IMI Annual Report 2000

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1. Segmental analysis	9. Earnings per ordinary share	18. Financial Instruments
2. Operating profit	10. Employee information	19. Provisions for liabilities and charges
3. Exceptional items	11. Intangible fixed assets	19. Provisions for liabilities and charges
4. The following have been charged in arriving at profit before taxation	12. Tangible fixed assets	20. Share Capital
	13. Fixed assets - investments	21. Reserves
	14. Stocks	22. Acquisitions
5. Net interest payable	15. Debtors	23. Cash flow notes
6. Taxation	16. Creditors: amounts falling due within one year	24. Post-retirement liabilities
7. Profits applicable to shareholders of IMI plc	16. Creditors: amounts falling due within one year	25. Operating leases
7. Profits applicable to shareholders of IMI plc	17. Creditors: amounts falling due after more than one year	26. Commitments
8. Dividends	17. Creditors: amounts falling due after more than one year	27. Contingencies


	Subsidiary Undertakings

	Accounting Policies

Segmental analysis

	Operating profit before goodwill Turnover		amortisation		Net Assets Excluding Operating profit		goodwill

BY ACTIVITY	2000 £m	1999 £m	2000 £m	1999 £m	2000 £m	1999 £m	2000 £m	1999 £m

Hydronic Controls

Continuing operations	651	528	79.7	75.5	66.5	68.1

Acquisitions	16	-	1.7	-	1.1	-

Hydronics Controls total	667	528	81.4	75.5	67.6	68.1	301	299


Drinks Dispense	340	353	33.0	34.6	32.6	34.3	116	108


Fluid Power	444	435	43.1	38.1	42.2	37.2	222	211

Energy Controls	152	139	17.6	15.4	17.5	15.2	43	36

Total continuing operations	1,603	1,455	175.1	163.6	159.9	154.8	682	654

BY GEOGRAPHICAL ORIGIN

UK	562	445	67.8	56.5	54.4	49.1	290	296

Rest of Europe	540	531	60.9	55.0	60.7	54.8	215	201

The Americas	453	435	44.0	50.2	42.4	49.0	162	142

Asia/Pacific	48	44	2.4	1.9	2.4	1.9	15	15

Total continuing operations	1,603	1,455	175.1	163.6	159.9	154.8	682	654

Acquisitions
Robimatic and Flow Design Inc are reported within Hydronic Controls from their acquisitions in August 2000 and September 2000 respectively.

Discontinued operations
The amounts shown for discontinued operations comprise the turnover and operating profit of Fittings Australia previously reported within Hydronic Controls and Asia/Pacific. 1999 figures also include copper smelting, the Drinks Dispense Brazilian operation and the Marston aerospace businesses.

TURNOVER BY GEOGRAPHICAL DESTINATION	2000 £m	1999 £m

UK	469	374

Germany	204	220

Rest of Europe	383	353

USA	397	373

Asia	68	55

Rest of World	82	80

Total continuing operations	1,603	1,455

RECONCILIATION OF NET ASSETS	2000 £m		1999 £m

Operating assets of continuing operations	682		654

Discontinued operations	-		4

Intangiable fixed assets	286		246

Investments	4		4

Net borrowings	(403	)	(388	)

Taxation liabilities and dividend payable	(91	)	(91	)

Net assets per Group balance sheet	478		429

Operating profit

			2000						1999
Continuing operations £m		Dis-continued operations £m			Total £m		Continuing operations £m	Dis-continued operations £m			Total £m

Turnover	1603.2		12.3		1615.5		1454.6		47.2		1501.8

Cost of sales	(1026.3	)	(8.3	)	(1034.6	)	(919.7	)	(43.7	)	(963.4	)

Gross profit	576.9		4.0		580.9		534.9		3.5		538.4

Distribution costs	(231.8	)	(2.3	)	(234.1	)	(219.5	)	(3.9	)	(223.4	)

Administrative expenses	(186.8	)	(0.5	)	(187.3	)	(162.5	)	(2.4	)	(164.9	)

Other operating income	1.6		-		1.6		1.9		-		1.9

Operating profit	159.9		1.2		161.1		154.8		(2.8	)	152.0

Continuing operations for 2000 include the following amounts relating to acqusitions: cost of sales £10.9m, distribution costs £1.1m, administrative expenses £2.2m.

3.	Exceptional items

	Profit on disposal of discontinued operations arises from the sale of Fittings Australia. The profit in 1999 represents the surplus arising on the sale of the Marston aerospace businesses. Provision for losses on closure of businesses in 1999 comprises £16.0m for the complete cessation of copper smelting and £3.1m for closing the Drinks Dispense Brazilian operation.

The following have been charged in arriving at profit before taxation

	2000 £m	1999 £m

Depreciation of tangible fixed assets	69.2	69.9

Amortisation of goodwill	15.2	8.8

Bonus under employees’ profit sharing scheme	1.3	1.5

Auditor’s remuneration*:

Fees and expenses	2.0	2.0

Non-audit services (mainly overseas)	1.0	1.0

Rentals under operating leases:

Property rents	11.2	10.4

Hire of plant and machinery	4.4	5.1

Research and development expenditure	19.5	19.2

* In addition to the above, amounts paid to the UK auditors in respect of fees included in cost of investment were £40,000 (1999: £145,000).

Net interest payable

	2000 £m		1999 £m

Interest payable:

Bank loans and overdrafts	21.1		13.8

Interest on finance leases	0.2		0.2

Other loans	9.7		8.0


	31.0		22.0

Interest receivable	(3.0	)	(6.2	)

	28.0		15.8

Taxation

	2000 £m		1999 £m

UK corporation tax
UK corporation tax at 30% (1999: 30.25%)	18.3		15.5

Adjustment in respect of prior periods	(8.9	)	(0.7	)



	9.4		14.8
Double taxation relief	(4.6	)	(1.3	)

	4.8		13.5

Foreign tax

Current tax on income for the period	29.9		24.0
Adjustment in respect of prior periods	0.4		0.7

	30.3		24.7

Deferred taxation
UK at 30% (1999: 30%)	3.1		(1.2	)
Foreign	10.1		6.3

	13.2		5.1

	48.3		43.3

7.	Profits applicable to shareholders of IMI plc

	Of the Group profit of £95.0m (1999: £79.3m), £55.4m (1999: £53.4m) has been dealt with in the profit and loss account of the Company.

Dividends

	2000 £m	1999 £m

Ordinary dividend:

Interim6.0p (1999 : 5.8p)	21.1	20.3

Proposed final 9.5p (1999 : 9.3p)	33.4	32.7

	54.5	53.0

9.	Earnings per ordinary share

	The weighted average number of shares in issue during the year was 351.2m, 351.5m diluted for the effect of outstanding share options (1999: 350.5m, 350.7m diluted). Earnings per share have been calculated on earnings of £95.0m (1999: £79.3m) and adjusted earnings per share have been calculated on earnings of £100.6m (1999: £98.0m) being the profit for the year before exceptional items and goodwill amortisation. Adjusted earnings per share figures have been shown because the Directors consider that they give a more meaningful indication of the underlying performance.

10.

Employee information

The number of people employed by the Group on average each month during the year was:

2000

1999

Hydronic Controls

7,090

5,910

Drinks Dispense

3,912

4,090

Fluid Power

6,524

6,684

Energy Controls

1,433

1,387

Other

202

232

19,161

18,303

The aggregate employment cost for the year was:

	£m	£m

Wages and salaries	409.3	389.4

Social security costs	58.3	54.8

Pension costs	12.1	12.6

	479.7	456.8

Directors’ emoluments for the year were:	£000	£000

Emoluments for qualifying service	1,611	1,539

Notional gains on exercise of share options	37	85

The detailed information concerning Directors’ emoluments, shareholdings and options is shown in the Corporate Governance Report.

11.

Intangible fixed assets

		Goodwill
	Gross book value £m	Amortisation £m	Net book value £m

At 31 December 1999	255.2	9.2	246.0

Exchange adjustments	2.2	0.1	2.1

Acquisitions	36.0	-	36.0

Adjustment to prior year acquisition (note 19)	17.5	-	17.5

Amortisation	-	15.2	(15.2	)

At 31 December 2000	310.9	24.5	286.4

Goodwill arising from the acquisitions in the year is being amortised over 20 years.

12.

Tangible fixed assets

Land and buildings

Plant and
machinery

Assets in course of construction

Total


	Gross book value £m		Depre-ciation £m		Net book value £m		Gross book value £m		Depre- ciation £m		Net book value £m		Gross book value £m		Net book value £m

At 31 December 1999	210.1		76.2		133.9		737.5		487.6		249.9		8.4		392.2

Exchange adjustments	3.9		1.6		2.3		12.3		8.9		3.4		0.2		5.9

Acquisitions	0.7		0.3		0.4		3.7		2.0		1.7		-		2.1

Disposal of subsidiaries	(0.3	)	(0.2	)	(0.1	)	(6.8	)	(4.4	)	(2.4	)	(0.3	)	(2.8	)

Additions	3.9		-		3.9		53.6		-		53.6		9.9		67.4

Disposals	(8.4	)	(4.0	)	(4.4	)	(45.8	)	(42.6	)	(3.2	)	(1.1	)	(8.7	)

Transfers	0.6		-		0.6		6.1		-		6.1		(6.7	)	-

Depreciation for year	-		5.8		(5.8	)	-		63.4		(63.4	)	-		(69.2	)

At 31 December 2000	210.5		79.7		130.8		760.6		514.9		245.7		10.4		386.9

The net book value of land and buildings comprises:

	2000 £m	1999 £m

Freehold: land	15.1	18.2

buildings	108.1	107.5

Long leasehold	5.2	5.3

Short leasehold	2.4	2.9

	130.8	133.9

Gross book value represents cost except for £1.0m in respect of revaluations of land and buildings in certain overseas subsidiaries.

Included in the total net book value is £1.5m (1999: £2.8m) in respect of assets acquired under finance leases. Depreciation for the year on these assets was £0.4m (1999: £0.3m).

13.

Fixed assets - investments

Company	Subsidiary undertakings

	Shares £m	Loans £m	Total £m

At 31 December 1999 at cost	395.7	349.4	745.1

Additions	13.8	-	13.8


Advances during the year	-	63.3	63.3

At 31 December 2000 at cost	409.5	412.7	822.2

Details of subsidiary undertakings at 31 December 2000 are shown here

The Company's cost of investment in subsidiary undertakings is stated at the aggregate of (a) the cash consideration, (b) the nominal value of the shares issued as consideration where sections 131 and 133 of the Companies Act 1985 apply and (c) in all other cases the market value of the Company's shares on the date they were issued as consideration.

14.

Stocks

	2000 £m		1999 £m

Raw materials and consumables	109.0		104.7

Work in progress	60.1		49.0

Finished goods	161.3		139.5

Payments on account	(5.0	)	(4.1	)

	325.4		289.1

15.

Debtors

	Group		Company

	2000 £m	1999 £m	2000 £m	1999 £m

Falling due for payment within one year:

Trade debtors	278.4	252.5	-	-

Amounts owed by subsidiary undertakings	-	-	63.5	66.5

Prepayments and accrued income	15.4	13.8	0.5	0.7

Other debtors	24.2	18.6	6.0	8.3

	318.0	284.9	70.0	75.5

Falling due for payment after more than one year:

Pension fund prepayment	9.1	9.9	-	-

Other debtors	5.6	6.3	-	-

	14.7	16.2	-	-

	332.7	301.1	70.0	75.5

16.

Creditors: amounts falling due within one year

	Group		Company

Borrowings and finance leases	2000 £m	1999 £m	2000 £m	1999 £m

Bank loans and overdrafts	29.2	23.7	14.2	29.3

Obligations under finance leases	0.1	0.2	-	-

Other loans	69.1	77.4	68.4	63.0
5.5% loan stock 2001/06	1.6	-	1.6	-

	100.0	101.3	84.2	92.3

The Group borrowings include bank loans and overdrafts of £5.8m (1999: £6.3m), obligations under finance leases of £0.1m (1999: £0.2m) and other loans of £0.3m (1999: nil) which are secured by charges over the assets of certain overseas subsidiary undertakings.

Other loans include £58.7m of floating rate loan stock 2001/07 issued in respect of the Polypipe acquisition and £9.7m of floating rate loan stock 2001/05 issued in respect of the Robimatic acquisition.

Other creditors	Group		Company

	2000 £m	1999 £m	2000 £m	1999 £m

Trade creditors	130.2	123.6	-	-

Bills of exchange payable	4.4	2.9	-	-

Corporation tax	8.2	17.9	-	0.9

Other taxation	33.7	23.7	-	-

Social security	6.3	5.9	-	-

Accruals and deferred income	117.4	105.6	4.6	11.4

Proposed dividend	33.4	32.7	33.4	32.7

Other creditors	1.9	2.2	-	-

	335.5	314.5	38.0	45.0

17.

Creditors: amounts falling due after more than one year


	Group		Company
Borrowings and finance leases	2000 £m	1999 £m	2000 £m	1999 £m

Bank loans

Secured	11.0	5.0	-	-

Unsecured	238.8	230.2	226.1	216.1

	249.8	235.2	226.1	216.1

Loan stock

Unsecured

5.5% loan stock 2001/06	-	1.6	-	1.6

US loan notes (6.70% to 7.17%) 2007/22	67.1	62.1	-	-

US loan notes (7.85% to 8.09%) 2009/14	30.2	27.9	30.2	27.9

	97.3	91.6	30.2	29.5

Other loans

Secured	5.6	5.5	-	-

Obligations under finance leases	0.7	0.8	-	-

	6.3	6.3	-	-

Total loans	353.4	333.1	256.3	245.6

Security consists of charges over the assets of certain overseas subsidiary undertakings.


Total borrowings and finance leases	Group		Company

	2000 £m	1999 £m	2000 £m	1999 £m

Secured	17.3	11.3	-	-

Unsecured	336.1	321.8	256.3	245.6

Total loans	353.4	333.1	256.3	245.6

	Group		Company

Repayment of loans	2000 £m	1999 £m	2000 £m	1999 £m

Bank loans

Between one and two years	143.0	3.7	-	-

Between two and five years	104.8	230.6	226.1	216.1

In five years or more	2.0	0.9	-	-

	249.8	235.2	226.1	216.1

Loan stock and other loans

Between one and two years	0.6	0.7	-	-

Between two and five years	2.0	1.9	-	-

In five years or more	101.0	95.3	30.2	29.5

	103.6	97.9	30.2	29.5

Total loans	353.4	333.1	256.3	245.6

Of the loans and loan stock repayable more than five years from the balance sheet date, the US loan notes mature between 2007 and 2022. The majority of other loans and loan stock are repayable in instalments between 2004 and 2007. Loans repayable by instalments any of which are payable after five years are included above as follows: bank loans £3.6m, loan stock and other loans £5.5m.


	Group		Company

Other creditors	2000 £m	1999 £m	2000 £m	1999 £m

Amounts owed to subsidiary undertakings	-	-	144.2	70.6

Overseas taxation	34.3	25.3	-	-

Accruals and deferred income	3.3	5.7	-	-

	37.6	31.0	144.2	70.6

18.

Financial Instruments

Currency profile of assets and liabilities


	Assets excluding cash and debt 2000 £m	Cash 2000 £m	Debt 2000 £m	Exchange contracts 2000 £m		Net asset exposure 2000 £m		Net asset exposure 1999 £m

Sterling	498	6	(143	)	59		420	384

US Dollars	173	5	(166	)	(3	)	9	7

Euro	168	20	(138	)	(40	)	10	2

Other	42	19	(6	)	(16	)	39	36

Total	881	50	(453	)	0		478	429

Exchange contracts are financial instruments used as currency hedges of overseas net assets.

Currency profile of interest exposure at 31 December 2000
Financial assets

	Cash and exchange contracts 2000 £m	Cash and exchange contracts 1999 £m

Sterling	65	64

US Dollars	5	5

Euro	20	19

Other	19	17

Total	109	105

All financial assets are floating rate and comprise short term cash of £50m (1999: £46m) bearing interest at short term bank deposit rates and the asset side of exchange contracts where the interest element is based primarily on six month interbank rate.

Financial liabilities

	Debt and exchange contracts 2000 £m	Floating rate 2000 £m	Fixed rate 2000 £m	Weighted average interest rate %	Weighted average period for which rate is fixed (years)

Sterling	143	141	2	5.5	0.5

US Dollars	169	93	76	7.3	9.4

Euro	178	105	73	5.4	3.3

Other	22	22	-	-	-

Total	512	361	151

	Debt and exchange contracts 1999 £m	Floating rate 1999 £m	Fixed rate 1999 £m	Weighted average interest rate %	Weighted average period for which rate is fixed (years)

Sterling	125	123	2	5.5	6.5

US Dollars	155	80	75	7.3	10.4

Euro	178	173	5	5.4	3.7

Other	35	35	-	-	-

Total	493	411	82

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 six month interbank rate.

Short term trade debtors and creditors have been excluded from the above two analyses. There are no other material non-interest bearing financial assets or liabilities.

Undrawn committed facilities
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:

	2000 £m	1999 £m

Expiring within one year	-	21.2

Expiring between one and two years	75.4	10.0

Expiring after more than two years	27.1	67.5

	102.5	98.7

The weighted average life of these facilities is 2.2 years (1999: 3.1 years).

Net monetary assets and liabilities
The table below shows the Group's transactional currency exposures at 31 December that give rise to the net currency gains and losses included in the profit and loss account. These include the monetary assets and liabilities of the Group that are not denominated in the functional currency of the operating unit involved, other than where such non-sterling liabilities are treated as hedges of net investments of non-UK operations.

	Net foreign currency monetary assets/(liabilities)
Functional currency of group operation	2000 Sterling £m		2000 US Dollar £m		2000 Euro £m		2000 Other £m		2000 Total £m

Sterling	-		(0.5	)	0.3		(0.5	)	(0.7	)

US Dollar	(0.6	)	-		(0.2	)	(0.1	)	(0.9	)

Euro	(0.4	)	-		-		0.1		(0.3	)

Other	(0.4	)	2.0		(3.1	)	(0.5	)	(2.0	)

Total	(1.4	)	1.5		(3.0	)	(1.0	)	(3.9	)

	Net foreign currency monetary assets/(liabilities)
Functional currency of group operation	1999 Sterling £m		1999 US Dollar £m		1999 Euro £m		1999 Other £m		1999 Total £m

Sterling	-		-		4.3		-		4.3

US Dollar	(3.8	)	-		(0.1	)	0.9		(3.0	)

Euro	(0.7	)	(0.5	)	-		1.7		0.5

Other	(3.1	)	0.8		0.3		(0.1	)	(2.1	)

Total	(7.6	)	0.3		4.5		2.5		(0.3	)

The amounts shown in the table above take into account the effect of any currency hedges entered into to manage these currency exposures.

As at 31 December 2000 the Group also held open various currency forward contracts taken out to hedge expected future foriegn sales.

Fair value of financial instruments

Financial instruments by category: asset/(liabilty)
	Book Value 2000 £m		Fair Value 2000 £m		Book Value 1999 £m		Fair Value 1999 £m

Short term deposits	12.6		12.6		39.2		39.2

Cash at bank and in hand	37.8		37.8		7.2		7.2

Borrowings falling due within one year	(100.0	)	(100.0	)	(101.3	)	(101.3	)

Borrowings falling due after more than one year	(353.4	)	(353.5	)	(333.1	)	(328.5	)

Forward currency contracts	-		(2.5	)	-		1.1
Interest rate instruments	-		1.5		-		-

Where available market rates have been used to determine fair values. When market prices are not available, fair values have been calculated by discounting cash flows at prevailing market rates.

Unrecognised gains and losses
The estimated current value of derivative currency and interest rate contracts entered into to hedge future transactional currency flows and interest rate fluctuation exposure is set out below based on quoted market prices where available. Changes in the fair values of instruments used as hedges are not recognised in the financial statements until the hedged position matures. An analysis of these unrecognised gains and losses is as follows:

	Gains £m	Losses £m		Total net gains/ (losses) £m

Unrecognised gains and losses on hedges at 31 December 1999	0.7	(0.6	)	0.1

Gains and losses arising in previous years that were recognised in 2000	0.7	(0.5	)	0.2

Gains and losses arising in previous years that were not recognised in 2000	-	(0.1	)	(0.1	)

Gains and losses arising in 2000 that were not recognised in 2000	3.3	(2.1	)	1.2

Unrecognised gains and losses on hedges at 31 December 2000 of which:	3.3	(2.2	)	1.1

Gains and losses expected to be recognised in 2001	1.0	(1.4	)	0.4

Gains and losses expected to be recognised in 2002 or later	2.3	(0.8	)	1.5

19.

Provisions for liabilities and charges

	Deferred taxation £m		Post- retirement liabilities £m		Trade Warranties £m	Other £m		Total £m

At 31 December 1999	12.9		25.8		9.1	21.8		69.6

Exchange adjustment	-		0.3		0.4	-		0.7

Acquisitions/disposals	(7.5	)	0.1		25.0	-		17.6

Utilised during the year	-		(1.0	)	(5.4)	(9.7	)	(16.1	)

Profit and loss account	3.1		1.5		2.8	2.5		9.9

At 31 December 2000	8.5		26.7		31.9	14.6		81.7

Post-retirement liabilities are in respect of overseas pension liabilities and US post-retirement benefits which have not been separately funded. At 31 December 2000 other provisions comprise mainly environmental provisions of £10m.

Following completion of reviews of provisional fair values on prior year acquisitions, provisions for trade warranties have been increased to reflect the fair value of warranty commitments on acquisition with a corresponding increase in goodwill. Product warranties are given in the normal course of business and cover a range of periods, typically from 1-6 years. The provision is calculated based on historical claims history.

The potential liability for deferred tax calculated at 30% (1999 : 30%) is analysed as follows:

	2000			1999
	Provided £m		Not provided £m	Provided £m		Not provided £m

Accelerated capital allowances	14.4		2.1	13.0		3.7

Other timing differences	(5.9	)	-	(0.1	)	-


	8.5		2.1	12.9		3.7

20.

Share capital

	2000 £m	1999 £m

Authorised

480m (1999 : 440m) ordinary shares of 25p each	120.0	110.0



Issued and fully paid

351.4m (1999 : 350.8m) ordinary shares of 25p each	87.9	87.7

During the year 595,915 shares were issued under employee share schemes realising £1.5m.

Share options
The majority of UK employees may participate in the IMI SAYE Share Option (1994) Scheme and selected senior executives within the Group participate in the IMI Executive Share Option (1995) Scheme. At 31 December 2000 options to purchase ordinary shares had been granted to and not exercised by participants of IMI share option schemes as follows:


	Date of grant	Number of shares	Price	Date of exercise	Scheme code

IMI Savings Related Share Option Scheme	08.04.94	214,938	280p	01.08.01	A


IMI SAYE Share Option (1994) Scheme	11.04.95	344,467	242p	01.07.00 or 01.07.02	B

	04.04.96	418,626	286p	01.07.01 or 01.07.03	C

	08.04.97	383,916	314p	01.07.00, 01.07.02 or 01.07.04	D

	07.04.98	388,497	365p	01.07.01, 01.07.03 or 01.07.05	E

	06.04.99	908,865	254p	01.08.02, 01.08.04 or 01.08.06	F

	13.04.00	1,912,941	210p	01.07.03, 01.07.05 or 01.07.07	G



IMI Executive Share Option (1985) Scheme	19.04.91	138,600	247.7p	19.04.94 to 19.04.01	H

	16.04.92	161,900	236.1p	16.04.95 to 16.04.02	I

	15.04.93	253,600	265.7p	15.04.96 to 15.04.03	J

	07.04.94	173,900	349.9p	07.04.97 to 07.04.04	K

	11.04.95	298,700	301.3p	11.04.98 to 11.04.05	L




IMI Executive Share Option (1995)Scheme	19.09.96	351,100	398.9p	19.09.99 to 19.09.06	M

	26.03.97	707,700	390.8p	26.03.00 to 26.03.07	N

	18.09.97	731,900	384.9p	18.09.00 to 18.09.07	O

	25.03.98	710,271	455.1p	25.03.01 to 25.03.08	P

	24.03.99	604,300	284.6p	24.03.01 to 24.03.09	Q
	22.03.00	538,650	226.6p	22.03.03 to 22.03.10	R

21.

Reserves

Group

	Share premium account £m	Revaluation reserve £m	Other reserves £m	Profit and loss account £m		Total £m

At 31 December 1999	130.8	1.0	1.6	208.0		341.4

Retained profit for the year	-	-	-	40.5		40.5
Previously acquired goodwill taken through the profit & loss account	-	-	-	0.4		0.4

Currency translation differences	-	-	-	6.6		6.6

Transfer	0.1	-	-	(0.1	)	-

Share premiums received	1.2	-	-	-		1.2

At 31 December 2000	132.1	1.0	1.6	255.4		390.1

Other reserves represent a capital redemption reserve. At the year end the aggregate amount of goodwill arising on acquisitions prior to 1 January 1999 deducted from Profit and Loss account reserves amounted to £422.0m.

Currency translation differences include a charge of £12.2m (1999: £14.0m) in respect of currency loans and hedging transactions used for overseas investments.

Company

	Share premium account £m	Other reserves £m	Profit and loss account £m	Total £m

At 31 December 1999	130.8	1.6	147.0	279.4

Retained profit for the year	-	-	0.9	0.9

Share premiums received	1.3	-	-	1.3

At 31 December 2000	132.1	1.6	147.9	281.6

22.

Acquisitions

There were no individually material acquisitions during the year.


	Total £m

Book value at acquisition

Fixed assets	2.1

Working capital	10.5

Taxation	(0.7	)

Net borrowings	(7.4	)

Net assets	4.5


Fair value to the Group	4.5

Purchase consideration	40.5


Goodwill arising in year	36.0


Adjustment in respect of prior year (note 19)	17.5


	53.5

23.

Cash flow notes

	2000 £m		1999 £m

a) Return on investments and servicing of finance

Interest received	2.9		6.2

Interest paid	(30.9	)	(22.0	)

Dividends to minorities	(0.5	)	(0.4	)

Net cash outflow for returns on investments and servicing of finance	(28.5	)	(16.2	)

b) Capital expenditure and financial investment

Purchase of fixed assets	(67.4	)	(63.5	)

Sale of fixed assets	5.7		9.1

(Purchase)/sale of current asset investments	(0.2	)	9.2
Exceptional proceeds from property sales	14.5		-

	(47.4	)	(45.2	)

c) Acquisitions and disposals

Purchase of subsidiary undertakings	(23.8	)	(289.0	)

(Overdrafts)/net cash acquired with subsidiary undertakings	(1.7)		4.2

Net cash of subsidiary disposed of	(0.9	)	-
Sale of businesses	8.8		16.6
Exceptional business closure costs	(5.8	)	-


	(23.4	)	(268.2	)

d) Purchase of subsidiary undertakings

Net assets acquired:

Tangible fixed assets	2.1		109.5

Stocks	8.8		54.2

Debtors	11.0		80.0

Creditors	(9.3	)	(62.6	)

Overdrafts/borrowings	(7.4	)	(49.4	)

Taxation	(0.7	)	(14.4	)

	4.5		117.3

Goodwill	36.0		234.7

	40.5		352.0

Satisfied by:

Cash consideration	23.8		289.0

Loan notes	9.7		63.0

Deferred consideration	7.0		-

	40.5		352.0

Acquisitions referred to in note 1 contributed a cash inflow of £0.7m to the Group's net operating cash flow.

e) Sale of businesses	2000 £m

Net assets disposed of:

Tangible fixed assets	2.8

Stocks	4.3

Debtors	2.5

Creditors	(2.0	)
Cash	0.9


	8.5

Add back goodwill previously written off to reserves	0.4

Profit on disposal	0.5

	9.4

Satisfied by:

Cash	8.8

Deferred receipt	0.6


	9.4

f) Reconciliation of movement in net borrowings


	Cash & deposits	Borrowings & finance leases due				Total net debt

	£m	within 1 year £m		after more than 1 year £m		£m


At 31 December 1999	46.4	(101.3	)	(333.1	)	(388.0	)

Cash Flow	3.3	12.1		(4.7	)	10.7

Borrowings assumed with acquisitions	-	(0.6	)	(4.9	)	(5.5	)

Loan notes issued to finance acquisitions	-	(9.7	)	-		(9.7	)

Exchange	0.7	(0.5	)	(10.7	)	(10.5	)

At 31 December 2000	50.4	(100.0	)	(353.4	)	(403.0	)

24.

Post-retirement liabilities

United Kingdom
The principal pension plan operated for UK employees is the IMI Pension Fund, a defined benefit plan with assets held separately from the Company in a separate trust fund. The latest formal actuarial valuation of the fund was as at 31 March 1999 and used the Projected Unit method of valuation. The main financial assumptions adopted were that the annual investment return will exceed the increase in earnings by 2.5% and the increase in pensions by 4.0%. The actuarial value of the fund assets was 112% of the liabilities to cover benefits accrued to members. The surplus, resulting in an abatement of the company contributions, is being spread over the average remaining service life of employees in membership. The market value of the assets of the fund at the valuation date was £725m.

Overseas
Both defined contributions and defined benefit plans operate in overseas subsidiaries. The contributions to the defined contribution plans are made in accordance with the rules of the plans. Each of the major defined benefit plans have been subject to valuation by an independent actuary within the last three years and the valuations showed that the overall value of the assets was sufficient to cover the value of the benefits accrued to members.

For certain pension plans, principally in Germany and Sweden, and US post-retirement benefits, the annual actuarial liability is funded by insurance and/or provisions made by the subsidiaries concerned. The provisions are shown in note 19.

25.

Operating leases


Annual commitments under operating leases expiring:

	2000		1999

	Land and buildings £m	Others £m	Land and buildings £m	Others £m


Within one year	3.3	1.2	2.8	1.5

In the second to fifth year	9.1	3.2	8.4	3.3

After five years	5.9	1.5	3.2	0.1

	18.3	5.9	14.4	4.9

26.	Commitments

	Group contracts in respect of future capital expenditure which had been placed at the balance sheet date amounted to £15m (1999: £8m). Foreign exchange commitments at the balance sheet date amounted to £115m (1999: £106m).

27.	Contingencies

	Group contingent liabilities relating to guarantees in the normal course of business and other items amounted to £20m (1999: £15m). There is a right of set-off with four of the Company's bankers relating to the balances of the Company and a number of its wholly-owned UK subsidiaries.

28.	Related party transactions

	During the year, the Group purchased travel and other services to the value of £30,000 from Gamston Aviation Ltd of which Mr K McDonald is a director and shareholder.