IMI Stock

Hello, everyone, and welcome to the IMI plc Interim Results 2026. My name is Nadia, and I'll be coordinating the call today. [Operator Instructions]

I will now hand over to your host, Roy Twite, CEO, to begin. Please go ahead.

Good morning, everybody, and welcome to IMI's 2026 Interim Results Presentation. I am joined here today by our CFO, Luke Grant. Together, we're going to take you through what was a strong first half performance, and I'd like to begin by thanking our people.

It is a real privilege to lead such a talented and committed team. And this first half performance is a direct reflection of their hard work and their dedication. We delivered 5% organic revenue growth in the first half with growth across all of IMI.

Organic adjusted operating profit was 8% higher than the same period last year. Growth Hub continues to deliver with orders up 22% to GBP 78 million despite a strong prior year comparator. And we saw a significant improvement in free cash flow generation. We are committed to deploying this capital for growth and to enhance shareholder returns. We returned over GBP 300 million to shareholders in the first half and are declaring another 10% increase in the interim dividend.

I am pleased to reconfirm our full year guidance. We are on track to deliver our sixth consecutive year of mid-single-digit organic revenue growth. And we continue to expect full year adjusted EPS to be between 136p and 142p.

Importantly, excluding any contribution from Truflo Marine, we expect to deliver our typical 45% half 1 to 55% half 2 EPS weighting. IMI has been fundamentally transformed since we launched our growth strategy in 2019, delivering a 10% EPS CAGR as we create significant value for shareholders.

At the heart of this is the One IMI operating model. Our relentless focus on commercial excellence, market-led innovation and continuous improvement, all underpinned by our performance culture. Supported by the 3 long-term megatrends of Energy, Automation and Healthcare, we remain confident in our ability to continue compounding earnings growth over the medium term.

Okay. With that, I'm going to hand over to Luke.

Thank you, Roy, and good morning, everybody. I'm pleased to be able to take you through our strong first half performance. Our One IMI operating model continues to drive consistent high-quality results and the first half of 2026 was no exception.

Revenue was 5% higher organically and organic adjusted operating profit was up 8%. The adjusted operating margin was 50 basis points higher at 18.7%, reflecting strong operating leverage and continued growth in the high-margin aftermarket, partly offset by our previously communicated cybersecurity investments.

Adjusted basic EPS increased to 63.4p, reflecting the strong operational performance and the benefits of our disciplined approach to capital allocation. Cash conversion was 96%, and we saw a significant improvement in the free cash flow generation during the period.

Following the strong performance and reflecting our confidence in the business, we're pleased to declare another 10% increase in the interim dividend.

Turning briefly to the revenue and profit bridges. Organic revenue was 5% higher with a modest tailwind from foreign exchange. Adjusted operating profit increased to GBP 217 million with organic adjusted operating profit up 8% year-on-year.

Disciplined execution of the One IMI operating model has delivered a 580 basis point margin expansion since 2019, taking us to 20% in 2025. We remain confident in further progression over the medium term. Our strong operating leverage means we expect to deliver a drop-through of around 30% over the medium term.

Turning to the income statement. As mentioned, we saw good organic revenue and profit growth in the period. The net interest charge was broadly in line with last year at GBP 8.4 million, and the tax rate increased to 26.2%, broadly in line with our guidance for the full year. Adjusted basic EPS increased by 13% to 63.4p in the period.

Looking now at the performance of the platforms and sectors. Automation delivered good growth with revenue up 5% organically. Process Automation had another strong first half. Order intake was up 12% organically, including a significant GBP 48 million New Construction Nuclear order, which covers deliveries over more than a decade. New Construction orders were up 20% organically and high-margin aftermarket orders were 7% higher. The Process Automation order book at the end of June was 10% higher than the prior year.

Industrial Automation organic revenue was 5% higher, principally reflecting improved levels of industrial activity and a softer first half comparator.

Turning to Life Technology, where organic revenue was also 5% higher. Climate Control organic revenue was 4% higher, reflecting continued demand for our energy-efficient and smart-connected solutions. Data center orders were GBP 18 million in the first half, significantly higher than the GBP 6 million in the first half of 2025.

Life Science & Fluid Control organic revenue was 5% higher, supported by resilient healthcare demand and a softer first half comparator. We now expect Life Science & Fluid Control organic revenue to be modestly higher in 2026.

Transport organic revenue was 8% higher as the heavy-duty truck market began to recover. Reflecting improving market conditions, we now expect Transport to deliver mid-single-digit organic revenue growth in 2026. The strategic review remains ongoing, and the team continues to execute well.

Finally, I'd like to provide a quick update on the Middle East. Shipments to the region in the first half were modestly ahead of the expectations we set out in our Q1 trading update. Our full year expectations for shipments into the region remain unchanged, and our guidance assumes that conditions allow for planned shipments to be delivered by the end of the financial year.

Turning now to cash flow, where we delivered a significant improvement during the first half. Adjusted operating cash flow was GBP 208 million, up 32% on the prior period, reflecting the strong profit performance and continued good working capital management. I want to say a big thank you to our commercial and operational teams across the business who continue to manage working capital exceptionally well.

Working capital showed an GBP 8 million outflow in the period, much improved on a GBP 42 million outflow in the prior period and follows on from an inflow in the full year 2025. Free cash flow was GBP 171 million, significantly higher than the GBP 30 million delivered in the first half of 2025. This reflects the strong operating cash flow performance, together with the non-repeat of the one-off items called out in 2025.

We continue to invest in new capacity and capability across IMI with CapEx of GBP 38 million in the first half, representing 1.2x depreciation. Net debt at the end of June was GBP 673 million with the net debt-to-adjusted EBITDA at 1.2x, comfortably within our 1x to 2x target range.

IMI is a highly cash-generative business with a clear and disciplined approach to capital allocation, prioritizing investments in our people, processes and operations that accelerate organic growth. In the first half, we opened 3 new world-class facilities and made significant investments in Growth Hub and data and digital across IMI, which are all key enablers of our One IMI operating model.

We remain committed to a progressive dividend and are very pleased to be declaring a 10% increase in the interim dividend today. We will also pursue targeted bolt-on acquisitions that enhance our positions in attractive long-term growth markets. Since 2019, we have deployed over GBP 400 million into bolt-on acquisitions, whilst increasing our fully burdened return on invested capital by 260 basis points to 14%.

Our M&A pipeline remains strong, and we will continue to seek targeted bolt-on opportunities that complement our organic growth model, providing access to differentiated, scalable technology and expanding our installed base and aftermarket positions whilst delivering returns in line with our strict financial criteria.

Finally, we will look to return surplus capital to shareholders should net debt-to-adjusted EBITDA fall sustainably below our 1x to 2x target range. Our GBP 500 million share buyback program announced at our full year results is progressing as planned with GBP 250 million completed as at the 30th of June 2026. By deploying our growing cash flows into organic growth, targeted bolt-on acquisitions and value-enhancing share buybacks, we are confident we can continue our track record of compounding EPS and free cash flow per share growth.

Turning now to the outlook. Following our strong first half performance, we are reconfirming our full year guidance. We remain on track to deliver our sixth consecutive year of mid-single-digit organic revenue growth in 2026, and we continue to expect full year adjusted basic EPS to be between 136p and 142p.

We continue to expect that the adjusted operating margin will be flat to slightly up in 2026 with strong operating leverage, offset by our previously communicated cybersecurity investments. Our guidance assumes that the disposal of Truflo Marine completes in the third quarter of 2026, that shipments to the Middle East for the full year are unchanged from the expectation set out during our Q1 trading update and that foreign exchange rates do not have a material impact on full year sales and profits.

We are assuming a net interest charge of approximately GBP 20 million, a tax rate of around 26.3% and a weighted average number of shares of 239 million following completion of the GBP 500 million share buyback program.

As Roy previously mentioned, excluding Truflo Marine, we expect our typically -- typical H1, H2 EPS profile of around 45% to 55%. If completion takes place as assumed, our reported EPS profile is likely to be more H1 weighted, reflecting Truflo Marine's contribution ahead of the disposal.

With that, I'll hand back to Roy, who will take you through the strategy update.

Thanks, Luke. Since launching our growth strategy in 2019, we have deliberately aligned our business to 3 long-term megatrends: Energy, Automation and Healthcare. These structural drivers provide significant opportunities to create long-term value and will underpin our delivery of profitable growth in the years to come.

IMI is a global leader in fluid and motion control, with a compelling value proposition. Our solutions typically account for a small share of the total system cost but have an outsized positive impact on end customer outcomes. This drives growth, customer loyalty and strong pricing power. It also positions us well to serve the attractive aftermarket, which today represents around 45% of IMI's sales.

Our business is built on the strength of our One IMI operating model. By applying a consistent approach rooted in commercial excellence, market-led innovation and continuous improvement, we are creating significant value for shareholders. Over half of IMI's sales are directly supported by rising energy demand and energy efficiency.

I wanted to provide an update on how this long-term megatrend is driving sustainable, profitable growth. Firstly, in conventional power, where IMI is a key supplier to the large gas turbine OEMs. We continue to see strong demand in the first half with organic order intake up 24% and New Construction actually doubling. This is being driven by widespread electrification and the need for stable, reliable energy to power data centers. Our customers now have multiyear order books that give us confidence in the growth opportunities ahead.

Nuclear also continues to be an exciting area for IMI. We won GBP 51 million of New Construction orders in the first half, including the GBP 48 million New Construction order that Luke mentioned earlier. This is one of our largest ever contracts with revenue to be recognized over more than a decade. We also continued to see strong momentum in the higher-margin aftermarket with orders up 33% organically year-on-year.

Thirdly, LNG, IMI's control solutions play a significant role right across the LNG value chain. And as previously highlighted, we are particularly excited about the significant opportunity to support new liquefaction capacity additions.

Organic order intake in Energy was up 56% in the first half with New Construction up 67% and Aftermarket up 36%. With strong customer relationships and leading technology, we see a clear pathway to sustained growth.

And finally, data centers. The rapid expansion of data center capacity is not only driving energy demand, it's also creating an exciting opportunity for Climate Control.

Our innovative solutions play a key role in supporting energy efficiency and thermal management, and we won GBP 18 million of orders in the first half, up from GBP 6 million in the first half of 2025. The global pipeline of opportunities continues to grow.

Growing the aftermarket is a key strategic priority for IMI. Our aftermarket exposure has expanded from around 35% in 2014 to approximately 45% in 2025, and it is central to how we create significant value for our customers and drive long-term returns for shareholders.

Our aftermarket revenues are mission-critical to customers' operations, largely funded through OpEx rather than CapEx and supported by long-term customer relationships. This gives us recurring revenue at high margins and stronger returns.

In Process Automation Aftermarket, the aftermarket now accounts for around 60% of orders. And as you can see on this slide, we've grown order intake at an 11% CAGR since 2020. This growth is underpinned by our installed base of more than 200,000 severe service valves, where our parts, upgrades and services help our customers run their most critical operations safely, efficiently and profitably.

As many of you will be aware, our innovative retrofit 3D technology uses 3D printing to fit our complex designs into installed valves. We are continuously finding ways to improve this process, and I'm really proud of the innovation coming from our teams.

A great example of this is our team in Korea, who have combined our engineering expertise with AI-enabled tools to accelerate the design of our bespoke 3D Disk Stacks, reducing engineering time by more than 90%. This means we can respond much more rapidly to customers and continue to grow the recurring high-margin aftermarket.

IMI now consistently delivers against our financial framework, and we have built a strong track record of compounding earnings growth. Over the last 5 years, we have delivered average organic revenue growth of 5%, supported by our leading positions in attractive long-term growth markets and our success in driving commercial excellence and market-led innovation.

The adjusted operating margin has expanded to 20%, and we continue to see opportunities for further progression over the medium term. Cash conversion remains very strong, and our fully burdened return on invested capital is meaningfully higher than our 12% underpin and well above our weighted average cost of capital. None of this would be possible without the more than 10,000 people right across IMI.

And I want to take this opportunity once again to thank each and every one of them. Our people and performance culture are the foundation of our One IMI operating model. And we've worked hard to build a culture rooted in ownership, customer focus and innovation. And we are continuing to make significant investments in our people to help them grow, develop and create value for our customers.

The image on the left-hand side of this slide is from the recent IMI Way Day, which this year focused on solving our customers' challenges. It really was an inspiring day and a great reminder of the pride and dedication of our teams right across IMI as our people work together to create great solutions.

As you can see on the right-hand side of this slide, this focus on our people and performance culture is delivering real results. Added value per employee has grown by 30% since 2019, while employee engagement remains at very high levels.

Just to close, 3 key messages to take away today. Firstly, we delivered a strong first half performance with organic growth across IMI, a significant improvement in cash generation and over GBP 300 million returned to shareholders. Secondly, we remain on track to deliver our sixth consecutive year of mid-single-digit organic revenue growth. And thirdly, we are reconfirming our full year guidance. We continue to expect adjusted EPS to be between 136p and 142p.

Thank you. I will now hand over to the moderator for the questions and answers.

[Operator Instructions] Question goes to Christian Hinderaker of Goldman Sachs.

I want to start on Process Automation, please. Very strong growth you saw in OE within the power market. I guess interested in your outlook there over the next few years, given some capacity expansion comments we've heard from the turbine makers. How do you expect that to affect your business? And then also the aftermarket capture piece. I saw I think you had 1% growth in the half. I guess there's a comp effect here. But as we think about that expansion in your installed base on OE, when might we see that pick up on the aftermarket side?

Brilliant. That's a great question. Thanks, Christian. Yes, obviously really pleased that conventional power orders doubled in the first half to GBP 64 million, Christian. So really, really good performance. And as you know, our customers that are actually building the power stations have got multiyear order books now. So we're very pleased with the medium- to long-term outlook for that segment.

What I would say is, obviously, it won't continue to double, right? I mean, as I said on the last call, this is going to be constrained by the ability to speed up the construction of those power stations. But nonetheless, it's going to be good for quite a few years, I would think, within that sector. On the aftermarket side, you are right, Christian, that just within that segment, within the conventional power segment, aftermarket orders up 1%. And what we see is that typically, a couple of years after the valve is installed, we start to see aftermarket at about 10% of the New Construction value on average, Christian. That number can go up a bit if the power station is cycling a lot, and it can come down a bit if it's sort of acting as baseload.

But on average, that's what we see. And that's what we love because we've now got something like 206,000 installed valves, severe service valves, not just in power, but across all the segments. And that's what's generating that beautiful long-term high-margin aftermarket stream of revenue that comes through.

I would say just so that everybody is clear on the call, our overall aftermarket orders across Process Automation were actually up 7% in the first half, so which is great, right, because that underpins this year and starts to even move into some delivery for next year as well.

So yes, that's where we see the power sector. I think the good news as well is that's conventional power that you focused on, Christian, but obviously, Nuclear, we won that nice Nuclear order, which, as I said, will be delivered over more than a decade. It's several reactors over more than a decade. But Nuclear Aftermarket as well, we saw good strength in the first half, as I said, and that was up 33%, right? So we're starting to see Nuclear Aftermarket improve. And in the longer term, I think we'll see Nuclear New Construction as we've been consistently saying, we'll see some good opportunities there.

Does that answer your question, Christian?

It does, Roy. And just moving then to in the growth Q-on-Q. I appreciate the comp was a bit easier. I guess Q3, we've then got a tougher comp. But can we just sort of think about the underlying demand you're seeing there? Has that improved? How do you expect that to play out through H2?

Sorry, Christian, we just lost the first part of your question there. Which sector?

Sorry. Life Sciences.

Yes, Life Sciences. Yes. So Life Sciences, so we've moved up our guidance slightly on that Life Science & Fluid Control sector from sort of stable to modest growth. So yes, we are seeing some improved demand, I would say, in that sector. It's modest, Christian. I don't want anybody to get carried away. We're not returning to the glory years yet on analytical devices by any means. But yes, there is, I would say, more consistent growth, modest growth in that sector.

Understood. And maybe thirdly, a little bit more strategic in terms of questioning. When we think about your growth initiatives, you've really scaled the Growth Hub initiatives over the years, innovated with the Retrofit3D and you've obviously got some emerging but higher growth opportunities for Climate Control now in data centers. When we think about your capital allocation priorities, i.e., buyback versus M&A, how do we think about those given you've shown, I would say, good ability to grow in higher growth segments? How are you thinking about M&A and the capacity to move into some of those more attractive growing markets?

Yes. I'll talk a little bit about Growth Hub, because I can't resist now that you've asked the question. But then if you just want to carry on with capital allocation, Luke, after that. Yes.

I mean, Growth Hub, fantastic, right, for orders to be up 22% in the first half. We did a brilliant event in California, where we had every single sector pitching. And then our IMI Way Day, where we involved all 10,000 people, we did mini -- what I would call, mini sprints to just again, really focus our whole culture of the company on customers, on finding customer problems, validating customer problems that customers are really prepared to pay to solve. And that has created another wave of ideas, Christian.

So yes, investment in organic growth has been and will be our absolute clear priority, right? We all know that if we can consistently grow organically, the returns on that, the reduced risk on that. Let's face it, the sort of virtuous spiral of opportunities for our people to develop our people, grow our people and the culture that, that brings. And again, we just did our employee survey, and 79% of people said, IMI is a great place to work. And that's what we want, is just to keep building on that momentum. Because that -- yes, that virtuous spiral, we know creates huge value for everybody.

So Luke, do you just want to talk a little bit about capital allocation?

Yes. I'll really just build on what Roy said, I always say our capital allocation is very purposeful in the way it's laid out. So if you think -- as Roy said, organic growth is the absolute #1 thing we think about -- when we think about capital allocation, you look at how much we're investing in the business. We're putting record levels of salespeople into the Aftermarket and Process Automation, investing in data centers and Climate Control. And that's what we're really driving and focusing on.

I think, as you said, with the share price improvement, we definitely look at M&A second from capital allocation perspective, and we're still looking at exactly what we talked about on the last call is things like severe service valve companies with underserviced aftermarket or technology companies that are in nice adjacencies that feed into each sector. So I think putting more time and effort in M&A has definitely been a focus in recent months, and we're continuing to do that. And then, as we then look at the any leftover capital to allocate, we think share buybacks deliver good returns. And then also, we've continued to progress the dividend at a good clip with very healthy cover.

Does that answer your question?

Yes.

The next question goes to Chitrita Sinha of JPMorgan.

I've got three, and I'll take them one by one. So just firstly, regarding the unchanged guide. I mean, clearly, a very strong performance in the first half, and you've seen very good order momentum in PA as well. I just wanted to get some of the moving parts in H2, which has led to you leaving the guidance unchanged for the year.

Appreciate that. Yes. I think what everybody should understand is that, last year was quite an unusual shape because of what happened with cyber, right? So first half, we were hit. Second half, we did a lot of catch-up. What that meant was in the first half of last year, we grew about 2%. Actually, it's just slightly less than 2%. And in the second half, we grew 9%, right? So in terms of comparators, it's an unusual effect this year.

What I always check is obviously both comparators, but then sequentially. And when we look sequentially, if we strip out Truflo Marine, we're at our standard 45% to 55% half 1 to half 2 on EPS. And that would get us to about where consensus is, which is about 140p, 140.5p, something like that.

And Chitrita, that makes a lot of sense for us given what's happening in the world. Clearly, externally in the external markets, there's a lot going on. Obviously, we've got the Middle East, but we've also got difficult German industrial production. We've got tariffs. There's various moving parts. So what we feel consensus, given all of these effects, is in about the right place.

Very clear. And then my second question is just on Middle East as well. I mean, in the last update, I believe you said that there's about a maximum of GBP 30 million orders that might be at risk of being pushed out. But it seems like from your comments that there's been positive development in the half. So could you please provide a bit more color on the latest there, please?

Yes, Chitrita. So obviously, on the last call, literally, things were just evolving, weren't they? Just literally a few days. So I'd say you're absolutely right. We've given out the numbers, everybody knows what our numbers are for the Middle East. I do feel a bit more confident now about delivering the year. And just recently, Luke and I have just checked July shipments, and they are bang in line with our plan, Chitrita. So despite the sort of raised events that were happening in July, it does seem to us that customers really want our spare parts, in particular, particularly the aftermarket parts and we're seeing good shipments. So I would say, yes, there is still a GBP 30 million risk, but it's a much reduced risk than when I last talked to you.

Great news. And then finally, just on Industrial Automation, maybe a bit more color here on what is the 60-day moving average looking like?

Yes. So Industrial Automation, obviously did well in the first half, but that was against a softer comparator because of cyber. Still nice to see it growing at 5%. Team is doing well, working really hard. That is a very high mix business where you're supplying a whole series of components to make a system. And therefore, the supply chain complexity is high, and we've been investing to reduce the supply chain complexity and improve -- effectively improve response to customers.

In the second half of last year, though, Chitrita, obviously, what we're going to see is a much harder comparator because there was catch-up as we went through the cyber event.

In terms of our 60-day moving average, we've done our best to sort of normalize that. It's worked hard on the numbers. And I think the way I'd characterize it is that it's slightly up, sort of 2% up as we go into the second half. That number will vary a bit now, though, Chitrita, honestly, as we go into the sort of European holiday season. But just to give you a rough idea, that's about where it is at the moment on orders. That's orders, obviously.

Sorry, just a follow-up. Do you mind providing a bit more color just geographically in terms of what you're seeing?

Yes, absolutely. So geographically, Europe is pretty flat, and that's dragged down by Germany. Other parts of Europe, not so bad. America's slightly up, around sort of 3% up. And then Asia Pacific is up closer to double digits. It's only 15% of Industrial Automation, but Asia Pacific is actually quite strong at the moment.

The next question goes to Tore Fangmann of Bank of America.

Only two left from my side. First would be on your data center growth. If I remember correctly, you'd indicated recently another around like 50-ish percent of growth this year. Now you've delivered already 200% growth in the first half. So could you speak a bit more about the opportunity here, what you're seeing? And maybe with this, it really seems like you're very quickly increasing your market share. So any further details would be super helpful.

Well, thanks, Tore. So on data centers, we said on the last call, we thought we'd probably do about GBP 30 million of sales this year. We've done GBP 18 million in the first half. So we think it will probably be slightly better than GBP 30 million now. It is a little bit lumpy, as you can imagine. I think I talked on the last call about you can get orders of GBP 6 million and whether they fall in this year or next year is a bit of an issue. I'm not sure whether we're taking share. I think we're doing well and we're holding our own in what is a rapidly growing market. And we have got a series of new product launches as we get towards the end of the second half as well, Tore, as Christian was talking about earlier with the Growth Hub. So yes, we remain pretty happy with where we are in data centers, but we do realize there's more to go for in the future as well.

Perfect. And then just the second one would be on Transport. I appreciate it is -- you're still having a review of this segment as a total. Does this change, given that we see very strong organic growth, especially in the North American truck market and also like a decent outlook into the second half? Or are you still committed to separate this potentially from the rest of the group?

It's still under strategic review, I would say, Tore. And my congratulations to the team there because they are really improving that sector. You saw the cash performance in the half and Transport is overweight producing cash. I mean, really, it's a phenomenal team. As I said, it's almost 2 years ago now, where we brought -- the new team started coming in. And yes, they're ex-passenger car people, and they're not only helping Transport actually, Tore, they're helping other parts of the business as well, which I really appreciate.

And just to give you one number, they've got their global quality to 9 parts per million. I mean, that is properly world-class. So it's not just improving stock turns. It's right across the operational performance of the business. And as you know, the target for them is very clear. It's to get above average return on invested capital for IMI and they are going full speed to do that. So the strategic review is still on, and all things will be considered. But, it's good progress in the first half in Transport.

The next question goes to Stephan Klepp of BNP Paribas.

I have three questions. The first one is a clarification on Nuclear. So that big deal, GBP 48 million. This is conventional Nuclear, as I understand. How is your pipeline looking into small modular reactors? And particularly if you think about the success that Rolls-Royce has in winning now 3 countries with projects, and how set are you in that setup? So is it more or less that you will help Rolls-Royce to more or less build out the franchise?

The second question is on your order funnel in Process Automation. I think we all understand that power is carrying the business quite a lot at the moment. Nuclear is really good. But what does it take for the other areas to come back? And what do you see in the funnel, in your pipeline, how that's building up?

And the last one is probably a very boring one. Yes, but looking ahead, your medium-term framework was put in place in the second half 2023. I mean, what do you want us to expect going forward? More of the same of the good execution because you're executing really, really well? Or is there any change factors that we should expect going forward with regard to your medium-term outlook?

Good set of questions. Thank you, Stephan. I appreciate that. The Nuclear is conventional. It's not SMR, that order, so that you know. On SMR, yes, we remain very upbeat about that. Of course, I'm not going to talk about a particular customer that's very commercially sensitive on this call, Stephan. But just to say that SMRs, yes, we are well placed. Our technology is very well placed for SMRs, not just in the U.K., but more globally than that as well. So if SMR becomes a viable technology, we would be very pleased with that, Stephan.

On Process Automation, obviously, the big thing is the aftermarket, right? And that's 60% of that business and aftermarket orders were up 7%. So that's really pleased. On the New Construction side, power, you've got power, we've got Nuclear. We've got LNG, remember as well, going great guns. So gas generally is good for us. We think gas over oil is good for the medium term, Stephan. So -- and we're well placed with gas in Process Automation.

The parts that haven't been doing so well, I don't think it will surprise anybody. On the New Construction side is downstream and petrochem. That's the bit that's been softer. Downstream oil, I think, is going to be tricky. I don't think -- I'm not expecting any big increase there. For us, the downstream opportunity is more in the aftermarket, it's more around upgrades. So that's what we're really excited about there. And we've done very well then. And I think as we look forward into the future over the next few years, there'll be more upgrades in that area.

And then the framework, yes, I mean, delighted right, that framework in 2023. We're looking at some stats from one of the big investment banks. And the percentage of companies that do compound EPS more than just 5% actually. As you know, Stephan, we've done it 10% over that period. But the percentage of companies that do 5% plus over 6 years, which hopefully we'll do this year is around 2%, Stephan.

So for us, it's about -- there's no fancy tricks here. This is about running a first-class engineering company, investing in the future, creating innovation, staying super close to customers, making sure that we don't waste a penny that we solve their problems that they're prepared to pay for, we create value and then we capture that value. We are -- we want to be the world's best engineering company in terms of that value creation, value capture, and that's what we're going to do.

So yes, there's not going to be any big breakouts. Of course, there will be hopefully, some really nice bolt-on acquisitions to accelerate that journey. But really, the core of our business is organic growth, high-quality organic growth and that investment growth cycle, continuing that. That's what we're about.

Super. One follow-up, just on the cash conversion. I mean you're doing really well, particularly this first half was strong. I mean 90% plus, is that just a bit conservative going forward actually?

I think 90% plus is still our base really, because we still want to invest CapEx to depreciation sort of north of 1x, at least sort of 1.2x through a cycle. And typically, as we grow, we will need to build inventory working capital as we go. So I think sort of thinking in that 90% plus range is about right for us.

The next question goes to Andrew Douglas of Jefferies.

Just two quick ones for me, please. In terms of the Nuclear order, can you tell us what region was that in? And are there multiple Nuclear opportunities? Because I suspect it's not just one country who's looking at the Nuclear opportunity?

And secondly, just going back to the question on M&A. It's been a real challenge for you guys from a multiple perspective and the areas in which you are focusing are not going to be seeing much multiple compression, I don't think, over the next few years, if anything, it's probably getting worse. So do you guys need to think slightly differently about how you do M&A, about the multiples that you're paying, maybe more synergistic M&A? Or is it just going to be more of an opportunistic opportunity to do M&A, and then buybacks if you can't? Because I'm slightly struggling to see how anything fundamentally changes from an M&A perspective.

Yes. That's a really good question. I'll let Luke talk about M&A in a moment. I'll just start. So the Nuclear order was in Europe, Andy, just to clear that one up for you. Yes, I think over the next few years, there will clearly be more New Construction opportunity in Nuclear. I think if you look at some of the Nuclear power stations, these are big projects, right? I mean, they are sort of 10-year type projects. So it will come over the next few years.

This particular order is for a whole series of reactors, as I said, which we will deliver over more than a decade, Andy, right? So the fact that these big orders come altogether, that's the way the customer wants to do it. That's great for us. We love that in our order book, obviously, nice to win that one. But I would say that Nuclear will happen over the next few years. I wouldn't say that there's going to be other huge orders directly upon us, but it's very exciting for the sort of medium term.

Luke, do you want to talk about M&A?

Yes, more than happy to. So I think from an M&A perspective for us, I think I'm not too concerned with what you're saying. I think if you remember really the M&A process we run, we have a wide net of opportunities we look at. We then typically build relationships with those companies over a multiyear period. So it's not something that just happens overnight.

And typically, when we've done that, we've been able to build good relationships, maybe work with them commercially ahead of a potential purchase and then sort of move forward from there and had a long success of bringing companies in. Many of the sort of founders or senior members of those management teams are still working for IMI years and years down the line. So I think from our perspective, it's just about investing more of the time in doing that and the more that we do that, the more opportunities that will come.

We haven't been sort of sat on our hands in recent years. We've been involved in process. We've looked at different things. I think to your point, I don't really like talking about multiples and stuff because there's always adjustments, lots of different stuff. We're really just focused on sort of cash returns over a long period for our shareholders. We talk about making sure that in excess of WACC after year 3 and then sort of above our 12% ROIC underpin after year 5. And that's what we're really focused on, and we won't step away from that discipline.

Yes. I mean some of the recent acquisitions, Andy, obviously, we've looked at and some of them have got a cash return of less than 3% on day 1. So to get above WACC, you've got to treble profits, right, in a reasonable period of time to get above WACC.

So you are right, Andy. If other people are prepared to pay that, we've really got to see where that's coming from, right? Because we certainly are all about increasing shareholder value. We're certainly not about destroying it. So you are right, the competitive environment slightly is a bit battling. For us, the target though has to -- we've done 6 acquisitions. The target has to continue to be those sort of preferably privately owned bolt-ons. Doesn't have to be privately owned, but those sorts of bolt-ons where we can see where us plus the acquisition equals a lot more than the sum of its parts. And I think we've clearly had some of those. I mean you'll remember over the last decade, companies like Remosa, Orton, Z&J, where -- as Luke said, suddenly, we could unlock the aftermarket and the value accretion has just been superb.

Yes. Perfect. And one just quick follow-up -- just a slight follow-up to Stephan's question. Margins are, I think the guidance was flat to slightly up in the current year given the investment in cybersecurity. Going forward, there's no reason why margins can't continue to pick up towards that 22% number that you talked about, about 18 months ago. Is that still fair in your thought process?

You're absolutely right, Andy. I think as we said on the call, right, the sort of baseline dropped through for us, because gross margins are now getting close to 50%, right, which is great as we reorganized the manufacturing footprint, as we've really been relentless on that continuous improvement drive when you saw the productivity numbers in the presentation.

So as we continue on that journey, what it means is that even after we invest fully in growth, which, as I said, is our #1 priority, we drop through, generally speaking, more like 30% than 20%. And if you run the math on that over a 5-year period, you get to around 22% margin. So acquisitions, all this stuff can alter that position, right? But from where we are today, let's say, the organic business, we would expect to do that sort of profile, 30% drop-through. Of course, if we need to invest like we certainly did need to invest in cyber, then we'd always announce that and explain that. But you're right, over a 5-year period, that's the trend we would expect.

Thank you. That's all the questions that we have time for today. I will hand back to Roy for any closing comments.

That's great. Well, thanks. Great questions. I've got to say, I'll repeat what I said at the beginning, I'm really proud to present these half year results. And just want to thank again the people across IMI, the 10,000 people that contributed to this first half. Thanks, everyone.

Thank you. This now concludes today's call. Thank you all for joining, and you may now disconnect your lines.

Good morning, everyone, and thank you for joining us on today's IMI plc Q1 Trading Update. My name is Drew, and I'll be the operator on the call today. [Operator Instructions] With that, it's my pleasure to hand over to Roy Twite, CEO, to begin. Please go ahead when you're ready.

Good morning, everybody, and welcome to IMI's First Quarter Trading Update. I'm joined here today by our CFO, Luke Grant. We have made a good start to the year, delivering organic growth across IMI in the first quarter. This performance reflects the strength of the One IMI operating model, our strategic focus on 3 megatrends: Energy, Automation and Healthcare, and the continued efforts from all of our people globally. We are pleased to reconfirm our full-year guidance. We remain firmly on track to deliver our sixth consecutive year of mid-single-digit organic revenue growth in 2026.

And we continue to expect that full year adjusted EPS will be between 136p and 142p. Process Automation delivered strong revenue growth. As expected, order intake was slightly lower year-on-year against a strong Q1 comparator, particularly in the aftermarket, where we grew 19% organically in the first quarter of last year, driven by several large nuclear orders that we previously announced. Industrial Automation performed in line with expectations, benefiting from an easier comparator following the cyber incident in the first quarter of last year. Climate Control continues to perform well, supported by demand for our energy-efficient solutions. Life Sciences and Fluid Control was slightly better than the prior year as we saw further signs of stabilization in the life science device market. Transport grew in line with the heavy-duty truck market.

Before I hand back to the operator, I would like to provide a quick update on the Middle East. We are actively monitoring the situation where the safety of our people remains our absolute top priority. The region represents 6% of IMI sales in 2025, principally in Process Automation. And I wanted to be clear on how this is reflected within our guidance. As at the end of April, we have shipped approximately GBP 35 million to the Middle East year-to-date. Despite the ongoing disruption, we currently have a further GBP 15 million planned for delivery in May and June. Our guidance assumes that conditions normalize, allowing us to deliver around GBP 75 million in the second half and therefore, approximately GBP 125 million across the full year into the Middle East. IMI remains well positioned with a unique market-led approach to innovation, significant recurring high-margin aftermarket exposure and strong pricing power. Importantly, our strong balance sheet and significant cash generation continue to support investment, shareholder returns and strategic flexibility.

So with that, I'm going to hand you back to the operator, who will manage the Q&A session. Thank you.

[Operator Instructions] Our question today comes from Chitrita Sinha from JPMorgan.

I have 3, please. My first question is just on the orders to be delivered in the Middle East. I believe you said, I think, GBP 75 million of orders that should be delivered in H2. Given the present situation, I mean, what are some of the risks to those deliveries in H2? And I guess also the GBP 15 million that you mentioned will be delivered in the next few months?

And then my second question is on Industrial Automation, where in the release, you said that you see modestly higher growth for the year versus flat to modestly higher previously. What are you seeing in this business that has made you incrementally more positive? And my final question is on Transport. The quarter clearly saw 9% organic growth. But as you mentioned, there's some easy comps there. How do you see the underlying growth for the rest of the year? And has that had any impact on the strategic review?

Well, thanks, Chitrita. That's a comprehensive set of questions to start with. So orders in the Middle East, yes, so I laid out a few minutes ago, GBP 35 million delivered year-to-date. Really for us, the key month was April because obviously, that's the one where we've got the current level of disruption, and that's what we based our guidance on for the first half. So what we're saying is that if we look at what we delivered in April, and obviously, the team worked really hard to do that, looking at the orders and the shipments Incoterms -- by Incoterm, considering other ways that we can get the product to customers.

What we're saying is that in May and June, we -- on that basis, we will deliver another GBP 15 million of shipments. That does mean though that GBP 15 million of sales will move from the first half to the second half, and we're now planning on GBP 75 million of shipments into the Middle East in the second half. If April conditions continued, and it didn't get any worse than that or any better than that, then in the full year, there would be about GBP 30 million of shipments at risk in our guidance to give you an overall view. But obviously, what we're all hoping is that conditions improve in the second half and we get back to a much more normal situation.

So hopefully, that answers all the details on the Middle East Chip. On IA, as you know, we look at lots of data. We looked at our 60-day moving average, which is slightly messed around by the cyber incident. It is looking strong versus last year, but you've got to take that with a pinch of salt. In terms of looking at it on an ongoing basis, yes, it's definitely in a better position, particularly in the U.S. And a lot of that's down to improving market conditions, but also the hard internal work that the team are doing to really use data to drive better effectiveness in the commercial area.

So that's why we now think, yes, actually, instead of being flat to modestly higher, IA will be higher. Clearly, PMIs have helped and external data has helped as well. Seeing the global PMI pinch up to 52 is better than it's been for a long time. I mean it's not fantastic. It's not in a real growth territory, but at least it is in a slightly positive situation. Clearly, we have got an eye on the Middle East, and we have taken that into account as well.

And then on Transport, yes, very good start from the transport team, but it was an easier comp exactly as you said, Chit. So again, when we look at the data coming in from customers, we're still maintaining Transport being broadly flat this year. Obviously, if the situation in the U.S. continues to be strong, then that could be revised up. But at the moment, we still think Transport will be about flat. What's really encouraging, and I've visited all of our key factories over the last sort of 6 months or so in transport is the rate of operational improvement.

And the first key sign of that is inventory turns. We're seeing a lot of cash coming out of the transport sector, which is really good as they really start to lean up all the processes. And they've been very good around cost control as well, plus there's some new products coming through at accretive margins. So that's really only just the beginning of that. We're not really seeing much of that new product in the P&L yet. But if you take that over the sort of next 18 months, that will clearly help them move towards their target, which is to match IMI's return on capital employed. So hopefully, that answers all your questions, unless I missed anything.

Our next question today comes from Christian Christian Hinderaker from Goldman Sachs.

I want to start actually on the data center comment in process. I wonder if you maybe you can help with an indication of your exposure there. How do we think about that in terms of pipeline development over the start of the year?

Did you mean in climate?

No, Process Automation. You've called out demand strength from data centers and widespread electrification in the release.

Yes. So as you know, within Process Automation, it's mainly conventional power where we did about GBP 300 million of orders last year, Christian. I mean it's been an absolutely fantastic start in the first quarter. I don't want to get carried away, but new construction orders on conventional power first quarter literally doubled. So it's a very, very strong start within conventional power. Yes. And when you look at our customers, and you know our customers are -- they are calling out very strong order books and our hit rate is very, very high, Christian. So yes, that whole data center sort of value chain, the power part of it is helping both process automation on conventional power, but obviously also climate as well.

And then maybe thinking more midterm around the Middle East or at least operationally, and I appreciate the color in terms of monthly run rates. That's very helpful. But what sort of actual effects are you seeing on customer sites? Is there a lot of shift to care and maintenance? Could that cause risk of increased breakages in your valves and hence, require a bit of an upgrade cycle, assuming that we come out of this at some stage?

Yes, Christian. So obviously a terrible situation in the Middle East. But we are seeing already opportunities to quote for replacement valves, yes. So it's only small at the moment, Christian. I think the bigger effect will honestly be energy -- the effect on energy security, a bit like after Russia, Ukraine, typically, we're sort of a year to 18 months after FID, as you know. But what we saw was a whole wave of increased investment because of energy security. And I just think there are some countries now -- some of the countries with huge populations that are now thinking, okay, they need to diversify their energy.

And I think that will only help what we see as powerful trends in obviously, conventional power, but also in LNG and gas in particular, more generally. So yes, I do agree. I think that in the medium term, there will be another way, both rebuilds and more broadly in terms of energy security investments.

Our next question comes from Stephan Klepp from BNP Paribas.

Can we talk a little bit about the order momentum in Process Automation? I mean, okay, you had high comps in the first quarter. It was down minus 2%. But if I look into the phasing of the last year, Q2 and Q3 have pretty low comps. How do you see orders developing for Process Automation through the year? And obviously, you pointed out power. Should we assume that this simply continues? And then the second question would be on the data center bit in CC, in Climate Control. Can you talk about the order that you're flagging there? What your expectations are for the year? You're coming from GBP 18 million orders in 2025, if I'm not wrong.

Excellent, Stephan. So yes, I mean in terms of Process Automation, we're obviously pleased with the start. I think in terms of new construction, power started really well, as I said, LNG started really well, and we see a very good pipeline in nuclear 7. So pretty much those thematics offset a bit by downstream, but still we expect to make a bit of progress on new construction this year. Then on the aftermarket side, yes, Q1 last year, we were up 19%. I did call it out at the time some big nuclear aftermarket orders if you go back and check what I said in the transcript, clearly, that was going to be a very difficult comparator.

Despite that, we're only 1% down in aftermarket. So yes, very pleased with the start. We had a detailed review with the team. And yes, the aftermarket outlook still looks good. Luke has done a bit of analysis. Do you want to talk about?

Yes. So the analysis we looked at for the first quarter in aftermarket, if you sort of strip out the impact of nuclear in the first quarter and normalizing for the Middle East, our underlying growth is around about mid-single digits. So we feel really good with how that starts playing out for us.

So in good shape, Christian, and then on the data center side in climate, yes, I mean, we've gone from nothing sort of 3 years ago as you said, 18 million last year, and it doubled last year, more than doubled last year. This year, for Q1, very good again, Stephan. So yes, I would think it will be something like 50% up. It's obviously the pipeline, and we'll see how fast all of that comes through, but something around 50% up this year would be sensible, I think, Christian. So yes, really, really quite strong.

Yes. Through Stephan, but it's okay. What about the verification process with those large consumers of the liquid cooling? Are you making any progress there? And then sorry, one add-on. You've talked about the shipments in the Middle East quite a lot and the team put a lot of effort in. Has that increased the margin situation because you had extra cost to deliver to the Middle East?

Sorry, Stephan, your line was a little bit late. Has the shipments to the Middle East changed the margin situation? Is that your question?

Yes, that was one of the questions because you said you put a lot of effort into getting shipments out, was that at higher cost and that impacted margins?

No, it's immaterial, Stephan. Yes. There's been a bit more airfreight and all that, it's around the edges. And margins are pretty much exactly where we expected them to be. So I don't worry about the margin. I think in terms of liquid cooling, Luke, do you want to talk about that?

Your question just about -- could you just repeat it again, as Roy said the line was very muffled on our side.

I'm sorry, yes. So I was asking, you are in those verification validation processes with some big consumers of liquid cooling. Is there any progress on that front as well that you can report about?

Nothing specific, but we are still working on that, and we'll come back.

Our next question comes from Jonathan Hurn from Barclays.

Just 2 questions from me, please. Firstly, can I just come back to the GBP 30 million of shipments that are potentially at risk for this year. Can you just talk about the margin of those orders that are at risk? Is that pretty much in line with the process average? Or are they higher or lower? That was the first one. And the second one was just coming back to your comments on conventional power. And obviously, you talked about a really high hit rate. Can you just give us some more information on that really, just in terms of sort of the stuff that you're tendering for, how much you're winning your success rate?

Yes. I mean, obviously, it varies slightly by customer, but it's Yes, a very high hit rate is what I'm going to call it, Jonathan. We really -- I was in South Korea a few weeks ago, and the factory there is quite frankly awesome, Jonathan. Really, the level of continuous improvement and therefore, competitiveness out of there and to be fair out of our other factories is now, I would say, really truly world-class. And yes, our hit rate is very, very high in power. And that's partly the service we're offering and obviously partly the technology that we have.

In terms of margins on the GBP 30 million that potentially might not get into the Middle East, again, it's around the edges really, Jonathan, but it would be slightly lower than Process Automation average because obviously, that is mainly the bigger new construction valves. And you know that aftermarket on average, margins are more than double what they are in new construction. So I'm sure that will help you with your modeling to stay with your maths, Jonathan.

Perfect. Very clear. And maybe just one sort of follow-up on the margin. Just obviously, we've got that sort of increased cyber spend coming into the profit bridge for this year. Is that going to be more H1 weighted? Or is it going to be equal sort of H1, H2?

Yes. Well, it's -- Jonathan, if you think about we started to put the investments in the second half of next year -- of last year, not next year, and the second half of last year in a meaningful way. So the comparator is going to be harder in the first half than it's going to be in the second half on that investment.

Our next question comes from the line of Kulwinder Rajpal from AlphaValue.

So the first one is on Climate Control. I recently read on EHPA that heat pump demand has been temporarily up in certain geographies in Europe, particularly in Germany. So I wanted to understand how could that translate into demand for you in Climate Control in particular? Secondly, on pricing. So you clearly mentioned in the press release that you'll be able to pass on prices to customers. So I wanted to understand what is the lag? Is the pricing immediately passed through to the customers? Or is there a particular lag that we are looking at? And thirdly, on M&A, what's the pipeline currently looking like? And if you were to do any M&As, which areas would you be targeting? Because it's been a while since we had any addition to the portfolio.

I can pick in there. So on the first question, so you mentioned a bit about improving demand in heat pumps in Europe. I think I'll just remind everyone that we tend to be pretty agnostic to the heat source, whether it's a gas boiler or a heat pump or so on, as long as there's water in the system. Heat pumps are usually slightly beneficial for us in terms of the fact that they operate within a narrower temperature range, the balancing and control becomes even more important, which is great. I would say no significant impact on demand in the quarter as a result of that for us.

So I think overall, just the broader drive for energy efficiency, particularly when energy prices are increasing in Europe at the minute, is what's been a demand driver as well as the data centers that we've talked about. I'd say for us if you look at our business historically through recent inflationary times, we've been very disciplined and good at putting pricing through into the market. As a reminder we're always usually a single-digit percentage cost of the system that we go into, but a very crucial part in that system. Just depending on the end market that we're selling into, this is across all of IMI, there could be something like a 30 or 60-day lag to put pricing through where you have agreements, things like that, with customers, but not too long in general.

And then your last question was just on the M&A pipeline. M&A pipeline still look good. We're still spending a lot of time investing energy into that and looking for the right targets for us with the right returns. I think really for us, there's probably two easy ways to think about the key things in the pipeline. We like things like severe service valve companies that have underserviced aftermarket, that's a key area for us to look at and that play in niche applications that would really suit the rest of our portfolio. All we really like wonderful technology adjacencies. I would give TWTG acquisition we've already done as a great example.

It's a sensing company, it's a fantastic company, and it's enabling us to generate more opportunities within the aftermarket, within Process Automation. So things like that that we're looking at.

Our next question comes from Lacie Midgley from Bloomberg Intelligence.

Already actually really helpful on the Middle East color. But just looking at the pipeline comment slightly differently, just a couple of follow-ons on that. When you say it's strong, can you just quantify whether that means projects, larger projects, higher probability weighted value or better win rates? And within that, obviously, data center exposure is becoming increasingly important for you. Assuming orders here are more project-based lumpy than the traditional HVAC business?

And lastly, just you touched on it briefly earlier on, I think, but how should we think about the backlog conversion timing and margins for those data center orders, that would be helpful.

So Lacie. Just I'm absolutely clear. Are you talking about the pipeline of power orders in Process Automation? Or are you talking about the data center orders in climate control?

I guess both. I mean, first, I guess, is more important from a front end perspective, I guess the first, but maybe comments on both.

You're absolutely right, Lacie. I mean that's the big effect at the moment. And it's big because, obviously, of the new construction orders. But, what I really like about those power orders in Process Automation is that once we have installed those severe service valves. Then for years and years and years, that gives us a recurring revenue of aftermarket. And that really is valuable in terms of driving overall economic profits for a very long time and obviously cash generation. So yes, when we look at that pipeline then, I think, we've had a big increase over the last, let's say, five quarters in new construction power orders.

What we still think though is that as we talk to our customers that are actually building these combined cycle gas power stations, that they can only build them at a certain rate. If you look, you can see, I won't mention their names, but you can see some of their press releases. Their book-to-bill is historically high levels, right? The ability to actually build them is obviously controlled by the ability to get skilled labor resolve all of the supply chain, all of that. So yes, there'll be an increase in the build rate that has to be, but it will be moderated by those things.

So what we actually see is, which we prefer, a sort of sustainable growth trend, which should be over the next several years, Lacie. So yes, it's a good pipeline for us. We've got very high hit rates. The real cash generation comes with the aftermarket for many years. That's what we really like about that part. As you say, I mean, that was GBP 300 million last year, of which 75% was aftermarket, right? So yes, that's a great situation. On the other side, which is the Climate side, I think you said it might be a little bit more lumpy. The orders there, they are a little bit more lumpy than normal Climate, but we're talking lumps of sort of GBP 6 million, which at an IMI level, at that sort of quantum, Lacie, it's nice to have rather than a problem, I would say. Right?

And what we see there is, as I said, the orders last year -- sorry, sales last year were GBP 18 million. We'd expect that to increase by about roughly 50% again this year off a very fast ramp-up. Really good and we're obviously investing more in resources, dedicated data center commercial resources to really help us accelerate that journey. And Stephan earlier was talking about some of the things that we're doing that will take a bit of time, but then could unlock even further growth as well, Lacie. So yes, we're very excited about that whole data center value chain. I mean, just to put it in a sort of sentence, for IMI, the resulting energy demand and the resulting requirement for energy efficiency, which is obviously Climate Control, affects about 50% or slightly over 50% of IMI's total business. So for us, this is an exciting sort of thematic growth driver.

Our final question comes from Richard Paige from Deutsche Bank.

Just a nice straightforward simple one for me, hopefully. Just on the -- you've said a lot about Process Automation, some expectation shift in the second half. We've obviously also got the Truflo Marine disposal. I assume that's still on track for the mid part of this year. But I just ask about, is there anything unusual in the second half weighting and in terms of profit that we should expect here? Or should it be a more typical IMI year, please?

Yes. I mean I think you've obviously got to strip Truflo Marine out from the half year. Clearly, that's just going through the last sort of approvals. So really, that's that's obviously not in our control, but we still expect that to happen about the midyear, Richard. So you've obviously got to strip that out, and I'm sure everybody is sensible strip out their numbers already for the second half. You are right though, Richard, to point out, it would be a normal year for us, sort of GBP 45 million, GBP 55 million, bang on normal, except for that GBP 15 million. And our base case is that GBP 15 million shipments in Process Automation, as I said, moves into the second half. So apart from that, bang on.

With that, we have no further questions in the queue.

I believe that's the last question.

Yes. I'll hand over to you for closing remarks. Thank you.

Well, thanks, Drew, for organizing that, and thanks, everybody, for attending. In summary, it was a very good first quarter for us. We're on track to deliver our sixth year of mid-single-digit growth. And the quality of our earnings is good. This is a point Luke made to me the other day, which is really important. You can see now a really strong drop-through to free cash flow in IMI, and that is obviously giving us plenty of optionality.

The pipeline for acquisitions is good. You all know we'll be incredibly disciplined about that. They will tend to be bolt-ons, and we will be looking for good returns. Absent that, there will be more returns to shareholders. So with that, I thank you all again, and wish you a good Q2. Thank you.

Thank you all for joining. That concludes today's call. You may now disconnect your lines.

Good morning, everyone, and welcome to IMI's 2025 Full Year Results Presentation. I am joined here today by our CFO, Luke Grant. Together, we will take you through another year of strong strategic and financial progress. And I would like to begin by thanking all of our people for their tremendous contribution.

The execution of our growth strategy is creating significant value for shareholders, and it was another strong performance in 2025. We have now delivered 5 consecutive years of mid-single-digit organic revenue growth and supported by the delivery of our financial framework, we are compounding earnings growth. We delivered 5% organic sales growth and 8% organic adjusted operating profit in 2025 and achieved a 20% operating margin for the first time.

It was another year of strong cash generation, and we are committed to deploying this capital for growth and to enhance shareholder returns. Organic investment is at record levels, and I am pleased to be announcing a GBP 500 million share buyback alongside a proposed 10% increase to the final dividend.

We expect to deliver our sixth consecutive year of mid-single-digit organic growth in 2026. And based on current market conditions, full year adjusted basic EPS is expected to be between 136p and 142p.

IMI has been fundamentally transformed since our growth strategy was launched in 2019. With our world-class engineering expertise and our relentless focus on commercial excellence, we are well placed to address our customers' needs for bespoke, high-value add fluid and motion control systems. Supported by 3 long-term megatrends, energy, automation and health care, and our focus on the attractive aftermarket, we are compounding EPS growth.

Thank you, Roy, and good morning. I'm pleased to be able to take you through our 2025 performance today. Our One IMI operating model continues to drive consistent compounding results and 2025 was another strong year.

Revenue increased by 5% organically, adjusted operating profit increased 8% organically and our adjusted operating margin increased by 30 basis points to 20%. Adjusted basic EPS was up 8% year-on-year. Cash conversion remains strong and we are proposing a further 10% increase in the final dividend, reflecting our confidence in the business.

As Roy mentioned, we delivered our fifth consecutive year of mid-single-digit organic revenue growth in 2025. Organic revenue grew by 5%, partly offset by the impact of foreign exchange and recent disposals. Adjusted operating profit increased to GBP 460 million with organic operating profit up 8% year-on-year.

We have made significant progress delivering sustainable improvements in our margins since launching our strategy in 2019. Our margins are now at 20%, which is 580 basis points higher than 2019, alongside the record levels of investment we are making in our business. This is an important milestone and we expect to deliver further progress over the coming years, driven by growth in our attractive end markets, strong pricing power and continued progress in the high-margin Aftermarket.

While we will be making the previously communicated cybersecurity investments in 2026 to further enhance the resilience of the business, our strong operating leverage means we still expect to deliver a drop-through of around 30% over the medium term.

Turning to the income statement, we saw strong organic revenue and profit growth in the year. The net interest charge was GBP 17.7 million and the tax rate increased to 25.4%, in line with our guidance.

Now, as you may be aware, IMI's multiyear restructuring program completed in 2024. This program transformed the business, streamlining our global footprint and laying the foundations for future growth.

Our focus is now on continuous improvement. And while we continue to look for efficiency opportunities, the costs associated with our current business are now being taken into our underlying results rather than as an adjusting item. Adjusted basic EPS increased by 8% to 132.3p in the year.

Now looking at the performance of the platforms and sectors, which was in line with expectations, Automation delivered strong growth with revenue up 8% organically. Process Automation had an excellent year, delivering strong order intake as shown at the bottom of the slide.

Adjusting for the planned disposal of Truflo Marine, orders were up 5% organically with particular strength in conventional power and nuclear, which Roy will cover later on. We made further progress in the high-margin Aftermarket, where after a very strong fourth quarter, full year orders were 11% higher than 2024 and 9% higher after adjusting for Truflo Marine.

Organic revenue was 12% higher than the prior year, and the order book was up another 2%. Industrial Automation delivered a resilient performance despite uncertain markets. Organic revenue was 1% lower year-on-year.

Turning to Life Technology, where organic revenue was 1% higher than 2024. Climate Control delivered another good performance with revenue up 5% on an organic basis. We saw continued demand for our products that reduce energy consumption in buildings and benefited from our growing portfolio of smart connected products, including those supporting advanced cooling technologies in data centers.

Life Science & Fluid Control was flat organically in 2025 as the global life science device market began to stabilize. Transport organic revenue was 6% lower than 2024, in line with the global heavy-duty truck market.

So continuing to the cash flow, where we delivered further improvements during the year. Supported by our strong profit performance and great working capital management, I'm incredibly proud of our operational and commercial teams delivering a GBP 3 million working capital inflow in the year whilst driving another year of mid-single-digit organic revenue growth with debtor and creditor increases in line with growth more than offset by a GBP 31 million reduction in inventory.

With the restructuring program now completed, we are making good progress reducing safety stocks across IMI. Inventory reduction also benefited from the ongoing strategic review of transport, where we are delivering significant operational improvements in line with our plan.

The review of transport is progressing well. We are clear that any outcome must deliver compelling long-term value for shareholders. And in the current market environment, continue to see further opportunities to strengthen performance within the group while continuing to assess all strategic options.

Capital expenditure remains at record levels as we continue to invest right across IMI for future growth. We expect CapEx to depreciation to be around 1x to 1.2x over the medium term.

Free cash flow increased to GBP 290 million and we returned GBP 281 million of this to shareholders through dividends and our share buyback program. Our net debt has reduced to GBP 533 million at year-end and net debt-to-EBITDA at 1x is at the bottom of our target range.

I am also very pleased to report that after a tremendous amount of hard work from our team over the last decade, we have now completed the final buyout of our U.K. pension scheme. This is an important milestone for IMI, and I would like to thank everyone involved for their significant efforts.

IMI is a highly cash-generative business with a clear and disciplined approach to capital allocation, prioritizing investments in our people, processes and operations that accelerate organic growth. We remain committed to a progressive dividend. And as mentioned, I'm very pleased to be recommending a 10% increase to the final dividend.

We will also pursue bolt-on acquisitions that enhance our positions in attractive, long-term growth markets. We have deployed over GBP 400 million in bolt-on acquisitions since 2019 while increasing our fully burdened return on invested capital by 260 basis points to 14%.

TWTG, a leading sensor solutions provider, acquired for EUR 25 million in October 2024, is now integrated into IMI. TWTG's differentiated product portfolio has greatly expanded our asset monitoring offering, providing us with the opportunity to accelerate Aftermarket growth even further.

Our M&A pipeline remains strong, and we will continue to seek attractive bolt-on acquisitions that accelerate organic growth and expand our capabilities while delivering returns in line with our strict financial criteria. Finally, we will look to return surplus capital to our shareholders should net debt-to-adjusted EBITDA fall sustainably below our 1 to 2x target range.

We completed a GBP 200 million share buyback in July and are pleased to be announcing a further GBP 500 million share buyback today. By deploying our growing free cash flow into organic growth opportunities, attractive acquisitions and value-enhancing share buybacks, we are confident we can continue our track record of compounding EPS growth.

We are very excited about the opportunities for growth at IMI and expect to deliver our sixth consecutive year of mid-single-digit organic revenue growth in 2026. Based on current market conditions, we expect adjusted EPS to be between 136p and 142p. This guidance assumes that Process Automation will grow mid- to high single digits, supported by the record order book.

Industrial Automation is expected to deliver another resilient year with organic revenue flat to modestly higher. We see continued good demand in Climate Control and stability within Life Science & Fluid Control with some growth in our Life Science business. Transport is expected to be broadly flat, in line with the global heavy-duty truck market.

We expect the adjusted operating margin to be flat to slightly up, with strong operating leverage offsetting the previously communicated cybersecurity investments. Our guidance assumes that the disposal of Truflo Marine will complete in mid-2026.

We are assuming a net interest charge of GBP 20 million, that our tax rate will increase to 26.3% and our weighted average number of shares of 238 million following a GBP 500 million share buyback. Foreign exchange rates are not currently expected to have a material impact on sales or profits.

With that, I'm going to hand over to Roy, who will talk you through the strategy update.

Over the last 6 years, we have focused on aligning our business to 3 long-term megatrends: energy, automation and health care. These structural drivers provide us with significant opportunities to create long-term value and will underpin the delivery of profitable growth in the years to come.

IMI is a global leader in fluid and motion control with a compelling value proposition. Our solutions typically represent a small part of the total system cost but have a significant positive impact on end customer outcomes. This drives growth, customer loyalty and strong pricing power.

We are well placed to support our customers in the attractive Aftermarket, which represents around 45% of IMI sales. Our business is aligned to long-term megatrends and is built on the strength of our One IMI operating model.

By applying a consistent approach, rooted in commercial excellence, market-led innovation and continuous improvement, we are creating significant value for shareholders. Our people and performance culture are the foundation of the One IMI operating model, and we have worked hard to build a culture of ownership, of customer focus and of innovation.

We are making significant investments in our people to help them grow, help them develop and create value for customers. Adopting artificial intelligence has been a key priority, and we are rolling out exciting new tools and platforms across IMI.

I'm pleased to report that over 2,000 of our colleagues have now completed our AI training. These investments are delivering tangible benefits. Employee engagement remains very high, and our productivity continues to improve and has increased by 31% since 2019.

Over half of IMI sales are directly supported by rising energy demand and energy efficiency, and I wanted to share a few examples of how this long-term megatrend is supporting sustainable, profitable growth.

As many of you may be aware, IMI is a key supplier to the large gas turbine OEMs. And we benefited from very strong demand in conventional power during the year. Order intake in the high-margin Aftermarket was up 16% organically and new construction was up 32%, with strong momentum driven by widespread electrification and the need for stable, reliable energy to power data centers.

Our customers now have significant multiyear order books, and we feel positive about the opportunities for further growth. We also saw a resurgence in demand for our solutions for the nuclear market during 2025. Plant life extensions present a significant opportunity for IMI, and we saw very strong growth in the Aftermarket where orders were up 33% organically year-on-year.

Thirdly, LNG. While IMI's fluid control solutions play a key role across the LNG value chain, we are particularly excited about the significant opportunity to support the liquefaction capacity additions in North America. We have strong customer relationships, leading technology and we see a clear opportunity to deliver growth.

Finally, how the rapid expansion of data centers is not only driving energy demand, but it is also presenting an exciting opportunity for Climate Control's energy-efficient fluid control products. Our innovative solutions can play a direct and key role in the liquid cooling systems and we more than doubled our order intake to GBP 18 million in 2025 with a global pipeline of opportunities that continues to expand.

We have an outstanding culture of customer-led, market-driven innovation at IMI. Grounded in deep customer insight and executed through our entrepreneurial Growth Hub model, our innovations solve complex engineering challenges.

Our teams utilize a disciplined test and learn approach to quickly validate solutions and validate market potential. Through this process, we maximize our return on investment by bringing products to market once customer endorsement has been secured.

Our methodology continues to evolve, and I am particularly proud of how we are now using artificial intelligence to help identify and validate Growth Hub opportunities even faster and with greater precision. We launched Growth Hub across IMI in 2019 and delivered a record GBP 206 million of orders in 2025, up 38% on 2024.

I also wanted to spend some time this morning highlighting the key role that Process Automation looks set to play in the energy transition. Process automation represents about 40% of our revenue and overall orders have grown at 8% CAGR since 2020.

New Construction represents about 40% of Process Automation. And as you have seen earlier in this presentation, there is renewed momentum across our end markets, principally driven by electrification and data center investments.

Adjusting for the disposal of Truflo Marine, over half of our New Construction business is directly exposed to gas, power, nuclear and hydrogen. We are very encouraged by the outlook for these markets. They support our medium-term growth ambitions. And importantly, expand our installed base, driving the Aftermarket and supporting long-term profitable growth.

Aftermarket orders now represent over 60% of Process Automation. And as you can see on this slide, orders have grown at an 11% CAGR since 2020. We actively track over 200,000 severe service valves in our own installed base, where our parts, upgrades and services are absolutely mission-critical to plant safety, efficiency and profitability. By working closely with customers to maximize uptime in their most critical applications, we build long-term relationships and secure recurring high-margin revenue.

IMI has been fundamentally transformed over the last 6 years as we built a track record of compounding EPS growth. We have delivered average organic growth of 5% over the last 5 years, supported by our leading positions in attractive long-term growth markets and our success in driving commercial excellence and market-led innovation.

Our adjusted operating margin is now at 20%, 580 basis points higher than in 2019. This continued progress reflects our strong operating leverage, our focus on the high-margin Aftermarket and the final benefits from our restructuring program. We aim to deliver further margin progression in the medium term, supported by the growth in our attractive markets.

Cash conversion remains high at 96%, and as Luke has outlined, we are committed to deploying this cash to accelerate growth and enhance our shareholder returns. Our fully burdened return on invested capital has now increased to 14%, significantly higher than our 12% underpin and our weighted average cost of capital.

So to summarize then, we are very proud of the achievements in 2025. Organic revenue grew by 5%. The operating margin is now at 20%, and our organic operating profit grew by 8% with strong cash conversion.

So the key takeaways are: firstly, our growth strategy is compounding earnings growth; second, in line with our disciplined approach to capital allocation and commitment to value creation, we are announcing a GBP 500 million share buyback in addition to the 10% increase in the final dividend; thirdly, we are targeting a sixth consecutive year of mid-single-digit organic revenue growth in 2026, and based on current market conditions, we expect this year's full year adjusted EPS to be between 136p and 142p; and finally, I would really like to take a moment to thank all of our people for another great year.

We are looking forward to another year of progress in 2026. Thank you. I'm now going to hand over to the moderator for the Q&A.

[Operator Instructions] Our first question comes from Lush Mahendrarajah from JPMorgan.

I've got 2, I think, both on process. The first is just a clarification on sort of Q4. It looks like you saw a quite steep acceleration in order momentum. Could you just sort of quantify that, particularly what you saw in New Construction and in Aftermarket? And just within, I mean, I'm guessing it's power, nuclear, et cetera, but just sort of the key drivers? And is there any sort of big orders in there? That would be helpful.

And the second question is on power and nuclear. Just how we think about lead times when you get an order, both for New Construction and Aftermarket? Obviously, some of your customers are taking orders throughout the year. Just trying to think about a lot of those orders for delivery in the sort of coming 12 to 18 months? Or do you have to think longer than that?

Yes. Thanks, Lush. I think I've got those questions. The line wasn't brilliant. So I think the first question was on Q4 Process Automation orders. Yes, as you said, they were really strong. So overall Q4 Process Automation orders were up 26%. When you break that down, New Construction was up 36%, but I always say this is not really a quarterly business.

And within that New Construction orders increase, there was a big nuclear order. And as you know, nuclear new construction, you get a big order. This was a big order for strainers, flow control strainers that go into an installation in the U.K. So great news that we won it, but they are lumpy at the moment. I do expect over time, over the next few years, nuclear new construction to increase, but it will take time.

On the Aftermarket side, yes, really good news because orders were up 20% as well in the Aftermarket in Q4. And I think, again, the way I look at that is Aftermarket orders for last year as a whole were up 11% again. And that, of course, is great news and really testament to Jackie, Roby and the teams and the investments we're making to drive that Aftermarket higher.

I think you fully understand, Lush, our upgrade valve strategy, and that's paying dividends again. And then once we get those upgrade valves, there's a long stream of that beautiful parts business recurring revenues that we get from that. So yes, a good strong quarter.

I would say for Process Automation, again, we said in the presentation that if you take Truflo Marine out, and we still expect to sell that, as we said, by the half year, get that completed, then last year's orders were 5% up for Process Automation, and we're guiding this year for sales to be sort of mid-single digit to high single digit up, something around 6%, 7%, something like that, we think is sensible for sales for Process Automation for this year.

So yes, good news on Q4. In terms of power, power was very strong for us last year. So the power segment was up to just under GBP 300 million of orders for Process Automation, 75% Aftermarket. And that whole segment was up 20% on the year before. The new construction part of power was actually up 32% last year. So yes, we're seeing an increase coming through for orders on those gas turbines you talked about, in particular, and that's obviously great news.

What I would say is, ultimately, the order rate though is going to be defined by how quickly the OEMs, those big OEMs you're talking about, the big gas turbines can actually build these power stations. So we see how that goes over time.

Typically, our lead time typically was about 6 months afterwards, they give us an order. I expect that will probably go out, Lush, because they've got multi-multiyear order books now. So it's great news for the sort of longer term, but yes, 32% up last year, I'm not sure we'll repeat that or anything close to it this year, but we still expect growth, obviously.

Did that cover your questions, Lush?

Yes, that did. Appreciate the color.

Our next question comes from Christian Hinderaker from Goldman Sachs.

I want to start on Process Automation. I think you had GBP 102 million of LNG orders. That's about 9.5% of order intake overall. I wonder how we should think about your oil and gas exposure in the context of the recent price spikes and obviously, geopolitical challenges. I appreciate it might be an initial view, but how are you impacted there? And is any of your installed base directly affected by recent events? That's the first one.

Yes, nice one, Christian. Good question. Yes. So LNG, you're absolutely right, it was up again last year to GBP 100 million. 40% of that is Aftermarket. More broadly, oil and gas, upstream midstream was up 12% to about GBP 130 million. 40% of that is Aftermarket as well, Christian.

In terms of the Middle East, in total, it represents about 6% of IMI sales. And the vast majority of that, as you expect, is in Process Automation. I think we're going to see a bit of sort of short-term volatility. Obviously, the good news about Process Automation is the order book, particularly the Aftermarket order book that's underpinning where we think it will be this year. We do expect a bit of midterm volatility.

And obviously, our thoughts go to everybody in the Middle East and everybody that's affected. As you can expect, we put maximum security protocols in place, and we're in touch. We've got about 60 people there. We're in touch straight away over the weekend.

So aside from that, short-term volatility in terms of the business and then normally, people's minds turn to energy security. And if you look at other recent events, then you would expect that will lead to further investment at some point, Christian. But clearly, we know that all takes time. So yes, we're happy with where we are with our guidance. And clearly, we're watching closely for the effects of what happens in the Middle East.

Maybe on Life Tech then, if we can look at the drivers in the bridge, particularly in H2, I appreciate year-on-year revenues were sort of flat and the margin accordingly. But how do we think about the margin here? Because, I guess, consensus was a little out in front relative to the 18% or so. Are there any incremental savings we can expect for the segment? Or is it all about growth in 2026?

It's mainly about investment and growth, Christian, is where we are. So if you think about the sort of constituents of that, we expect another year of good growth within Climate. We grew at 4% in the second half of last year. It seems a reasonable place to start, probably a little bit second half loaded in Climate this year.

But overall, we expect another good year driven by the need for the energy saving products and of course, the demand for the data center products as well. So I think Climate is in good shape. Margins are coming through nicely.

Life Science & Fluid Control, I think Life Sciences is starting to show a little bit of growth, which is good. The Fluid Control part is more into industrial markets. And we are not expecting anything fantastic out of industrial markets this year.

Of course, we've all seen PMIs going up a bit. Normally IA and sort of Fluid Control will follow PMIs 3 to 6 months later. I think you know that, Christian. But we're just making sure that we want to see that in our orders before we start committing that in our outlook.

So overall, Life Science & Fluid Control, we probably carve out a little bit of growth this year. Transport, we put basically in line with the global heavy-duty truck markets that we serve and think that's going to be about flat.

So I think in terms of -- and again, as I said earlier, the Transport team, the passenger car team that came in 18 months ago, doing a great job of leaning that out, driving stock turns up, getting the cash out of the business. So I think -- I wouldn't expect anything stellar on margins across IMI this year because of the extra investments we're putting in place.

And I flagged those back in November. We're investing in the business, and we're investing particularly we're upping our investment in cybersecurity, which we see our base case is that will step up in terms of investment. It started in the second half of last year actually, but go through this year.

And then we would expect that to be the new run rate, unless, of course, the bad guys get increased tech and we're forced to invest incrementally again. But our base case is not that, Christian. Our base case is this year, profits move more or less in line with sales, organic sales, but then we get back to our sort of 30% drop-through in the years beyond that and margins start to accrete again. That's our base case, Christian.

Our next question comes from Jonathan Hurn from Barclays.

Just a few questions from me, please. The first one is on process. Just in terms of the pricing in our business, and particularly for nuclear and conventional power and focusing on gas, I mean, what are we seeing there? Like you say, strong demand? Are you also seeing positive pricing? Are you getting better pricing for that? That was the first question. Maybe we'll start there.

Yes. Well, thanks, Jonathan. Yes, so on the New Construction side on pricing, I would say margins are reasonable. They're sort of slightly above where they were last year on our New Construction side, but nothing -- no real move yet.

What tends to happen, Jonathan, I'm just thinking, the last time we saw this when particularly oil and gas at the time really took off and once capacity in the industry fills up, and we're still away from that. I mean, certainly, we've got plenty of capacity, which is the good news. But we're still away from the capacity of the industry filling up.

So I would say, yes, I mean, if it continues at this rate, and they find a way to accelerate -- really accelerate the production of these plants, that could well happen. But I'd say pricing is slightly better across New Construction for us in the order book, but nothing huge at the moment, Jonathan.

Okay. Very clear. Second one is just on Transport, like you say, the guys are delivering in terms of the turnaround. Just in terms of your view there, is there anything you can say? Are you more inclined to keep that business going forward? Any sort of comment there would be helpful.

Yes. I think Transport, as I said, is very much an internal focus at the moment. Really pleased with what the team are doing. As I said on the last call, Jonathan, we're really focused around getting the return on capital employed in that sector in line with IMI as an average.

I think if they can do that, yes, it will mean the margins are slightly lower, but we have to be a bit realistic about this. What they're doing in terms of driving working capital turns is really quite exciting.

And the plan hasn't changed. It's all around driving the new product introduction, driving the lean initiatives, continuous improvement really, really hard, exiting some of the lower-margin business that basically on a risk-reward basis doesn't make sense for us. And overall, really improving the position of that business. So very much focused on that.

As you know, the North American market, in particular, has been very difficult for heavy-duty trucks in the second half of last year. There's some early signs that might be improving. But 2 months don't make a spring or certainly don't make a summer. So until we see a sort of sustained improvement, we're very, very much focused internally. And we'll make the right decision for shareholders in the medium term if things improve in that market.

Very clear. And then maybe just one last question. Just in terms of M&A, obviously, in your presentation, you talked about it quite a lot. But if we kind of look back, there really hasn't been a big deal since Q4 2022. I mean can you just talk about what's happening there? I mean, you normally sort of do a reasonably sized large acquisition probably every sort of 2 years, but obviously, that hasn't happened. Just comments there, why we haven't seen sort of more M&A coming through?

Yes. I mean it comes down to our discipline really, Jonathan. We've always said that the #1 priority is organic growth, right? And we -- you understood right from the beginning that strategy and growth, I mean, I'm just so pleased with where our innovation was creating minimal growth last year to get GBP 200 million or over GBP 200 million of orders from business that we didn't even have pre 2019.

It's just been a marvelous result from the Growth Hub teams. And we're just taking that to another level. Now we're doing these completely cross IMI multisector sprint team pitches. We just have one in Asia. We're going to have another one in the U.S.

So it's just a joy to behold how much validation of customer problems, customer willingness to pay, very fast test and learn, solution development, including, as I said in the video, we're now using an AI agent as the fifth dragon, I hate calling it dragons actually, but the dragons of the picture are really helping the thinking of the teams to really try and create the most robust business case that we can as early as possible, before we've invested much money, to really test the market, test product market pull.

And that, as you know, that's all part of the overall game plan of saying right, how do we really consolidate organic growth around mid-single digit, drive earnings growth and make sure we compound every year, as we have done for the last 5 years, as we want to do for the next years and beyond that, right, hopefully, for many, many years to come.

So that's been the overall game plan. Then what we've done is, say, okay, some nice bolt-on acquisitions. And TWTG, as Luke said in the presentation, is a great example of where we've added sensing capability, which in the long term will help us drive Process Automation, Aftermarket growth even more, right? And it's a great acquisition of a fantastic technology, and we're really excited about where that's going.

So yes, when the Growth Hub team say, here's a customer problem that will be enhanced through a bolt-on, exactly as TWTG was, that was found through the Growth Hub capability, and we can buy at a sensible valuation because remember, we're looking to get above our cost of capital within 3 years, and then we're not looking to be materially dilutive to IMI's underpin, the 12% ROIC, which is a harsh ROIC measure with everything in the denominator within 5 years, right?

And that's easy to say. But that's not easy to do, right? So that's what we're looking for in acquisitions. Last year, we walked away from several. Our acquisition pipeline looks good, and I have to say there's some interesting things in there, but we're not going to overpay to the point that we can't get decent shareholder returns. We're very proud of our returns track record, and we certainly want to maintain it, Jonathan. So that's where we are on acquisitions.

[Operator Instructions] Our next question comes from Mark Fielding from RBC.

In terms of -- I want to talk a bit more. You touched on pricing, but can we take a wider comment on how you see pricing across the business? And in that context, cost inflation, I suppose I'm thinking about some of the metal prices rises, how that might, in fact, impact businesses like climate, but also probably equally thinking about how IA last year probably had positive pricing, so volumes were even a bit lower and just how you think about these things evolving into 2026?

Yes, I don't mind taking that one. I think across IMI last year, pricing versus volume was about half and half. So we won't go into sort of all the different specifics within the sectors, but I think we did a good job of winning the sort of price inflation equation as we look back into last year.

And I think as we look ahead into this year, we would think about a similar sort of ratio. Clearly, if inflation pushes up on things like copper, our track record, our history of being able to push pricing through the market in high inflationary environment has been good.

And that always comes down to that fact that we're using that single-digit percentage cost of a system but a key component in the system. So we're just watching the inflation on things like copper and anything that might come out of the conflict in the Middle East, and we'll go to the market if we need to on price later in the year.

Great. And I'm going to really cheekily ask a really short second question despite your nice lady just asking me to ask one. But can you just clarify in terms of your EPS guide, does that assume the full GBP 500 million buyback completes in the year or -- just so we understand what you're thinking there?

It's right. So as we said, we're assuming the Truflo Marine disposal completes in about the middle of the year, and we assume the GBP 500 million share buyback, I think completes towards the end of the year.

Our next question comes from Kulwinder Rajpal from AlphaValue.

So just wanted to clarify a bit on the power business within PA. So I apologize if I missed it. So when we think about the power business, is it entirely combined gas cycle business for you? Or are there other components in it as well? And when we think about the cyclicality or the lack of orders that is coming in the New Construction, is it fairly correct that there is no lag? Or is there a certain amount of lead time that is there in that business?

Thanks, Kulwinder. Your line is not great either. I think what you said is, can you describe a bit more about power business within Process Automation, how much of it is combined cycle and then talk a bit about the lead times, is that right?

Yes.

Yes. Okay, Kulwinder, yes, got it. As I said, the power segment was just under GBP 300 million last year. 75% of that is Aftermarket. Of the New Construction part, over half is combined cycle gas. There's other things in there as well.

There's things like molten salts, the solar systems. There's some coal-fired power in there, which is still reasonably strong in places like China and India as well, Kulwinder, on the New Construction side and on the Aftermarket side.

And as I said earlier, Kulwinder, the lead time typically is about a 6-month lag. It has been historically from when we would see the orders from the OEMs, right? But that is likely to be going out now because they've gone from, let's say, a normal demand level or even a low demand level to a very, very high demand level and their order books have gone to multiyear order books now. So I'm sure that, that time will go out now. But historically, it's been about 6 months.

Our next question comes from Harry Philips from Peel Hunt.

Just a question on Growth Hub and broader new product development, please. Just thinking about how more rapid, if you like, the time to market Growth Hub is given it's more customer focused? And then given that sort of collaboration with the customer, the margins are, therefore, a little bit higher than they would be on a more sort of traditional new product launch. And then just I missed the Truflo ex or process ex Truflo orders on the organic basis. So just repeating those could be very helpful, please.

Thanks, Harry. Great. Luke, do you want to do the Truflo -- ex Truflo?

Overall, ex Truflo orders are up 5%. New Construction was flat and Aftermarket was up 9% all excluding Truflo last year on orders.

Yes. So again, I'd say our typical profile really over the last few years, very strong Aftermarket, holding our own on the OE side. So that said, Growth Hub, Harry, I think you know I can talk for a very long time on Growth Hub. I'll try and keep it short.

So you're absolutely right on both things. But the fundamental thing about the spirit and the culture of Growth Hub is, number one, proper customer intimacy. In other words, really understand the acute customer problems that the customer is prepared to pay to solve, what their willingness to pay is.

So let's say that you can make a process -- customers' process go faster, you can make it more reliable, what is that value worth and how much of that value can we capture, and therefore, what's the business case? And to do that very, very early. All of that work to come up with a rough cut business case, we try and do it in 12 weeks, Harry.

And to give you an idea, that will be a much better business case than we would have done 10 years ago in terms of customer buy-in because often, to get to the next 12 weeks of Growth Hub, once you've done that first 12 weeks, we will be looking for some sort of customer commitment because we know that you can spend a lot of money and customers will say, yes, that would be great if you can solve that problem.

But what we're really looking for is something. It could be a letter of intent, it could be an order, it could be actually some joint investment. There's a whole range of things that could signal that intent. But what we're looking for is much more certainty that when we do develop that product, it will have genuine market pull, and it will achieve the sales.

To give you a rough idea, 10 years ago, we were achieving only half the sales that we expected to in our new product plans. And so that meant that IMI, and we try and think of IMI, okay, so how do we make sure and we check this about 3 or 4 ways, how do we really try and make sure we are going to grow mid-single digit. And we think, okay, in a normal year, that would be 1% or 2% from our markets, 1% or 2% from price, 1% or 2% now from innovation. And that's what we've been getting.

In fact, last year, if you look at the incremental growth, it was closer to 3% from innovation, right, which is fantastic. And remember, all the time, you've got products coming to end of life as well, Harry. So you have to take that into your model to genuinely grow mid-single digit.

So I'd say Growth Hub has tremendously reduced the time to an effective product that will actually sell. And that's really the most important thing because those products genuinely solve customer problems. So we've got about 9 projects now that are delivering significant orders because those products are things like Retrofit3D, where the power station is having trip outs because of the circuit that we are involved in, right?

And as you know, we're very strong in things like turbine bypass valves, which are very much at the heart of that process. They're at the severe part of that process. And because we came up with a way of being able to retrofit and derisk, so you don't always have to cut the valve out of the circuit to upgrade the whole valve, you can upgrade the inners of the valve to our track design because we managed to do it through the 3D printing and shrink the size of that technology.

So it goes in other people's valves as well as our own valves. And what that means is that business has gone from something like literally 0 to something like GBP 26 million. But what it does for the customer is derisk the decision, stop the trip outs that they've got, which is tremendously high value. So exactly as you say, that is good margin business for us, accretive margin business.

And that's really what Growth Hub is doing for us. One, give us more certainty that the product will sell in the numbers that we think it will. Two, give us more certainty that we are actually solving a customer problem and creating real value that we can then capture a decent amount of that value, Harry. So you're absolutely right on both. And yes, really proud of the teams.

But I actually think, Harry, if you think about it across IMI, we're still only at an early stage. We've been in this for 6 years. There's still plenty of opportunity. And if I look at the next set of projects coming through, I mean, some of them are really exciting.

Obviously, not all of them will work. We have to accept that or you're not going to innovate. You're going to end up with a culture where you can't -- if you can't fail and you can't fail fast, people stop innovating, right? But I think some of them have got tremendous potential for the next 5, 10 years.

They won't necessarily gain traction really quickly because they're in some of the customers' very critical processes. And that, of course, has got its advantages. But in terms of innovation, it doesn't necessarily mean we get a very, very fast uptake, but it means we get long-term sustainable, profitable growth, Harry, and that's what we're trying to generate. So hopefully, that answers your question.

Our next question comes from Stephan Klepp from BNP Paribas.

I don't want to bore you with orders too much in Process Automation, but I still have another one there. So if we bear in mind that hydrogen was very strong in 2024 and very weak in '25 because of drop of subsidies, isn't the order picture, the 5% underlying ex Marine a little bit too conservative because we had an extraordinary driver in 2024 and then that was dropping in 2025?

So is the conclusion that the orders that you see in Process Automation, having heard what you said about power, should start to rather accelerate because the low base effect is now gone -- sorry, the high base effect is now gone?

Yes, not too sure how you look at it. We try to be careful with what we strip out and what we don't strip out because there's always a reason, right? So Truflo Marine nothing we can strip out because that should complete around the half year.

I think there's ups and downs elsewhere. Yes, as I said, power is super strong, really, really good for us. And last year, overall, up 20%, that whole segment to GBP 300 million, great news. But also don't forget you've got downstream, midstream, which is tough for everybody right now. And downstream, midstream was down for us, refining and petrochem, down 22%, right?

So it's all -- you've got to take the whole thing to account. You know me, Stephan. I certainly don't want to oversell anything or overpromise anything. I think you're right, though, we're sort of saying, well, 5% underlying orders. We do expect sales this year to be more like 6%, 7% up than 5% up.

So we do expect growth in that area. And let's see how the whole year shakes out. Clearly, right now, as I said earlier, there's going to be some volatility, right, because of what's happening in the Middle East.

But to offset that, we've got a very strong order book, as you can see from what happened in the fourth quarter in Process Automation. So in and around, we think, as a base case, Stephan, 6%, 7% growth, something like that for Process Automation in sales is about right this year.

Okay. And then on the margins, again, so you said margins flat to slightly up because of the cyber investments. So is it as easy as understanding it this way that with the normal 30% drop-through, you would increase your margins 50 basis points. They're not coming through this year. And that 50 basis points, you invest in cybersecurity. Is that how we should read it?

Yes. I mean when I did the math, and I went through this on the last call, effectively over 5 years, on average, of course, it's going to change a bit with mix and things like that. But you're absolutely right. On average, we expect about a 30% drop-through from our mid-single-digit organic growth.

If you do the math over 5 years, that moves you more towards 22% margins than where we are today, Stephan. So the right way to think about it. As I said earlier, we really feel these investments in cybersecurity are vital. And so far, I have to say I'm really pleased with them. I think we're going to a different level.

It does not mean we cannot get attacked. Anybody can get attacked. This is a race between the bad guys and the good guys. But I think the good guys that we've got on board now are very, very impressive. And we just want to be the hardest door to knock on out there. That's our ambition.

We have time for one final question. Our next question comes from Richard Paige from Deutsche Numis.

I've a few, and I made the cut just about. I'll keep -- trying to switch the focus from Process Automation to Climate Control. And obviously, that big growth in orders, it looks like it's accelerated in the second half in data center cooling. Just wondering, I assume a reasonable chunk of that is to U.S. customers. And I know there are technology constraints here, but does it make you think about U.S. as an opportunity slightly differently at all?

Yes. I think we were asked this question on the Q3 call, and I think it was slightly less than half of the orders were to North America. But actually, as we ended the year, we had a really strong fourth quarter of North American orders, and it's now over half. So it's really focusing on that North American growth market.

And I think key is that understanding that a lot of the smaller data centers in the installed base at the moment are all air-based systems. All of the newer, bigger data centers that are coming in are water-based systems, which is really in our sweet spot. So I think, yes, we are definitely investing and some of that investment that we talked about earlier in Life Technology is specifically in North America for Climate Control to support growth there.

This concludes our Q&A session. So I will now hand back over to Roy for some closing remarks.

Yes. Well, thank you. And thanks, everybody, for joining the call. And thanks to everybody in IMI. Thanks to all our people; number one, for a great year in 2025, I really appreciate that, very strong finish, great cash flow; number two, for everything we're setting out to achieve this year. As I said, this will be, if everything comes as we expect it to come, our sixth consecutive year of mid-single-digit organic growth, and we're really proud of that compounding track record. Thanks, everybody.

Thank you.

Hello, everyone, and welcome to the IMI plc Q3 Interim Management Statement. My name is Nadia, and I'll be coordinating the call today. [Operator Instructions]

I will now hand over to your host, Roy Twite, CEO, to begin. Roy, please go ahead.

Good morning, everybody, and welcome to IMI's Third Quarter Trading Update. I'm joined here today by Luke, our CFO. It was another excellent performance from our team in the third quarter. Organic revenue was 12% higher than the same period last year and is now 5% higher year-to-date, demonstrating the continued success of our growth strategy and the strength of our One IMI operating model.

We delivered an outstanding performance in Process Automation, supported by rising global energy demand and our focus on high-margin aftermarket orders, which are now up 7% organically year-to-date and were up 1% against a strong performance in the third quarter last year.

The Climate Control, Industrial Automation and Life Science % Fluid Control market sectors all performed well. There is strong momentum across the business, and we remain on track to deliver our fourth consecutive year of mid-single-digit organic revenue growth. And I am, therefore, pleased to reconfirm guidance. We continue to expect that full year EPS will be between 129p and 136p.

With that, I'm going to hand back to the operator, who will manage the Q&A session. Thank you.

[Operator Instructions] The first question goes to Christian Hinderaker of Goldman Sachs.

I want to start on the Process Automation growth rate. I think you've called out what the year-to-date number was, but what was the quarterly figure? And then just how do we think about the quantum of the shipment catch-up that you flagged both with respect to process, but maybe elsewhere as well?

So in terms of Process Automation, obviously, the sales grew 26% in the quarter. That was shipment phasing, Christian, okay? So we still see Process Automation high single digit, maybe slightly higher, maybe 9%, 10% for this year in terms of shipments. No change to that. But what we've done is derisk the final quarter, which obviously, if you do the math, we expect to be flattish in terms of shipments versus last year.

If you remember last year, we had an absolutely fantastic Q4 in terms of shipments and December, in particular, was massive. And what we've done is derisk that. So I'm really pleased with the team. Obviously, to be able to ship 26% more is excellent in terms of execution. And that really has been a long journey in terms of our investment in the factories, our investment in supply chains and obviously, the team.

On the order side, in Q3, we were flat in the quarter versus last year, which was a very tough comparator. I mean, from memory, last year, aftermarket orders in the third quarter are up 10% and new construction was up 20%. So it was a huge third quarter. So I'm pleased we're flat. The difference really was mainly those big hydrogen orders that we won with VIVO in Q3 last year, which we said we were never going to repeat, right, because the grants that were given by governments and local governments were not repeated this year in hydrogen to that extent. So yes, we were flat in terms of orders.

Year-to-date, I think the important number that we put in the release is that total orders outside of the multiyear marine order, which we called out last year are up 5% organically year-to-date. And we see, obviously, Christian, we do see good support from combined cycle gas, energy in general across Process Automation, obviously, on the back of what's happening with the energy demands for electrification and for data centers and AI. So we see good demand there

I think we see good demand in Nuclear aftermarket at the moment for the sort of upgrades to the existing plants, the life extensions to the existing plants. And in time, we expect to see good demand on new construction in Nuclear, but that will obviously be a few years out. That's not something that's going to happen quickly. But in general, Process Automation, I would say, in good shape. We had a good look, Luke and I at the pipelines with Jackie and Robbie and the team and the pipelines of opportunity for aftermarket and new construction, and they look good.

So yes, it's -- I would say, in terms of shipments, we are about where we thought we would be. Maybe the year-end will be slightly better than we thought at the half year for Process Automation. And in terms of orders, again, pretty much bang on where we thought. And that would lead, Christian, into what I would call good growth for next year, not at the high single-digit level. I don't think we'll be quite that good next year, but around the mid-single-digit level for Process Automation in terms of shipments.

Yes. Maybe just the second question you asked, Christian, was on shipment catch-ups in the quarter. So the group overall, as you know, grew 12% organically, and we think about 2% to 3% of that was shipment catch-ups and quite a bit of that was in the Life Science and Fluid Control sector, some in Industrial Automation and then a little bit in Process Automation, but only a relatively small impact from a percentage growth perspective in both Process and Industrial Automation, and then there was a reasonable amount of catch-up in Life Science and Fluid Control in the quarter.

Very helpful. Can I just squeeze one on IA -- sorry, Luke, go ahead.

I was just going to say we do think the catch-up is about done now.

Okay. Can I just squeeze one on IA? I guess just interested in any commentary around regional developments and I guess, the sort of underlying backdrop there. Obviously, data has been a bit mixed.

Yes. No, we had a good look at this. And broadly, all regions are broadly flat, Christian. It's -- I think industrial automation markets generally are still struggling a bit. We haven't yet seen the recovery we're hoping for. I think I said previously that sort of 60-day moving average was up, which it was. Now it's about flat in Industrial Automation. So still not yet seeing that investment. We all know it will come. It's just a question of when, and we've all seen these cycles before. But it's across the regions, Christian, it's broadly flat.

The next question goes to Lushanthan Mahendrarajah of JPMorgan.

I've got 3, I think. The first is on Process Automation and orders, and I guess, OE in the quarter. I appreciate there's a sort of, I think, GBP 9 million comp in Q3. I think ex that, were sort of new construction orders up 10% in Q3. Just wanted to check my math there. And if so, what are the key end markets driving that? I know you sort of called out power already, but just interested to hear what's driving that sort of OE growth there.

The second question is on next year, if possible. I know it's early, but I don't got any initial thoughts. I know you've sort of touched on process already, but across some of the other end markets as well. And then also margin-wise, anything we need to think about?

And then the third question is just on transport and the strategic review. Just any update you can give there? I appreciate the backdrop is probably tougher now than maybe we thought it was going to be 6, 7, 8 months ago, just if that's impacted your thinking in any way?

Three good questions, Lush. On Process automation orders, I think your math is about right. So orders in the third quarter were just over GBP 90 million. And yes, the hydrogen orders that you -- I think you are referring to, the comp on that is about GBP 10 million. So yes, you're right. If you did -- I think be careful what we strip out, I think, but if you did take out those sort of hydrogen orders from the grants from last year, yes, you'd be looking at about 10% growth in the quarter on new construction.

I still think, Lush, in my mind, the sort of 5% it's very much a year-to-date business process automation. As you know, it's a longer cycle. So I still think that sort of total orders of 5% up organically year-to-date. If you strip out the marine order that we called out last year, I still think that's a pretty good guide. But as I said, we do see good opportunity pipelines in both combined cycle gas and in gas generally LNG and so on.

Your second question then was about next year. So obviously, we haven't completed the budget reviews yet. We've sort of done some pre-budget reviews. But we saw one of the peers call out yesterday sort of 4% organic growth for next year in overall terms across the piece. And I wouldn't disagree with that. Again, I think mid-single-digit growth for next year looks to me at the moment about right, subject to sort of current market conditions carrying on.

I think on top of that, our tax rate, unfortunately, will be going up next year. This year, we have benefited from settling some old tax cases. And next year, our tax rate will be going up to just over 26%. So that's worth getting into your models.

And then the other thing, clearly, we are going to be -- we are already investing more in cyber. Having been through the cyber incident beginning of this year and seeing what else is happening, obviously, around the piece in the industrials, but more broadly in retail and automotive, we are going to be -- we are upping our game already. Luke talked about a bit about it on the last call, investing in the team, investing in the best systems, investing in training broadly across IMI. In all of this, it will probably cost us about 1.5p of EPS incremental next year. So again, it's an investment I absolutely believe we need having been through that attack earlier this year.

And then your last question on transport, yes, tough market, particularly U.S., that is a regional effect where some of our customers have literally shut down for a week or more because of the lack of demand. So transport market, tough. The transport strategic review made very good progress in the quarter, I have to say. We've got a really strong team.

As you know, we brought in some ex passenger car people last year. They are -- come up with a pragmatic ambitious plan, which was presented to the Board, accepted by the Board. It's a 5-year plan, obviously, in line with all of our plans. I talked a little bit about on the last call. Obviously, it's predicated on value engineering, new products of better margins and exiting, frankly, some of the lower-margin business. They've also built on that. There's more continuous improvement, lean and cost effectiveness that's gone into the plan as well. That's sort of a fourth leg of that plan.

And then the fifth leg is all about working capital and particularly stock turns. And they've made good progress this year, and we can see good runway for next year as well. So they're very focused on improving the return on capital of that business. And indeed, by the end of the 5 years, getting the return on capital employed of transport to be pretty close to the IMI average.

So yes, it's a good plan, Lush. They're very focused. Clearly, as you said, externally, truck market is not great, and we're very much focused on the internal plan, get our heads down to deliver those improvements. Does that cover all your points, Lush?

Yes. That was really helpful.

The next question goes to Colin Grant of Davy.

Just a question on 2 things really. Just firstly on margin development. Is there anything you can give us in terms of what you're expecting margins to do in the current year 2025? I mean you've got very strong growth coming through here and you're getting it in your higher-margin areas. Just any kind of view on the accretion that you might get in margin would be helpful.

And secondly, just if you could give us an update on any thoughts looking into 2026 around potential share buybacks that you might look to try and do next year given the strength of your balance sheet.

Yes. Great. Thanks, Colin. I'll let Luke talk about share buybacks in a moment for next year. Just a couple of points for me. Margins, as I said, where consensus is for this year is our base case, looks about right. That would mean margins of about 20% for this year, which obviously, I'm very pleased with the team, Colin, because we started at 14% and we've made year-on-year progress towards that original target.

As we go forward over time, I would expect over the sort of 5-year period, as I've said before, for those margins to tick up. And if you take roughly a 30% drop-through because we are going to continue to fully invest in the business, growth is our #1 priority. So we will continue to fully invest in the business. But we still expect to do around on average, obviously, it won't be every year around a 30% drop-through over that 5-year period, and that will take margins closer to sort of 22% over that period.

Before I let Luke talk on share buybacks, I will just say the acquisition pipeline does look better than it's looked for a while. Of course, these things are very binary. And we're very, very disciplined about how we use shareholder money. And as you know, we are looking for returns above the cost of capital within 3 years, and we're looking to be not too dilutive to IMI's sort of 13% over a 5-year period. So we're very strict about that.

But I would say, Colin, the muscles that we've built, particularly around aftermarket, Growth Hub innovation around the way we go to market commercial excellence, the use of data and obviously, our operational footprint, which I really say was truly world-class. And the way we can improve companies in that way means that we are more confident of generating those returns.

So with that, I'll let Luke talk about share buybacks.

Colin, and looking at the year's free cash flow, I think we feel really good about the work we've been doing, particularly on working capital this year and particularly the inventory reduction work we're doing. So it's nice cash generation coming through there. And we've always said we'll look at our leverage and operate roughly between a 1x to 2x range. And at the half year, it was 1.4x. Subsequent to the half year, we completed the share buyback, paid the dividend.

So sort of as we now approach the end of the year, we said we'll delever to around about 1.1x come the end of this year. And as we get into next year, we'll look ahead. And if we sustainably think we'll have leverage below x, we'll definitely look at initiating a share buyback. But I'd sort of echo the same as Roy, that we continue to have M&A as part of our strategy and look at that as well.

The next question goes to Jonathan Hurn of Barclays.

Just 3 questions, please. Just going to focus on some of the other subsegments. Firstly, just in terms of Climate Control, obviously, 5% growth. If we kind of look to Q4, there's a really tough comp, probably the toughest comp of the year. Do you think that business can still grow at sort of 5% in Q4? And if you can just give us a little bit more info about that sort of exposure to data centers and what you're seeing. I think we had 14 million orders of that last time you spoke about it, where we're sitting in that.

Second question was just on sort of Life Science and Fluid Control. Obviously, a big spike up in growth, 13%. Can you just sort of break that out? How much of that is underlying? And where is that coming from? And how much of that is catch-up?

And then the third question was just coming back to process, but just focusing on that sort of nuclear opportunity there. I mean, look, there's a lot of talk out there about what that market can ultimately be. Can you just sort of give us some more information about where you sit, where you're winning, what type of growth rates you expect? Just some sort of more color on that nuclear opportunity going forward for you in process, please?

As usual, Jonathan, you managed to find 3 new questions after everybody else [indiscernible]. Climate 5%. Climate has been growing at 5% pretty much year in, year out for the last 5 years, something like that, Jonathan. And it really has driven by overall requirement for energy saving principally in Europe, right? So it's a great growth track record. It does have a very difficult comparator in Q4. So I'm not sure if we'll quite grow that fast. But in the overall year, we'll be around that 4% to 5% level for climate. So very pleased with their performance.

As you said, data centers is becoming an increasing part. It's only 2% or 3%, but that's come from nothing over the last few years, obviously, for data centers. And the pipeline is strong. And as I said on the last call, we will follow several years after those initial investment decisions on those data centers. So that's good for the future because that means with all that data center investment that's been announced, that gives us a very good pipeline.

Life Sciences, yes, I mean, 13%. I'll let Luke talk in a minute about what was catch-up. Clearly, the catch-up side was on the Fluid Control side, and we flagged that at the half year. I still think Life Sciences an overall term will be about flat for the year, about flat for the fourth quarter. So we're not seeing that inflection point yet. Certainly, though, the mood music is better. And at some point next year, I'm not going to call first or second half at this point, Jonathan. But at some point next year, I would expect it to start to return to, let's say, low single-digit growth before eventually kicking up to more of that mid-single, even higher growth that we saw historically.

And then on Nuclear, yes, I mean, Nuclear new construction, as I said earlier, is not going to happen quickly. These are long, long cycle projects. It's very good news for IMI. I mean this year, as you know, we won a big project in the U.K. already. I think Nuclear -- in terms of Nuclear new construction and aftermarket put together will probably be 7% or 8% of our orders this year, so ticking up nicely. Per reactor, we can get up to GBP 20 million worth of content around the valves and the strainers. And then on an SMR as well, that could be up to GBP 20 million worth of content as well. So again, longer term, but bodes well for the future as that starts to really kick in.

Aftermarket will be up in Nuclear again this year. And that's the extension to the nuclear reactors that's already happening. And I expect to see more of that, Jonathan. And that aftermarket is just about the best aftermarket we have in terms of the capture rate. Obviously, a lot of it is regulatory and in terms of the margins because everybody competes very hard on new construction, as you probably remember, but then aftermarket can be an annuity for decades after that, a very good recurring revenue stream.

Does that capture your questions apart from -- I'll just let Luke talk about [indiscernible] catch-up.

On the Life Science and Fluid Control organic growth of 13% growth in the quarter, but 3% to 4% of that was underlying growth and then the rest was catch-up. As Roy said, the most important thing is it's now brought us to where we thought we would be, which is 1% year-to-date growth and then around about that for the year.

Great. That's very helpful. Can I just have one just very quick follow-up just on that sort of aftermarket within process. Can you sort of tell us where that sits in terms of percentage of the division? I know it's been growing, but where are we kind of in that sort of AMOE mix? And where do you think you can go to in process?

Yes. Yes. So Jonathan, it's about 60%. I think last year it was 59%. So it's in that sort of 60% aftermarket, 40% OE. Clearly, I want both segments to grow as fast as possible, right? That will be my absolute dream, which means the mix wouldn't change. Naturally, I think what's changed over the last couple of years is the power requirement globally has obviously stepped up, and that's very good for our combined cycle gas, good for LNG, good for our gas business in general.

So let's see how the next sort of few years sort of fall out. We have said at the Capital Markets Day back a few years ago now that we expect aftermarket to grow more like 5% to 7% new construction in the longer term, probably a bit slower than that, which will mean the mix will tick up, which will mean, obviously, the margins will tick up. Roughly, our gross margins are 2.5x in the aftermarket, what they are in new construction. So as that mix does tick up over time, Jonathan, that's obviously very healthy for us.

The next question goes to Mark Davies Jones of Stifel.

We're getting down to some gory detail here. But on process, I just wanted to ask quickly on the non-power gen-related markets and whether you're seeing any softening in the sort of refining petrochem end of the world given where current oil prices are. That was the first one.

And then on IA, obviously, it hasn't really turned yet. But looking into next year, are you starting to hear any more positive noises out of particularly Germany, given the sort of stimulus plans coming through there? Is that likely to feed through to you? Or is that still fairly distant?

Yes. Good questions, Mark. Yes, you're absolutely right. On process, it's downstream where orders are lower. You're absolutely right. I think everybody is seeing that, and we're certainly seeing that.

In IA, I would say it's early days yet, Mark. I would -- when you look at a normal IA cycle, I'd say we're overdue an uplift. And certainly, with the investment going into Germany at some point, I mean, Germany is 12% of IMI's total sales. And the biggest part of that is into the sort of industrial production economy, which is obviously both IA and the Fluid Control part of Fluid Control and Life Sciences. And then very close behind that, we've got Climate Control with what we do in HVAC.

So Germany, very important to IMI. At some point, I'm pretty sure there will be a lift now. When exactly that is, is difficult to call, I would say, Mark.

The next question goes to Stephen Klepp of BNP Paribas. Moving on to the next question from Richard Paige of Deutsche Bank.

As Mark said, down to the nitty gritty, but could you just remind us on gas combined cycle, what the size of your opportunity there and ultimately, how quickly aftermarket flows from new construction there?

And then secondly, just a point of clarity on the European -- sorry, on the Climate Control data center work, is all of that exclusively European customers, please?

Yes, good questions. I'll let Luke talk about data centers in Climate in a minute. In terms of gas combined cycle -- well, in terms of, let's call it, conventional power, Richard, which is mainly gas combined cycle, that's about 25% of process automation, 5% is new construction at the moment and 20% is aftermarket.

So yes, that's a significant tailwind. And I'm sure you've seen what's happened to our customers in that segment. Their order books are very, very full. And that's building for us, and we're getting nice high hit rates as well. So very encouraged about that.

In terms of data centers, do you want to talk a little bit about data centers and Climate?

Yes, definitely. So we continue to see lots of opportunity there with our cooling products going in there, and that's fully global exposure. So of the orders we've had year-to-date, about half is Europe, 40% is in North America and then about 10% in Asia Pacific. So I think we've got a really good geographic spread and exposure opportunities there.

The next question goes to Mark Fielding of RBC.

Actually, I'm going to be not original and asking new question, but actually circle back to one at the start in terms of just getting a little bit more sense around this phasing in Process Automation. I was trying to think about clever ways to ask it. But I think the simplest one is in terms of us understanding how good Q3 was and what that means in Q4, how do you think the sequential progression will be Q4-on-Q3 in the revenues in Process Automation?

Yes, very good. Yes. So you're right, Mark, because I think what you've cottoned on to is that last year, the comparator in Q3 was weaker and the comparator in Q4 was a lot harder, right? But if we look at overall shipments in Q3 this year, we shipped about just over GBP 230 million, right. And then in Q4, we're going to be shipping just over GBP 300 million. That's the plan, right?

So -- and that will be very similar, as I said earlier, to the level that we shipped last year, Mark. So you're right. We still got a lot of work to do, and the teams know that. And that probably puts it better in context than I did, Mark. So thank you for that.

[Operator Instructions] And we have a question from Stephan Klepp of BNP Paribas.

Can you hear me now, guys?

Yes, Stephan, it's a very, very bad line though.

I'm very sorry. I'll speak a bit louder [indiscernible] Just follow-up, sorry for that. On transport, you sounded very positive on the internal catch-up plan. Are you ruling out that you divest the division? And secondly, on the acquisition side of things, I think you have for a long time not been that positive on acquisitions. What are you looking at, at the moment size-wise? Because the last big acquisition was TWTG and that was a tiny one. What is basically in your funnel there at the moment?

I think I heard you right. So transport I think you were asking about the balance between the internal efforts and what we might be doing externally. And as I said earlier, Stephan, the real focus is on internal progress with a great team at the moment. Clearly, the external market with what's happening, particularly in the U.S., is not in great shape. And so we will always, as we always do, as we run through our strategic review process, look at both across the business and what value we can generate over a reasonable time period versus what value we can attract externally. But right now, as I said, the focus is on internal improvement, I think, for obvious reasons. And it's a great internal improvement plan, I have to say, from the team.

I think your second question is what sort of size of acquisitions do we look at? And there's really no change there to what we've always said. We would look at bolt-ons up to a value of about GBP 500 million in terms of the acquisition cost. What's really important for us is that 1 plus 1 equals a lot more than 2. As I said earlier, the muscles that we have around aftermarket generation, around things like innovation, around our commercial excellence, the broad, the global teams that we have that can really expand businesses.

But when we really look at that, and we're quite harsh in our judgment, which is why we're only doing an acquisition every year or so, that when we do that, the returns -- we understand the returns on day 1. and that we understand the returns on at the end of year 3, and they have to be above our cost of capital. And then at the end of the 5-year period that we're not too dilutive to our overall IMI return on invested capital. And we really look at that and we make sure that we can look ourselves in the basis. We are paid in our long-term investment plan on our all-in return on invested capital, right? So we are incentivized to make sure that we create shareholder value. And it is, I can tell you, top of our minds.

But yes, the acquisition pipeline, as I said, Stephan, does look better than it's looked for a while, and there's a few interesting ones in there. I'm sorry, I couldn't hear your question in detail because of the line, but hopefully, that covered what you asked.

Moving on to the final question from Harry Philips of Peel Hunt.

Again, sorry, 2 questions from myself. And again, just sort of given some of the other questions around nerdy detail that sort of got up my competitive streak. So another nerdy detailed one. Just wondering around the LNG opportunity and what scale that is within the business?

And then secondly, I just missed the data center percentage of Climate earlier on. I know you've just given the sort of joke split, but I missed the original one as a data percentage of total Climate at the current time, please?

Yes. Data center Climate, 2% or 3%, Harry, that's a nice, easy one. And then in terms of LNG, LNG is around 10%. When you look at aftermarket and new construction combined, it's about 10% of Process Automation, Harry. And as you said, the pipeline of opportunities, the projects as we go sort of into next year and the next few years looks very strong to us, yes.

We have no further questions. I'll hand back to Roy for any closing comments.

Well, I'm obviously just going to use this as a big thank you. A lot of people across IMI listen to this. And I want to thank them for an excellent -- and I don't use that word often, but an excellent operational performance, excellent execution in the third quarter, an excellent recovery from cyber and everything else that's happened geopolitically this year.

And in particular, I want to thank, obviously, the exec, Jackie and the operations team. I think it was a really outstanding performance. And we look forward to closing out the year from here. Thanks very much, everybody, for listening. Thank you.

Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect.