TIDMSPX
RNS Number : 8661I
Spirax-Sarco Engineering PLC
10 August 2023
Thursday 10th August 2023
2023 Half Year Results
First half trading broadly as expected; Biopharm return to
growth now anticipated in 2024
HIGHLIGHTS
Six months ended 30th June
Statutory 2023 2022 Reported
------------------------- ---------- ---------- ----------
Revenue(+) GBP850.8m GBP750.1m 13%
Operating profit GBP132.2m GBP142.1m (7)%
Operating profit margin 15.5% 18.9% (340) bps
Profit before taxation GBP114.0m GBP138.5m (18)%
Basic earnings per
share 112.5p 131.8p (15)%
Dividend per share 46.0p 42.5p 8%
Adjusted 2023 2022 Reported Organic*
------------------------- ---------- ---------- ---------- ----------
Revenue(+) GBP850.8m GBP750.1m 13% 2%
Adjusted operating
profit GBP171.7m GBP178.8m (4)% (13)%
Adjusted operating
profit margin 20.2% 23.8% (360) bps (370) bps
Adjusted profit before
taxation GBP153.5m GBP175.2m (12)%
Adjusted basic earnings
per share 155.2p 175.1p (11)%
-- Revenues up 13% or 2% organically
-- Strong growth in Steam Specialties and ETS offset by lower Biopharm(**)
sales in Watson-Marlow
-- Statutory operating profit down 7% and margin down 340 bps due to
ERP write-down and restructuring
-- Adjusted operating margin down 360 bps due to unfavourable sales
mix
-- Strong sales growth +15% in Steam Specialties; adjusted operating
profit margin +190 bps organically
-- ETS organic sales growth +7%; adjusted operating profit margin lower
due to Semicon WFE^ weakness
-- Vulcanic and Durex Industries integration progressing very well
-- Watson-Marlow sales down 21% organically; adjusted operating profit
lower due to operational gearing
-- Underlying Biopharm demand remains strong; growth anticipated to
return in 2024
-- Adjusted cash conversion 48% in H1; anticipate full year conversion
to be over 70%
-- Interim dividend up 8% to 46.0 pence, following 12% total increase
in 2022
Nicholas Anderson, Group Chief Executive, commenting on the
results said:
"We achieved first half results that are broadly in line with
our expectations, against the backdrop of continued destocking in
the Biopharm and Semicon WFE sectors, as well as softening
Industrial Production growth. I am grateful to all our colleagues
for their continued support of our customers' critical industrial
processes against this challenging backdrop.
"The underlying demand for Watson-Marlow products and solutions
remains as robust as in pre-pandemic periods, albeit the short-term
headwind from Biopharm destocking is now expected to continue into
2024, with Watson-Marlow's competitive strengths and market-leading
capabilities to service that demand remaining unchanged. Similarly,
we remain confident in the underlying growth drivers of the Semicon
WFE sector.
"We are confident in our Group's strength and our ability to
navigate the current macroeconomic uncertainty and short-term
headwinds, while continuing to drive strategic progress. Our robust
business model, diverse reach across end-markets and geographies
and clear opportunity to accelerate the decarbonisation of
industrial processes underpin our confidence in the medium-term
outlook."
(+) The term 'sales' is used interchangeably with 'revenue' when
describing the financial performance of the business.
*Organic measures are at constant currency and exclude
contributions from acquisitions and disposals (with our Russian
Operating Companies treated as disposals from the date at which the
Group suspended all trading with and within Russia).
**Biopharm refers to Watson-Marlow sales to the Pharmaceutical
& Biotechnology sector
^Semicon WFE refers to the Semiconductor Wafer Fabrication
Equipment sector
See Appendix to the Financial Statements for an explanation of
alternative performance measures.
For further information, please contact:
Nimesh Patel, Chief Financial Officer
Mal Patel, Head of Investor Relations
mal.patel@uk.spiraxsarco.com (+44 (0) 7392 263166)
Audio webcast
The meeting with analysts will be available as a live audio
webcast at 9.00 am on the Company's website at
www.spiraxsarcoengineering.com or via the following link:
https://edge.media-server.com/mmc/p/2o4cf767/ and a recording
will be made available on the website shortly after the
meeting.
Conference Call
The meeting with analysts will also be available via a full
conference call with Q&A facility, at 9.00 am, participants
must register in advance using the provided link below:
https://register.vevent.com/register/BI16128f01983b4d23bbf2208936e39fd6
After completing the conference call registration, you will
receive dial-in details on screen and via email.
About Spirax--Sarco Engineering plc
Spirax--Sarco Engineering plc is a leading global thermal energy
management and fluid technology solutions Group that aims to
deliver sustainable value to all its stakeholders through
engineering a more efficient, safer and sustainable world. It
comprises three world--leading Businesses: Steam Specialties, for
the control and management of steam; Electric Thermal Solutions,
for advanced electrical process heating and temperature management
solutions; and Watson-Marlow, for peristaltic pumping and
associated fluid path technologies. The Steam Specialties and
Electric Thermal Solutions Businesses provide a broad range of
fluid control and process heating products, engineered packages,
site services and systems expertise for a diverse range of
industrial and institutional customers. Both Businesses help their
customers improve process efficiencies, meet environmental
sustainability targets, improve product quality and enhance the
safety of their operations. Watson--Marlow provides solutions for a
wide variety of demanding fluid path applications with highly
accurate, controllable and virtually maintenance-free pumps and
associated technologies.
The Group is headquartered in Cheltenham (UK), with 40
strategically located manufacturing plants around the world and
employs more than 10,000 people, including more than 2,100 direct
sales and service engineers. The Company's shares have been listed
on the London Stock Exchange since 1959 (symbol: SPX) and it is a
constituent of the FTSE 100 and the FTSE4Good Indexes.
Further information can be found at
spiraxsarcoengineering.com
RNS filter: Inside information prior to release
LEI 213800WFVZQMHOZP2W17
SUMMARY FINANCIALS
Six months to 30th June H1 2023 H1 2022 y-o-y change
GBPm GBPm Organic Reported
-------- -------- -------- ---------
SUMMARY FINANCIALS
-------- -------- -------- ---------
Steam Specialties 459.8 400.6 15% 15%
-------- -------- -------- ---------
ETS 192.5 104.7 7% 84%
-------- -------- -------- ---------
Watson-Marlow 198.5 244.8 (21)% (19)%
-------- -------- -------- ---------
Group Revenue 850.8 750.1 2% 13%
-------- -------- -------- ---------
Steam Specialties 96.3 87.7 10%
-------- -------- -------- ---------
ETS 10.7 (8.9) 220%
-------- -------- -------- ---------
Watson-Marlow 42.1 83.6 (50)%
-------- -------- -------- ---------
Corporate (16.9) (20.3)
-------- -------- -------- ---------
Group Statutory Operating Profit 132.2 142.1 (7)%
-------- -------- -------- ---------
(100)
Steam Specialties 20.9% 21.9% bps
-------- -------- -------- ---------
1,410
ETS 5.6% (8.5)% bps
-------- -------- -------- ---------
(1,300)
Watson-Marlow 21.2% 34.2% bps
-------- -------- -------- ---------
Group Statutory Operating Profit (340)
margin 15.5% 18.9% bps
-------- -------- -------- ---------
Steam Specialties 112.2 92.1 25% 22%
-------- -------- -------- ---------
ETS 26.9 12.8 (6)% 110%
-------- -------- -------- ---------
Watson-Marlow 48.9 87.0 (47)% (44)%
-------- -------- -------- ---------
Corporate (16.3) (13.1)
-------- -------- -------- ---------
Group Adjusted Operating Profit 171.7 178.8 (13)% (4)%
-------- -------- -------- ---------
Steam Specialties 24.4% 23.0% 190 bps 140 bps
-------- -------- -------- ---------
(140)
ETS 14.0% 12.2% bps 180 bps
-------- -------- -------- ---------
(1,220) (1,090)
Watson-Marlow 24.6% 35.5% bps bps
-------- -------- -------- ---------
Group Adjusted Operating Profit (370) (360)
margin 20.2% 23.8% bps bps
-------- -------- -------- ---------
Cashflow
-------- -------- -------- ---------
Statutory cash from operations 85.6 92.1 (7)%
-------- -------- -------- ---------
Adjusted cash from operations 82.8 78.4 6%
-------- -------- -------- ---------
Adjusted cash conversion 48% 44% 400 bps
-------- -------- -------- ---------
Net debt 748.3 202.7
-------- -------- -------- ---------
BUSINESS REVIEW
Engineering our Difference
Around the world, our teams are continuing to navigate the
challenging macroeconomic backdrop to deliver mission-critical
products and solutions to our customers while continuing to support
all our stakeholders.The Board would like to express its sincere
thanks and gratitude to all colleagues for their commitment,
expertise and efforts during the first half of 2023.
Board changes
On Tuesday 8th August 2023, the Board announced that following
his decision to retire, Nicholas Anderson will step down as Group
Chief Executive and from the Board on 16th January 2024, upon
completion of ten years in the role. The Board acknowledges with
gratitude Nick's significant contribution to the Group's growth and
prosperity, firmly establishing Spirax-Sarco Engineering as a
constituent of the FTSE100 Index since 2019 and wishes him every
success in his future Non-Executive career.
On the same date, the Board also announced that Nimesh Patel has
been appointed to succeed Nick as Group Chief Executive and will
take up the position on 16th January 2024. Nimesh joined the Group
in 2020 as Chief Financial Officer and his appointment follows a
rigorous succession process supported by external advisors, Egon
Zehnder.
Nimesh's strategic approach and deep understanding of the three
Businesses, together with his global and financial experience, all
underpin the Board's confidence in the future leadership of the
Group. Nimesh will provide both continuity and progression in the
Group's journey towards creating sustainable value for all our
stakeholders.
Nimesh will continue as Chief Financial Officer until 16th
January 2024. The Board has commenced a process to appoint a
successor to this role, which will be announced at the appropriate
time. To support the transition Nick will remain as an employee of
the Group until 31st March 2024, acting in an advisory capacity to
Nimesh to ensure a seamless handover of the role.
On 2nd August 2023, the Board was pleased to confirm the
appointment of Constance Baroudel as an Independent Non-Executive
Director. Constance is Sector Chief Executive, Environmental &
Analysis and Chief Sustainability Officer at Halma plc. She joined
Halma in 2018, having previously held a range of executive
positions with First Group plc, De La Rue and Strategic Decisions
Group. Constance also brings considerable Board experience having
previously served as a Non-Executive Director for both Keir Group
and Synergy Health.
Summary of half year performance
In the first half demand for our products and services was
strong in Steam Specialties and the industrial process focused
Divisions of ETS (Chromalox and Vulcanic). Demand from industrial
equipment customers of ETS was lower than anticipated, particularly
in Semicon WFE, impacting Durex Industries and to a lesser extent,
Thermocoax. Demand in Watson-Marlow was slightly weaker than
expected, driven by destocking by its Biopharm customers post the
COVID-19 pandemic.
First half sales of GBP850.8 million (+13%) benefited from a
currency tailwind of 1.5% and a 10% impact from the first-time
contribution of our acquisitions of Vulcanic and Durex Industries,
net of a small adverse impact from the disposal of our Russian
operations in 2022. Organic growth was 2% reflecting strong growth
in Steam Specialties (+15%) and ETS (+7%) offset by a 21% decline
in Watson-Marlow.
First half adjusted operating profit of GBP171.7 million was
down 4% as an organic decline of 13% more than offset a currency
tailwind of 1.7% and an 8% positive impact from acquisitions net of
disposals. This organic decline reflects l ower sales to customers
in the Biopharm and Semicon WFE sectors that impacted our highest
margin Businesses. The resulting difference in the Group's mix of
sales, compared to the first half of 2022, had an adverse impact on
the adjusted operating profit.
The Board has declared an interim dividend of 46.0 pence (2022:
42.5 pence) per ordinary share, an increase of 8%, reflecting
confidence in the medium and long-term outlook for the Group. This
growth in the interim dividend follows an increase of 12% in the
total dividend in respect of 2022.
Strategic progress in the half year
Our Businesses have continued to make progress against our
strategic priorities. The key achievements during the first half
are set out below:
Increasing direct sales effectiveness through market sector
focus
All three of our Businesses have continued to develop new
solutions in support of their sector specific growth programmes
especially in the Americas and Asia Pacific. In Steam Specialties,
the Customer Value Proposition (CVP) developed to support lithium
mining projects in Argentina for the electric vehicle battery
sector, is helping to expand our addressable market in this growing
sector. Steam Specialties is also successfully expanding its
delivery of solutions to lithium battery projects in China, with
around one hundred of its customers active in this sector. In ETS,
Chromalox continued to develop its decarbonisation projects
pipeline and penetration of its Medium Voltage technology in the
Oil & Gas and Petrochemicals sectors. Watson-Marlow's team
successfully transformed its operating model in the mining sector
in Australia from a distributor-led approach to direct sales,
helping to build customer proximity and strengthen its competitive
advantage.
Leverage our research & development (R&D)
investments
Following commercial launch of the Group's 'TargetZero'
solutions, Steam Specialties has begun to build a pipeline of
long-term opportunities amongst its extensive global customer base.
There is strong interest in the ' TargetZero' solutions, especially
the first-to-world 'ElectroFit' product that has been fully
commissioned for Diageo in Turkey. Watson-Marlow launched an
important range extension for its Qdos pump, targeted at the
industrial liquid/solid separation market that is forecast to grow
at a mid-to-high single digit CAGR until 2030. We also continued to
make progress in implementing our digital strategy with an
acceleration in the number of Steam Specialties EMEA customers that
are digitally connected, as well as growing momentum in connections
throughout the Americas.
Optimise supply chain effectiveness
Across our Group, we measure our customer service levels using a
number of metrics including on-time-to-request (OTTR). Steam
Specialties notably achieved a material improvement in its OTTR
performance that had been impacted by supply chain challenges
during 2022.
Operate sustainably and help improve our customers'
sustainability
We have achieved a significant reduction in our absolute Scope 1
and 2 market-based greenhouse gas emissions which have reduced by
16% in H1 2023, compared to H1 2022. The 47% reduction achieved
against the 2019 baseline means the Group is on track to achieve
its targeted reduction of 50% by 2025. There has also been a
year-on-year reduction in water consumption across the Group
compared to 2022 and building on the momentum of 78 biodiversity
projects completed in 2022, a further 41 biodiversity projects have
been undertaken so far in 2023. At the end of the first half, we
had secured green energy contracts for close to 61% of the Group's
electricity supply and made further progress in implementing
Project Clear Sky which will fully decarbonise Steam Specialties'
UK manufacturing facility in Cheltenham by early 2024.
Acquisitions and Disposals
In July, we completed the acquisition of a 15% stake in Kyoto
Group (Euronext ticker: KYOTO) as part of a strategic investment
agreement alongside Iberdrola to accelerate the decarbonisation of
industrial process heat with Kyoto's proprietary ' Heatcube' , a
molten salt thermal energy storage solution. Through Vulcanic, we
have been working with Kyoto since 2021 to provide the electric
immersion heater and power control systems of ' Heatcube' . Our
investment and partnership will support the commercial and
technological development of electrical heaters for existing and
future generations of ' Heatcube' and help drive market
adoption.
Market environment
Year-on-year Industrial Production growth H1 2023 H1 2022
(IP)
Europe, Middle East & Africa (0.1)% 3.5%
-------- --------
of which, Europe (0.2)% 3.2%
-------- --------
North America 0.4% 4.1%
-------- --------
Latin America (0.4)% (0.6)%
-------- --------
Asia Pacific 1.5% 3.3%
-------- --------
of which, China 4.3% 3.4%
-------- --------
Global 1.0% 2.9%
-------- --------
Source: Oxford Economics
Global industrial production growth (IP) was 1.0% in the first
half of 2023, compared to 2.9% for the equivalent period in 2022.
IP in all regions, except China where there are differing views on
the extent of recovery, was lower than the equivalent period of
2022. IP contracted 0.8% in mature markets, reflecting weak growth
in North America and declines across much of Europe, offset by 2.9%
growth in emerging markets. In Asia Pacific, IP showed significant
regional differences with apparent strength in China offset by
weakness in Taiwan and Korea. There is a risk of downward revisions
to IP in the second half in response to continuing macroeconomic
uncertainty as governments and central banks seek to contain
inflation, as well as the slower than anticipated post COVID-19
recovery in China. The weaker economic backdrop in China is
beginning to impact customer demand, while broader macroeconomic
uncertainty is also leading to customer deferrals of project
orders.
Pharmaceutical & Biotechnology (Biopharm) customers
accounted for around 60% of Watson-Marlow's sales in 2022. At the
beginning of this year and based upon customer feedback, we had
anticipated that the normalisation of Biopharm demand that began in
the second half of 2022 would largely complete during the first
half of 2023. We also anticipated that demand growth would return
during the second half of the year. In our trading update in May,
we reiterated the challenges of predicting the precise timing and
scale of this return to demand growth. More recently, customers
have indicated higher excess inventory levels than they had
originally estimated, with a return to demand growth now unlikely
until 2024. Despite the challenges associated with forecasting
short-term demand, the Biopharm end-markets remain robust and
supported by demand for cell and gene therapies and personalised
medicines. We anticipate that the underlying growth in demand has
continued at its pre-pandemic rate of over 10% per annum,
throughout the COVID-19 cycle.
Semicon WFE customers accounted for around 18% of ETS pro-forma
sales in 2022. Anticipated lower demand for consumer electronics
was factored into our forecasted demand from customers in the
Semicon WFE sector. Nevertheless, demand in the first half was
lower than we had anticipated. Based on recent customer feedback we
expect demand to improve during the second half, although we remain
cautious as to the extent of the recovery in this year. Over the
medium term, Semicon WFE remains an attractive and growing sector.
We continue to anticipate strong demand for our niche solutions for
precise thermal control that are incorporated by Original Equipment
Manufacturers (OEMs), into Wafer Fabrication Equipment (WFE)
utilised in higher-end applications. Our niche positions partially
mitigate the impact of any overall reduction in Semiconductor
demand.
Other strategic sectors such as Food & Beverage, Oil &
Gas and Power Generation have proven more resilient.
Decarbonisation also remains a growing strategic imperative for
customers, reflected in the strong interest we see for our
sustainability solutions.
Against this backdrop and the strong comparative performance of
H1 2022, overall Group performance in H1 2023 was broadly in line
with our expectations.
FINANCIAL PERFORMANCE
HY 2022 Exchange Organic Acquisitions HY 2023 Organic Reported
& disposals*
Revenue GBP750.1m GBP11.6m GBP15.9m GBP73.2m GBP850.8m 2% 13%
---------- --------- ----------- -------------- ---------- -------- ---------
Adjusted operating
profit GBP178.8m GBP3.0m GBP(24.5)m GBP14.4m GBP171.7m (13)% (4)%
---------- --------- ----------- -------------- ---------- -------- ---------
Adjusted operating (370) (360)
profit margin 23.8% 20.2% bps bps
---------- --------- ----------- -------------- ---------- -------- ---------
Statutory operating
profit GBP142.1m GBP132.2m (7)%
---------- --------- ----------- -------------- ---------- -------- ---------
Statutory operating (340)
margin 18.9% 15.5% bps
---------- --------- ----------- -------------- ---------- -------- ---------
*Results include the impact of (i) the acquisition of Vulcanic
and Durex Industries and (ii) the treatment of our Russian
operating companies as disposals from the date at which the Group
suspended all trading with and within Russia.
To aid comparability with the first half of last year we refer
to both organic and pro-forma performance measures in the
commentary below. Organic performance measures exclude the
contribution of Vulcanic and Durex Industries from both periods.
Pro-forma comparisons include six months of contribution from
Vulcanic and Durex Industries, as if they had been fully owned by
the Group throughout H1 2022.
Sales
Group sales of GBP850.8 million (H1 2022: GBP750.1 million) grew
13% or 2% organically, benefiting from first-time contributions
from Vulcanic and Durex Industries (acquired in H2 2022) and a
currency tailwind. The disposal of our Russian operations in H1
2022 had a small adverse impact.
Strong organic sales growth in Steam Specialties (+15%) and ETS
(+7%) was significantly ahead of IP.
On a pro-forma basis, Vulcanic and Durex Industries collective
sales were higher than in the first half of last year, with strong
growth at Vulcanic partially offset by lower sales at Durex
Industries as a result of ongoing destocking by Semicon WFE
OEMs.
Watson-Marlow sales were down by 21% organically, compared to a
very strong H1 2022, as a result of ongoing destocking by Biopharm
customers. Sales to Process Industries sectors were broadly flat on
the very strong prior year comparator.
As a result, Group sales in H1 2023 were broadly in line with
our expectations, with strong growth in Steam Specialties and ETS
offsetting the reduction in Watson-Marlow. Excluding
Watson-Marlow's Biopharm sales, the Group's sales grew 11%
organically.
Adjusted operating profit
Group adjusted operating profit of GBP171.7 million (H1 2022:
GBP178.8 million) was down 4% or 13% organically .
Strong organic growth in adjusted operating profit at Steam
Specialties of 25% was driven by higher sales and cost containment
initiatives.
ETS adjusted operating profit was broadly flat organically,
compared to the first half of 2022 despite the Business' strong
organic sales growth, with profit impacted by weaker Semicon WFE
demand in Thermocoax.
On a pro-forma basis, the combined adjusted operating profit of
Vulcanic and Durex Industries was lower than in the first half of
2022, reflecting investment in onboarding costs and the weaker
Semicon WFE demand in Durex Industries . Actions were taken in the
first half of the year to appropriately right-size capacity and
overhead support costs in Durex Industries, with the full
beneficial effect expected to be realised in the second half.
Watson-Marlow's adjusted operating profit was down 47%
organically, as a result of lower sales to customers in the
Biopharm sector. Actions were taken in the first half of the year
to appropriately right-size capacity and overhead support costs in
Watson-Marlow, with the full beneficial effect expected to be
realised in the second half of the year. Destocking by these
customers is expected to be a short-term headwind, with a return to
demand growth anticipated during 2024. As such, no further
restructuring actions are currently planned to avoid compromising
the longer-term growth potential of the Watson-Marlow Business.
Adjusted operating profit margin
Although strong sales growth in Steam Specialties and ETS offset
Watson-Marlow's sales decline, the lower demand from customers in
the Biopharm and Semicon WFE sectors impacted our highest margin
Businesses. Therefore, the resulting difference in the Group's mix
of sales compared to the first half of 2022, had an adverse impact
on the adjusted operating profit margin.
Group adjusted operating profit margin of 20.2% (H1 2022: 23.8%)
was down 370 bps organically. Steam Specialties adjusted operating
profit margin of 24.4% saw strong organic progression (+190 bps),
reflecting volume growth, cost containment initiatives and strong
pricing discipline to offset inflation and protect margins. This
strong growth was offset by organic declines in adjusted operating
profit margin at ETS (-140 bps) and Watson-Marlow (-1,220 bps) to
24.6%, reflecting lower demand from customers in the Semicon WFE
and Biopharm sectors respectively. On a pro-forma basis the
combined adjusted operating profit margin of Vulcanic and Durex
Industries was lower than in the prior year and lower than the
Group average due to investment in onboarding costs and weaker
Semicon WFE demand in Durex Industries.
Statutory operating profit and margin
Statutory operating profit decreased by 7% to GBP132.2 million
(H1 2022: GBP142.1 million) and the statutory operating profit
margin of 15.5% was down 340 bps (H1 2022: 18.9%). Statutory
operating profit and statutory operating profit margin are impacted
by the same drivers as explained in the adjusted operating profit
sections above, as well as the reconciling items detailed
below:
-- A charge of GBP18.5 million (H1 2022: GBP10.5 million) for the
amortisation of acquisition-related intangible assets
-- A restructuring charge of GBP5.2 million in Watson-Marlow to appropriately
right-size manufacturing capacity and reduce overhead support
costs in order to offset the adverse impact of lower sales volumes
-- Acquisition costs of GBP0.6 million relating to the acquisition
of Vulcanic
-- A one-off impairment charge of GBP13.9 million relating to a global
ERP programme implementation within the Steam Specialties Business
(see the Steam Specialties Business operating review for further
details)
-- A charge of GBP1.3 million from the reversal of fair value adjustments
to inventory on the acquisition of Vulcanic
Outlook and full year guidance
We continue to be confident in our Group's resilience and
ability to navigate the current uncertainty in the macroeconomic
climate and short-term headwinds from weaker demand in the Biopharm
and Semicon WFE sectors. Our confidence is underpinned by our
robust business model, our proven price management practices to
offset inflation and protect margins, as well as the opportunities
arising from the demand for decarbonisation solutions.
Oxford Economics' latest forecast for 2023 global Industrial
Production growth (IP) is largely unchanged from earlier this year
at 1.4%, reflecting 5.1% growth in China, which implies a step up
to 1.8% IP in the second half of the year from 1.0% IP in H1 2023.
However, the equivalent CHR Economics forecast for global IP is
0.6%, based on 0.4% in China, illustrating the difficulties of
forecasting in the current environment. There is a risk of downward
revisions to forecasted IP in the second half of the year as
governments and central banks seek to contain inflation through
active monetary policies, as well as a slower than anticipated post
COVID-19 recovery in China. The weaker economic backdrop in China
is beginning to impact customer demand, while broader macroeconomic
uncertainty is also leading to customer deferrals of project
orders.
At the time of our last trading update in May, we anticipated a
modest adverse effect from currency movements on full year 2023
sales and adjusted operating profit if rates as at the end of April
were to prevail for the remainder of the year. Given sterling's
continued appreciation and based on rates at the end of July, we
now anticipate an adverse impact on the Group's full year sales and
adjusted operating profit of between 2.0% and 2.5%, compared with
the full year 2022. However, movements in exchange rates are often
volatile and unpredictable, therefore the actual impact could be
significantly different.
The Biopharm and Semicon WFE sectors are likely to remain
challenging across the remainder of the current year. Demand from
Biopharm customers is now likely to normalise in 2024 as they
continue to work through COVID-19-driven excess inventories. In
both the Biopharm and Semicon WFE sectors, based upon the latest
customer feedback, we expect demand to improve in the latter part
of 2023 but remain cautious as to the extent of the recovery in
this year.
Against this backdrop and consistent with our guidance at the
beginning of the year, for the full year 2023 we continue to
anticipate that organic sales growth in Steam Specialties will be
significantly above IP, albeit at a lower rate of IP outperformance
than in the first half. We anticipate that the improved first half
adjusted operating profit margin will be sustained.
In ETS, compared to the full year 2022 pro-forma, we now
anticipate full year 2023 sales growth well above IP and for
adjusted operating profit margin, we now anticipate a larger
decline in the full year 2023 margin than we had expected at the
beginning of the year, reflecting the impact of weaker Semicon WFE
demand in Durex Industries and Thermocoax.
Watson-Marlow is expected to deliver sequential growth in sales
and adjusted operating profit in the second half of 2023, although
both are likely to remain below prior year levels before returning
to year-on-year growth in 2024.
As a result of these factors and excluding the impact of the
currency headwind, compared to 2022 pro-forma sales of GBP1,734
million and the Group's adjusted operating profit margin of 23.6%,
we anticipate Group sales for the full year 2023 to grow between 0%
and 4%, with a year-on-year adjusted operating profit margin
decline of between 100 bps and 200 bps.
We now anticipate that the half-yearly sales split of all three
Businesses will be closer to the typical 48%:52% than we previously
guided to. Second half adjusted operating profit will benefit from
operational gearing and the full effect of right-sizing actions
taken in the first half.
While our guidance for the remainder of the year reflects the
short-term challenges of predicting the precise timing and scale of
the return to growth in the Biopharm and Semicon WFE sectors, we
remain confident in the strong underlying medium and long-term
growth drivers for both sectors.
We continue to anticipate adjusted cash conversion of above 70%
in 2023, as well as capital expenditure of approximately 7% of
sales.
Net financing expense
Net financing expenses increased to GBP18.2 million (H1 2022:
GBP3.6 million) comprising GBP16.5 million of net bank interest (H1
2022: GBP2.6 million), GBP0.8 million of interest on pension
liabilities (H1 2022: GBP0.3 million) and GBP0.9 million of
interest on lease liabilities (H1 2022: GBP0.7 million). Bank
interest increased due to higher average net debt following the
acquisitions of Vulcanic and Durex Industries at the end of the
prior financial year. We expect net financing expenses for the
second half of the year to be broadly in line with the first
half.
Profit before tax
Adjusted operating profit before tax was down 12% to GBP153.5
million (H1 2022: GBP175.2 million), driven by a decrease of
adjusted operating profit by 4% and additional net financing
expense. Statutory operating profit before tax was down 18% to
GBP114.0 million (H1 2022: GBP138.5 million). The reconciling items
between adjusted operating profit before tax and statutory
operating profit before tax are shown above and in the Appendix to
the Financial Statements.
Taxation
The Group tax rate reflects the blended average of rates in tax
jurisdictions around the world in which the Group trades and
generates profit. The Group adjusted effective tax rate increased
by 40 bps to 25.4% (FY 2022: 25.0%) and on a statutory basis the
Group effective tax rate was 27.2% (FY 2022: 27.0%).
The Group adjusted effective tax rate is in line with our
forecast for 2023, anticipating a marginally higher rate than in
2022. The Group is subject to a tax adjustment in Argentina that
seeks to offset the impact of inflation upon taxable profits. Given
the current high levels of inflation in Argentina, this has a
meaningful impact on the effective tax rate. Whilst we include the
expected impact of this adjustment in our guidance for the
effective tax rate, this is difficult to accurately forecast given
the volatility of Argentinian inflation.
The Group monitors income tax developments in the territories in
which it operates, including the OECD Base Erosion and Profit
Shifting (BEPS) initiative to set a new minimum global corporate
tax rate of 15%. We do not currently expect that this BEPS
initiative will lead to a material increase in our effective tax
rate from 2024 onwards.
On 8th June 2022, the European Union (EU) General Court
published its decision on the appeals for annulment made against
the European Commission's (EC) 2019 decision that certain aspects
of the UK's Controlled Foreign Company regime constituted State
Aid, finding in favour of the EC. The UK Government has appealed
the decision of the EU General Court. Whilst the EU General Court
ruling was in favour of the EC, our assessment is that there are
grounds for successful appeal. As a result, we have continued to
recognise a receivable of GBP4.9 million in the Consolidated
Statement of Financial Position. This relates to the full amount
paid to HM Revenue & Customs for Charging Notices received in
2021. The Group has not received a Charging Notice for either the
benefit received prior to 2017, which is estimated to be GBP2.8
million, or the benefit received during 2019 of GBP1.1 million. No
provisions have currently been recognised relating to these amounts
and therefore they remain a contingent liability at 30th June
2023.
Earnings per share
Adjusted basic earnings per share decreased by 11% to 155.2
pence (H1 2022: 175.1 pence), consistent with the decrease in
adjusted operating profit. Statutory basic earnings per share were
112.5 pence (H1 2022: 131.8 pence). The statutory fully diluted
earnings per share were not materially different to the statutory
basic earnings per share in either year.
Dividends
The Board has declared an interim dividend of 46.0 pence (2022:
42.5 pence) per ordinary share, an increase of 8%. This growth in
the interim dividend follows an increase of 12% in the total
dividend in respect to 2022. The dividend will be paid on 10th
November 2023 to shareholders on the register at the close of
business on the 13th of October 2023. The final dividend of 109.5
pence per share in respect of 2022 was paid on 19th May at a cash
cost of GBP80.7 million.
Currency movements
The Group's Income Statement and Statement of Financial Position
are exposed to movements in a wide range of different currencies.
This stems from our direct sales business model, with a large
number of local operating companies. These currency exposures and
risks are managed through a rigorously applied Treasury Policy,
typically using centrally managed and approved simple forward
contracts to mitigate exposures to forecast future cash flows and
avoiding the use of complex derivative transactions. The largest
exposures are to the euro, US dollar, Chinese renminbi and Korean
won. While currency effects can be significant, the structure of
the Group provides some mitigation through our regional
manufacturing presence, diverse spread of geographic locations and
through the natural hedge of having a high proportion of our
overhead costs in the local currencies of our operating
companies.
Financial Position and Cash Flow
Capital employed
30th June 31st December
2023 2022
GBPm GBPm
--------------------------------------------- ----------- ---------------
Property, plant and equipment 395.3 384.5
Right-of-use assets 90.2 67.2
Software & development costs 35.0 44.5
Non-current prepayments 2.5 2.0
Inventories 304.9 290.0
Trade receivables 317.2 341.1
Other current assets 81.8 79.6
Tax recoverable 16.6 19.0
Trade, other payables and current provisions (242.7) (295.0)
Current tax payable (24.9) (40.4)
Capital employed 975.9 892.5
--------------------------------------------- ----------- ---------------
Capital employed increased by GBP83.4 million to GBP975.9
million at 30th June 2023. In first half of this financial year,
our capital expenditure was GBP50.6 million, which amounts to 6% of
sales and is a comparable investment to H1 2022 at GBP49.3 million.
For the full year, we expect capital expenditure to be
approximately 7% of sales due to increased investment in the second
half of the year, driven by the expansion of Chromalox's
manufacturing facility in Ogden, Utah (USA). During the first half,
tangible fixed assets (Property, Plant & Equipment (PPE) and
right-of-use-assets) increased by GBP33.8 million to GBP485.5
million principally as a result of the new leased manufacturing
facility for Watson-Marlow in Devens, Massachusetts (USA).
Total working capital increased by GBP62.7 million reflecting
usual seasonality, with an increase in inventory and a reduction in
payables driven by the completion of a number of large capital
expenditure projects. Going forward, we anticipate that the ratio
of working capital to sales will be at a similar level to the
pro-forma basis reported at December 2022.
Adjusted cash flow
30(th) June 2023 30(th) June
GBPm 2022
Adjusted Cash flow GBPm
------------------------------------------ ------------------------------------------- ------------
Adjusted operating profit 171.7 178.8
Depreciation and amortisation (excl.
leased assets) 21.7 17.0
Depreciation of leased assets 7.5 6.4
Cash payments to pension schemes
more than the charge to adjusted
operating profit (2.7) (2.9)
Equity settled share plans 4.8 4.8
Working capital changes (62.7) (70.8)
Repayments of principal under lease
liabilities (7.7) (6.2)
Capital expenditure (including software
and development) (50.6) (49.3)
Capital disposals 0.8 0.6
------------------------------------------ ------------------------------------------- ------------
Adjusted cash from operations 82.8 78.4
------------------------------------------ ------------------------------------------- ------------
Net interest (17.4) (3.3)
Income taxes paid (46.1) (41.2)
Adjusted Free cash flow 19.3 33.9
------------------------------------------ ------------------------------------------- ------------
Net dividends paid (81.0) (72.2)
Purchase of employee benefit trust
shares/Proceeds from issue of shares (8.8) (10.4)
(Acquisitions)/Disposals of subsidiaries (2.3) (12.7)
Restructuring costs (6.1) -
Cash flow for the year (78.9) (61.4)
------------------------------------------ ------------------------------------------- ------------
Exchange movements 21.0 (8.5)
Cash transferred to assets classified
as held for sale - (2.3)
Opening net debt (690.4) (130.5)
------------------------------------------ ------------------------------------------- ------------
Net debt at 30 June 2023 (748.3) (202.7)
------------------------------------------ ------------------------------------------- ------------
Lease liability (88.4) (61.8)
Net debt and lease liability 30(th)
June 2023 (836.7) (264.5)
------------------------------------------ ------------------------------------------- ------------
Adjusted cash from operations of GBP82.8 million (H1 2022:
GBP78.4 million) was up GBP4.4 million, resulting in cash
conversion of 48% (H1 2022: 44%). For the full year we continue to
expect cash conversion to be above 70%. Adjusted cash from
operations is a measure of the cash flow generated from our
operating companies that reflects the components within the control
of local management. A reconciliation between this and statutory
operating cash flow can be found in the Appendix to the Financial
Statements.
Tax paid in the period increased to GBP46.1 million (H1 2022:
GBP41.2 million) driven by payments made by Vulcanic and Durex
Industries included in H1 2023 but not in H1 2022. Adjusted free
cash flow decreased to GBP19.3 million (H1 2022: GBP33.9 million)
principally due to increased financing expense in the period.
Dividend payments were GBP81.0 million (H1 2022: GBP72.2
million) including payments to minority shareholders.
Share purchases, net of new shares issued for the Group's
various employee share schemes, resulted in a cash outflow of
GBP8.8 million (H1 2022: GBP10.4 million).
Restructuring spend of GBP6.1 million relates primarily to the
right-sizing of capacity and overhead support costs undertaken in
Watson-Marlow.
The net post-retirement benefit liability under IAS 19 decreased
to GBP43.4 million (FY 2022: GBP52.1 million, H1 2022: GBP35.2
million). The fair value of assets decreased by GBP7.8 million from
31st December 2022 to GBP333.8 million. This was more than offset
by lower liabilities which reduced by GBP16.5 million since 31st
December 2022 to GBP377.2 million.
Financing and Liquidity
Net debt (excluding leases) at the 30th June 2023 was GBP748.3
million (FY 2022: GBP690.4 million), with a net debt to EBITDA
ratio of 1.8x (FY 2022: 1.7x on a reported basis and 1.5x on a
pro-forma basis).
As at the 30th June 2023, total committed and undrawn debt
facilities amounted to GBP227.7 million alongside a net cash
balance of GBP214.7 million. The average tenor of our debt is over
four years with the next contractual repayment maturity in
September 2023. During the period, the Group successfully exercised
an option to extend the maturity of our GBP400 million committed,
revolving credit facility by an additional year to April 2028.
OPERATING REVIEW
Steam Specialties
HY 2022 Exchange Organic Acquisitions HY 2023 Organic Reported
& disposals
Revenue GBP400.6m GBP0.6m GBP60.0m GBP(1.4)m GBP459.8m 15% 15%
---------- ---------- --------- ------------- ---------- -------- ---------
Adjusted operating
profit GBP92.1m GBP(2.2)m GBP22.4m GBP(0.1)m GBP112.2m 25% 22%
---------- ---------- --------- ------------- ---------- -------- ---------
Adjusted operating
margin 23.0% 24.4% 190 bps 140 bps
---------- ---------- --------- ------------- ---------- -------- ---------
Statutory operating
profit GBP87.7m GBP96.3m 10%
---------- ---------- --------- ------------- ---------- -------- ---------
Statutory operating (100)
margin 21.9% 20.9% bps
---------- ---------- --------- ------------- ---------- -------- ---------
*Results include the impact of the treatment of our Russian
operating companies as disposals from the date at which the Group
suspended all trading with and within Russia.
Progress in the half year
Steam Specialties made exceptional progress during the first
half, with demand above sales and continued growth in the overall
order book. Steam Specialties sales of GBP459.8 million were up 15%
on a reported basis and organically, significantly ahead of IP
.
EMEA
In EMEA, organic sales growth of 15% reflected the delivery of
our first ' TargetZero' order in Turkey and the benefits of prior
year revenue investments to enter new markets in the Middle East
and Africa. Growth in more mature markets, including the UK, was
lower reflecting weaker IP.
Asia Pacific
In Asia Pacific, organic sales growth of 14% reflected an
increase in self-generated sales across the region and a focus on
driving maintenance and replacement orders, reducing the historical
higher dependency on large orders. However, Korea benefited from
growth in large orders, funded from our customers' capital
expenditure budgets, continuing the post COVID-19 recovery.
Americas
In the Americas, organic sales growth of 17% was delivered
against the backdrop of contracting IP during the first half. In
North America, sales growth was supported by delivery against a
significant order book built up in 2022. In Latin America, sales in
Brazil were up strongly, driven by the Oil & Gas sector, while
growth in Argentina was driven by both the Food & Beverage and
Oil & Gas sectors including some significant large orders.
Across all regions broader macroeconomic uncertainty is leading
to customer deferrals of project orders, while the weaker economic
backdrop in China is beginning to impact on customer demand in Asia
Pacific.
Steam Specialties adjusted operating profit of GBP112.2 million
was up 25% up on an organic basis. Adjusted operating profit margin
of 24.4% was up 190 bps on an organic basis, reflecting volume
growth, cost containment initiatives and strong pricing discipline
to offset inflation and protect margins.
Statutory operating profit of GBP96.3 million was up 10% from
GBP87.7 million in the first half of 2022 and statutory operating
profit margin of 20.9% was down 100 bps. Since 2018, Steam
Specialties has been engaged in a project to upgrade its ERP
systems, known as Project OPAL. Over time the scope of the project
has expanded substantially to include a wider range of business
applications. In parallel, the external technology market has
continued to evolve and the Group has also taken the decision to
implement consistent ERP solutions across all three Businesses.
Within Steam Specialties, this will enhance future capability in
addition to leveraging the scale of the broader Group. This has
resulted in a non-cash impairment charge to statutory operating
profit of GBP13.9 million in relation to existing assets which will
no longer provide future economic benefit.
Operating highlights and strategic update
Following commercial launch of the Group's ' TargetZero'
solutions late in 2022, Steam Specialties has begun to build a
long-term pipeline of opportunities within its global customer
base. There is strong interest in the 'TargetZero' solutions,
especially the 'ElectroFit' solution, which is the retrofit of gas
burners for electric heaters. In H1 2023, we completed the
installation and commissioning of the first-to-world 'Electrofit'
for global Food & Beverage customer Diageo in Turkey.
During the first half, Steam Specialties continued to implement
its digital strategy with the continued build-out of regional
'digital hubs' and the deployment of our proprietary STRATA
platform, which came with our acquisition in 2022 of the global
energy consulting specialist Cotopaxi, across the Group's
manufacturing facilities in all of our three Businesses.
Electric Thermal Solutions
HY 2022 Exchange Organic Acquisitions HY 2023 Organic Reported
& disposals*
Revenue GBP104.7m GBP4.4m GBP7.1m GBP76.3m GBP192.5m 7% 84%
---------- --------- ---------- -------------- ---------- -------- ---------
Adjusted operating
profit GBP12.8m GBP0.4m GBP(0.8)m GBP14.5m GBP26.9m (6)% 110%
---------- --------- ---------- -------------- ---------- -------- ---------
Adjusted operating (140)
margin 12.2% 14.0% bps 180 bps
---------- --------- ---------- -------------- ---------- -------- ---------
Statutory operating
(loss)/profit GBP(8.9)m GBP10.7m 220%
---------- --------- ---------- -------------- ---------- -------- ---------
Statutory operating 1,410
margin (8.5)% 5.6% bps
---------- --------- ---------- -------------- ---------- -------- ---------
*Results include the impact of the acquisitions of Vulcanic and
Durex Industries.
Progress in the half year
In 2022, on a pro-forma basis and following the acquisitions of
Vulcanic and Durex Industries, the Americas and EMEA represented
56% and 32% of ETS sales respectively , with sales to the Semicon
WFE sector representing 18% of total ETS sales. While IP remains a
key underlying driver of growth in ETS, secular trends in the
decarbonisation and Semiconductor markets are important additional
drivers. As expected, the Semicon WFE sector continued to slow
during the first half with demand additionally impacted by
destocking in the supply chain.
Demand growth for ETS products was significantly ahead of IP and
above sales. In Chromalox and Vulcanic, demand growth was strongest
in the strategically important sectors of Energy Transition, which
includes decarbonisation solutions, as well as Health &
Nutrition, leading to a significantly enhanced order book.
Thermocoax experienced strong demand from customers in the
Aerospace, Power Generation and Nuclear industries. Both Durex
Industries and Thermocoax were impacted by slowing Semicon WFE
demand.
ETS sales of GBP192.5 million were up 84% reflecting the
first-time contribution of sales from the acquisitions of Vulcanic
and Durex Industries. Excluding this contribution, sales were up
11% or 7% organically, with the difference reflecting a currency
tailwind during the first half.
On a pro-forma basis, Vulcanic and Durex Industries sales were
higher than in the first half of last year, with strong growth at
Vulcanic partially offset by lower sales at Durex Industries that
were impacted by slowing Semicon WFE demand exacerbated by
destocking in the supply chain.
Adjusted operating profit in ETS of GBP26.9 million was up 110%
due to the first-time contribution from the acquisitions of
Vulcanic and Durex Industries. Excluding this contribution,
adjusted operating profit was broadly flat year-on-year with
adjusted operating profit margin performance impacted by weaker
Semicon WFE demand in Thermocoax. On a pro-forma basis, margins in
the recently acquired Divisions were down year-on-year, driven by
the impact of lower Semicon WFE demand at Durex Industries, as well
as investment in systems and processes to align the Divisions with
the Group's operating standards.
Statutory operating profit of GBP10.7 million was up 220% from a
statutory operating loss of GBP8.9 million in the first half of
2022 reflecting the absence of restructuring charges in relation to
Chromalox EMEA which impacted the H1 2022 result. For the same
reason, statutory operating profit margin of 5.6% was up 1,410
bps.
Operating highlights and strategic update
We have made good progress with the operational integration of
Vulcanic and Durex Industries to align both acquisitions to the
Group culture, our Values including Safety, our business model, as
well as core operational and financial processes. In addition, we
have begun to leverage cross-selling opportunities between Vulcanic
and Chromalox as well as Durex Industries and Thermocoax that are
also consolidating their US manufacturing facilities.
In Q2 2023, we initiated a US$58 million investment to extend
Chromalox's facility in Ogden, Utah (USA) by 9,600 m(3) and
establish a state-of-the-art manufacturing unit dedicated to Medium
Voltage heating solutions, which will be operational early in
2025.
Watson-Marlow
HY 2022 Exchange Organic Acquisitions HY 2023 Organic Reported
& disposals*
Revenue GBP244.8m GBP6.6m GBP(51.2)m GBP(1.7)m GBP198.5m (21)% (19)%
---------- --------- ----------- -------------- ---------- -------- ---------
Adjusted operating
profit GBP87.0m GBP4.8m GBP(42.9)m GBP48.9m (47)% (44)%
---------- --------- ----------- -------------- ---------- -------- ---------
Adjusted operating (1,220) (1,090)
margin 35.5% 24.6% bps bps
---------- --------- ----------- -------------- ---------- -------- ---------
Statutory operating
profit GBP83.6m GBP42.1m (50)%
---------- --------- ----------- -------------- ---------- -------- ---------
Statutory operating (1,300)
margin 34.2% 21.2% bps
---------- --------- ----------- -------------- ---------- -------- ---------
*Results include the impact of the treatment of our Russian
operating companies as disposals from the date at which the Group
suspended all trading with and within Russia.
Progress in the half year
Watson-Marlow sells to the Biopharm sector through OEMs,
contract manufacturers and directly to end customers. All three
customer groups drove strong growth in Watson-Marlow from Q4 2020
through to H1 2022. This exceptional demand from the sector was
driven by expectations of a far larger deployment of the COVID-19
vaccine than was subsequently required. The resulting excess
inventory across the supply chain has driven destocking from H2
2022 onwards.
Expectations from our customers at the beginning of 2023 were
that this destocking would complete during H1 2023, before demand
normalised during H2 2023. In recent weeks it has become clear that
destocking is likely to continue through the remainder of 2023,
with a return to more normal levels of demand growth during
2024.
Against a challenging comparator in H1 2022, as well as the
backdrop of continuing normalisation of demand in Biopharm,
Watson-Marlow sales in the first half were 19% lower year-on-year,
or down 21% organically, as our customers have been working through
significant levels of overstocking. As a result, in H1 2023
Biopharm sales were down 33% organically, while Process Industries
sales were broadly flat against a record H1 2022 that saw
double-digit growth.
The higher-than-expected decline in sales volumes during the
first half impacted Watson-Marlow's profitability. Adjusted
operating profit in the first half of GBP48.9 million was 47% lower
organically, with adjusted operating profit margin lower by 1,220
bps at 24.6%.
Although Watson-Marlow's performance in 2023 is below the
exceptional levels experienced through the COVID-19 pandemic, the
Business remains robust and is well positioned for a return to
growth in 2024. Compared to the first half of 2019, Watson-Marlow's
H1 2023 sales have grown by 9% on a compound annual basis, which is
consistent with Watson-Marlow's pre-pandemic sales growth,
demonstrating the underlying strength of its business model and
strategy.
Statutory operating profit of GBP42.1 million was down 50%
compared to the first half of 2022, while statutory operating
profit margin was down 1,300 bps for the reasons set out above.
Operating highlights and strategic update
While the trading environment remains temporarily challenging,
Watson-Marlow has taken a prudent approach to costs by balancing
the needs of business-readiness for a recovery in volumes in 2024
against appropriate near-term actions to support margins.
In the first quarter, Watson-Marlow took steps to appropriately
right-size manufacturing capacity and reduce overhead support costs
to offset the adverse impact of lower sales volumes on adjusted
operating profit margin. While the right-sizing was focused on our
UK and EMEA operations, Watson-Marlow also closed the Flowsmart
site in Delaware (USA) and transferred manufacturing to its newly
built facility in Devens, Massachusetts (USA). Following these
actions Watson-Marlow's manufacturing capacity is strongly
positioned to respond to the return of Biopharm demand.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group has processes in place to identify, evaluate and
mitigate the Principal Risks that could have an impact on the
Group's performance. The Principal Risks, as agreed at the most
recent meeting of the Risk Management Committee, together with a
description of why they are relevant and if the significance of the
risk has changed during the first half of 2023, are set out below.
Details of how they link with the Group's strategy, an explanation
of the change in risk and how mitigation is managed are disclosed
in the 2022 Annual Report & Accounts.
Economic and political instability - Consistent compared to
2022
The Group operates worldwide and maintains operations in
territories that have historically experienced economic or
political instability, including regime changes. In addition to the
potential impact on our local operations, this instability also
increases credit, liquidity and currency risks.
This risk was already increased in 2022 due to escalating global
political uncertainties and a weakening macroeconomic outlook. For
H1 2023 this the risk remains unchanged.
Significant exchange rate movements -Consistent compared to
2022
The Group reports its results and pays dividends in sterling.
Sales and manufacturing companies trade in local currency. With our
local presence in markets across the globe, the nature of our
business necessarily results in exposure to exchange rate
volatility.
Cybersecurity - Consistent compared to 2022
Cybersecurity risks include theft of information, malware,
ransomware and compliance with evolving statutory and legislative
requirements. Risks may manifest through a direct attack on our
business or through our supply chain.
This risk was increased in 2022 due to rising geopolitical
tensions and sophisticated, state-backed cyber attacks. For H1 2023
this risk remains unchanged.
Loss of manufacturing output at any Group factory - Consistent
compared to 2022
The risk includes loss of output as a result of natural
disasters, industrial action, accidents or other causes. Loss of
manufacturing output from our larger plants risks serious
disruption to Group sales.
Failure to realise acquisition objectives - Consistent compared
to 2022
The Group mitigates this risk in various ways, including through
comprehensive due diligence, professional advisers, contractual
protections and comprehensive integration planning. However, there
are some variables that are difficult to control, such as adverse
economic conditions, or the loss of key colleagues, which could
impact acquisition objectives.
Loss of critical supplier - Consistent compared to 2022
This risk relates to the loss of a critical supplier that could
result in manufacturing constraints and delayed deliveries to
customers.
Breach of legal and regulatory requirements (including ABC laws)
- Consistent compared to 2022
We operate globally and must ensure compliance with laws and
regulations wherever we do business. As we enter new markets and
territories we continually review and update our operating
procedures and ensure our colleagues are fully informed and
educated in all applicable legal requirements, such as with respect
to anti-bribery and corruption (ABC) legislation. Breaching any of
these laws or regulations could have serious consequences for the
Group.
Inability to identify and respond to changes in customer needs -
Consistent compared to 2022
This risk could lead to a reduction in demand from a failure to
respond to changes in the needs of customers or technology
shifts.
Climate change risks
Although not a Principal Risk, Climate change was elevated to
risk 9 in our Risk Register in 2022. Our Group Director of
Sustainability became a member of the Risk Management Committee in
2022 in recognition of the increasing importance of this risk.
Following a comprehensive review, our description of this risk was
updated in the Group Risk Register, aligning with the TCFD
framework and recognising that climate change is not a singular
risk, but a combination of physical and transitional risks that
will emerge differently under various scenarios.
Climate change-related risks are currently deemed to be low for
the Group (based on assessment of likelihood, impact and control)
and climate change is not identified as a Principal Risk. However,
a number of the key risks associated with climate change are
already managed through other Principal Risks on the Group Risk
Register. These include physical risks - notably the impact of a
climate-related event on our manufacturing operations, specifically
the loss of a manufacturing site, or our supply chain - and
transition risks - such as failure to meet changing market
needs.
Based on this assessment we believe that our risk management
processes are adequate and appropriate for the level of risk.
During the first half of 2023, management of the Group's
climate-change risk mitigation activities was overseen by the
Board, the Group Executive Committee and the Group Sustainability
Management Committee.
Emerging risks
We are continuing to monitor the conflict in Ukraine and its
subsequent impact on our Group, including volatile energy costs,
inflationary pressures and corresponding interest rate rises in an
effort to curb inflation.
INDEPENT REVIEW REPORT TO SPIRAX-SARCO ENGINEERING PLC
Conclusion
We have been engaged by the Group to review the condensed set of
financial statements in the half-yearly financial report for the
six months ended 30th June 2023 which comprises the Condensed
Consolidated Statement of Financial Position, the Condensed
Consolidated Income Statement, the Condensed Consolidated Statement
of Comprehensive Income, the Condensed Consolidated Statement of
Changes in Equity, the Condensed Consolidated Statement of Cash
Flows and related Notes 1 to 13.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30th
June 2023 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council for use in the
United Kingdom. A review of interim financial information consists
of making inquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK) and consequently does not enable us to obtain assurance that
we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in Note 1 the annual financial statements of the
group will be prepared in accordance with United Kingdom adopted
international accounting standards. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE (UK), however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the group a conclusion on the
condensed set of financial statement in the half-yearly financial
report. Our conclusion, including our Conclusions Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council. Our work
has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review
report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the
conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
9th August 2023
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Notes 30(th) 30(th) 31(st)
June June December
2023 2022 2022
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
----------------------------------------- ------ ------------ ------------ ----------
ASSETS
Non-current assets
Property, plant and equipment 395.3 311.1 384.5
Right-of-use assets 90.2 64.2 67.2
Goodwill 677.8 446.8 703.3
Other intangible assets 455.5 263.8 500.3
Prepayments 2.5 1.3 2.0
Investment in Associate - - -
Taxation recoverable 4.9 4.9 5.1
Deferred tax assets 18.9 50.0 69.0
----------------------------------------- ------ ------------ ------------ ----------
1,645.1 1,142.1 1,731.4
----------------------------------------- ------ ------------ ------------ ----------
Current assets
Inventories 304.9 239.4 290.0
Trade receivables 317.2 311.1 341.1
Other current assets 81.8 58.7 79.6
Taxation recoverable 11.7 9.4 13.9
Assets classified as held for sale - 0.7 -
Cash and cash equivalents 8 322.8 304.9 328.9
----------------------------------------- ------ ------------ ------------ ----------
1,038.4 924.2 1,053.5
----------------------------------------- ------ ------------ ------------ ----------
Total assets 2,683.5 2,066.3 2,784.9
----------------------------------------- ------ ------------ ------------ ----------
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables 232.9 225.4 283.0
Provisions 9.8 14.2 12.0
Bank overdrafts 8 108.1 74.3 85.1
Current portion of long-term borrowings 8 196.7 0.9 202.9
Short-term lease liabilities 8 13.3 12.6 14.1
Liabilities directly associated - 0.5 -
with assets classified as held for
sale
Current tax payable 24.9 33.8 40.4
----------------------------------------- ------ ------------ ------------ ----------
585.7 361.7 637.5
----------------------------------------- ------ ------------ ------------ ----------
Net current assets 452.7 562.5 416.0
----------------------------------------- ------ ------------ ------------ ----------
Non-current liabilities
Long-term borrowings 8 766.3 432.4 731.3
Long-term lease liabilities 8 75.1 49.2 51.1
Deferred tax liabilities 76.8 88.1 128.1
Post-retirement benefits 7 43.4 35.2 52.1
Provisions 6.5 1.6 6.2
Long-term payables 8.6 6.2 8.8
----------------------------------------- ------ ------------ ------------ ----------
976.7 612.7 977.6
----------------------------------------- ------ ------------ ------------ ----------
Total liabilities 1,562.4 974.4 1,615.1
----------------------------------------- ------ ------------ ------------ ----------
Net assets 2 1,121.1 1,091.9 1,169.8
----------------------------------------- ------ ------------ ------------ ----------
Equity
Share capital 19.8 19.8 19.8
Share premium account 88.4 86.6 88.1
Translation reserve (49.1) 17.8 17.5
Other reserves (3.4) (15.2) (23.4)
Retained earnings 1,064.8 982.1 1,067.0
----------------------------------------- ------ ------------ ------------ ----------
Equity shareholders' funds 1,120.5 1,091.1 1,169.0
Non-controlling interest 0.6 0.8 0.8
----------------------------------------- ------ ------------ ------------ ----------
Total equity 1,121.1 1,091.9 1,169.8
----------------------------------------- ------ ------------ ------------ ----------
Total equity and liabilities 2,683.5 2,066.3 2,784.9
----------------------------------------- ------ ------------ ------------ ----------
CONDENSED CONSOLIDATED INCOME STATEMENT
Six months Six months
to 30th to 30(th) Year ended
June June 31st December
2023 2022 2022
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
Revenue 2 850.8 750.1 1,610.6
Operating costs (718.6) (608.0) (1,291.8)
---------------------------- ------ ------------ ------------ ---------------
Operating profit 2 132.2 142.1 318.8
---------------------------- ------ ------------ ------------ ---------------
Financial expenses (22.3) (5.5) (16.3)
Financial income 4.1 1.9 5.6
---------------------------- ------ ------------ ------------ ---------------
Net financing expense 3 (18.2) (3.6) (10.7)
---------------------------- ------ ------------ ------------ ---------------
Share of (loss)/profit - - -
of Associate
---------------------------- ------ ------------ ------------ ---------------
Profit before taxation 114.0 138.5 308.1
---------------------------- ------ ------------ ------------ ---------------
Taxation 4 (31.0) (41.3) (83.1)
---------------------------- ------ ------------ ------------ ---------------
Profit for the period 83.0 97.2 225.0
---------------------------- ------ ------------ ------------ ---------------
Attributable to:
Equity shareholders 82.9 97.1 224.7
Non-controlling interest 0.1 0.1 0.3
---------------------------- ------ ------------ ------------ ---------------
Profit for the period 83.0 97.2 225.0
---------------------------- ------ ------------ ------------ ---------------
Earnings per share
Basic earnings per share 5 112.5p 131.8p 305.1p
Diluted earnings per share 5 112.3p 131.5p 304.4p
---------------------------- ------ ------------ ------------ ---------------
Dividends
Dividends per share 6 46.0p 42.5p 152.0p
---------------------------- ------ ------------ ------------ ---------------
Dividends paid (per share) 6 109.5p 97.5p 140.0p
---------------------------- ------ ------------ ------------ ---------------
All amounts relate to continuing operations. The Notes on pages
26 to 37 form an integral part of the Interim Condensed
Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months Six months Year ended
to 30(th) to 30(th) 31(st) December
June June 2022
2023 2022 GBPm
GBPm GBPm
(unaudited) (unaudited) (audited)
--------------------------------------------- ------------ ------------ -----------------
Profit for the period 83.0 97.2 225.0
--------------------------------------------- ------------ ------------ -----------------
Items that will not be reclassified
to profit or loss:
Remeasurement gain on post-retirement
benefits 5.9 8.5 (8.3)
Deferred tax on remeasurement gain
on post-retirement benefits (1.4) (2.3) 1.8
--------------------------------------------- ------------ ------------ -----------------
4.5 6.2 (6.5)
--------------------------------------------- ------------ ------------ -----------------
Items that may be reclassified subsequently
to profit or loss:
Exchange (loss)/gain on translation
of foreign operations and net investment
hedges (57.7) 63.8 54.8
Transfer to Income Statement of cumulative
translation differences on disposal
of subsidiaries - - 3.2
Gain/(loss) on cash flow hedges net
of tax 5.7 (7.7) (3.5)
--------------------------------------------- ------------ ------------ -----------------
(52.0) 56.1 54.5
--------------------------------------------- ------------ ------------ -----------------
Total comprehensive income for the
period 35.5 159.5 273.0
--------------------------------------------- ------------ ------------ -----------------
Attributable to:
Equity shareholders 35.4 159.4 272.7
Non-controlling interest 0.1 0.1 0.3
--------------------------------------------- ------------ ------------ -----------------
Total comprehensive income for the
period 35.5 159.5 273.0
--------------------------------------------- ------------ ------------ -----------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period
ended 30(th) June Share Equity Non-controlling
2023 Share premium Translation Other Retained shareholders' interest Total
(unaudited) capital account Reserve reserves earnings funds GBPm equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- --------- --------- ------------- ---------- ---------- --------------- ----------------- --------
Balance at 1(st)
January 2023 19.8 88.1 17.5 (23.4) 1,067.0 1,169.0 0.8 1,169.8
------------------- --------- --------- ------------- ---------- ---------- --------------- ----------------- --------
Profit for the
period - - - - 82.9 82.9 0.1 83.0
------------------- --------- --------- ------------- ---------- ---------- --------------- ----------------- --------
Other
comprehensive
(expense)/income:
Foreign exchange
translation
differences
and net
investment
hedges - - (66.6) 8.9 - (57.7) - (57.7)
Remeasurement
gain on
post-retirement
benefits - - - - 5.9 5.9 - 5.9
Deferred tax on
remeasurement
gain on
post-retirement
benefits - - - - (1.4) (1.4) - (1.4)
Cash flow hedges - - - 5.7 - 5.7 - 5.7
------------------- --------- --------- ------------- ---------- ---------- --------------- ----------------- --------
Total other
comprehensive
(expense)/income
for the period - - (66.6) 14.6 4.5 (47.5) - (47.5)
------------------- --------- --------- ------------- ---------- ---------- --------------- ----------------- --------
Total
comprehensive
(expense)/income
for the period - - (66.6) 14.6 87.4 35.4 0.1 35.5
------------------- --------- --------- ------------- ---------- ---------- --------------- ----------------- --------
Contributions
by and
distributions
to owners of the
Company:
Dividends paid - - - - (80.7) (80.7) (0.3) (81.0)
Equity-settled
share plans net
of tax - - - - (8.9) (8.9) - (8.9)
Issue of share
capital - 0.3 - - - 0.3 - 0.3
Employee Benefit
Trust shares - - - 5.4 - 5.4 - 5.4
Balance at 30(th)
June 2023 19.8 88.4 (49.1) (3.4) 1,064.8 1,120.5 0.6 1,121.1
------------------- --------- --------- ------------- ---------- ---------- --------------- ----------------- --------
Other reserves represent the Group's net investment hedge, cash
flow hedge, capital redemption and Employee Benefit Trust reserves.
The non-controlling interest is a 2.5% share of Spirax Sarco
(Korea) Ltd held by employee shareholders.
For the period
ended 30(th) Share Equity Non-controlling
June 2022 Share premium Translation Other Retained shareholders' interest Total
(unaudited) capital account Reserve reserves earnings funds GBPm equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- --------- ------------- ------------- ---------- ---------- --------------- ----------------- --------
Balance at 1(st)
January 2022 19.8 86.3 (53.2) (5.0) 961.1 1,009.0 1.0 1,010.0
------------------- --------- ------------- ------------- ---------- ---------- --------------- ----------------- --------
Profit for the
period - - - - 97.1 97.1 0.1 97.2
------------------- --------- ------------- ------------- ---------- ---------- --------------- ----------------- --------
Other
comprehensive
income/(expense):
Foreign exchange
translation
differences
and net
investment
hedges - - 71.0 (7.2) - 63.8 - 63.8
Remeasurement
gain on
post-retirement
benefits - - - - 8.5 8.5 - 8.5
Deferred tax
on remeasurement
gain on
post-retirement
benefits - - - - (2.3) (2.3) - (2.3)
Cash flow hedges - - - (7.7) - (7.7) - (7.7)
------------------- --------- ------------- ------------- ---------- ---------- --------------- ----------------- --------
Total other
comprehensive
income/(expense)
for the period - - 71.0 (14.9) 6.2 62.3 - 62.3
------------------- --------- ------------- ------------- ---------- ---------- --------------- ----------------- --------
Total
comprehensive
income/(expense)
for the period - - 71.0 (14.9) 103.3 159.4 0.1 159.5
------------------- --------- ------------- ------------- ---------- ---------- --------------- ----------------- --------
Contributions
by and
distributions
to owners of
the Company:
Dividends paid - - - - (71.9) (71.9) (0.3) (72.2)
Equity-settled
share plans net
of tax - - - - (10.4) (10.4) - (10.4)
Issue of share
capital - 0.3 - - - 0.3 - 0.3
Employee Benefit
Trust shares - - - 4.7 - 4.7 - 4.7
Balance at 30(th)
June 2022 19.8 86.6 17.8 (15.2) 982.1 1,091.1 0.8 1,091.9
------------------- --------- ------------- ------------- ---------- ---------- --------------- ----------------- --------
For the year ended
31st December 2022
(audited) Share Equity Non-controlling
premium shareholders' interest
funds
Share account Translation Other Retained GBPm GBPm Total
capital reserves earnings equity
GBPm GBPm Reserve GBPm GBPm GBPm
GBPm
--------------------- --------- ----------- -------------- ---------- -------------- --------------- ------------------ --------
Balance at 1(st)
January 2022 19.8 86.3 (40.5) (17.7) 961.1 1,009.0 1.0 1,010.0
--------------------- --------- ----------- -------------- ---------- -------------- --------------- ------------------ --------
Profit for the
period - - - - 224.7 224.7 0.3 225.0
--------------------- --------- ----------- -------------- ---------- -------------- --------------- ------------------ --------
Other comprehensive
income/(expense):
Foreign exchange
translation
differences
and net investment
hedges - - 54.8 - - 54.8 - 54.8
Transfer to Income
Statement of
cumulative
translation
differences
on disposal of
subsidiaries - - 3.2 - - 3.2 - 3.2
Remeasurement gain
on post-retirement
benefits - - - - (8.3) (8.3) - (8.3)
Deferred tax on
remeasurement gain
on post-retirement
benefits - - - - 1.8 1.8 - 1.8
Cash flow hedges - - - (3.5) - (3.5) - (3.5)
--------------------- --------- ----------- -------------- ---------- -------------- --------------- ------------------ --------
Total other
comprehensive
income/(expense)
for the period - - 58.0 (3.5) (6.5) 48.0 - 48.0
--------------------- --------- ----------- -------------- ---------- -------------- --------------- ------------------ --------
Total comprehensive
income/(expense)
for the period - - 58.0 (3.5) 218.2 272.7 0.3 273.0
--------------------- --------- ----------- -------------- ---------- -------------- --------------- ------------------ --------
Contributions by
and distributions
to owners of the
Company:
Dividends paid - - - - (103.1) (103.1) (0.5) (103.6)
Equity-settled
share plans net
of tax - - - - (9.2) (9.2) - (9.2)
Issue of share
capital - 1.8 - - - 1.8 - 1.8
Employee Benefit
Trust shares - - - (2.2) - (2.2) - (2.2)
Balance at 31(st)
December 2022 19.8 88.1 17.5 (23.4) 1,067.0 1,169.0 0.8 1,169.8
--------------------- --------- ----------- -------------- ---------- -------------- --------------- ------------------ --------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Notes Six months Six months Year ended
to 30(th) to 30(th) 31(st) December
June June 2022
2023 2022 GBPm
GBPm GBPm
(unaudited) (unaudited) (audited)
-------------------------------------- ------ ------------ ------------ -----------------
Cash flows from operating activities
Profit before taxation 114.0 138.5 308.1
Depreciation, amortisation and
impairment 61.1 40.9 81.0
Loss/(profit) on disposal of
fixed assets 0.5 (0.7) (1.4)
Loss on impairment of assets - 3.6 -
classified as held for sale
Cash payments to the pension
schemes greater than the charge
to operating profit (2.7) (2.9) (5.3)
Loss on disposal of subsidiaries - - 7.0
Acquisition related items (0.6) - 3.8
Restructuring related provisions
and impairments (0.9) 16.3 10.2
Equity-settled share plans 4.8 4.8 8.9
Net finance expense 18.2 3.6 10.7
-------------------------------------- ------ ------------ ------------ -----------------
Operating cash flow before
changes in working capital and
provisions 194.4 204.1 423.0
(Increase)/decrease in trade
and other receivables (7.0) (36.3) (56.3)
(Increase)/decrease in inventories (28.3) (29.7) (58.3)
(Decrease)/increase in provisions (0.3) (0.8) (0.8)
(Decrease)/increase in trade
and other payables (27.1) (4.0) 23.5
-------------------------------------- ------ ------------ ------------ -----------------
Cash generated from operations 131.7 133.3 331.1
Income taxes paid (46.1) (41.2) (90.0)
-------------------------------------- ------ ------------ ------------ -----------------
Net cash from operating activities 85.6 92.1 241.1
-------------------------------------- ------ ------------ ------------ -----------------
Cash flows from investing activities
Purchase of property, plant
and equipment (42.4) (44.1) (104.3)
Proceeds from sale of property,
plant and equipment 0.8 0.6 4.0
Purchase of software and other
intangibles (4.7) (3.5) (8.9)
Development expenditure capitalised (3.5) (1.7) (4.3)
Disposal of subsidiaries - - (2.8)
Acquisition of businesses net
of cash acquired - (12.7) (460.3)
Interest received 4.1 1.8 5.6
-------------------------------------- ------ ------------ ------------ -----------------
Net cash used in investing
activities (45.7) (59.6) (571.0)
-------------------------------------- ------ ------------ ------------ -----------------
Cash flows from financing activities
Proceeds from issue of share
capital 0.3 0.3 1.8
Employee Benefit Trust share
purchase (9.1) (10.7) (20.8)
Repaid borrowings - (59.1) (511.1)
New borrowings 60.3 134.2 1,008.8
Interest paid including interest
on lease liabilities (21.5) (5.1) (15.5)
Repayment of lease liabilities 8 (7.7) (6.2) (12.9)
Dividends paid (including minority
shareholders) 6 (81.0) (72.2) (103.6)
-------------------------------------- ------ ------------ ------------ -----------------
Net cash used in financing
activities (58.7) (18.8) 346.7
-------------------------------------- ------ ------------ ------------ -----------------
Net change in cash and cash
equivalents 8 (18.8) 13.7 16.8
Net cash and cash equivalents
at beginning of period 8 243.8 219.0 219.0
Cash transferred to assets held - (2.3) -
for sale
Exchange movement 8 (10.3) 0.2 8.0
-------------------------------------- ------ ------------ ------------ -----------------
Net cash and cash equivalents
at end of period 8 214.7 230.6 243.8
-------------------------------------- ------ ------------ ------------ -----------------
Borrowings 8 (963.0) (433.3) (934.2)
-------------------------------------- ------ ------------ ------------ -----------------
Net debt at end of period 8 (748.3) (202.7) (690.4)
-------------------------------------- ------ ------------ ------------ -----------------
Lease liabilities 8 (88.4) (61.8) (65.2)
-------------------------------------- ------ ------------ ------------ -----------------
Net debt and lease liabilities
at end of period 8 (836.7) (264.5) (755.6)
-------------------------------------- ------ ------------ ------------ -----------------
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
Spirax-Sarco Engineering plc is a company domiciled in the UK.
The Condensed Consolidated Interim Financial Statements of
Spirax-Sarco Engineering plc and its subsidiaries (the Group) for
the six months ended 30th June 2023 have been prepared in
accordance with United Kingdom adopted International Financial
Reporting Standard IAS 34 (Interim Financial Reporting). The
accounting policies applied are consistent with those set out in
the Spirax-Sarco Engineering plc 2022 Annual Report.
These Condensed Consolidated Interim Financial Statements do not
include all the information required for full annual statements and
should be read in conjunction with the 2022 Annual Report. The
comparative figures for the year ended 31st December 2022 do not
constitute the Group's statutory Financial Statements for that
financial year as defined in Section 434 of the Companies Act 2006.
The Financial Statements of the Group for the year ended 31st
December 2022 were prepared in accordance with International
Financial Reporting Standards (IFRS), as adopted by the United
Kingdom. The statutory Consolidated Financial Statements for
Spirax-Sarco Engineering plc in respect of the year ended 31st
December 2022 have been reported on by the Company's auditor and
delivered to the registrar of companies. The report of the auditor
was (i) unqualified, (ii) did not include a reference to any
matters to which the auditor drew attention by way of emphasis
without qualifying their report, and (iii) did not contain a
statement under Section 498 (2) or (3) of the Companies Act
2006.
The Consolidated Financial Statements of the Group in respect of
the year ended 31st December 2022 are available upon request from
Mr A. J. Robson, General Counsel and Company Secretary, The Grange,
Bishops Cleeve, Cheltenham, GL52 8YQ. The Report is also available
on our website at www.spiraxsarcoengineering.com .
The Condensed Consolidated Interim Financial Statements for the
six months ended 30th June 2023, which have been reviewed by the
auditor in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 'Review of Interim Financial
Information Performed by the Independent Auditor of the Entity'
issued by the Financial Reporting Council, were authorised by the
Board on 9th August 2023.
The Half Year Report and Interim Financial Statements (Half Year
Report) has been prepared solely to provide additional information
to shareholders as a body to assess the Group's strategies and the
potential for those strategies to succeed. This Half Year Report
should not be relied upon by any other party or for any other
purpose.
GOING CONCERN
Having made enquiries and reviewed the Group's plans and
available financial facilities, the Board has a reasonable
expectation that the Group has adequate resources to continue its
operational existence for at least 12 months from the date of
signing the 2023 Half Year Report. For this reason, it continues to
adopt the going concern basis in preparing the Condensed
Consolidated Interim Financial Statements.
The Group's principal objective when managing liquidity is to
safeguard the Group's ability to continue as a going concern for at
least 12 months from the date of signing the 2023 Half Year Report.
The Group retains sufficient resources to remain in compliance with
all the required terms and conditions within its borrowing
facilities over this period. The Group continues to conduct ongoing
risk assessments on its business operations and liquidity.
Consideration has also been given to reverse stress tests, which
seek to identify factors that might cause the Group to require
additional liquidity and a view has been formed as to the
probability of these occurring.
Our financial position remains robust, with the Group holding
committed total debt facilities of GBP1,190.5 million at 30th June
2023 giving headroom in excess of GBP267 million. Committed
facilities include a GBP400 million revolving credit facility with
a maturity of April 2028 which has GBP227.7 million undrawn at 30th
June 2023. The Group also has cash and cash equivalents, net of
overdrafts, of GBP214.7 million. The next maturity of our committed
debt facilities is EUR225 million of Private Placement notes which
mature in September 2023. For the going concern modelling we have
not included any refinancing assumptions in relation to existing
debt. The Group's debt facilities contain a leverage (defined as
net debt divided by adjusted earnings before interest, tax,
depreciation and amortisation) covenant of up to 3.5x. Certain debt
facilities also contain an interest cover (defined as adjusted
earnings before interest, tax, depreciation and amortisation
divided by net bank interest) covenant of a minimum of 3.0x.
The Group regularly monitors its financial position to ensure
that it remains within the terms of these debt covenants. At 30th
June 2023 leverage was 1.8x (30th June 2022: 0.5x; and 31st
December 2022: 1.7x), showing an increase as a result of the debt
taken on to finance the acquisitions of Vulcanic and Durex
Industries in the second half of 2022. Interest cover was 19x at
30th June 2023 (30th June 2022: 91x; and 31st December 2022:
62x).
Reverse stress testing was also performed to assess what level
of business under-performance would be required for a breach of the
financial covenants to occur, the results of which evidenced that
no reasonably possible change in future forecast cash flows would
cause a breach of these covenants. In addition, the reverse stress
test does not take into account any mitigating actions which the
Group would implement in the event of a severe and extended revenue
and profitability decline, which would increase the covenant
headroom further.
This assessment indicates that the Group can operate within the
level of its current committed debt facilities, without the need to
obtain any new facilities for a period of not less than 12 months
from the date of this report.
NEW STANDARDS AND INTERPRETATIONS APPLIED FOR THE FIRST TIME
On 1st January 2023, the Group applied new or amended IFRS and
interpretations issued by the International Accounting Standards
Board (IASB) that are mandatorily effective for an accounting
period that begins on or after 1st January 2023. Their adoption has
not had a material impact on the Condensed Consolidated Financial
Statements.
The economy in Argentina and Turkey remain subject to high
inflation. At 30th June 2023 we have concluded that applying IAS 29
(Financial Reporting in Hyperinflationary Economies) is not
required as the impact of adopting is not material. We will
continue to assess the position going forward.
NEW STANDARDS AND INTERPRETATIONS NOT YET APPLIED
At the date of approval of these Condensed Consolidated
Financial Statements, there were no new or revised IFRSs,
amendments or interpretations in issue but not yet effective that
are potentially material for the Group and which have not yet been
applied.
SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of Interim Financial Statements, in conformity
with adopted IFRS, requires management to make judgements,
estimates and assumptions that affect the application of accounting
policies and the reported amount of assets and liabilities, income
and expense. Actual results may differ from these estimates. In
preparing these Condensed Consolidated Interim Financial
Statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
Consolidated Financial Statements for the year ended 31st December
2022.
CAUTIONARY STATEMENTS
This Half Year Report contains forward-looking statements. These
have been made by the Directors in good faith based on the
information available to them up to the time of their approval of
this Report. The Directors can give no assurance that these
expectations will prove to have been correct. Due to the inherent
uncertainties, including both economic and business risk factors
underlying such forward-looking information, actual results may
differ materially from those expressed or implied by these
forward-looking statements. The Directors undertake no obligation
to update any forward-looking statements, whether as a result of
new information, future events, or otherwise.
RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge:
-- This Condensed Consolidated set of Interim Financial Statements
has been prepared in accordance with IAS 34 (Interim Financial
Reporting), as adopted by the United Kingdom;
-- The interim management report includes a fair review of
the information required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules,
being an indication of important events that have
occurred during the first six months of the financial
year and their impact on the Condensed Consolidated
Financial Statements, and a description of the principal
risks and uncertainties for the remaining six months
of the financial year.
b) DTR 4.2.8R of the Disclosure and Transparency Rules,
being related party transactions that have taken place
in the first six months of the current financial year
that have materially affected the financial position
or performance of the entity during that period, and
any changes in the related party transactions described
in the last Annual Report that could do so.
The Directors of Spirax-Sarco Engineering plc on 9th August 2023
are as listed in the 2022 Annual Report on pages 104 and 105,
except for Constance Baroudel, appointed on 2nd August 2023 and
Olivia Qiu who stepped down on 31st January 2023. Constance
Baroudel's biography can be found on the Group's website.
N. J. Anderson
Group Chief Executive
9th August 2023
N. B. Patel
Chief Financial Officer
9th August 2023
On behalf of the Board
SEGMENTAL REPORTING
2.
As required by IFRS 8 (Operating Segments), the following
segmental information is presented in a consistent format with
management information considered by the Board.
Analysis by operating segment
Total
Six months to 30(th) June operating Operating
2023 Revenue profit profit margin
GBPm GBPm %
------------------------------------- ---------- ----------- ----------------
Steam Specialties 459.8 96.3 20.9%
Electric Thermal Solutions 192.5 10.7 5.6%
Watson-Marlow 198.5 42.1 21.2%
Corporate - (16.9)
------------------------------------- ---------- ----------- ----------------
Total 850.8 132.2 15.5%
------------------------------------- ---------- ----------- ----------------
Net finance expense (18.2)
Share of (loss)/profit of Associate -
Profit before taxation 114.0
------------------------------------- ---------- ----------- ----------------
Total
Six months to 30(th) June operating Operating
2022 Revenue profit profit margin
GBPm GBPm %
------------------------------------- ---------- ----------- ----------------
Steam Specialties 400.6 87.7 21.9%
Electric Thermal Solutions 104.7 (8.9) (8.5)%
Watson-Marlow 244.8 83.6 34.2%
Corporate (20.3)
------------------------------------- ---------- ----------- ----------------
Total 750.1 142.1 18.9%
------------------------------------- ---------- ----------- ----------------
Net finance expense (3.6)
Share of (loss)/profit of Associate -
Profit before taxation 138.5
------------------------------------- ---------- ----------- ----------------
Year ended 31(st) December Total
2022 operating Operating
Revenue profit profit margin
GBPm GBPm %
------------------------------------- ---------- ----------- ----------------
Steam Specialties 866.0 196.2 22.7%
Electric Thermal Solutions 256.1 7.3 2.9%
Watson-Marlow 488.5 154.4 31.6%
Corporate (39.1)
------------------------------------- ---------- ----------- ----------------
Total 1,610.6 318.8 19.8%
------------------------------------- ---------- ----------- ----------------
Net finance expense (10.7)
Share of (loss)/profit of Associate -
------------------------------------- ---------- ----------- ----------------
Profit before taxation 308.1
------------------------------------- ---------- ----------- ----------------
The following table details the split of revenue by geography
for the combined Group:
Six months Six months Year ended
to 30(th) to 30(th) 31(st) December
June 2023 June 2022 2022
GBPm GBPm GBPm
Europe, Middle East and
Africa 365.1 308.5 649.6
Asia Pacific 184.1 176.2 384.3
Americas 301.6 265.4 576.7
Total revenue 850.8 750.1 1,610.6
------------------------- ------------ ------------ -----------------
Net financing income and expense
Six months Six months Year ended
to to 31(st) December
30(th) June 30(th) June 2022
2023 2022
GBPm GBPm GBPm
Steam Specialties (0.2) 0.7 1.8
Electric Thermal Solutions (0.4) (0.2) (0.2)
Watson-Marlow - (0.2) (0.3)
Corporate (17.6) (3.9) (12.0)
---------------------------- ------------- ------------- ------------------
Total net financing
expense (18.2) (3.6) (10.7)
---------------------------- ------------- ------------- ------------------
Net assets
30(th) June 30(th) June 2022 31(st) December
2023 2022
Assets Liabilities Assets Liabilities Assets Liabilities
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- -------- ------------ -------- ------------ -------- ------------
Steam Specialties 735.0 (180.1) 716.5 (178.7) 756.8 (219.2)
Electric Thermal
Solutions 1,119.5 (78.7) 581.7 (42.1) 1,171.9 (80.2)
Watson-Marlow 447.2 (40.4) 386.0 (60.7) 423.8 (55.3)
Corporate* 23.5 (2.0) 12.2 (1.1) 15.5 (7.4)
2,325.2 (301.2) 1,696.4 (282.6) 2,368.0 (362.1)
Liabilities (301.2) (282.6) (362.1)
Net deferred tax (57.9) (38.1) (59.1)
Net assets held - 0.2 -
for sale
Net tax payable (8.3) (19.5) (21.4)
Net debt including
lease liabilities (836.7) (264.5) (755.6)
-------------------- -------- ------------ -------- ------------ -------- ------------
Net assets 1,121.1 1,091.9 1,169.8
-------------------- -------- ------------ -------- ------------ -------- ------------
*In order to align to with how we manage net assets across the
Group, we have reallocated specific assets and liabilities to the
corporate operating segment in both the current period and the
comparative periods.
Capital additions, depreciation, amortisation and impairment
Six months to Six months to Year ended
30(th) June 2023 30(th) June 2022 31(st) December
2022
Depreciation, Depreciation, Depreciation,
amortisation amortisation amortisation
Capital and impairment Capital and impairment Capital and impairment
additions GBPm additions GBPm additions GBPm
GBPm GBPm GBPm
------------------- ------------ ---------------- ------------ ---------------- ------------ ----------------
Steam Specialties 20.9 30.6 19.5 15.5 43.8 32.9
Electric Thermal
Solutions 7.6 20.1 3.3 11.8 285.4 24.7
Watson-Marlow 53.0 10.4 35.2 9.5 76.4 19.0
Corporate* 4.2 - 0.1 4.1 3.3 4.4
------------------- ------------ ---------------- ------------ ---------------- ------------ ----------------
Total 85.7 61.1 58.1 40.9 408.9 81.0
------------------- ------------ ---------------- ------------ ---------------- ------------ ----------------
*In order to align to with how we manage net assets across the
Group, we have reallocated specific capital additions,
depreciation, amortisation and impairment to the corporate
operating segment in both the current period and the comparative
periods.
Capital additions include property, plant and equipment at 30th
June 2023 of GBP42.4 million (at 30th June 2022: GBP44.1 million;
and at 31st December 2022: GBP135.0 million). Capital additions
also include other intangible assets at 30th June 2023 of GBP8.5
million (at 30th June 2022: GBP8.0 million; and at 31st December
2022: GBP258.3 million), of which GBP0.3 million relates to
acquisition related intangibles (at 30th June 2022: GBP2.8 million;
and at 31st December 2022: GBP245.1 million). Right-of-use asset
additions at 30th June 2023 were GBP34.8 million (at 30th June
2022: GBP6.0 million; and at 31st December 2022: GBP15.6
million).
NET FINANCING INCOME AND EXPENSE
3.
Six months Six months Year ended
to 30(th) to 30(th) 31(st) December
June June 2022
2023 2022 GBPm
GBPm GBPm
--------------------------------------- ----------- ----------- -----------------
Financial expenses:
Bank and other borrowing interest
payable (20.6) (4.5) (14.0)
Interest expense on lease liabilities (0.9) (0.7) (1.5)
Net interest on pension scheme
liabilities (0.8) (0.3) (0.8)
--------------------------------------- ----------- ----------- -----------------
(22.3) (5.5) (16.3)
--------------------------------------- ----------- ----------- -----------------
Financial income:
Bank interest receivable 4.1 1.9 5.6
Net financing expense (18.2) (3.6) (10.7)
--------------------------------------- ----------- ----------- -----------------
Net bank interest (16.5) (2.6) (8.4)
Interest expense on lease liabilities (0.9) (0.7) (1.5)
Net pension scheme financial expense (0.8) (0.3) (0.8)
--------------------------------------- ----------- ----------- -----------------
Net financing expense (18.2) (3.6) (10.7)
--------------------------------------- ----------- ----------- -----------------
TAXATION
4.
Taxation has been estimated at the rate expected to be incurred
in the full year.
Six months Six months Year ended
to 30(th) to 30(th) 31(st) December
June June 2022
2023 2022 GBPm
GBPm GBPm
-------------------- ----------- ----------- -----------------
UK corporation tax (1.7) (0.8) 6.4
Foreign tax 31.2 40.7 87.3
Deferred tax 1.5 1.4 (10.6)
-------------------- ----------- ----------- -----------------
Total taxation 31.0 41.3 83.1
-------------------- ----------- ----------- -----------------
Effective tax rate 27.2% 29.8% 27.0%
-------------------- ----------- ----------- -----------------
The Group's tax charge in future years is likely to be affected
by the proportion of profits arising and the effective tax rates in
the various countries in which the Group operates. The rate may
also be affected by the impact of any acquisitions.
The Group is subject to a tax adjustment in Argentina that seeks
to offset the impact of inflation upon taxable profits. Given the
current high levels of inflation in Argentina this has a meaningful
impact on the effective tax rate. Whilst we include the expected
impact of this adjustment in our effective tax rate this is
difficult to accurately forecast given the volatility of
Argentinian inflation.
The Group monitors income tax developments in the territories in
which it operates, including the OECD Base Erosion and Profit
Shifting (BEPS) initiative to set a new minimum global corporate
tax rate of 15%. We do not currently expect that this BEPS
initiative will lead to a material increase in our effective tax
rate from 2024 onwards.
The Group's tax charge for the year ended 30th June 2023
includes a credit of GBP8.0 million in relation to certain items
excluded from adjusting operating profit (as disclosed in the
Appendix). The tax impacts of these items are:
-- Amortisation of acquisition related intangible assets (GBP3.1
million credit)
-- Watson-Marlow restructuring costs (GBP1.1 million credit)
-- Costs association with the acquisition of Vulcanic in the prior
year (GBP0.1 million credit)
-- Impairment of global ERP system within the Steam Specialties Business
(GBP3.4 million credit)
-- Reversal of fair value adjustments to inventory on the acquisition
of Vulcanic (GBP0.3 million credit)
Excluding these adjustments, the tax on profit and the effective
tax rate are GBP39.0 million and 25.4% respectively.
In October 2017, the European Commission (EC) opened a State Aid
investigation into the UK's Controlled Foreign Company (CFC)
regime. In April 2019, the EC published its final decision that the
UK CFC Finance Company Exemption (FCE) constituted State Aid in
certain circumstances, following which the UK Government appealed
the decision to the EU General Court. In June 2022, the EU General
Court dismissed the UK Government's appeal following which the UK
Government lodged a further appeal to the European Court of
Justice. The UK Government's appeal has not yet been heard. Like
other UK Groups, the Group submitted its own appeal against the
EC's decision.
The Group's benefit from the FCE in the period from 1st January
2013 to 31st December 2022 is approximately GBP8.8 million,
including compound interest. To date, the Group has received, paid
and appealed Charging Notices totalling GBP4.9 million, assessed
for the period from 1st January 2017 to 31st December 2018. The
Group expects to recover this in the event of a successful appeal
and has recognised a receivable for the full amount at the balance
sheet date. The Group has not received a Charging Notice for the
period prior to 1st January 2017, the benefit for this period being
GBP2.8 million. HMRC has enquired into the benefit received during
2019, which the Group estimates to be GBP1.1 million. No provisions
have been recognised at the year-end balance sheet date for either
the Charging Notice amounts or for the estimates for the other
periods.
No UK tax (after double tax relief for underlying tax) is
expected to be payable on the future remittance of retained
earnings of overseas subsidiaries.
The effective tax rate is calculated as a percentage of profit
before tax and a share of profits of associates.
EARNINGS PER SHARE
5.
Six months Six months Year ended
to 30th to 30th 31st December
June June 2022
2023 2022
-------------------------------------------- ----------- ----------- ---------------
Profit attributable to equity shareholders
(GBPm) 82.9 97.1 224.7
Weighted average shares in issue
(million) 73.6 73.7 73.6
Dilution (million) 0.1 0.1 0.2
--------------------------------------------- ----------- ----------- ---------------
Diluted weighted average shares
in issue (million) 73.7 73.8 73.8
--------------------------------------------- ----------- ----------- ---------------
Basic earnings per share 112.5p 131.8p 305.1p
--------------------------------------------- ----------- ----------- ---------------
Diluted earnings per share 112.3p 131.5p 304.4p
--------------------------------------------- ----------- ----------- ---------------
Basic and diluted earnings per share calculated on an adjusted
profit basis are included in the Appendix. The dilution is in
respect of the Performance Share Plan.
DIVIDS
6.
Six months Six months Year ended
to 30(th) to 30(th) 31(st) December
June June 2022
2023 2022 GBPm
GBPm GBPm
----------------------------------------- ----------- ------------- -------------------
Amounts paid in the period:
Final dividend for the year ended
31st December 2022 of 109.5p (2021:
97.5p) per share 80.7 71.9 71.9
Interim dividend for the year
ended 31st December 2022 of 42.5p
(2021: 38.5p) per share - - 31.2
----------------------------------------- ----------- ------------- -------------------
Total dividends paid 80.7 71.9 103.1
----------------------------------------- ----------- ------------- -------------------
Amounts arising in respect of
the period:
Interim dividend for the year
ending 31st December 2023 of 46.0p
(2022: 42.5p) per share 33.9 31.2 31.2
Final dividend for the year ended
31st December 2022 of 109.5p (2021:
97.5p) per share - - 80.7
----------------------------------------- ----------- ------------- -------------------
Total dividends arising 33.9 31.2 111.9
----------------------------------------- ----------- ------------- -------------------
The interim dividend for the year ending 31st December 2023 was
approved by the Board after 30th June 2023. It is therefore not
included as a liability in these Interim Condensed Consolidated
Financial Statements. No scrip alternative to the cash dividend is
being offered in respect of the 2023 interim dividend.
In addition, dividends paid to minority shareholders at 30th
June 2023 were GBP0.3 million (31st December 2022: GBP0.5 million,
30th June 2022: GBP0.3 million).
POST-RETIREMENT BENEFITS
7.
The Group is accounting for pension costs in accordance with IAS
19. The disclosures shown here are in respect of the Group's
Defined Benefit Obligations. Other plans operated by the Group were
either Defined Contribution plans or were deemed immaterial for the
purposes of IAS 19 reporting. Full IAS 19 disclosure for the year
ended 31st December 2022 is included in the Group's Annual
Report.
The amounts recognised in the Consolidated Statement of
Financial Position are as follows:
30th June 30th June 31st December
2023 2022 2022
GBPm GBPm GBPm
---------------------------- ---------- ---------- --------------
Post-retirement benefits (43.4) (35.2) (52.1)
Related deferred tax asset 11.0 9.2 13.2
---------------------------- ---------- ---------- --------------
Net pension liability (32.4) (26.0) (38.9)
---------------------------- ---------- ---------- --------------
ANALYSIS OF CHANGES IN NET DEBT, INCLUDING CHANGES IN LIABILITIES
8. ARISING FROM FINANCING ACTIVITIES
1 (st) Cash Acquired Exchange 30(th)
January flow debt* movement June
2023 GBPm GBPm GBPm 2023
GBPm GBPm
--------------------------------------- ---------- ------- ----------- ----------- --------------
Current portion of long-term
borrowings (202.9) (196.7)
Non-current portion of long-term
borrowings (731.3) (766.3)
Total borrowings (934.2) (963.0)
--------------------------------------- ---------- ------- ----------- ----------- --------------
Comprising:
Lease liability (65.2) 6.8 (32.8) 2.8 (88.4)
Borrowings (934.2) (60.3) - 31.5 (963.0)
Changes in liabilities arising
from financing (999.4) (53.5) (32.8) 34.3 (1,051.4)
--------------------------------------- ---------- ------- ----------- ----------- --------------
Cash at bank 328.9 5.8 - (11.9) 322.8
Bank overdrafts (85.1) (24.6) - 1.6 (108.1)
--------------------------------------- ---------- ------- ----------- ----------- --------------
Net cash and cash equivalents 243.8 (18.8) - (10.3) 214.7
--------------------------------------- ---------- ------- ----------- ----------- --------------
Net debt and lease liability (755.6) (72.3) (32.8) 24.0 (836.7)
--------------------------------------- ---------- ------- ----------- ----------- --------------
Net debt excluding lease liability (690.4) (79.1) - 21.2 (748.3)
--------------------------------------- ---------- ------- ----------- ----------- --------------
* Acquired debt comprises debt recognised on the Statement of
Financial Position due to net additions to lease liabilities
During the period GBP20.6 million of interest on external
borrowings (31st December 2022: GBP14.0 million; 30th June 2022:
GBP4.5 million) was incurred and paid.
At 30th June total lease liabilities consist of GBP13.3 million
(31st December 2022: GBP14.1m , 30th June 2022: GBP12.6 million)
short-term and GBP75.1 million (31st December 2022: and GBP51.1
million , 30th June 2022: GBP49.2 million) long-term.
Cash transferred
to assets
classified 30th
1st January Cash Acquired as held Exchange June
2022 flow debt* for sale movement 2022
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- -------------- ------- ----------- ----------------- ----------- --------
Current portion of long-term
borrowings (59.6) (0.9)
Non-current portion of
long-term borrowings (289.9) (432.4)
Total borrowings (349.5) (433.3)
------------------------------- -------------- ------- ----------- ----------------- ----------- --------
Comprising:
Lease liabilities (60.1) 6.2 (6.0) - (1.9) (61.8)
Borrowings (349.5) (75.1) - - (8.7) (433.3)
Changes in liabilities
arising from financing (409.6) (68.9) (6.0) - (10.6) (495.1)
------------------------------- -------------- ------- ----------- ----------------- ----------- --------
Cash at bank 274.6 30.8 - (2.3) 1.8 304.9
Bank overdrafts (55.6) (17.1) - - (1.6) (74.3)
------------------------------- -------------- ------- ----------- ----------------- ----------- --------
Net cash and cash equivalents 219.0 13.7 - (2.3) 0.2 230.6
------------------------------- -------------- ------- ----------- ----------------- ----------- --------
Net debt and lease liability (190.6) (55.2) (6.0) (2.3) (10.4) (264.5)
------------------------------- -------------- ------- ----------- ----------------- ----------- --------
Net debt excluding lease
liability (130.5) (61.4) - (2.3) (8.5) (202.7)
------------------------------- -------------- ------- ----------- ----------------- ----------- --------
1 (st) 31(st)
January Cash Acquired Disposal Exchange December
2022 flow debt* of subsidiaries movement 2022
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ---------- -------- ----------- ------------------ ----------- -----------
Current portion of long-term
borrowings (59.6) (202.9)
Non-current portion of
long-term borrowings (289.9) (731.3)
Total borrowings (349.5) (934.2)
------------------------------- ---------- -------- ----------- ------------------ ----------- -----------
Comprising:
Lease liabilities (60.1) 12.9 (15.2) - (2.8) (65.2)
Borrowings (349.5) (497.7) (67.0) - (20.0) (934.2)
------------------------------- ---------- -------- ----------- ------------------ ----------- -----------
Changes in liabilities
arising from financing (409.6) (484.8) (82.2) - (22.8) (999.4)
------------------------------- ---------- -------- ----------- ------------------ ----------- -----------
Cash at bank 274.6 46.3 - (2.8) 10.8 328.9
Bank overdrafts (55.6) (26.7) - - (2.8) (85.1)
------------------------------- ---------- -------- ----------- ------------------ ----------- -----------
Net cash and cash equivalents 219.0 19.6 - (2.8) 8.0 243.8
------------------------------- ---------- -------- ----------- ------------------ ----------- -----------
Net debt and lease liability (190.6) (465.2) (82.2) (2.8) (14.8) (755.6)
------------------------------- ---------- -------- ----------- ------------------ ----------- -----------
Net debt excluding lease
liability (130.5) (478.1) (67.0) (2.8) (12.0) (690.4)
------------------------------- ---------- -------- ----------- ------------------ ----------- -----------
9 RELATED PARTY TRANSACTIONS
.
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this Note. Full details of the Group's other related
party relationships, transactions and balances are given in the
Group's Financial Statements for the year ended 31st December 2022.
There have been no material changes in these relationships in the
period up to the end of this Report.
No related party transactions have taken place in the first half
of 2023 that have materially affected the financial position or the
performance of the Group during that period.
FAIR VALUE OF FINANCIAL INSTRUMENTS
10.
The following table compares the carrying and fair values of the
Group's financial assets and liabilities:
30(th) June 2023 30(th) June 2022 31(st) December
2022
Carrying Fair Carrying Fair Carrying Fair
value value value value value value
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ---------- ------- ---------- ------- --------- -------
Financial assets:
Cash and cash
equivalents 322.8 322.8 304.9 304.9 328.9 328.9
Trade, other receivables
and contract assets 362.9 362.9 342.3 342.3 395.2 395.2
-------------------------- ---------- ------- ---------- ------- --------- -------
Total financial
assets 685.7 685.7 647.2 647.2 724.1 724.1
-------------------------- ---------- ------- ---------- ------- --------- -------
Financial liabilities:
Loans 963.0 948.7 433.3 423.1 934.1 918.1
Lease liabilities 88.4 88.4 61.8 61.8 65.2 65.2
Bank overdrafts 108.1 108.1 74.3 74.3 85.1 85.1
Trade payables 74.1 77.4 69.6 69.6 89.9 89.9
Other payables
and contract liabilities 59.0 59.0 63.7 63.7 70.5 70.5
Long-term payables 8.6 8.6 6.2 6.2 8.8 8.8
Accruals 90.7 90.7 84.3 84.3 113.2 113.2
--------------------------- -------- -------- ------ ------ -------- --------
Total financial
liabilities 1,391.9 1,380.9 793.2 783.0 1,366.9 1,350.8
--------------------------- -------- -------- ------ ------ -------- --------
There are no other assets or liabilities measured at fair value
on a recurring or non-recurring basis for which fair value is
disclosed.
Fair values of financial assets and financial liabilities
Fair values of financial assets and liabilities at 30th June
2023 are not materially different from book values due to their
size, the fact that they were at short-term rates of interest or
for borrowings at long-term rates of interest where the rate of
interest is not materially different to the current market rate.
Fair values have been assessed as follows:
Derivatives
Forward exchange contracts are marked to market by discounting
the future contracted cash flows using readily available market
data.
Interest-bearing loans and borrowings
Fair value is calculated based on discounted expected future
principal and interest cash flows using a current market rate of
interest.
Lease liabilities
The fair value is estimated as the present value of future cash
flows, discounted at the incremental borrowing rate for the related
geographical location, unless the rate implicit in the lease is
readily determinable.
Trade and other receivables and payables
For receivables and payables with a remaining life of less than
one year, the notional amount is deemed to reflect the fair
value.
The Group uses forward currency contracts to manage its exposure
to movements in foreign exchange rates. The forward contracts are
designated as hedging instruments in a cash flow hedging
relationship. At 30th June 2023, the Group had contracts
outstanding to economically hedge or to purchase GBP24.3 million
with US dollars, GBP80.9 million with euros, GBP8.5 million with
Korean won, GBP25.1 million with Chinese renminbi, GBP3.7 million
with Singapore dollars, EUR18.8 million with US dollars, EUR3.4
million with Korean won, EUR8.1 million with Chinese renminbi and
DKK15.9 million with euros. Derivative financial instruments are
measured at fair value. The fair value at the end of the reporting
period is a GBP4.0 million asset (31st December 2022: GBP3.7
million liability, 30th June 2022: GBP7.9 million liability).
Financial instruments fair value disclosure
Fair value measurements are classified into three levels,
depending on the degree to which the fair value is observable.
-- Level 1 fair value measurements are those derived from quoted
prices in active markets for identical assets and liabilities
-- Level 2 fair value measurements are those derived from other
observable inputs for the asset or liability
-- Level 3 fair value measurements are those derived from valuation
techniques using inputs that are not based on observable market
data
We consider that the derivative financial instruments fall into
Level 2. There have been no transfers between levels during the
period.
CAPITAL COMMITMENTS
11.
Capital expenditure contracted for, but not provided for, at
30th June 2023 was GBP55.5 million (31st December 2022: GBP67.0
million; 30th June 2022: GBP60.4 million). All capital commitments
related to property, plant and equipment.
EXCHANGE RATES
12.
Set out below is an additional disclosure (not required by IAS
34) that highlights movements in a selection of average exchange
rates between half year 2022 and half year 2023.
Average Average
half year half year Change
2023 2022 %
---------------- ----------- ----------- ---------
US dollar 1.24 1.30 5%
Euro 1.14 1.19 4%
Renminbi 8.60 8.40 (2)%
Won 1,606 1,593 (1)%
Real 6.26 6.63 6%
Argentine peso 263.21 145.55 (81)%
A negative movement indicates a strengthening in sterling versus
that currency. When sterling strengthens against other currencies
in which the Group operates, the Group incurs a loss on translation
of the financial results into sterling.
On a translation basis, sales increased by 1.5% and adjusted
operating profit increased by 0.5%, with transactional currency
impacts also increasing profit, giving a total benefit to profit
from currency movements of 1.7%.
13. PURCHASE OF BUSINESSES
During the period the f air value of the assets acquired as part
of the acquisition of Vulcanic (and its related companies) as well
as Durex Industries were reassessed. The outcome of this
reassessment was a decrease in goodwill of GBP1.2 million for Durex
Industries and increase in goodwill of GBP0.7 million for
Vulcanic.
Appendix - Alternative performance measures
The Group reports under International Financial Reporting
Standards (IFRS) and also uses adjusted performance measures where
the Board believes that:
-- they help to effectively monitor the performance of the Group;
and
-- users of the Financial Statements might find them informative.
Certain adjusted performance measures also form a meaningful
element of Executive Directors' annual remuneration. A definition
of the adjusted performance measures and a reconciliation to the
closest IFRS equivalent are disclosed below. The term 'adjusted' is
not defined under IFRS and may therefore not be comparable with
similarly titled measures reported by other companies. Adjusted
performance measures are not considered to be a substitute for, or
superior to, IFRS measures.
Adjusted operating profit
Adjusted operating profit excludes items that are considered to
be significant in nature and/or quantum at either a Group or an
operating segment level and where treatment as an adjusted item
provides stakeholders with additional useful information to assess
the period-on-period trading performance of the Group. The Group
excludes such items including those defined as follows:
-- Amortisation and impairment of acquisition-related intangible
assets
-- Costs associated with the acquisition or disposal of businesses
-- Gain or loss on disposal of a subsidiary and / or disposal groups
-- Reversal of acquisition-related fair value adjustments to inventory
-- Changes in deferred and contingent consideration payable on
acquisitions
-- Costs associated with a material restructuring programme
-- Material gains or losses on disposal of property
-- Accelerated depreciation, impairment and other related costs
on non-recurring, material property redevelopments
-- Material non-recurring pension costs or credits
-- Costs or credits arising from regulatory and litigation matters
-- Other material items which are considered to be non-recurring
in nature and / or are not a result of the underlying trading
of the business
-- Related tax effect on adjusting items above and other tax items
which do not form part of the underlying tax rate
A reconciliation between operating profit as reported under IFRS
and adjusted operating profit is given below.
Six months Six months Year ended
to 30(th) to 30(th) 31(st) December
June 2023 June 2022 2022
GBPm GBPm GBPm
----------------------------------------------- ---------- ---------- ----------------
Operating profit as reported under IFRS 132.2 142.1 318.8
Amortisation of acquisition-related intangible
assets 18.5 10.5 23.7
Reversal of acquisition-related fair value
adjustments to inventory 1.3 - 1.8
Restructuring costs 5.2 15.4 15.5
Acquisition-related items 0.6 3.2 9.1
Software related impairment 13.9 - -
Disposal of subsidiaries in Russia - 3.6 7.1
Accelerated depreciation and other related
costs on one-off property redevelopments - 4.0 4.2
Adjusted operating profit 171.7 178.8 380.2
----------------------------------------------- ---------- ---------- ----------------
Adjusted earnings per share
Six months Six months Year ended
to 30(th) to 30(th) 31(st) December
June 2023 June 2022 2022
---------------------------------------------- ---------- ---------- ----------------
Profit for the period attributable to
equity holders as reported under IFRS (GBPm) 82.9 97.1 224.7
Items excluded from adjusted operating
profit disclosed above (GBPm) 39.5 36.7 61.4
Finance expenses excluded from adjusted
operating profit (GBPm) - - 1.1
Tax effects on adjusted items (GBPm) (8.0) (4.8) (9.4)
Adjusted profit for the period attributable
to equity holders (GBPm) 114.4 129.0 277.8
Weighted average shares in issue (million) 73.6 73.7 73.6
Basic adjusted earnings per share 155.2p 175.1p 377.2p
Diluted weighted average shares in issue
(million) 73.7 73.8 73.8
Diluted adjusted earnings per share 154.9p 174.8p 376.3p
---------------------------------------------- ---------- ---------- ----------------
Basic adjusted earnings per share is defined as adjusted profit
for the period attributable to equity holders divided by the
weighted average number of shares in issue. Diluted adjusted
earnings per share is defined as adjusted profit for the period
attributable to equity holders divided by the diluted weighted
average number of shares in issue.
Basic and diluted EPS calculated on an IFRS profit basis are
included in Note 5.
Adjusted cash flow
Adjusted cash from operations is used by the Board to monitor
the performance of the Group, with a focus on elements of cashflow,
such as net capital expenditure, which are subject to day-to-day
control by the business. A reconciliation showing the items that
bridge between net cash from operating activities as reported under
IFRS to adjusted cash from operations is given below:
Six months to Six months Year ended
30(th) June to 30(th) 31(st) December
2023 June 2022 2022
GBPm GBPm GBPm
---------------------------------------- --------------- ------------ -----------------
Net cash from operating activities
as reported under IFRS 85.6 92.1 241.1
Restructuring and acquisition-related
costs 8.6 - 10.2
Net capital expenditure excluding
acquired intangibles from acquisitions (49.8) (48.7) (113.5)
Income tax paid 46.1 41.2 90.0
Repayments of principal under lease
liabilities (7.7) (6.2) (12.9)
Adjusted cash from operations 82.8 78.4 214.9
---------------------------------------- --------------- ------------ -----------------
Adjusted cash conversion in the first half was 48% (30th June
2022: 44%). Cash conversion is calculated as adjusted cash from
operations divided by adjusted operating profit. The adjusted cash
flow is included on page 12.
Capital employed
This is a non-statutory measure that the Board uses to
effectively monitor the performance of the Group. More information
on Capital employed can be found on page 11.
An analysis of the components is as follows:
30(th) 30(th) 31(st) December
June 2023 June 2022 2022
GBPm GBPm GBPm
--------------------------------------------- ----------- ----------- ---------------
Property, plant and equipment 395.3 311.1 384.5
Right-of-use assets 90.2 64.2 67.2
Software & development costs 35.0 40.2 44.5
Non-current prepayments 2.5 1.3 2.0
Inventories 304.9 239.4 290.0
Trade receivables 317.2 311.1 341.1
Other current assets 81.8 58.7 79.6
Tax recoverable 16.6 14.3 19.0
Trade, other payables and current provisions (242.7) (239.6) (295.0)
Current tax payable (24.9) (33.8) (40.4)
Capital employed 975.9 766.9 892.5
--------------------------------------------- ----------- ----------- ---------------
A reconciliation of Capital employed to net assets as reported
under IFRS and disclosed in the Consolidated Statement of Financial
Position is given below:
30(th) 30(th) 31(st) December
June 2023 June 2022 2022 GBPm
GBPm GBPm
--------------------------------------- ---------- ---------- ---------------
Capital employed 975.9 766.9 892.5
Goodwill and other intangible assets 1,098.3 670.4 1,159.1
Investment in Associate - - -
Post-retirement benefits (43.4) (35.2) (52.1)
Net deferred tax (57.9) (38.1) (59.1)
Non-current provisions and long-term
payables (15.1) (7.8) (15.0)
Lease liabilities (88.4) (61.8) (65.2)
Net assets classified as held for sale - 0.2 -
Net debt (748.3) (202.7) (690.4)
--------------------------------------- ---------- ---------- ---------------
Net assets as reported under IFRS 1,121.1 1,091.9 1,169.8
--------------------------------------- ---------- ---------- ---------------
Net debt including lease liabilities
A reconciliation between net debt and net debt including lease
liabilities is given below. A breakdown of the balances that are
included within net debt is given in Note 8. Net debt excludes
lease liabilities to be consistent with how net debt is defined for
external debt covenant purposes, as well as to enable comparability
with prior years.
30(th) 30(th) 31(st) December
June 2023 June 2022 2022
GBPm GBPm GBPm
------------------------------------- ---------- ---------- ---------------
Net debt 748.3 202.7 690.4
Lease liabilities 88.4 61.8 65.2
Net debt including lease liabilities 836.7 264.5 755.6
------------------------------------- ---------- ---------- ---------------
Net debt to earnings before interest, tax, depreciation and
amortisation (EBITDA)
To assess the size of the net debt balance relative to the size
of the earnings for the Group we analyse net debt as a proportion
of EBITDA. EBITDA is calculated by adding back depreciation and
amortisation of owned property, plant and equipment, software and
development to adjusted operating profit. For half year
calculations, this is based on the results for the last 12 months
all translated at the exchange rate used for the half year period.
Net debt is calculated as Cash and cash equivalents less Bank
overdrafts, Short-term borrowings and Long-term borrowings
(excluding Short-term and Long-term lease liabilities). The net
debt to EBITDA ratio is calculated as follows:
12 month period to 30th June 2023 12 month period to 31st December 2022
GBPm GBPm
-------------------------------------------- --------------------------------- -------------------------------------
Adjusted operating profit 366.2 380.2
Depreciation and amortisation of property,
plant and equipment, software and
development 40.3 37.4
EBITDA 406.5 417.6
Net Debt 748.3 690.4
Net debt to EBITDA 1.8x 1.7x
-------------------------------------------- --------------------------------- -------------------------------------
Organic measures
As we are a multi-national Group of companies that trade in a
large number of currencies and also acquire and sometimes dispose
of companies, we also refer to organic performance measures
throughout the Half Year Report. Organic measures strip out the
effects of the movement in exchange rates and of acquisitions and
disposals. The Board believe that this allows readers of the
accounts to gain a further understanding of how the Group has
performed.
Exchange translation movements are assessed by re-translating
prior period reported values to current period exchange rates.
Exchange transaction impacts on operating profit are assessed on
the basis of transactions being at constant currency between years.
The incremental impact of any acquisitions that occurred in either
the current period or prior period is excluded from the organic
results of the current period at current period exchange rates. For
any disposals that occurred in the current or prior period, the
current period organic results include the difference between the
current and prior period financial results only for the
like-for-like period of ownership.
The organic percentage movement is calculated as the organic
movement divided by the prior period at current period exchange
rates, excluding disposals for the non like-for-like period of
ownership. The organic bps change in adjusted operating margin is
the difference between the current period margin, excluding the
incremental impact of acquisitions, and the prior period margin
excluding disposals for the non like-for-like period of ownership
at current period exchange rates.
A reconciliation of the movement in revenue and adjusted
operating profit compared to the prior period is given below:
Six months Six months
to 30(th) Acquisitions to 30(th)
June 2022 Exchange Organic and disposals* June Organic Reported
2023
------------------- ---------- ---------- ---------- ---------------- ----------- --------- ----------
Revenue GBP750.1m GBP11.6m GBP15.9m GBP73.2m GBP850.8m 2% 13%
Adjusted operating
profit GBP178.8m GBP3.0m GBP(24.5)m GBP14.4m GBP171.7m (13)% (4)%
Adjusted operating (370) (360)
profit margin 23.8% 20.2% bps bps
------------------- ---------- ---------- ---------- ---------------- ----------- --------- ----------
*Results include the impact of (i) the acquisition of Vulcanic
and Durex Industries and (ii) the treatment of our Russian
operating companies as disposals from the date at which the Group
suspended all trading with and within Russia.
Analysis by operating segment
Adjusted Adjusted
Six months to 30(th) June 2023 operating operating
Revenue profit profit margin
GBPm GBPm %
------------------------------------- ---------- ----------- ---------------
Steam Specialties 459.8 112.2 24.4%
Electric Thermal Solutions 192.5 26.9 14.0%
Watson-Marlow 198.5 48.9 24.6%
Corporate - (16.3)
------------------------------------- ---------- ----------- ---------------
Total 850.8 171.7 20.2%
------------------------------------- ---------- ----------- ---------------
Net finance expense (18.2)
Share of (loss)/profit of Associate -
Adjusted profit before taxation 153.5
------------------------------------- ---------- ----------- ---------------
Adjusted Adjusted
Six months to 30(th) June 2022 operating operating
Revenue profit profit margin
GBPm GBPm %
------------------------------------- ---------- ----------- ---------------
Steam Specialties 400.6 92.1 23.0%
Electric Thermal Solutions 104.7 12.8 12.2%
Watson-Marlow 244.8 87.0 35.5%
Corporate (13.1)
------------------------------------- ---------- ----------- ---------------
Total 750.1 178.8 23.8%
------------------------------------- ---------- ----------- ---------------
Net finance expense (3.6)
Share of (loss)/profit of Associate -
Adjusted profit before taxation 175.2
------------------------------------- ---------- ----------- ---------------
Year ended 31(st) December Adjusted Adjusted
2022 operating operating
Revenue profit profit margin
GBPm GBPm %
------------------------------------- ---------- ----------- ---------------
Steam Specialties 866.0 206.1 23.8%
Electric Thermal Solutions 256.1 39.9 15.6%
Watson-Marlow 488.5 160.0 32.8%
Corporate (25.8)
------------------------------------- ---------- ----------- ---------------
Total 1,610.6 380.2 23.6%
------------------------------------- ---------- ----------- ---------------
Net finance expense (9.6)
Share of (loss)/profit of Associate -
------------------------------------- ---------- ----------- ---------------
Adjusted profit before taxation 370.6
------------------------------------- ---------- ----------- ---------------
The reconciliation for each operating segment for adjusting
items is analysed below:
Six months to Reversal
30(th) June Amortisation of
2023 of acquisition-related
acquisition-related fair value Software
intangible adjustments Restructuring Acquisition-related related
assets to inventory costs items impairment Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------- -------------------- -------------------- -------------- -------------------- ----------- -------
Steam
Specialties (2.0) - - - (13.9) (15.9)
Electric
Thermal
Solutions (14.9) (1.3) - - - (16.2)
Watson-Marlow (1.6) - (5.2) - - (6.8)
Corporate
expenses - - - (0.6) - (0.6)
Total (18.5) (1.3) (5.2) (0.6) (13.9) (39.5)
--------------- -------------------- -------------------- -------------- -------------------- ----------- -------
Six months to Accelerated
30(th) June 2022 depreciation
Amortisation and other
of related costs Impairment
acquisition-related on one-off of Russia
intangible Restructuring property disposal Acquisition-related
assets costs redevelopments groups items Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------------------- -------------- ---------------- ----------- -------------------- -------
Steam Specialties (2.3) - - (2.1) - (4.4)
Electric Thermal
Solutions (6.3) (15.4) - - - (21.7)
Watson-Marlow (1.9) - - (1.5) - (3.4)
Corporate
expenses - - (4.0) - (3.2) (7.2)
Total (10.5) (15.4) (4.0) (3.6) (3.2) (36.7)
------------------ -------------------- -------------- ---------------- ----------- -------------------- -------
Year ended Accelerated
31(st) depreciation
December Reversal and other
2022 Amortisation of related
of acquisition-related Disposal costs on
acquisition-related fair value of one-off
intangible adjustments subsidiaries Restructuring Acquisition-related property
assets to inventory in Russia costs items redevelopment Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- --------------------- -------------------- ------------- --------------
Steam
Specialties (4.6) - (5.3) - - - (9.9)
Electric
Thermal
Solutions (15.3) (1.8) - (15.5) - - (32.6)
Watson-Marlow (3.8) - (1.8) - - - (5.6)
Corporate
expenses - - - - (9.1) (4.2) (13.3)
Total (23.7) (1.8) (7.1) (15.5) (9.1) (4.2) (61.4)
Pro-forma Revenue
Due to the disposal of our Russian operating companies and the
acquisitions of Cotopaxi Limited, Vulcanic and Durex Industries,
our reported financial results for the six months to 30th June 2022
and year ended 31st December 2022 only include the impact of these
operations for the period of ownership by the Group. The table
below reconciles between statutory revenue as reported within the
Consolidated Income Statement, and the pro-forma revenue had all
acquisition and disposal transactions occurred on 1st January 2022.
This allows readers of the accounts to see the split of revenue by
operating segment on a basis that will be like-for-like.
Six months to
30(th) June 2022
Revenue (statutory) Pro-forma adjustments Revenue (pro-forma) Proportion
GBPm GBPm GBPm of group
Steam Specialties 400.6 (1.2) 399.4 49%
Electric Thermal
Solutions 104.7 72.5 177.2 21%
Watson-Marlow 244.8 (1.9) 242.9 30%
Total 750.1 69.4 819.5
Year ended 31(st)
December 2022
Revenue (statutory) Pro-forma adjustments Revenue (pro-forma) Proportion
GBPm GBPm GBPm of group
Steam Specialties 866.0 (1.2) 864.8 50%
Electric Thermal
Solutions 256.1 126.8 382.9 22%
Watson-Marlow 488.5 (1.9) 486.6 28%
Total 1,610.6 123.7 1,734.3
The term 'sales' is used interchangeably with 'revenue' when
describing the financial performance of the business.
Tax on adjusting items
Six months to Six months to Year ended
30(th) June 2023 30(th) June 2022 31(st) December 2022
Adjusted Adj't Total Adjusted Adj't Total Adjusted Adj't Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
UK Corporation
tax (1.8) - (1.8) (0.8) - (0.8) 6.6 (0.2) 6.4
Foreign tax 36.2 (4.9) 31.3 40.7 - 40.7 88.1 (0.8) 87.3
Deferred tax 4.6 (3.1) 1.5 6.2 (4.8) 1.4 (2.2) (8.4) (10.6)
Total taxation 39.0 (8.0) 31.0 46.1 (4.8) 41.3 92.5 (9.4) 83.1
Effective
tax rate 25.4% 20.3% 27.2% 26.3% 13.0% 29.8% 25.0% 15.0% 27.0%
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