Spirax Group Plc. · LSE:SPX
Spirax — Spirax-Sarco Engineering — FY2020 Earnings Presentation
32 slides from Spirax's earnings presentation, February 2021
Slide 1: 2020 Results
2020 Results Year ended 31st December 2020 Nicholas Anderson (Group Chief Executive) Nimesh Patel (Chief Financial Officer) Efficient Safer Efficient, Sustainable 0 2020 Results Year ended 31st December 2020 Safer, Sustainable
Slide 2: Agenda
Agenda 2020 Highlights Nicholas Anderson 2020 Financial Review Nimesh Patel Operations and Outlook Nicholas Anderson 1 2020 Results Year ended 31st December 2020 Efficient, Safer, Sustainable
Slide 3: 2020 operational highlights
2020 operational highlights • Outstanding contributions from our employees during unprecedented times • Continued progress in Health & Safety; stepped up wellbeing initiatives • Increased focus on sustainability, inclusion & diversity, talent development • Direct sales model adapted to new customer
Slide 4: 2020 performance highlights
2020 performance highlights • Resilient sales and margin performance despite challenging market conditions • Sales related to customer OPEX less impacted than CAPEX-related sales • Sales to more defensive, less cyclical sectors now over 55% • Steam Specialties delivered resilient sales and margin pr
Slide 5: Advancing our ESG agenda
Advancing our ESG agenda ENVIRONMENT SOCIAL GOVERNANCE Net zero emissions before 2040; Committed to inclusivity and creating Improved diversity as well as 50% electricity from renewable a culture where diversity thrives. employee engagement. sources by 2030. • Appointed Group Head Sustainability • A
Slide 6: Agenda
Agenda 2020 Highlights Nicholas Anderson 2020 Financial Review Nimesh Patel Operations and Outlook Nicholas Anderson 5 2020 Results Year ended 31st December 2020 Efficient, Safer, Sustainable
Slide 7: Financial performance
Financial performance Strong organic sales performance despite industrial production decline • Revenue down 3%, organically 2020 2019 Reported Organic⁺ • Operating profit down 1%, Revenue £1,193.4m £1,242.4m -4% -3% organically Operating profit* £270.4m £282.7m -4% -1% • EPS down 3% driven by Operat
Slide 8: Sales bridge
Sales bridge Growth in Watson-Marlow, resilient performance in Steam Specialties and ETS • Currency headwind of 2% 1,300 1,250 27.2 • Thermocoax adds £15.2m to 15.2 40.7 sales (1% impact) 1,200 21.7 25.4 • Total organic⁺ decline of 3%: – Steam Specialties -6% 1,150 Sales £m – ETS -12% 1,242.4 1,193.
Slide 9: Profit bridge
Profit bridge Growth in Watson-Marlow, resilient performance in Steam Specialties and ETS • Currency headwind of 4% 300 • Thermocoax adds £3.1m to profit (1% impact) 12.0 280 3.1 14.5 13.9 0.1 • Total organic decline of 1%: 2.7 – Steam Specialties -9% 260 – ETS Profit £m -11% – Watson-Marlow +15% 24
Slide 10: Operating margin of 22.7%
Operating margin of 22.7% • Excluding 2017 acquisitions, margin maintained at above 27% 25% 25.2% 25.1% 25.1% 24.6% 24% • Operating margin 22.7%, up 40 bps organically 21% • Organic margin movement: – Steam Specialties -80 bps 18% 23.8% 23.6% 22.5% 22.8% 23.0% 22.8% 22.7% 22.0% – ETS +10 bps 20.2% 2
Slide 11: Strong cash flow
Strong cash flow • Excellent cash genera on˄ Cash flow (£ million) 31st December 2020 31st December 2019 with cash conversion of Adjusted operating profit* 270.4 282.7 Depreciation and amortisation (excluding IFRS 16) 36.7 34.3 102% Depreciation of leased assets 12.1 11.3 • Improved working capital
Slide 12: Dividend growth
Dividend growth 200.0 120p • 53 years of dividend 180.0 progress with a CAGR of 11% 160.0 100p 140.0 • Final dividend up 8% to Pence per share +7% 84.5p 120.0 +10% +14% 100.0 +15% • Total dividend up 7% to 80.0 +7% +10% +9% 118.0p 60.0 +8% +11% +14% 40.0 • Dividend cover of 2.2 times 20.0 0.0 2011 2
Slide 13: Agenda
Agenda 2020 Highlights Nicholas Anderson 2020 Financial Review Nimesh Patel Operations and Outlook Nicholas Anderson 12 2020 Results Year ended 31st December 2020 Efficient, Safer, Sustainable
Slide 14: Annual IP growth rates by quarter 2019-2021
Annual IP growth rates by quarter 2019-2021 IP Index Q4 2019 = 100 110.0 Forecast 105.0 104.4 103.2 102.0 100.6 101.0 99.5 99.7 99.6 100.0 100.0 97.4 101.6 100.0 95.6 98.6 97.5 96.7 95.0 95.9 89.7 Y-o-Y Global IP growth 90.0 Forecast 2019 2020 2021 87.6 24/Feb/21 1.3% (4.0%) 7.2% 85.0 13/Jan/21 1.0%
Slide 15: Steam Specialties
Steam Specialties Acquisitions 31st Dec 2019 Exchange Organic and disposals 31st Dec 2020 Organic⁺ Reported Sales £755.4m (£20.6m) (£40.7m) - £694.1m -6% -8% Operating profit* £177.9m (£9.1m) (£14.5m) - £154.3m -9% -13% Margin* 23.6% 22.2% -80 bps -140 bps ⁺ Organic measures are at constant currency
Slide 16: Steam Specialties: Europe, Middle East and Africa
Steam Specialties Europe, Middle East and Africa Acquisitions 31st Dec 2019 Exchange Organic and disposals 31st Dec 2020 Organic⁺ Reported Sales £335.7m (£1.0m) (£24.7m) - £310.0m -7% -8% Operating profit* £67.0m (£0.9m) (£12.0m) - £54.1m -18% -19% Margin* 20.0% 17.5% -220 bps -250 bps ⁺ Organic mea
Slide 17: Steam Specialties: Asia Pacific
Steam Specialties Asia Pacific Acquisitions 31st Dec 2019 Exchange Organic and disposals 31st Dec 2020 Organic⁺ Reported Sales £249.8m (£3.7m) (£11.5m) - £234.6m -5% -6% Operating profit* £72.5m (£1.4m) £1.3m - £72.4m +2% 0% Margin* 29.0% 30.9% +200 bps +190 bps ⁺ Organic measures are at constant cu
Slide 18: Steam Specialties: Americas
Steam Specialties Americas Acquisitions 31st Dec 2019 Exchange Organic and disposals 31st Dec 2020 Organic⁺ Reported Sales £169.9m (£15.9m) (£4.5m) - £149.5m -3% -12% Operating profit* £38.4m (£6.8m) (£3.8m) - £27.8m -12% -28% Margin* 22.6% 18.6% -190 bps -400 bps ⁺ Organic measures are at constant
Slide 19: Electric Thermal Solutions
Electric Thermal Solutions Acquisitions 31st Dec 2019 Exchange Organic and disposals 31st Dec 2020 Organic⁺ Reported Sales £186.1m (£1.6m) (£21.7m) £15.2m £178.0m -12% -4% Operating profit* £24.7m (£0.5m) (£2.7m) £3.1m £24.6m -11% 0% Margin* 13.3% 13.8% +10 bps +50 bps ⁺ Organic measures are at cons
Slide 20: Watson-Marlow
Watson-Marlow Acquisitions 31st Dec 2019 Exchange Organic and disposals 31st Dec 2020 Organic⁺ Reported Sales £300.9m (£5.0m) £25.4m - £321.3m +9% +7% Operating profit* £95.8m (£2.4m) £13.9m - £107.3m +15% +12% Margin* 31.8% 33.4% +180 bps +160 bps ⁺ Organic measures are at constant currency and exc
Slide 21: Living our purpose in 2020
Living our purpose in 2020 Engineering a more efficient, safer and sustainable world Read more: customer case studies can be found in Appendix I 20 2020 Results Year ended 31st December 2020 Efficient, Safer, Sustainable
Slide 22: Summary and outlook
Summary and outlook • Revenue down 4%; organic revenue down 3% • Operating profit down 4%; organically down 1% • Operating margin 22.7%; up 40bps organically • Watson Marlow sales growth driven by Biopharm • Resilient performance in Steam Specialties and Electric Thermal Solutions • Global IP recove
Slide 23: Full Year Results
Full Year Results For the year ended 31st December 2020 Engineering opportunities for growth; creating shareholder value 22 2020 Results Year ended 31st December 2020 Efficient, Safer, Sustainable
Slide 24: Appendices
Appendices 23 2020 Results Year ended 31st December 2020 Efficient, Safer, Sustainable
Slide 25: Appendix I - Case study: Spirax Sarco South Africa
Appendix I - Case study: Spirax Sarco South Africa Improved process and productivity, saving water, energy and CO2 Application: issues pumping sunflower oil for noodle frying due to poor temperature control, resulting in high oil viscosity, exacerbated on cold days Requirement: sunflower oil needed
Slide 26: Appendix I - Case study: Watson-Marlow China
Appendix I - Case study: Watson-Marlow China Supported the production of devices for diagnosing COVID-19 Application: rapid production of Chemiluminescent immunoassay (CLIA) devices Requirement: CLIA diagnostic instruments contain multichannel pumps for transferring waste liquid produced after the t
Slide 27: Appendix I - Case study: Chromalox USA
Appendix I - Case study: Chromalox USA Delivered zero carbon heating solution that met strict requirements Application: heat high temperature heat transfer fluid to be circulated through critical production tools, in keeping with the electric vehicle and clean energy company’s “green” ethos Requirem
Slide 28: Appendix II - Underlying margin factors
Appendix II - Underlying margin factors Effects on margin; arrows are qualitative and indicate direction only 2020 2021 Currency movements Operating leverage Sales pricing (vs. inflation) Manufacturing strategies Business and product mix Business development investment Impact of acquisitions and dis
Slide 29: Appendix III: Cash conversion
Appendix III Cash conversion Pounds (£) million 2020 2019 Adjusted cash generated from operations 275.8 238.1 Adjusted Operating Profit* 270.4 282.7 Cash conversion 102% 84% * See Appendix V for definition of profit measures. 28 2020 Results Year ended 31st December 2020 Efficient, Safer, Sustainabl
Slide 30: Appendix IV: Currencies
Appendix IV Currencies Average exchange rates 2020 2019 Change Bank of England index 78.3 78.1 0% US$ 1.29 1.28 -1% Euro 1.13 1.14 1% RMB 8.93 8.83 -1% Won 1,524 1,486 -3% Brazilian Real 6.67 5.04 -32% Argentine Peso 91.65 61.83 -48% 29 2020 Results Year ended 31st December 2020 Efficient, Safer, Su
Slide 31: Appendix V: 2020 note on profit measures
Appendix V 2020 note on 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 understanding the Grou
Slide 32: Appendix VI: Current guidance
Appendix VI Current guidance 2020 Actual 2021 Estimate Capex (as a percentage of sales) 4% c. 6% Effective Tax Rate 27.5% c. 27% Net Finance Cost £8.7m c. £9m Net impact of acquisitions and disposals on revenue +1% - Net impact of acquisitions and disposals on adjusted operating profit +1% - Foreign
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