RNS Number:6283P
Spirax-Sarco Engineering PLC
11 September 2003
Thursday 11th September 2003
2003 Interim Results
Six months to 30th June
2003 2002 Change
Turnover #154.0m #144.9m +6%
Operating profit #20.3m #20.0m +1%
Operating profit margin 13.2% 13.8%
Profit before taxation #19.6m #18.9m +4%
Earnings per share 17.2p 16.7p +3%
Dividend per share 6.0p 5.8p +3%
Operating cash inflow #20.6m #24.6m
* Sales up 6%
* Sales growth in all regions
* Operating profit up 1% after charging production transfer
costs of #11/2m
* Underlying operating profit margin up to 14.1%
* EPS and dividend up 3%
Commenting on the results, the Chairman, Tim Fortune, said:
"The Group has achieved a satisfactory performance in the first half of the
year. Our diverse customer base, wide product range, geographical spread and
dedicated people remain the fundamental strengths which underpin our world
leading businesses. Assuming that there is no deterioration in world trading
conditions, we expect to make further progress this year."
Enquiries:
Marcus Steel - Chief Executive
David Meredith - Director-Finance
Tel: 020 7638 9571 at Citigate Dewe Rogerson until 6.00 p.m.
The Chairman, Tim Fortune, comments as follows:
"I am pleased to report satisfactory progress in the first half of 2003. Our
business is built on providing a full value-added package of knowledge, service
and products to our customers across many industrial sectors and all regions of
the world who use steam or peristaltic pumping in their processes. These
attributes allowed the firm start to the year to be continued through the first
half.
Group sales of #154 million increased by 6% with organic growth in all regions.
Exchange rate movements have had a small net negative effect on sales of around
1%, with the weakness of the American and Asian currencies mitigated by the
stronger euro.
The operating profit of #20.3 million increased by 1% as against the first half
of 2002, including an adverse exchange effect. As explained in March, we have
transferred the production out of our small Spanish factory as part of our
efficiency improvements; the one-off cost of #11/2 million has been included in
operating profit in the first half of 2003. Excluding this cost, the operating
profit margin showed a further improvement from 13.8% to 14.1%.
The net interest charge was down nearly 40% to #0.7 million (2002: #1.1
million) mainly due to the lower level of net debt versus the first half of
2002. Profit before tax was #19.6 million, an increase of 4% compared with
#18.9 million last year.
The tax charge was 33% (2002: 33%) and the attributable profit increased by 3%
to #12.8 million. Earnings per share improved by 3% to 17.2p (2002: 16.7p).
TRADING
Our industrial steam system and specialist peristaltic pumping businesses serve
global markets across most industrial sectors and our business is therefore
geographically well spread with over 85% of our sales being outside the UK. The
sales growth has come from a combination of increased sales coverage,
implementation of sales developments, contributions from new products and
building on the strength of our customer relationships. Our 900 sales and
service engineers worldwide provide knowledge and support in the application of
our products in order to improve the efficiency of our customers' plant, to save
cost or improve quality. The technical expertise in our salesforce is central
to the service we provide for our customers, and we are the world leaders in our
focused markets.
The trading environment in the UK remained difficult with industrial production
and investment depressed. Nevertheless, our sales organisations performed well
and increased sales. The UK factories continued to be busy and, overall, UK
profits grew modestly as compared with the first half of 2002.
In Continental Europe, the economic conditions were mixed and generally weak.
However, the performance of our French company improved markedly following the
reorganisation at the end of 2002 and good progress was also made in Spain,
Italy, Czech Republic, Norway, Poland, Portugal, Sweden and generally in the
Watson-Marlow Bredel companies. Business in Germany was tough, and our
underlying results were flat. Overall in Continental Europe, sales increased in
the first half of the year. Operating profits increased as a result of the
higher sales and the stronger euro, partly offset by the Spanish factory closure
cost of #11/2 million. Ampe, the small Italian plant which we acquired at the
end of 2002 for #1.4 million, made a good contribution performing in line with
expectations.
The performance in the Americas was resilient given the lack-lustre economic
conditions. The US economy remained weak, with some investment decisions being
delayed. However, both our Spirax Sarco and Watson-Marlow Bredel operations
grew sales marginally in local currency but profits and margins were down due to
higher pension costs and the weakness of the US dollar. Although recent signals
relating to economic activity in the USA appear encouraging, there is little
sign of increased industrial activity in our markets. Good progress was made in
Argentina and Brazil but our Canadian and Mexican companies faced more
challenging trading conditions and Mexico, in particular, saw further declines.
Overall in the Americas, underlying progress with sales and profits was impacted
by unfavourable currency movements and results were lower in sterling.
Sales improved in Asia, Australasia and Africa. The effect on our business of
SARS was limited and the after-effects seem to be minimal. We achieved good
sales growth in China, India, Japan and Korea but in Australia, Malaysia, Taiwan
and Thailand business was slower. Operating profits in the region were only
slightly ahead as weaker Asian currencies reduced margins. The acquisition of
the Watson-Marlow Bredel distribution business in South Africa was completed in
April and the business has performed as expected and made a small contribution
to the improved results in the region.
BALANCE SHEET AND CASH FLOW
Working capital increased in the first half of 2003, reflecting the increase in
business levels. Capital expenditure at #6.6 million (2002: #5.3 million) was
in line with depreciation. There was a cash outflow of #1.2 million for the
acquisition in South Africa. Tax payments were higher at #9.0 million
reflecting the higher tax charge in 2002 and the timing of tax payments.
The cash flow followed the usual profile with higher outgoings in the first
half, notably the final dividend payment. The higher working capital, increased
taxation payments and the acquisition resulted in an overall cash outflow of
#6.7 million. In addition, the exchange movements in the half year increased
net debt on translation by a further #1.0 million. Net debt at 30th June 2003
was therefore #30.4 million compared with #22.7 million at the end of 2002 and
#40.8 million at 30th June 2002. Net gearing was 19% at the end of the period
but is expected to be lower by the year end.
DIVIDEND
The directors have declared an interim dividend for 2003 of 6.0p (2002: 5.8p)
per ordinary share, an increase of 3% which will be paid on 14th November 2003
to shareholders on the register at the close of business on 17th October 2003.
No scrip alternative to the cash dividend is being offered in respect of the
2003 interim dividend.
BOARD CHANGES
P. Michael Smith retired from the Board with effect from 31st May 2003. Michael
has many years of experience in the manufacturing industry and brought an
incisiveness and clarity of purpose to the Group which was greatly appreciated.
The Board wishes to put on record its thanks for Michael's contributions to the
Group's performance over the last 17 years.
The Board is delighted to welcome Neil Daws as Director-Supply. He started with
Spirax Sarco as an apprentice and has gained experience in all aspects of
product design and development, as well as production and customer service. His
appointment was effective from 1st June 2003.
PROSPECTS
The Group has achieved a satisfactory performance in the first half of the year.
Our diverse customer base, wide product range, geographical spread and
dedicated people remain the fundamental strengths which underpin our world
leading businesses. Assuming that there is no deterioration in world trading
conditions, we expect to make further progress this year."
Spirax-Sarco Engineering plc
GROUP PROFIT AND LOSS ACCOUNT
Six months Six months Year ended
to 30th June to 30th June 31st December
2003 2002 2002
#'000 #'000 #'000
Turnover 154,026 144,879 296,363
Operating profit 20,257 19,993 42,674
Net interest payable (688) (1,088) (1,981)
Profit before taxation 19,569 18,905 40,693
Taxation (note 3) (6,420) (6,254) (13,887)
Profit after taxation 13,149 12,651 26,806
Minority interests - equity (399) (286) (681)
Attributable profit 12,750 12,365 26,125
Dividends (4,463) (4,304) (14,350)
Retained profit 8,287 8,061 11,775
Earnings per share (note 4) 17.2p 16.7p 35.3p
Dividends per share 6.0p 5.8p 19.3p
Spirax-Sarco Engineering plc
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Six months Six months Year ended
to 30th June to 30th June 31st December
2003 2002 2002
#'000 #'000 #'000
Profit for the period 12,750 12,365 26,125
Currency translation difference on foreign
currency net investments 2,514 (4,893) (8,475)
Total recognised gains and losses relating
to the period 15,264 7,472 17,650
Prior year adjustment in respect of the
adoption of FRS19 (959) (959)
Total recognised gains and losses 6,513 16,691
Spirax-Sarco Engineering plc
GROUP BALANCE SHEET
30th June 30th June 31st December
2003 2002 2002
#'000 #'000 #'000
Fixed assets
Intangible assets 11,305 9,919 10,384
Tangible assets 90,600 89,542 88,593
101,905 99,461 98,977
Current assets
Stocks 62,305 60,478 57,588
Debtors 91,390 91,098 87,130
Cash deposits and short term investments 26,265 17,611 31,796
Cash at bank and in hand 3,772 4,909 4,882
183,732 174,096 181,396
Creditors
Amounts falling due within one year (67,991) (68,386) (73,859)
Net current assets 115,741 105,710 107,537
Total assets less current liabilities 217,646 205,171 206,514
Creditors
Amounts falling due after more than one year (39,996) (40,792) (41,035)
Provisions for liabilities and charges (17,089) (16,075) (16,186)
Net assets 160,561 148,304 149,293
Capital and reserves
Called up share capital 18,589 18,507 18,575
Share premium account 34,584 33,578 34,380
Revaluation reserve 4,391 4,399 4,216
Capital redemption reserve 1,832 1,832 1,832
Profit and loss account 97,953 87,014 87,328
Shareholders' funds - equity 157,349 145,330 146,331
Minority interests - equity 3,212 2,974 2,962
160,561 148,304 149,293
Spirax-Sarco Engineering plc
GROUP CASH FLOW STATEMENT
Six months Six months Year ended
to 30th June to 30th June 31st December
2003 2002 2002
#'000 #'000 #'000
RECONCILIATION OF OPERATING PROFIT
TO OPERATING CASH FLOW
Operating profit 20,257 19,993 42,674
Depreciation & amortisation charges 6,842 6,271 12,492
Increase in stocks (2,696) 1,701 3,858
Increase in debtors (2,210) (2,720) (2,241)
Decrease in creditors and provisions (1,587) (628) 1,779
Cash inflow from operating activities 20,606 24,617 58,562
GROUP CASH FLOW STATEMENT
Cash inflow from operating activities 20,606 24,617 58,562
Net interest paid (615) (1,129) (1,914)
Dividends paid by subsidiary undertakings
to minority interests (182) (255) (527)
Taxation (9,014) (5,784) (11,605)
Purchase of tangible fixed assets (6,602) (5,317) (11,684)
Sales of tangible fixed assets 170 153 345
Acquisitions (net of disposals) (1,245) (1,213) (1,386)
Equity dividends paid (10,033) (9,622) (13,930)
Cash outflow before use of liquid resources
and financing (6,915) 1,450 17,861
Management of liquid resources 6,162 (1,737) (15,918)
(753) (287) 1,943
Financing
- Issue of ordinary share capital 218 275 1,144
- Increase in debt 647 863 (4,492)
865 1,138 (3,348)
Increase in cash in the period 112 851 (1,405)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET
DEBT (Note 5)
Increase in cash in the period 112 851 (1,405)
Cash inflow from increase in debt (647) (863) 4,492
Cash inflow from decrease in liquid
resources (6,162) 1,737 15,918
Change in net debt resulting from cash flows (6,697) 1,725 19,005
Amortisation of loan expenses - (11) (21)
Translation difference (1,014) (2,045) (1,177)
Movement in net debt in the period (7,711) (331) 17,807
Opening net debt (22,666) (40,473) (40,473)
Closing net debt (30,377) (40,804) (22,666)
Notes
1. Overseas results and cash flows have been translated into sterling at
average rates of exchange for each period. Foreign currency assets and
liabilities have been translated at period end rates.
2. In accordance with Financial Reporting Standard 10, purchased
goodwill arising on consolidation in respect of acquisitions since 1st January
1999 has been capitalised and is being amortised over 20 years. The charge for
amortisation in the six months to 30th June 2003 was #319,000 (2002: #266,000).
3. Taxation has been estimated at the rate expected to be incurred in
the full year.
Six months Six months Year ended
to 30th June to 30th June 31st December
2003 2002 2002
#'000 #'000 #'000
United Kingdom corporation tax 1,514 852 2,815
Overseas taxation 5,206 5,313 11,357
Deferred taxation (103) 104 (102)
Adjustment in respect of previous years (197) (15) (183)
6,420 6,254 13,887
4. The calculation of earnings per share before the non-operating item
is based on earnings of #12,750,000 (2002: #12,365,000) together with the
weighted average number of shares in issue during the half year of 74,316,289
(2002: 73,979,877). For the full year 2002 the calculation is based on
earnings of #26,125,000 together with the weighted average number of shares in
issue during the full year of 74,072,923.
5. Analysis of changes in net debt:
At Cash flow Exchange At
1st Jan 2003 movement 30 th June 2003
#'000 #'000 #'000 #'000
Cash in hand and at bank 4,882 (1,337) 227 3,772
Overdrafts (6,794) 1,449 (356) (5,701)
112
Debt due within a year (12,542) (2,420) (365) (15,327)
Debt due beyond a year (38,491) 1,593 (1,051) (37,949)
Finance leases (1,517) 180 (100) (1,437)
(647)
Current asset investments 31,796 (6,162) 631 26,265
(22,666) (6,697) (1,014) (30,377)
6. Capital employed is represented by net assets excluding goodwill and
net debt.
7. This financial information, which is unaudited, does not amount to
full accounts within the meaning of Section 240 of the Companies Act 1985 (as
amended). Full year accounts for 2002 with an unqualified audit report have
been filed with the Registrar of Companies.
8. Copies of the Interim Report will be sent on 12th September 2003 to
members and can be obtained from our registered office at Charlton House,
Cirencester Road, Cheltenham, Gloucestershire GL53 8ER. From 11th September
2003 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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