Last checked at 24 Mar 2014 16:28
24th March 2014
Spirax-Sarco Engineering plc
2013 Annual Report and Accounts and
Notice of Annual General Meeting
Spirax-Sarco Engineering plc (the "Company") released its preliminary results announcement of annual results for the year ended 31st December 2013 ("Final Results announcement") on 6th March 2014. The announcement made on that date included inter alia a condensed set of the Company's financial statements and extracts from the management report.
The Company announces that its 2014 Annual General Meeting will be held at 2.00 pm on Tuesday, 20th May 2014 at Charlton House, Cheltenham, Gloucestershire, GL53 8ER.
In connection with this, the following documents have been posted to shareholders:
- Notice of 2014 Annual General Meeting;
- 2013 Annual Report and Accounts; and
- Proxy form for 2014 Annual General Meeting.
In accordance with Listing Rule 9.6.1, printed copies of these documents have also been submitted to the National Storage Mechanism and will shortly be available for inspection on the National Storage Mechanism (http://www.morningstar.co.uk/uk/NSM).
The Company confirms that the Annual Report and Accounts and the Notice of 2014 Annual General Meeting are now available to view or download in a pdf format from the Spirax-Sarco Engineering website. The direct link to download the Annual Report and Accounts is http://www.spiraxsarcoengineering.com/pdfs/reports/2013-annual-report.pdf and the direct link to download the Notice of 2014 Annual General Meeting is
http://www.spiraxsarcoengineering.com/pdfs/circulars/2014/2014%20Circular_Notice%20of%20Meeting.pdf.
A condensed set of the Company's financial statements and extracts of the management report including the Business Review, were included in the Company's Final Results announcement. That information, together with the Appendix to this announcement, which contains additional information which has been extracted from the Annual Report and Accounts for the year ended 31st December 2013, constitutes the material required for the purposes of compliance with the Transparency Rules and should be read together with the Final Results announcement, which can be downloaded from the Company's website at http://www.spiraxsarcoengineering.com/pdfs/news/News%20Release%202013%20Preliminary%20Results.pdf. This announcement should be read in conjunction with and is not a substitute for reading the full Annual Report and Accounts. Together these constitute the information required by DTR 6.3.5, which is required to be communicated to media in unedited full text through a Regulatory Information Service. Page and note references in the text below refer to page numbers and notes in the Annual Report and Accounts.
Appendix
Our risks
"Principal risks
A summary of the principal risks, their likely impact and an explanation of how the Group mitigates each risk is set out in the table below. The direction of change in particular risks during the year is explained in the "Principal Risk" column and illustrated by the arrow in the "Change" column. Please note that the "Change" column shows the change in the risk and not the mitigation of the risk. We have also set out the relevance of the risk to our strategy.
Following the reprioritisation of the principal risks in 2013 by the Risk Management Committee, we have added one new principal risk (Significant exchange rate movements) and removed one principal risk shown in our 2012 Annual Report and Accounts (Risk of product failure).
The way in which the Risk Management Committee reviews and controls our risk management processes and procedures is set out in the Risk Management Committee report on pages 70 to 72.
There may be other risks and uncertainties which are unknown to the Group or which could become material in the future. These risks may cause the Group's results to vary materially from historic and expected results.
Principal risk | Change | Impact | Mitigation | Relevance to strategy | |
Economic and political instability:
The Group operates worldwide. Economic and political instability creates risks for our locally based direct operations. The Group has reviewed country, credit, liquidity and currency risks and, in particular, those arising from European debt issues. |
è | Fluctuations in profit from significant currency movements Reduced profit due to impact on customers with economic problems Potential redenomination of local currency, devaluation and high inflation | Compliance with Group Treasury Policy
Strong internal controls with internal audit and appropriate insurance
Resilient business model (see pages 12-21)
Senior managers in the EMEA division undertook a Eurozone Scenario Planning Workshop, externally facilitated by PA Consulting Group, which considered the impact of countries leaving the Eurozone. The objective was to improve the Group's preparedness in respect of this risk. The toolkit developed is to be deployed by other operating companies
The operations in Argentina were profitable despite a general devaluation in Argentina. This is mainly due to the move of the business to the US dollar.
| Broaden our global presence
| |
Significant exchange rate movements:
The Group reports its results and pays dividends in sterling. Operating companies, including manufacturing, trade in local currency. |
é | Exchange rate movements impact landed costs, and therefore gross profits, depending upon the country of origin. Non‑sterling receipts are translated into sterling on consolidation | Regional manufacturing strategy to spread manufacturing across a number of currency areas, and consideration of exchange rate exposures in the manufacturing strategy
Forward cover where appropriate and in line with the Treasury Policy. However, this has only a relatively short-term effect (up to two years) after which the underlying currency cost base and exchange rates apply
Focus on reducing manufacturing costs including sourcing materials, where appropriate, from cheaper areas such as China and India.
| Strengthen our global market position
Generate consistent organic growth | |
Loss of manufacturing output at any Group factory:
In relation to the steam business, the Group manufactures most of the products we sell in eight main factory units which supply our sales operations worldwide. Loss of manufacturing output at any important plant risks serious disruption to sales operations. In Watson‑Marlow Pumps Group, pump and tubing manufacturing are separated.
|
è | Reduced sales and profit due to inability to meet customer orders
Loss of market share
Damage to reputation | Group manufacturing strategy to regionalise manufacturing base and increase resilience
Business continuity planning and disaster recovery plans
Stocks of components and finished products in sales companies
Regular and comprehensive back-ups of IT systems
Use of insurance audits/ inspections and business interruption insurance. | Operate sustainably
Strengthen our global market position | |
Breach of regulatory requirements:
The Group operates in a large number of countries across the world and is subject to many different laws and regulations, including the UK Bribery Act, the US Foreign and Corrupt Practices Act, health and safety, competition laws and local quality regulations. Breaching these laws and regulations could have serious consequences. |
è | Fines and regulatory action and resultant reduced profit
Damage to reputation
Diversion of management time | Significant improvements to our compliance programme including (i) participation by over 2,800 employees in anti-bribery training ("anti-bribery@ work"), (ii) issue of Sanctions, Embargoes and Restrictions Policy and Guide, and (iii) the intended roll-out of a Behavioural Based Safety programme
Robust internal controls, policies and procedures and Group Management Code
Established strong ethical culture supported by communication and training
Review of commercial arrangements and regulatory requirements with appropriate professional advice
Maintain local quality accreditations. | Operate sustainably
Strengthen our global market position
| |
Non-compliance with health, safety and environmental legislation:
The Group places great emphasis on health, safety and environmental issues in relation to our employees and operations, and those of our customers, suppliers and communities so as to avoid the risk of major health, safety or environmental problems.
|
è | Damage to reputation
Reduced profit due to fines, compensation and clean-up costs
Enforcement action by regulatory authorities | Compliance with legislation and codes of best practice
Regular audits, checks and reporting to management and the Board on health, safety and environmental issues
On-going training
Appointment of a Group Health, Safety and Environment executive and improvement in health and safety awareness across the Group. | Operate sustainably
Strengthen our global market position
Broaden our global presence | |
Defined benefit pension deficit:
Defined benefit pension schemes carry risks in relation to investment performance, security of assets, longevity and inflation. Total defined benefit pension liabilities represent approximately 52% of total Group assets
This risk has reduced further in the year as a result of the operation of the Mercer "Dynamic De‑Risking Solution".
|
ê | Increase in liabilities
Increase in pension costs and cash contributions
Fluctuations in pension fund asset and liability values | Use of independent professional advisers and custodians for defined benefit pension schemes
Pension scheme de-risking strategy to automatically reduce equity exposure and increase matching assets at pre-agreed trigger points
Use of Mercer "Dynamic De-Risking Solution". | Operate sustainably
| |
Failure to respond to technological developments or customer needs:
The Group has significantly increased R&D resources and risks this being ineffective if we fail to respond to development and customer needs or if we fail to manage and protect our intellectual property. |
è | Failure to achieve expected return on the R&D investment
Reduced profit
Loss of market share
Loss of intellectual property | Maintain market knowledge and monitor competitor developments, making effective use of our direct field sales force
Maintain investment in R&D programmes in order to satisfy customers' technical requirements
Maintain appropriate intellectual property registrations, taking enforcement action where appropriate
Regular updating of technical and product improvement roadmaps.
| Operate sustainably
Generate consistent organic growth
Deliver solutions to reduce energy usage
| |
Failure to realise acquisition objectives:
The Group's strategy is focused on organic growth complemented by acquisitions. We risk failing to achieve the expected return on investment if acquisitions are not properly identified, executed and integrated. |
è | Failure to achieve expected return on investment
Assumption of unexpected liabilities
| Evaluation of potential targets against Strategic Plan and acquisition criteria
Project management disciplines
Appropriate due diligence by Group personnel and external advisers covering commercial, legal, accounting, environmental, market and technical issues
The Group has expanded its acquisitions team to strengthen its due diligence process. | Grow market share
Deliver solutions to reduce energy usage"
| |
Related Party Transactions
The following related parties transactions are extracted from page 138 of the 2013 Annual Report and Accounts.
2013 | 2012 | |
"THE GROUP | £000 | £000 |
Sales to associated companies | 569 | 567 |
Dividends from associated companies | 964 | 1,454 |
Amounts due from associated companies at 31st December | 52 | 47 |
2013 | 2012 | |
PARENT COMPANY | £000 | £000 |
Dividends received from subsidiaries | 186,059 | 16,500 |
Dividends received from associates | 964 | 1,454 |
Loans and amounts due from subsidiaries at 31st December | 157,546 | 143,748 |
Amounts due to subsidiaries at 31st December | 8,526 | 23,941" |
Statement of Directors' responsibility
The following responsibility statement is repeated here solely for the purpose of complying with Disclosure and Transparency Rule 6.3.5. This statement relates to and is extracted from page 99 of the 2013 Annual Report and Accounts. Responsibility is for the full 2013 Annual Report and Accounts not the extracted information presented in this announcement and the Final Results announcement.
"Responsibility statement
We confirm that to the best of our knowledge:
• The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
• The management report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks that they face.
Signed by
D J Meredith
Finance Director
on behalf of the Board of Directors
5th March 2014"
For further information, please contact:
Andy Robson, General Counsel & Company Secretary
Tel: 01242 535276
About Spirax Sarco
Spirax-Sarco Engineering plc is the world leader in each of its two businesses, steamspecialties and peristaltic and niche pumping. The steam specialties business provides a broad range of fluid control products, engineered packages, site services and systems expertise for a diverse range of industrial and institutional customers. The company helps its customers to improve productionefficiency, reduce energy costs, water usage and emissions, improve product quality and enhance the safety of their operations. Watson-Marlow is the global leader in peristaltic pumps, specialising in the design and manufacture of the most advance peristaltic and niche pumps, and tubing. Watson-Marlow pumps offer the ideal solution for a wide variety of difficult pumping applications and are highly accurate, controllable and virtually maintenance free. The Group is headquartered in Cheltenham, England, hasstrategically located manufacturing plants around the world and employs approximately 4,700 people, of whom around 1,300 are direct sales and service engineers. Its shares have been listed on the London Stock Exchange since 1959 (symbol: SPX). Further information can be found at www.spiraxsarcoengineering.com