Preliminary Results 2005
Spirax-Sarco Engineering PLC
13 March 2006
Spirax-Sarco Engineering plc Charlton House
Cheltenham
Glos. GL53 8ER
News Release Telephone: 01242 521361
Fax: 01242 581470
www.SpiraxSarcoEngineering.com
2005 PRELIMINARY ANNOUNCEMENT
HIGHLIGHTS
Year to 31st December
2005 2004 Change
Revenue £349.1m £316.0m +10%
Operating profit £55.2m £48.0m +15%
Operating profit margin 15.8% 15.2%
Profit before taxation £57.0m £48.7m +17%
Cash generated from operations £60.2m £62.2m -3%
Earnings per share 50.0p 43.1p +16%
Dividends per share 23.8p 21.4p +11%
• Good growth in Asia and Americas.
• Operating profit up 15%.
• Improved operating margin of 15.8%.
• Strong cash flow.
• Dividend for the full year up 11%.
Mike Townsend, Chairman, commenting on prospects said:
'The results for 2005 were helped by favourable exchange movements and a broadly
positive trading environment. We invested in the growth of the business and
will continue to invest in sales and marketing resources and to improve
efficiency. The current year has started satisfactorily and, assuming that
there is no disruption to the major world economies and that currency movements
do not go significantly against us, we expect that the Group will make still
further progress in 2006.'
Enquiries:
Mike Townsend - Chairman
Marcus Steel - Chief Executive
David Meredith - Director Finance
Tel: 020 7638 9571 at Citigate Dewe Rogerson until 6.00 p.m.
SPIRAX-SARCO ENGINEERING plc
PRELIMINARY RESULTS
SUMMARY
The Chairman, Mike Townsend, says:
'I am pleased to report a further good set of results for 2005. Following the
progress in the first half of the year, the momentum was maintained through the
second half. Sales increased 10% in the full year, operating profit was 15%
ahead and pre-tax profit rose by 17% to a record £57.0 million, which includes
favourable exchange movements and a small contribution from acquisitions. These
trading results together with control of the balance sheet are reflected in the
improved return on capital employed, the strong cash flow and the recommended
11% increase in dividend for the year.
This is the first full year's results to have been prepared under International
Financial Reporting Standards (IFRS) and all comparisons are with 2004 results
which have been restated to comply with IFRS.
Operating profit increased to £55.2 million from £48.0 million in 2004, an
increase of 15%. The effect of exchange rate movements was to increase
operating profits by £2.1 million. The Group operating profit margin improved
to 15.8% compared with 15.2% in 2004, the improvement largely arising from the
higher sales. We strengthened our position as the world leader in providing
advice and products for the efficient use of both steam and peristaltic pumps.
Our businesses in the Americas and Asia made good progress but the markets in
the UK and Continental Europe were, for the most part, quiet and our progress in
those economies was, therefore, constrained.'
The Chief Executive, Marcus Steel, reports:
'TRADING
Following the good progress in the first half of 2005, we continued the growth
of our businesses through the second half of the year and the market conditions
have been broadly positive. North American markets have remained firm. The
South American economies have grown but are fragile. Continental European
economies were generally slow with weak manufacturing sectors but we continued
to implement our own selective growth plans. The conditions in the UK market
were similar to Continental Europe and we have been focussing our sales effort
on new product areas and strong marketing. By contrast, there was strong growth
in the Asian markets, driven particularly by China, India and Korea. The high
oil price does not yet seem to have had much adverse effect on markets generally
and, for Spirax Sarco with the ability to save energy for our customers, the oil
price is overall a positive factor.
Exchange rates have moved in our favour in 2005 with a small weakening of
sterling. With 89% of the Group's sales being outside the UK and the majority
of the Group's manufacturing resources also outside the UK, exchange is a
significant factor for us. Taking the annual average exchange rates against
sterling, the euro and US dollar were both slightly stronger in 2005 than 2004
but the South American and Asian currencies were stronger still - most notably
the Brazilian Real and the Korean Won. The net result is that, with our mix of
business, sterling was approximately 21/2% weaker than in 2004. The effect was
to enhance sales by £8.1 million in the year; the operating profit increase
includes a positive exchange movement of £2.1 million, of which £1.5 million was
translation and £0.6 million was transaction.
Turnover increased to £349.1 million from £316.0 million in 2004, an increase of
10%. At constant exchange the growth in sales was 8%, a good result which
includes organic growth of 6% and a contribution from acquisitions of 2%. The
organic growth was achieved in all regions except the UK, which was broadly
flat. The strongest growth was in Asia and the Rest of the World, with good
growth in North America too. The sales increase in Continental Europe was
patchy and, in total, modest.
In the Spirax Sarco business, we made progress with a number of sales
initiatives including engineered units, steam system services and controls.
Sales to the oil and petrochemicals industry increased with more project work.
We also increased our sales and service coverage during the year. Watson-Marlow
Bredel capitalised on the recent releases of the award-winning new pump ranges
which take the company well ahead of the competition and sales grew particularly
well in developing markets in Asia and South America.
Operating profit for the Group increased by 15% over 2004 from £48.0 million to
£55.2 million, a record for the Group. Excluding the exchange gains, the profit
increase was 10%, a solid underlying performance. The profit increase was
mainly achieved organically; acquisitions also added 2%. We increased
productivity during the year and made progress with the resourcing of raw
materials; the benefits of the latter were however outweighed by significant
raw material cost increases in Europe and energy cost increases generally. We
expanded our investment in sales resources in the growing markets in Asia and
the Americas, largely in the form of extra sales and service engineers and sales
support.
We have only minority shareholdings in our operations in India and Mexico which
are therefore reported outside the operating profit. They are nevertheless
integral to the whole and both produced good performances in 2005.
The operating profit margin increased from 15.2% in 2004 to 15.8% in 2005, the
effect of the sales increase being reduced by our continuing investment for the
future. On 9th June 2005 we announced the acquisition of the Mitech group of
controls companies in South Africa for £2.3 million, and on 27th June 2005 we
announced the acquisition for £2.5 million of the assets and business of EMCO, a
small supplier of flow meters in the USA. Both businesses have been
successfully brought into the Group.
UK
The UK domestic market continued to be weak with lower industrial production and
weak manufacturing investment. Third party sales rose marginally to £40.1
million (2004: £39.9m) with the sales growth held back by the non-repeat of a
large boilerhouse project in 2004. The sales teams concentrated on market
segments where there is potential to grow such as oil and petrochemicals, steam
system services, hospitals, controls, OEMs, water treatment and custom tubing.
Our factories were busy with strong demand from our companies overseas.
Operating profits in the UK were £10.9 million, an increase of 3% on 2004
despite significant raw material and energy cost increases.
CONTINENTAL EUROPE
Sales into the Continental European markets increased by 3% from £121.2 million
in 2004 to £125.3 million in 2005, which was achieved against a backdrop of weak
markets; the effect of exchange rate movements was relatively small. The main
economies, Germany, France and Italy, have not yet shown any sustained signs of
returning to growth, and industrial output and investment were generally weak,
with relatively few projects. Our growth has come from increased sales of
controls, heat exchanger packages and both condensate pumps and peristaltic
pumps. Particular attention has also been paid to the oil and petrochemicals
industry, and pulp and paper.
The growth in Continental Europe was patchy in the Spirax Sarco business. Gains
were made in Scandinavia where the companies in Finland, Denmark and Norway grew
sales and profits. Sales were also ahead in Italy, Spain and Switzerland but
were flat in Germany. The Watson-Marlow Bredel sales increased in most markets
based on the new product releases and the relatively early stages of development
of our companies in some of the markets. The Hygromatik humidifier business in
Germany also increased sales and profits. The main weaknesses were in the Czech
Republic, France, Portugal and Sweden, the latter having produced a particularly
strong performance in 2004. We set up our own trading company in Russia and
sales increased well in 2005.
Our factories in France and the Netherlands were busy with demand from around
the world; here too there were higher raw material and energy costs. The
Bredel factory undertook a major process reorganisation which constrained
profits in 2005.
Operating profits in Continental Europe increased by 6% to £18.7 million (2004:
£17.8 million).
NORTH AMERICA
Turnover in North America increased by 14% from £64.1 million to £73.1 million
in 2005, a good increase which was only marginally helped by exchange movements.
The market in the USA was resilient in the face of the twin economic deficits
and worries about consumer indebtedness.
The Spirax Sarco sales increased in the USA, helped by the EMCO acquisition
which performed well in its first six months under our ownership. The growth
came in energy services, engineered systems, controls and pumps; a number of
product releases supported these sales initiatives. Our Canadian company
produced increased sales and profits. Watson-Marlow Bredel Inc. also pushed
sales ahead with particular success in sanitary applications, sales to OEMs and
tubing sales.
Operating profits in the region increased 20% to £7.9 million (2004: £6.6
million) and the operating margin increased to 10.8% despite a squeeze on the
gross margin due to significant product sourcing from Europe.
Although Mexico is excluded from the figures above because we have only a
minority shareholding, we were pleased that the team there carried the strong
growth through from 2004.
ASIA
Sales in the Asian territories increased to £65.8 million (2004: £55.3
million), a strong rise of 19%. The economies in Asia continued their growth
record of the last few years and trading conditions were generally positive.
Our operations pushed up both sales and profits as a result of the market
activity, implementing our own sales plans and increasing our sales coverage.
Project activity was also higher. The Asian currencies have generally been
stronger against the US dollar, with the Korean Won being particularly strong;
the main exception has been the Japanese Yen which has weakened against the US
dollar and sterling thereby holding back the gross margin in Japan. At constant
exchange rates there was a strong underlying sales increase of 13% in Asia. The
gains in sales and profits have been widespread with the largest increases being
in China, Korea and India (which is reported separately under Associates).
Elsewhere there was good growth in Japan, Singapore, Taiwan and Thailand.
Operating profit for the region was £11.4 million (2004: £8.2 million), an
increase of 40% which came mainly from the sales growth but the gross margins
were also boosted by the stronger currencies. If the total currency effect is
discounted, the underlying profit growth is still a good 24%. The operating
profit margin rose from 16.2% in 2004 to 18.7% in 2005.
SOUTH AMERICA, AFRICA, AUSTRALASIA (Rest of the World)
The economies were, not surprisingly for such a diverse region, rather mixed.
The Australian market was quiet and in Brazil the economy slowed noticeably in
the second half of the year. Against this, South Africa and Argentina were
strong, although the economic fundamentals in Argentina and Brazil must give
cause for concern.
Turnover in the ROW was strongly ahead at £44.8 million (2004: £35.5 million),
an increase of 26%. This does include the first six months trading of the small
Mitech controls companies in South Africa following their acquisition in June
2005. The effect of exchange on the sales was significant as the currencies
strengthened against sterling, particularly the Brazilian Real. The underlying
increase in turnover in ROW after allowing for currency movements and the
acquisition was still a solid 10%. We achieved good growth in Argentina, South
Africa and New Zealand. Sales in Australia were flat.
Operating profit in ROW increased by 27% to £6.2 million (2004: £4.9 million)
helped by exchange and the Mitech acquisition. The South American trading
margins eased slightly, which held back the margin to 13.5% for the whole
region.
INTEREST, TAX AND DIVIDENDS
Net finance income was £0.9 million which compares with a figure close to zero
in 2004. This increased income results partly from the strong cash flow in the
year and partly from an improved net finance income in respect of defined
benefit pension funds.
The Group's share of profits of Associates increased to £0.9 million (2004:
£0.7 million). The Group pre-tax profit increased by 17% to £57.0 million
(2004: £48.7million).
The tax charge at 33% was similar to 2004 and earnings per share rose to 50.0p
from 43.1p, an increase of 16%.
The Board has decided to recommend a final dividend of 17.0p per share which,
together with the interim dividend of 6.8p per share paid in November, makes a
total dividend for the year of 23.8p. This compares with a total dividend of
21.4p per share last year, an increase of 11%. The cost of the interim and
final dividends is £18.3 million, which is covered 2.1 times by earnings. No
scrip alternative to the cash dividend is being offered.
BALANCE SHEET AND CASH FLOW
We continue to pay close attention to the management of the balance sheet.
Capital employed, comprising property, plant and equipment, inventories, debtors
and creditors, increased by 7% to £188 million; at constant exchange rates the
increase was 3% including the addition of £1 million in respect of the
acquisitions of Mitech and EMCO during the year. Underlying working capital
levels rose by under 5% compared with the 6% organic increase in sales. The
value of tangible fixed assets was broadly unchanged at constant exchange rates
as additions were in line with the depreciation charge for the year. Under
IFRS, the deficit of £45.8 million (before deferred tax) in the defined benefit
schemes is included as a liability for the first time.
Cash flow for the year was strong and net cash balances increased by £17.7
million to £19.0 million, underpinned by the good profit and control of capital
employed. There was an unusually large inflow of £8.6 million from the issue of
shares under the Group's option scheme and employee share ownership plan. This
was roughly matched by the outflow of £5.9 million for acquisitions and an extra
£4 million in cash contributions into the Group's defined benefit pension
schemes. In 2006, we plan to make additional contributions of around £20
million to the defined benefit pension schemes, thereby reducing the deficit.
In addition, in 2006, we expect to buy in up to 2 million shares to be held by
the company to meet the demand for shares in respect of share options, the share
ownership plan and the performance share plan.'
BOARD CHANGES
We recently announced that Graham Marchand will be retiring from the Board on
30th June 2006. Graham started work at Spirax in 1987 and came onto the Board
in 1992. Throughout his time at Spirax, Graham has been responsible for many of
our operating companies at first in Europe and, later, the Americas. He has
helped to develop those businesses and we have to thank him for much of the
growth and development in those markets in recent years.
We have also announced that we will be welcoming Mark Vernon to the Board from
1st July 2006 with responsibility for the Americas and Group Marketing. Mark,
who is a US citizen, joined Spirax in 2003 to run the Spirax Sarco business in
the USA. Mark has a great deal of relevant experience having worked for many
years in the controls industry. We look forward to Mark making a strong
contribution to the future development of the Group.
The Chairman comments as follows:
'The Group's performance reflects continued management focus on our core
businesses and I would like to thank, on behalf of the Board, all the teams of
dedicated people in all parts of the world who have delivered the good results
of the Group not only in 2005 but consistently over many years.
PROSPECTS
The results for 2005 were helped by favourable exchange movements and a broadly
positive trading environment. We invested in the growth of the business and
will continue to invest in sales and marketing resources and to improve
efficiency. The current year has started satisfactorily and, assuming that
there is no disruption to the major world economies and that currency movements
do not go significantly against us, we expect that the Group will make still
further progress in 2006.'
SPIRAX-SARCO ENGINEERING PLC
Group Income Statement for the year ended 31st December 2005
Note 2005 2004
£'000 £'000
Revenue 2 349,100 315,991
Operating costs (293,930) (268,035)
Operating profit 3 55,170 47,956
Financial expenses 4 (11,450) (10,920)
Financial income 4 12,378 10,933
Net financing income 4 928 13
Share of profit of associates 861 735
Profit before taxation 56,959 48,704
Taxation 5 (18,772) (16,262)
Profit for the period 38,187 32,442
Attributable to:
Equity holders of the parent 38,036 32,314
Minority interest 151 128
Profit for the period 38,187 32,442
Earnings per share
Basic earnings per share 6 50.0p 43.1p
Diluted earnings per share 6 49.6p 42.7p
Dividends 7
Dividends per share 23.8p 21.4p
Dividends paid during the year (per share) 7 21.9p 20.4p
SPIRAX-SARCO ENGINEERING plc
Group Balance Sheet at 31st December 2005
Note 2005 2004
£'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 85,752 83,514
Goodwill 15,033 11,862
Other intangible assets 8,357 6,988
Prepayments 396 345
Investment in associates 3,371 2,494
Deferred tax 18,536 16,615
131,445 121,818
Current assets
Inventories 64,216 58,229
Trade receivables 83,303 76,021
Other current assets 8,688 8,388
Cash and cash equivalents 9 56,929 48,756
213,136 191,394
Total assets 344,581 313,212
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables 46,843 43,429
Bank overdrafts 9 3,836 4,842
Short term borrowing 9 1,498 -
Current portion of long term borrowings 9 25,010 8,183
Current tax payable 7,326 6,788
84,513 63,242
Net current assets 128,623 128,152
Non-current liabilities
Long term borrowings 9 7,540 34,432
Deferred tax 7,728 7,273
Post retirement benefits 11 45,807 41,335
Provisions 747 644
61,822 83,684
Total liabilities 146,335 146,926
Net assets 8 198,246 166,286
Equity
Share capital 19,238 18,800
Share premium account 46,154 38,024
Other reserves 7,554 699
Retained earnings 124,672 107,957
Equity attributable to equity holders of the parent 197,618 165,480
Minority interest 628 806
Total equity 198,246 166,286
Total equity and liabilities 344,581 313,212
SPIRAX-SARCO ENGINEERING plc
Group Statement of Total Recognised Income and Expense
for the year ended 31st December 2005
2005 2004
£'000 £'000
Actuarial loss on post retirement benefits (8,974) 3,815
Deferred tax on actuarial loss on post retirement benefits 2,942 (886)
Foreign exchange translation differences 6,907 (1,133)
Gains on cash flow hedges 6 -
Income and expense recognised directly in equity 881 1,796
Profit for the period 38,187 32,442
Total recognised income and expense for the period 39,068 34,238
Attributable to
Equity holders of the parent 38,917 34,110
Minority interest 151 128
Total recognised income and expense for the period 39,068 34,238
Change in accounting policy
Adjustment in respect of adoption of IAS32 and IAS39 on 1st January 2005
Adjustment to cash flow hedge reserve (58) -
SPIRAX-SARCO ENGINEERING plc
Statement of Changes in Equity
for the year ended 31st December 2005
2005 2004
£'000 £'000
Equity attributable to equity holders of parent at beginning of period 165,480 143,810
Implementation of IAS 32 and IAS 39 (58) -
As adjusted at beginning of period 165,422 143,810
Total recognised income and expense for the period 38,917 34,110
Dividends paid (16,684) (15,289)
Proceeds from issue of share capital 8,568 2,138
Equity settled share plans 1,395 711
Equity attributable to equity holders of parent at end of period 197,618 165,480
SPIRAX-SARCO ENGINEERING plc
Group Cash Flow Statement for the year ended 31st December 2005
Note 2005 2004
£'000 £'000
Cash flows from operating activities
Profit before taxation 56,959 48,704
Depreciation and amortisation 13,151 13,030
Share of profit of associates (861) (735)
Equity settled share plans 576 357
Net finance income (928) (13)
Operating profit before changes in working capital and provisions
68,897 61,343
Increase in trade and other receivables (2,814) (6,875)
Increase in inventories (3,224) 619
Decrease in provisions and post retirement benefits (4,045) (23)
Increase in trade and other payables 1,371 7,139
Cash generated from operations 60,185 62,203
Interest paid (1,677) (1,829)
Income taxes paid (16,789) (16,071)
Net cash from operating activities 41,719 44,303
Cash flows from investing activities
Purchase of property, plant and equipment (11,692) (13,477)
Proceeds from sale of property, plant and equipment 850 641
Purchase of software (1,139) (918)
Development expenditure capitalised (1,070) (674)
Acquisition of businesses (5,866) (803)
Interest received 1,860 1,517
Dividends received 351 71
Net cash used in investing activities (16,706) (13,643)
Cash flows from financing activities
Proceeds from issue of share capital 8,568 2,138
Repayment of borrowings (7,728) (2,330)
Payment of finance lease liabilities (372) (360)
Dividends paid (including minorities) (16,796) (15,322)
Net cash used in financing activities (16,328) (15,874)
Net increase in cash and cash equivalents 8,685 14,786
Cash and cash equivalents at beginning of period 43,914 29,120
Exchange movement 494 8
Cash and cash equivalents at end of period 9 53,093 43,914
Borrowings and finance leases (34,048) (42,615)
Net cash 9 19,045 1,299
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. Segmental Reporting Primary Segment
The analysis of revenue by reference to the geographical location of
customers is as follows:-
2005 2004 change change
£'000 £'000 at constant
exchange
rates
% %
UK & Republic of Ireland 40,084 39,922 - -
Continental Europe 125,343 121,164 +3 +2
North America 73,056 64,119 +14 +12
Asia 65,841 55,327 +19 +13
Rest of the World 44,776 35,459 +26 +16
349,100 315,991 +10 +8
and by reference to the geographical location of the Group's operations is as
follows:-
2005 2004 change change
£'000 £'000 at constant
exchange
rates
% %
UK & Republic of Ireland 102,479 97,419 +5 +5
Continental Europe 156,050 149,334 +4 +3
North America 73,220 64,950 +13 +11
Asia 61,263 50,465 +21 +15
Rest of the World 45,949 36,482 +26 +15
438,961 398,650 +10 +8
Intra-group sales (89,861) (82,659) +9 +8
Sales to customers 349,100 315,991 +10 +8
Secondary segment revenue by business operation:
2005 2004
£'000 £'000
Spirax Sarco 302,627 273,065
Watson-Marlow Bredel 46,473 42,926
349,100 315,991
3. Operating profit, analysed by reference to the geographical location of the
Group's operations, is as follows:-
2005 2004 change * change
£'000 £'000 at constant
exchange
rates
% %
UK & Republic of Ireland 10,881 10,533 +3 +5
Continental Europe 18,733 17,752 +6 +2
North America 7,938 6,601 +20 +25
Asia 11,430 8,184 +40 +24
Rest of the World 6,188 4,886 +27 +10
55,170 47,956 +15 +10
Profit from operations figures reflect the allocation of UK incurred
central support costs to the segments to which the expenses relate. This is a
change from the July 2005 IFRS restatement and so 2004 segmental profit figures
reflect the changes.
Amortisation of intangible assets acquired was £175,000 (2004:
£nil) and amortisation of capitalised development costs was £834,000 (2004:
£632,000).
*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
2005 2004
£'000 £'000
Financial expenses
Bank and other borrowing interest payable (1,704) (1,832)
Interest on pension scheme liabilities (9,746) (9,088)
(11,450) (10,920)
Financial income
Bank interest receivable 1,869 1,518
Expected return on pension scheme assets 10,509 9,415
12,378 10,933
Net financing income 928 13
Net pension scheme financing income 763 327
Net bank and other interest 165 (314)
Net financing income 928 13
5. Taxation
2005 2004
£'000 £'000
Analysis of charge in period
UK corporation tax
Current tax on income for the period 12,702 12,164
Adjustments in respect of prior periods (268) (148)
12,434 12,016
Double taxation relief (9,755) (8,851)
2,679 3,165
Foreign tax
Current tax on income for the period 15,565 12,752
Adjustments in respect of prior periods (47) 48
15,518 12,800
Total current tax charge 18,197 15,965
UK deferred tax 19 70
Foreign deferred tax 556 227
Tax on profit on ordinary activities 18,772 16,262
6. Earnings per share
2005 2004
£'000 £'000
Earnings 38,036 32,314
Weighted average shares in issue 76,119,005 74,931,130
Dilution 577,169 781,558
Diluted weighted average shares in issue 76,696,174 75,712,688
Basic earnings per share 50.0p 43.1p
Diluted earnings per share 49.6p 42.7p
The dilution is in respect of unexercised share options and the performance share plan.
7. Dividends
2005 2004
£'000 £'000
Amounts paid in the year
Final dividend for the year ended 31st December 2004 of 15.1p
(2003: 14.1p) per share 11,459 10,552
Interim dividend for the year ended 31st December 2005 of 6.8p
(2004: 6.3p) per share 5,225 4,737
16,684 15,289
Amounts arising in respect of the year
Interim dividend for the year ended 31st December 2005 of 6.8p
(2004: 6.3p) per share 5,225 4,737
Proposed final dividend for the year ended 31st December 2005 of
17.0p (2004: 15.1p) per share 13,093 11,459
18,318 16,196
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 10th May 2006, the
final dividend will be paid on 22nd May 2006 to shareholders on the register at
21st April 2006. 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:-
2005 2004
£'000 £'000
UK & Republic of Ireland 27,836 32,130
Continental Europe 58,718 58,893
North America 27,194 22,419
Asia 35,427 30,190
Rest of the World 25,017 17,496
174,192 161,128
Deferred tax 10,808 9,342
Current tax (5,799) (5,483)
Net cash 19,045 1,299
Net assets 198,246 166,286
9. Analysis of changes in net cash
1st Jan Cash Exchange 31st Dec
2005 Flow movement 2005
£'000 £'000 £'000 £'000
Current portion of long term borrowings (8,183) (25,010)
Non-current portion of long term borrowings
(34,432) (7,540)
Short term borrowings - (1,498)
Total borrowings (42,615) (34,048)
Comprising:
Borrowings (41,768) 7,728 440 (33,600)
Finance Leases (847) 372 27 (448)
(42,615) 8,100 467 (34,048)
Cash and cash equivalents 48,756 7,407 766 56,929
Bank overdrafts (4,842) 1,278 (272) (3,836)
Net cash and cash equivalents 43,914 8,685 494 53,093
Net cash 1,299 16,785 961 19,045
10. Return on capital employed
2005 2004
£'000 £'000
Capital employed
Property, plant and equipment 85,752 83,514
Prepayments 396 345
Inventories 64,216 58,229
Trade receivables 83,303 76,021
Other current assets 8,688 8,388
Trade and other payables (46,843) (43,429)
Current tax payable (7,326) (6,788)
Capital employed 188,186 176,280
Average capital employed 182,233 176,303
Operating profit 55,170 47,956
Acquisition intangibles amortisation 175 -
55,345 47,956
ROCE 30.4% 27.2%
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
medical Total
2005 2004 2005 2004 2005 2004
£'000 £'000 £'000 £'000 £'000 £'000
Current service cost (5,700) (6,000) (1,468) (1,372) (7,168) (7,372)
Past service cost - - 117 - 117 -
Settlement, Curtailment - - - 279 - 279
Interest on schemes' liabilities (8,000) (7,400) (1,746) (1,688) (9,746) (9,088)
Expected return on schemes' assets 9,300 8,300 1,209 1,115 10,509 9,415
Total expense recognised in income
statement (4,400) (5,100) (1,888) (1,666) (6,288) (6,766)
A summary of the deficits in the schemes is as follows:-
Overseas
UK pensions Total
pensions & medical
£'000 £'000 £'000
Total market value of schemes' assets 152,300 19,048 171,348
Present value of the schemes' liabilities
(178,600) (38,555) (217,155)
Deficit in the schemes (26,300) (19,507) (45,807)
Related deferred tax asset 7,890 6,523 14,413
Net pension liability 2005 (18,410) (12,984) (31,394)
Net pension liability 2004 (17,261) (10,751) (28,012)
The charge to the income statement in respect of share-based payments is made
up as follows:-
2005 2004
£'000 £'000
Share Option Scheme 374 301
Performance Share Plan 139 -
Employees Share Ownership Plan 525 502
Total expense recognised in income statement 1,038 803
12. Basis of preparation
The financial information set out above is derived from the Group's
first financial statements following the adoption of International
Financial Reporting Standards (IFRS). These financial statements have been
prepared in accordance with IFRS adopted for use in the EU ('Adopted IFRS')
in accordance with EU Law (IAS Regulation EC/606/2002).
As allowed by IFRS 1 'First Time adoption of IFRS' the group adopted
IAS 32 'Financial Instruments: Disclosure and Presentation' and IAS 39 '
Financial instruments: Recognition and Measurement' prospectively from 1st
January 2005. Until 31st December 2004, the group accounted for forward
exchange contracts in accordance with UK GAAP, and hence the comparative
financial statements exclude the impact of these standards.
On 12th July 2005, the Group published a comprehensive analysis of
the impact of adopting IFRS from 1st January 2004 - available from the
Company's web site at www.SpiraxSarcoEngineering.com. This included
details of the accounting policies applied in restating its financial
statements and reconciliations from UK GAAP to IFRS for the year ended 31st
December 2004 and as at 1st January 2004. Some small adjustments have been
made to these statements to reflect reclassifications more accurately.
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31st December 2004 or
2005. Statutory accounts for 2004, which were prepared under UK GAAP, have
been delivered to the registrar of companies, and those for 2005, prepared
under accounting standards adopted by the EU, will be delivered in due
course. The auditors have reported on those accounts; their reports were
(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
The company news service from the London Stock Exchange
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