Interim Results
Spirax-Sarco Engineering PLC
09 September 2004
________________________________________________________________________________
Spirax-Sarco Engineering plc Charlton House
Cheltenham
Glos. GL53 8ER
________________________________________________________________________________
News Release Telephone: 01242 521361
Fax: 01242 581470
www.SpiraxSarcoEngineering.com
________________________________________________________________________________
Thursday 9th September 2004 - embargoed until 7.00 a.m.
2004 Interim Results
Six months to 30th June
2004 2003 Change
Turnover £157.7m £154.0m +2.4%
Operating profit £23.4m £20.3m +15.6%
Operating profit margin 14.9% 13.2%
Profit before taxation £23.1m £19.6m +18.2%
Earnings per share 19.6p 17.2p +14.0%
Dividend per share 6.3p 6.0p +5.0%
Operating cash inflow £26.2m £20.6m
• Good organic sales growth of 7%
• Strong performances in Asia and Americas
• Margin increased to 14.9%
• Good cash flow and reduced net debt
• Interim dividend up 5%
Commenting on the results, the Chairman, Tim Fortune, said:
'We are continuing to invest in our world leading businesses and to build on our
market development opportunities. Assuming that there is no marked
deterioration in the Americas and Asian trading conditions or in exchange rates,
we expect to make further progress in the second half of the year.'
Enquiries:
Marcus Steel - Chief Executive
David Meredith - Director-Finance
Tel: 020 7638 9571 at Citigate Dewe Rogerson until 6.00 p.m.
The Chairman, Tim Fortune, comments as follows:
'I am pleased to report a good set of results for the first half of 2004, we
made strong progress in Asia and the Americas but market conditions in Western
Europe were subdued. We achieved progress by building on the strengths of our
specialist businesses in the industrial and commercial steam and peristaltic
pumping markets and on our wide customer and geographic spread.
Sales increased by 2.4% to £157.7 million. Organic growth of 7% was partially
offset by adverse exchange movements of over 4% primarily caused by the weakness
of the US dollar and related currencies in Asia.
Operating profit increased by 15.6% to £23.4 million, with a corresponding
increase in margin from 13.2% to 14.9%. The 2003 comparative figure includes
the one-off charge of £1.5 million for closure of the Hydra factory in Spain,
excluding which the profit increase is 8%. The adverse movement of exchange
rates in 2004 as compared with the first half of 2003 amounted to £1.3 million.
This comprised £0.9 million for translation and £0.4 million for transaction
effects. The operating profit increase therefore reflects a strong underlying
performance attributable to the organic sales growth and firm management
controls.
The interest charge for the first half year was £0.3 million compared with £0.7
million in the first half of last year reflecting good cash generation.
The profit before tax increased by £3.6 million to £23.1 million, an increase of
18.2%. The tax charge was 34% (2003: 33%).
The minority interest increased, attributable profit therefore improved by 15%
to £14.6 million and earnings per share increased by 14% to 19.6p (2003:
17.2p).
TRADING
Spirax Sarco is the world leader in the provision of knowledge, service and
products to improve the performance of customers' plants in our niche markets
which cover users of steam and peristaltic pumps in industrial and commercial
applications. The superior qualities of steam as a heat transfer medium, and of
the peristaltic principle as a solution to pumping problems, result in them
being used in many production processes by diverse industries across the world.
Spirax Sarco supplies a wide range of technical products and focuses on
providing high levels of customer service and advice worldwide.
In the UK, operating profit improved by 6% due to increased demand on the
factories from overseas markets. UK domestic demand by comparison remains quiet
although we largely protected our position through a combination of new product
releases and focused marketing. We extended the resourcing of raw materials in
Asia, the benefit of which was partly offset by increased steel prices.
In Continental Europe, an organic sales increase of 3% was reduced to only 1% in
sterling as a result of the weakening of the euro and most other European
currencies versus sterling as compared to the first half of 2003. The European
markets were generally weak and we concentrated on our own growth opportunities.
We made sales gains in local currency across most of the region, including
France, Holland, Portugal, Spain and most of Scandinavia both in the Spirax
Sarco and Watson-Marlow Bredel businesses. Germany and Italy were broadly flat
and in the Czech Republic and Norway sales were lower against exceptionally
strong performances in 2003. Notwithstanding weak European markets, demand on
our European factories increased, reflecting the sales activity worldwide.
Profits in Europe were well ahead of 2003 due mainly to the non-repeat of the
Hydra factory closure costs of £1.5 million incurred in the first half of 2003.
At constant exchange, and after excluding the impact of the Hydra costs, the
Continental European profits were 1% ahead of 2003.
In the Americas, good local currency sales growth of 11% was reduced to a flat
result in sterling by the weakness of the US dollar. In the USA, sales were
increased and profits of our Spirax Sarco company were well ahead. However, the
margin in Watson-Marlow Bredel USA was lower as a result of the impact of
exchange on products sourced from the UK and Holland. We also produced good
results in Canada, Brazil and Argentina. Operating profits in the Americas
increased by 10%; at constant currency the increase was 34%, which was achieved
through sales growth and close control of costs.
Our operations in Asia, Australasia and Africa performed strongly with overall
sales growth of 16% in local currency and 10% in sterling. The economies were
generally good, although the Chinese government's actions to limit overheating
of the economy seem to be beginning to temper their rate of growth. Our
operations in China, India, Japan, Korea, Malaysia, Taiwan and Thailand all
performed well, but the markets in Singapore and South Africa were tough and
their results were lower. Overall, this region produced a strong result for the
half year and profits were up 19% in sterling (31% at constant exchange), driven
chiefly by the sales increases.
BALANCE SHEET AND CASH FLOW
Capital employed (net assets excluding goodwill and net debt) increased by £7
million to £174 million in the first half. Debtors rose by £6 million, driven
by the extra sales but stocks have been tightly controlled and fell marginally
during the six month period. Capital expenditure of £6.2 million (2003: £6.6
million) was slightly below depreciation and the value of fixed assets was
therefore broadly unchanged.
The cash flow in the first half of the year was good with a reduction in net
debt of £1.8 million in spite of the normal relatively high outgoings that occur
in any first half year, notably the final dividend payment. The net debt
reduction included £0.8 million on translation due to the weakness of the US
dollar and euro in which our debt is largely denominated. Net debt at 30th June
2004 was therefore £12.6 million compared with £14.4 million at the end of 2003
and £30.4 million at 30th June 2003. Net gearing at the end of the period was
7%.
DIVIDEND
The directors have declared an interim dividend of 6.3p (2003: 6.0p) per
ordinary share, an increase of 5% which will be paid on 12th November 2004 to
shareholders on the register at the close of business on 15th October 2004. No
scrip alternative to the cash dividend is being offered in respect of the 2004
interim dividend.
PROSPECTS
The Group has achieved a good result in the first six months of 2004 even though
exchange rates moved against us and show little sign of easing; the
contribution to the profit increase which arose from the non-recurrence of the
Hydra factory closure costs will not, of course, be repeated in the second half
of the year. We are continuing to invest in our world leading businesses and to
build on our market development opportunities. Assuming that there is no marked
deterioration in the Americas and Asian trading conditions or in exchange rates,
we expect to make further progress in the second half of the year.'
Spirax-Sarco Engineering plc
GROUP PROFIT AND LOSS ACCOUNT
Six months Six months Year ended
to 30th June to 30th June 31st December
2004 2003 2003
£'000 £'000 £'000
Turnover (note 2) 157,740 154,026 314,087
______________________________________________________________
Operating profit (note 3) 23,427 20,257 45,750
Net interest payable (304) (688) (1,186)
______________________________________________________________
Profit before taxation 23,123 19,569 44,564
Taxation (note 5) (7,887) (6,420) (15,138)
______________________________________________________________
Profit after taxation 15,236 13,149 29,426
Minority interests - equity (608) (399) (788)
______________________________________________________________
Attributable profit 14,628 12,750 28,638
Dividends (4,729) (4,463) (15,028)
______________________________________________________________
Retained profit 9,899 8,287 13,610
______________________________________________________________
Earnings per share (note 6) 19.6p 17.2p 38.5p
Dividends per share 6.3p 6.0p 20.1p
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Six months Six months Year ended
to 30th June to 30th June 31st December
2004 2003 2003
£'000 £'000 £'000
Profit for the period 14,628 12,750 28,638
Currency translation difference on foreign
currency net investments (2,631) 2,514 (1,022)
______________________________________________________________
Total recognised gains and losses relating
to the period 11,997 15,264 27,616
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Spirax-Sarco Engineering plc
GROUP BALANCE SHEET
30th June 30th June 31st December
2004 2003 2003
£'000 £'000 £'000
Fixed assets
Intangible assets 10,671 11,305 11,123
Tangible assets 86,010 90,600 88,089
______________________________________________________________
96,681 101,905 99,212
Current assets
Stocks 58,868 62,305 60,695
Debtors 96,449 91,390 90,515
Cash deposits and short term investments 39,434 26,265 38,197
Cash at bank and in hand 3,662 3,772 4,977
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198,413 183,732 194,384
Creditors
Amounts falling due within one year (68,984) (67,991) (86,727)
______________________________________________________________
Net current assets 129,429 115,741 107,657
______________________________________________________________
Total assets less current liabilities 226,110 217,646 206,869
Creditors
Amounts falling due after more than one year (36,112) (39,996) (25,376)
Provisions for liabilities and charges (17,871) (17,089) (17,677)
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Net assets 172,127 160,561 163,816
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Capital and reserves
Called up share capital 18,725 18,589 18,690
Share premium account 36,588 34,584 35,996
Revaluation reserve 4,259 4,391 4,350
Capital redemption reserve 1,832 1,832 1,832
Profit and loss account 107,141 97,953 99,782
______________________________________________________________
Shareholders' funds - equity 168,545 157,349 160,650
Minority interests - equity 3,582 3,212 3,166
______________________________________________________________
172,127 160,561 163,816
______________________________________________________________
Spirax-Sarco Engineering plc
GROUP CASH FLOW STATEMENT
Six months Six months Year ended
to 30th June to 30th June 31st December
2004 2003 2003
£'000 £'000 £'000
RECONCILIATION OF OPERATING PROFIT
TO OPERATING CASH FLOW
Operating profit 23,427 20,257 45,750
Depreciation & amortisation charges 6,371 6,842 13,824
Decrease in stocks 246 (2,696) (2,558)
Increase in debtors (8,074) (2,210) (1,677)
Increase in creditors and provisions 4,268 (1,587) (1,913)
______________________________________________________________
Cash inflow from operating activities 26,238 20,606 53,426
______________________________________________________________
GROUP CASH FLOW STATEMENT
Cash inflow from operating activities 26,238 20,606 53,426
Net interest paid (303) (615) (1,181)
Dividends paid by subsidiary undertakings
to minority interests (108) (182) (312)
Taxation (9,052) (9,014) (16,269)
Purchase of tangible fixed assets (6,225) (6,602) (12,571)
Sales of tangible fixed assets 325 170 659
Acquisitions (net of disposals) - (1,245) (1,909)
Equity dividends paid (10,552) (10,033) (14,517)
______________________________________________________________
Cash inflow before use of liquid resources
and financing 323 (6,915) 7,326
Management of liquid resources (1,917) 6,162 (6,012)
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(1,594) (753) 1,314
______________________________________________________________
Financing
- Issue of ordinary share capital 627 218 1,731
- Decrease in debt (1,555) 647 (8,759)
______________________________________________________________
(928) 865 (7,028)
______________________________________________________________
Decrease in cash in the period (2,522) 112 (5,714)
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RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET
DEBT (Note 7)
Decrease in cash in the period (2,522) 112 (5,714)
Cash outflow from decrease in debt 1,555 (647) 8,759
Cash outflow from increase in liquid
resources 1,917 (6,162) 6,012
______________________________________________________________
Change in net debt resulting from cash flows 950 (6,697) 9,057
Translation difference 761 (1,014) (748)
______________________________________________________________
Movement in net debt in the period 1,711 (7,711) 8,309
Opening net debt (14,357) (22,666) (22,666)
______________________________________________________________
Closing net debt (12,646) (30,377) (14,357)
______________________________________________________________
Notes
1. Overseas results and cash flows have been translated into sterling at
average rates of exchange for each period. Foreign currency assets and
liabilities have been translated at period end rates.
2. The analysis of turnover by reference to the geographical location of
customers is as follows:
Six months Six months Year ended
to 30th June to 30th June 31st December
2004 2003 2003
£'000 £'000 £'000
United Kingdom 20,183 20,562 39,215
Continental Europe 60,532 60,137 117,390
The Americas 39,458 39,222 84,207
Asia, Australasia and Africa 37,567 34,105 73,275
________________________________________________________
157,740 154,026 314,087
________________________________________________________
The analysis of turnover by reference to the geographical location of the
Group's operations is as follows:
Six months Six months Year ended
to 30th June to 30th June 31st December
2004 2003 2003
£'000 £'000 £'000
United Kingdom 49,082 47,085 92,370
Continental Europe 74,190 74,615 146,408
The Americas 41,553 41,453 87,962
Asia, Australasia and Africa 34,045 30,998 67,145
________________________________________________________
198,870 194,151 393,885
Intra-group sales (41,130) (40,125) (79,798)
________________________________________________________
Sales to third parties 157,740 154,026 314,087
________________________________________________________
3. The analysis of operating profit by reference to the geographical location
of the Group's operations is as follows:
Six months Six months Year ended
to 30th June to 30th June 31st December
2004 2003 2003
£'000 £'000 £'000
United Kingdom 4,133 3,885 8,021
Continental Europe 9,253 7,604 16,439
The Americas 4,710 4,300 10,335
Asia, Australasia and Africa 5,331 4,468 10,955
________________________________________________________
23,427 20,257 45,750
________________________________________________________
4. In accordance with Financial Reporting Standard 10, purchased goodwill
arising on consolidation in respect of acquisitions since 1st January 1999
has been capitalised and is being amortised over 20 years. The charge for
amortisation in the six months to 30th June 2004 was £336,000 (2003:
£319,000).
5. Taxation has been estimated at the rate expected to be incurred in the full
year.
Six months Six months Year ended
to 30th June to 30th June 31st December
2004 2003 2003
£'000 £'000 £'000
United Kingdom corporation tax 1,491 1,514 2,759
Overseas taxation 6,235 5,206 12,810
Deferred taxation 202 (103) 66
Adjustment in respect of previous years (41) (197) (497)
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7,887 6,420 15,138
________________________________________________________
6. The calculation of earnings per share is based on earnings of £14,628,000
(2003: £12,750,000) together with the weighted average number of shares in
issue during the half year of 74,817,348 (2003: 74,316,269). For the full
year 2003 the calculation is based on earnings of £28,638,000 together with
the weighted average number of shares in issue during the full year of
74,432,975.
7. Analysis of changes in net debt:
At Exchange At
1st Jan 2004 Cash flow Movement 30 th June 2004
£'000 £'000 £'000 £'000
Cash in hand and at bank 4,977 (1,188) (127) 3,662
Overdrafts (12,602) (1,334) 407 (13,529)
_____________
(2,522)
_____________
Debt due within a year (19,714) 13,401 149 (6,164)
Debt due beyond a year (23,986) (12,011) 955 (35,042)
Finance leases (1,229) 165 57 (1,007)
_____________
1,555
_____________
Current asset investments 38,197 1,917 (680) 39,434
_____________________________________________________________________
(14,357) 950 761 (12,646)
_____________________________________________________________________
8. This financial information, which is unaudited, does not amount to full
accounts within the meaning of Section 240 of the Companies Act 1985 (as
amended). Full year accounts for 2003 with an unqualified audit report
have been filed with the Registrar of Companies.
9. Copies of the Interim Report will be sent on 10th September 2004 to members
and can be obtained from our registered office at Charlton House,
Cirencester Road, Cheltenham, Gloucestershire GL53 8ER. From 10th
September 2004 the Interim Report will be available on our website at
www.SpiraxSarcoEngineering.com.
This information is provided by RNS
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