REG - Spirax-Sarco Engng - Half-year Report <Origin Href="QuoteRef">SPX.L</Origin> - Part 3
09/08/2017 07:06
- Part 3: For the preceding part double click ID:nRSI4581Nb
(2.6)
(2.6) (1.9) (4.0)
Financial income:
Bank interest receivable 0.6 0.6 1.4
Net financing expense (2.0) (1.3) (2.6)
Net pension scheme financial expense (1.7) (1.3) (2.6)
Net bank interest (0.3) - -
Net financing expense (2.0) (1.3) (2.6)
5. TAXATION
Taxationhas been estimated at the rate expected to be incurred in the full
year.
Six months to 30th June 2017 £m Six months to 30th June 2016 £m Year ended31st December 2016£m
UK corporation tax 1.2 1.1 3.1
Foreign tax 27.9 22.4 47.8
Deferred tax (1.5) (1.6) (0.8)
Total Taxation 27.6 21.9 50.1
6. EARNINGS PER SHARE
Six months to 30th June 2017 Six monthsto 30th June2016 Year ended31st December2016
Profit attributable to equity shareholders (£m) 60.8 51.4 121.1
Weighted average shares in issue (million) 73.5 73.3 73.4
Dilution (million) 0.2 0.3 0.2
Diluted weighted average shares in issue (million) 73.7 73.6 73.6
Basic earnings per share 82.7p 70.2p 165.0p
Diluted earnings per share 82.4p 70.0p 164.5p
Basic and diluted earnings per share calculated on an adjusted profit basis
are included in Note 2.
The dilution is in respect of unexercised share options and the Performance
Share Plan.
7. DIVIDENDS
Six months to 30th June 2017 £m Six months to 30th June 2016 £m Year ended 31st December 2016 £m
Amounts paid in the period:
Final dividend for the year ended 31st December 2016 of 53.5p (2015: 48.2p) per share 39.4 35.4 35.4
Interim dividend for the year ended 31st December 2016 of 22.5p (2015: 20.8p) per share - - 16.5
Total dividends paid 39.4 35.4 51.9
Amounts arising in respect of the period:
Interim dividend for the year ended 31st December 2017 of 25.5p (2016: 22.5p) per share 18.7 16.5 16.5
Final dividend for the year ended 31st December 2016 of 53.5p (2015: 48.2p) per share - - 39.4
Total dividends arising 18.7 16.5 55.9
The interim dividend for the year ended 31st December 2017 was approved by the
Board after the 30th June 2017. It is therefore not included as a liability
in these Interim Condensed Consolidated Financial Statements. No scrip
alternative to the cash dividend is being offered in respect of the 2017
interim dividend.
8. POST-RETIREMENT BENEFITS
The Group is accounting for pension costs in accordance with IAS 19. The
disclosures shown here are in respect of the Group's Defined Benefit
Obligations. Other plans operated by the Group were either Defined
Contribution plans or were deemed immaterial for the purposes of IAS 19
reporting. Full IAS 19 disclosure for the year ended 31st December 2016 is
included in the Group's Annual Report.
The amounts recognised in the balance sheet are as follows:
30th June2017£m 30th June 2016£m 31st December2016£m
Retirement benefit liability recognised in the Balance Sheet (91.1) (113.8) (94.2)
Related deferred tax asset 22.5 27.3 23.4
Net pension liability (68.6) (86.5) (70.8)
9. ANALYSIS OF CHANGES IN NET CASH
1st Jan2017£m Cash flow £m Exchangemovement£m 30th June 2017£m
Current portion of long-term borrowings (0.2) (46.7)
Non-current portion of long-term borrowings (58.2) (199.9)
Short-term borrowings (33.0) (26.6)
Total borrowings (91.4) (273.2)
Comprising:
Borrowings (91.0) (176.6) (5.4) (273.0)
Finance leases (0.4) 0.2 - (0.2)
(91.4) (176.4) (5.4) (273.2)
Cash at bank 119.2 38.3 2.2 159.7
Bank overdrafts (0.4) 0.1 - (0.3)
Net cash and cash equivalents 118.8 38.4 2.2 159.4
Net cash/(debt) 27.4 (138.0) (3.2) (113.8)
10. RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
Note.
Full details of the Group's other related party relationships, transactions
and balances are given in the Group's Financial Statements for the year ended
31st December 2016. There have been no material changes in these
relationships in the period up to the end of this report.
No related party transactions have taken place in the first half of 2017 that
have materially affected the financial position or the performance of the
Group during that period.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table compares amounts and fair values of the Group's financial
assets and liabilities:
30th June 2017 30th June 2016 31st December 2016
Carrying value £m Fair value £m Carrying value £m Fair value £m Carrying value £m Fair value £m
Financial assets
Cash and cash equivalents 159.7 159.7 109.0 109.0 119.2 119.2
Trade and other receivables 203.6 203.6 172.9 172.9 197.8 197.8
Total financial assets 363.3 363.3 281.9 281.9 317.0 317.0
Financial liabilities
Bank loans 273.0 273.0 71.8 71.8 91.0 91.0
Finance lease obligations 0.2 0.2 0.3 0.3 0.4 0.4
Bank overdrafts 0.3 0.3 16.3 16.3 0.4 0.4
Derivative financial liabilities 3.6 3.6 2.6 2.6 - -
Trade payables 30.0 30.0 23.2 23.2 29.6 29.6
Other payables 40.8 40.8 29.2 29.2 36.9 36.9
Total financial liabilities 347.9 347.9 143.4 143.4 158.3 158.3
There are no other assets or liabilities measured at fair value on a recurring
or non-recurring basis for which fair value is disclosed.
Fair values of financial assets and financial liabilities
Fair values of financial assets and liabilities at 30th June 2017 are not
materially different from book values due to their size or the fact that they
were at short-term rates of interest. Fair values have been assessed as
follows:
Derivatives
Forward exchange contracts are marked to market by discounting the future
contracted cash flows using readily available market data.
Interest-bearing loans and borrowings
Fair value is calculated based on discounted expected future principal and
interest cash flows.
Finance lease liabilities
The fair value is estimated as the present value of future cash flows,
discounted at market interest rates for homogeneous lease agreements.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the
notional amount is deemed to reflect the fair value.
The Group uses forward currency contracts to manage its exposure to movements
in foreign exchange rates. The forward contracts are designated as hedge
instruments in a cash flow hedging relationship. At 30th June 2017 the Group
had contracts outstanding to purchase US$282.4m with euros, £31.7m with US
dollars, £3.9m with euros, £0.5m with Danish krone and £0.1m with Japanese
yen. Derivative financial instruments are measured at fair value. The fair
value at the end of the reporting period is a £3.6m liability (31st December
2016: £0.2m asset).
Financial instruments fair value disclosure
Fair value measurements are classified into three levels, depending on the
degree to which the fair value is observable.
· Level 1 fair value measurements are those derived from quoted prices in
active markets for identical assets and liabilities;
· Level 2 fair value measurements are those derived from other observable
inputs for the asset or liability; and
· Level 3 fair value measurements are those derived from valuation
techniques using inputs that are not based on observable market data.
We consider that the derivative financial instruments fall into Level 2.
There have been no transfers between levels during the period.
12. CAPITAL COMMITMENTS
Capital expenditure contracted for but not provided for at 30th June 2017 was
£3.0m (31st December 2016: £3.6m, 30th June 2016: £4.0m). All capital
commitments related to property, plant and equipment.
13. PURCHASE OF BUSINESSES
30th June 2017 Acquisitions
Book value£m Fair valueadjustment£m Fair value£m
Non-current assets:Property, plant and equipment 7.3 1.6 8.9
Software 2.1 - 2.1
Deferred tax 0.6 - 0.6
Intangibles - 56.5 56.5
10.0 58.1 68.1
Current assets:InventoriesTrade receivablesOther receivables 10.611.70.2 0.9-- 11.511.70.2
Cash 21.1 (2.7) 18.4
43.6 (1.8) 41.8
Total assets 53.6 56.3 109.9
Current liabilities:Trade payables Other payables and accrualsDeferred tax 2.18.3- -(3.8)16.8 2.14.516.8
10.4 13.0 23.4
Non-current liabilities:Post-retirement benefit plans 1.7 - 1.7
Total liabilities 12.1 13.0 25.1
Total net assetsGoodwill 41.5 43.3 84.887.4
Total 172.2
Satisfied by
Cash paid 172.2
Deferred consideration -
172.2
Cash outflow for acquired businesses in the Statement of Cash Flows:
Cash paid for businesses acquired in the period 172.2
Less cash acquired (18.4)
Deferred consideration for businesses acquired in prior years -
Net cash outflow 153.8
The acquisition of 99.96% of Gestra AG and associated businesses (Gestra) was
completed on the 2nd May 2017. The acquisition method of accounting has been
used. Consideration of £172.2m was paid on completion. Separately identified
intangibles are recorded as part of the provisional fair value adjustment.
The acquired intangibles relate to brand names and trademarks, manufacturing
designs and core technology and customer relationships. The Goodwill
recognised represents the skilled workforce acquired and the opportunity to
achieve synergies from being part of a larger Group. Goodwill arising is not
expected to be tax deductible. Goodwill recognised on acquisition of £87.4m
moved to £90.4m at 30th June 2017 due to exchange translation. The
acquisition has generated £12m of revenue and £2m of adjusted pre-tax profit
since acquisition. Had the acquisition been made on the 1st January 2017, the
Gestra revenue and adjusted pre-tax profit would have been approximately three
times the figures disclosed. Gestra, which has its headquarters in Bremen,
Germany, is a technology leader in advanced industrial boiler control systems
and specialises in the design and production of valves and control systems for
steam and fluid process control. Gestra is highly complementary to the Spirax
Sarco Steam Specialties business and will enhance and accelerate the
implementation of Spirax Sarco's strategy for growth, as a result of its
well-developed capabilities in a wide range of industries and applications.
14. EVENTS AFTER THE BALANCE SHEET DATE
On 3rd July 2017 the Group acquired the entire share capital of Chromalox Inc.
for a cash consideration of US$415m. The purchase consideration was financed
from new borrowings supplied by our existing banks.
Chromalox is a well-established USA based provider of electrical products,
systems and solutions for industrial process heating and temperature
management. It is closely related to the Spirax Sarco Steam Specialties
business in delivering thermal energy management solutions to customers
through a primarily direct sales channel. Chromalox is also highly
complementary to the Steam Specialties business, with the decision between
using steam or electricity as a heating medium being driven by different needs
of the application or customer circumstances. It will form part of the
Spirax-Sarco business group and be reported as a separate segment within that
business.
To indicate the size of the business, our estimate for Chromalox's current
year ending 30th September 2017 is revenues in the region of US$190m and
pre-tax profit of around US$32m. Due to the proximity of the acquisition date
to the date of the approval of the Group's half-year results, it is
impractical to provide further information.
15. EXCHANGE RATES
Set out below is an additional disclosure (not required by IAS 34) that
highlights movements in a selection of average exchange rates between half
year 2017 and half year 2016.
Average Half year 2017 Average Half year 2016 Change %
Bank of England sterling index 77.7 86.5 +10%
US$ 1.27 1.42 +11%
Euro 1.16 1.29 +10%
Renminbi 8.71 9.33 +7%
Won 1,452 1,677 +13%
Real 4.06 5.26 +23%
Argentine peso 20.06 20.38 +2%
A positive movement indicates a devaluation in sterling versus that currency.
When sterling devalues against other currencies in which the Group operates
the Group benefits from a gain on translation of the financial results into
sterling.
The devaluation of sterling, following the UK's decision in June 2016 to exit
the European Union, resulted in much more favourable exchange rates in the
period when compared to the first half of 2016. On a translation basis, sales
and profits have increased by over 10% while transaction benefits further
boosted profits, giving a total uplift to profits from currency movements of
16%.
About Spirax-Sarco Engineering plc
Spirax-Sarco Engineering plc comprises two world-leading businesses, Spirax
Sarco for steam and electrical thermal energy solutions and Watson-Marlow
Fluid Technology Group for niche peristaltic pumps and associated fluid path
technologies. Spirax Sarco provides a broad range of fluid control and
electrical process heating products, engineered packages, site services and
systems expertise for a diverse range of industrial and institutional
customers. The business helps its end users to improve production efficiency,
reduce energy costs, water usage and emissions, improve product quality and
enhance the safety of their operations. Watson-Marlow Fluid Technology Group
offers the ideal solution for a wide variety of demanding fluid path
applications with highly accurate, controllable and virtually maintenance free
pumps and associated technologies. The Group is headquartered in Cheltenham,
England, has strategically located manufacturing plants around the world and
employs over 7,000 people, of whom approximately 1,550 are direct sales and
service engineers. Its shares have been listed on the London Stock Exchange
since 1959 (symbol: SPX).
Further information can be found at www.spiraxsarcoengineering.com
RNS filter: Inside information prior to release
This information is provided by RNS
The company news service from the London Stock ExchangeRecent news on Spirax
See all newsREG - Spirax Group PLC - Result of AGM
AnnouncementREG - Spirax Group PLC - Trading Update
AnnouncementREG - Spirax Group PLC - Director/PDMR Shareholding
AnnouncementREG - Spirax Group PLC - Change in Director Details
AnnouncementREG - Spirax Group PLC - Director/PDMR Shareholding
Announcement