REG - Spirax-Sarco Engng - Final Results 2015 <Origin Href="QuoteRef">SPX.L</Origin> - Part 2
03/03/2016 07:11
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significant flexibility. We have been active in 2015 and made five
small acquisitions at a total cost of £25 million that each fulfil one or more
of our three broad acquisition categories;
· geographic expansion, typically through the acquisition of a distributor
in a developing market;
· products that can be integrated into our existing businesses; and,
· related acquisitions that fit alongside our existing steam specialties
and Watson-Marlow businesses.
On 9th April 2015, we announced the acquisition of Asepco Corporation for £7.2
million. Asepco is a manufacturer of high purity aseptic valves and magnetic
mixers for the Biopharmaceutical industry and advances Watson-Marlow's fluid
path strategy in the important Biopharmaceutical sector. The business is
being integrated into the WMFTG business and has performed ahead of
expectations since acquisition.
Valve and Control Engineering Limited (VCE) was acquired on 14th April 2015
for £0.8 million and was successfully integrated into our steam specialties
sales business in the UK. Operating in Scotland, the business manages
customers' annual boiler inspections and recertifications, opening up a
potentially interesting new stream of service opportunity.
On 5th July 2015, we announced the acquisition of the MasoSine manufacturing
and distribution business from PRIMIX Corporation in Japan for £2.8 million.
The acquisition adds new products, enables Watson-Marlow to initiate direct
sales in this important market and provides a platform for future expansion in
this under-developed market for Watson-Marlow. The business performed well in
its first months within the Group.
On 25th September 2015, we acquired the distribution rights of the steam
specialties business from Casaval S.A., in Colombia for £6.6 million and a
further £1.9m was paid for inventory. Direct sales operations throughout
Colombia have been initiated. This geographic expansion of the steam
specialties business also provides a hub for further developments in northern
Latin America.
On 26th November 2015, we announced the acquisition of Flow Smart Inc. for
£5.7 million from the founding shareholder and partners. Flow Smart
specialises in the design and manufacture of high purity sanitary gaskets,
braided silicone transfer tubing and reinforced silicone hoses for the
bioprocessing and pharmaceutical industries. This is a further extension of
the WMFTG fluid path strategy and is being integrated into Watson-Marlow's
business.
As previously reported, on 1st March 2015, we sold our 49.3% holding in Spirax
Marshall, an Associate company, in India for £6.6 million. We subsequently
established a wholly owned sales and manufacturing company in Chennai, India
that commenced trading on 1st July 2015 on a direct sales basis through our
new team of sales and service engineers. The new purpose built manufacturing
plant, warehouse, training centre and offices, representing an investment of
over £12 million, will be completed in April 2016.
Also as previously reported, on 3rd August 2015, we disposed of M&M
International Srl to Rotork plc for £6.7 million. This solenoid and piston
valve company lacked strategic fit with the steam specialties business.
Acquisitions in recent prior years have performed well, in particular BioPure
Technology has achieved significant sales and profit growth following its
successful integration into the Watson-Marlow Fluid Technology Group.
Research and development
The development of innovative new products, and getting those products to
market faster and sold more effectively, is an important element of our
strategy for growth. In our steam specialties business, the focus remains
centred on developments in controls, energy monitoring and management, and
thermal energy management. The development cycle is increasingly aligned with
the priorities of our sales teams and larger application specific
opportunities. We have been successful in securing major funding for a number
of innovation developments through Innovate UK and European Horizon 2020
initiatives, including demonstrating a trilateral flash cycle for converting
low temperature waste streams into valuable electricity, hollow micro-fibre
heat exchangers and microwave-based sensors for steam applications.
In our Watson-Marlow niche peristaltic pump and associated fluid path
technologies business, the drive is for truly innovative products that target
attractive market opportunities and expand our addressable market by taking
market share from other positive displacement pump types. Developments are
being progressed across the product range, including tube and hose
developments.
Overall the Group's total investment in research and development was £9.9
million (2014: £9.6 million).
Capital employed
Capital employed 2015 2014
£'000 £'000
Property, plant and equipment 169,948 176,668
Inventories 92,502 98,007
Trade receivables 152,082 155,696
Prepayment and other current assets/(liabilities) (70,056) (84,134)
Capital employed 344,476 346,237
Intangibles and investment in Associate 108,918 101,959
Post-retirement benefits (73,654) (75,779)
Deferred tax 15,306 18,529
Provisions and long-term payables (1,554) (1,561)
Net cash 4,823 52,493
Net assets 398,315 441,878
Adjusted operating profit 152,437 152,950
Average capital employed 345,357 345,358
Return on capital employed 44.1% 44.3%
Total capital employed was virtually unchanged at £344 million. At constant
exchange rates the increase was 3%.
Tangible fixed assets reduced by 1% at constant currency to £170 million due
to net disposals during the year. Significant capital expenditure projects
included the new plant at Chennai in India and the extension of our plant in
Shanghai, China, where work commenced late in 2015 and is scheduled for
completion in early 2017. Watson-Marlow reached significant milestones, with
multiple implementations of a global ERP solution and now 70% of business is
being transacted through the new system. In the steam specialties UK plant in
Cheltenham, a new clean unit to manufacture products for the Pharmaceutical
and other clean industries to exacting standards is now operational. We
generate significant cash flow and our first priority is to reinvest in the
business, taking opportunities to generate good returns from increased
efficiency, reduced costs and flexibility. The combined heat and power plant
in Cheltenham, saving up to £1,000 per day in energy costs from early 2015,
contributed significantly to a reduction in our CO2e emissions in 2015.
Total working capital increased by 8% at constant currency to £175 million.
Trade receivables were 2% higher, with a repeat of the high level of project
work shipped in the final two months of the year, particularly in Asia
Pacific. Inventory levels were flat at constant currency as we continued to
embed improved stock management techniques, optimising stock levels and
improving customer service in support of sales growth. Creditors were lower
and prepayments increased, related to leasehold property in China. The ratio
of working capital to sales increased to 26.2% (2014: 25.0%) due mainly to the
reduction in payables and the increase in prepayments.
Return on capital employed (ROCE)
This is one of our most important key performance indicators and forms a
meaningful element of Executive Directors' annual bonuses. ROCE encompasses
effective management of fixed assets and working capital, and profitability of
the business. ROCE edged lower to 44.1% (2014: 44.3%) due to a 90 bps impact
from the start-up of our new operation in India. Underlying ROCE improved by
70 bps reflecting our close control of the various components of capital
employed and improvement in the operating profit margin.
Post-retirement benefits
The net post-retirement benefit liability under IAS19 was slightly lower at
£73.7 million (2014: £75.8 million). The overall defined benefit obligation
for all schemes in the Group reduced by 2%. This reflected small actuarial
gains from changes in demographic assumptions and changes in financial
assumptions, the latter essentially due to a slight increase in discount
rates, which is driven by movements in AA Corporate Bond yields, as mandated
under IAS19. The value of assets held by the Group's various defined benefit
pension arrangements (89% of which are held in the main UK defined benefit
pension schemes) declined by 1%, reflecting returns on assets below the scheme
assumptions. The main UK schemes were closed to new members in 2001 but have
remained open to future service accrual. These schemes continue to be managed
under a dynamic de-risking strategy whereby asset and liability values are
monitored on a daily basis by the asset manager and appropriate asset
allocation decisions taken as the funding level improves against pre-agreed
trigger points.
The last actuarial valuation of the UK schemes, as at 31st December 2013, was
completed in September 2014 and showed those schemes to be broadly in balance.
As a consequence, deficit reduction cash contributions by the Company ceased
with effect from October 2014.
Cash flow and treasury
Cash generation in 2015 was very strong, driven by conversion of operating
profit into cash, whilst continuing to invest in capital expenditure projects
that generate good returns from improvements in efficiency and cost reduction,
and in support of sales growth.
Adjusted cash flow 2015£'000 2014£'000
Operating profit 152,437 152,950
Depreciation and amortisation 22,156 22,703
Equity settled share plans 3,330 2,374
Working capital changes (1,574) (14,523)
Net capital expenditure (including capitalised R&D) (30,864) (31,331)
Cash from operations 145,485 132,173
Net interest 819 (53)
Tax paid (43,304) (41,915)
Free cash flow 103,000 90,205
Net dividends paid (140,484) (45,109)
Provisions and pension deficit reduction payments 673 (4,870)
Proceeds from issue of shares 4,706 2,218
Acquisitions and disposals (10,230) (9,984)
Adjustments (acquisition and disposal costs and EMCO closure costs paid) (2,056) (759)
Cash flow for the year (44,391) 31,701
Exchange movements (3,279) 4,392
Opening net cash 52,493 16,400
Net cash at 31st December 4,823 52,493
Cash from operations increased to £145.5 million (2014: £132.2 million)
representing a 95% cash conversion. This good improvement reflects a small
working capital outflow of £1.6 million versus an outflow of £14.5 million in
2014. Capital expenditure was £30.9 million (2014: £31.3 million) and we
would expect capital expenditure in the current year to increase to around £35
million as we complete the new plant in India and progress the major expansion
of our plant in China. Improvements to our end-to-end supply chain are an
important element of our strategy and are aimed at under-pinning future
continued strong cash generation.
Taxation paid was £43.3 million (2014: £41.9 million) reflecting larger
withholding taxes on an increased flow of dividends from subsidiary companies
outside the UK. Tax paid was broadly in line with the tax charge in the
profit & loss account and included tax paid in virtually every one of the 43
countries in which the Group has operating units. Free cash flow rose to
£103.0 million (2014: £90.2 million), providing funds for dividends to
shareholders and acquisitions.
Dividend payments were £140.5 million (2014: £45.1 million) and reflect
payment of the increased Ordinary dividend together with the special dividend
of £91.0 million paid in July 2015. Provisions movements and pension deficit
reduction cash contributions show a marked improvement versus the prior year
due to the cessation of pension deficit contributions to the main UK schemes
following the triennial actuarial valuations completed in September 2014.
There was a net cash outflow of £10.2 million for acquisitions and disposals,
comprising a cash cost of £23.6 million, net of an inflow of £13.3 million in
respect of the two disposals. Shares issued under the Group's various
employee share schemes gave a cash inflow of £4.7 million (2014: £2.2
million).
The good free cash flow generated for the year, together with the opening net
cash balance of £52.5 million, was therefore utilised to fund the special
dividend and acquisitions, resulting in a closing net cash balance of £4.8
million at 31st December 2015.
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 RMB 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 earns a high return on capital,
which is reflected in strong cash generation over time. Our first priority is
to maximise investment in the business to generate further good returns in the
future, aligned with our strategy for growth and targeting improvement in our
key performance indicators. We also prioritise finding suitable acquisitions
that can expand our addressable market through increasing our geographic
reach, deepening our market penetration and broadening our product range.
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, as evidenced by the cash return of £91.0 million via the special
dividend of 120p per share that was paid in July 2015.
Spirax-Sarco Engineering plc
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31ST DECEMBER 2015
Note 2015£'000 2014£'000
ASSETS
Non-current assets
Property, plant and equipment 169,948 176,668
Goodwill 54,082 47,682
Other intangible assets 54,772 48,123
Prepayments 5,516 402
Investment in Associate 64 377
Deferred tax assets 33,047 35,941
317,429 309,193
Current assets
Inventories 92,502 98,007
Trade receivables 152,082 155,696
Other current assets 20,431 23,973
Taxation recoverable 9,394 4,420
Associate held for sale - 5,777
Bank deposits - 24,437
Cash and cash equivalents 99,835 117,981
374,244 430,291
Total assets 691,673 739,484
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables 84,347 90,754
Bank overdrafts 3,911 461
Short-term borrowing 10,130 40,070
Current portion of long-term borrowings 298 298
Current tax payable 21,050 22,175
119,736 153,758
Net current assets 254,508 276,533
Non-current liabilities
Long-term borrowings 80,673 49,096
Deferred tax liabilities 17,741 17,412
Post-retirement benefits 73,654 75,779
Provisions 1,229 556
Long-term payables 325 1,005
173,622 143,848
Total liabilities 293,358 297,606
Net assets 2 398,315 441,878
Equity
Share capital 19,718 19,622
Share premium account 69,703 65,067
Other reserves (18,756) (6,486)
Retained earnings 326,799 362,796
Equity shareholders' funds 397,464 440,999
Non-controlling interest 851 879
Total equity 398,315 441,878
Total equity and liabilities 691,673 739,484
398,315
441,878
Total equity and liabilities
691,673
739,484
Spirax-Sarco Engineering plc
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31ST DECEMBER 2015
Note Adjusted2015£'000 Adj't2015£'000 Total 2015£'000 Adjusted2014£'000 Adj't2014£'000 Total2014£'000
Revenue 2 667,214 - 667,214 678,277 - 678,277
Operating costs (514,777) (9,628) (524,405) (525,327) (4,855) (530,182)
Operating profit 2 152,437 (9,628) 142,809 152,950 (4,855) 148,095
Financial expenses (3,624) - (3,624) (5,229) - (5,229)
Financial income 2,140 - 2,140 2,246 - 2,246
3 (1,484) - (1,484) (2,983) - (2,983)
Share of profit of Associates 177 (1,845) (1,668) 1,151 (1,469) (318)
Profit before taxation 151,130 (11,473) 139,657 151,118 (6,324) 144,794
Taxation 4 (44,983) 2,069 (42,914) (44,857) 636 (44,221)
Profit for the period 106,147 (9,404) 96,743 106,261 (5,688) 100,573
Attributable to:
Equity shareholders 105,960 (9,404) 96,556 106,015 (5,688) 100,327
Non-controlling interest 187 - 187 246 246
Profit for the period 106,147 (9,404) 96,743 106,261 (5,688) 100,573
Earnings per share 5
Basic earnings per share 142.6p 129.9p 140.4p 132.8p
Diluted earnings per share 141.9p 129.4p 139.5p 132.0p
Dividends 6
Dividends per share 69.0p 64.5p
Special dividend per share - 120.0p
Dividends paid during the year (per share) 185.8p 60.5p
Adjusted figures exclude certain non-operational items, as set out and
explained in the Financial Review and as detailed in note 2
Spirax-Sarco Engineering plc
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED
31ST DECEMBER 2015
The Group
2015£'000 2014£'000
Profit for the year 96,743 100,573
Items that will not be reclassified to profit or loss
Remeasurement gain/(loss) on post-retirement benefits 5,717 (5,159)
Deferred tax on remeasurement gain/(loss) on post-retirement benefits (657) (258)
5,060 (5,417)
Items that may be reclassified subsequently to profit or loss
Foreign exchange translation differences (14,129) (15,155)
Non-controlling interest foreign exchange translation differences - 22
Loss on cash flow hedges net of tax (13) (232)
(14,142) (15,365)
Total comprehensive income for the year 87,661 79,791
Attributable to:
Equity shareholders 87,474 79,523
Non-controlling interest 187 268
Total comprehensive income for the year 87,661 79,791
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31ST DECEMBER
2015
GROUP
ShareCapital £'000 SharePremiumaccount £'000 Otherreserves £'000 RetainedEarnings £'000 Equity shareholders' funds £'000 Non-controlling interest £'000 TotalEquity £'000
Balance at 1st January 2015 19,622 65,067 (6,486) 362,796 440,999 879 441,878
Profit for the year - - - 96,556 96,556 187 96,743
Other comprehensive (expense)/income
Foreign exchange translation differences - - (14,129) - (14,129) - (14,129)
Remeasurement gain on post-retirement benefits - - - 5,717 5,717 - 5,717
Deferred tax on remeasurement gain on post-retirement benefits - - - (657) (657) - (657)
Loss on cash flow hedges reserve - - (13) - (13) - (13)
Total other comprehensive (expense) for the year - - (14,142) 5,060 (9,082) - (9,082)
Total comprehensive income for the year - - (14,142) 101,616 87,474 187 87,661
Contributions by and distributions to owners of the Company
Dividends paid - - - (140,269) (140,269) (215) (140,484)
Equity settled share plans net of tax - - - 2,656 2,656 - 2,656
Issue of share capital 81 4,636 - - 4,717 - 4,717
Employee Benefit Trust shares 15 - 1,872 - 1,887 - 1,887
Balance at 31st December 2015 19,718 69,703 (18,756) 326,799 397,464 851 398,315
Other reserves represent the Group's Translation, Cash flow hedge and Capital
redemption reserves.
The non-controlling interest is a 2.5% share of Spirax-Sarco (Korea) Ltd held
by employee shareholders.
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)
Loss on cash flow hedges reserve - - (232) - (232) - (232)
Total other comprehensive (expense)/income for the year - - (15,387) (5,417) (20,804) 22 (20,782)
Total comprehensive (expense)/income for the year - - (15,387) 94,910 79,523 268 79,791
Contributions by and distributions to owners of the Company
Dividends paid - - - (45,715) (45,715) (190) (45,905)
Equity settled share plans net of tax - - - 1,864 1,864 - 1,864
Issue of share capital 110 5,113 - - 5,223 - 5,223
Employee Benefit Trust shares (56) (2,573) - (2,629) - (2,629)
Balance at 31st December 2014 19,622 65,067 (6,486) 362,796 440,999 879 441,878
Spirax-Sarco Engineering plc
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31ST DECEMBER 2015
Note 2015£'000 2014£'000
Cash flows from operating activities
Profit before taxation 139,657 144,794
Depreciation, amortisation and impairment 29,298 27,272
Profit on disposal of fixed assets (452) (473)
Sale of businesses 1,965 318
Equity settled share plans 3,330 2,374
Net finance expense 1,484 2,983
Operating cash flow before changes in working capital and provisions 175,282 177,268
Change in trade and other receivables (1,889) (20,032)
Change in inventories 3,500 1,111
Change in provisions and post-retirement benefits 673 (4,870)
Change in trade and other payables (2,600) 4,398
Cash generated from operations 174,966 157,875
Interest paid (1,321) (2,299)
Income taxes paid (43,304) (41,915)
Net cash from operating activities 130,341 113,661
Cash flows from investing activities
Purchase of property, plant and equipment (26,010) (27,032)
Proceeds from sale of property, plant and equipment 2,334 2,980
Sale of businesses 13,329 -
Purchase of software and other intangibles (4,813) (4,647)
Development expenditure capitalised (2,375) (2,632)
Acquisition of businesses (23,559) (9,984)
Bank deposits 24,293 9,038
Interest received 2,140 2,246
Dividends received - 796
Net cash used in investing activities (14,661) (29,235)
Cash flows from financing activities
Proceeds from issue of share capital 4,706 5,223
Purchase of Employee Benefit Trust shares - (3,005)
Repaid borrowings (79,481) (8,995)
New borrowings 81,305 -
Change in finance lease liabilities 7 (377) (241)
Dividends paid (including minorities) (140,484) (45,905)
Net cash used in financing activities (134,331) (52,923)
Net change in cash and cash equivalents 7 (18,651) 31,503
Net cash and cash equivalents at beginning of period 117,520 82,608
Exchange movement (2,945) 3,409
Net cash and cash equivalents at end of period 7 95,924 117,520
Bank deposits - 24,437
Borrowings and finance leases (91,101) (89,464)
Net cash at end of period 7 4,823 52,493
4,823
52,493
1.NOTES TO THE ACCOUNTS
This announcement is based on the Company's financial statements, which are
prepared in accordance with International Financial Reporting Standards (IFRS)
adopted for use in the European Union (EU) and therefore comply with Article 4
of the EU IAS legislation and with those parts of the Companies Act 2006 that
are applicable to companies reporting under IFRS.
With the exception of the new standards adopted in the year, as discussed
below, there have been no significant changes in accounting policies from
those set out in the Spirax-Sarco Engineering plc 2014 Annual Report. The
accounting policies have been applied consistently throughout the years ended
31 December 2014 and 31 December 2015.
In the current year the group has applied a number of amendments to IFRSs
issued by the International Accounting Standards Board (IASB). Their adoption
has not had a material impact on the disclosures or on the amounts reported in
these financial statements. The following amendments were applied:
· IAS 19 Defined Benefit Plans in relation to employee contributions;
· Annual improvements to IFRSs 2010-2012 Cycle including the amendments
too existing requirements for IFRS 8 Operating Segments and IAS 24 Related
Party Disclosures;
· The clarifications amended under the Annual improvements to IFRSs
2011-2013 Cycle.
Having made appropriate enquiries, the Directors consider that the Group has
adequate resources to continue in operational existence for the foreseeable
future and that therefore it is appropriate to adopt the going concern basis
in preparing the Annual Report.
The Group has processes in place to identify, evaluate and mitigate the
principal risks that could have an impact on the Group's performance. The
principal risks together with a description of why they are relevant are set
out below. Details of how they link with the Group's strategy and how
mitigation is managed are included in the Group's 2014 Annual Report on page
29 and they will be disclosed in the 2015 Annual Report on page 33.
· Economic and political instability
Economic and political instability creates risks for our locally based direct
operations, including the impact of regime changes
· Significant exchange rate movements
The Group reports its results and pays dividends in sterling. Operating and
manufacturing companies trade in local currency
· Loss of manufacturing output at any Group factory
Loss of manufacturing output at any important plant risks serious disruption
to sales operations
· Defined benefit pension deficit
Defined benefit pension schemes carry risks in relation to investment
performance, security of assets, longevity and inflation.
· Breach of legal and regulatory requirements
The Group is subject to many different laws and regulations. Breaching these
laws and regulations could have serious consequences.
· Non-compliance with health, safety and environmental legislation
A major health and safety incident could cause total or partial closure of a
manufacturing facility
· Product specification failure
Failure to meet customers' specific technical requirements could result in
disruption and potential loss to an end users' plant or facility
The 2015 financial statements were approved by the Board of Directors and
authorised for issue on 2nd March 2016.
2.SEGMENTAL REPORTING
Analysis by location of operation
2015
GrossRevenue £'000 Inter-Segmentrevenue£'000 Revenue £'000 TotalOperatingProfit£'000 AdjustedOperatingProfit£'000 AdjustedOperatingMargin%
Europe, Middle East & Africa 253,655 34,215 219,440 41,427 42,694 19.5%
Asia Pacific 176,262 4,488 171,774 44,197 44,703 26.0%
Americas 128,934 5,531 123,403 21,590 27,112 22.0%
Steam specialties business 558,851 44,234 514,617 107,214 114,509 22.3%
Watson-Marlow 152,606 9 152,597 45,623 47,956 31.4%
Corporate Expenses (10,028) (10,028)
711,457 44,243 667,214 142,809 152,437 22.8%
Intra Group (44,243) (44,243)
Total 667,214 - 667,214 142,809 152,437 22.8%
Net finance expense (1,484) (1,484)
Share of profit of Associates (1,668) 177
Profit before tax 139,657 151,130
2014
GrossRevenue £'000 Inter-Segmentrevenue£'000 Revenue £'000 TotalOperatingProfit£'000 AdjustedOperatingProfit£'000 AdjustedOperatingMargin%
Europe, Middle East & Africa 274,271 38,039 236,232 44,855 45,929 19.4%
Asia Pacific 182,556 4,894 177,662 46,191 46,418 26.1%
Americas 131,869 5,681 126,188 26,478 27,961 22.2%
Steam specialties business 588,696 48,614 540,082 117,524 120,308 22.3%
Watson-Marlow 138,195 - 138,195 41,428 43,499 31.5%
Corporate Expenses (10,857) (10,857)
726,891 48,614 678,277 148,095 152,950 22.5%
Intra Group (48,614) (48,614)
Total 678,277 - 678,277 148,095 152,950 22.5%
Net finance expense (2,983) (2,983)
Share of profit of Associates (318) 1,151
Profit before tax 144,794 151,118
Net revenue generated by Group companies based in the USA is £125,293,000
(2014: £109,879,000), in China is £78,649,000 (2014: £74,266,000) in the UK is
£66,479,000 (2014: £69,889,000), and the rest of the world is £396,793,000
(2014: £424,243,000)
The total operating profit for each period includes the non-operational items
analysed below:
2015
Amortisationof acquisition-related intangible assets Loss on closure of USA metering unit Profit on disposal of M&M less recycled exchange losses Acquisition and disposal costs Total
£'000 £'000 £'000 £'000 £'000
Europe, Middle East & Africa (613) - (297) (357) (1,267)
Asia Pacific (506) - - - (506)
Americas (1,646) (3,814) - (62) (5,522)
Steam specialties business (2,765) (3,814) (297) (419) (7,295)
Watson-Marlow (1,921) - - (412) (2,333)
Total non-operational items (4,686) (3,814) (297) (831) (9,628)
2014
Amortisationof acquisition-related intangibleassets Acquisition and disposal costs Total
£'000 £'000 £'000
Europe, Middle East & Africa (427) (647) (1,074)
Asia Pacific (227) - (227)
Americas (1,430) (53) (1,483)
Steam Specialties business (2,084) (700) (2,784)
Watson-Marlow (2,012) (59) (2,071)
Total non-operational items (4,096) (759) (4,855)
Share of profit of Associates
The share of profit of associates analysed between adjusted income and total
(including non-operational items) is as follows:
2015Adjusted£'000 2015Total£'000 2014Adjusted £'000 2014Total£'000
Europe, Middle East & Africa (116) (313) (172) (367)
Asia Pacific 293 (1,355) 1,323 49
Americas - - - -
Steam specialties business 177 (1,668) 1,151 (318)
Watson-Marlow - - - -
Total share of profit of Associates 177 (1,668) 1,151 (318)
Adjusted share of profit of associates excludes amortisation and impairment of
acquisition-related intangible assets of £197,000 (2014: £1,125,000) and in
2015 excludes recycled exchange losses and a final adjustment to the date of
sale to the impairment of tangible assets in respect of Spirax Marshall in
India of £1,648,000 (2014: £344,000).
Net financing income and expense
2015£'000 2014£'000
Europe, Middle East & Africa (1,403) (2,310)
Asia Pacific 1,053 1,215
Americas (188) (326)
Steam specialties business (538) (1,421)
Watson-Marlow (6) (5)
Corporate (940) (1,557)
Total net financing expense (1,484) (2,983)
Net assets
2015 2014
Assets£'000 Liabilities£'000 Assets£'000 Liabilities£'000
Europe, Middle East & Africa 182,839 (91,248) 203,729 (94,959)
Asia Pacific 140,320 (30,401) 136,592 (22,831)
Americas 102,383 (23,955) 103,318 (33,244)
Watson-Marlow 123,855 (13,951) 113,066 (17,060)
549,397 (159,555) 556,705 (168,094)
Liabilities (159,555) (168,094)
Deferred Tax 15,306 18,529
Current Tax payable (11,656) (17,755)
Net Cash 4,823 52,493
Net assets 398,315 441,878
Non-current assets in the UK were £98,170,000 (2014: £102,889,000)
Capital additions and depreciation and amortisation
2015 2014
Capitaladditions £'000 Depreciation and amortisation£'000 Capitaladditions £'000 Depreciation and amortisation£'000
Europe, Middle East & Africa 12,970 11,114 15,301 10,476
Asia Pacific 11,031 5,480 8,657 5,144
Americas 10,396 4,959 4,159 5,335
Watson-Marlow 11,868 7,293 11,271 5,844
46,265 28,846 39,388 26,799
Capital additions include property, plant and equipment of £26,291,000 (2014:
£26,876,000) and other intangible assets of £19,974,000 (2014: £12,512,000) of
which £12,786,000 (2014: £5,233,000) relates to acquired intangibles from
acquisitions in the period. Capital additions split between the UK and rest
of the world are UK £11,573,000 (2014: £20,902,000), rest of the world
£34,692,000 (2014: £18,486,000). Depreciation and amortisation includes the
profit on disposal of fixed assets of £452,000 (2014: £473,000)
3.NET FINANCING INCOME AND EXPENSE
2015£'000 2014£'000
Financial expenses
Bank and other borrowing interest payable (1,293) (2,310)
Interest on pension scheme liabilities (2,331) (2,919)
(3,624) (5,229)
Financial income
Bank interest receivable 2,140 2,246
2,140 2,246
Net financing expense (1,484) (2,983)
Net pension scheme financial expense (2,331) (2,919)
Net bank interest 847 (64)
Net financing expense (1,484) (2,983)
(2,983)
4.TAXATION
2015£'000 2014£'000
Analysis of charge in period
UK corporation tax
Current tax on income for the period 1,989 2,440
Adjustments in respect of prior periods (697) 945
1,292 3,385
Double taxation relief (436) (851)
856 2,534
Foreign tax
Current tax on income for the period 44,233 42,233
Adjustments in respect of prior periods (661) 247
43,572 42,480
Total current tax charge 44,428 45,014
Deferred tax - UK 1,059 (179)
Deferred tax - Foreign (2,573) (614)
Tax on profit on ordinary activities 42,914 44,221
Effective tax rate 30.4% 30.5%
42,914
44,221
Effective tax rate
30.4%
30.5%
The Group's tax charge in future years is likely to be affected by the
proportion of profits arising and the effective tax rates in the various
territories in which the Group operates.
The UK corporation tax charge is calculated after deducting tax allowable
deficit reduction cash contributions to the UK post-retirement benefit schemes
of £nil (2014: £3,366,000) covering all employees in the UK defined benefit
schemes.
5.EARNINGS PER SHARE
2015 2014
Profit attributable to equity shareholders (£'000) 96,556 100,327
Weighted average shares in issue 74,311,728 75,532,018
Dilution 334,712 455,530
Diluted weighted average shares in issue 74,646,440 75,987,548
Basic earnings per share 129.9p 132.8p
Diluted earnings per share 129.4p 132.0p
Adjusted profit attributable to equity shareholders (£'000) 105,960 106,015
Basic adjusted earnings per share 142.6p 140.4p
Diluted adjusted earnings per share 141.9p 139.5p
The dilution is in respect of unexercised share options and the Performance
Share Plan.
6.DIVIDENDS
2015£'000 2014£'000
Amounts paid in the year
Final dividend for the year ended 31st December 2014 of 45.0p (2013: 41.0p) per share 34,089 30,960
Special dividend for the year ended 31st December 2014 of 120.0p (2013: nil) per share 90,951 -
Interim dividend for the year ended 31st December 2015 of 20.8p (2014: 19.5p) per share 15,229 14,755
140,269 45,715
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