn out to be worthless or non-existent, or an
inflated price for shares they own. These calls come
from fraudsters operating in ‘boiler rooms’ that are
mostly based abroad. Further information on how
to spot share fraud or report a scam can be found
on our corporate website.
American Depository Receipts
IMI plc has an American Depository Receipt (‘ADR’)
programme that trades on the Over-The-Counter
market in the USA, using the symbol IMIAY. ADR
enquiries should be directed to Citibank Shareholder
Services, PO Box 43077, Providence, RI 02940-3077,
USA. Toll-free number in the USA is 1-877-CITI-ADR
(877-248-4237) and from outside the USA is 1-781-
575-4555. You can also email
citibank@shareholders-online.com.
IMI plc is registered in England No.714275
Registrars
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Telephone: 0371 384 2916 or from overseas
+44 121 415 7047
Lines are open 8.30am to 5.30pm, Monday to Friday
(excluding public holidays in England and Wales).
Email:
customer@equiniti.com
bereavementsupport@equiniti.com
Stockbrokers
JPMorgan Cazenove
Bank of America
Auditor
Deloitte
Cautionary statement
This Annual Report may contain forward-looking
statements that may or may not prove accurate.
For example, statements regarding expected revenue
growth and operating margins, market trends and
our product pipeline are forward-looking statements.
It is believed that the expectations reflected in
these statements are reasonable but they may be
affected by a number of risks and uncertainties
that are inherent in any forward-looking statement
which could cause actual results to differ materially
from those currently anticipated. Any forward-
looking statement is made in good faith and based
on information available to IMI plc as of the date of
the preparation of this Annual Report. All written
or oral forward-looking statements attributable to
IMI plc are qualified by this caution. IMI plc does not
undertake any obligation to update or revise any
forward-looking statement to reflect any change in
circumstances or in IMI plc’s expectations.
IMI plc Annual Report & Accounts 2021
Printed in the UK by Pureprint Group, a Carbon Neutral®
company. The CO2 emissions associated with the paper
manufacturing and printing of this publication have been
offset. It was printed using vegetable-based inks and a
water-based coating. Both the paper mill and printer are
registered to the Environmental Management System
ISO 14001 and are Forest Stewardship Council® (FSC®)
chain-of-custody certified.
IMI plc
Lakeside
Solihull Parkway
Birmingham Business Park
Birmingham B37 7XZ
United Kingdom
www.imiplc.com