2009 Half Year Results
|
Spirax-Sarco Engineering plc |
Charlton House Cheltenham Glos. GL53 8ER |
|
News Release |
Telephone: 01242 521361 Fax: 01242 581470 www.SpiraxSarcoEngineering.com |
Thursday 20th August 2009
2009 Half Year Results [embargoed until 7.00 a.m.]
Six months ended 30th June
|
|
2009 |
2008 |
Change |
Constant Currency Change |
|
Revenue |
£251.6m |
£238.7m |
+5% |
-8% |
|
Operating profit |
£30.1m |
£40.1m |
-25% |
|
|
Adjusted operating profit* |
£37.8m |
£40.8m |
-7% |
-26% |
|
Adjusted operating profit margin* |
15.0% |
17.1% |
|
|
|
Profit before taxation |
£30.2m |
£41.9m |
-28% |
|
|
Adjusted profit before taxation* |
£38.2m |
£42.7m |
-11% |
-28% |
|
|
|
|
|
|
|
Earnings per share (Basic) |
27.2p |
36.9p |
-26% |
|
|
Adjusted Earnings per share (Basic)* |
34.9p |
38.0p |
-8% |
-27% |
|
Interim dividend per share |
10.5p |
10.0p |
+5% |
|
* Adjusted figures exclude the headcount reduction costs of £7.0m and the amortisation of acquisition-related intangible assets in 2009 of £1.0m (2008: £0.8m) of which £0.2m relates to Associates (2008: £0.2m).
-
Revenue up 5%, geographically widespread
-
Adjusted operating profit margin of 15.0% (12.0% including severance cost & amortisation)
-
Interim dividend increase of 5% - confidence in future prospects
-
Strong balance sheet with £4.1m net cash
-
Good progress with cost reductions in line with expectations
Commenting on the results Mark Vernon, the Chief Executive, said:
We are pleased to report a good set of results for the first half of 2009 in the context of the worst economic downturn for decades and trading conditions have remained challenging. Sales in sterling increased in each geographic region and reporting segment, benefiting from favourable currency movements. We have limited forward visibility of our business levels which month-to-month remain somewhat volatile, although the pace of decline against last year has stabilised in recent months. The Group is benefiting from its outstanding niche businesses and fundamental strengths of a very diverse geographic spread, broad industry and customer base, and wide range of products and solutions. Accordingly, the Board remains confident in the future prospects for the Group.
For further information, please contact:
|
Mark Vernon, Chief Executive David Meredith, Finance Director Tel: 020 7638 9571 at Citigate Dewe Rogerson until 6.00 p.m. |
Note: Unless otherwise stated, the figures quoted in the text below exclude headcount reduction costs and the amortisation of acquired intangible assets.
REVIEW OF OPERATIONS
We are pleased to report a good set of results for the first half of 2009 in the context of the worst economic downturn for decades and trading conditions have remained challenging. Sales in sterling increased in each geographic region and reporting segment, benefiting from favourable currency movements. Financial performance across the reporting segments was reasonably consistent, highlighting similar customer purchasing reactions to the global downturn. Currency movements favourably impacted both sales and profits.
Group sales in the half year were £251.6 million, up 5% from £238.7 million in 2008. At constant exchange rates, sales declined 8% against a comparatively strong first half of 2008.
Operating profit decreased 7% (26% at constant currency) from £40.8 million to £37.8 million in 2009. The operating profit margin was strong at 15.0%, as we benefited from favourable currency movements and pricing, which mitigated the impact of lower volume and higher material costs.
Net finance expense was £1.0 million compared with income of £0.8 million in the same period in 2008. As previously reported, there was a sharp decline in the expected return on pension fund assets (under IAS 19) following the fall in pension asset values in 2008. Our share of the after tax profits of our Associates in India and Mexico increased from £1.2 million to £1.4 million. Profit before tax was £38.2 million as against £42.7 million in 2008.
We have made good progress in reducing costs and the headcount is now down 6% this year. In these results, we have taken a one-off charge, excluded from the adjusted figures, of £7.0 million covering the full amount of severance costs, against which we still expect to generate £8 million of annual cost savings, effectively commencing in the second half. The profit before tax after deducting these severance costs and the amortisation of acquisition-related intangible assets was £30.2 million (2008: £41.9 million).
The tax charge, based on the profit excluding Associates, was 31% (2008: 33%) and the profit for the period was £26.6 million. Adjusted earnings per share fell by 8% from 38.0p to 34.9p.
Trading
We are the world leader in industrial steam and in peristaltic pumping. Both Spirax and Watson-Marlow have robust business models that are serving us well in today's market environment. We work closely with our customers in supplying a wide range of products, services and engineered packages to generate energy savings, lower emissions, process efficiency, quality improvements and compliance assistance to meet increasingly stringent health and safety regulations. On a long-term basis, the cost of energy remains relatively high, and this continues to provide a backdrop in which we work with our customers to reduce their energy consumption and also lower their flue gas emissions. In the first half of 2009, we achieved a constant currency sales increase from our prefabricated heat transfer packages - a product segment which we had previously targeted for growth - evidence of the effectiveness of our solutions selling approach.
We have adopted the new accounting standard IFRS 8 Segmental Reporting for 2009. The new segmental disclosures give greater visibility and enable a better understanding of the business. The new segments comprise the Steam Specialties business geographically split into EMEA (Europe, Middle East and Africa), Americas (North and South America) and AsiaPac (Asia Pacific), and the Watson-Marlow Pumps business.
Steam Specialties Business
Europe, Middle East and Africa (EMEA) market conditions weakened considerably in Q4 of 2008 and have remained difficult in 2009. Sales were 2% higher at £113.2 million (down 8% at constant currency) including a small contribution from the Colima business acquired in 2008. Market conditions and results were mixed from country to country. After two consecutive years of double-digit annual growth, sales declined in the UK. Our larger selling companies in France, Germany and Italy each performed well in the prevailing conditions, although our M&M business in Italy was impacted by lower demand from OEMs. Reduced volume at our factories in the UK and France, including some internal de-stocking by our direct sales operations, resulted in a significant drag on profit - this should be mitigated somewhat in the second half year as we benefit from our cost reduction programme. We achieved higher sales of prefabricated heat exchange packages and services across Europe. Credit tightening and a steep drop in industrial production negatively impacted our Russian business which has had historically a higher percentage of projects. For the first half, overall operating profit in EMEA declined by 23% (down 31% at constant currency) to £15.6 million.
Sales in AsiaPacific increased 8% to £49.0 million (down 7% at constant currency). We reduced backlog at our large company in China and benefited from more favourable exchange rates, resulting in a good profit increase in China. Sales declined nearly 10% at our Korean operation and this, together with the weak local currency, resulted in an even greater decline in trading profit. We have some large projects on hand in Korea that we expect to ship in the second half year and therefore anticipate a good sequential profit improvement. Profits in India (an Associate) were up substantially over last year on higher sales, as we benefited from project sales that were shipped from the backlog. Sales and profits results were somewhat mixed elsewhere throughout AsiaPacific, with Singapore, Taiwan and Thailand turning in weaker profits, but with higher profits from Australia and Malaysia. Total operating profit in AsiaPacific was 10% ahead at £9.4 million (down 23% at constant currency).
Sales in the Americas increased 7% to £51.0 million (down 11% at constant currency). The sales decline in constant currency was widespread across our companies in the USA, Canada, Argentina and Brazil, although the fall in Brazilian sales occurred in the second quarter. End-user manufacturing output declined significantly in both Argentina and Brazil, where customer exports have also sharply declined. General industrial market weakness in both Canada and the United States resulted in lower sales of our traditional steam specialties products, offset partially by higher sales of prefabricated heat exchange packages. The operating profit in the Americas was 2% higher than in the same period in 2008 (down 16% at constant currency).
Watson-Marlow Pumps Business
The Watson-Marlow pumps segment performed generally in line with the Steam Specialties Business. Sales increased 10% to £38.3 million (down 7% at constant currency). The market in EMEA was generally difficult with lower sales of Bredel pumps in particular. Sales in Asia increased over 50% as we began to reap the benefits of our investment in selling resources, albeit against a small sales base. Constant currency sales in the Americas were flat due largely to higher Flexicon shipments and continued good sales of Watson-Marlow pumps into the biopharmaceutical market. Overall operating profit was unchanged at £8.9 million (down 25% at constant currency), representing a trading margin of 23%.
Balance Sheet and Cash Flow
We continue to maintain a strong balance sheet with a good cash flow. Total capital employed was down 3% in the first half to £263 million. At constant currency there was an increase of 7%, comprising a 5% rise in net fixed assets and a rise in working capital where both stock levels and trade debtors were lower but creditors, including taxation, were also reduced. Increased capital expenditure of £15 million reflects the previously announced investment projects in the UK at Falmouth and Cheltenham, and in China.
The net cash balance at 30th June 2009 was £4.1 million (31st December 2008: £17.4 million). There was a good underlying cash flow, offset by the higher capital expenditure, headcount reduction costs, increased taxation payments, additional pension cash contributions and payment in May of the final dividend for 2008. Overall, therefore, there was a net cash outflow of £12.5 million for the first half. Currency movements reduced net cash balances on translation by £0.8 million in the period.
Corporate Developments
As previously announced, Mike Townsend retired from the Board on 30th June 2009 and has been succeeded as Chairman by Bill Whiteley from 1st July 2009. Also, Mike Gibbin joined the Board from 1st May, replacing Alan Black who retired.
Principal Risks and Uncertainties
The Group has an established risk management process which operates within the corporate governance framework, details of which are set out in note 10 below which is followed by a Directors' Responsibility Statement.
Dividend
The Board has declared an interim dividend of 10.5p (2008: 10.0p) per ordinary share, an increase of 5%. The dividend will be paid on 6th November 2009 to shareholders on the register at the close of business on 9th October 2009. The 2008 final dividend of 23.3p was paid on 18th May 2009 at a cash cost of £17.7 million.
Outlook
As widely reported, there are indications that the rate of decline in global GDP and industrial production has moderated in many geographic regions, although industrial production in most countries has fallen sharply from last year and remains at a comparatively low level. We have limited forward visibility of our business levels which month-to-month remain somewhat volatile, although the pace of decline against last year has stabilised in recent months. However, our markets remain challenging.
Subject to continuation of the current favourable exchange rates versus 2008, there is expected to be a further exchange benefit to trading in the second half year, although at current rates of exchange the benefit will be smaller than in the first half year.
We have acted decisively in reducing our operating costs and have nearly completed the previously announced headcount reductions. Some of the cost savings benefit began to come through late in the second quarter and we will realise full annualised benefits in the second half year.
The 5% increase to the interim dividend demonstrates the confidence of the Board in the strength of the underlying business and the Group's prospects. At Spirax Sarco, we make our business decisions with a long-term perspective and therefore continue to invest selectively in priority areas through acquisition, product development and geographic expansion. We have maintained our large direct selling presence around the globe to drive market share growth and keep close relationships with our many customers, even in this difficult economic period. The Group is benefiting from its outstanding niche businesses and fundamental strengths of a very diverse geographic spread, broad industry and customer base, and wide range of products and solutions. Accordingly, the Board remains confident in the future prospects for the Group.
Spirax-Sarco Engineering plc
GROUP INCOME STATEMENT
|
|
Six months to 30th June *Before adj't 2009 £'000 |
Adj't 2009 £'000 |
Total 2009 £'000 |
Six months to 30th June June *Before adj't 2008 £'000 |
Adj't 2008 £'000 |
Total 2008 £'000 |
Year ended 31st Dec. *Before adj't 2008 £'000 |
Adj't 2008 £'000 |
Total 2008 £'000 |
|
Revenue (note1) |
251,557 |
- |
251,557 |
238,707 |
- |
238,707 |
502,316 |
- |
502,316 |
|
Operating costs |
(213,723) |
(7,769) |
(221,492) |
(197,922) |
(637) |
(198,559) |
(416,647) |
(4,641) |
(421,288) |
|
Operating profit (note 1) |
37,834 |
(7,769) |
30,065 |
40,785 |
(637) |
40,148 |
85,669 |
(4,641) |
81,028 |
|
|
|
|
|
|
|
|
|
|
|
|
Financial expenses |
(7,893) |
- |
(7,893) |
(7,354) |
- |
(7,354) |
(14,805) |
- |
(14,805) |
|
Financial income |
6,848 |
- |
6,848 |
8,113 |
- |
8,113 |
16,541 |
- |
16,541 |
|
Net financing income (note 2) |
(1,045) |
- |
(1,045) |
759 |
- |
759 |
1,736 |
- |
1,736 |
|
|
|
|
|
|
|
|
|
|
|
|
Share of profit of associates |
1,366 |
(187) |
1,179 |
1,200 |
(170) |
1,030 |
2,741 |
(343) |
2,398 |
|
Profit before taxation |
38,155 |
(7,956) |
30,199 |
42,744 |
(807) |
41,937 |
90,146 |
(4,984) |
85,162 |
|
Taxation (note 3) |
(11,571) |
2,112 |
(9,459) |
(13,641) |
- |
(13,641) |
(26,257) |
883 |
(25,374) |
|
Profit for the period |
26,584 |
(5,844) |
20,740 |
29,103 |
(807) |
28,296 |
63,889 |
(4,101) |
59,788 |
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
Equity holders of the parent |
26,552 |
(5,844) |
20,708 |
28,971 |
(807) |
28,164 |
63,648 |
(4,101) |
59,547 |
|
Minority interest |
32 |
- |
32 |
132 |
- |
132 |
241 |
- |
241 |
|
Profit for the period |
26,584 |
(5,844) |
20,740 |
29,103 |
(807) |
28,296 |
63,889 |
(4,101) |
59,788 |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
Basic earnings per share (note 4) |
|
|
27.2p |
|
|
36.9p |
|
|
78.0p |
|
Diluted earnings per share (note 4) |
|
|
27.1p |
|
|
36.8p |
|
|
77.7p |
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
|
|
|
|
|
|
Dividend paid per share (note 5) |
|
|
23.3p |
|
|
21.6p |
|
|
33.3p |
|
Dividend proposed per share (note 5) |
|
|
10.5p |
|
|
10.0p |
|
|
31.6p |
* Adjustments relate to headcount reduction costs and amortisation of acquisition-related intangibles (see note 1). Before adjustment, the basic earnings per share for the six months ended 30th June 2009 is 34.9p, for the six months ended 30th June 2008 38.0p and for the year ended 31st December 2008 83.4p.
Spirax-Sarco Engineering plc
GROUP BALANCE SHEET
|
|
Notes |
30th June 2009 £'000 |
30th June 2008 £'000 |
31st December 2008 £'000 |
|
ASSETS |
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Property, plant and equipment |
|
118,977 |
96,425 |
122,897 |
|
Goodwill |
|
27,272 |
24,860 |
29,908 |
|
Other intangible assets |
|
20,199 |
19,089 |
22,921 |
|
Prepayments |
|
621 |
2,682 |
900 |
|
Investment in associates |
|
9,599 |
8,162 |
9,396 |
|
Deferred tax |
|
37,775 |
19,276 |
33,180 |
|
|
|
214,443 |
170,494 |
219,202 |
|
Current assets |
|
|
|
|
|
Inventories |
|
91,810 |
84,071 |
102,382 |
|
Trade receivables |
|
105,805 |
103,190 |
124,595 |
|
Other current assets |
|
13,668 |
13,649 |
12,874 |
|
Tax recoverable |
|
2,020 |
874 |
1,118 |
|
Cash and cash equivalents |
7 |
41,285 |
35,750 |
54,140 |
|
|
|
254,588 |
237,534 |
295,109 |
|
Total assets |
|
469,031 |
408,028 |
514,311 |
|
|
|
|
|
|
|
EQUITY AND LIABILITIES |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
|
62,758 |
67,644 |
81,010 |
|
Bank overdrafts |
7 |
3,953 |
4,118 |
2,045 |
|
Short term borrowing |
7 |
7,887 |
2,143 |
9,008 |
|
Current portion of long term borrowings |
7 |
63 |
86 |
176 |
|
Current tax payable |
|
6,952 |
10,657 |
11,932 |
|
|
|
81,613 |
84,648 |
104,171 |
|
Net current assets |
|
172,975 |
152,886 |
190,938 |
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
Long term borrowings |
7 |
25,281 |
17,178 |
25,521 |
|
Deferred tax |
|
12,272 |
8,455 |
13,714 |
|
Post-retirement benefits |
|
90,652 |
47,035 |
73,717 |
|
Other payables and provisions |
|
1,067 |
3,268 |
1,182 |
|
|
|
129,272 |
75,936 |
114,134 |
|
Total liabilities |
|
210,885 |
160,584 |
218,305 |
|
Net assets |
|
258,146 |
247,444 |
296,006 |
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
Share capital |
|
19,307 |
19,299 |
19,307 |
|
Share premium account |
|
47,559 |
47,280 |
47,559 |
|
Other reserves |
|
29,514 |
14,087 |
56,802 |
|
Retained earnings |
|
161,552 |
165,878 |
171,645 |
|
Equity attributable to equity holders of the parent |
|
257,932 |
246,544 |
295,313 |
|
Minority interest |
|
214 |
900 |
693 |
|
Total equity |
|
258,146 |
247,444 |
296,006 |
|
Total equity and liabilities |
|
469,031 |
408,028 |
514,311 |
Spirax-Sarco Engineering plc
GROUP STATEMENT OF COMPREHENSIVE INCOME
|
|
Six months to 30th June 2009 £'000 |
Six months to 30th June 2008 £'000 |
Year ended 31st December 2008 £'000 |
|
Profit for the period |
20,740 |
28,296 |
59,788 |
|
Actuarial loss on post-retirement benefits |
(20,737) |
(25,588) |
(50,088) |
|
Deferred tax on actuarial loss on post-retirement benefits |
6,373 |
8,034 |
17,708 |
|
Foreign exchange translation differences |
(28,933) |
7,202 |
51,521 |
|
Profits on cash flow hedges |
1,645 |
(113) |
(438) |
|
Total recognised income and expense for the period |
(20,912) |
17,831 |
78,491 |
|
|
|
|
|
|
Attributable to |
|
|
|
|
Equity holders of the parent |
(20,944) |
17,699 |
78,250 |
|
Minority interest |
32 |
132 |
241 |
|
Total recognised income and expense for the period |
(20,912) |
17,831 |
78,491 |
GROUP STATEMENT OF CHANGES IN EQUITY
|
|
Six months to 30th June 2009 £'000 |
Six months to 30th June 2008 £'000 |
Year ended 31st December 2008 £'000 |
|
Shareholders' funds at beginning of period |
295,313 |
242,151 |
242,151 |
|
Total recognised income and expense for the period |
(20,944) |
17,699 |
78,250 |
|
Dividends paid |
(17,752) |
(16,452) |
(24,159) |
|
Equity settled share plans net of tax |
972 |
925 |
1,645 |
|
Proceeds of issue of share capital |
- |
13 |
300 |
|
Treasury shares purchased |
- |
- |
(6,762) |
|
Treasury shares reissued |
1,124 |
5,283 |
7,679 |
|
Loss on the reissue of treasury shares |
(781) |
(3,075) |
(3,791) |
|
Equity attributable to equity holders of parent at end of period |
257,932 |
246,544 |
295,313 |
Spirax-Sarco Engineering plc
GROUP CASH FLOW
|
|
Notes |
Six months to 30th June 2009 £'000 |
Six months to 30thJune 2008 £'000 |
Year ended 31st December 2008 £'000 |
|
Cash flows from operating activities |
|
|
|
|
|
Profit before taxation |
|
30,199 |
41,937 |
85,162 |
|
Depreciation and amortisation |
|
9,338 |
8,198 |
19,859 |
|
Share of profit of associates |
|
(1,179) |
(1,030) |
(2,398) |
|
Equity settled share plans |
|
1,144 |
1,075 |
1,519 |
|
Net finance expense |
|
1,045 |
(759) |
(1,736) |
|
Operating cash flow before changes in working capital and provisions |
|
40,547 |
49,421 |
102,406 |
|
Change in trade and other receivables |
|
4,080 |
(4,534) |
(4,029) |
|
Change in inventories |
|
2,437 |
(5,468) |
(12,143) |
|
Change in trade and other payables |
|
(6,283) |
368 |
4,819 |
|
Change in provisions and post-retirement benefits |
|
(4,101) |
(196) |
(3,236) |
|
Cash generated from operations |
|
36,680 |
39,591 |
87,817 |
|
Interest paid |
|
(605) |
(737) |
(1,480) |
|
Income taxes paid |
|
(15,424) |
(10,802) |
(22,087) |
|
Net cash from operating activities |
|
20,651 |
28,052 |
64,250 |
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
Purchase of property, plant & equipment |
|
(13,957) |
(6,882) |
(22,881) |
|
Proceeds from sale of property, plant & equipment |
|
375 |
346 |
879 |
|
Purchase of software & other intangibles |
|
(758) |
(1,322) |
(2,999) |
|
Development expenditure capitalised |
|
(819) |
(561) |
(1,542) |
|
Acquisition of businesses |
|
(1,288) |
(12,166) |
(13,939) |
|
Interest received |
|
341 |
561 |
1,291 |
|
Dividends received |
|
316 |
329 |
1,063 |
|
Net cash used in investing activities |
|
(15,790) |
(19,695) |
(38,128) |
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
Proceeds from issue of share capital |
|
- |
13 |
62 |
|
Proceeds from reissue of treasury shares |
|
343 |
2,208 |
3,888 |
|
Treasury shares purchased |
|
- |
- |
(6,762) |
|
Repayment of borrowings |
|
- |
(1,936) |
- |
|
Proceeds from borrowings |
7 |
2,056 |
- |
9,396 |
|
Payment of finance lease liabilities |
7 |
(24) |
- |
(66) |
|
Dividends paid (including minorities) |
|
(17,739) |
(16,484) |
(24,252) |
|
Net cash used in financing activities |
|
(15,364) |
(16,199) |
(17,734) |
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
7 |
(10,503) |
(7,842) |
8,388 |
|
Cash and cash equivalents at beginning of period |
7 |
52,095 |
37,857 |
37,857 |
|
Exchange movement |
7 |
(4,260) |
1,617 |
5,850 |
|
Cash and cash equivalents at end of period |
7 |
37,332 |
31,632 |
52,095 |
|
|
|
|
|
|
|
Borrowings and finance leases |
7 |
(33,231) |
(19,407) |
(34,705) |
|
Net cash |
7 |
4,101 |
12,225 |
17,390 |
NOTES TO THE ACCOUNTS
1. SEGMENTAL REPORTING
Analysis by location of operation
Six months to 30th June 2009
|
|
Revenue £'000 |
Inter-segment revenue £'000 |
Gross revenue £'000 |
Total operating profit £'000 |
Before adjustment operating profit £'000 |
Before adjustment operating margin % |
|
EMEA |
113,235 |
13,846 |
127,081 |
10,187 |
15,640 |
12.3% |
|
Americas |
51,017 |
2,009 |
53,026 |
4,513 |
5,992 |
11.3% |
|
AsiaPac |
49,021 |
1,330 |
50,351 |
9,116 |
9,404 |
18.7% |
|
Steam Specialties business |
213,273 |
17,185 |
230,458 |
23,816 |
31,036 |
13.5% |
|
Watson-Marlow Pumps business |
38,284 |
48 |
38,332 |
8,320 |
8,869 |
23.1% |
|
Corporate Expenses |
|
|
|
(2,071) |
(2,071) |
|
|
|
251,557 |
17,233 |
268,790 |
30,065 |
37,834 |
14.1% |
|
Intra-Group |
|
(17,233) |
(17,233) |
|
|
|
|
Net Revenue |
251,557 |
- |
251,557 |
30,065 |
37,834 |
15.0% |
Six months to 30th June 2008
|
|
Revenue £'000 |
Inter-segment revenue £'000 |
Gross revenue £'000 |
Total operating profit £'000 |
Before adjustment operating profit £'000 |
Before adjustment operating margin % |
|
EMEA |
110,736 |
17,937 |
128,673 |
20,120 |
20,223 |
15.7% |
|
Americas |
47,530 |
3,052 |
50,582 |
5,810 |
5,898 |
11.7% |
|
AsiaPac |
45,501 |
1,518 |
47,019 |
8,583 |
8,583 |
18.3% |
|
Steam Specialties business |
203,767 |
22,507 |
226,274 |
34,513 |
34,704 |
15.3% |
|
Watson-Marlow Pumps business |
34,940 |
16 |
34,956 |
8,408 |
8,854 |
25.3% |
|
Corporate Expenses |
|
|
|
(2,773) |
(2,773) |
|
|
|
238,707 |
22,523 |
261,230 |
40,148 |
40,785 |
15.6% |
|
Intra-Group |
|
(22,523) |
(22,523) |
|
|
|
|
Net Revenue |
238,707 |
- |
238,707 |
40,148 |
40,785 |
17.1% |
Year ended 31st December 2008
|
|
Revenue £'000 |
Inter-segment revenue £'000 |
Gross revenue £'000 |
Total operating profit £'000 |
Before adjustment operating profit £'000 |
Before adjustment operating margin % |
|
EMEA |
226,091 |
34,547 |
260,638 |
38,880 |
39,180 |
15.0% |
|
Americas |
101,913 |
6,102 |
108,015 |
8,840 |
12,119 |
11.2% |
|
AsiaPac |
98,931 |
3,898 |
102,829 |
21,136 |
21,136 |
20.6% |
|
Steam Specialties business |
426,935 |
44,547 |
471,482 |
68,856 |
72,435 |
15.4% |
|
Watson-Marlow Pumps business |
75,381 |
67 |
75,448 |
17,347 |
18,409 |
24.4% |
|
Corporate Expenses |
|
|
|
(5,175) |
(5,175) |
|
|
|
502,316 |
44,614 |
546,930 |
81,028 |
85,669 |
15.7% |
|
Intra-Group |
|
(44,614) |
(44,614) |
|
|
|
|
Net Revenue |
502,316 |
- |
502,316 |
81,028 |
85,669 |
17.1% |
Year ended 31st December 2007
|
|
Revenue £'000 |
Inter-segment revenue £'000 |
Gross revenue £'000 |
Total operating profit £'000 |
Before adjustment operating profit £'000 |
Before adjustment operating margin % |
|
EMEA |
191,130 |
32,257 |
223,387 |
31,586 |
31,781 |
14.2% |
|
Americas |
84,573 |
4,512 |
89,085 |
9,806 |
9,995 |
11.2% |
|
AsiaPac |
85,908 |
2,221 |
88,129 |
18,426 |
18,426 |
20.9% |
|
Steam Specialties business |
361,611 |
38,990 |
400,601 |
59,818 |
60,202 |
15.0% |
|
Watson-Marlow Pumps business |
55,706 |
54 |
55,760 |
12,856 |
12,856 |
23.1% |
|
Corporate Expenses |
|
|
|
(4,338) |
(4,338) |
|
|
|
417,317 |
39,044 |
456,361 |
68,336 |
68,720 |
15.1% |
|
Intra-Group |
|
(39,044) |
(39,044) |
|
|
|
|
Net Revenue |
417,317 |
- |
417,317 |
68,336 |
68,720 |
16.5% |
The total operating profit for each period is after charging the expenses analysed below:
|
|
30th June 2009 £'000 |
30th June 2008 £'000 |
31st Dec. 2008 £'000 |
|
Headcount reduction costs |
6,980 |
- |
- |
|
Amortisation of acquisition-related intangible assets |
789 |
637 |
1,541 |
|
Impairment of goodwill & intangible assets |
- |
- |
3,100 |
|
|
7,769 |
637 |
4,641 |
Net assets
|
|
30th June 2009 |
30th June 2008 |
31st December 2008 |
|||
|
|
Assets £'000 |
Liabilities £'000 |
Assets £'000 |
Liabilities £'000 |
Assets £'000 |
Liabilities £'000 |
|
EMEA |
193,973 |
(114,588) |
178,134 |
(86,214) |
216,124 |
(111,832) |
|
Americas |
61,197 |
(20,304) |
58,727 |
(14,463) |
81,420 |
(27,722) |
|
AsiaPac |
70,070 |
(7,429) |
60,343 |
(7,920) |
81,437 |
(11,694) |
|
Watson-Marlow Pumps business |
62,712 |
(12,157) |
54,923 |
(9,349) |
46,892 |
(4,661) |
|
|
387,952 |
(154,478) |
352,127 |
(117,946) |
425,873 |
(155,909) |
|
|
|
|
|
|
|
|
|
Liabilities |
(154,478) |
|
(117,946) |
|
(155,909) |
|
|
Deferred tax |
25,503 |
|
10,821 |
|
19,466 |
|
|
Current tax payable |
(4,932) |
|
(9,783) |
|
(10,814) |
|
|
Net cash |
4,101 |
|
12,225 |
|
17,390 |
|
|
Net assets |
258,146 |
|
247,444 |
|
296,006 |
|
Capital additions and depreciation and amortisation
|
|
30th June 2009 |
30th June 2008 |
31st December 2008 |
|||
|
|
Capital Depreciation and |
Capital Depreciation and |
Capital Depreciation and |
|||
|
|
additions £'000 |
amortisation £'000 |
additions £'000 |
amortisation £'000 |
additions £'000 |
amortisation £'000 |
|
EMEA |
6,148 |
4,804 |
5,151 |
4,264 |
15,285 |
8,772 |
|
Americas |
1,399 |
1,644 |
1,436 |
1,285 |
4,216 |
5,689 |
|
AsiaPac |
3,771 |
1,135 |
1,708 |
908 |
8,928 |
1,846 |
|
Watson-Marlow Pumps business |
3,257 |
1,816 |
10,032 |
1,741 |
15,540 |
3,552 |
|
|
14,575 |
9,399 |
18,327 |
8,198 |
43,969 |
19,859 |
Capital additions include property, plant and equipment and other intangible assets. Depreciation and amortisation includes amortisation of acquisition-related intangible assets at 30th June 2009 of £789K, 30th June 2008 of £637K and 31st December 2008 of £1,541K. Also included at 31st December 2008 is £3,100K of impairment of goodwill and intangible assets.
2. NET FINANCING EXPENSE
|
|
Six months to 30th June 2009 £'000 |
Six months to 30th June 2008 £'000 |
Year ended 31st December 2008 £'000 |
|
Financial expenses |
|
|
|
|
Bank and other borrowing interest payable |
(605) |
(737) |
(1,480) |
|
Interest on pension scheme liabilities |
(7,288) |
(6,617) |
(13,325) |
|
|
(7,893) |
(7,354) |
(14,805) |
|
Financial income |
|
|
|
|
Bank interest receivable |
341 |
561 |
1,291 |
|
Expected return on pension scheme assets |
6,507 |
7,552 |
15,250 |
|
|
6,848 |
8,113 |
16,541 |
|
Net financing expense |
(1,045) |
759 |
1,736 |
|
|
|
|
|
|
Net pension scheme financial expense |
(781) |
935 |
1,925 |
|
Net bank interest |
(264) |
(176) |
(189) |
|
Net financing expense |
(1,045) |
759 |
1,736 |
3. TAXATION
Taxation has been estimated at the rate expected to be incurred in the full year
|
|
Six months to 30th June 2009 £'000 |
Six months to 30th June 2008 £'000 |
Year ended 31st December 2008 £'000 |
|
United Kingdom corporation tax |
879 |
2,272 |
3,423 |
|
Overseas taxation |
8,243 |
11,136 |
20,730 |
|
Deferred taxation |
337 |
233 |
1,221 |
|
|
9,459 |
13,641 |
25,374 |
4. EARNINGS PER SHARE
|
|
Six months to 30th June 2009 £'000 |
Six months to 30th June 2008 £'000 |
Year ended 31st December 2008 £'000 |
|
Profit attributable to equity holders of the parent |
20,708 |
28,164 |
59,547 |
|
Weighted average shares in issue |
76,006,495 |
76,230,122 |
76,359,740 |
|
Dilution |
254,687 |
386,999 |
303,354 |
|
Diluted weighted average shares in issue |
76,261,182 |
76,617,121 |
76,663,094 |
|
|
|
|
|
|
Basic earnings per share |
27.2p |
36.9p |
78.0p |
|
Diluted earnings per share |
27.1p |
36.8p |
77.7p |
|
Adjusted profit attributable to equity holders of the parent |
26,552 |
28,971 |
63,648 |
|
Basic adjusted earnings per share |
34.9p |
38.0p |
83.4p |
The dilution is in respect of unexercised share options and the performance share plan.
5. DIVIDENDS
|
|
Six months to 30th June 2009 £'000 |
Six months to 30th June 2008 £'000 |
Year ended 31st December 2008 £'000 |
|
Amounts paid in the period |
|
|
|
|
Final dividend for the year ended 31st December 2008 of 23.3p (2007: 21.6p) per share |
17,719 |
16,452 |
16,452 |
|
Interim dividend for the year ended 31st December 2008 of 10.0p per share |
- |
- |
7,674 |
|
|
17,719 |
16,452 |
24,126 |
|
|
|
|
|
|
Amounts arising in respect of the period |
|
|
|
|
Interim dividend for the year ended 31st December 2009 of 10.5p (2008: 10.0p) per share |
7,983 |
7,653 |
7,674 |
|
Final dividend for the year ended 31st December 2008 of 23.3p (2007: 21.6p) per share |
- |
- |
17,719 |
|
|
7,983 |
7,653 |
25,393 |
No scrip alternative to the cash dividend is being offered in respect of the 2009 interim dividend.
6. EMPLOYEE BENEFITS
Pension plans
The Group is accounting for pension costs in accordance with International Accounting Standard 19.
The disclosures shown here are in respect of the Group's Defined Benefit Obligations. Other plans operated by the Group were either Defined Contribution plans or were deemed immaterial for the purposes of IAS 19 reporting. Full IAS 19 disclosure for the year ended 31st December 2008 is included in the Group's Annual Report.
The defined benefit plan expense is recognised in the income statement as follows:-
|
|
UK Pensions |
Overseas pensions & medical |
Total |
||||
|
|
Six months to 30th June 2009 £'000 |
Six months to 30th June 2008 £'000 |
Six months to 30th June 2009 £'000 |
Six months to 30th June 2008 £'000 |
Six months to 30th June 2009 £'000 |
Six months to 30th June 2008 £'000 |
Year ended 31st Dec. 2008 £'000 |
|
Current service cost |
(3,100) |
(2,900) |
(732) |
(642) |
(3,832) |
(3,542) |
(7,718) |
|
Settlement,curtailment |
- |
- |
(108) |
- |
(108) |
- |
- |
|
Interest on schemes' liabilities |
(5,900) |
(5,600) |
(1,388) |
(1,017) |
(7,288) |
(6,617) |
(13,325) |
|
Expected return on schemes' assets |
5,700 |
6,700 |
807 |
852 |
6,507 |
7,552 |
15,250 |
|
Total expense recognised in income statement |
(3,300) |
(1,800) |
(1,421) |
(807) |
(4,721) |
(2,607) |
(5,793) |
The expense is recognised in the following line items in the income statement:
|
|
Six months to 30th June 2009 £'000 |
Six months to 30th June 2008 £'000 |
Year ended 31st December 2008 £'000 |
|
Operating costs |
(3,940) |
(3,542) |
(7,718) |
|
Financial expenses |
(7,288) |
(6,617) |
(13,325) |
|
Financial income |
6,507 |
7,552 |
15,250 |
|
Total expense recognised in income statement |
(4,721) |
(2,607) |
(5,793) |
The amounts recognised in the balance sheet are determined as follows:
|
|
UK Pensions |
Overseas pensions & medical |
Total |
||||
|
|
30th June 2009 £'000 |
30th June 2008 £'000 |
30th June 2009 £'000 |
30th June 2008 £'000 |
30th June 2009 £'000 |
30th June 2008 £'000 |
31st Dec. 2008 £'000 |
|
Fair value of schemes' assets |
150,500 |
167,887 |
21,376 |
23,207 |
171,876 |
191,094 |
170,442 |
|
Present value of schemes' liabilities |
(217,200) |
(200,211) |
(45,328) |
(37,918) |
(262,528) |
(238,129) |
(244,159) |
|
Retirement benefit liability recognised in the balance sheet |
(66,700) |
(32,324) |
(23,952) |
(14,711) |
(90,652) |
(47,035) |
(73,717) |
|
Related deferred tax |
18,676 |
9,050 |
6,963 |
4,650 |
25,639 |
13,700 |
24,528 |
|
Net pension liability |
(48,024) |
(23,274) |
(16,989) |
(10,061) |
(65,013) |
(33,335) |
(49,189) |
Share based payments
The charge to the income statement in respect of share-based payments is made up as follows:-
|
|
Six months to 30th June 2009 £'000 |
Six months to 30th June 2008 £'000 |
Year ended 31st December 2008 £'000 |
|
Share Option Scheme |
425 |
458 |
809 |
|
Performance Share Plan |
347 |
266 |
605 |
|
Employee Share Ownership Plan |
372 |
351 |
691 |
|
|
1,144 |
1,075 |
2,105 |
7. ANALYSIS OF CHANGES IN NET CASH
|
|
At 1st Jan 2009 £'000 |
Cash flow £'000 |
Exchange movement £'000 |
At 30 th June 2009 £'000 |
|
Current portion of long term borrowings |
(176) |
|
|
(63) |
|
Non-current portion of long term borrowings |
(25,521) |
|
|
(25,281) |
|
Short term borrowing |
(9,008) |
|
|
(7,887) |
|
Total borrowings |
(34,705) |
|
|
(33,231) |
|
|
|
|
|
|
|
Comprising: |
|
|
|
|
|
Borrowings |
(34,319) |
(2,056) |
3,460 |
(32,915) |
|
Finance Leases |
(386) |
24 |
46 |
(316) |
|
|
(34,705) |
(2,032) |
3,506 |
(33,231) |
|
|
|
|
|
|
|
Cash and cash equivalents |
54,140 |
(8,275) |
(4,580) |
41,285 |
|
Bank overdrafts |
(2,045) |
(2,228) |
320 |
(3,953) |
|
Net cash and cash equivalents |
52,095 |
(10,503) |
(4,260) |
37,332 |
|
|
|
|
|
|
|
Net cash |
17,390 |
(12,535) |
(754) |
4,101 |
8. CAPITAL EMPLOYED
An analysis of the components of capital employed is as follows:
|
|
30th June 2009 £'000 |
30th June 2008 £'000 |
31st December 2008 £'000 |
|
Property, plant and equipment |
118,977 |
96,425 |
122,897 |
|
Prepayments |
621 |
2,682 |
900 |
|
Inventories |
91,810 |
84,071 |
102,382 |
|
Trade receivables |
105,805 |
103,190 |
124,595 |
|
Other current assets |
13,668 |
13,649 |
12,874 |
|
Tax recoverable |
2,020 |
874 |
1,118 |
|
Trade and other payables |
(62,758) |
(67,644) |
(81,010) |
|
Current tax payable |
(6,952) |
(10,657) |
(11,932) |
|
|
263,191 |
222,590 |
271,824 |
9. RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
Full details of the Group's other related party relationships, transactions and balances are given in the Group's financial statements for the year ended 31st December 2008. There have been no material changes in these relationships in the period up to the end of this report.
No related party transactions have taken place in the first half of 2009 that have materially affected the financial position or the performance of the Group during that period.
10. BASIS OF PREPARATION
The half year consolidated financial statements of Spirax-Sarco Engineering plc and its subsidiaries (the 'Group') have been prepared on the basis of the accounting policies set out in the 2008 Spirax-Sarco Engineering plc Annual Report, and in accordance with International Accounting Standard 34 Interim Financial Reporting, as adopted by the EU. IFRS 8, Operating Segments, has been adopted from 1st January 2009 and reflected in the comparative figures. The standard introduces a management approach to segment reporting and segment information is consistent with internal management reporting.
The comparative figures for the year ended 31st December 2008 do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The consolidated statutory accounts for Spirax-Sarco Engineering plc in respect of the year ended 31st December 2008 have been reported on by the company's auditors and delivered to the registrar of companies. The report of the auditors was unqualified and did not contain statements under section 237 (2) or (3) of the Companies Act 1985. The financial statements for the six months ended 30th June 2009, which have not been audited or reviewed by the auditors, were authorised for issue by the Board on 20th August 2009.
The interim report has been prepared solely to provide additional information to shareholders as a body to assess the Group's strategies and the potential for those strategies to succeed. This interim report should not be relied upon by any other party or for any other purpose.
CAUTIONARY STATEMENTS
This interim report contains forward-looking statements. These have been made by the directors in good faith based on the information available to them up to the time of their approval of this report. The directors can give no assurance that these expectations will prove to have been correct. Due to the inherent uncertainties, including both economic and business risk factors underlying such forward-looking information, actual results may differ materially from those expressed or implied by these forward-looking statements. The directors undertake no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.
PRINCIPAL RISKS AND UNCERTAINTIES
There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remainder of the financial year and could cause actual results to differ materially from expected and historical results. The principal risks and uncertainties are strategic, commercial, operational and financial. Ultimately these affect our ability to deliver our prime financial objective, which is to provide enhanced value to shareholders through consistent growth in earnings per share and dividends per share as a result of maintaining our world leading position and investing in our businesses for growth. More details of the key risks facing the Group's businesses are included on page 27 and page 36 of the Group's statutory financial statements for the year ended 31st December 2008. Details of further potential risks and uncertainties arising since the issue of the previous statutory financial statements are included within the Review of Operations as appropriate.
RESPONSIBILITY STATEMENT
The directors confirm that to the best of their knowledge:
- this financial information has been prepared in accordance with IAS 34, as adopted by the EU;
- this interim management report includes a fair review of the information required by DTR 4.2.7R (Indication of
important events during the first half and description of principal risks and uncertainties for the remaining half of
the year); and
- this interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of
related party transactions and changes therein).
From 20th August 2009 the Half Year Report will be available to view and download on our website at www.SpiraxSarcoEngineering.com. As previously advised, no printed version is being sent to shareholders.
This information is provided by RNS
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