RNS Number : 0717C
Spirax-Sarco Engineering PLC
27 August 2008
Spirax-Sarco Engineering plc
Charlton House
Cheltenham
Glos. GL53 8ER
News Release
Telephone: 01242 521361
Fax: 01242 581470
www.SpiraxSarcoEngineering.com
Wednesday 27th August 2008 - [embargoed until 7.00 a.m.]
2008 Half Year Results
Six months to 30th June
2008 2007 Change
Revenue £238.7m £200.1m +19%
Operating profit £40.1m £31.4m +28%
Profit before taxation £41.9m £33.0m +27%
Earnings per share 36.9p 28.8p +28%
Dividend per share 10.0p 8.3p +20%
Adjusted* 2008 2007 Change Constant currency change
Revenue £238.7m £200.1m +19% +12%
Operating profit £40.8m £31.6m +29% +15%
Operating profit margin 17.1% 15.8%
Profit before taxation £42.7m £33.1m +29% +15%
Earnings per share 38.0p 29.1p +31% +17%
Dividend per share 10.0p 8.3p +20% +20%
* Excludes the amortisation of acquisition-related intangible assets. Total 2008 is
£0.8m (2007: £0.2m) of which £0.2m relates to
Associates (2007: £nil)
* Continued strong sales growth of 19% (12% at constant currency)
* Operating profit up 29% (15% at constant currency)
* Good sales and profit growth from all geographic regions
* Operating profit margin improved to 17.1% (2007: 15.8%)
* Interim dividend increase of 20%
* Good cash flow - significant capital investment in 2008 and 2009
Commenting on the results, the Chief Executive, Mark Vernon, said:
"The strong trading performance during the period has, so far, been maintained into the
early weeks of the second half year, although
the global macro-environment is deteriorating. We have seen sustained business investment by
customers and are benefiting from expanding our
selling opportunities and increasing market share. Due to the high cost of energy, our
customers are increasingly valuing our energy-saving
solutions. Subject to continuation of the favourable exchange rates, there is expected to be a
further exchange benefit to trading in the
second half year and, assuming our markets remain stable, we expect to achieve continued good
progress for the year."
For further information, please contact:
Mark Vernon, Chief Executive
David Meredith, Finance Director
Tel: 020 7638 9571 at Citigate Dewe Rogerson until 6.00 p.m.
Note: Unless otherwise stated, the figures quoted in the text below exclude the
amortisation of acquired intangible assets.
REVIEW OF OPERATIONS
We are pleased to report another strong set of results for the first half of 2008. Trading
conditions remained positive and we grew
sales in all geographic regions. Currency movements favourably impacted both sales and
profits. Our two specialist businesses in the
industrial steam and the peristaltic pumping markets both produced good results and offer good
opportunity for future growth.
Group sales in the half year were £238.7 million, up 19% from £200.1 million in 2007.The increase at constant exchange rates was 12%,
including a small contribution from acquisitions made earlier in 2008.
We increased operating profits by 29% (15% at constant currency) from £31.6 million to
£40.8 million in 2008. The operating profit
margin in the first half improved from 15.8% to 17.1%, around half of which was due to
exchange. We benefited from the organic sales growth,
efficiency improvements and favourable currency movements, which more than offset the impact
of higher material and energy costs.
Net finance income of £0.8 million was lower than the £0.9 million in the same period of
2007 due to the reduced net finance income in
respect of pension schemes. The profit from Associates was £1.2 million in the period (2007:
£0.6 million). Profit before tax was £42.7
million as against £33.1 million in 2007; the increase of 29% includes a gain of £3.9m from
favourable currency movements, most notably the
stronger euro.
The tax charge was 33% (2007: 34%) and the profit for the period increased by 32% to
£29.1 million. Earnings per share for the period
increased by 31% to 38.0p compared with 29.1p in the first half of 2007.
Trading
We are world leaders in our industrial steam and peristaltic pumping niche businesses.Both Spirax and Watson-Marlow Bredel have robust
business models that are serving us well in today's market environment. We work closely with
our customers in supplying a wide range of
products, services and engineered systems to generate energy savings, process efficiency and
quality improvements, and compliance assistance
to meet increasingly stringent health and safety regulations. Today's high cost of energy, in
particular, has provided a favourable backdrop
in which we work with our customers to reduce their energy consumption - seen in good sales
growth in the first half of 2008 for traditional
steam specialty products and systems.
In the UK market, we achieved good organic sales growth of 11% to £25.1 million despite
the poor climate for the manufacturing sector
which we serve. The growth resulted primarily from our ongoing steam business initiatives in
services and heat exchange systems related to
energy saving projects for our customers. Operating profit was up 9% at £8.2 million compared
with £7.6 million in the first half of 2007
(up 21% at constant currency).
Business momentum continued in Continental Europe although the economic environment is
weakening. Sales increased 23% to £93.3 million
and at constant exchange rates the increase was 8%, including a small contribution from the
Flexicon and Colima acquisitions. The Spirax
operations increased sales of controls, services and products/systems for clean steam
applications. We have continued to see very strong
sales and profit growth from Russia. The Watson-Marlow Bredel business grew sales and profits
in most markets and the integration of the
Flexicon acquisition is progressing well. Operating profit in Continental Europe increased by
48% (9% at constant currency) to £17.9
million.
North American sales increased 12% to £43.0 million (11% at constant currency), with
continued strength in both the Spirax steam
business and Watson-Marlow Bredel. The Spirax steam business increased due to success with
heat exchange packages and traditional steam
specialty products. The Watson-Marlow Bredel business achieved strong growth in sales in the
general industrial and water/waste water
markets and profits were well ahead. The much-publicised difficulties of the USA economy have
thus far not impacted our business. The
operating profit in North America was 22% higher than in the same period in 2007 (up 34% at
constant currency).
The good performance continued in Asia, with overall sales growth of 15% to £45.2 million
(13% at constant currency). Our large company
in China performed particularly well with strong sales and profit growth. Sales by our Korean
operation increased over the prior year but
profits were lower due to the impact of the weaker local currency and some lower margin
projects. Sales and profits in India (an Associate)
were up substantially over last year as we benefited from major capital investment activities
in the industrial sector and we also benefited
from the increase in our shareholding to nearly 50% which was completed in April 2007. The
Watson Marlow-Bredel business is still relatively
small in Asia and we continue to invest to expand our sales operations in the region. Total
operating profit in Asia was 17% ahead at £7.8
million (12% at constant currency).
Sales in the Rest of the World (South America, Africa and Australasia) increased 32% (up
22% at constant currency). The Spirax steam
business in South America was exceptionally strong, with large sales and profit gains coming
from improved domestic markets, particularly in
Brazil. Australia and New Zealand increased sales and profits. Our Watson Marlow-Bredel
business also did well. Operating profits in the
region increased by 43% to £3.5 million (25% at constant currency).
Balance Sheet and Cash Flow
Total capital employed increased by only 6% in the first half (3% at constant currency) to
£223 million, comprising a 3% increase in
tangible net fixed assets and an 8% increase in working capital reflecting the good sales
growth. Capital expenditure rose to £8.2 million
including the start of the £9 million project to build our new factory and offices in China.This, together with a £6 million investment in
expanding the Watson-Marlow tube and pump production plant and also the construction of our
new offices in Korea, will lead to high capital
expenditure in the second half year and into 2009.
There was a cash outflow of £12.2 million for acquisitions, largely in respect of
Flexicon A/S in Denmark which as previously reported
was completed in February, and including £0.5 million in respect of Colima which was
completed in March. Despite this investment, and after
payment of the 2007 final dividend, the net cash position of £12.2 million at 30th June 2008
was only £3.6m lower than at the start of the
period, reflecting the continued strong underlying cash flow.
The net post-retirement benefits liability increased by £26 million to £47 million in
the first half due mainly to a fall in the
schemes' asset values.
Principal Risks and Uncertainties
Details of the principal risks and uncertainties are set out in note 12 and are followed
by a Directors' Responsibility Statement.Commencing in 2009, this half year report will be produced only in electronic form, in line
with the majority of similar companies.
Dividend
The Board has declared an interim dividend of 10.0p (2007: 8.3p) per ordinary share, an
increase of 20%, reflecting the good increase in
first half profits. The dividend will be paid on 7th November 2008 to shareholders on the
register at the close of business on 10th October
2008. No scrip alternative to the cash dividend is being offered in respect of the 2008
interim dividend.
Prospects
The strong trading performance during the period has, so far, been maintained into the
early weeks of the second half year, although the
global macro-environment is deteriorating. We have seen sustained business investment by
customers and are benefiting from expanding our
selling opportunities and increasing market share. Due to the high cost of energy, our
customers are increasingly valuing our energy-saving
solutions. Subject to continuation of the favourable exchange rates, there is expected to be a
further exchange benefit to trading in the
second half year and, assuming our markets remain stable, we expect to achieve continued good
progress for the year.
Spirax-Sarco Engineering plc
GROUP INCOME STATEMENT
Six months Adj't Total Six months Adj't
Total Year ended Adj't Total
to 30th June to 30th
31st Dec.
*Before June June
*Before
adj't *Before
adj't
adj't
2008
2007
£'000 2007
£'000
£'000
2008 2008 2007
2007 2007 2007
£'000 £'000 £'000
£'000 £'000 £'000
Revenue (note1) 238,707 - 238,707 200,120 -
200,120 417,317 - 417,317
Operating costs (197,922) (637) (198,559) (168,538) (173)
(168,711) (348,597) (384) (348,981)
Operating profit (note 1)
40,785 (637) 40,148 31,582 (173)
31,409 68,720 (384) 68,336
Financial expenses
(7,354) - (7,354) (6,722) -
(6,722) (13,248) - (13,248)
Financial income
8,113 - 8,113 7,667 -
7,667 15,688 - 15,688
Net financing income (note 2)
759 - 759 945 -
945 2,440 - 2,440
Share of profit of associates
1,200 (170) 1,030 620 -
620 1,636 (249) 1,387
Profit before taxation
42,744 (807) 41,937 33,147 (173)
32,974 72,796 (633) 72,163
Taxation (note 3) (13,641) - (13,641) (11,089) -
(11,089) (22,973) - (22,973)
Profit for the period
29,103 (807) 28,296 22,058 (173)
21,885 49,823 (633) 49,190
Attributable to:
Equity holders of the
parent 28,971 (807) 28,164 22,010 (173)
21,837 49,734 (633) 49,101
Minority interest
132 - 132 48 -
48 89 - 89
Profit for the period
29,103 (807) 28,296 22,058 (173)
21,885 49,823 (633) 49,190
Earnings per share
Basic earnings per share
(note 4)
36.9p
28.8p 64.7p
Diluted earnings per share
(note 4)
36.8p
28.6p 64.4p
Dividends
Dividend paid per share
(note 5)
21.6p
19.0p 27.3p
Dividend proposed per share
(note 5)
10.0p
8.3p 21.6p
* Adjustments relate to the amortisation of acquisition-related intangibles. Before
adjustment, the basic earnings per share for the
six months ended 30th June 2008 is 38.0p, for the six months ended 30th June 2007 29.1p and
for the year ended 31st December 2007 65.5p.
Spirax-Sarco Engineering plc
GROUP BALANCE SHEET
Notes 30th June 30th June 31st December
2008 2007 2007
£'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 96,425 88,185 93,933
Goodwill 24,860 17,815 18,697
Other intangible assets 19,089 8,853 9,663
Prepayments 2,682 316 986
Post-retirement benefits - - 1,095
Investment in associates 8,162 7,235 7,937
Deferred tax 19,276 5,312 11,659
170,494 127,716 143,970
Current assets
Inventories 84,071 71,823 73,824
Trade receivables 103,190 87,394 98,067
Other current assets 13,649 11,477 9,755
Tax recoverable 874 1,363 949
Cash and cash equivalents 7 35,750 23,271 38,844
237,534 195,328 221,439
Total assets 408,028 323,044 365,409
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables 67,644 50,192 58,832
Bank overdrafts 7 4,118 5,154 987
Short term borrowing 7 2,143 7,133 1,717
Current portion of long term 7 86 65 78
borrowings
Current tax payable 10,657 6,565 8,321
84,648 69,109 69,935
Net current assets 152,886 126,219 151,504
Non-current liabilities
Long term borrowings 7 17,178 18,145 20,231
Deferred tax 8,455 6,527 8,307
Post-retirement benefits 47,035 2,546 22,628
Other payables and provisions 3,268 857 1,343
75,936 28,075 52,509
Total liabilities 160,584 97,184 122,444
Net assets 247,444 225,860 242,965
Equity
Share capital 19,299 19,299 19,299
Share premium account 47,280 47,267 47,267
Other reserves 14,087 (2,452) 5,719
Retained earnings 165,878 160,614 169,866
Equity attributable to equity
holders of the parent 8 246,544 224,728 242,151
Minority interest 900 1,132 814
Total equity 247,444 225,860 242,965
Total equity and liabilities 408,028 323,044 365,409
Spirax-Sarco Engineering plc
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
Six months Six months Year ended
to 30th to 30th 31st
June June December
2008 2007 2007
£'000 £'000 £'000
Actuarial loss on post-retirement (25,588) 20,450 (877)
benefits
Deferred tax on actuarial loss on post
retirement benefits 8,034 (6,207) 279
Foreign exchange translation differences 7,202 (577) 7,650
Losses on cash flow hedges (113) (24) (81)
Income and expense recognised directly in
equity (10,465) 13,642 6,971
Profit for the period 28,296 21,885 49,190
Total recognised income and expense for
the period 17,831 35,527 56,161
Attributable to
Equity holders of the parent 17,699 35,479 56,072
Minority interest 132 48 89
Total recognised income and expense for
the period 17,831 35,527 56,161
Spirax-Sarco Engineering plc
GROUP CASH FLOW
Notes Six months Six months Year ended
to 30th to 31st
June 30thJune December
2008 2007 2007
£'000 £'000 £'000
Cash flows from operating activities
Profit before taxation 41,937 32,974 72,163
Depreciation and amortisation 8,198 6,958 14,231
Share of profit of associates (1,030) (620) (1,387)
Equity settled share plans 1,075 844 1,259
Net finance income (759) (945) (2,440)
Operating cash flow before changes
in 49,421 39,211 83,826
working capital and provisions
Increase in trade and other (4,534) (916) (5,244)
receivables
Increase in inventories (5,468) (4,407) (3,999)
Decrease in provisions and
post-retirement benefits (196) (5,581) (5,726)
Increase in trade and other payables 368 (167) 5,671
Cash generated from operations 39,591 28,140 74,528
Interest paid (737) (880) (1,699)
Income taxes paid (10,802) (8,767) (18,162)
Net cash from operating activities 28,052 18,493 54,667
Cash flows from investing activities
Purchase of property, plant & (6,882) (5,741) (13,826)
equipment
Proceeds from sale of property,
plant & equipment 346 360 599
Purchase of software & other (1,322) (649) (1,693)
intangibles
Development expenditure capitalised (561) (822) (1,604)
Acquisition of businesses (12,166) (744) (1,170)
Interest received 561 261 906
Dividends received 329 227 557
Net cash used in investing (19,695) (7,108) (16,231)
activities
Cash flows from financing activities
Proceeds from issue of share capital 13 42 42
Proceeds from reissue of treasury 2,208 1,695 3,115
shares
Repayment of borrowings 7 (1,936) 1,264 (2,543)
Increase/(decrease) in finance lease
liabilities 7 - 26 (20)
Dividends paid (including (16,484) (14,497) (20,828)
minorities)
Net cash used in financing (16,199) (11,470) (20,234)
activities
Net decrease in cash and cash
equivalents 7 (7,842) (85) 18,202
Cash and cash equivalents at
beginning of period 7 37,857 18,099 18,099
Exchange movement 7 1,617 103 1,556
Cash and cash equivalents at end of
period 7 31,632 18,117 37,857
Borrowings and finance leases 7 (19,407) (25,343) (22,026)
Net cash/(borrowings) 7 12,225 (7,226) 15,831
NOTES TO THE ACCOUNTS
1. SEGMENTAL REPORTING
Primary segment
Analysis by location of operation
Six months to 30th June 2008
Net Intra- Inter- Gross Operating Adjusted
Adjusted
Profit
Revenue Division Division Revenue Operatin
Operating
al al g
Margin
£'000 Profit
%
£'000 £'000 £'000
£'000 £'000
UK & Republic of Ireland 33,594 12 31,337 64,943 8,191 8,226
12.7
Continental Europe 93,690 10,529 13,267 117,486 17,382 17,850
15.2
North America 42,103 515 1,231 43,849 3,296 3,384
7.7
Asia 40,192 296 1,543 42,031 7,781 7,781
18.5
Rest of the world 29,128 134 2,418 31,680 3,498 3,544
11.2
238,707 11,486 49,796 299,989 40,148 40,785
13.6
Total intra-Group revenue
(11,486) (49,796) (61,282)
238,707 - - 238,707 40,148 40,785
17.1
Six months to 30th June 2007
Net Intra- Inter- Gross Operating Adjusted
Adjusted
Profit
Revenue Division Division Revenue Operatin
Operatin
al al g
g
£'000 Profit
Margin
£'000 £'000 £'000
%
£'000 £'000
UK & Republic of Ireland 29,437 21 29,116 58,574 7,546 7,577
12.9
Continental Europe 75,595 8,477 9,544 93,616 12,093 12,092
12.9
North America 37,925 504 337 38,766 2,680 2,774
7.2
Asia 34,929 311 988 36,228 6,669 6,669
18.4
Rest of the world 22,234 79 2,006 24,319 2,421 2,470
10.2
200,120 9,392 41,991 251,503 31,409 31,582
12.6
Total intra-Group revenue
(9,392) (41,991) (51,383)
200,120 - - 200,120 31,409 31,582
15.8
Year ended 31st December 2007
Net Intra- Inter- Gross Operating Adjusted
Adjusted
Profit
Revenue Division Division Revenue Operatin
Operatin
al al g
g
£'000 Profit
Margin
£'000 £'000 £'000
%
£'000 £'000
UK & Republic of Ireland 58,542 48 58,630 117,220 13,314 13,370
11.4
Continental Europe 153,028 16,631 20,217 189,876 26,223 26,263
13.8
North America 79,915 881 753 81,549 7,138 7,326
9.0
Asia 76,933 620 2,267 79,820 16,641 16,643
20.9
Rest of the world 48,899 846 4,341 54,086 5,020 5,118
9.5
417,317 19,026 86,208 522,551 68,336 68,720
13.2
Total intra-Group revenue
(19,026) (86,208) (105,234)
417,317 - - 417,317 68,336 68,720
16.5
Revenue by geographical location of customers
Six months Six months Year ended
to 30th to 30th 31st
June June December
2008 2007 2007
£'000 £'000 £'000
UK & Republic of Ireland 25,113 22,414 43,993
Continental Europe 93,336 75,703 153,661
North America 42,983 38,393 80,800
Asia 45,231 39,345 85,252
Rest of the world 32,044 24,265 53,611
238,707 200,120 417,317
Share of profit of associates
Six months to 30th June Six months to 30th June Year ended 31st
December
2008 2008 2007 2007 2007
2007
Before Total Before Total Before
Total
adjustment adjustment adjustment
£'000 £'000 £'000
£'000 £'000
£'000
UK & Republic of Ireland - - - - -
-
Continental Europe - - - - -
-
North America 414 414 311 311 668
668
Asia 786 616 309 309 968
719
Rest of the world - - - - -
-
1,200 1,030 620 620 1,636
1,387
Net assets
30th June 2008 30th June 2007 31st
December 2007
Assets Liabilities Assets Liabilities Assets
Liabilities
£'000 £'000 £'000 £'000 £'000
£'000
UK & Republic of Ireland 82,340 (50,014) 84,281 (11,926) 78,721
(24,318)
Continental Europe 135,134 (41,489) 97,955 (33,302) 105,655
(35,052)
North America 42,885 (9,575) 40,194 (4,207) 42,750
(8,055)
Asia 53,120 (6,631) 46,671 (6,214) 51,937
(7,375)
Rest of the world 38,648 (10,237) 32,772 (6,721) 34,894
(8,003)
352,127 (117,946) 301,873 (62,370) 313,957
(82,803)
Liabilities (117,946) (62,370) (82,803)
Deferred tax 10,821 (1,215) 3,352
Current tax payable net of tax
recoverable (9,783) (5,202) (7,372)
Net cash/(borrowings) 12,225 (7,226) 15,831
Net assets 247,444 225,860 242,965
Capital additions and Depreciation and amortisation
30th June 2008 30th June 2007
31st December 2007
Capital Depreciation and Capital Depreciation and
Capital Depreciation and
additions amortisation additions amortisation additions
amortisation
£'000 £'000 £'000 £'000
£'000 £'000
UK & Republic of Ireland 3,276 2,904 2,546 2,783 6,502
5,664
Continental Europe 11,671 2,895 1,747 2,070 5,231
4,101
North America 859 1,004 705 959 1,390
1,948
Asia 1,531 676 686 579 1,883
1,182
Rest of the world 990 719 1,501 567 2,814
1,336
18,327 8,198 7,185 6,958 17,820
14,231
Secondary segment
Revenue by business operation
Six months Six months Year ended
to 30th to 30th 31st
June June December
2008 2007 2007
£'000 £'000 £'000
Spirax Sarco 203,767 174,056 361,611
Watson-Marlow Bredel 34,940 26,064 55,706
238,707 200,120 417,317
Capital additions
Six months Six months Year ended
to 30th to 30th 31st
June June December
2008 2007 2007
£'000 £'000 £'000
Spirax Sarco 8,295 6,290 15,870
Watson-Marlow Bredel 10,032 895 1,950
18,327 7,185 17,820
2. NET FINANCING INCOME
Six months Six months Year ended
to 30th to 30th 31st
June June December
2008 2007 2007
£'000 £'000 £'000
Financial expenses
Bank and other borrowing interest payable (737) (880) (1,699)
Interest on pension scheme liabilities (6,617) (5,842) (11,549)
(7,354) (6,722) (13,248)
Financial income
Bank interest receivable 561 264 906
Expected return on pension scheme assets 7,552 7,403 14,782
8,113 7,667 15,688
Net financing income 759 945 2,440
Net pension scheme financial income 935 1,561 3,233
Net bank interest (176) (616) (793)
Net financing income 759 945 2,440
3. TAXATION
Taxation has been estimated at the rate expected to be incurred in the full year
Six months Six months Year ended
to 30th to 30th 31st
June June December
2008 2007 2007
£'000 £'000 £'000
United Kingdom corporation tax 2,272 - 922
Overseas taxation 11,136 8,884 18,331
Deferred taxation 233 2,205 3,720
13,641 11,089 22,973
4. EARNINGS PER SHARE
Six months Six months Year ended
to 30th to 30th 31st
June June December
2008 2007 2007
£'000 £'000 £'000
Earnings 28,164 21,837 49,101
Weighted average shares in issue 76,230,122 75,760,224 75,889,850
Dilution 386,999 687,007 365,911
Diluted weighted average shares in issue 76,617,121 76,447,231 76,255,761
Basic earnings per share 36.9p 28.8p 64.7p
Diluted earnings per share 36.8p 28.6p 64.4p
Adjusted profit attributable to equity
holders of the parent 28,971 22,010 49,734
Basic adjusted earnings per share 38.0p 29.1p 65.5p
The dilution is in respect of unexercised share options and the performance share plan.
5. DIVIDENDS
Six months Six months Year ended
to 30th to 30th 31st
June June December
2008 2007 2007
£'000 £'000 £'000
Amounts paid in the period
Final dividend for the year ended 31st
December 2007 of 21.6p (2006: 19.0p) per 16,452 14,413 14,413
share
Interim dividend for the year ended 31st
December 2007 of 8.3p per share - - 6,315
16,452 14,413 20,728
Amounts arising in respect of the period
Interim dividend for the year ended 31st
December 2008 of 10.0p per share 7,653 6,315 6,315
Final dividend for the year ended 31st -
December 2007 of 21.6p (2006: 19.0p) per - 16,439
share
7,653 6,315 22,754
8. EMPLOYEE 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 2007 is included in the Group's Annual Report.
The defined benefit plan expense is recognised in the income statement as follows:-
UK Pensions Overseas pensions & medical
Total
Six months Six months Six months Six months
Six months Six months Year
ended
to 30th to 30th to 30th to 30th
to 30th to 30th 31st
Dec.
June 2008 June 2007 June 2008 June 2007
June 2008 June 2007 2007
£'000 £'000 £'000
£'000 £'000 £'000 £'000
Current service cost (2,900) (3,300) (642) (653)
(3,542) (3,953) (7,873)
Settlement,curtailment - - - 126
- 126 115
Interest on schemes'
liabilities (5,600) (4,900) (1,017) (942)
(6,617) (5,842)
(11,549)
Expected return on schemes'
assets 6,700 6,550 852 853
7,552 7,403 14,782
Total expense recognised in
income statement
(1,800) (1,650) (807) (616)
(2,607) (2,266) (4,525)
The expense is recognised in the following line items in the income statement:
Six months Six months Year ended
to 30th to 30th 31st
June June December
2008 2007 2007
£'000 £'000 £'000
Operating costs (3,542) (3,827) (7,758)
Financial expenses (6,617) (5,842) (11,549)
Financial income 7,552 7,403 14,782
Total expense recognised in income (2,607) (2,266) (4,525)
statement
The amounts recognised in the balance sheet are determined as follows:
UK Pensions Overseas
pensions & medical
Total
30th June 2008 30th June 2007 30th June 2008
30th June 2007 30th June 2008 30th
June 2007 31st Dec.
£'000 £'000 £'000
£'000 £'000
£'000 2007
£'000
Fair value of schemes' assets
167,887 188,756 23,207
23,260 191,094
212,016 208,520
Present value of schemes'
liabilities (200,211) (180,300) (37,918)
(34,262) (238,129)
(214,562) (230,053)
Retirement benefit liability
recognised in the balance
sheet
(32,324) 8,456 (14,711)
(11,002) (47,035)
(2,546) (21,533)
Related deferred tax 9,050 (2,500) 4,650
3,300 13,700
800 6,820
Net pension liability (23,274) 5,956 (10,061)
(7,702) (33,335)
(1,746) (14,713)
Share based payments
The charge to the income statement in respect of share based payments is made up as
follows:-
Six months Six months Year ended
to 30th to 30th 31st
June June December
2008 2007 2007
£'000 £'000 £'000
Share Option Scheme 458 300 695
Performance Share Plan 266 225 468
Employee Share Ownership Plan 351 319 631
1,075 844 1,794
7. ANALYSIS OF CHANGES IN NET BORROWINGS
At Cash flow Exchange At
1st Jan movement 30 th June 2008
2008 £'000
£'000 £'000 £'000
Current portion of long term (78) (86)
borrowings
Non-current portion of long (20,231) (17,178)
term borrowings
Short term borrowing (1,717) (2,143)
Total borrowings (22,026) (19,407)
Comprising:
Borrowings (21,665) 1,936 709 (19,020)
Finance Leases (361) - (26) (387)
(22,026) 1,936 683 (19,407)
Cash and cash equivalents 38,844 (4,905) 1,811 35,750
Bank overdrafts (987) (2,937) (194) (4,118)
Net cash and cash equivalents 37,857 (7,842) 1,617 31,632
Net borrowings 15,831 (5,906) 2,300 12,225
8. GROUP STATEMENT OF CHANGES IN EQUITY
Six months Six months Year ended
to 30th to 30th 31st
June June December
2008 2007 2007
£'000 £'000 £'000
Shareholders' funds at beginning of 242,151 198,509 198,509
period
Total recognised income and expense for 17,699 35,479 56,072
the period
Dividends paid (16,452) (14,413) (20,728)
Increased investment in associated - 2,705 2,946
company
Equity settled share plans net of tax 925 711 2,195
Proceeds of issue of share capital 13 42 42
Treasury shares reissued 5,283 2,852 5,457
Loss on the reissue of treasury shares (3,075) (1,157) (2,342)
Equity attributable to equity holders of
parent at end of period 246,544 224,728 242,151
9. CAPITAL EMPLOYED
An analysis of the components of capital employed is as follows:
30th June 30th June 31st December
2008 2007 2007
£'000 £'000 £'000
Property, plant and equipment 96,425 88,185 93,933
Prepayments 2,682 316 986
Inventories 84,071 71,823 73,824
Trade receivables 103,190 87,394 98,067
Other current assets 13,649 11,477 9,755
Tax recoverable 874 1,363 949
Trade and other payables (67,644) (50,192) (58,832)
Current tax payable (10,657) (6,565) (8,321)
222,590 203,801 210,361
10. PURCHASE OF BUSINESSES
2008
Flexicon A/S Colima S.r.l & Distant Star
CC
Book FV adj Fair Book FV.adj
Fair Total
Value Value Value
Value Value
£'000 £'000 £'000
£'000 £'000
£'000 £'000
Fixed assets
Property, plant & equipmment
100 - 100 66 -
66 166
Intangibles - 8,437 8,437 177 422
599 9,036
100 8,437 8,537 243 422
665 9,202
Current assets
Inventories 744 - 744 143 (26)
117 861
Trade receivables 1,518 - 1,518 572 (4)
568 2,086
Other receivables - - - 8 -
8 8
Cash 55 - 55 - -
- 55
2,317 - 2,317 723 (30)
693 3,010
Total assets 2,417 8,437 10,854 966 392
1,358 12,212
Current liabilities
Trade payables - - - 303 -
303 303
Other payables and accruals
45 - 45 107 14
121 166
Short term borrowing 849 - 849 182 -
182 1,031
894 - 894 592 14
606 1,500
Long term liabilities 125 - 125 - -
- 125
Total liabilities 1,019 - 1,019 592 14
606 1,625
Total net assets 1,398 8,437 9,835 374 378
752 10,587
Goodwill 4,881
526 5,407
Purchase consideration
14,716
1,278 15,994
Satisfied by
Cash paid 11,422
570 11,992
Deferred consideration
2,994
481 3,475
Expenses 300
227 527
14,716
1,278 15,994
Analysis of net flow of cash and cash equivalents in respect of purchase of subsidiaries
Cash consideration
11,992
Expenses
174
Net cash outflow
12,166
1. The acquisition of Flexicon A/S based in Denmark was completed on 11th February 2008.The transaction also resulted in the Group
obtaining full ownership of Flexicon*s distribution company for the USA, Flexicon America Inc. The acquisition method of accounting has been
used. Consideration of £11,422,000 was paid on completion. The book value of intangibles has
been adjusted to reflect Spirax Sarco*s
accounting policies in order to arrive at their fair value.
2. The acquisition of Colima S.r.l, based in Italy was completed on 31st March 2008. The
acquisition method of accounting has been
used. Consideration of £480,000 was paid on completion. The book value of intangibles,
inventory, trade receivables and other payables and
accruals has been adjusted to reflect Spirax Sarco*s accounting policies in order to arrive at
fair value.
3. The acquisition of the assets and business of Distant Star CC based in South Africa
was completed on 30th June 2008. The acquisition
method of accounting has been used. Consideration of £90,000 was paid on completion. The book
value of intangibles has been adjusted to
reflect Spirax Sarco*s accounting policies in order to arrive at fair value.
2007
1. The acquisition of the Watson-Marlow business in Denmark from A/S Christian
Berner was completed on 30th January 2007. The
acquisition method of accounting was used. Consideration of £292,000 was paid on completion.To reflect Spirax Sarco's accounting policies
the consideration has been split between intangibles £160,000, goodwill £126,000 and
expenses £6,000 to arrive at fair value.
2. The acquisition of the minority owned 20% of Spirax UltraPure LLC of Florida,
USA was completed on 9th
August 2007. Consideration of £612,000 was paid on completion, which included
goodwill of £321,000.
11. 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 2007. 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 2008 that have
materially affected the financial position or the
performance of the Group during that period.
12. BASIS OF PREPARATION
The half year consolidated financial statements of Spirax-Sarco Engineering plc and its
subsidiaries (the 'Group') have been prepared on
the basis of the accounting policies set out in the 2007 Spirax-Sarco Engineering plc Annual
Report, and in accordance with International
Accounting Standard 34 Interim Financial Reporting, as adopted by the EU.
The comparative figures for the year ended 31st December 2007 do not constitute statutory
accounts within the meaning of section 240 of
the Companies Act 1985. The consolidated statutory accounts for Spirax-Sarco Engineering plc
in respect of the year ended 31st December 2007
have been reported on by the company's auditors and delivered to the registrar of companies.The report of the auditors was unqualified and
did not contain statements under section 237 (2) or (3) of the Companies Act 1985. The
financial statements for the six months ended 30th
June 2008, which have not been audited or reviewed by the auditors, were authorised for issue
by the Board on 27th August 2008.
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. Notice is given of the intention to issue next year's interim report, for the six
months ended 30th June 2009, only via the Group
web site: www.SpiraxSarcoEngineering.com
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.
PRINCIPAL RISKS AND UNCERTAINTIES
There are a number of potential risks and uncertainties which could have a material impact
on the Group's performance over the remainder
of the financial year and could cause actual results to differ materially from expected and
historical results. The principal risks and
uncertainties are strategic, commercial, operational and financial. Ultimately these affect
our ability to deliver our prime financial
objective, which is to provide enhanced value to shareholders through consistent growth in
earnings per share and dividends per share as a
result of maintaining our world leading position and investing in our businesses for growth.More details of the key risks facing the
Group's businesses are included on page 22 and page 30 of the Group's statutory financial
statements for the year ended 31st December 2007. Details of further potential risks and uncertainties arising since the issue of the previous
statutory financial statements are included
within the Review of Operations as appropriate.
RESPONSIBILITY STATEMENT
The directors confirm that to the best of their knowledge:
- this financial information has been prepared in accordance with IAS 34, as adopted by
the EU;
- this interim management report includes a fair review of the information required by
DTR 4.2.7R (Indication of
important events during the first half and description of principal risks and
uncertainties for the remaining half of
the year); and
- this interim management report includes a fair review of the information required by
DTR 4.2.8R (disclosure of
related party transactions and changes therein).
Copies of the Interim Report will be sent on 5th September 2008 to shareholders and can be
obtained from our registered office at
Charlton House, Cirencester Road, Cheltenham, Gloucestershire GL53 8ER. From 29th August 2008
the Interim Report will be available on our
website at www.SpiraxSarcoEngineering.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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