12th Mar 2007 07:02
Spirax-Sarco Engineering PLC12 March 2007 Spirax-Sarco Engineering plc Monday 12th March 2007 2006 PRELIMINARY ANNOUNCEMENT HIGHLIGHTS Year to 31st DecemberStatutory 2006 2005 Change Revenue £384.2m £349.1m +10%Operating profit £61.9m £55.2m +12%Profit before taxation £65.3m £57.0m +15%Earnings per share 57.7p 50.0p +15%Dividends per share 26.5p 23.8p +11% Year to 31st December Adjusted* 2006 2005 Change Revenue £384.2m £349.1m +10%Operating profit £62.3m £55.3m +13%Operating profit margin 16.2% 15.9%Profit before taxation £65.7m £57.1m +15%Earnings per share 58.1p 50.2p +16%Dividends per share 26.5p 23.8p +11% * Excludes £0.4m amortisation of acquired intangible assets (2005: £0.2m) • Good sales growth - particularly Asia and Continental Europe. • Increasing investments for growth. • Improved operating margin of 16.2%. • Pre-tax profit up 15% and EPS up 16%. • Good underlying cash flow. • Final dividend up 12%. Mike Townsend, Chairman, commenting on prospects said: "We are currently faced with the continuing strength of sterling and, therefore,a likely adverse effect on the 2007 results, particularly in comparison with thefirst half of 2006. However, in most markets trading conditions remain firm andthe year has started well, which, with the Group's fundamental strengths, shouldenable us to make further progress in 2007." Enquiries: Mike Townsend - Chairman Marcus Steel - Chief Executive David Meredith - Director Finance Tel: 020 7638 9571 at Citigate Dewe Rogerson until 6.00 p.m. SPIRAX-SARCO ENGINEERING plc PRELIMINARY RESULTS (Unless otherwise stated, the figures quoted in the text below exclude theamortisation of acquired intangible assets). SUMMARY The Chairman, Mike Townsend, says: "I am pleased to report a good performance in 2006 which continues the Group'slong record of consistent growth and strong profitability. We grew sales byover 10% and pre-tax profits were 15% ahead of 2005 at a record £65.7 million.This is a consequence of the Board's long-standing determination to focus on thedevelopment of the Spirax Sarco steam specialty business and the Watson-MarlowBredel peristaltic pumping business through investment in new products,expansion of sales coverage, development of new markets and management of costs. Sales reached £384.2 million (2005: £349.1 million). Sterling was largelyunchanged on average versus other currencies in 2006 as against 2005, theweakness in the first half having been virtually eliminated by a strengtheningin the second half of the year, particularly against the US dollar. The sales growth came in all regions. Growth in sales in Asia continuedstrongly. In Continental Europe, the good growth which started in 2005 andaccelerated through the first half of 2006, continued for the full year. Salesgrowth in North America and the Rest of the World was good and in the UK waspositive, though this market remains difficult. Operating profit increased to £62.3 million from £55.3 million in 2005, anincrease of 13%, with a small positive effect of less than £1/2 million fromcurrency movements. The operating margin improved to 16.2% compared with 15.9%in 2005." TRADING Sales grew to £384.2 million from £349.1 million in 2005, an increase of 10%.In all parts of the world our companies have successfully concentrated on theagreed sales development plans to increase our market share and widen theproduct offering to our customers. Organic growth was achieved in all regionswith a strong advance in Asia, good progress in Continental Europe and NorthAmerica, and lower levels of organic growth in the Rest of the World and the UK. The decision has been taken to build a new larger plant in China both toaccommodate the growing sales team and to expand local production capacity. The Spirax Sarco business expanded sales of steam system services, heat exchangepackaged units, controls and clean steam products, and sales to the oil andpetrochemicals industry. The Watson-Marlow Bredel business increased sales ofthe recently upgraded pump ranges and tubing, and the business with OEMs. The Group's operating profit grew to £62.3 million (2005: £55.3 million); anincrease of 13% and a new record for the Group. Excluding the small exchangegains, the increase was 12% - a good performance. Profit growth was drivenmainly by the organic sales growth and by improved productivity, and was offsetby higher overheads particularly in sales coverage in the developing markets.The operating profit margin rose to 16.2% from 15.9% in 2005. As expected, themargin improvement was restricted by increased charges for pensions andshare-based payments, the slow-down in Brazil and the costs associated withintegrating acquisitions into the Group. Current environment The business environment remained generally positive through the second half of2006 as it had been during the first half. The oil price, despite decliningfrom its peak, remains high and has stimulated investment projects in the oiland petrochemical sectors. The widespread pick-up in business confidence andactivity in Continental Europe, which was evident in the first half of the year,continued through the second half. However in the UK market, the industrialsectors remain subdued and the strength of sterling is putting pressure oncustomers who export. In North American markets, the economic background hasbeen steady through 2006, although the pharmaceutical sector has been quiet inthe USA. In South America, political and economic uncertainties have restrainedgrowth and demand in some of our manufacturing markets. The Asian economieshave generally remained strong and we have seen good activity levels in mostmarkets. As expected at the half year, exchange rates moved against us in the second halfof 2006. The US dollar, which was stronger versus sterling in the first half ofthe year, weakened significantly in the second half. Some Asian currencies havedeclined with the dollar but on average in 2006 our Asian currencies,particularly the Korean Won, were firmer against sterling. The overall resultis that the 4% exchange gain on sales in the first half of 2006 has beenvirtually eliminated during the last six months of the year. United Kingdom and Republic of Ireland Sales into the domestic market increased only 2% to £40.7 million reflecting thesubdued state of the manufacturing base in the UK. In the Republic of Ireland,there continues to be investment in new or expanding plants, particularly in thepharmaceutical industry. We focussed on the application of our technicalexpertise to improve customers' plant performance, particularly energyconservation, and through expansion of the steam system management offering.Watson-Marlow Bredel increased business with the water treatment sector and withOEMs. Our UK factories felt the effects of higher energy and material costs butremained busy with increased demand from overseas. Operating profits of £11.0million were flat after including higher charges for pensions and share-basedpayments. Continental Europe Our operations in Continental Europe produced good results with sales advancingby 10% to £138.3 million from £125.3 million in 2005; at constant exchangerates the increase was 11%. The economic backdrop in Europe has generally beenpositive, the main exceptions being France and Italy where the markets haveremained subdued, although our businesses performed well. The increase inturnover included growth in heat exchange packages, steam system services, cleansteam applications and tubing by Watson-Marlow Bredel. There was also successin increasing sales to oil and petrochemicals, pulp and paper, and OEM sectors. The increase in sales and profits was widespread across Europe with good gainsin Italy, Germany, Belgium, Czech Republic, Poland, Spain and the Hygromatikbusiness. Sales and profits were also ahead in France and the new company inRussia grew strongly both in sales and profits. The factories in France, the Netherlands and Alitea in Sweden were also busywith higher demand not only from Europe but also from Asia and the Americas.High energy and raw material costs persisted through 2006, and thewell-established programme of resourcing raw material purchases in lower costeconomies continued and contributed to the profit growth. Operating profits in Continental Europe increased by 20% from £18.7 million in2005 to £22.4 million in 2006, driven by the sales increase. North America Group turnover in the North American markets rose to £80.0 million from £73.1million in 2005; an increase of 9% and at constant exchange rates a rise of10%, coming equally from organic growth and acquisitions. In April 2006, the acquisition of the business and assets of AFTCO LLC ofFlorida was announced for $2.75 million (£1.5 million). The AFTCO range ofelectromagnetic flow meters complements the EMCO range of meters; the twobusinesses are being combined and will strengthen the Group's position inmetering. In July 2006, the acquisition was announced of 80% of the businessand assets of UltraPure Group Inc. of Florida for $4.9 million (£2.6 million).UltraPure's pure steam generators and water stills are used in hygienicprocesses mainly in the pharmaceutical and biotechnology industries. As anticipated at the half year, the US economy grew more slowly in the secondhalf of 2006 but sales and profits increased in spite of subdued demand from thepharmaceutical industry. In the Spirax Sarco business there was good growth insteam system services and in sales of heat exchange packages. In Watson-MarlowBredel sales into sanitary and industrial markets were ahead; sales to thewater treatment sector were down. Sales and profits in Canada were ahead. Our Mexican operation, which isaccounted for as an Associate, produced another strong result with sales andprofits well ahead. The operating profit for North America at £8.9 million was up 11% from £8.0million in 2005. The growth in the operating profit margin in North Americawas, as expected, held back by the costs of reorganising and integrating theacquisitions into the Group. Asia Sales and profits in Asia continued to grow strongly in 2006 with sales up 17%from £65.8 million to £77.1 million; an increase of 14% at constant exchangerates. There were some good projects particularly in the oil and petrochemicalsector. Sales coverage was increased in most markets and sales grew across theproduct range. Business levels in China and Korea advanced strongly and in bothcountries we have outgrown our existing premises and will be investing in newfacilities. The new, larger factory planned for China in 2007 will enable anincrease in locally made products from 2008. Our Indian operation, which istreated as an Associate, grew strongly and produced an excellent overallperformance. Sales in Japan were ahead of 2005 with particular emphasis onsteam traps and meters. Watson-Marlow Bredel's new operations in Korea andChina also grew well and both made good profits. The Korean Won and Chinese RMB, in particular, strengthened against sterling in2006 as against 2005 and boosted the overall profitability of the Asianoperations. The operating profit increased from £11.4 million in 2005 to £15.1million; an increase of 32%. The operating profit margin increased to 20.9%. Rest of the World (South America, Africa, Australasia) Sales in the Rest of the World increased by 8% to £48.2 million from £44.8million in 2005. The effect of exchange rate movements overall was minimal.The economies in Brazil and Argentina were volatile with inflation risks inArgentina and Presidential elections in Brazil undermining market confidence. Sales in Argentina were ahead but profits were lower as inflationary pressuresreduced the gross margin. In Brazil, sales and profits were much improved inthe second half of the year but the full year figures were well below 2005 asthe continuing strength of the Real reduced the competitiveness of somecustomers; costs have been reduced to protect future performance. In SouthAfrica, one-off costs were incurred in absorbing the Mitech acquisition andconsolidating both companies into a new facility, which was completed at the endof the year. The companies in Australasia produced good results for the year. Operating profits in the Rest of the World declined to £4.8 million (2005: £6.3million) due to the tighter conditions in South America and the investments inSouth Africa. The margin, therefore, reduced to 10.0% (2005: 13.6%) for theregion. Interest Net finance income was £2.0 million which compares with £0.9 million in 2005.The increase was due to improved net finance income in respect of definedbenefit pension funds. This arose because the increased value of the assets ofthe funds, together with the £16 million special pension contributions duringthe year, improved the return on assets by more than the increased interest onthe schemes' higher liabilities. The net cash outflow in the year (includingthe special pension payments) has eliminated the net bank interest income (2005: £0.2m). Associates We have minority shareholdings in our operations in India and Mexico, which arereported as Associates outside the operating profit. They are nevertheless anintegral part of the Group and both produced good performances in 2006. TheGroup's share of after tax profits of Associates increased to £1.4 million(2005: £0.9 million). Profit before taxation* The Group's pre-tax profit increased by 15% to £65.7 million (2005: £57.1million). Taxation The tax charge at 32.4% was consistent with the rate in 2005. More than 80% ofthe Group's profits are earned outside the UK and the majority of the overseastax rates are effectively higher than UK rates. We expect that the tax rate for2007 will be broadly in line with 2006. Earnings per share* The Group's prime financial objective is to provide enhanced value toshareholders through consistent growth in earnings per share and dividends pershare. Earnings per share rose to 58.1p from 50.2p; an increase of 16%. Dividend The Board is recommending a final dividend of 19.0p per share which, togetherwith the interim dividend of 7.5p per share paid in November, makes a totaldividend for the year of 26.5p per share. This compares with a total dividendof 23.8p per share last year, an increase of 11%. The cost of the interim andfinal dividends is £20.0 million, which is covered 2.2 times by earnings. Noscrip alternative to the cash dividend is being offered. Capital employed The good growth in the business is reflected in the balance sheet and inparticular in the higher level of capital employed, although exchange ratemovements have clouded the comparisons with 2005. Working capital increasedwith trade receivables and inventories rising in response to rising sales,particularly in the second half. We continue closely to manage working capitaland in 2006 trade receivable and inventory measures showed a small improvement. Return on capital employed (ROCE)* ROCE improved in 2006 to 32.2% from 30.4% in 2005. The capital employed wascarefully controlled and increased by 6% in 2006, whereas the operating profit,excluding amortisation of acquired intangible assets, increased by 13%. Capital expenditure The value of tangible fixed assets was little changed in sterling at £88.8million but increased by 8% at constant exchange rates as we continue investingin our businesses. There were investments in new premises in South Africa andin land for new premises in Korea, together with on-going plant and machineryexpenditure in our manufacturing plants to increase efficiency and expandcapacity. The additions in 2006 exceeded the depreciation charge by 58%. 2006 2005 £'000 £'000 Capital expenditure** 19,153 12,885Depreciation and amortisation** 12,151 12,617Capital expenditure as a % of depreciation 158% 102% ** The numbers above exclude acquired intangible assets and capitalised development costs. During 2007 and 2008, there will be an investment of around £9 million in a newfactory and offices in China to increase the volume of production in Shanghaiand to accommodate the growth of the sales organisation of this successfulcompany. Intangible assets and investments in Associates Intangible assets include goodwill capitalised prior to 2004 under UK GAAP andgoodwill and other intangible assets capitalised on acquisitions since thetransition to IFRS. Goodwill is the subject of annual impairment testing andintangible assets are amortised over their expected useful lives. There was noimpairment of goodwill during 2006, or 2005. Amortisation of acquiredintangible assets was £0.4 million for the year (2005: £0.2 million). Productdevelopment costs capitalised and computer software are also included inintangible assets in accordance with IFRS. The Group balance sheet alsoincludes the cost of investment in our Associate companies in India and Mexicoand our share of post-acquisition profit, net of dividends received. Post-retirement benefits The post-retirement benefit liability recognised in the balance sheet declinedto £20.2 million (net of deferred tax) at the end of 2006 compared with £31.4million a year earlier. The improvement was due to the special pensioncontributions (net of deferred tax) made during the year and good investmentreturns on pension scheme assets. Pension liabilities rose following a reviewof mortality assumptions but the increase was mitigated by a rise in bond yieldswhich reduced pension liability values. Cash flow Free cash flow for the year was £10.0 million (2005: £30.5 million) aftermaking special payments to defined benefit pension schemes of £15.9 million.The cash flow arising from the good growth in operating profit was also reducedby an increase in working capital of £13.7 million as a result of the salesgrowth and above average capital expenditure (net of disposals) of £19.9million. The share buy-back programme announced in March was completed inOctober; we bought 1.98 million shares at a cost of £18.1 million and anaverage share price of 913p. The shares are being held in Treasury to meet thefuture requirements of the Group's share schemes. There was also an outflow of£4.0 million for acquisitions. The underlying cash flow remains good but, after the special pension payments,the share buy-back and the acquisitions mentioned above, and after a smallfavourable exchange effect, the year finished with net debt of £6.6 million ascompared with net cash of £19.0 million at the start of the year. In January 2007, we have made the £5 million final instalment of the specialpayment into the Group's major defined benefit pension schemes. Capitalexpenditure, in 2007, will also be higher than usual reflecting the investmentsin new facilities in China and Korea. The Chairman comments as follows: "As we announced earlier in the year, Graham Marchand retired from the Board on30th June 2006, having joined the Group in 1987 and the Board in 1992. I wouldlike to restate the Board's thanks to Graham for his excellent contribution tothe Board's deliberations and to the progress of the Group over those years. We welcomed Mark Vernon onto the Board on 1st July 2006 as an Executive Directorwith responsibility for the Americas and the Group Marketing function. Markjoined the Group in 2003 as President and General Manager of Spirax Sarco Inc.in South Carolina. I am confident that Mark will, as a member of the executiveteam, bring an imaginative and constructive approach to the future developmentof the Group. The good performance in 2006 is the result of maintaining focus on our corebusinesses where we place particular emphasis on serving the needs of ourcustomers, on broadening our presence across the globe and on continuouslyimproving efficiency in all aspects of our activities, including the use oflatest technology. We are fortunate to have a strong team of talented andhardworking people in the Group who have delivered the successful performance in2006, and I thank them all on behalf of the Board and the shareholders. PROSPECTS We are currently faced with the continuing strength of sterling and, therefore,a likely adverse effect on the 2007 results, particularly in comparison with thefirst half of 2006. However, in most markets trading conditions remain firm andthe year has started well, which, with the Group's fundamental strengths, shouldenable us to make further progress in 2007." * Operating profit, pre-tax profit and EPS figures exclude the amortisation ofacquired intangible assets of £0.4 million in 2006 (2005: £0.2 million). SPIRAX-SARCO ENGINEERING PLC Group Income Statement for the year ended 31st December 2006 Note 2006 2005 £'000 £'000 Revenue 2 384,249 349,100Operating costs (322,308) (293,930)Operating profit 3 61,941 55,170 Financial expenses 4 (11,722) (11,450)Financial income 4 13,757 12,378Net financing income 4 2,035 928 Share of profit of associates 1,368 861Profit before taxation 65,344 56,959 Taxation - UK (3,257) (2,698)Taxation - Foreign (18,021) (16,074)Total taxation 5 (21,278) (18,772) Profit for the period 44,066 38,187 Attributable to:Equity holders of the parent 43,919 38,036Minority interest 147 151Profit for the period 44,066 38,187 Earnings per shareBasic earnings per share 6 57.7p 50.0pDiluted earnings per share 6 57.1p 49.6p Dividends 7Dividends per share 26.5p 23.8pDividends paid during the year (per share) 7 24.5p 21.9p SPIRAX-SARCO ENGINEERING plc Group Balance Sheet at 31st December 2006 Note 2006 2005 £'000 £'000 ASSETSNon-current assets Property, plant and equipment 88,802 85,752Goodwill 17,541 15,033Other intangible assets 8,866 8,357Prepayments 352 396Investment in associates 3,790 3,371Deferred tax 13,738 18,536 133,089 131,445 Current assets Inventories 67,707 64,216Trade receivables 90,023 83,303Other current assets 8,382 7,161Tax recoverable 1,746 1,527Cash and cash equivalents 9 22,085 56,929 189,943 213,136Total assets 323,032 344,581 EQUITY AND LIABILITIESCurrent liabilities Trade and other payables 50,372 46,843Bank overdrafts 9 3,986 3,836Short term borrowing 9 5,934 1,498Current portion of long term borrowings 9 4,669 25,010Current tax payable 7,445 7,326 72,406 84,513Net current assets 117,537 128,623 Non-current liabilities Long term borrowings 9 14,050 7,540Deferred tax 6,386 7,728Post retirement benefits 11 29,592 45,807Provisions 876 747 50,904 61,822Total liabilities 123,310 146,335 Net assets 8 199,722 198,246 Equity Share capital 19,296 19,238Share premium account 47,228 46,154Other reserves (1,850) 7,554Retained earnings 133,835 124,672Equity attributable to equity holders of the parent 198,509 197,618Minority interest 1,213 628Total equity 199,722 198,246 Total equity and liabilities 323,032 344,581 SPIRAX-SARCO ENGINEERING plc Group Statement of Total Recognised Income and Expense for the year ended 31st December 2006 2006 2005 £'000 £'000 Actuarial loss on post retirement benefits (2,939) (8,974)Deferred tax on actuarial loss on post retirement benefits 1,142 2,942Foreign exchange translation differences (9,574) 6,907Gains on cash flow hedges 170 6Income and expense recognised directly in equity (11,201) 881 Profit for the period 44,066 38,187Total recognised income and expense for the period 32,865 39,068 Attributable toEquity holders of the parent 32,718 38,917Minority interest 147 151Total recognised income and expense for the period 32,865 39,068 SPIRAX-SARCO ENGINEERING plc Statement of Changes in Equity For the year ended 31st December 2006 2006 2005 £'000 £'000 Equity attributable to equity holders of parent at beginning of period 197,618 165,422Total recognised income and expense 32,718 38,917Dividends paid (18,715) (16,684)Proceeds from issue of share capital 1,132 8,568Equity settled share plans 1,142 1,395Treasury shares purchased (18,082) -Treasury shares reissued 3,777 -Loss on the reissue of treasury shares (1,081) - 198,509 197,618 SPIRAX-SARCO ENGINEERING plc Group Cash Flow Statement for the year ended 31st December 2006 Note 2006 2005 £'000 £'000 Cash flows from operating activities Profit before taxation 65,344 56,959Depreciation and amortisation 13,364 13,151Share of profit of associates (1,368) (861)Equity settled share plans 860 576Net finance income (2,035) (928)Operating profit before changes in working capital and provisions 76,165 68,897Increase in trade and other receivables (12,662) (2,814)Increase in inventories (6,248) (3,224)Decrease in provisions and post retirement benefits (15,887) (4,045)Increase in trade and other payables 5,184 1,371Cash generated from operations 46,552 60,185Interest paid (1,137) (1,677)Income taxes paid (16,484) (16,789)Net cash from operating activities 28,931 41,719 Cash flows from investing activities Purchase of property, plant and equipment (17,935) (11,692)Proceeds from sale of property, plant and equipment 660 850Purchase of software and other intangibles (1,678) (1,139)Development expenditure capitalised (989) (1,070)Acquisition of businesses (3,969) (5,866)Interest received 983 1,860Dividends received 477 351Net cash used in investing activities (22,451) (16,706) Cash flows from financing activities Proceeds from issue of share capital 3,828 8,568Treasury shares purchased (18,082) -Repayment of borrowings (7,544) (7,728)Payment of finance lease liabilities (88) (372)Dividends paid (including minorities) (18,843) (16,796)Net cash used in financing activities (40,729) (16,328) Net decrease in cash and cash equivalents (34,249) 8,685 Cash and cash equivalents at beginning of period 53,093 43,914Exchange movement (745) 494Cash and cash equivalents at end of period 9 18,099 53,093 Borrowings and finance leases (24,653) (34,048)Net borrowings 9 (6,554) 19,045 Notes: 1. Foreign currency assets and liabilities are translated intosterling at rates of exchange ruling at 31st December. Trading results ofoverseas subsidiary undertakings have been translated into sterling at averagerates of exchange ruling during the year. 2. Revenue analysis The analysis of revenue by reference to the geographical location of customersis as follows:- 2006 2005 Change change £'000 £'000 at constant exchange rates % % UK & Republic of Ireland 40,695 40,084 +2 +2Continental Europe 138,299 125,343 +10 +11North America 79,956 73,056 +9 +10Asia 77,138 65,841 +17 +14Rest of the World 48,161 44,776 +8 +7 384,249 349,100 +10 +10 and by reference to the geographical location of the Group's operations is asfollows:- 2006 2005 change change £'000 £'000 at constant exchange rates % % UK & Republic of Ireland 107,922 102,479 +5 +5Continental Europe 172,382 156,050 +10 +11North America 80,610 73,220 +10 +11Asia 72,208 61,263 +18 +15Rest of the World 48,273 45,949 +5 +5 481,395 438,961 +10 +10Intra-group sales (97,146) (89,861) +8 +9 Sales to customers 384,249 349,100 +10 +10 Secondary segment revenue by business operation: 2006 2005 £'000 £'000 Spirax Sarco 332,655 302,627Watson-Marlow Bredel 51,594 46,473 384,249 349,100 3. Operating profit, analysed by reference to the geographicallocation of the Group's operations, is as follows:- 2006 2005 Change * change £'000 £'000 at constant exchange rates % % UK & Republic of Ireland 10,957 10,881 +1 +1Continental Europe 22,435 18,733 +20 +20North America 8,732 7,938 +10 +13Asia 15,120 11,430 +32 +23Rest of the World 4,697 6,188 (24) (23) 61,941 55,170 +12 +11 Amortisation of intangible assets acquired was £350,000 (2005: £175,000) andamortisation of capitalised development costs was £994,000 (2005: £834,000). \* The percentage change at constant exchange rates in respect of the operatingprofit also includes an estimate of the transaction effect. 4. Net Financing Income 2006 2005 £'000 £'000 Financial expensesBank and other borrowing interest payable (1,137) (1,704)Interest on pension scheme liabilities (10,585) (9,746) (11,722) (11,450) Financial incomeBank interest receivable 1,038 1,869Expected return on pension scheme assets 12,719 10,509 13,757 12,378Net financing income 2,035 928 Net pension scheme financing income 2,134 763Net bank and other interest (99) 165Net financing income 2,035 928 5. Taxation 2006 2005 £'000 £'000 Analysis of charge in periodUK corporation taxCurrent tax on income for the period 8,178 12,702Adjustments in respect of prior periods (207) (268) 7,971 12,434Double taxation relief (3,233) (9,755) 4,738 2,679Foreign taxCurrent tax on income for the period 16,561 15,565Adjustments in respect of prior periods (79) (47) 16,482 15,518Total current tax charge 21,220 18,197Deferred tax 58 575Tax on profit on ordinary activities 21,278 18,772 6. Earnings per share 2006 2005 £'000 £'000 Earnings 43,919 38,036 Weighted average shares in issue 76,161,612 76,119,005Dilution 733,050 577,169Diluted weighted average shares in issue 76,894,662 76,696,174 Basic earnings per share 57.7p 50.0p Diluted earnings per share 57.1p 49.6p Earnings 43,919 38,036Amortisation of acquired intangible assets 350 175Adjusted earnings 44,269 38,211 Basic adjusted earnings per share 58.1p 50.2p The dilution is in respect of unexercised share options and the performanceshare plan. 7. Dividends 2006 2005 £'000 £'000 Amounts paid in the yearFinal dividend for the year ended 31st December 2005 of 17.0p(2004: 15.1p) per share 13,047 11,459Interim dividend for the year ended 31st December 2006 of 7.5p(2005: 6.8p) per share 5,668 5,225 18,715 16,684 Amounts arising in respect of the yearInterim dividend for the year ended 31st December 2006 of 7.5p(2005: 6.8p) per share 5,668 5,225Proposed final dividend for the year ended 31st December 2006 of19.0p (2005: 17.0p) per share 14,370 13,093 20,038 18,318 The proposed final dividend is subject to approval by shareholders at the AnnualGeneral Meeting and has not been included as a liability in the financialstatements. If approved at the annual general meeting on 17th May 2007, the final dividendwill be paid on 21st May 2007 to shareholders on the register at 20th April2007. No scrip alternative to the cash dividend is being offered. 8. The analysis of net assets by reference to the geographicallocation of the Group's operations is as follows:- 2006 2005 £'000 £'000 UK & Republic of Ireland 43,935 27,836Continental Europe 61,063 58,718North America 35,207 27,194Asia 40,586 35,427Rest of the World 23,832 25,017 204,623 174,192Deferred tax 7,352 10,808Current tax (5,699) (5,799)Net cash (6,554) 19,045Net assets 199,722 198,246 9. Analysis of changes in (debt)/cash 1st Jan Cash Exchange 31st Dec 2006 Flow Movement 2006 £'000 £'000 £'000 £'000 Current portion of long term borrowings (25,010) (4,669)Non-current portion of long term borrowings (7,540) (14,050)Short term borrowings (1,498) (5,934)Total borrowings (34,048) (24,653) Comprising:Borrowings (33,600) 7,544 1,756 (24,300)Finance Leases (448) 88 7 (353) (34,048) 7,632 1,763 (24,653) Cash and cash equivalents 56,929 (33,604) (1,240) 22,085Bank overdrafts (3,836) (645) 495 (3,986)Net cash and cash equivalents 53,093 (34,249) (745) 18,099 Net cash 19,045 (26,617) 1,018 (6,554) 10. Return on capital employed 2006 2005 £'000 £'000 Capital employedProperty, plant and equipment 88,802 85,752Prepayments 352 396Inventories 67,707 64,216Trade receivables 90,023 83,303Other current assets 10,128 8,688Trade and other payables (50,372) (46,843)Current tax payable (7,445) (7,326)Capital employed 199,195 188,186Average capital employed 193,691 182,233 Operating profit 61,941 55,170Acquisition intangibles amortisation 350 175 62,291 55,345 ROCE 32.2% 30.4% 11. Employee benefits The Group is accounting for pension cost and share based payments in accordancewith International Accounting Standard 19 - Employee benefits and InternationalFinancial Reporting Standard 2 - Share-based payments. The defined benefit plan expense is recognised in the income statement asfollows:- UK Pensions Overseas pensions and Total medical 2006 2005 2006 2005 2006 2005 £'000 £'000 £'000 £'000 £'000 £'000 Current service cost (6,491) (5,700) (1,699) (1,468) (8,190) (7,168)Past service cost (375) - - 117 (375) 117Interest on schemes' liabilities (8,715) (8,000) (1,870) (1,746) (10,585) (9,746)Expected return on schemes' assets 11,216 9,300 1,503 1,209 12,719 10,509Total expense recognised in incomestatement (4,365) (4,400) (2,066) (1,888) (6,431) (6,288) A summary of the deficits in the schemes is as follows:- Overseas UK Pensions Total Pensions & medical £'000 £'000 £'000 Fair value of schemes' assets 176,326 22,356 198,682Present value of the schemes' liabilities (191,980) (36,294) (228,274)Deficit in the schemes (15,654) (13,938) (29,592)Related deferred tax asset 4,696 4,695 9,391Net pension liability 2006 (10,958) (9,243) (20,201)Net pension liability 2005 (18,410) (12,984) (31,394) The charge to the income statement in respect of share-based payments is made upas follows:- 2006 2005 £'000 £'000 Share Option Scheme 495 374Performance Share Plan 290 139Employees Share Ownership Plan 579 525Total expense recognised in income statement 1,364 1,038 12. Basis of preparation The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31st December 2006 or 31st December 2005.Statutory accounts for 2005, which were prepared under accounting standardsadopted by the EU have been delivered to the registrar of companies and thosefor 2006 will be delivered in due course. The auditors have reported on thoseaccounts; their report was (i) unqualified, (ii) did not include any referencesto any matters to which the auditors drew attention by way of emphasis withoutqualifying and (iii) did not contain statements under sections 237(2) or (3) ofthe Companies Act 1985. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Spirax-Sarco