Preliminary Results
Spirax-Sarco Engineering PLC
12 March 2007
Spirax-Sarco Engineering plc
Monday 12th March 2007
2006 PRELIMINARY ANNOUNCEMENT
HIGHLIGHTS
Year to 31st December
Statutory 2006 2005 Change
Revenue £384.2m £349.1m +10%
Operating profit £61.9m £55.2m +12%
Profit before taxation £65.3m £57.0m +15%
Earnings per share 57.7p 50.0p +15%
Dividends per share 26.5p 23.8p +11%
Year to 31st December
Adjusted* 2006 2005 Change
Revenue £384.2m £349.1m +10%
Operating profit £62.3m £55.3m +13%
Operating profit margin 16.2% 15.9%
Profit before taxation £65.7m £57.1m +15%
Earnings per share 58.1p 50.2p +16%
Dividends per share 26.5p 23.8p +11%
* Excludes £0.4m amortisation of acquired intangible assets (2005: £0.2m)
• Good sales growth - particularly Asia and Continental Europe.
• Increasing investments for growth.
• Improved operating margin of 16.2%.
• Pre-tax profit up 15% and EPS up 16%.
• Good underlying cash flow.
• Final dividend up 12%.
Mike Townsend, Chairman, commenting on prospects said:
'We are currently faced with the continuing strength of sterling and, therefore,
a likely adverse effect on the 2007 results, particularly in comparison with the
first half of 2006. However, in most markets trading conditions remain firm and
the year has started well, which, with the Group's fundamental strengths, should
enable us to make further progress in 2007.'
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
(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 a good performance in 2006 which continues the Group's
long record of consistent growth and strong profitability. We grew sales by
over 10% and pre-tax profits were 15% ahead of 2005 at a record £65.7 million.
This is a consequence of the Board's long-standing determination to focus on the
development of the Spirax Sarco steam specialty business and the Watson-Marlow
Bredel peristaltic pumping business through investment in new products,
expansion of sales coverage, development of new markets and management of costs.
Sales reached £384.2 million (2005: £349.1 million). Sterling was largely
unchanged on average versus other currencies in 2006 as against 2005, the
weakness in the first half having been virtually eliminated by a strengthening
in the second half of the year, particularly against the US dollar.
The sales growth came in all regions. Growth in sales in Asia continued
strongly. In Continental Europe, the good growth which started in 2005 and
accelerated through the first half of 2006, continued for the full year. Sales
growth in North America and the Rest of the World was good and in the UK was
positive, though this market remains difficult.
Operating profit increased to £62.3 million from £55.3 million in 2005, an
increase of 13%, with a small positive effect of less than £1/2 million from
currency movements. The operating margin improved to 16.2% compared with 15.9%
in 2005.'
TRADING
Sales grew to £384.2 million from £349.1 million in 2005, an increase of 10%.
In all parts of the world our companies have successfully concentrated on the
agreed sales development plans to increase our market share and widen the
product offering to our customers. Organic growth was achieved in all regions
with a strong advance in Asia, good progress in Continental Europe and North
America, and lower levels of organic growth in the Rest of the World and the UK.
The decision has been taken to build a new larger plant in China both to
accommodate the growing sales team and to expand local production capacity.
The Spirax Sarco business expanded sales of steam system services, heat exchange
packaged units, controls and clean steam products, and sales to the oil and
petrochemicals industry. The Watson-Marlow Bredel business increased sales of
the recently upgraded pump ranges and tubing, and the business with OEMs.
The Group's operating profit grew to £62.3 million (2005: £55.3 million); an
increase of 13% and a new record for the Group. Excluding the small exchange
gains, the increase was 12% - a good performance. Profit growth was driven
mainly by the organic sales growth and by improved productivity, and was offset
by higher overheads particularly in sales coverage in the developing markets.
The operating profit margin rose to 16.2% from 15.9% in 2005. As expected, the
margin improvement was restricted by increased charges for pensions and
share-based payments, the slow-down in Brazil and the costs associated with
integrating acquisitions into the Group.
Current environment
The business environment remained generally positive through the second half of
2006 as it had been during the first half. The oil price, despite declining
from its peak, remains high and has stimulated investment projects in the oil
and petrochemical sectors. The widespread pick-up in business confidence and
activity in Continental Europe, which was evident in the first half of the year,
continued through the second half. However in the UK market, the industrial
sectors remain subdued and the strength of sterling is putting pressure on
customers who export. In North American markets, the economic background has
been steady through 2006, although the pharmaceutical sector has been quiet in
the USA. In South America, political and economic uncertainties have restrained
growth and demand in some of our manufacturing markets. The Asian economies
have generally remained strong and we have seen good activity levels in most
markets.
As expected at the half year, exchange rates moved against us in the second half
of 2006. The US dollar, which was stronger versus sterling in the first half of
the year, weakened significantly in the second half. Some Asian currencies have
declined with the dollar but on average in 2006 our Asian currencies,
particularly the Korean Won, were firmer against sterling. The overall result
is that the 4% exchange gain on sales in the first half of 2006 has been
virtually eliminated during the last six months of the year.
United Kingdom and Republic of Ireland
Sales into the domestic market increased only 2% to £40.7 million reflecting the
subdued state of the manufacturing base in the UK. In the Republic of Ireland,
there continues to be investment in new or expanding plants, particularly in the
pharmaceutical industry. We focussed on the application of our technical
expertise to improve customers' plant performance, particularly energy
conservation, and through expansion of the steam system management offering.
Watson-Marlow Bredel increased business with the water treatment sector and with
OEMs. Our UK factories felt the effects of higher energy and material costs but
remained busy with increased demand from overseas. Operating profits of £11.0
million were flat after including higher charges for pensions and share-based
payments.
Continental Europe
Our operations in Continental Europe produced good results with sales advancing
by 10% to £138.3 million from £125.3 million in 2005; at constant exchange
rates the increase was 11%. The economic backdrop in Europe has generally been
positive, the main exceptions being France and Italy where the markets have
remained subdued, although our businesses performed well. The increase in
turnover included growth in heat exchange packages, steam system services, clean
steam applications and tubing by Watson-Marlow Bredel. There was also success
in increasing sales to oil and petrochemicals, pulp and paper, and OEM sectors.
The increase in sales and profits was widespread across Europe with good gains
in Italy, Germany, Belgium, Czech Republic, Poland, Spain and the Hygromatik
business. Sales and profits were also ahead in France and the new company in
Russia grew strongly both in sales and profits.
The factories in France, the Netherlands and Alitea in Sweden were also busy
with higher demand not only from Europe but also from Asia and the Americas.
High energy and raw material costs persisted through 2006, and the
well-established programme of resourcing raw material purchases in lower cost
economies continued and contributed to the profit growth.
Operating profits in Continental Europe increased by 20% from £18.7 million in
2005 to £22.4 million in 2006, driven by the sales increase.
North America
Group turnover in the North American markets rose to £80.0 million from £73.1
million in 2005; an increase of 9% and at constant exchange rates a rise of
10%, coming equally from organic growth and acquisitions.
In April 2006, the acquisition of the business and assets of AFTCO LLC of
Florida was announced for $2.75 million (£1.5 million). The AFTCO range of
electromagnetic flow meters complements the EMCO range of meters; the two
businesses are being combined and will strengthen the Group's position in
metering. In July 2006, the acquisition was announced of 80% of the business
and assets of UltraPure Group Inc. of Florida for $4.9 million (£2.6 million).
UltraPure's pure steam generators and water stills are used in hygienic
processes mainly in the pharmaceutical and biotechnology industries.
As anticipated at the half year, the US economy grew more slowly in the second
half of 2006 but sales and profits increased in spite of subdued demand from the
pharmaceutical industry. In the Spirax Sarco business there was good growth in
steam system services and in sales of heat exchange packages. In Watson-Marlow
Bredel sales into sanitary and industrial markets were ahead; sales to the
water treatment sector were down.
Sales and profits in Canada were ahead. Our Mexican operation, which is
accounted for as an Associate, produced another strong result with sales and
profits well ahead.
The operating profit for North America at £8.9 million was up 11% from £8.0
million in 2005. The growth in the operating profit margin in North America
was, as expected, held back by the costs of reorganising and integrating the
acquisitions into the Group.
Asia
Sales and profits in Asia continued to grow strongly in 2006 with sales up 17%
from £65.8 million to £77.1 million; an increase of 14% at constant exchange
rates. There were some good projects particularly in the oil and petrochemical
sector. Sales coverage was increased in most markets and sales grew across the
product range. Business levels in China and Korea advanced strongly and in both
countries we have outgrown our existing premises and will be investing in new
facilities. The new, larger factory planned for China in 2007 will enable an
increase in locally made products from 2008. Our Indian operation, which is
treated as an Associate, grew strongly and produced an excellent overall
performance. Sales in Japan were ahead of 2005 with particular emphasis on
steam traps and meters. Watson-Marlow Bredel's new operations in Korea and
China also grew well and both made good profits.
The Korean Won and Chinese RMB, in particular, strengthened against sterling in
2006 as against 2005 and boosted the overall profitability of the Asian
operations. The operating profit increased from £11.4 million in 2005 to £15.1
million; an increase of 32%. The operating profit margin increased to 20.9%.
Rest of the World (South America, Africa, Australasia)
Sales in the Rest of the World increased by 8% to £48.2 million from £44.8
million in 2005. The effect of exchange rate movements overall was minimal.
The economies in Brazil and Argentina were volatile with inflation risks in
Argentina and Presidential elections in Brazil undermining market confidence.
Sales in Argentina were ahead but profits were lower as inflationary pressures
reduced the gross margin. In Brazil, sales and profits were much improved in
the second half of the year but the full year figures were well below 2005 as
the continuing strength of the Real reduced the competitiveness of some
customers; costs have been reduced to protect future performance. In South
Africa, one-off costs were incurred in absorbing the Mitech acquisition and
consolidating both companies into a new facility, which was completed at the end
of the year. The companies in Australasia produced good results for the year.
Operating profits in the Rest of the World declined to £4.8 million (2005: £6.3
million) due to the tighter conditions in South America and the investments in
South Africa. The margin, therefore, reduced to 10.0% (2005: 13.6%) for the
region.
Interest
Net finance income was £2.0 million which compares with £0.9 million in 2005.
The increase was due to improved net finance income in respect of defined
benefit pension funds. This arose because the increased value of the assets of
the funds, together with the £16 million special pension contributions during
the year, improved the return on assets by more than the increased interest on
the schemes' higher liabilities. The net cash outflow in the year (including
the special pension payments) has eliminated the net bank interest income (2005:
£0.2m).
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 2006. The
Group's share of after tax profits of Associates increased to £1.4 million
(2005: £0.9 million).
Profit before taxation*
The Group's pre-tax profit increased by 15% to £65.7 million (2005: £57.1
million).
Taxation
The tax charge at 32.4% was consistent with the rate in 2005. 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
2007 will be broadly in line with 2006.
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 58.1p from 50.2p; an increase of 16%.
Dividend
The Board is recommending a final dividend of 19.0p per share which, together
with the interim dividend of 7.5p per share paid in November, makes a total
dividend for the year of 26.5p per share. This compares with a total dividend
of 23.8p per share last year, an increase of 11%. The cost of the interim and
final dividends is £20.0 million, which is covered 2.2 times by earnings. No
scrip alternative to the cash dividend is being offered.
Capital employed
The good growth in the business is reflected in the balance sheet and in
particular in the higher level of capital employed, although exchange rate
movements have clouded the comparisons with 2005. Working capital increased
with trade receivables and inventories rising in response to rising sales,
particularly in the second half. We continue closely to manage working capital
and in 2006 trade receivable and inventory measures showed a small improvement.
Return on capital employed (ROCE)*
ROCE improved in 2006 to 32.2% from 30.4% in 2005. The capital employed was
carefully controlled and increased by 6% in 2006, whereas the operating profit,
excluding amortisation of acquired intangible assets, increased by 13%.
Capital expenditure
The value of tangible fixed assets was little changed in sterling at £88.8
million but increased by 8% at constant exchange rates as we continue investing
in our businesses. There were investments in new premises in South Africa and
in land for new premises in Korea, together with on-going plant and machinery
expenditure in our manufacturing plants to increase efficiency and expand
capacity. The additions in 2006 exceeded the depreciation charge by 58%.
2006 2005
£'000 £'000
Capital expenditure** 19,153 12,885
Depreciation and amortisation** 12,151 12,617
Capital expenditure as a % of depreciation 158% 102%
** The numbers above exclude acquired intangible assets and capitalised development costs.
During 2007 and 2008, there will be an investment of around £9 million in a new
factory and offices in China to increase the volume of production in Shanghai
and to accommodate the growth of the sales organisation of this successful
company.
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 2006, or 2005. Amortisation of acquired
intangible assets was £0.4 million for the year (2005: £0.2 million). 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 recognised in the balance sheet declined
to £20.2 million (net of deferred tax) at the end of 2006 compared with £31.4
million a year earlier. The improvement was due to the special pension
contributions (net of deferred tax) made during the year and good investment
returns on pension scheme assets. Pension liabilities rose following a review
of mortality assumptions but the increase was mitigated by a rise in bond yields
which reduced pension liability values.
Cash flow
Free cash flow for the year was £10.0 million (2005: £30.5 million) after
making special payments to defined benefit pension schemes of £15.9 million.
The cash flow arising from the good growth in operating profit was also reduced
by an increase in working capital of £13.7 million as a result of the sales
growth and above average capital expenditure (net of disposals) of £19.9
million. The share buy-back programme announced in March was completed in
October; we bought 1.98 million shares at a cost of £18.1 million and an
average share price of 913p. The shares are being held in Treasury to meet the
future requirements of the Group's share schemes. There was also an outflow of
£4.0 million for acquisitions.
The underlying cash flow remains good but, after the special pension payments,
the share buy-back and the acquisitions mentioned above, and after a small
favourable exchange effect, the year finished with net debt of £6.6 million as
compared with net cash of £19.0 million at the start of the year.
In January 2007, we have made the £5 million final instalment of the special
payment into the Group's major defined benefit pension schemes. Capital
expenditure, in 2007, will also be higher than usual reflecting the investments
in new facilities in China and Korea.
The Chairman comments as follows:
'As we announced earlier in the year, Graham Marchand retired from the Board on
30th June 2006, having joined the Group in 1987 and the Board in 1992. I would
like to restate the Board's thanks to Graham for his excellent contribution to
the Board's deliberations and to the progress of the Group over those years.
We welcomed Mark Vernon onto the Board on 1st July 2006 as an Executive Director
with responsibility for the Americas and the Group Marketing function. Mark
joined the Group in 2003 as President and General Manager of Spirax Sarco Inc.
in South Carolina. I am confident that Mark will, as a member of the executive
team, bring an imaginative and constructive approach to the future development
of the Group.
The good performance in 2006 is the result of maintaining focus on our core
businesses where we place particular emphasis on serving the needs of our
customers, on broadening our presence across the globe and on continuously
improving efficiency in all aspects of our activities, including the use of
latest technology. We are fortunate to have a strong team of talented and
hardworking people in the Group who have delivered the successful performance in
2006, and I thank them all on behalf of the Board and the shareholders.
PROSPECTS
We are currently faced with the continuing strength of sterling and, therefore,
a likely adverse effect on the 2007 results, particularly in comparison with the
first half of 2006. However, in most markets trading conditions remain firm and
the year has started well, which, with the Group's fundamental strengths, should
enable us to make further progress in 2007.'
* Operating profit, pre-tax profit and EPS figures exclude the amortisation of
acquired intangible assets of £0.4 million in 2006 (2005: £0.2 million).
SPIRAX-SARCO ENGINEERING PLC
Group Income Statement for the year ended 31st December 2006
Note 2006 2005
£'000 £'000
Revenue 2 384,249 349,100
Operating costs (322,308) (293,930)
Operating profit 3 61,941 55,170
Financial expenses 4 (11,722) (11,450)
Financial income 4 13,757 12,378
Net financing income 4 2,035 928
Share of profit of associates 1,368 861
Profit before taxation 65,344 56,959
Taxation - UK (3,257) (2,698)
Taxation - Foreign (18,021) (16,074)
Total taxation 5 (21,278) (18,772)
Profit for the period 44,066 38,187
Attributable to:
Equity holders of the parent 43,919 38,036
Minority interest 147 151
Profit for the period 44,066 38,187
Earnings per share
Basic earnings per share 6 57.7p 50.0p
Diluted earnings per share 6 57.1p 49.6p
Dividends 7
Dividends per share 26.5p 23.8p
Dividends paid during the year (per share) 7 24.5p 21.9p
SPIRAX-SARCO ENGINEERING plc
Group Balance Sheet at 31st December 2006
Note 2006 2005
£'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 88,802 85,752
Goodwill 17,541 15,033
Other intangible assets 8,866 8,357
Prepayments 352 396
Investment in associates 3,790 3,371
Deferred tax 13,738 18,536
133,089 131,445
Current assets
Inventories 67,707 64,216
Trade receivables 90,023 83,303
Other current assets 8,382 7,161
Tax recoverable 1,746 1,527
Cash and cash equivalents 9 22,085 56,929
189,943 213,136
Total assets 323,032 344,581
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables 50,372 46,843
Bank overdrafts 9 3,986 3,836
Short term borrowing 9 5,934 1,498
Current portion of long term borrowings 9 4,669 25,010
Current tax payable 7,445 7,326
72,406 84,513
Net current assets 117,537 128,623
Non-current liabilities
Long term borrowings 9 14,050 7,540
Deferred tax 6,386 7,728
Post retirement benefits 11 29,592 45,807
Provisions 876 747
50,904 61,822
Total liabilities 123,310 146,335
Net assets 8 199,722 198,246
Equity
Share capital 19,296 19,238
Share premium account 47,228 46,154
Other reserves (1,850) 7,554
Retained earnings 133,835 124,672
Equity attributable to equity holders of the parent 198,509 197,618
Minority interest 1,213 628
Total equity 199,722 198,246
Total equity and liabilities 323,032 344,581
SPIRAX-SARCO ENGINEERING plc
Group Statement of Total Recognised Income and Expense
for the year ended 31st December 2006
2006 2005
£'000 £'000
Actuarial loss on post retirement benefits (2,939) (8,974)
Deferred tax on actuarial loss on post retirement benefits 1,142 2,942
Foreign exchange translation differences (9,574) 6,907
Gains on cash flow hedges 170 6
Income and expense recognised directly in equity (11,201) 881
Profit for the period 44,066 38,187
Total recognised income and expense for the period 32,865 39,068
Attributable to
Equity holders of the parent 32,718 38,917
Minority interest 147 151
Total recognised income and expense for the period 32,865 39,068
SPIRAX-SARCO ENGINEERING plc
Statement of Changes in Equity
For the year ended 31st December 2006
2006 2005
£'000 £'000
Equity attributable to equity holders of parent at beginning of period
197,618 165,422
Total recognised income and expense 32,718 38,917
Dividends paid (18,715) (16,684)
Proceeds from issue of share capital 1,132 8,568
Equity settled share plans 1,142 1,395
Treasury shares purchased (18,082) -
Treasury shares reissued 3,777 -
Loss on the reissue of treasury shares (1,081) -
198,509 197,618
SPIRAX-SARCO ENGINEERING plc
Group Cash Flow Statement for the year ended 31st December 2006
Note 2006 2005
£'000 £'000
Cash flows from operating activities
Profit before taxation 65,344 56,959
Depreciation and amortisation 13,364 13,151
Share of profit of associates (1,368) (861)
Equity settled share plans 860 576
Net finance income (2,035) (928)
Operating profit before changes in working capital and provisions
76,165 68,897
Increase in trade and other receivables (12,662) (2,814)
Increase in inventories (6,248) (3,224)
Decrease in provisions and post retirement benefits (15,887) (4,045)
Increase in trade and other payables 5,184 1,371
Cash generated from operations 46,552 60,185
Interest paid (1,137) (1,677)
Income taxes paid (16,484) (16,789)
Net cash from operating activities 28,931 41,719
Cash flows from investing activities
Purchase of property, plant and equipment (17,935) (11,692)
Proceeds from sale of property, plant and equipment 660 850
Purchase of software and other intangibles (1,678) (1,139)
Development expenditure capitalised (989) (1,070)
Acquisition of businesses (3,969) (5,866)
Interest received 983 1,860
Dividends received 477 351
Net cash used in investing activities (22,451) (16,706)
Cash flows from financing activities
Proceeds from issue of share capital 3,828 8,568
Treasury shares purchased (18,082) -
Repayment of borrowings (7,544) (7,728)
Payment of finance lease liabilities (88) (372)
Dividends paid (including minorities) (18,843) (16,796)
Net cash used in financing activities (40,729) (16,328)
Net decrease in cash and cash equivalents (34,249) 8,685
Cash and cash equivalents at beginning of period 53,093 43,914
Exchange movement (745) 494
Cash and cash equivalents at end of period 9 18,099 53,093
Borrowings and finance leases (24,653) (34,048)
Net borrowings 9 (6,554) 19,045
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:-
2006 2005 Change change
£'000 £'000 at constant
exchange
rates
% %
UK & Republic of Ireland 40,695 40,084 +2 +2
Continental Europe 138,299 125,343 +10 +11
North America 79,956 73,056 +9 +10
Asia 77,138 65,841 +17 +14
Rest of the World 48,161 44,776 +8 +7
384,249 349,100 +10 +10
and by reference to the geographical location of the Group's operations is as
follows:-
2006 2005 change change
£'000 £'000 at constant
exchange
rates
% %
UK & Republic of Ireland 107,922 102,479 +5 +5
Continental Europe 172,382 156,050 +10 +11
North America 80,610 73,220 +10 +11
Asia 72,208 61,263 +18 +15
Rest of the World 48,273 45,949 +5 +5
481,395 438,961 +10 +10
Intra-group sales (97,146) (89,861) +8 +9
Sales to customers 384,249 349,100 +10 +10
Secondary segment revenue by business operation:
2006 2005
£'000 £'000
Spirax Sarco 332,655 302,627
Watson-Marlow Bredel 51,594 46,473
384,249 349,100
3. Operating profit, analysed by reference to the geographical
location of the Group's operations, is as follows:-
2006 2005 Change * change
£'000 £'000 at constant
exchange
rates
% %
UK & Republic of Ireland 10,957 10,881 +1 +1
Continental Europe 22,435 18,733 +20 +20
North America 8,732 7,938 +10 +13
Asia 15,120 11,430 +32 +23
Rest of the World 4,697 6,188 (24) (23)
61,941 55,170 +12 +11
Amortisation of intangible assets acquired was £350,000 (2005: £175,000) and
amortisation of capitalised development costs was £994,000 (2005: £834,000).
*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
2006 2005
£'000 £'000
Financial expenses
Bank and other borrowing interest payable (1,137) (1,704)
Interest on pension scheme liabilities (10,585) (9,746)
(11,722) (11,450)
Financial income
Bank interest receivable 1,038 1,869
Expected return on pension scheme assets 12,719 10,509
13,757 12,378
Net financing income 2,035 928
Net pension scheme financing income 2,134 763
Net bank and other interest (99) 165
Net financing income 2,035 928
5. Taxation
2006 2005
£'000 £'000
Analysis of charge in period
UK corporation tax
Current tax on income for the period 8,178 12,702
Adjustments in respect of prior periods (207) (268)
7,971 12,434
Double taxation relief (3,233) (9,755)
4,738 2,679
Foreign tax
Current tax on income for the period 16,561 15,565
Adjustments in respect of prior periods (79) (47)
16,482 15,518
Total current tax charge 21,220 18,197
Deferred tax 58 575
Tax on profit on ordinary activities 21,278 18,772
6. Earnings per share
2006 2005
£'000 £'000
Earnings 43,919 38,036
Weighted average shares in issue 76,161,612 76,119,005
Dilution 733,050 577,169
Diluted weighted average shares in issue 76,894,662 76,696,174
Basic earnings per share 57.7p 50.0p
Diluted earnings per share 57.1p 49.6p
Earnings 43,919 38,036
Amortisation of acquired intangible assets 350 175
Adjusted earnings 44,269 38,211
Basic adjusted earnings per share 58.1p 50.2p
The dilution is in respect of unexercised share options and the performance
share plan.
7. Dividends
2006 2005
£'000 £'000
Amounts paid in the year
Final dividend for the year ended 31st December 2005 of 17.0p
(2004: 15.1p) per share
13,047 11,459
Interim dividend for the year ended 31st December 2006 of 7.5p
(2005: 6.8p) per share
5,668 5,225
18,715 16,684
Amounts arising in respect of the year
Interim dividend for the year ended 31st December 2006 of 7.5p
(2005: 6.8p) per share
5,668 5,225
Proposed final dividend for the year ended 31st December 2006 of
19.0p (2005: 17.0p) per share
14,370 13,093
20,038 18,318
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 17th May 2007, the final dividend
will be paid on 21st May 2007 to shareholders on the register at 20th April
2007. 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:-
2006 2005
£'000 £'000
UK & Republic of Ireland 43,935 27,836
Continental Europe 61,063 58,718
North America 35,207 27,194
Asia 40,586 35,427
Rest of the World 23,832 25,017
204,623 174,192
Deferred tax 7,352 10,808
Current tax (5,699) (5,799)
Net cash (6,554) 19,045
Net assets 199,722 198,246
9. Analysis of changes in (debt)/cash
1st Jan Cash Exchange 31st Dec
2006 Flow Movement 2006
£'000 £'000 £'000 £'000
Current portion of long term borrowings (25,010) (4,669)
Non-current portion of long term borrowings (7,540) (14,050)
Short term borrowings (1,498) (5,934)
Total borrowings (34,048) (24,653)
Comprising:
Borrowings (33,600) 7,544 1,756 (24,300)
Finance Leases (448) 88 7 (353)
(34,048) 7,632 1,763 (24,653)
Cash and cash equivalents 56,929 (33,604) (1,240) 22,085
Bank overdrafts (3,836) (645) 495 (3,986)
Net cash and cash equivalents 53,093 (34,249) (745) 18,099
Net cash 19,045 (26,617) 1,018 (6,554)
10. Return on capital employed
2006 2005
£'000 £'000
Capital employed
Property, plant and equipment 88,802 85,752
Prepayments 352 396
Inventories 67,707 64,216
Trade receivables 90,023 83,303
Other current assets 10,128 8,688
Trade and other payables (50,372) (46,843)
Current tax payable (7,445) (7,326)
Capital employed 199,195 188,186
Average capital employed 193,691 182,233
Operating profit 61,941 55,170
Acquisition intangibles amortisation 350 175
62,291 55,345
ROCE 32.2% 30.4%
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
2006 2005 2006 2005 2006 2005
£'000 £'000 £'000 £'000 £'000 £'000
Current service cost (6,491) (5,700) (1,699) (1,468) (8,190) (7,168)
Past service cost (375) - - 117 (375) 117
Interest on schemes' liabilities (8,715) (8,000) (1,870) (1,746) (10,585) (9,746)
Expected return on schemes' assets
11,216 9,300 1,503 1,209 12,719 10,509
Total expense recognised in income
statement
(4,365) (4,400) (2,066) (1,888) (6,431) (6,288)
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 176,326 22,356 198,682
Present value of the schemes' liabilities (191,980) (36,294) (228,274)
Deficit in the schemes (15,654) (13,938) (29,592)
Related deferred tax asset 4,696 4,695 9,391
Net pension liability 2006 (10,958) (9,243) (20,201)
Net pension liability 2005 (18,410) (12,984) (31,394)
The charge to the income statement in respect of share-based payments is made up
as follows:-
2006 2005
£'000 £'000
Share Option Scheme 495 374
Performance Share Plan 290 139
Employees Share Ownership Plan 579 525
Total expense recognised in income statement 1,364 1,038
12. Basis of preparation
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31st December 2006 or 31st December 2005.
Statutory accounts for 2005, which were prepared under accounting standards
adopted by the EU have been delivered to the registrar of companies and those
for 2006 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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