Spirax Group Plc. · LSE:SPX
Spirax — Spirax-Sarco Engineering — H1 2016 Earnings Presentation
28 slides from Spirax's earnings presentation, August 2016
Slide 1: 2016 Half Year Results
2016 Half Year Results Six months ended 30th June 2016 Bill Whiteley – Chairman Nicholas Anderson – Group Chief Executive Kevin Boyd – Group Finance Director 0 2016 Half Year Results Six months ended 30th June 2016
Slide 2: Agenda
Agenda 2016 H1 Highlights 2016 H1 Financial Review Operations and Outlook Appendices 1 2016 Half Year Results Six months ended 30th June 2016
Slide 3: 2016 First half year highlights
2016 First half year highlights 30th June 30th June 2016 2015 Reported sales £344.0m £320.0m Organic sales growth* +5% +3% Operating profit margin** 22.5% 20.6% EPS** 73.1p 60.5p DPS 22.5p 20.8p * Organic measures are at constant currency and exclude acquisitions and disposals ** See Appendix V for
Slide 4: Agenda: 2016 H1 Financial Review
Agenda Kevin Boyd 2016 H1 Financial Review 3 2016 Half Year Results Six months ended 30th June 2016
Slide 5: Financial aspects
Financial aspects 30th June 30th June • Organic sales +5%; growth in all 2016 2015 Reported Organic* divisions of the Revenue £344.0m £320.0m +8% +5% Steam Specialties business and Operating profit** £77.5m £65.8m +18% +16% Watson-Marlow Operating profit margin** 22.5% 20.6% +190 bps +210 bps • Oper
Slide 6: Sales bridge
Sales bridge Increase in sales £m 350 • Currency (FX) gain of 1% 345 2.6 7.2 • Total organic* 340 344.0 growth of 5%; Steam Specialties 335 9.8 +4%, Watson- Marlow +10% 330 4.4 • Asepco, 325 Flowsmart, WM 320 Japan and M&M add a net 1% 315 320.0 310 305 300 * Organic measures are at constant currenc
Slide 7: Profit bridge
Profit bridge Increase in adjusted operating profit £m • Adjusted 78.0 operating profit* +18% 76.0 77.5 • Negligible FX 74.0 6.8 effect • Non-recurring 72.0 contribution from 0.8 2.3 Argentina in 70.0 period 68.0 1.5 • Restructuring in H1 2015 0.3 66.0 • Asepco, 65.8 Flowsmart, WM 64.0 Japan and M&M
Slide 8: H1 operating profit margin of 22.5%
H1 operating profit margin of 22.5% 25% • Operating margin* up across all divisions 20% • Operational gearing • Cost controls and 15% benefits from cost reduction actions in 2015 10% • Non-recurring benefit from 5% 22.5% Argentina 15.3% 17.1% 15.8% 17.1% 17.1% 17.0% 15.0% 19.5% 19.3% 21.0% 19.9% 21.
Slide 9: Currency movements
Currency movements FX translation impact on sales 2016 Actual Projected 6% projected full year 1% H1 translation translation impact on sales impact on sales Based on Spirax Sarco sales-weighted currency translation index Translation Index 2015 H1 2015 Year 2016 H1 2016 Year 8 2016 Half Year Results
Slide 10: Adjusted cash flow
Adjusted cash flow 30th June 30th June Pounds (£) millions 2016 2015 Adjusted operating profit* 77.5 65.8 Depreciation and share schemes 13.9 13.8 • Good cash flow performance Working capital (5.1) (1.6) Capital expenditure (16.8) (13.4) • 90% cash conversion Adjusted cash from operations 69.5 64.6
Slide 11: Operating margin factors
Operating margin factors Indicative effects on operating margins* H1 2016 H2 2016 Currency movements Operating leverage Sales pricing (vs. inflation) Material prices Manufacturing strategies Business & product mix Business development investment * The arrows as shown are qualitative and indicate dir
Slide 12: Agenda: Operations and Outlook
Agenda Nicholas Anderson Operations and Outlook 11 2016 Half Year Results Six months ended 30th June 2016
Slide 13: Annual IP growth rates by quarter 2012-2016
Annual IP growth rates by quarter 2012-2016 Actual Projected 5.0% Developed (OECD) Emerging (Non-OECD) Global 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% Source: CHR Economics July 2016 -2.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2013 2014 2015 2016 12 2016 Half Year Results Six months
Slide 14: Europe, Middle East & Africa (EMEA)
Europe, Middle East & Africa (EMEA) 30th June 30th June 2015 Exchange Organic Disposal 2016 Organic* Reported Sales £111.8m £2.7m £0.8m (£3.2m) £112.1m +1% +0% Op profit** £21.3m £0.2m £2.2m (£0.6m) £23.1m +11% +8% Margin** 19.0% 20.6% +180 bps +160 bps * Organic measures are at constant currency an
Slide 15: Asia Pacific
Asia Pacific 30th June Acquisition/ 30th June 2015 Exchange Organic Disposal 2016 Organic* Reported Sales £74.3m £1.4m £6.3m - £82.0m +8% +10% Op profit** £15.5m £0.3m £2.3m - £18.1m +14% +17% Margin** 20.9% 22.0% +110 bps +110 bps * Organic measures are at constant currency and exclude acquisitions
Slide 16: Americas
Americas 30th June Acquisition/ 30th June 2015 Exchange Organic Disposal 2016 Organic* Reported Sales £61.0m (£2.1m) £2.7m - £61.6m +5% +1% Op profit** £11.8m (£1.3m) £2.9m - £13.4m +28% +14% Margin** 19.3% 21.7% +400 bps +240 bps * Organic measures are at constant currency and exclude acquisitions
Slide 17: Watson-Marlow
Watson-Marlow 30th June 30th June 2015 Exchange Organic Acquisitions 2016 Organic* Reported Sales £72.8m £2.5m £7.2m £5.8m £88.3m +10% +21% Op profit** £21.8m £1.1m £4.7m £1.4m £29.0m +21% +33% Margin** 29.9% 32.9% +300 bps +300 bps * Organic measures are at constant currency and exclude acquisition
Slide 18: Implementing our strategy for growth
Implementing our strategy for growth Notable progress in 2016 • Spirax-Sarco Academy structure and programmes in place • Increased sales sectorisation, higher growth in priority sectors • Innovative product developments, new products launched • New Clean Steam unit in UK, first sectorisation in manu
Slide 19: Case study: applied solutions
Case study: applied solutions Innovative heat transfer solution in bottle washing application at Brazilian brewery • The problem: fouling, low heat transfer efficiency, high maintenance and safety concerns with heat exchanger inside bottle washing machine • The requirement: heat exchange unit outsid
Slide 20: Case study: product superiority
Case study: product superiority MasoSine pumps from Watson-Marlow enable fully automated granola production • The problem: ingredients weighed manually into mixer during batch manufacturing process • The requirement: accurate and automated dosing of ingredients with gentle, low-shear pumping; easy c
Slide 21: Summary and outlook
Summary and outlook • Organic sales up 5% • Operating profit up 18% • Currency tailwind: 1% on sales, broadly neutral on profit • Strong balance sheet, cash conversion 90% • Interim dividend up 8% • Implementing strategy to accelerate growth and improve efficiencies • Anticipate slower sales growth
Slide 22: Focused on consistent growth and creating shareholder value
Spirax-Sarco Engineering plc Half Year Results to 30th June 2016 Focused on consistent growth and creating shareholder value 21 2016 Half Year Results Six months ended 30th June 2016
Slide 23: Appendices
Appendices 22 2016 Half Year Results Six months ended 30th June 2016
Slide 24: Appendix I - Key impacts and outlook from Brexit
Appendix I - Key impacts and outlook from Brexit Key impacts: 1) Currency fluctuations - Translation gains: over 90% of sales and profits generated outside UK - Transaction impacts: lower input costs for global sales companies on £85m UK exports higher input costs for UK manufacturing plants on £2
Slide 25: Appendix II - Return on capital employed
Appendix II - Return on capital employed 30th June 30th June Pounds (£) millions 2016 2015 Working Capital Inventories 104.1 98.8 Trade receivables 160.7 133.2 Prepayments, other current assets 40.2 30.1 Capital employed element of business held for sale - 4.7 Trade, other payables, current provisio
Slide 26: Appendix III - Cash conversion
Appendix III - Cash conversion 30th June 30th June Pounds (£) millions 2016 2015 Adjusted cash generated from operations 69.5 64.6 Adjusted operating profit* 77.5 65.8 Cash conversion 90% 98% * See Appendix V for definition of profit measures 25 2016 Half Year Results Six months ended 30th June 2016
Slide 27: Appendix IV - Currencies
Appendix IV - Currencies • Bank of England Average exchange rates 30th June 30th June sterling index 2015 2016 % 2016* % weakened by 5% Spirax weighted index 100.0 98.6 +1% 95.7 +6% overall Bank of England sterling index 90.6 86.5 +5% 84.1 +9% US$ 1.53 1.42 +8% 1.38 +11% Euro 1.36 1.29 +5% 1.25 +10%
Slide 28: Appendix V - 2016 note on first half profit measures
Appendix V - 2016 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 understan
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