Spirax Group Plc. · LSE:SPX
Spirax — Spirax-Sarco Engineering — H1 2018 Earnings Presentation
27 slides from Spirax's earnings presentation, Nov 25, 2018
Slide 1: 2018 Half Year Results
2018 HALF YEAR RESULTS Six months ended 30th June 2018 Nicholas Anderson (Chief Executive) Kevin Boyd (Chief Financial Officer) Obadah Zaher (Research Team Leader) and Jagoda Cieslik (Year in Industry Student, R&D) reviewing a steam system’s health using a SIMS™ software and energy monitoring soluti
Slide 2: Agenda
Agenda 2018 Half Year Highlights Nicholas Anderson 2018 Half Year Financial Review Kevin Boyd Operations and Outlook Nicholas Anderson 1 2018 Half Year Results Six months ended 30th June 2018 Engineering Opportunities
Slide 3: 2018 Half Year highlights
2018 Half Year highlights • Revenue growth of 28%, organic sales growth 7%⁺ • Adjusted operating margin of 23.0%* • Good organic growth in both Steam Specialties and Watson-Marlow • Gestra and Chromalox performing to plan; adding 24% to sales, 16% to profit • Net debt of £373.0 million; 1.3x EBITDA
Slide 4: Agenda
Agenda 2018 Half Year Highlights Nicholas Anderson 2018 Half Year Financial Review Kevin Boyd Operations and Outlook Nicholas Anderson 3 2018 Half Year Results Six months ended 30th June 2018 Engineering Opportunities
Slide 5: Financial performance
Financial performance 30th June 30th June • Organic sales +7%, 2018 2017 Reported Organic⁺ growth in all segments of Steam Revenue £547.6m £428.6m +28% +7% Specialties and Operating profit* £125.7m £101.2m +24% +15% Watson-Marlow Operating profit margin* 23.0% 23.6% -60 bps +170 bps • Gestra and Chr
Slide 6: Sales bridge
Sales bridge Increase in sales • 3% currency (FX) 560 headwind 10.1 540 8.2 • Total organic⁺ 7.6 547.6 growth of 7%; 101.5 4.1 520 Steam Specialties +7%, Watson- 500 Marlow +9% Sales £m • Acquisitions add 480 24% 460 440 (12.5) 420 428.6 ⁺ Organic measures are at 400 constant currency and exclude in
Slide 7: Profit bridge
Profit bridge Increase in adjusted operating profit • Adjusted operating 130 profit* +24% 3.9 0.1 125 • 5% currency (FX) 5.9 125.7 headwind 120 4.2 • Non-recurring 115 benefit from 15.2 0.1 Argentine peso 110 Profit £m devaluation 105 • Acquisitions add (4.9) 16% 100 101.2 • Organic profit 95 growth
Slide 8: Operating margin of 23.0%
Operating margin of 23.0% 27% 24.8% • Group margin +170 bps organically; +110 bps excluding Argentine effect • Steam Specialties margin +100 bps 18% organically, excluding Argentine effect 23.0% • Watson-Marlow margin -30 bps, 9% exchange headwind; +60 bps organically 0% 2008 2009 2010 2011 2012 201
Slide 9: Cash flow
Cash flow Adjusted cash flow 30th June 30th June • Good cash Pounds (£) million 2018 2017 generation; 75% Adjusted operating profit* 125.7 101.2 cash conversion Depreciation and amortisation 15.4 14.0 • Working capital Adjusted earnings before interest, tax, depreciation and amortisation 141.1 115.2
Slide 10: Underlying margin factors
Underlying margin factors Effects on underlying margins* H1 2018 H2 2018 Currency movements Operating leverage Sales pricing (vs. inflation) Manufacturing strategies Business and product mix Business development investment Impact of acquisitions * The arrows as shown are qualitative and indicate dir
Slide 11: Agenda
Agenda 2018 Half Year Highlights Nicholas Anderson 2018 Half Year Financial Review Kevin Boyd Operations and Outlook Nicholas Anderson 10 2018 Half Year Results Six months ended 30th June 2018 Engineering Opportunities
Slide 12: Annual IP growth rates by quarter 2012-2018
Annual IP growth rates by quarter 2012-2018 6.0% Developed (OECD) Emerging (Non-OECD) Global 5.0% 3.6% 4.0% 3.0% 2.0% 1.7% 1.0% 0.6% 0.0% -1.0% -2.0% 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 2012 2013 2014 2015 2016 2017 2018 Source: CHR Economics – June 2018 Pre
Slide 13: Steam Specialties: Europe, Middle East and Africa
Steam Specialties Europe, Middle East and Africa 30th June 30th June 2017 Exchange Organic Acquisitions 2018 Organic⁺ Reported Sales £137.9m £1.0m £4.1m £26.1m £169.1m +3% +23% Op profit* £30.4m £1.0m £0.1m £4.3m £35.8m +0% +18% Margin* 22.0% 21.2% -60 bps -80 bps ⁺ Organic measures are at constant
Slide 14: Steam Specialties: Asia Pacific
Steam Specialties Asia Pacific 30th June 30th June 2017 Exchange Organic Acquisitions 2018 Organic⁺ Reported Sales £97.9m (£2.0m) £7.6m £1.2m £104.7m +8% +7% Op profit* £25.0m (£0.7m) £4.2m £0.0m £28.5m +17% +14% Margin* 25.5% 27.2% +220 bps +170 bps ⁺ Organic measures are at constant currency and e
Slide 15: Steam Specialties: Americas
Steam Specialties Americas 30th June 30th June 2017 Exchange Organic Acquisitions 2018 Organic⁺ Reported Sales £72.3m (£7.5m) £8.2m £2.1m £75.1m +13% +4% Op profit* £13.8m (£2.8m) £5.9m £0.3m £17.2m +54% +25% Margin* 19.1% 22.9% +620 bps +380 bps ⁺ Organic measures are at constant currency and exclu
Slide 16: Chromalox
Chromalox (For reference only) 30th June 30th June Half Year 2017 2017 Exchange Organic Acquisitions 2018 @HY 2018 FX Sales £0.0m - - £72.1m £72.1m £67.3m +7% Op profit* £0.0m - - £10.6m £10.6m £11.7m -9% Margin* 14.7% 17.4% -270 bps * See Appendix III for definition of adjusted profit measures. • S
Slide 17: Watson-Marlow
Watson-Marlow 30th June 30th June 2017 Exchange Organic Acquisitions 2018 Organic⁺ Reported Sales £120.5m (£4.0m) £10.1m £0.0m £126.6m +9% +5% Op profit* £37.9m (£2.4m) £3.9m £0.0m £39.4m +11% +4% Margin* 31.4% 31.1% +60 bps -30 bps ⁺ Organic measures are at constant currency and exclude incremental
Slide 18: Implementing our strategy for organic growth
Implementing our strategy for organic growth Notable progress in H1 2018 • Five new operating companies: ⁻ Spirax Sarco in the Maghreb, Hungary, Romania ⁻ Watson-Marlow in Malaysia, UAE • Chromalox: sales offices in Spain, UAE, USA west coast • Gestra: - direct sales presence in Korea, Indonesia; -
Slide 19: Case study: Spirax Sarco South Africa
Case study: Spirax Sarco South Africa Langeberg & Ashton Foods saves energy in fruit peeling application • Problem: inconsistent water temperature from shell & tube heat exchangers • Requirement: reliable hot water generation and energy savings • Solution: five Turflow heat exchangers and automatic
Slide 20: Case study: Watson-Marlow UK
Case study: Watson-Marlow UK Automatic vial filling and screw capping machine increases process efficiency at pharmaceutical company Allergy Therapeutics • Requirement: automatic filling and capping machine with faster throughput capacity • Solution: Flexicon FMB210L fully-automatic vial filling and
Slide 21: Case study: Chromalox USA
Case study: Chromalox USA Kapton® heater delivers temperature control for DNA amplification • Problem: replicating DNA requires three temperature changes, in repeated cycles; poor temperature control damages DNA, affecting yield and purity • Requirement: heating element for precise control during th
Slide 22: Summary and outlook
Summary and outlook • Reported revenue up 28%, organic revenue up 7% • Operating profit up 24%, organic increase up 15% • Currency headwind: 3% on sales, 5% on profit • Acquisitions add 24% to sales, 16% to profit • Operating margin 23.0%; underlying margin 24.8% • Interim dividend raised 14% • Net
Slide 23: Spirax-Sarco Engineering plc
Spirax-Sarco Engineering plc Half year results for six months ended 30th June 2018 Engineering opportunities for growth; creating shareholder value 22 2018 Half Year Results Six months ended 30th June 2018 Engineering Opportunities
Slide 24: Appendices
APPENDICIES 23 2018 Half Year Results Six months ended 30th June 2018 Engineering Opportunities
Slide 25: Appendix I: Cash conversion
Appendix I Cash conversion 30th June 30th June Pounds (£) million 2018 2017 Adjusted cash generated from operations 93.7 84.9 Adjusted operating profit* 125.7 101.2 Cash conversion 75% 84% * See Appendix III for definition of profit measures. 24 2018 Half Year Results Six months ended 30th June 2018
Slide 26: Appendix II: Currencies
Appendix II Currencies Average exchange rates 30th June 30th June 2017 2018 % 2018* % US dollar 1.27 1.37 -8% 1.35 -4% Euro 1.16 1.14 +2% 1.13 +1% RMB 8.71 8.76 -1% 8.75 0% Won 1,452 1,476 -2% 1,473 -1% Brazilian real 4.06 4.71 -16% 4.88 -15% Argentine peso 20.06 29.84 -49% 33.65 -36% * 2018 rates a
Slide 27: Appendix III: 2018 note on first half profit measures
Appendix III 2018 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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