Spirax Group Plc. · LSE:SPX
Spirax — Spirax-Sarco Engineering — H1 2017 Earnings Presentation
27 slides from Spirax's earnings presentation, July 2017
Slide 1: 2017 Half Year Results
> ENGINEERING SUSTAINABLE VALUE > 2017 HALF YEAR RESULTS Six months ended 30th June 2017 Bill Whiteley – Chairman Nicholas Anderson – Chief Executive Kevin Boyd – Group Finance Director Vicky Ming, Training Executive, Technical Sustainability Department, in Spirax Sarco’s Steam Training Centre, Chin
Slide 2: Agenda
Agenda 2017 H1 Highlights 2017 H1 Financial Review Bill Whiteley Operations and Outlook Appendices Nicholas Anderson Kevin Boyd > ENGINEERING 1 2017 Half Year Results Six months ended 30th June 2017 > SUSTAINABLE VALUE
Slide 3: 2017 First half year highlights
2017 First half year highlights 30th June 30th June 2017 2016 Reported sales £428.6m £344.0m Organic sales growth⁺ +5% +5% Operating profit margin* 23.6% 22.5% EPS* 95.5p 73.1p DPS 25.5p 22.5p ⁺ Organic measures are at constant currency and exclude acquisitions and disposals. * See Appendix III for
Slide 4: 2017 H1 Financial Review
Kevin Boyd 2017 H1 Financial Review > ENGINEERING 3 2017 Half Year Results Six months ended 30th June 2017 > SUSTAINABLE VALUE
Slide 5: Financial performance
Financial performance 30th June 30th June Constant • Organic sales +5% 2017 2016 Reported currency Organic⁺ • Organic sales Revenue £428.6m £344.0m +25% +13% +5% growth in EMEA and Asia Pac of the Operating profit* £101.2m £77.5m +31% +13% +8% Steam Specialties business, flat in the Operating profit
Slide 6: Sales bridge
Sales bridge Increase in sales • Currency gain of 440 500 10% 9.1 6.2 0.2 450 • Total organic* 420 5.2 428.6 27.8 400 growth of 5%; Steam Specialties 400 350 Sales £m +4%, Watson- Marlow +9% 36.1 300 380 • Acquisitions add 7% 250 360 200 340 344.0 150 100 320 50 ⁺ Organic measures are at 300 0 const
Slide 7: Profit bridge
Profit bridge Increase in adjusted operating profit • Adjusted operating 105 120 profit* +31% 4.2 -1.5 0.4 0.7 • Currency impact 100 100 2.9 101.2 +16% 95 4.9 80 • Organic increase Profit £m +8% 12.1 90 60 • Acquisitions add 5% • Americas down due 85 40 to non-recurrence of Argentine currency 80 20
Slide 8: Record H1 operating profit margin of 23.6%
Record H1 operating profit margin of 23.6% 25% • Operating margin* +110 bps ahead in Steam Specialties business 20% • Operating margin -150 bps in Watson- Marlow as we invest 15% for growth 23.6% • Record H1 margin, 10% despite dilutionary impact of acquisitions 5% 15.8% 17.1% 17.1% 17.0% 15.0% 19.5
Slide 9: Currency movements
Currency movements FX translation impact on sales 2015-2017 Actual Projected 105 8% full year translation impact on sales 10% half year 100 translation impact on sales 5% projected full year translation 95 impact on sales 90 85 80 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 Yearly average exchan
Slide 10: Adjusted cash flow
Adjusted cash flow Pounds (£) million 30th June 30th June 2017 2016 Adjusted operating profit* 101.2 77.5 • 84% cash Depreciation and amortisation 14.0 12.6 conversion Adjusted earnings before interest, tax, depreciation and amortisation 115.2 90.1 • Net debt at Cash payments to the pension schemes
Slide 11: Operating margin factors
Operating margin factors Indicative effects on operating margins* H1 2017 H2 2017 Currency movements Operating leverage Sales pricing (vs. inflation) Material prices Manufacturing strategies Business & product mix Business development investment Acquisitions * The arrows as shown are qualitative and
Slide 12: Operations and Outlook
Nicholas Anderson Operations and Outlook > ENGINEERING 11 2017 Half Year Results Six months ended 30th June 2017 > SUSTAINABLE VALUE
Slide 13: Annual IP growth rates by quarter 2012-2017
Annual IP growth rates by quarter 2012-2017 Actual Forecast 6.0% Developed (OECD) Emerging (Non-OECD) Global 5.0% 4.0% 3.3% 3.0% 2.0% 1.7% 1.0% 0.5% 0.0% H1/16 ≈ 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 2012 2013 2014 2015 2016 2017 > Source: CHR Econo
Slide 14: Europe, Middle East and Africa (EMEA)
Europe, Middle East and Africa (EMEA) 30th June 30th June 2016 Exchange Organic Acquisition 2017 Organic⁺ Reported Sales £112.1m £9.8m £5.2m £10.8m £137.9m +4% +23% Op profit* £23.1m £2.6m £2.9m £1.8m £30.4m +11% +32% Margin* 20.6% 22.0% +140 bps +140 bps ⁺ Organic measures are at constant currency
Slide 15: Asia Pacific
Asia Pacific 30th June 30th June 2016 Exchange Organic Acquisition 2017 Organic⁺ Reported Sales £82.0m £9.2m £6.2m £0.5m £97.9m +7% +19% Op profit* £18.1m £2.7m £4.2m £0.0m £25.0m +20% +38% Margin* 22.0% 25.5% +290 bps +350 bps ⁺ Organic measures are at constant currency and exclude acquisitions and
Slide 16: Americas
Americas 30th June 30th June 2016 Exchange Organic Acquisition 2017 Organic⁺ Reported Sales £61.6m £7.5m £0.2m £3.0m £72.3m +0% +17% Op profit* £13.4m £2.0m (£1.5m) (£0.1m) £13.8m -10% +3% Margin* 21.7% 19.1% -220 bps -260 bps ⁺ Organic measures are at constant currency and exclude acquisitions and
Slide 17: Watson-Marlow
Watson-Marlow 30th June 30th June 2016 Exchange Organic Acquisition 2017 Organic⁺ Reported Sales £88.3m £9.7m £9.1m £13.4m £120.5m +9% +36% Op profit* £29.0m £4.9m £0.7m £3.3m £37.9m +2% +30% Margin* 32.9% 31.4% -230 bps -150 bps ⁺ Organic measures are at constant currency and exclude acquisitions a
Slide 18: Acquisitions
Acquisitions Gestra and Chromalox Gestra: advanced industrial steam boiler control systems, valves and controls • Acquired for €186 million • 2016 revenue of €92.5 million, EBITDA €16.6 million, EBIT €15.2 million • Increases Steam Specialties global market share from 13% to 15% • Completed May 2017
Slide 19: Implementing our strategy for growth
Implementing our strategy for growth Notable progress in H1 2017 • Spirax Sarco Academy: global roll out to 40% of sales engineers • Strengthened sales team sectorisation • Strengthened global Strategic Account Management • Six new operating companies • Further innovative product launches • Gestra a
Slide 20: Case study: Spirax Sarco Middle East
Case study: Spirax Sarco Middle East Heat recovery solution generates significant cost savings The Address Hotel, Dubai • Problem: high energy costs when generating hot water for hotel guests, laundry and kitchen • Requirement: energy cost savings • Solution: energy audit identified inefficiencies;
Slide 21: Case study: Watson-Marlow China
Case study: Watson-Marlow China Bredel pumps replace piston pumps in costal concrete grouting projects • Problem: piston pumps leaking, component wear and difficult maintenance • Requirement: pumping of abrasive cement slurries without water separation, leakage and pump wear • Solution: 90 Bredel he
Slide 22: Summary and outlook
Summary and outlook • Reported revenues up 25%, organic revenues up 5% • Operating profit up 31%, organic increase 8% • Currency tailwind: 10% on sales and 16% on profit • Acquisitions added 7% to sales and 5% to profit • Operating profit margin increased 110 bps to 23.6% • Interim dividend up 13% •
Slide 23: Spirax-Sarco Engineering plc
Spirax-Sarco Engineering plc Half Year Results to 30th June 2017 Focused on consistent growth and creating shareholder value > ENGINEERING 22 2017 Half Year Results Six months ended 30th June 2017 > SUSTAINABLE VALUE
Slide 24: Appendices
> ENGINEERING SUSTAINABLE VALUE > Appendices 23 2017 Half Year Results Six months ended 30th June 2017
Slide 25: Appendix I: Cash conversion
Appendix I Cash conversion 30th June 30th June Pounds (£) millions 2017 2016 Adjusted cash generated from operations 84.9 72.2 Adjusted operating profit* 101.2 77.5 Cash conversion 84% 93% * See Appendix III for definition of profit measures > ENGINEERING 24 2017 Half Year Results Six months ended 3
Slide 26: Appendix II: Currencies
Appendix II Currencies • Bank of England Average exchange rates 30th June 30th June sterling index 2016 2017 % 2017* % weakened by 10% overall Spirax weighted index 100.0 89.6 +10% 89.5 +5% Bank of England sterling index 86.5 77.7 +10% 77.6 +6% US$ 1.42 1.27 +11% 1.28 +6% Euro 1.29 1.16 +10% 1.15 +7
Slide 27: Appendix III: 2017 note on first half profit measures
Appendix III 2017 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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