Spirax Group Plc. · LSE:SPX
Spirax — Spirax-Sarco Engineering — H1 2020 Earnings Presentation
31 slides from Spirax's earnings presentation, July 2020
Slide 1: 2020 Half Year Results
2020 HALF YEAR RESULTS SIX MONTHS ENDED 30th JUNE 2020 Nicholas Anderson (Group Chief Executive) Kevin Boyd (Chief Financial Officer) Scientist working on an experimental vaccine for COVID-19 in a Biotechnology facility in Beijing using a Watson-Marlow process pump 0 2020 Half Year Results Six month
Slide 2: Agenda
Agenda Half Year 2020 Highlights Nicholas Anderson Half Year 2020 Financial Review Kevin Boyd Operations and Outlook Nicholas Anderson 1 2020 Half Year Results Six months ended 30th June 2020 Engineering every day
Slide 3: HY 2020 operational highlights
HY 2020 operational highlights • Employees’ engagement pivotal for customers and results • Employee health, safety and wellbeing remained top priority • Operational health & safety performance improved • Manufacturing and warehousing facilities remained operational • Strategic capital and revenue in
Slide 4: HY 2020 performance highlights
HY 2020 performance highlights • Resilient trading performance – robust business model mitigates unprecedented circumstances • Organic revenue outperformed global industrial production (IP) • Strong cost containment reduced impact on operating profit • Watson-Marlow sales and profit up; strong BioPh
Slide 5: Agenda
Agenda Half Year 2020 Highlights Nicholas Anderson Half Year 2020 Financial Review Kevin Boyd Operations and Outlook Nicholas Anderson 4 2020 Half Year Results Six months ended 30th June 2020 Engineering every day
Slide 6: Financial performance
Financial performance Trading performance resilient, despite unprecedented circumstances • Sales down 5% 30th June 30th June organically against 2020 2019 Reported Organic⁺ 8% decline in global IP Revenue £569.7m £591.2m -4% -5% • Organic sales and Operating profit* £119.0m £129.2m -8% -7% profit de
Slide 7: Sales bridge
Sales bridge Resilient sales against strong decline in global industrial production • Total organic⁺ decline of less than 610 5%; Steam Specialties -7%, 600 Electric Thermal 15.2 12.8 Solutions -12%, 9.5 Sales £m Watson-Marlow 590 +5% 9.3 7.6 10.4 • Thermocoax 580 acquisition adds 2.3 £15.2m 570 • N
Slide 8: Profit bridge
Profit bridge Cost containment and efficiencies partially offset lower sales • Adjusted operating profit* down 7% 135 organically • Negative impact 130 4.5 from exchange (FX) 0.8 7.8 3.1 headwind Profit £m • Thermocoax 125 acquisition adds £3.1m 4.2 3.9 1.9 • Reported profit 120 decline 8% 0.4 129.2
Slide 9: Operating profit margin of 20.9%
Operating profit margin of 20.9% Good margin resilience • Operating profit 27% margin 20.9% • Margin down 50 23.1% bps organically; lower sales 22% volumes and FX • Steam Specialties margin down 190 20.9% bps organically 17% • Electric Thermal Solutions margin down 130 bps organically 12% • Watson-M
Slide 10: Cash flow
Cash flow Cash flow £m 30th June 2020 30th June 2019 • Good cash Adjusted operating profit* 119.0 129.2 generation; 86% Depreciation and amortisation (excluding IFRS 16) 18.0 17.0 cash conversion Depreciation of leased assets 6.0 5.4 Pensions/Share plans 1.5 0.8 • Working capital as Working capital
Slide 11: Agenda
Agenda Half Year 2020 Highlights Nicholas Anderson Half Year 2020 Financial Review Kevin Boyd Operations and Outlook Nicholas Anderson 10 2020 Half Year Results Six months ended 30th June 2020 Engineering every day
Slide 12: Global industrial production growth rates
Global industrial production growth rates 6.0% 3.6% 3.1% 4.0% 3.0% Forecast 2.0% 1.4% 1.1% 0.9% 0.0% -2.0% % = Annual average -4.0% -6.4% -6.0% -8.0% -10.0% Source: Oxford Economics, July 2020 -12.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015 2016 2
Slide 13: Steam Specialties
Steam Specialties 30th June Acquisitions 30th June 2019 Exchange Organic & disposals 2020 Organic⁺ Reported Sales £365.7m (£9.6m) (£24.4m) - £331.7m -7% -9% Op profit* £83.9m (£4.3m) (£11.6m) - £68.0m -15% -19% Margin* 22.9% 20.5% -190 bps -240 bps ⁺ Organic measures are at constant currency and exc
Slide 14: Steam Specialties: Europe, Middle East and Africa
Steam Specialties Europe, Middle East and Africa 30th June Acquisitions 30th June 2019 Exchange Organic & disposals 2020 Organic⁺ Reported Sales £166.6m (£1.5m) (£12.8m) - £152.3m -8% -9% Op profit* £34.3m (£0.6m) (£7.8m) - £25.9m -23% -25% Margin* 20.6% 17.0% -340 bps -360 bps ⁺ Organic measures ar
Slide 15: Steam Specialties: Asia Pacific
Steam Specialties Asia Pacific 30th June Acquisitions 30th June 2019 Exchange Organic & disposals 2020 Organic⁺ Reported Sales £116.8m (£2.1m) (£9.3m) - £105.4m -8% -10% Op profit* £33.6m (£1.0m) (£4.2m) - £28.4m -13% -16% Margin* 28.8% 26.9% -150 bps -190 bps ⁺ Organic measures are at constant curr
Slide 16: Steam Specialties: Americas
Steam Specialties Americas 30th June Acquisitions 30th June 2019 Exchange Organic & disposals 2020 Organic⁺ Reported Sales £82.3m (£6.0m) (£2.3m) - £74.0m -3% -10% Op profit* £16.0m (£2.7m) £0.4m - £13.7m +3% -14% Margin* 19.4% 18.5% +110 bps -90 bps ⁺ Organic measures are at constant currency and e
Slide 17: Electric Thermal Solutions
Electric Thermal Solutions 30th June Acquisitions 30th June 2019 Exchange Organic & disposals 2020 Organic⁺ Reported Sales £83.1m £1.0m (£10.4m) £15.2m £88.9m -12% +7% Op profit* £8.1m £0.1m (£1.9m) £3.1m £9.4m -23% +16% Margin* 9.7% 10.6% -130 bps +90 bps ⁺ Organic measures are at constant currency
Slide 18: Watson-Marlow
Watson-Marlow 30th June Acquisitions 30th June 2019 Exchange Organic & disposals 2020 Organic⁺ Reported Sales £142.4m (£0.9m) £7.6m - £149.1m +5% +5% Op profit* £45.0m (£0.3m) £3.9m - £48.6m +9% +8% Margin* 31.6% 32.6% +100 bps +100 bps ⁺ Organic measures are at constant currency and exclude contrib
Slide 19: COVID-19: Half-year update
COVID-19: Half-year update • Health, safety and wellbeing of employees a top priority • Supporting the vulnerable in our communities • Over 50% of sales to sectors on front line of pandemic • Sales engineers maintained virtual connection with customers • Manufacturing and warehousing sites remained
Slide 20: Customer case studies
Customer case studies Read more: customer case studies can be found in Appendix I 19 2020 Half Year Results Six months ended 30th June 2020 Engineering every day
Slide 21: Summary and outlook
Summary and outlook • Resilient first half performance. Despite an 8% contraction of global IP: Reported revenue down 4%; organic revenue down 5% Operating profit down 8%; organically down 7% Operating margin 20.9%; organically down 50 bps • FX headwind for 2020: 2% on sales; 4% on operating p
Slide 22: Half Year Results
Half Year Results For the period ended 30th June 2020 Engineering opportunities for growth; creating shareholder value 21 2020 Half Year Results Six months ended 30th June 2020 Engineering every day
Slide 23: Appendices
Appendices 22 2020 Half Year Results Six months ended 30th June 2020 Engineering every day
Slide 24: Appendix I - Case study: Spirax Sarco BeNeLux
Appendix I - Case study: Spirax Sarco BeNeLux Energy savings and CO₂ reduction for manufacturer of sealing solutions Application: heat recovery from boiler flue gases Requirement: engineered solution to recover thermal energy and improve boiler efficiency Solution: condensing economiser from Spirax
Slide 25: Appendix I - Case study: Thermocoax France
Appendix I - Case study: Thermocoax France Increased service life and data capacity for geo-satellite Application: electrical propulsion to thrust broadcasting satellite into orbit and an engine heating system Requirement: electrical components that can withstand temperature extremes, with a long se
Slide 26: Appendix I - Case study: Watson-Marlow Brazil
Appendix I - Case study: Watson-Marlow Brazil Precision filling of test tubes for COVID-19 testing at bioBoaVista Application: filling of test tubes with a “viral transport medium” for nasal testing and diagnosis of COVID-19 Requirement: compact, efficient, sterile, precise filling Solution: 7 Flexi
Slide 27: Appendix II - Underlying margin factors
Appendix II - Underlying margin factors Effects on margin; arrows are qualitative and indicate direction only H1 2020 H2 2020 Currency movements Operating leverage Sales pricing (vs. inflation) Manufacturing strategies Business and product mix Business development investment Impact of acquisitions a
Slide 28: Appendix III - Cash conversion
Appendix III Cash conversion 30th June 30th June £m 2020 2019 Adjusted cash generated from operations 102.2 86.9 Adjusted operating profit* 119.0 129.2 Cash conversion 86% 67% * See Appendix V for definition of profit measures. 27 2020 Half Year Results Six months ended 30th June 2020 Engineering ev
Slide 29: Appendix IV - Currencies
Appendix IV Currencies Average exchange rates 30th June 30th June 2019 2020 % 2020* % US dollar 1.29 1.27 +2% 1.29 0% Euro 1.14 1.15 -1% 1.13 +1% RMB 8.78 8.94 -2% 9.04 -3% Won 1,479 1,531 -4% 1,546 -5% Brazilian real 4.96 6.21 -25% 6.50 -31% Argentine peso 53.28 82.01 -54% 87.93 -65% * 2020 rates a
Slide 30: Appendix V - 2020 note on first half profit measures
Appendix V 2020 note on first half profit measures The Group uses adjusted figures as key performance measures in addition to those reported under adopted IFRS. The Group’s management believes these measures provide valuable additional information for users of the financial statements in understandi
Slide 31: Appendix VI - Current guidance
Appendix VI - Current guidance 2019 2020 Actual Estimate Capex (excluding IFRS 16) £62.4m £60.0m Effective Tax Rate 28.5% 28.0% Net Finance Cost £8.4m £9.0m Net impact of acquisitions and disposals on revenue +1% +1% Net impact of acquisitions and disposals on adjusted operating profit +1% +1% Forei
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