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2012 Half Year Results 30 th June 2012

2012 Half Year Results 30 th June 2012. Mark Vernon – Chief Executive David Meredith – Finance Director. Overview of Half Year 2012 results. Organic sales up 5% Continued good growth in Asia Pacific, especially China

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2012 Half Year Results 30 th June 2012

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  1. 2012 Half Year Results 30th June 2012 Mark Vernon – Chief Executive David Meredith – Finance Director

  2. Overview of Half Year 2012 results • Organic sales up 5% • Continued good growth in Asia Pacific, especially China • Restructuring in Europe to improve efficiency – £5m annual cost reduction • Improved cash flow performance • Dividend increased 8% • Stronger than usual seasonal profit bias expected in the second half * See Appendix IV for definition of profit measures

  3. Group geographic revenuesEmerging market sales growth +8% EMEA 46% (2011: 48%) Emerging markets 9% (2011: 9%) Asia Pacific 25% (2011: 24%) Americas 29% (2011: 28%) Emerging markets 20% (2011: 18%) Emerging markets 9% (2011: 10%) H1 2012 emerging markets 38% of sales and 51% of operating profit Sales are by geographical location of operations

  4. Segment profit contributionsIncreasing importance of Asia Pacific • Nearly 30% of H1 2012 profit from Asia Pac • EMEA profit contribution down 20 ppts since 2008 and down 6 ppts vs. 2011 • Good regional balance of sales and profit * Segment profit contributions exclude Corporate Expense

  5. Europe, Middle East & Africa (EMEA) • Trading conditions difficult in most mature markets • Organic sales up 1% • Improved Q2 order rates despite worsening economic outlook • Cost reduction actions to yield £5m annualised cost savings • Euro 6% weaker vs. sterling • Continued investments in R&D and market development squeeze profit • Lower factory volumes and profits from planned destocking and reduced European demand *Based on adjusted Operating profit – see Appendix IV

  6. Asia Pacific • Broadly favourable market conditions across region • Strong sales and profit growth in China – 10% of Group sales (including Watson-Marlow) • Flat sales in Korea but higher H2 sales and profit expected • Strong sales and profit growth in Southeast Asia – continue to add sales resources • Trading margin improved 90 bps to 24.8% *Based on adjusted Operating profit – see Appendix IV

  7. Americas • Good market conditions in North America – higher Q2 US maintenance spending • US sales (including Watson-Marlow) 17% of total Group (2011: 16%) • Tougher H2 comparative for the US • Mixed but tougher market conditions in Latin America • Profit reduced by weaker Latin America currencies, US product mix and lower Brazil sales *Based on adjusted Operating profit – see Appendix IV

  8. Watson-Marlow Pumps • Regional market conditions similar to steam business • Good 8% sales growth led by Americas – strong growth in Latin America • Continued investments in geographic coverage and sector-focused sales resource • Higher sales growth from recent acquisitions (Flexicon and MasoSine) • Two important product launches – “Qdos” revolutionary pumping technology • Margin reduced from higher R&D and market development expenditures *Based on adjusted Operating profit – see Appendix IV

  9. Financial aspects • Reduced operating profit margin • Reduced finance income – DB pensions • Lower tax rate • H1 currency impact of £1.4m • Headcount reduction costs of £5.5m * See Appendix IV for definition of profit measures

  10. Profit bridgeH1 2011 to H1 2012 1.0 Mfg. Consolidation Benefits 19.9% 1.5 Materials 1.5 Europe Restructuring 1.5 R&D/Market Development £’m Sales Leverage H1 2012 H1 2012 Underlying Mfg. Consol. Benefits 2011 Mfg. One Off Expense Materials & Product Mix FX R&D / Market Develop Europe Factory Volume H1 2011 * See Appendix IV for definition of profit measures

  11. Operating profit margin –Overall trend improvement but H1 2012 lower Key H1 H2 * See Appendix IV for definition of profit measures

  12. Cash flow • Lower working capital outflow – reduced debtors and lower trade creditors (stock reduction) • Capex held to more normal level • Dividend payment increased 15% • Closing net cash £9m * See Appendix IV for definition of profit measures

  13. Key performance indicators App I ROCE App II Cash App III FX App IV Adj profit • Good organic sales growth • Higher free cash flow and good cash conversion – reduced capital expenditure • Lower ROCE from reduced operating margin • Working capital to sales ratio improved * See Appendix IV for definition of profit measures

  14. Industry segment contributionsBalanced portfolio of end markets • Very diversified range of customers and end markets • Good exposure to defensive markets that supports resiliency • Roughly 85% of revenues from annual Opex budgets Defensive End Markets > 50%

  15. MRO business not recovered to 2008USA example – good uptick in Q2 2012 2007-2012 USA MRO business (TTM indexed to 2006) Peak 2008 2012

  16. Open order book build in H1 2012Better than usual build in Q2 • Ratio above 1.0 indicates backlog build • H1 backlog build usually unwinds in Q4 • Higher than normal Q2 book-to-bill ratio • H1 orders typically about 50% of full year 1.10 1.00

  17. Summary • Organic sales up 5% – continued strong growth in Asia • Continued investment in market penetration, geographic expansion and new product development (+£2.5m in H1 moderating in H2) • Restructuring in Europe to improve efficiency – £5m annualised cost reduction • Strong balance sheet – net cash £9m • Dividend increased 8% • Expect stronger than usual seasonal profit bias in H2 2012

  18. Spirax-Sarco Engineering plc2012 Interim results to 30th June Focused on consistent growthand creating shareholder value

  19. Appendix I -Return on capital employed * See Appendix IV for definition of profit measures

  20. Appendix II -Cash conversion • See Appendix IV for definition of profit measures • ** Property, plant, equipment, software and development

  21. Appendix III -Currencies • Euro weakened 6% • US dollar strengthened 3% • RMB strengthened 6%

  22. Appendix IV -2012 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 understanding the Group’s performance. Adjusted operating profit excludes certain non-operational items which are analysed below.

  23. Appendix V -Current market conditions Europe Pharma & Biopharm HVAC Foods & Beverage Refining & Petrochem Water Treatment Healthcare OEM North America Asia Latin America Legend Favourable Unfavourable Neutral Metals Processing

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