REG - Spirax-Sarco Engng - Half Yearly Report <Origin Href="QuoteRef">SPX.L</Origin> - Part 2
29/10/2014 10:55
- Part 2: For the preceding part double click ID:nRSG4724Oa
66 3,782 - - 3,848 - 3,848
Employee benefit trust shares (34) - (3,797) - (3,831) - (3,831)
Balance at 31st December 2013 19,568 59,954 11,474 311,737 402,733 801 403,534
CASH FLOW STATEMENT
Notes Six monthsto 30th June2014£'000 Six monthsto 30thJune2013£'000 Year ended31st December2013£'000
Cash flows from operating activities
Profit before taxation 63,454 65,520 145,714
Depreciation, amortisation and impairment 13,207 13,749 26,678
Share of profit of associates (338) (751) (974)
Equity settled share plans 1,795 1,748 3,315
Net finance expense 1,542 1,059 2,300
Operating cash flow before changes in working capital and provisions 79,660 81,325 177,033
Change in trade and other receivables 8,751 (4,152) (8,704)
Change in inventories (9,771) (3,184) (3,573)
Change in provisions and post-retirement benefits (2,645) (3,943) (6,985)
Change in trade and other payables (6,097) (2,613) 3,309
Cash generated from operations 69,898 67,433 161,080
Interest paid (1,120) (600) (1,551)
Income taxes paid (24,449) (22,076) (42,318)
Net cash from operating activities 44,329 44,757 117,211
Cash flows from investing activities
Purchase of property, plant & equipment (16,517) (10,612) (20,451)
Proceeds from sale of property, plant & equipment 793 721 1,777
Purchase of software & other intangibles (2,069) (3,073) (5,240)
Development expenditure capitalised (891) (534) (2,779)
Acquisition of businesses (9,087) (3,997) (5,601)
Bank deposits - - (32,901)
Interest received 976 873 1,968
Dividends received - - 964
Net cash used in investing activities (26,795) (16,622) (62,263)
Cash flows from financing activities
Proceeds from issue of share capital 2,454 2,231 3,848
Employee benefit trust share purchase - - (4,430)
Repaid borrowings 8 (1,703) (8,248) (4,383)
New borrowings 8 11,000 1,370 57,506
Change in finance lease liabilities 8 (96) 319 (353)
Dividends paid (including minorities) (31,101) (29,124) (120,956)
Net cash used in financing activities (19,446) (33,452) (68,768)
Net change in cash and cash equivalents 8 (1,912) (5,317) (13,820)
Cash and cash equivalents at beginning of period 8 82,608 99,445 99,445
Exchange movement 8 (5,061) 4,573 (3,017)
Cash and cash equivalents at end of period 8 75,635 98,701 82,608
Bank deposits 8 31,103 - 32,901
Borrowings and finance leases 8 (108,267) (41,336) (99,109)
Net (Debt)/cash at the end of the period 8 (1,529) 57,365 16,400
(108,267)
(41,336)
(99,109)
Net (Debt)/cash at the end of the period
8
(1,529)
57,365
16,400
NOTES TO THE ACCOUNTS
1. BASIS OF PREPARATION
Spirax-Sarco Engineering plc is a company domiciled in the UK. The half year
condensed consolidated financial statements of Spirax-Sarco Engineering plc
and its subsidiaries (the 'Group') have been prepared in accordance with IAS
34 Interim Financial Reporting as adopted by the EU. The accounting policies
applied are consistent with those set out in the 2013 Spirax-Sarco Engineering
plc Annual Report.
These condensed consolidated half year financial statements do not include all
the information required for full annual statements and should be read in
conjunction with the 2013 Annual Report. The comparative figures for the year
ended 31st December 2013 do not constitute the Group's statutory accounts for
that financial year as defined in section 434 of the Companies Act 2006. The
consolidated statutory accounts for Spirax-Sarco Engineering plc in respect of
the year ended 31st December 2013 have been reported on by the Company's
former auditors and delivered to the registrar of companies. The report of the
auditors was (i) unqualified, (ii) did not include a reference to any matters
to which the auditors drew attention by way of emphasis without qualifying
their report, and (iii) did not contain a statement under section 498 (2) or
(3) of the companies Act 2006.
The consolidated financial statements of the Group in respect of the year
ended December 2013 are available upon request from Mr A. J. Robson, General
Counsel and Company Secretary, Charlton House, Cheltenham, Gloucestershire,
GL53 8ER, United Kingdom or on www.spiraxsarcoengineering.com.
The financial statements for the six months ended 30th June 2014, which have
not been audited or reviewed by the auditors, were authorised by the Board on
6th August 2014.
The interim report has been prepared solely to provide additional information
to shareholders as a body to assess the Group's strategies and the potential
for those strategies to succeed. This interim report should not be relied
upon by any other party or for any other purpose.
GOING CONCERN
Having made enquiries and reviewed the Group's plans and available financial
facilities, the Board has a reasonable expectation that the Group has adequate
resources to continue its operational existence for the foreseeable future.
For this reason, it continues to adopt the going concern basis in preparing
the condensed consolidated financial statements. There are no key
sensitivities identified in relation to this conclusion.
NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
There are a number of new standards, amendments to standards and
interpretations that are not yet effective for the period ended 30th June 2014
and have, therefore, not been applied in preparing these condensed
consolidated interim financial statements. None of these are anticipated to
have a significant impact on the consolidated income statement or consolidated
statement of financial position.
SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of interim financial statements in conformity with adopted
IFRS requires management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported amount of
assets and liabilities, income and expense. Actual results may differ from
these estimates. In preparing these condensed consolidated interim financial
statements, the significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation uncertainty were
the same as those that applied to the consolidated financial statements for
the year ended 31st December 2013.
The Directors have considered the facts and circumstances as at 30th June 2014
and concluded that there are no indicators of impairments that require an
impairment review to be undertaken on goodwill at the interim statement of
financial position date. The annual impairment review will be undertaken later
in 2014 consistent with the timing in previous years.
CAUTIONARY STATEMENTS
This interim report contains forward-looking statements. These have been made
by the Directors in good faith based on the information available to them up
to the time of their approval of this report. The Directors can give no
assurance that these expectations will prove to have been correct. Due to the
inherent uncertainties, including both economic and business risk factors
underlying such forward-looking information, actual results may differ
materially from those expressed or implied by these forward-looking
statements. The Directors undertake no obligation to update any
forward-looking statements, whether as a result of new information, future
events, or otherwise.
RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge:
· this financial information has been prepared in accordance with IAS 34
Interim Financial Reporting as adopted by the EU;
· the interim management report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed financial statements, and a
description of the principal risks and uncertainties for the remaining six
months of the financial year.
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year that have materially affected the financial position or
performance of the entity during that period, and any changes in the related
party transactions described in the last annual report that could do so.
The Directors of Spirax-Sarco Engineering plc on 5th August 2014 are the same
as those listed in the 2013 Annual Report on pages 60 and 61 with the
exception of Mark Vernon who retired on 15th January 2014, Gareth Bullock who
retired on 20th May 2014 and Jamie Pike who was appointed on 1st May 2014.
N J Anderson
Group Chief Executive
6th August 2014
D J Meredith
Finance Director
6th August 2014
On behalf of the Board
2. SEGMENTAL REPORTING
Analysis by location of operation
Six months to 30th June 2014 Grossrevenue£'000 Inter-segmentrevenue£'000 Revenue£'000 Totaloperatingprofit£'000 Adjustedoperatingprofit£'000 Adjustedoperatingmargin%
Europe, Middle East & Africa 138,354 19,089 119,265 23,772 24,218 20.3%
Asia Pacific 78,424 2,881 75,543 16,754 16,754 22.2%
Americas 62,566 2,742 59,824 10,954 11,862 19.8%
Steam Specialties business 279,344 24,712 254,632 51,480 52,834 20.7%
Watson-Marlow 64,536 8 64,528 18,135 19,272 29.9%
Corporate expenses (4,957) (4,957)
343,880 24,720 319,160 64,658 67,149 21.0%
Intra-Group (24,720) (24,720)
Total 319,160 - 319,160 64,658 67,149 21.0%
Net finance expense (1,542) (1,542)
Share of operating profit of associates 338 718
Profit before tax 63,454 66,325
Six months to 30th June 2013 Grossrevenue£'000 Inter-segmentrevenue£'000 Revenue£'000 Totaloperatingprofit£'000 Adjustedoperatingprofit£'000 Adjustedoperatingmargin%
Europe, Middle East & Africa 141,034 20,419 120,615 22,136 22,654 18.8%
Asia Pacific 82,810 2,041 80,769 19,849 19,849 24.6%
Americas 69,738 3,130 66,608 10,958 11,980 18.0%
Steam Specialties business 293,582 25,590 267,992 52,943 54,483 20.3%
Watson-Marlow 63,619 50 63,569 17,357 18,138 28.5%
Corporate expenses (4,472) (4,472)
357,201 25,640 331,561 65,828 68,149 20.6%
Intra-Group (25,640) (25,640)
Total 331,561 - 331,561 65,828 68,149 20.6%
Net finance expense (1,059) (1,059)
Share of operating profit of associates 751 912
Profit before tax 65,520 68,002
Year ended 31st December 2013 Grossrevenue£'000 Inter-segmentrevenue£'000 Revenue£'000 Totaloperatingprofit£'000 Adjustedoperatingprofit£'000 Adjustedoperatingmargin%
Europe, Middle East & Africa 286,551 42,240 244,311 47,057 48,205 19.7%
Asia Pacific 187,916 5,142 182,774 48,033 48,033 26.3%
Americas 138,676 6,642 132,034 24,243 26,119 19.8%
Steam Specialties business 613,143 54,024 559,119 119,333 122,357 21.9%
Watson-Marlow 130,325 56 130,269 37,940 39,502 30.3%
Corporate expenses (10,233) (10,233)
743,468 54,080 689,388 147,040 151,626 22.0%
Intra-Group (54,080) (54,080)
Total 689,388 - 689,388 147,040 151,626 22.0%
Net finance expense (2,300) (2,300)
Share of operating profit of associates 974 1,730
Profit before tax 145,714 151,056
Non-operational items
The Group uses adjusted figures as key performance measures in addition to
those reported under adopted IFRS. The Group's management believes these
measures provide valuable additional information for users of the financial
statements in understanding the Group's performance. Adjusted operating
profit excludes certain non-operational items which are analysed below:
Six months30th June 2014£'000 Six months30th June 2013£'000 Year ended31st Dec. 2013£'000
Amortisation and impairment of acquisition-related intangible assets (2,020) (2,072) (3,971)
Acquisition and disposal costs (471) (249) (615)
(2,491) (2,321) (4,586)
Net assets
The total assets and liabilities of the four segments have not been disclosed
as there has been no material change in the amounts disclosed in the 2013
Annual Report and Accounts.
Capital additions and depreciation and amortisation
Six month30th June 2014 Six month30th June 2013 Year ended31st December 2013
Capitaladditions£'000 Depreciationandamortisation£'000 CapitalAdditions£'000 Depreciationandamortisation£'000 Capitaladditions£'000 Depreciationandamortisation£'000
Europe, Middle East & Africa 6,818 5,119 7,388 5,5510 10,532 11,859
Asia Pacific 7,144 2,385 3,152 2,646 6,602 4,707
Americas 2,351 3,035 3,593 2,956 6,770 5,912
Watson-Marlow 6,187 2,668 3,190 2,637 7,323 4,200
22,500 13,207 17,323 13,749 31,227 26,678
Capital additions include property, plant and equipment at 30th June 2014 of
£16,144,000; at 30th June 2013 of £13,716,000; and at 31st December 2013 of
£21,835,000; and other intangible assets at 30th June 2014 of £6,356,000; at
30th June 2013 of £3,607,000; and at 31st December 2013 of £9,392,000.
Depreciation and amortisation includes amortisation of acquisition-related
intangible assets.
Exchange rate impacts
Set out below are some additional disclosures (not required by IAS 34) that
further explain the strong currency headwind experienced in the first half of
2014. The first table highlights movements in a selection of average exchange
rates between half-year 2014 and half-year 2013. The subsequent tables
illustrate the transaction and translation exchange impacts.
Average exchange rates to sterling have been as follows:
Averagehalf-year 2014 Averagehalf-year 2013 Change%
Bank of England sterling index 86.4 80.8 -6%
US$ 1.67 1.55 -7%
Euro 1.22 1.18 -3%
RMB 10.33 9.58 -7%
Won 1,751 1,708 -2%
Real 3.84 3.18 -17%
Argentine Peso 13.07 7.94 -39%
Australian $ 1.83 1.54 -16%
Rouble 58.28 48.19 -17%
Rand 17.85 14.26 -20%
Turkish Lira 3.61 2.82 -22%
The table below captures the main exchange transaction impact on 2014 first
half-year operating profit, comparing 2014 half-year average exchange rates to
2013 half-year average exchange rates
UK£'m EMEA£'m Asia-Pac£'m Americas£'m Total£'m
Extent of currency exposure
Purchases from UK - 18.7 10.6 9.7 39.0
Purchases from EMEA 6.4 - 4.8 6.1 17.3
Purchases from Asia-Pac 4.1 0.0 - 0.1 4.2
Purchases from Americas 1.1 0.7 1.6 - 3.4
Total exchange transaction effect* 1.0 (1.1) (0.9) (1.4) (2.4)
2014 Revenue 29.3 123.9 81.0 85.0 319.2
Exchange transaction impact on half-year trading margin 3.4% -0.9% -1.1% -1.6% -0.8%
*The total exchange effect includes intra-segment effects, but they are
excluded from the currency exposure figures
The structure of the Group and actions taken to mitigate the effects of
exchange rate movements include:
The direct sales business model dictates that the Group operates directly in
many different currencies; however these direct sales costs are all in local
currencies providing a natural hedge against currency movements. The Group
follows a regional manufacturing strategy to maximise local service levels and
minimise cost. Regionalising manufacturing also provides a degree of hedge
against exchange rate movements. Forward currency contracts are used where
deemed appropriate to hedge the exposure to exchange rate movements on the
transfer of goods from the country of manufacture to the country of sale. In
some markets, volatile exchange rate movements can give rise to increased
price flexibility, giving some ability to mitigate the impact of increased
landed costs where there is a significant movement in exchange rates.
Purchases of materials in Asia and the pricing of some purchases in US
dollars, also provides an additional hedge against exchange rate movements.
The table below shows the exchange translation impact on 2014 first half-year
operating profit, comparing 2014 half-year average exchange rates to 2013
half-year average exchange rates
EMEA£'m Asia-Pac£'m Americas£'m Watson Marlow£'m Corp exp£'m Total£'m
2013 half-year at2013 half-year XR
Revenue 120.6 80.8 66.6 63.6 - 331.6
Operating Profit* 22.7 19.8 12.0 18.1 (4.5) 68.1
2013 half year at2014 half-year XR
Revenue 115.4 74.9 56.7 59.2 - 306.2
Operating Profit* 21.7 18.3 9.6 17.1 (4.5) 62.2
Change
Revenue (5.2) (5.9) (9.9) (4.4) (25.4)
Operating Profit* (1.0) (1.5) (2.4) (1.0) (5.9)
% Change
Revenue -4.3% -7.3% -14.9% -6.9% -7.6%
Operating Profit* -4.4% -7.6% -20.0% -5.5% -8.7%
*This measure uses adjusted operating profit
3. NET FINANCING EXPENSE
Six monthsto 30th June2014£'000 Six monthsto 30th June2013£'000 Year ended31st December2013£'000
Financial expenses
Bank and other borrowing interest payable (1,120) (600) (1,551)
Net interest on pension scheme liabilities (1,398) (1,332) (2,717)
(2,518) (1,932) (4,268)
Financial income
Bank interest receivable 976 873 1,968
Net financing expense (1,542) (1,059) (2,300)
Net pension scheme financial expense (1,398) (1,332) (2,717)
Net bank interest (144) 273 417
Net financing expense (1,542) (1,059) (2,300)
(1,542)
(1,059)
(2,300)
4. TAXATION
Taxation has been estimated at the rate expected to be incurred in the full
year
Six monthsto 30th June2014£'000 Six monthsto 30th June2013£'000 Year ended31st December 2013£'000
United Kingdom corporation tax 67 417 136
Overseas taxation 18,923 18,372 39,180
Deferred taxation 150 362 4,078
19,140 19,151 43,394
19,140
19,151
43,394
5. EARNINGS PER SHARE
Six monthsto 30th June2014£'000 Six monthsto 30th June2013£'000 Year ended31st December2013£'000
Profit attributable to equity holders of the parent 44,269 46,320 102,104
Weighted average shares in issue 75,452,395 77,730,771 76,566,689
Dilution 393,906 556,289 549,341
Diluted weighted average shares in issue 75,846,301 78,287,060 77,116,030
Basic earnings per share 58.7p 59.6p 133.4p
Diluted earnings per share 58.4p 59.2p 132.4p
Adjusted profit attributable to equity holders of the parent 46,532 48,184 106,298
Basic adjusted earnings per share 61.7p 62.0p 138.8p
Diluted adjusted earnings per share 61.4p 61.5p 137.8p
61.5p
137.8p
The dilution is in respect of unexercised share options and the performance
share plan.
6. DIVIDENDS
Six monthsto 30th June2014£'000 Six monthsto 30th June2013£'000 Year ended31st December2013£'000
Amounts paid in the period
Final dividend for the year ended 31st December 2013 of 41.0p (2012 : 37.0p) per share 30,960 28,942 28,942
Special dividend for the year ended 31st December 2013 of nil per share (2012 : 100.0p) - - 78,260
Interim dividend for the year ended 31st December 2013 of 18.0p per share (2012 : 16.0p) - - 13,590
30,960 28,942 120,792
Amounts arising in respect of the period
Interim dividend for the year ended 31st December 2014 of 19.5p (2013: 18.0p) per share 14,733 13,568 13,590
Final dividend for the year ended 31st December 2013 of 41.0p (2012 : 37.0p) per share - - 30,903
14,733 13,568 44,493
13,568
44,493
No scrip alternative to the cash dividend is being offered in respect of the
2014 interim dividend.
7. POST-RETIREMENT BENEFITS
Pension plans
The Group is accounting for pension costs in accordance with International
Accounting Standard 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 2013 is
included in the Group's Annual Report.
The amounts recognised in the balance sheet are as follows:
Total
30th June2014£'000 30th June 2013£'000 31st December2013£'000
Post-retirement benefits (64,889) (64,313) (72,043)
Deferred tax 16,905 17,738 17,993
Net pension liability (47,984) (46,575) (54,050)
8. ANALYSIS OF CHANGES IN NET CASH/(DEBT)
At1st Jan 2014£'000 Cash flow £'000 Exchangemovement£'000 At30th June 2014 £'000
Current portion of long-term borrowings (298) (298)
Non-current portion of long-term borrowings (59,473) (73,341)
Short-term borrowing (39,338) (34,628)
Total borrowings (99,109) (108,267)
Comprising:
Borrowings (98,041) (9,297) 43 (107,295)
Finance leases (1,068) 96 - (972)
(99,109) (9,201) 43 (108,267)
Cash and cash equivalents 84,417 (42) (5,057) 79,318
Bank overdrafts (1,809) (1,870) (4) (3,683)
Net cash and cash equivalents 82,608 (1,912) (5,061) 75,635
Bank deposits 32,901 - (1,798) 31,103
Net cash/(Debt) 16,400 (11,113) (6,816) (1,529)
9. CAPITAL EMPLOYED
The Board uses certain non-GAAP measures to help it effectively monitor the
performance of the Group. Capital employed is a key measure.
30th June2014£'000 30th June2013£'000 31st December2013£'000
Property, plant and equipment 177,116 182,902 174,218
Prepayments (non-current) 180 48 162
Inventories 111,306 109,898 104,164
Trade receivables 132,596 143,622 145,380
Other current assets 21,153 23,775 19,880
Tax recoverable 4,027 2,346 3,709
Trade and other payables (80,443) (88,670) (86,108)
Current tax payable (11,184) (12,692) (16,927)
354,751 361,229 344,478
344,478
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 2013. 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 2014 that
have materially affected the financial position or the performance of the
Group during that period.
11. ACQUISITIONS
Acquisitions
Bookvalue£'000 FVadj£'000 Fairvalue£'000
Fixed assets
Property, plant and equipment 829 - 829
Intangibles - 4,395 4,395
829 4,395 5,224
Current assets
Inventories 283 - 283
Trade receivables 517 - 517
Cash 1,008 - 1,008
Total assets 2,637 4,395 7,032
Current liabilities
Trade payables 439 - 439
Deferred tax - 739 739
Total liabilities 439 739 1,178
Total net assets 2,198 3,656 5,854
Goodwill - - 4,301
Total - - 10,155
Satisfied by Cash paid 9,355
Deferred consideration 800
10,155
Cash outflow for acquired businesses in the Cash Flow statements:
Cash paid for businesses acquired in the period 9,355
Less cash acquired (1,008)
Deferred consideration for businesses acquired in prior years 740
Purchase consideration 9,087
9,087
1. The acquisition of Bio Pure Technology Limited, a company specialising
in the design and production of advanced single-use tubing connector systems
for the Biopharmaceutical process industry based in the UK was completed on
6th January 2014. The acquisition method of accounting has been used.
Consideration of £9,255,000 was paid on completion. Separately identified
intangibles are recorded as part of the fair value adjustment. The goodwill
recognised represents the skilled workforce acquired and the synergies that
can be achieved by being part of the Spirax Group. 100% of voting rights were
acquired. Goodwill arising is not expected to be tax deductible. Bio Pure
Technology Limited has generated £2,523,000 of revenue and £877,000 of pre-tax
profit since acquisition.
2. The acquisition of the UK Transvac thermocompressor business was
completed on 22nd May 2014. The acquisition method of accounting has been
used. Consideration of £100,000 was paid on completion with a further
£800,000 being payable by the end of May 2015. This payment is dependent upon
the delivery of the assets, designs and training. Therefore the anticipated
payment is £800,000. Separately identified intangibles are recorded as part
of the fair value adjustment. The goodwill recognised represents the
opportunity to sell a wider range of products to our existing customer base to
fully utilise the Group's applications expertise to expand sales. Goodwill
arising is expected to be tax deductible.
£107,000 of acquisition costs were incurred in relation to these acquisitions.
The values above are provisional. The acquired intangibles relate to
customer relationships, technology based assets and marketing based assets.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
There is no significant difference between the book value and fair value of
the Group's financial assets and liabilities. 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 2014 the Group had contracts outstanding to
purchase £1,274,000 with Singapore Dollars and £60,000 with YEN. The fair
values at the end of the reporting period were £1,339,000 (31th December 2013
£1,887,000). The fair value of derivative financial instruments falls into
the level 2 category of the fair value hierarchy in accordance with IFRS7.
This information is provided by RNS
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