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Spirax-Sarco Engineering plc 2006 Interim Results 30 th June 2006

Spirax-Sarco Engineering plc 2006 Interim Results 30 th June 2006. 2006 Interim Results. Marcus Steel - Chief Executive David Meredith - Director - Finance. Overview of Interim 2006. 2006 2005 Change Revenue £185.9m £166.6m +12% Operating profit £28.2m £25.0m +13%

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Spirax-Sarco Engineering plc 2006 Interim Results 30 th June 2006

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  1. Spirax-Sarco Engineering plc 2006 Interim Results 30th June 2006

  2. 2006 Interim Results Marcus Steel - Chief Executive David Meredith - Director - Finance

  3. Overview of Interim 2006 2006 2005 Change Revenue £185.9m £166.6m +12% Operating profit £28.2m £25.0m +13% Margin 15.2% 15.0% Pre-tax profit £30.0m £26.0m +16% EPS 26.2p 23.0p +14% DPS 7.5p 6.8p +10% • Continuing good growth in Asia and North America • Noticeable improvement in Continental Europe • Margin growth despite higher material and energy costs and the Brazilian result • Pre-tax profit up 16% • Interim Dividend up 10% • Continuing bolt-on acquisitions

  4. Geographical Analysis of Sales UK & Republic of Ireland 11% North America 20% Rest of World 12% Continental Europe 37% Asia 20% Sales are by geographical location of the customer

  5. Sales Changes £m +/- % YOY Organic Sales +6% Acquisitions +2% Exchange +4% Sales Increase +12% Sales are by geographical location of the customer

  6. Operating Profit Changes £m +/-% YOY Operating profit +13% Operating margin H1 2006 15.2% Operating margin H1 2005 15.0%

  7. UK & Republic of Ireland 2006 2005 change change excl XR Sales to customers £20.5m £21.0m -3% -3% Sales by operation* £53.5m £51.8m +3% +3% Operating profit £5.7m £6.7m -15% -13% Margin 10.7% 13.0% • UK market remains subdued • Domestic sales declined 3% • Demand on factories increased from overseas • Higher material and energy costs, and investment in efficiency improvement for the longer term * Sales by operation comprise customer and intra-group sales

  8. Tate & Lyle Saves energy with Spirax Sarco Engineered System • EasiHeat steam to hot water packaged system installed in Manchester facility providing 5 tonnes of instantaneous hot water per hour • Increased capacity - can now meet peaks in demand for liquid sugar - previously restricted by plant design • Increased flexibility - within 20 minutes of start-up, there is enough hot water to begin processing the sugar • Reduced energy consumption • Expected payback in less than 12 months

  9. Continental Europe 2006 2005 change change excl XR Sales to customers £68.5m £62.4m +10% +9% Sales by operation*£85.2m £77.5m +10% +9% Operating profit £10.2m £8.6m +19% +18% Margin 11.9% 11.0% • Organic third party sales grew 2% • European markets mainly weak • Exchange boosted sales by 8% • Profit includes factory closure net charge of £1¼ million • Good profit growth helped by France & exchange • European economies generally improved • Good performance overall – sales up 10% • Strong results from the Czech Republic, Germany, Russia, Spain and WM Alitea • Good demand on factories • Profit up 19% - widespread improvements * Sales by operation comprise customer and intra-group sales

  10. Redacre Revolutionary dosing system uses Watson-Marlow peristaltic pumpheads • OEM supplying dosing systems for agriculture and water treatment in applications across the globe • Ease of use was critical to the system, allowing farmers and technicians to change the tubes and adjust dose rates as required • Robust design to withstand the agricultural environment and pump aggressive substances • Highly accurate dosing of sometimes small amounts of critical fluids (vaccines, water treatment etc) • No cross-contamination

  11. Asia 2006 2005 change change excl XR Sales to customers £36.3m £30.1m +20% +13% Sales by operation* £34.2m £27.5m +24% +15% Operating profit £6.5m £4.2m +53% +26% Margin 19.0% 15.4% • Continued overall strong performance • Organic sales up 13% • Good results in China, Korea, Malaysia and Singapore • Significant exchange gains – notably Korea and China • Profit well ahead and further margin improvement * Sales by operation comprise customer and intra-group sales

  12. Korean Telecom Reduced energy costs through our Steam System Service • KT branch offices have steam systems for space heating, humidification and generating hot water • Spirax conducted surveys on 9 KT branch offices as part of ongoing Steam System Service contract • Asked to carry out corrective maintenance • Installed new Spirax equipment • Provided training for the operators in effective boiler operation • Provided significant energy savings, and peace of mind • Expansion to cover 20 KT branch offices expected

  13. North America 2006 2005 change change excl XR Sales to customers £37.6m £32.6m +16% +9% Sales by operation* £37.7m £33.0m +14% +8% Operating profit £3.6m £2.6m +38% +16% Margin 9.5% 7.9% • Sales up 16% - including acquisitions • Significant exchange benefit (USA and Canada) • EMCO and AFTCO metering acquisitions in USA being integrated • Profit up 38% • Operating margin improved * Sales by operation comprise customer and intra-group sales

  14. Rest of the World 2006 2005 change change excl XR Sales to customers £22.9m £20.5m +12% +3% Sales by operation* £24.2m £20.8m +17% +7% Operating profit £2.2m £2.9m -23% -40% Margin 9.2% 14.1% • Sales up 12% • Big exchange benefit – Brazilian Real • Brazilian market difficult and profits sharply down • Mitech control valve acquisition being integrated in South Africa • Operating profit and margin lower * Sales by operation comprise customer and intra-group sales

  15. Nestlé - East London, South Africa Energy savings through reduced steam usage and water consumption • Nestle requested our help to reduce cost of steam bought in from outside supplier • Spirax carried out an audit of the full steam and condensate loop • Made recommendations on configuration, installation, application and sizing of equipment • More efficient steam distribution and reduced water use • Full steam trap audit conducted – failed units repaired or replaced • Steam usage reduced by 26%

  16. Financial Aspects - Interim £m 2006 2005 change Revenue 185.9 166.6 +12% Operating profit 28.2 25.0 +13% Margin 15.2% 15.0% Net finance income 1.2 0.6 Associates 0.6 0.4 Profit before tax 30.0 26.0 +16% Tax rate 32.7% 32.7% EPS 26.2p 23.0p +14% DPS 7.5p 6.8p +10% • Improved finance income – good cash flow and increased net pension finance income • Associates (India & Mexico) well ahead • Pre-tax profit up 16% • Tax rate unchanged – in line with underlying rate • Strong EPS growth +14% • Interim dividend up 10%

  17. Cash Flow First Half First Half £m 2006 2005 Operating profit 28.2 25.0 Dep’n & amortisation 6.8 6.1 Equity settled share plans 0.7 0.5 Working capital changes (9.7) (5.4) Pension pay’t > P&L charge (1.0) 0.5 Net interest received 0.2 0.1 Taxation paid (8.4) (9.5) Net capital expenditure (7.1) (6.1) Free Cash Flow 9.7 11.2 Net dividends (12.9) (11.5) Acquisitions (1.6) (4.9) Share buy-back/Issued (12.1) 4.5 Cash Flow (16.9) (0.7) _________________________ _________________________ _________________________ _________________________ • Working capital up 8% - mainly stocks • Extra pension payment £1m • Capital Expenditure increased • Dividends paid up 12% • Buy-back 1.5m shares so far • Acquisition of AFTCO April 2006 - metering business in USA • Special pension contribution made in second half of £14.5m

  18. Key Statistics First half First half 2006 2005 Net cash balance £2.2m £1.5m Capital expend / depreciation 112% 105% Free Cash Flow £9.7m £11.2m Operating profit margin 15.2% 15.0% Pension deficit (net of deferred tax) £22.0m £36.2m • Net cash £2.2m • Pension deficit much reduced • Acquired 80% of UltraPure in July 2006 for £2.7m

  19. Spirax Sarco Focused on growth and creating shareholder value

  20. Spirax-Sarco Engineering 2006 Interim Results 30th June 2006 Questions

  21. Appendix - Currencies First half 2006 First half 2005 Year 2005 Average exchange rates Bank of England sterling index 99.4 102.4 101.0 US$ 1.79 1.88 1.82 Euro 1.45 1.46 1.46 Won 1,727 1,911 1,866 Period end exchange rates Bank of England sterling index 100.5 100.9 98.3 US$ 1.85 1.79 1.72 Euro 1.45 1.48 1.46 Won 1,755 1,853 1,735

  22. Appendix – Sources of Growth • Geographic expansion - new and increased penetration • Market share - traditional and newer products • Product additions and developments • Focus on market segments where we are under-represented • Increased sales coverage • Increase in industrial activity • Acquisitions

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