REG - Spirax-Sarco Engng - 2014 Preliminary Results <Origin Href="QuoteRef">SPX.L</Origin> - Part 2
05/03/2015 07:00
- Part 2: For the preceding part double click ID:nRSE5799Ga
reduction cash contributions by the Company were
ceased with effect from October 2014. This actuarial position compares with a
deficit of £42m, as at 31st December 2013, under IAS19.
Cash flow and treasury
2014 was another good year for cash flow, founded on a high conversion of
profit into cash through close control of working capital, whilst continuing
to invest in capital expenditure projects in support of business growth and
margin improvement.
Adjusted cash flow 2014£'000 2013£'000
Operating profit 152,950 151,626
Depreciation and amortisation 22,703 22,707
Adjustments (including share plans) 1,615 2,700
Working capital changes (14,523) (7,345)
Net capital expenditure (including software and R&D) (31,331) (26,693)
Cash from operations 131,414 142,995
Net interest (53) 417
Tax paid (41,915) (42,318)
Free cash flow 89,446 101,094
Net dividends paid (45,109) (119,992)
Pension deficit reduction payments and provisions (4,870) (6,985)
Restructuring costs paid - (1,623)
Proceeds from issue of shares/buy-back 2,218 (582)
Acquisitions (9,984) (5,601)
Cash flow for the year 31,701 (33,689)
Exchange movements 4,392 (1,587)
Opening net cash 16,400 51,676
Net cash at 31st December 52,493 16,400
Adjusted operating cash flow was £131.4 million (2013: £143.0 million). Cash
conversion was 86%, down from 94% for the prior year partly due to an increase
of £4.6 million in capital expenditure to £31.3 million, as we invested in a
new site in India and in additional land adjacent to our existing plant in
China. We would expect capital expenditure in the current year to increase
again to over £35 million. Working capital absorbed £14.5 million (2013 £7.3
million), due to an increase in trade debtors reflecting the greater
proportion of project work in the last two months of the year. Our business
is vertically integrated with high value added, where we purchase raw
materials in the form of castings, forgings and components, and manufacture,
test, hold inventories of finished product and sell direct to end-users
wherever possible. This business model means that our working capital largely
comprises debtors and inventories, with a relatively low value of trade
creditors but also delivered a 44.3% return on capital employed.
Taxation paid was £41.9 million, which was similar to the previous year and
close to the tax charge in the profit & loss account, with tax paid in
virtually every one of the 41 countries in which the Group has operating
units. Free cash flow of £89.4 million (2013: £101.1 million) was therefore
generated and available for dividends to shareholders, acquisitions and other
corporate uses.
Dividend payments were £45.1 million reflecting the increase in the Ordinary
dividend, partially offset by the reduction in the number of shares in issue
following the share consolidation. Total dividend payments in the prior year
were £120.0 million and included £78.3 million in respect of the 2012 special
dividend paid in July 2013. Pension deficit reduction cash contributions and
provision movements were lower at £4.9 million (2013: £7.0 million) due to the
cessation of such contributions following the triennial actuarial valuation of
the main UK schemes completed during 2014. There was an outflow of £10.0
million for acquisitions, largely comprising the purchase of BioPure in
January 2014. There was an inflow of £2.2 million in respect of share capital
comprising an inflow of £5.2 million for shares issued under the Group's
various employee share schemes and an outflow of £3.0 million for shares
bought back and lodged in the Group's Employee Benefit Trust, to provide
shares for future vesting of awards under the Group's long-term performance
share plan.
We therefore generated an increase in net cash of £31.7 million during the
year. Currency movements increased net cash balances by £4.4 million, giving
closing net cash of £52.5 million at 31st December 2014, compared with £16.4
million a year earlier.
The Group's profit and loss account and balance sheet are exposed to movements
in a wide range of different currencies. This stems from our direct sales
business model, with a large number of local operating units. These currency
exposures and risks are managed through a rigorously applied Treasury Policy,
typically using centrally managed and approved simple forward contracts to
mitigate exposures to known cash flows and avoiding the use of complex
derivative transactions. The largest exposures are to the euro, US dollar,
Chinese renminbi and Korean won. Whilst currency effects can be significant,
the structure of the Group provides mitigation through our regional
manufacturing strategy, diverse spread of geographic locations and through the
natural hedge of having a high proportion of our overhead costs in local
currency in our direct sales operating units.
Capital structure
The Board keeps the capital requirements of the Group under regular review,
maintaining a strong balance sheet to protect the business and provide
flexibility of funding for growth. The Group generates high returns on
capital and our priority is to maximise reinvestment in the business to
generate further returns in the future. We also prioritise the search for
suitable acquisitions that can expand our geographic reach, deepen our market
penetration, broaden our product range or add to our addressable markets in
related areas. Acquisition targets need to exhibit good strategic fit and
meet strict commercial, economic and return on investment criteria.
Where cash resources exceed expected future requirements, we will seek to
return capital to shareholders and have today announced a £91 million return
via a special dividend of 120p per share. This is equivalent to approximately
4% of the Company's share capital and, as is common with a significant return
of capital, is being combined with an appropriate share consolidation. The
purpose of the share consolidation is to maintain, as far as possible, the
comparability of the share price before and after the special dividend and to
remove the impact of the special dividend on employee equity-based
incentives.
STATEMENT OF FINANCIAL POSITION AT 31ST DECEMBER 2014
Note 2014£'000 2013£'000
ASSETS
Non-current assets
Property, plant and equipment 176,668 174,218
Goodwill 47,682 45,765
Other intangible assets 48,123 44,594
Prepayments 402 162
Investment in associates 377 7,039
Deferred tax assets 35,941 34,472
309,193 306,250
Current assets
Inventories 98,007 104,164
Trade receivables 155,696 145,380
Other current assets 23,973 19,880
Taxation recoverable 4,420 3,709
Associate held for sale 5,777 -
Bank deposits 24,437 32,901
Cash and cash equivalents 117,981 84,417
430,291 390,451
Total assets 739,484 696,701
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables 90,754 86,108
Bank overdrafts 461 1,809
Short-term borrowing 40,070 39,338
Current portion of long-term borrowings 298 298
Current tax payable 22,175 16,927
153,758 144,480
Net current assets 276,533 245,971
Non-current liabilities
Long-term borrowings 49,096 59,473
Deferred tax liabilities 17,412 15,853
Post-retirement benefits 75,779 72,043
Provisions 556 720
Long-term payables 1,005 598
143,848 148,687
Total liabilities 297,606 293,167
Net assets 2 441,878 403,534
Equity
Share capital 19,622 19,568
Share premium account 65,067 59,954
Other reserves (6,486) 11,474
Retained earnings 362,796 311,737
Equity shareholders' funds 440,999 402,733
Non-controlling interest 879 801
Total equity 441,878 403,534
Total equity and liabilities 739,484 696,701
441,878
403,534
Total equity and liabilities
739,484
696,701
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31ST DECEMBER 2014
Note Adjusted2014£'000 Adj't2014£'000 Total 2014£'000 Adjusted2013£'000 Adj't2013£'000 Total2013£'000
Revenue 2 678,277 - 678,277 689,388 - 689,388
Operating costs (525,327) (4,855) (530,182) (537,762) (4,586) (542,348)
Operating profit 2 152,950 (4,855) 148,095 151,626 (4,586) 147,040
Financial expenses (5,229) - (5,229) (4,268) - (4,268)
Financial income 2,246 - 2,246 1,968 - 1,968
3 (2,983) - (2,983) (2,300) - (2,300)
Share of profit of associates 1,151 (1,469) (318) 1,730 (756) 974
Profit before taxation 151,118 (6,324) 144,794 151,056 (5,342) 145,714
Taxation 4 (44,857) 636 (44,221) (44,542) 1,148 (43,394)
Profit for the period 106,261 (5,688) 100,573 106,514 (4,194) 102,320
Attributable to:
Equity shareholders 106,015 (5,688) 100,327 106,298 (4,194) 102,104
Non-controlling interest 246 - 246 216 - 216
Profit for the period 106,261 (5,688) 100,573 106,514 (4,194) 102,320
Earnings per share 5
Basic earnings per share 140.4p 132.8p 138.8p 133.4p
Diluted earnings per share 139.5p 132.0p 137.8p 132.4p
Dividends 6
Dividends per share 64.5p 59.0p
Special dividend per share 120.0p -
Dividends paid during the year (per share) 60.5p 155.0p
Adjusted figures exclude certain non-operational items as detailed in note 2
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED
31ST DECEMBER 2014
The Group
2014£'000 2013£'000
Profit for the year 100,573 102,320
Items that will not be reclassified to profit or loss
Remeasurement loss on post-retirement benefits (5,159) (2,866)
Deferred tax on remeasurement loss on post-retirement benefits (258) (1,074)
(5,417) (3,940)
Items that may be reclassified subsequently to profit or loss
Foreign exchange translation differences (15,155) (12,875)
Non-controlling interest foreign exchange translation differences 22 (49)
Profit on cash flow hedges net of tax (232) 48
(15,365) (12,876)
Total comprehensive income for the year 79,791 85,504
Attributable to:
Equity shareholders 79,523 85,337
Non-controlling interest 268 167
Total comprehensive income for the year 79,791 85,504
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31ST DECEMBER
2014
GROUP
ShareCapital £'000 Sharepremiumaccount £'000 Otherreserves £'000 RetainedEarnings £'000 Equity shareholders' funds £'000 Non- controlling interest £'000 TotalEquity £'000
Balance at 1st January 2014 19,568 59,954 11,474 311,737 402,733 801 403,534
Profit for the year - - - 100,327 100,327 246 100,573
Other comprehensive (expense)/income
Foreign exchange translation differences - - (15,155) - (15,155) 22 (15,133)
Remeasurement loss on post-retirement benefits - - - (5,159) (5,159) - (5,159)
Deferred tax on remeasurement loss on post-retirement benefits - - - (258) (258) - (258)
Profit on cash flow hedges reserve - - (232) - (232) - (232)
Total other comprehensive (expense)/income for the year - - (15,387)Recent news on Spirax
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