Annual Financial Report

RNS Number : 6441A

Spirax-Sarco Engineering PLC

22 March 2013

 



22nd March 2013

Spirax-Sarco Engineering plc

2012 Annual Report and Accounts and

Notice of Annual General Meeting

Spirax-Sarco Engineering plc (the "Company") released its preliminary results announcement of annual results for the year ended 31st December 2012 ("Final Results announcement") on 7th March 2013.  The announcement made on that date included inter alia a condensed set of the Company's financial statements and extracts from the management report.

The Company announces that its 2013 Annual General Meeting will be held at 2.00 pm on Thursday, 9th May 2013 at Charlton House, Cheltenham, Gloucestershire, GL53 8ER.

In connection with this, the following documents have been posted to shareholders:

- Notice of 2013 Annual General Meeting;

- 2012 Annual Report and Accounts; and

- Proxy form for 2013 Annual General Meeting.

In accordance with Listing Rule 9.6.1, printed copies of these documents have also been submitted to the National Storage Mechanism and will shortly be available for inspection on the National Storage Mechanism (http://www.morningstar.co.uk/uk/NSM).

The Company confirms that the Annual Report and Accounts and the Notice of 2013 Annual General Meeting are now available to view or download in a pdf format from the Spirax-Sarco Engineering website.  The direct link to download the Annual Report and Accounts is http://www.spiraxsarcoengineering.com/pdfs/reports/2012-annual-report.pdf and the direct link to download the Notice of 2013 Annual General Meeting is http://www.spiraxsarcoengineering.com/pdfs/circulars/2013/Cicular%20to%20Shareholders.pdf.

A condensed set of the Company's financial statements and extracts of the management report including the Business Review, were included in the Company's Final Results announcement.  That information, together with the Appendix to this announcement, which contains additional information which has been extracted from the Annual Report and Accounts for the year ended 31st December 2012, constitutes the material required for the purposes of compliance with the Transparency Rules and should be read together with the Final Results announcement, which can be downloaded from the Company's website at http://www.spiraxsarcoengineering.com/pdfs/news/News%20Release%202012%20Preliminary%20Results.pdf.  This announcement should be read in conjunction with and is not a substitute for reading the full Annual Report and Accounts.  Together these constitute the information required by DTR 6.3.5, which is required to be communicated to media in unedited full text through a Regulatory Information Service.  Page and note references in the text below refer to page numbers and notes in the Annual Report and Accounts.

Appendix

Risks and uncertainties

A description of the Company's principal risk and uncertainties is extracted from pages 58 and 59 of the 2012 Annual Report and Accounts.

"Principal risks

A summary of the principal risks, their likely impact and an explanation of how the Group mitigates each risk is set out in the table below. The direction of change in particular risks during the year is explained in the 'Principal Risk' column and illustrated by the arrow in the 'Change' column. Finally, we have also set out the relevance of the risk to our strategy.

Please note that the 'Change' column shows the change in the risk and not the mitigation of the risk.

Principal Risk	Change	Impact	Mitigation	Relevance to strategy
Economic and political instability: The Group operates worldwide. Economic and political instability creates risks for our locally based direct operations. The Group has reviewed country, credit, liquidity and currency risks and, in particular, those arising from European debt issues. The risk has increased as a result of the deterioration in some European economies and the general world economic outlook.	Ç	• Fluctuations in profit from significant currency movements • Reduced profit due to impact on customers from economic problems • Potential redenomination of local currency, devaluation and high inflation.	• Compliance with Group Treasury Policy • Strong internal controls with internal audit and appropriate insurance • Resilient business model (as explained in the Business Review on page 17). • Well spread business - approximately 10% of Group sales originate in the higher risk countries of Greece, Ireland, Italy, Portugal and Spain. Sales in Greece are immaterial.	Broaden our global presence
Breach of regulatory requirements: The Group operates in a large number of countries across the world and is subject to many different laws and regulations, including the UK Bribery Act, the US Foreign and Corrupt Practices Act, health and safety, competition laws and local quality regulations. Breaching these laws and regulations could have serious consequences. This risk has increased in the year as sales in Asia Pacific have risen.	Ç	• Fines and regulatory action and resultant reduced profit • Damage to reputation • Diversion of management time.	• Robust internal controls, policies and procedures and Group Management Code • Establish strong ethical culture supported by communication and training • Review of commercial arrangements and regulatory requirements with appropriate professional advice • Maintain local quality accreditations.	Create strong market positions
Non-compliance with health, safety and environmental legislation: The Group places great emphasis on health, safety and environmental issues in relation to our employees and operations, and those of our customers, suppliers and communities so as to avoid the risk of major health, safety or environmental problems.	Æ	• Damage to reputation • Reduced profit due to fines, compensation and clean-up costs • Enforcement action by regulatory authorities.	• Compliance with legislation and codes of best practice • Regular audits, checks and reporting to management and the Board on health, safety and environmental issues • Ongoing training • In the course of appointing a Senior Group Health and Safety Manager.	Create strong market positions
Failure to respond to technological developments or customer needs: The Group has significantly increased R&D resources and risks, this being ineffective if we fail to respond to development and customer needs or if we fail to manage and protect our intellectual property.	Æ	• Failure to achieve expected return on the R&D investment • Reduced profit • Loss of market share • Loss of intellectual property.	• Maintain market knowledge and monitor competitor developments, making effective use of our direct field sales force • Maintain investment in R&D programmes • Maintain appropriate intellectual property registrations, taking enforcement action where appropriate.	Generate consistent organic growth Deliver solutions to reduce energy usage

There may be other risks and uncertainties which are unknown to the Group or which could become material in the future. These risks may cause the Group's results to vary materially from historic and expected results.

Risk of product failure: The Group provides a wide range of products into many different plants and industries many of which are in critical parts of our customers' processes. A risk exists that products are wrongly specified or installed, fail, or contain design or manufacturing faults. This risk has increased during the year as a result of the Group providing more fully integrated solutions.	Ç	• Damage to customer relationships • Reduced profit due to increased costs to correct the problems caused at customers' plants • Litigation following product liability claim.	• Products designed and tested to international standards and strict quality procedures • Training of sales/installation staff • Appropriate conditions of sale and contractual restrictions on liability • Insurance cover.	Create strong market positions Deliver solutions to reduce energy usage
Loss of manufacturing output at any Group factory: The Group manufactures most of the products we sell in eight main factory units which supply our sales operations worldwide. Loss of manufacturing output at any important plant risks serious disruption to sales operations. This risk has reduced in the year due to the realisation of the Group's manufacturing strategy of regionalising the manufacturing base.	È	• Reduced sales and profit due to inability to meet customer orders • Loss of market share • Damage to reputation.	• Group manufacturing strategy to regionalise manufacturing base and increase resilience • Business continuity planning and disaster recovery plans • Stocks of components and finished products in sales companies • Regular and comprehensive back‑ ups of IT systems • Use of insurance audits/ inspections and business interruption insurance.	Broaden our global presence
Defined benefit pension deficit: Defined benefit pension schemes carry risks in relation to investment performance, security of assets, longevity and inflation. Total defined benefit pension liabilities represent approximately 52% of total Group assets. This risk has reduced in the year as a result of the operation of the Mercer 'Dynamic De-Risking Solution'.	È	• Increase in liabilities • Increase in pension costs and cash contributions • Fluctuations in pension fund asset and liability values.	• Use of independent professional advisers and custodians for defined benefit pension schemes • Pension scheme de‑risking strategy to automatically reduce equity exposure and increase matching assets at pre‑agreed trigger points.
Failure to realise acquisition objectives: The Group's strategy is focused on organic growth complemented by acquisitions (as explained in the Business Review on page 17). We risk failing to achieve the expected return on investment if acquisitions are not properly identified, executed and integrated.	Æ	• Failure to achieve expected return on investment • Assumption of unexpected liabilities.	• Evaluation of potential targets against Strategic Plan and acquisition criteria • Project management disciplines • Appropriate due diligence by Group personnel and external advisers covering commercial, legal, accounting and environmental issues.	Grow market share Deliver solutions to educe energy usage"

Related Party Transactions

The following related parties transactions are extracted from page 118 of the 2012 Annual Report and Accounts.

	2012	2011
"THE GROUP	£000	£000
Sales to associated companies	567	732
Dividends from associated companies	1,454	1,461
Amounts due from associated companies at 31st December	47	21

	2012	2011
PARENT COMPANY	£000	£000
Dividends received from subsidiaries	16,500	99,000
Dividends received from associates	1,454	1,461
Loans and amounts due from subsidiaries at 31st December	143,748	203,172
Amounts due to subsidiaries at 31st December	23,941	1,277

The transactions above were priced on an arm's length basis and on standard business terms."

Statement of Directors' responsibility

The following responsibility statement is repeated here solely for the purpose of complying with Disclosure and Transparency Rule 6.3.5.  This statement relates to and is extracted from page 83 of the 2012 Annual Report and Accounts.  Responsibility is for the full 2012 Annual Report and Accounts not the extracted information presented in this announcement and the Final Results announcement.

"Responsibility statement

We confirm that to the best of our knowledge:

•     The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

•     The management report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks that they face.

Signed by

D J Meredith

Finance Director

on behalf of the Board of Directors

6th March 2013"

For further information, please contact:

Andy Robson, General Counsel & Company Secretary

Tel:  [phone]

About Spirax Sarco

Spirax-Sarco Engineering plc is the world leader in both steam system management and peristaltic pumping. The Company provides a broad range of fluid control products, engineered packages, site services and systems expertise for its diverse range of over 100,000 industrial and institutional customers. The Company helps its customers to optimise production capacity, reduce energy costs and emissions, improve product quality and enhance the safety of their operations.  Spirax Sarco is headquartered in Cheltenham, England, has strategically located manufacturing plants around the world and employs approximately 4,700 people, of whom around 1,300 are direct sales and service engineers.  Its shares have been listed on the London Stock Exchange since 1959 (symbol: SPX). Further information can be found at www.spiraxsarcoengineering.com 

 

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