Spirax Group Plc. · LSE:SPX
Spirax — FY2019 Earnings Presentation
32 slides from Spirax's earnings presentation, February 2020
Slide 1: 2019 Results
2019 RESULTS YEAR ENDED 31ST DECEMBER 2019 Nicholas Anderson (Group Chief Executive) Kevin Boyd (Chief Financial Officer) 0 2019 Results Year ended 31st December 2019 Engineering every day
Slide 2: Agenda
Agenda 2019 Highlights Nicholas Anderson 2019 Financial Review Kevin Boyd Operations and Outlook Nicholas Anderson 1 2019 Results Year ended 31st December 2019 Engineering every day
Slide 3: 2019 Highlights
2019 Highlights • Strong organic sales and profit growth, despite weak industrial production • Organic profit margin expansion, despite continued revenue investments • Strategy drives Steam Specialties and Watson-Marlow performance • Chromalox profit margin increased to 15.1% in H2 2019 • Thermocoax
Slide 4: Agenda
Agenda 2019 Highlights Nicholas Anderson 2019 Financial Review Kevin Boyd Operations and Outlook Nicholas Anderson 3 2019 Results Year ended 31st December 2019 Engineering every day
Slide 5: Financial performance
Financial performance Strong organic sales growth despite weak industrial production growth • Organic sales up 6%; organic growth 2019 2018 Reported Organic⁺ in all segments of Steam Specialties Revenue £1,242.4m £1,153.3m +8% +6% and Watson- Operating profit* £282.7m £264.9m +7% +7% Marlow Operatin
Slide 6: Sales bridge
Sales bridge Increase in sales • Zero currency (FX) 1,300 impact • Acquisitions and 1,250 33.4 1.5 disposals add a net 1% 17.4 • Total organic⁺ 1,200 17.0 growth of 6%; 15.2 7.6 Sales £m Steam Specialties 0.0 +6%, Watson- 1,150 Marlow +12%, Chromalox -1% 1,100 1,242.4 1,050 1,153.3 ⁺ Organic measure
Slide 7: Profit bridge
Profit bridge Increase in adjusted operating profit • Adjusted operating 300 profit* +7% • 1% currency (FX) 9.2 4.5 290 2.9 headwind 5.8 280 • Acquisitions and a 8.3 disposal add a net 1% 270 2.3 Profit £m 2.0 1.6 • Organic profit 260 growth of 7% 250 240 282.7 264.9 230 * See Appendix V for definit
Slide 8: Operating margin of 22.8%
Operating margin of 22.8% • Operating margin 27% 22.8%, up 10 bps organically 25.2% 25.1% 24.6% • Reported margin 24% down 20 bps; disposal of HygroMatik & FX 21% • Excluding 2017 acquisitions, 18% 23.8% 23.6% 23.0% margin 25.1% 22.0% 22.5% 22.8% 22.8% 20.2% 20.6% 20.6% • Organically, Steam Specialt
Slide 9: Strong cash flow
Strong cash flow Cash flow Pounds (£) million 31st December 31st December 2019 2018 • Good cash Adjusted operating profit* 282.7 264.9 generation; 84% Depreciation and amortisation (excluding IFRS 16) 34.3 32.9 cash conversion Depreciation of leased assets 11.3 - Pensions/Share plans 1.0 1.1 • Incre
Slide 10: Dividend growth
Dividend growth • Total dividend up 200.0 10% to 110.0p 120p 180.0 • Final dividend up 160.0 100p 10% to 78.0p • Dividend cover of 140.0 Pence per share 2.4 times 120.0 +10% • 52 years of +14% 100.0 dividend progress +15% with a CAGR of 11% 80.0 +10% 25p +9% +7% +8% +11% 60.0 +14% +19% 40.0 20.0 0.0
Slide 11: Agenda
Agenda 2019 Highlights Nicholas Anderson 2019 Financial Review Kevin Boyd Operations and Outlook Nicholas Anderson 10 2019 Results Year ended 31st December 2019 Engineering every day
Slide 12: Annual IP growth rates by quarter 2012-2020
Annual IP growth rates by quarter 2012-2020 6.0% Developed (OECD) Emerging (Non-OECD) Global 5.0% Forecast 4.0% 3.6% 3.0% 3.1% 3.0% 2.1% 2.0% 1.9% 1.5% 1.0% 1.0% 1.1% 0.8% 0.0% -1.0% % = Annual average -2.0% Q1 Q2 Q3Q4 Q1 Q2Q3 Q4 Q1 Q2Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Slide 13: Steam Specialties
Steam Specialties Acquisitions and 31st Dec 2018 Exchange Organic disposals 31st Dec 2019 Organic⁺ Reported Sales £733.5m (£7.4m) £42.0m (£12.7m) £755.4m +6% +3% Operating profit* £170.1m (£4.8m) £16.4m (£3.8m) £177.9m +10% +5% Margin* 23.2% 23.6% +100 bps +40 bps ⁺ Organic measures are at constant
Slide 14: Steam Specialties: Europe, Middle East and Africa
Steam Specialties Europe, Middle East and Africa Acquisitions and 31st Dec 2018 Exchange Organic disposals 31st Dec 2019 Organic⁺ Reported Sales £344.4m (£3.6m) £7.6m (£12.7m) £335.7m +2% -3% Operating profit* £69.3m (£0.8m) £2.3m (£3.8m) £67.0m +4% -3% Margin* 20.1% 20.0% +30 bps -10 bps ⁺ Organic
Slide 15: Steam Specialties: Asia Pacific
Steam Specialties Asia Pacific Acquisitions and 31st Dec 2018 Exchange Organic disposals 31st Dec 2019 Organic⁺ Reported Sales £232.7m £0.1m £17.0m - £249.8m +7% +7% Operating profit* £63.9m £0.3m £8.3m - £72.5m +13% +14% Margin* 27.5% 29.0% +140 bps +150 bps ⁺ Organic measures are at constant curre
Slide 16: Steam Specialties: Americas
Steam Specialties Americas Acquisitions and 31st Dec 2018 Exchange Organic disposals 31st Dec 2019 Organic⁺ Reported Sales £156.4m (£3.9m) £17.4m - £169.9m +11% +9% Operating profit* £36.9m (£4.3m) £5.8m - £38.4m +18% +4% Margin* 23.6% 22.6% +120 bps -100 bps ⁺ Organic measures are at constant curre
Slide 17: Electric Thermal Solutions
Electric Thermal Solutions Acquisitions and 31st Dec 2018 Exchange Organic disposals 31st Dec 2019 Organic⁺ Reported Sales £154.6m £5.1m (£1.5m) £27.9m £186.1m -1% +20% Operating profit* £22.8m £1.0m (£4.5m) £5.4m £24.7m -19% +8% Margin* 14.7% 13.3% -270 bps -140 bps ⁺ Organic measures are at consta
Slide 18: Watson-Marlow
Watson-Marlow Acquisitions and 31st Dec 2018 Exchange Organic disposals 31st Dec 2019 Organic⁺ Reported Sales £265.2m £2.3m £33.4m - £300.9m +12% +13% Operating profit* £84.8m £1.8m £9.2m - £95.8m +11% +13% Margin* 32.0% 31.8% -60 bps -20 bps ⁺ Organic measures are at constant currency and exclude c
Slide 19: COVID-19: current assessment
COVID-19: current assessment • China represents 11% of Group sales; 8% of employees • China manufactures c.75% of domestic sales; low global sourcing from China • February sales in China significantly below original expectations • China manufacturing close to normal levels by end February; suppliers
Slide 20: Customer case studies
Customer case studies Read more: customer case studies can be found in Appendix I 19 2019 Results Year ended 31st December 2019 Engineering every day
Slide 21: Summary and Outlook
Summary and Outlook • Reported revenue up 8%; organic revenue up 6% • Operating profit up 7% on reported and organic basis • Operating margin 22.8%; excluding 2017 acquisitions margin 25.1% • Chromalox H2 margin increased to 15.1%; up 40 bps on FY 2018 • Acquired Thermocoax; expands technology, geog
Slide 22: Full Year Results
Full Year Results For the year ended 31st December 2019 Engineering opportunities for growth; creating shareholder value 21 2019 Results Year ended 31st December 2019 Engineering every day
Slide 23: Appendices
Appendices 22 2019 Results Year ended 31st December 2019 Engineering every day
Slide 24: Appendix I - Case study: Spirax Sarco UK
Appendix I - Case study: Spirax Sarco UK Improved energy efficiency during egg production Application: heating of poultry sheds Requirement: biomass heating system fuelled by waste litter, bedding and feed Solution: Spirax Sarco and a biomass boiler specialist developed a heating system with integra
Slide 25: Appendix I - Case study: Chromalox, Ireland
Appendix I - Case study: Chromalox, Ireland Precise temperature control for biopharmaceutical production Application: warming of water-jacketed vessels during biopharmaceutical production Requirement: accurate, clean & safe heating solution Solution: Chromalox worked with a specialist OEM to determi
Slide 26: Appendix I - Case study: Watson-Marlow Brazil
Appendix I - Case study: Watson-Marlow Brazil Increased process efficiency during confectionery manufacture Application: transfer of liquid sugar and other viscous fluids during confectionery production Requirement: pumps able to transfer hot sugar without sticking and requiring frequent maintenance
Slide 27: Appendix II – Underlying margin drivers
Appendix II – Underlying margin drivers Effects on margin; arrows are qualitative and indicate direction only 2019 2020 Currency movements Operating leverage Sales pricing (vs. inflation) Manufacturing strategies Business and product mix Business development investment Impact of acquisitions and dis
Slide 28: Appendix III - Cash conversion
Appendix III - Cash conversion Pounds (£) million 2019 2018 Adjusted cash generated from operations 238.1 242.9 Adjusted Operating Profit* 282.7 264.9 Cash conversion 84% 91% * See Appendix V for definition of profit measures. 27 2019 Results Year ended 31st December 2019 Engineering every day
Slide 29: Appendix IV - Currencies
Appendix IV - Currencies Average exchange rates 2018 2019 Change Bank of England index 78.3 78.1 0% US$ 1.33 1.28 +4% Euro 1.13 1.14 -1% RMB 8.82 8.83 0% Won 1,461 1,486 -2% Brazilian Real 4.85 5.04 -4% Argentine Peso 37.44 61.83 -65% 28 2019 Results Year ended 31st December 2019 Engineering every d
Slide 30: Appendix V - 2019 note on profit measures
Appendix V - 2019 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 Gr
Slide 31: Appendix VI - Current guidance
Appendix VI - Current guidance 2019 2020 Actual Estimate Capex £62.4m £65.0m Effective Tax Rate 28.5% 29.0% Net Finance Cost £8.4m £8.5m Net impact of acquisitions and disposals on revenue +1% +1% Net impact of acquisitions and disposals on adjusted operating profit +1% +1% Foreign exchange impact o
Slide 32: Appendix VII - IFRS – the impact of implementation
Appendix VII - IFRS 16 – the impact of implementation Assets: On transition to IFRS 16, net assets reduced by £2.4m comprising: • An increase in right-of-use assets of £36.1m; • An increase in lease liability of £39.0m; and • Recognition of deferred tax asset of £0.5m. Operating Profit: An increase