Sales at £1,615m (1999: £1,502m) were up 7.5% and profit before goodwill amortisation and exceptional items at £148.3m (1999: £145.0m) was up 2.3%. Acquisitions contributed £136m sales and £2.2m profit before goodwill amortisation. This includes £120m sales and £1.6m profit in respect of the additional months contribution from the Polypipe businesses acquired in May 1999.

The tax charge on profit before goodwill amortisation and exceptional items was 32%, the same rate as the previous year, and adjusted earnings per share 28.6p (1999: 28.0p), up 2.1%.

Goodwill amortisation increased to £15.2m (1999: £8.8m) largely as a result of the inclusion of Polypipe for a full year. Exceptional items of £10.5m profit resulted mainly from property sales and compared with a £13.1m net loss last year arising from the sale and closure of businesses. Including these items, profit before tax increased by 17% and earnings per share by 20%.

Net borrowings at the end of the year were £403m (1999: £388m) and balance sheet gearing was 84% compared with 100% at 30 June 2000 and 90% at the end of 1999. Interest cover based on operating profit before goodwill amortisation and exceptional items was 6 times (1999: 10 times). Operating cash flow was £154m (1999: £176m) and free cash flow after financing and dividends amounted to £33m (1999: £77m).

The Board is recommending an increased final dividend of 9.5p (1999: 9.3p) making a total dividend for the year of 15.5p (1999: 15.1p), up 2.6%. Excluding goodwill amortisation and exceptional items the total dividend is covered
1.8 times (1999: 1.8 times).

During the year we spent £40m on acquiring businesses including Robimatic in the UK for a consideration of up to £19m and Flow Design in the US for a consideration of £14m. Since the year end we have completed the acquisition of BTG based in Sweden for a consideration of £16m.

The closures of copper smelting and the Drinks Dispense operation in Brazil are largely complete and within budget; in December we sold our Australian copper fittings business for £9m.

As previously announced, I will be retiring from the Board at the forthcoming Annual General Meeting. I have been proud to serve as Chairman of IMI since 1989 but I feel it is now time to step down. I am delighted that Gary Allen will succeed me as Chairman after fifteen years as Chief Executive. During this period IMI has been developed from a predominantly UK metals business to a global engineered products company focused on market requirements. Martin Lamb, our new Chief Executive who reports on pages 4 to 13, will take IMI through its next stage of development.

Corporate Governance
I confirm that the Company has complied with the principles and the best practice provisions of the Combined Code as set out on pages 22 to 26. Following publication of guidance on internal control by the Institute of Chartered Accountants in England and Wales in September 1999, the Board undertook a review of its procedures and other aspects of internal control in 1999 and confirms that the Company complied with this guidance during 2000 and up to the date of this Annual Report.

Our People
Nick Paul retired from the Board in January 2001 after 24 years with the Group, the last four as Deputy Chief Executive. Ian McIntosh will also retire from the Board at the Annual General Meeting after 12 years as a Non-executive Director. In March 2000 Kevin McDonald, who joined the Board in May 1999 with the acquisition of Polypipe plc, retired as a Non-executive Director. They have made a valuable contribution to IMI and I wish them well for the future.

I would also like to welcome Brian Staples who joined the Board as a
Non-executive Director in May 2000.

We have 19,000 employees in our worldwide operations. The global economy means employees at all levels have to be adaptable; I am pleased to say that throughout my time as Chairman our employees have always responded well to change and have shown great commitment. I thank them for their hard work and loyalty.

Eric Pountain Chairman
12 March 2001