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2009 Half Year Results

2009 Half Year Results. Spirax-Sarco Engineering plc 2009 Half Year Results 30 th June 2009. Bill Whiteley – Chairman Mark Vernon – Chief Executive David Meredith – Finance Director. Overview of 2009 half year results. Constant 2009 2008 Change currency

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2009 Half Year Results

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  1. 2009 Half Year Results Spirax-Sarco Engineering plc 2009 Half Year Results 30th June 2009 Bill Whiteley – Chairman Mark Vernon – Chief Executive David Meredith – Finance Director

  2. Overview of 2009 half year results Constant 2009 2008 Change currency Revenue £251.6m £238.7m +5% -8% Operating profit* £37.8m £40.8m -7% -26% Operating margin* 15.0% 17.1% Pre-tax profit* £38.2m £42.7m -11% -28% EPS* 34.9p 38.0p -8% -27% DPS 10.5p 10.0p +5% • 5% sales growth well-spread across all geographies (-8% at constant FX) • Significant exchange benefits • Operating profit margin of 15.0% • Interim Dividend up 5% – confidence in future prospects • Strong balance sheet - net cash balance £4m * Operating profit, Pre-tax profit and EPS exclude amortisation of acquisition-related intangible assets of £1.0m (2008: £0.8m) of which £0.2m relates to Associates, and headcount reduction costs of £7.0m (2008: nil)

  3. Revenue changes – Half year 2009 Asia Watson- EMEA Pac Americas Marlow Exchange -£9.6m -£3.6m -£6.3m -£2.7m +£35.1m 2009 Change EMEA -8% AsiaPac -7% Americas -11% Watson-Marlow -7% Exchange +14% +5% £m 2009 Sales £’m EMEA 113.2 AsiaPac 49.0 Americas 51.0 Watson-Marlow 38.3 251.6 Sales are based on the location of operations and are shown at constant exchange rates.

  4. Operating profit changes – Half year 2009 Asia Watson- Corporate EMEA Pac Americas Marlow Exp’s Exchange -£7.0m -£2.8m -£1.1m -£2.9m +£0.7m +£10.1m 2009 Change EMEA -31% AsiaPac -23% Americas -16% Watson-Marlow -24% Exchange +25% -7% £m Profits are based on the location of operations and are shown at constant exchange rates.

  5. Financial aspects – Half year 2009 2009 2008 change Revenue £251.6m £238.7m +5% Operating profit* £37.8m £40.8m -7% Margin* 15.0% 17.1% Net finance expense (£1.0m) £0.8m Associates £1.4m £1.2m Profit before tax* £38.2m £42.7m -11% Tax rate (excl Associates) 31.5% 32.8% EPS* 34.9p 38.0p -8% DPS 10.5p 10.0p +5% • Significant exchange gains • IAS19 Pensions – lower investment returns reduced interest significantly • Tax rate 31.5% • Good increase from Associates – India • Interim Dividend up 5% - confidence in future prospects * Operating profit, Pre-tax profit and EPS exclude amortisation of acquisition-related intangible assets of £1.0m (2008: £0.8m) of which £0.2m relates to Associates, and headcount reduction costs of £7.0m (2008: nil)

  6. £ millions 2009 2008 Operating profit 37.8 40.8 Depreciation and share schemes9.8 8.6 Working capital 0.2 (9.6) Cash generated from operations 47.8 39.8 Interestpaid(0.3) (0.2) Tax paid (15.4) (10.8) Capital expenditure (net incl Development) (15.2) (8.4) Dividends paid (17.4) (16.1) Underlying cash flow (0.5) 4.3 Special pension pay’ts/severance/provisions(11.0) (0.2) Treasury shares (net) 0.3 2.2 Acquisitions (1.3) (12.2) Cash flow for half year (12.5) (5.9) £m Net cash 31.12.08 17.4 Cash flow (12.5) Exchange (0.8) Net cash 30.06.09 4.1 £m Net cash 31.12.07 15.8 Cash flow (5.9) Exchange 2.3 Net cash 30.06.08 12.2 Cash flow – Half year 2009 • Good underlying cash flow – increased capex investment • Special pension contributions, severance payments and provisions of £11m • Closing net cash of £4.1m

  7. Key financial statistics – Half year 2009 30th June 30th June 2009 2008 Operating profit margin* 15.0% 17.1% Amortisation of acquisition intangibles £1.0m £0.8m Net cash £4.1m £12.2m Cash from operations* £47.8m £39.8m Capital expenditure as % of depreciation 177% 111% Cash conversion* 86% 77% Pension liability IAS19 basis (net after tax) £65.0m £33.3m App I Sales history App II EPS/DPS history App III Cash Conversion App IV Currencies • Good underlying cash flow • Increased capex investment • Increased IAS19 net Pension liability – Lower bond yields *Profit measures exclude severance costs and the amortisation of acquisition-related intangibles. Cash from operations and Cash conversion also exclude Special pension contributions.

  8. 20092008 EMEA 45.0% 46.4% AsiaPac 19.5% 19.1% Americas 20.3% 19.9% WM 15.2%14.6% 100.0% 100.0% Segmental analysis of revenue – Half year 2009 EMEA 45.0% Americas 20.3% AsiaPac 19.5% Watson-Marlow Pumps 15.2% • Good geographic spread serving very diverse industries • Major manufacturing operations on nearly all continents – expansion in Asia • Direct sales channel in most markets – close to customers • Diverse industry and customer base Sales are by geographical location of operations

  9. Europe, Middle East & Africa (EMEA) constant 2009 2008 change currency Sales to customers £113.2m £110.7m +2% -8% Sales by operation* £127.1m £128.7m -1% -10% Operating profit £15.6m £20.2m -23% -31% Margin* 12.3% 15.7% • Market conditions weakened from Q4 2008 – remain difficult • France, Germany and Italy performed relatively well • Turnaround in South Africa • Russia and M&M business particularly affected • Manufacturing operations impacted by internal de-stocking • Higher material costs in first half but now reversing • FX hit the UK but good gains overall in EMEA Operating profit excludes severance costs and the amortisation of acquisition-related intangibles *Sales by operation comprise customer and intra-group sales. Margin is Operating profit as % of Sales by operation

  10. Smurfit Kappa reduces boiler fuel costs by 21% • Smurfit Kappa corrugated board factory based in Weston-super-Mare, UK • Spirax Sarco installed innovative Flash Recovery Energy Management Equipment system (FREME) to recover energy from condensate and flash steam to preheat the pressurised feed water to the boiler • Provided temperature controls for process steam and installed automatic pump traps to clear condensate • FREME system was supplied as a prefabricated skid comprising a flash separation vessel and two plate heat exchangers • Smurfit reduced boiler fuel costs by 21% through steam system improvements • Also reduced Smurfit’s water bill by £300/£400 per month

  11. AsiaPacific constant 2009 2008 change currency Sales to customers £49.0m £45.5m +8% -7% Sales by operation* £50.4m £47.0m +7% -8% Operating profit £9.4m £8.6m +10% -23% Margin* 18.7% 18.3% • China did well • Good results in Australia and Malaysia • Lower Korean results – good backlog for second half • Weaker profits in Singapore, Taiwan and Thailand • Significant FX gains overall for AsiaPacific Operating profit excludes severance costs and the amortisation of acquisition-related intangibles *Sales by operation comprise customer and intra-group sales. Margin is Operating profit as % of Sales by operation

  12. Americas constant 2009 2008 change currency Sales to customers £51.0m £47.5m +7% -11% Sales by operation* £53.0m £50.6m +5% -13% Operating profit* £6.0m £5.9m +2% -16% Margin* 11.3% 11.7% • Sales declines widespread • South American economies difficult later in period • USA relatively resilient • Good sales of prefabricated heat exchange packages • FX gains from weaker sterling and stronger dollar Operating profit excludes severance costs and the amortisation of acquisition-related intangibles *Sales by operation comprise customer and intra-group sales. Margin is Operating profit as % of Sales by operation

  13. Watson-Marlow constant 2009 2008 change currency Sales to customers £38.3m £34.9m +10% -7% Sales by operation* £38.3m £35.0m +10% -7% Operating profit £8.9m £8.9m +0% -24% Margin* 23.1% 25.3% • Difficult markets in EMEA • Strong sales growth in Asia from small base • Americas sales flat – good biopharmaceutical market • Lower volume impact in manufacturing operations • Good FX gains Operating profit excludes severance costs and the amortisation of acquisition-related intangibles *Sales by operation comprise customer and intra-group sales. Margin is Operating profit as % of Sales by operation

  14. Summary • Exceptionally challenging market environment. • Benefiting from resiliency of business model. • Pace of decline in business levels has stabilised. • Broadly similar trading conditions across geographic areas—less maintenance spending, tight local capex budgets. • Trading margin held up well at 15%—benefit from pricing and transaction offset by lower volumes, higher material costs and overheads overhang. • Net cash position of £4.1m with good underlying cash flow. • Investing for the future.

  15. Questions Spirax-Sarco Engineering plc 2009 Half Year Results 30th June 2009 Focused on consistent growthand creating shareholder value Questions

  16. Appendix I - Investing for the long term delivers results Sales Sterling weakens Sterling strengthens Sterling weakens From 2004 figures prepared under IFRS

  17. Appendix II - Investing for the long term delivers results Earnings per share & Dividends per share 41 year dividend record Key EPS DPS Figures exclude non-operating and exceptional items From 2004 figures prepared under IFRS and exclude amortisation and impairment of acquired intangibles

  18. Good cash conversion in first half 2009 despite much higher capex investment Appendix III - Cash conversion first half year £’m 2009 2008 Cash generated from operations* 47.8 39.8 Net capital expenditure (property, plant equipment, software and development) (15.2) (8.4) 32.6 31.4 Operating Profit* 37.8 40.8 Cash conversion 86% 77% * Operating cash flow and operating profit exclude severance costs and amortisation of acquisition-related intangibles

  19. Appendix IV - Currencies First Half First Half Year 20092008 2008 Average exchange rates Bank of England sterling index 78.6 94.4 90.7 US$ 1.50 1.99 1.85 Euro 1.11 1.30 1.26 RMB 10.23 14.01 12.90 Won 1,999 1,954 1,998 Period end exchange rates Bank of England sterling index 83.8 93.2 73.8 US$ 1.65 1.99 1.44 Euro 1.17 1.26 1.03 RMB 11.25 13.64 9.81 Won 2,098 2,082 1,811 At current exchange rates the second half benefit will be smaller than the first half

  20. Synergy Health lowers fuel consumption by 11% • Synergy Health provides complete linen management services exclusively to the healthcare sector • Spirax Sarco installed skid-mounted Flash Recovery Energy Management Equipment (FREME)system • The FREME system recovers the energy in condensate and flash steam to preheat the pressurised feed water to the boiler • Before the project, water entered the boiler at around 90oC, but now arrives at 130oC. • Supplying hotter feed water reduces the amount of work the boiler needs to do to raise steam • A reduction of 11% in gas consumption was realised, with < two-year payback

  21. Plant Audit for Indonesian customer results in significant cost savings • PT Simba Indosnack Makmur produce puffed corn • Issues with high quantities of product rejects from wet steam and inefficient heat transfer • Spirax Sarco proposed comprehensive steam system audit to evaluate performance and identify areas for improvement • Customer achieved a significant improvement product quality and 30% saving in fuel consumption • Output of existing boiler was doubled and can now supply enough steam to operate nearly five production lines compared to two lines prior to audit

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