Spirax Group Plc. · LSE:SPX
Spirax — Spirax-Sarco Engineering — H1 2019 Earnings Presentation
26 slides from Spirax's earnings presentation, July 2019
Slide 1: 2019 Half Year Results
2019 Half Year Results Six months ended 30th June 2019 Nicholas Anderson (Group Chief Executive) Kevin Boyd (Chief Financial Officer) 0 2019 Half Year Results Six months ended 30th June 2019 Engineering Sustainable Growth
Slide 2: Agenda
Agenda 2019 Half Year Highlights Nicholas Anderson 2019 Half Year Financial Review Kevin Boyd Operations and Outlook Nicholas Anderson 1 2019 Half Year Results Six months ended 30th June 2019 Engineering Sustainable Growth
Slide 3: 2019 half year highlights
2019 half year highlights “We are pleased to report strong organic sales growth of 8% in the first half of the year and organic operating profit growth of 4%, with all three businesses delivering organic sales growth ahead of industrial production. Both the Steam Specialties and Watson-Marlow busine
Slide 4: Agenda
Agenda 2019 Half Year Highlights Nicholas Anderson 2019 Half Year Financial Review Kevin Boyd Operations and Outlook Nicholas Anderson 3 2019 Half Year Results Six months ended 30th June 2019 Engineering Sustainable Growth
Slide 5: Financial performance
Financial performance Strong first half organic growth; full year expectations unchanged • Organic sales up 8%; sales growth 30th June 30th June ahead of industrial production growth 2019 2018 Reported Organic⁺ in all three Revenue £591.2m £547.6m +8% +8% businesses Operating profit* £129.2m £125.7m
Slide 6: Sales bridge
Sales bridge Increase in sales • Total organic⁺ 600 700 growth of 8%; 14.0 1.8 590 Steam Specialties 600 +8%, Chromalox 580 8.7 +2%, Watson- 500 Marlow +11% 570 11.7 Sales £m • Acquisition and a 560 400 6.2 591.2 disposal give a net 2.4 1.2 £1.2m reduction 550 300 • Small exchange 540 (FX) gain 200
Slide 7: Profit bridge
Profit bridge Increase in adjusted operating profit • Adjusted 140 140 operating profit* +3% 120 4.5 4.1 • Small exchange 135 (FX) headwind 100 Profit £m • Acquisition and a 1.1 2.0 130 4.7 80 disposal give a net £1.1m reduction 60 • Organic profit 0.8 125 1.1 1.2 growth +4% 40 125.7 129.2 20 120 0
Slide 8: Operating profit margin of 21.9%
Operating profit margin of 21.9% • Operating profit 27% margin 21.9% 24.4% • Reported margin down 110 bps; M&A, FX, Chromalox and 22% central costs • Steam Specialties 21.9% margin up 20 bps organically 17% • Chromalox margin down 560 bps organically • Watson-Marlow margin up 10 bps 12% organically
Slide 9: Cash flow
Cash flow Adjusted cash flow Pounds (£) million 30th June 2019 30th June 2018 Adjusted operating profit* 129.2 125.7 • Good cash Depreciation and amortisation 22.4 15.4 generation; 71% Adjusted earnings before interest, tax, depreciation and amortisation 151.6 141.1 cash conversion Pensions/Share pl
Slide 10: Underlying margin factors
Underlying margin factors Effects on underlying margins* H1 2019 H2 2019 Currency movements Operating leverage Sales pricing (vs. inflation) Manufacturing strategies Business and product mix Business development investment Impact of acquisitions and disposals * The arrows as shown are qualitative an
Slide 11: Agenda
Agenda 2019 Half Year Highlights Nicholas Anderson 2019 Half Year Financial Review Kevin Boyd Operations and Outlook Nicholas Anderson 10 2019 Half Year Results Six months ended 30th June 2019 Engineering Sustainable Growth
Slide 12: Annual IP growth rates by quarter 2012-2019
Annual IP growth rates by quarter 2012-2019 6.0% Developed (OECD) July 19 Emerging (Non-OECD) July 19 Global July 19 5.0% 3.6% 4.0% 3.1% 3.0% 2.0% 1.7% 1.6% 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 Q3 Q4 Q1 Q2 Q3 Q4 2012 2013 2014 2015
Slide 13: Steam Specialties: Europe, Middle East and Africa
Steam Specialties Europe, Middle East and Africa 30th June Acquisitions 30th June 2018 Exchange Organic & disposals 2019 Organic⁺ Reported Sales £169.1m (£1.7m) £6.2m (£7.0m) £166.6m +4% -2% Op profit* £35.8m (£0.6m) £1.2m (£2.1m) £34.3m +4% -4% Margin* 21.2% 20.6% 0 bps -60 bps ⁺ Organic measures a
Slide 14: Steam Specialties: Asia Pacific
Steam Specialties Asia Pacific 30th June Acquisitions 30th June 2018 Exchange Organic & disposals 2019 Organic⁺ Reported Sales £104.7m £0.4m £11.7m - £116.8m +11% +12% Op profit* £28.5m £0.4m £4.7m - £33.6m +16% +18% Margin* 27.2% 28.8% +130 bps +160 bps ⁺ Organic measures are at constant currency a
Slide 15: Steam Specialties: Americas
Steam Specialties Americas 30th June Acquisitions 30th June 2018 Exchange Organic & disposals 2019 Organic⁺ Reported Sales £75.1m (£1.5m) £8.7m - £82.3m +12% +10% Op profit* £17.2m (£2.3m) £1.1m - £16.0m +7% -7% Margin* 22.9% 19.4% -80 bps -350 bps ⁺ Organic measures are at constant currency and exc
Slide 16: Chromalox
Chromalox 30th June Acquisitions 30th June 2018 Exchange Organic & disposals 2019 Organic⁺ Reported Sales £72.1m £3.4m £1.8m £5.8m £83.1m +2% +15% Op profit* £10.6m £0.6m (£4.1m) £1.0m £8.1m -37% -24% Margin* 14.7% 9.7% -560 bps -500 bps ⁺ Organic measures are at constant currency and exclude contri
Slide 17: Watson-Marlow
Watson-Marlow 30th June Acquisitions 30th June 2018 Exchange Organic & disposals 2019 Organic⁺ Reported Sales £126.6m £1.8m £14.0m - £142.4m +11% +13% Op profit* £39.4m £1.1m £4.5m - £45.0m +11% +14% Margin* 31.1% 31.6% +10 bps +50 bps ⁺ Organic measures are at constant currency and exclude contribu
Slide 18: Case study: Spirax Sarco South Africa
Case study: Spirax Sarco South Africa RCL Foods saves energy and water during peanut butter manufacture • Application: Removing air bubbles from peanut butter using steam-induced vacuum • Problem: Exhaust steam venting to atmosphere, wasting energy and a potential safety hazard • Requirement: Energy
Slide 19: Case study: Watson-Marlow UK
Case study: Watson-Marlow UK Optimising product quality at A E Rodda and Son • Application: Transferring cream from storage tanks • Requirement: gentle and hygienic pumping to prevent product damage; low maintenance • Solution: MasoSine Certa 100 pump from Watson-Marlow • Result: Optimised product q
Slide 20: Case study: Thermocoax France
Case study: Thermocoax France Maintaining critical temperatures during microchip manufacture • Application: Extreme Ultraviolet (EUV) lithography machine for nano-patterning of silicon wafers • Requirement: Precision heating of tin in a highly-corrosive, vacuum environment • Solution: Bespoke Thermo
Slide 21: Summary and outlook
Summary and outlook • Strong first half performance Revenue up 8% on a reported and organic basis Organic operating profit up 4% Operating margin 21.9% • Thermocoax acquisition completed in May • Industrial production growth forecast to halve in 2019 • Anticipate second half trading conditions
Slide 22: Spirax-Sarco Engineering plc
Spirax-Sarco Engineering plc Half year results for six months ended 30th June 2019 Engineering sustainable growth; creating shareholder value 21 2019 Half Year Results Six months ended 30th June 2019 Engineering Sustainable Growth
Slide 23: Appendices
Appendices 22 2019 Half Year Results Six months ended 30th June 2019 Engineering Sustainable Growth
Slide 24: Appendix I: Cash conversion
Appendix I Cash conversion 30th June 30th June Pounds (£) million 2019 2018 Adjusted cash generated from operations 92.2 93.7 Adjusted operating profit* 129.2 125.7 Cash conversion 71% 75% * See Appendix III for definition of profit measures. 23 2019 Half Year Results Six months ended 30th June 2019
Slide 25: Appendix II: Currencies
Appendix II Currencies Average exchange rates 30th June 30th June 2018 2019 % 2019* % US dollar 1.37 1.29 +6% 1.28 +4% Euro 1.14 1.14 0% 1.13 0% RMB 8.76 8.78 0% 8.76 +1% Won 1,476 1,479 0% 1,475 -1% Brazilian real 4.71 4.96 -5% 4.92 -1% Argentine peso 29.84 53.28 -79% 53.59 -43% * 2019 rates assume
Slide 26: Appendix III: Note on first half profit measures
Appendix III 2019 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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