Final Results
Spirax-Sarco Engineering PLC
10 March 2008
Monday 10th March 2008 - (embargoed until 7.00 a.m.)
2007 PRELIMINARY ANNOUNCEMENT
HIGHLIGHTS
Year to 31st December
IFRS 2007 2006 Change
Revenue £417.3m £384.2m +9%
Operating profit £68.3m £61.9m +10%
Profit before taxation £72.2m £65.3m +10%
Earnings per share 64.7p 57.7p +12%
Dividends per share 29.9p 26.5p +13%
Year to 31st December
Adjusted* 2007 2006 Change
Revenue £417.3m £384.2m +9%
Operating profit £68.7m £62.3m +10%
Operating profit margin 16.5% 16.2%
Profit before taxation £72.8m £65.7m +11%
Earnings per share 65.5p 58.1p +13%
Dividends per share 29.9p 26.5p +13%
* Excludes £0.6m amortisation of acquisition-related intangible assets
(2006: £0.4m) of which £0.2m relates to Associates (2006: nil).
• 11% sales growth at constant currency
• Good sales growth in all regions
• Strong 16% growth in operating profit at constant currency
• Operating profit margin increased to 16.5%
• EPS up 13% and final dividend up 14%
• Strong cash generation
Mike Townsend, Chairman, commenting on prospects said:
'Today, whilst we are faced with increasing uncertainty about the resilience of
the global economy, the underlying strengths of the Spirax Sarco and
Watson-Marlow Bredel businesses, which sell into a very broad range of
industries worldwide, and the increasing importance of energy savings should
allow us to continue our long history of consistent performance. 2008 has
started well including a more favourable exchange environment. We will continue
to invest in the development and expansion of our business and, assuming that
our global markets remain stable, we expect to produce another good performance
in 2008.'
Enquiries:
Mike Townsend - Chairman
Marcus Steel - Chief Executive
Mark Vernon - Chief Operating officer
David Meredith - Director Finance
Tel: 020 7638 9571 at Citigate Dewe Rogerson until 6.00 p.m.
SPIRAX-SARCO ENGINEERING plc
PRELIMINARY RESULTS
(Unless otherwise stated, the figures quoted in the text below exclude the
amortisation of acquired intangible assets).
SUMMARY
The Chairman, Mike Townsend, says:
'I am pleased to report another strong performance in 2007; we built on the
investments and developments of the last few years which helped to sustain our
long record of growth, good profitability and cash generation. We increased
sales by 9% and pre-tax profits by 11% to £72.8 million. This was achieved
through maintaining our commitment to product development, investing in new and
expanding markets and improving efficiency in our business.'
Business Environment
Market conditions in 2007 remained generally positive throughout the year.
Although there has been increasing speculation as to the future impact of the
global credit problems, our markets remained firm and were underpinned by an
increasing need to improve plant efficiency and reduce energy consumption, due
in part to high oil prices, increasing emphasis on climate change and
requirement for reduction in CO2 emissions. The markets in Continental Europe
were helpful through 2007 following the pick up in 2006. Although we increased
sales in the UK domestic market in 2007, our underlying market in the industrial
sectors of the economy continued to be subdued, not helped by the strength of
sterling. The markets in North America remained positive with good levels of
demand despite increasing general worries about a slow-down in 2008. The
economies in South America, Australasia and South Africa were positive, although
with some degree of fragility, particularly in South America. In Asia, market
activity has continued to be good and the economic fundamentals have, in most
cases, been strong.
Trading
Total Group sales increased by 9% in 2007 to £417.3 million (2006: £384.2
million). This increase was after an exchange hit and, at constant currency,
the sales increase was a strong 11%. While some of this growth arose from the
generally positive economic conditions, we continued to develop the product
range and to implement a series of global and local sales plans, and, as a
result, have increased our market share. There has been good organic growth in
all regions, with the strongest increases in Asia and the Rest of the World and
solid growth in UK, Continental Europe and North America.
In the Spirax Sarco steam business, sales increases were achieved in controls,
heat exchange solutions, clean steam products and steam system services; the
latter also contributed to good growth in sales of traditional products. In
Watson-Marlow Bredel, there were good increases in business into the
environmental and sanitary applications in both developed and developing
markets.
The Group's operating profit was £68.7 million (2006: £62.3 million), an
increase of 10% in sterling and 16% at constant currency - a strong result. The
profit was the highest ever achieved by the Group. The increase in operating
profit arose mainly from the organic sales growth and improved efficiency,
partially offset by higher material costs and the impact of exchange rate
movements. The operating profit margin improved again from 16.2% in 2006 to
16.5% in 2007. The improvement was held back by exchange transaction effects
and the impact of slow sales development at UltraPure as reported at the half
year.
Not surprisingly, exchange rate movements, on average, have had a noticeable
effect on the 2007 results, particularly as the Group's business is so
geographically diverse. The US dollar and dollar-related currencies were
substantially weaker against sterling than in 2006, which has held back the
reported results - especially in North America. By contrast, the euro and
related currencies were roughly unchanged against sterling in 2007 as against
2006; this area accounts for roughly a third of the Group's sales. The
currencies in Asia tended to move with the US dollar.
United Kingdom and Republic of Ireland
Sales into the domestic market increased by 8% in 2007 to £44.0 million from
£40.7 million in 2006. The underlying market remains quiet due to the
continuing pressure on the manufacturing base. In Spirax Sarco, we focused on
our technical support for customers in helping to improve their plant operations
and energy conservation, which resulted in good growth in sales of steam system
services and prefabricated packages. Watson-Marlow Bredel's sales included a
good increase in demand for Bredel pumps but was held back by a lower level of
projects.
Our UK factories continued to be busy satisfying demand for both the domestic
and overseas markets and benefiting from the increased throughput and tight
control of costs.
Operating profit of £13.4 million was well ahead of the £11.0 million achieved
in 2006, with good gains in both the sales companies and the manufacturing
operations - with the latter helped by the overseas demand.
Continental Europe
The good levels of activity that built up in 2006 continued through 2007, with
sales increasing to £153.7 million from £138.3 million, an increase of 11%.
Exchange movements had little effect on the sterling figures as the average euro
rates were similar in both years. In 2007, levels of economic and industrial
activity were positive with increases in GDP growth and industrial production.
The higher sales were reflected across both the Spirax Sarco and Watson-Marlow
Bredel ranges. In particular, there was good progress in sales of controls,
heat exchangers, steam system services and tubing. Sales to OEMs,
pharmaceutical, biotech, food and pulp & paper did well.
Geographically, the growth was also widespread with increases for the Spirax
Sarco business in nearly all the operating companies, including in France,
Germany, Scandinavia, Spain and Russia. In Watson-Marlow Bredel, there was good
progress in all companies and the new direct selling company in Denmark,
acquired in January 2007, started well.
Operating profits increased 17% from £22.4 million in 2006 to £26.3 million in
2007, driven mainly by the organic growth. The operating margin in 2007 was
slightly ahead at 13.8%.
North America
Sales in North America increased in sterling by only 1% in 2007 to £80.8 million
from £80.0 million. The substantial devaluation (average year on year) of the
US dollar in 2007 as against 2006 has masked an underlying growth in sales of
9%, which is mainly organic growth. In the USA, the markets remained positive
and sales in the Spirax Sarco business grew well with increased sales of energy
services, controls and traditional products. The Watson-Marlow Bredel business
saw good growth in water/wastewater and sanitary applications.
Our Canadian company produced a strong performance in 2007. Our Mexican
operation also generated a significant increase in sales and profits, although
it is accounted for separately as an Associate.
The operating profit in North America was down 18% at £7.3 million, which
compares with £8.9 million in 2006; at constant currency, the operating profit
was up 5%. The operating profit margin was lower at 9.0% as against 11.0% in
2006. The reduction in margin arises from unfavourable exchange rate movements,
particularly in Watson-Marlow Bredel, and, to a lesser extent, the impact of
slow sales development at UltraPure. Excluding these, the operating profit
margin in North America would have increased slightly over 2006.
Asia
Sales growth in our Asian territories was 11% in sterling to £85.3 million
(2006: £77.1 million) and at constant exchange was ahead 15%. The markets in
most of the Asian countries continued to be buoyant, the main exceptions being
Taiwan and Thailand. In Malaysia and South East Asia, our sales and profits
increased nicely and our operations in China and Korea turned in excellent
performances with good increases in profits. We increased sales coverage in the
growing markets and increased sales of traditional products as well as heat
exchange packages, boilerhouse products and clean steam products. The new
factory in China and offices in Korea were delayed for some months for technical
reasons and the projects will now run into 2009. Our Indian operation, which is
treated as an Associate, grew sales well and is strongly profitable.
The Asian currencies tended to weaken with the US dollar, particularly the Yen,
Won and Taiwanese dollar, thus adversely affecting the Asian results when
reported in sterling. The operating profit in 2007 was £16.6 million, which
compares with £15.1 million in 2006, an increase of 10%; at constant
currencies, the operating profit increase was 23%. The overall operating profit
margin in Asia was unchanged at 20.9%, despite the exchange transaction impact.
Rest of the World (South America, Africa, Australasia)
We also increased sales well in the Rest of the World to £53.6 million in 2007
(2006: £48.2 million), an increase of 11%. Here too, net exchange rate
movements adversely affected the sterling numbers and, at constant exchange
rates, the sales increased by 13% in 2007. Although the South American
economies remain somewhat fragile, they were buoyant and our company in
Argentina, particularly, produced strong increases in local currency sales and
profits. The Spirax Sarco and Watson-Marlow Bredel operations in Brazil also
provided good growth. In South Africa, the Watson-Marlow Bredel business
produced an excellent result, but the Spirax Sarco business performed poorly and
a management reorganisation is being implemented. In Australasia, our New
Zealand company continued to produce strong results, but in Australia sales were
flat and profits were slightly down.
Operating profits in the Rest of the World were £5.1 million, up 6% from £4.8
million in 2006; at constant exchange, the operating profit increase was 11%.
The profit increase was reduced by the results in Spirax Sarco South Africa and
Australia. The margin in the region therefore came down slightly from 10.0% in
2006 to 9.5% in 2007.
Interest
Net finance income was £2.4 million which compares with £2.0 million in 2006.
The increase was due to improved net finance income in respect of defined
benefit pension funds. This arose because the higher value of the assets of the
funds, following the special pension contributions in 2006 and early 2007,
improved the return on assets by more than the interest on the schemes'
liabilities. Net bank interest payable increased by £0.7 million in 2007 due to
the share buy-back in 2006, the special pension contributions in late 2006 and
early 2007, and the acquisition of UltraPure.
Associates
We have minority shareholdings in our operations in India and Mexico, which are
reported as Associates outside the operating profit. They are nevertheless an
integral part of the Group and both produced good performances in 2007. During
2007, we increased our shareholding in the Indian operation from 40% to nearly
50%. The Group's share of after tax profits of Associates increased to £1.6
million (2006: £1.4 million).
Profit before taxation
The Group's pre-tax profit increased by 11% to £72.8 million (2006: £65.7
million).
Taxation
The tax charge at 31.6% compares with 32.4% in 2006. More than 80% of the
Group's profits are earned outside the UK and the majority of the overseas tax
rates are effectively higher than UK rates. We expect that the tax rate for
2008 will be broadly in line with 2007.
Earnings per share
The Group's prime financial objective is to provide enhanced value to
shareholders through consistent growth in earnings per share and dividends per
share. Earnings per share rose to 65.5p from 58.1p, an increase of 13%
including a small benefit resulting from the share buy-back in 2006.
Dividends per share
The Board is recommending a final dividend of 21.6p per share payable on
19th May 2008 to shareholders on the register at the close of business on 18th
April 2008. This, together with the interim dividend of 8.3p per share paid in
November, makes a total dividend for the year of 29.9p per share. This compares
with a total dividend of 26.5p per share last year, an increase of 13%, in line
with our improved performance in 2007. The cost of the interim and final
dividends is £22.8 million, which is covered 2.2 times by earnings. No scrip
alternative to the cash dividend is being offered.
Capital employed
The continued growth in the business is reflected in a higher level of capital
employed, although the overall increase is well below the increase in sales.
Working capital was higher with increases in trade receivables and inventories
but reflecting improvements in both debtor days and stock weeks as we continued
to closely manage working capital levels.
Return on capital employed (ROCE)*
ROCE improved in 2007 to 33.6% from 32.2% in 2006. Capital employed was
carefully controlled and increased by 6% in 2007, whereas operating profit
increased by 10%.
Capital expenditure
The value of tangible fixed assets increased by 2% at constant exchange rates to
£93.9 million in 2007 as we continue investing in our businesses. There were
investments in new or extended premises in Denmark, Germany and South Africa,
together with on-going plant and machinery expenditure in our manufacturing
plants to increase efficiency and expand capacity. The additions in 2007
exceeded the depreciation charge by 22%.
2007 2006
£'000 £'000
Capital expenditure** 16,052 19,153
Depreciation and amortisation 13,147 12,151
Capital expenditure as a % of depreciation 122% 158%
** Capital expenditure excludes acquisition-related intangible assets and
capitalised development costs.
There have been delays in the expansion plans for our plant in China. During
2008 and 2009 there will be an investment of around £9 million in a new factory
and offices to increase the volume of production in Shanghai and to accommodate
the growth of the sales organisation of this successful company. We also intend
to invest £6 million in expanding the Watson-Marlow tube and pump production
plant.
Intangible assets and investments in Associates
Intangible assets include goodwill capitalised prior to 2004 under UK GAAP and
goodwill and other intangible assets capitalised on acquisitions since the
transition to IFRS. Goodwill is the subject of annual impairment testing and
intangible assets are amortised over their expected useful lives. There was no
impairment of goodwill during 2007, or 2006. Amortisation of acquired
intangible assets was £0.6 million for the year (2006: £0.4 million). Of this
£0.2m relates to Associates (2006: nil) following the increase in our
shareholding in India from 40% to nearly 50%, which required the recognition of
intangible assets in respect of our total shareholding. Product development
costs capitalised and computer software are also included in intangible assets
in accordance with IFRS. The Group balance sheet also includes the cost of
investment in our Associate companies in India and Mexico and our share of
post-acquisition profit, net of dividends received.
Post-retirement benefits
The post-retirement benefit liability shown in the balance sheet reduced to
£21.5 million at 31st December 2007 from £29.6 million a year earlier. The
improvement was due to the special pension contributions of £5.5 million made in
early 2007 and to a reduction in pension liability values as bond yields rose
both in the UK and overseas. These gains were partially offset by a shortfall
in the return on assets for the year and to a lesser extent by increased
liabilities due to pay and demographic factors.
Cash flow
There was a good cash flow performance for the year. Free cash flow was £39.0
million (2006: £10.0 million) driven by the strong growth in operating profit
and despite making the £5.5 million of special contributions into the Group's
main defined benefit pension schemes. Working capital levels were well
controlled and movements during the year absorbed only £3.6 million. Taxation
payments at £18.2 million were reduced by tax relief on the special pension
contributions, particularly in the UK. Capital expenditure (net of disposals)
at £16.5 million was at a normal level but is expected to increase significantly
in 2008 as previously explained.
Net dividend payments rose to £20.8 million and there was an outflow of £1.2
million in respect of acquisitions. Against this, there was an inflow of £3.2
million due to the operation of the Group's share-based payment schemes which
were satisfied by the reissue of treasury shares. In February 2008, we acquired
Flexicon A/S in Denmark for DKK141 million (£14.1 million) of which DKK113
million (£11.3 million) was paid on completion with the remainder to be paid in
three equal annual instalments starting in February 2009.
The good cash flow and a small favourable exchange effect meant that we finished
2007 with net cash of £15.8 million compared with net debt of £6.6 million a
year earlier.
The Chairman comments as follows:
'On 11th February 2008, the Group completed the acquisition of Flexicon A/S in
Denmark. Flexicon will form part of the Watson-Marlow Bredel business and its
range of peristaltic aseptic filling systems is complementary to the range
offered by Watson-Marlow Bredel. The consideration was DKK141 million (£14.1
million).
We announced on 13th December 2007 that our Chief Executive, Marcus Steel, would
be retiring from the Board on 31st March 2008, having joined the Group in 1972
and the Board in 1992. Marcus has successfully led the company in a firm and
positive manner achieving improved financial performances, while retaining its
ethos and reputation for fair dealing. I, and the whole Board, thank him and
wish him a very happy and long retirement.
We were delighted to announce that Mark Vernon will succeed Marcus as Chief
Executive from 1st April 2008. Mark joined the Group as President of Spirax
Sarco, Inc. in the USA in 2003 and he then came onto the Board of Spirax-Sarco
Engineering plc in June 2006 with responsibility for the Americas and Group
Marketing. Mark brought to Spirax a wealth of experience in the global process
control industry and he is well qualified to take the Group forward.
Also on 13th December 2007 we announced that Peter Smith will be retiring as
Company Secretary and Director with effect from 31st March 2008 after 33 years
with the Group. He joined the Board of Spirax-Sarco Engineering plc in 1995.
Since that date, Peter has provided the Board with wise and balanced advice.
His counsel will be much missed and we wish him a long and healthy retirement.
We are pleased to have announced the appointment of William Stebbings as Company
Secretary with effect from 1st April 2008. William joined Spirax in February
2007. He is a solicitor with extensive industrial experience at Linpac Group
Ltd., HP Bulmer Holdings PLC, Bunzl PLC and The Distillers Company PLC.
The good results we have achieved in the past and again in 2007 reflect the
fundamental strengths of the Group - a wide geographical spread, diverse
customer base, broad product range and our focus on our niche Spirax Sarco and
Watson-Marlow Bredel businesses. Spirax-Sarco Engineering plc is a high quality
business and it is the skills and dedication of the people who make up the Group
that sets it apart. Their efforts all around the world have made our
achievements possible; my thanks and those of the Board go to our colleagues
past and present for their hard work which has produced such strong results over
a very long period.
PROSPECTS
Today, whilst we are faced with increasing uncertainty about the resilience of
the global economy, the underlying strengths of the Spirax Sarco and
Watson-Marlow Bredel businesses, which sell into a very broad range of
industries worldwide, and the increasing importance of energy savings should
allow us to continue our long history of consistent performance. 2008 has
started well including a more favourable exchange environment. We will continue
to invest in the development and expansion of our business and, assuming that
our global markets remain stable, we expect to produce another good performance
in 2008.'
Note: All profit measures exclude the amortisation of acquisition-related
intangible assets. The total in 2007 is £0.6 million (2006: £0.4 million) of
which £0.2 million relates to Associates (2006: nil).
SPIRAX-SARCO ENGINEERING PLC
Group Income Statement for the year ended 31st December 2007
Note Before Adj't* Total Before Adj't* Total
Adjustment 2007 2007 Adjustment 2006 2006
2007 2006
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 2 417,317 - 417,317 384,249 - 384,249
Operating costs (348,597) (384) (348,981) (321,958) (350) (322,308)
Operating profit 3 68,720 (384) 68,336 62,291 (350) 61,941
Financial expenses (13,248) - (13,248) (11,722) - (11,722)
Financial income 15,688 - 15,688 13,757 - 13,757
Net financing income 4 2,440 - 2,440 2,035 - 2,035
Share of profit of associates 1,636 (249) 1,387 1,368 - 1,368
Profit before taxation 72,796 (633) 72,163 65,694 (350) 65,344
Taxation UK (3,697) - (3,697) (3,257) - (3,257)
Taxation Foreign (19,276) - (19,276) (18,021) - (18,021)
Total taxation 5 (22,973) - (22,973) (21,278) - (21,278)
Profit for the period 49,823 (633) 49,190 44,416 (350) 44,066
Attributable to:
Equity holders of the parent 49,734 (633) 49,101 44,269 (350) 43,919
Minority interest 89 - 89 147 - 147
Profit for the period 49,823 (633) 49,190 44,416 (350) 44,066
Earnings per share 6
Basic earnings per share 64.7p 57.7p
Diluted earnings per share 64.4p 57.1p
Dividends 7
Dividends per share 29.9p 26.5p
Dividends paid during the
year (per share) 27.3p 24.5p
* Amortisation of acquisition-related intangibles. Total 2007 is £633,000
(2006: £350,000) of which £249,000 relates to Associates (2006: nil). On
this basis, the basic earnings per share for 2007 is 65.5p (2006: 58.1p).
SPIRAX-SARCO ENGINEERING plc
Group Balance Sheet at 31st December 2007
2007 2006
Note £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 93,933 88,802
Goodwill 18,697 17,541
Other intangible assets 9,663 8,866
Prepayments 986 352
Post retirement benefits 1,095 -
Investment in associates 7,937 3,790
Deferred tax 11,659 13,738
143,970 133,089
Current assets
Inventories 73,824 67,707
Trade receivables 98,067 90,023
Other current assets 9,755 8,382
Tax recoverable 949 1,746
Cash and cash equivalents 38,844 22,085
221,439 189,943
Total assets 365,409 323,032
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables 58,832 50,372
Bank overdrafts 987 3,986
Short term borrowing 1,717 5,934
Current portion of long term borrowings 78 4,669
Current tax payable 8,321 7,445
69,935 72,406
Net current assets 151,504 117,537
Non-current liabilities
Long term borrowings 20,231 14,050
Deferred tax 8,307 6,386
Post-retirement benefits 22,628 29,592
Provisions 1,343 876
52,509 50,904
Total liabilities 122,444 123,310
Net assets 8 242,965 199,722
Equity
Share capital 19,299 19,296
Share premium account 47,267 47,228
Other reserves 5,719 (1,850)
Retained earnings 169,866 133,835
Equity attributable to equity holders of the parent 242,151 198,509
Minority interest 814 1,213
Total equity 242,965 199,722
Total equity and liabilities 365,409 323,032
SPIRAX-SARCO ENGINEERING plc
Group Statement of Total Recognised Income and Expense
for the year ended 31st December 2007
2007 2006
£'000 £'000
Actuarial loss on post retirement benefits (877) (2,939)
Deferred tax on actuarial loss on post retirement benefits 279 1,142
Foreign exchange translation differences 7,650 (9,574)
(Loss)/Gain on cash flow hedges (81) 170
Income and expense recognised directly in equity 6,971 (11,201)
Profit for the period 49,190 44,066
Total recognised income and expense for the period 56,161 32,865
Attributable to
Equity holders of the parent 56,072 32,718
Minority interest 89 147
Total recognised income and expense for the period 56,161 32,865
SPIRAX-SARCO ENGINEERING plc
Statement of Changes in Equity
For the year ended 31st December 2007
2007 2006
£'000 £'000
Equity attributable to equity holders of parent at beginning of period 198,509 197,618
Total recognised income and expense 56,072 32,718
Dividends paid (20,728) (18,715)
Increased investment in Associated company 2,946 -
Proceeds from issue of share capital 42 1,132
Equity settled share plans 2,195 1,142
Treasury shares purchased - (18,082)
Treasury shares reissued 5,457 3,777
Loss on the reissue of treasury shares (2,342) (1,081)
242,151 198,509
SPIRAX-SARCO ENGINEERING plc
Group Cash Flow Statement for the year ended 31st December 2007
Note 2007 2006
£'000 £'000
Cash flows from operating activities
Profit before taxation 72,163 65,344
Depreciation and amortisation 14,231 13,364
Share of profit of associates (1,387) (1,368)
Equity settled share plans 1,259 860
Net finance income (2,440) (2,035)
Operating cash flow before changes in working capital and provisions 83,826 76,165
Increase in trade and other receivables (5,244) (12,662)
Increase in inventories (3,999) (6,248)
Decrease in provisions and post retirement benefits (5,726) (15,887)
Increase in trade and other payables 5,671 5,184
Cash generated from operations 74,528 46,552
Interest paid (1,699) (1,137)
Income taxes paid (18,162) (16,484)
Net cash from operating activities 54,667 28,931
Cash flows from investing activities
Purchase of property, plant and equipment (13,826) (17,935)
Proceeds from sale of property, plant and equipment 599 660
Purchase of software and other intangibles (1,693) (1,678)
Development expenditure capitalised (1,604) (989)
Acquisition of businesses (1,170) (3,969)
Interest received 906 983
Dividends received 557 477
Net cash used in investing activities (16,231) (22,451)
Cash flows from financing activities
Proceeds from issue of share capital 42 1,132
Proceeds from reissue of treasury shares 3,115 2,696
Treasury shares purchased - (18,082)
Repayment of borrowings (2,543) (7,544)
Payment of finance lease liabilities (20) (88)
Dividends paid (including minorities) (20,828) (18,843)
Net cash used in financing activities (20,234) (40,729)
Net decrease in cash and cash equivalents 18,202 (34,249)
Cash and cash equivalents at beginning of period 18,099 53,093
Exchange movement 1,556 (745)
Cash and cash equivalents at end of period 9 37,857 18,099
Borrowings and finance leases (22,026) (24,653)
Net cash/(borrowings) 9 15,831 (6,554)
Notes:
1. Foreign currency assets and liabilities are translated into sterling at
rates of exchange ruling at 31st December. Trading results of overseas
subsidiary undertakings have been translated into sterling at average rates
of exchange ruling during the year.
2. Revenue analysis
The analysis of revenue by reference to the geographical location of
customers is as follows:-
2007 2006 Change change
£'000 £'000 at constant
exchange
rates
% %
UK & Republic of Ireland 43,993 40,695 +8 +8
Continental Europe 153,661 138,299 +11 +10
North America 80,800 79,956 +1 +9
Asia 85,252 77,138 +11 +15
Rest of the World 53,611 48,161 +11 +13
417,317 384,249 +9 +11
and by reference to the geographical location of the Group's
operations is as follows:-
2007 2006 change change
£'000 £'000 at constant
exchange
rates
% %
UK & Republic of Ireland 117,220 107,922 +9 +9
Continental Europe 189,876 172,382 +10 +9
North America 81,549 80,610 +1 +9
Asia 79,820 72,208 +11 +16
Rest of the World 54,086 48,273 +12 +15
522,551 481,395 +9 +11
Intra-group sales (105,234) (97,146) +8 +9
Sales to customers 417,317 384,249 +9 +11
Secondary segment revenue by business operation:
2007 2006
£'000 £'000
Spirax Sarco 361,611 332,655
Watson-Marlow Bredel 55,706 51,594
417,317 384,249
3. Operating profit, analysed by reference to the geographical location
of the Group's operations, is as follows:-
2007 2006 change * change
£'000 £'000 at constant
exchange
rates
% %
UK & Republic of Ireland 13,314 10,957 +22 +19
Continental Europe 26,223 22,435 +17 +15
North America 7,138 8,732 -18 +4
Asia 16,641 15,120 +10 +23
Rest of the World 5,020 4,697 +7 +12
68,336 61,941 +10 +16
Amortisation of acquisition-related intangible assets acquired was
£384,000 (2006: £350,000) and amortisation of capitalised development
costs was £1,086,000 (2006: £994,000).
*The percentage change at constant exchange rates in respect of the
operating profit also includes an estimate of the transaction effect.
4. Net Financing Income
2007 2006
£'000 £'000
Financial expenses
Bank and other borrowing interest payable (1,699) (1,137)
Interest on pension scheme liabilities (11,549) (10,585)
(13,248) (11,722)
Financial income
Bank interest receivable 906 1,038
Expected return on pension scheme assets 14,782 12,719
15,688 13,757
Net financing income 2,440 2,035
Net pension scheme financing income 3,233 2,134
Net bank interest (793) (99)
Net financing income 2,440 2,035
5. Taxation
2007 2006
£'000 £'000
Analysis of charge in period
UK corporation tax
Current tax on income for the period 2,259 7,918
Adjustments in respect of prior periods (1,057) (207)
1,202 7,711
Double taxation relief (280) (7,570)
922 141
Foreign tax
Current tax on income for the period 18,291 16,561
Adjustments in respect of prior periods 40 (79)
18,331 16,482
Total current tax charge 19,253 16,623
Deferred tax - UK 2,775 3,116
Deferred tax - Foreign 945 1,539
Tax on profit on ordinary activities 22,973 21,278
6. Earnings per share
2007 2006
£'000 £'000
Earnings 49,101 43,919
Weighted average shares in issue 75,889,850 76,161,612
Dilution 365,911 733,050
Diluted weighted average shares in issue 76,255,761 76,894,662
Basic earnings per share 64.7p 57.7p
Diluted earnings per share 64.4p 57.1p
Adjusted earnings 49,734 44,269
Basic adjusted earnings per share 65.5p 58.1p
The dilution is in respect of unexercised share options and the
performance share plan.
7. Dividends
2007 2006
£'000 £'000
Amounts paid in the year
Final dividend for the year ended 31st December 2006 of 19.0p
(2005: 17.0p) per share 14,413 13,047
Interim dividend for the year ended 31st December 2007 of 8.3p
(2006: 7.5p) per share 6,315 5,668
20,728 18,715
Amounts arising in respect of the year
Interim dividend for the year ended 31st December 2007 of 8.3p
(2006: 7.5p) per share 6,315 5,668
Proposed final dividend for the year ended 31st December 2007 of
21.6p (2006: 19.0p) per share 16,439 14,370
22,754 20,038
The proposed final dividend is subject to approval by shareholders at the
Annual General Meeting and has not been included as a liability in the
financial statements.
If approved at the annual general meeting on 13th May 2008, the final
dividend will be paid on 19th May 2008 to shareholders on the register at
18th April 2008. No scrip alternative to the cash dividend is being
offered.
8. The analysis of net assets by reference to the geographical location of the
Group's operations is as follows:-
2007 2006
£'000 £'000
UK & Republic of Ireland 54,403 43,935
Continental Europe 70,603 61,063
North America 34,695 35,207
Asia 44,562 40,586
Rest of the World 26,891 23,832
231,154 204,623
Deferred tax 3,352 7,352
Current tax (7,372) (5,699)
Net cash 15,831 (6,554)
Net assets 242,965 199,722
9. Analysis of changes in net cash
1st Jan Cash Exchange 31st Dec
2007 Flow movement 2007
£'000 £'000 £'000 £'000
Current portion of long term borrowings (4,669) (78)
Non-current portion of long term borrowings (14,050) (20,231)
Short term borrowings (5,934) (1,717)
Total borrowings (24,653) (22,026)
Comprising:
Borrowings (24,300) 2,543 92 (21,665)
Finance Leases (353) 20 (28) (361)
(24,653) 2,563 64 (22,026)
Cash and cash equivalents 22,085 15,188 1,571 38,844
Bank overdrafts (3,986) 3,014 (15) (987)
Net cash and cash equivalents 18,099 18,202 1,556 37,857
Net cash (6,554) 20,765 1,620 15,831
10. Return on capital employed
2007 2006
£'000 £'000
Capital employed
Property, plant and equipment 93,933 88,802
Prepayments 986 352
Inventories 73,824 67,707
Trade receivables 98,067 90,023
Other current assets 9,755 8,382
Tax recoverable 949 1,746
Trade and other payables (58,832) (50,372)
Current tax payable (8,321) (7,445)
Capital employed 210,361 199,195
Average capital employed 204,778 193,691
Operating profit 68,336 61,941
Acquisition intangibles amortisation 384 350
68,720 62,291
ROCE 33.6% 32.2%
11. Employee benefits
The Group is accounting for pension cost and share based payments in
accordance with International Accounting Standard 19 - Employee benefits
and International Financial Reporting Standard 2 - Share-based payments.
The defined benefit plan expense is recognised in the income
statement as follows:-
UK Pensions Overseas pensions and Total
medical
2007 2006 2007 2006 2007 2006
£'000 £'000 £'000 £'000 £'000 £'000
Current service cost (6,540) (6,491) (1,333) (1,699) (7,873) (8,190)
Past service cost - (375) - - - (375)
Settlement curtailment - - 115 - 115 -
Interest on schemes' liabilities (9,660) (8,715) (1,889) (1,870) (11,549) (10,585)
Expected return on schemes' assets 13,087 11,216 1,695 1,503 14,782 12,719
Total expense recognised in income
statement (3,113) (4,365) (1,412) (2,066) (4,525) (6,431)
A summary of the deficits in the schemes is as follows:-
Overseas
UK pensions Total
pensions & medical
£'000 £'000 £'000
Fair value of schemes' assets 184,588 23,932 208,520
Present value of the schemes' liabilities (192,612) (37,441) (230,053)
Deficit in the schemes (8,024) (13,509) (21,533)
Related deferred tax asset 2,247 4,573 6,820
Net pension liability 2007 (5,777) (8,936) (14,713)
Net pension liability 2006 (10,958) (9,243) (20,201)
The charge to the income statement in respect of share-based
payments is made up as follows:-
2007 2006
£'000 £'000
Share Option Scheme 695 495
Performance Share Plan 468 290
Employees Share Ownership Plan 631 579
Total expense recognised in income statement 1,794 1,364
12. Basis of preparation
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31st December 2007 or 31st December
2006. Statutory accounts for 2006, which were prepared under accounting
standards adopted by the EU have been delivered to the registrar of
companies and those for 2007 will be delivered in due course. The auditors
have reported on those accounts; their report was
(i) unqualified, (ii) did not include any references to any matters to
which the auditors drew attention by way of emphasis without qualifying and
(iii) did not contain statements under sections 237(2) or (3) of the
Companies Act 1985.
This information is provided by RNS
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