TIDMSPX
RNS Number : 0224X
Spirax-Sarco Engineering PLC
21 November 2017
News Release
Tuesday 21(st) November 2017
TRADING UPDATE
Underlying markets remain positive, overall expectations
unchanged
Spirax-Sarco Engineering plc, the world leader in the control
and efficient use of steam, electrical thermal energy solutions and
peristaltic pumping and associated fluid path technologies, issues
the following trading update in respect of the period ended 31(st)
October 2017.
Economic Environment
The global macro-economic environment for the Group remains
positive with the latest forecast for Global Industrial Production
(IP) growth for 2017 being 3.5%, marginally above the 3.3% forecast
at the time of our Interim Report. As in the first half, growth is
skewed towards the emerging economies where the increase is
forecast to be 5.0%, compared with 2.5% in the developed economies,
with much of the differential coming from strong growth in
China.
Trading
As anticipated, Group organic* sales growth in the four months
to October increased modestly from that achieved in the first half
of the year, reflecting the generally positive industrial
backdrop.
In EMEA, organic sales growth in the four months to October was
higher than in the first half of the year with the segment
benefitting from a strong order book at the beginning of the second
half of the year and improved underlying markets. Organic growth in
Asia Pacific has continued to be strong with good performance in
China and Korea, our two largest territories in the region. In the
Americas, however, organic growth has continued to be difficult to
find and performance was only marginally ahead of that seen in the
first half of the year. Growth in the Watson-Marlow Fluid
Technology Group continues to be strong, in line with that seen in
the first half of the year.
Hiter and Aflex which were acquired in 2016 and Gestra and
Chromalox which joined the Group this year are all progressing well
and are performing in line with expectations. To date we have had a
positive response from the customers and employees of these
businesses and their integration is proceeding as planned. In
particular, we were pleased that the relatively complex carve-out
of some of the Gestra businesses from their previous parent were
completed on schedule at the end of September. The net effect of
these acquisitions is anticipated to increase the full-year sales
by approximately 19%.
As at the half year, Group operating profit is ahead of the
comparable ten-month period at constant currency, both on an
organic basis and when the effects of the above acquisitions are
included.
Following the anniversary of the Brexit vote in June this year,
currency effects have moderated. If spot rates at 31(st) October
2017 prevail to the end of 2017, sales for the full year would be
increased by approximately 5% with the uplift in profits expected
to be in the region of 8%.
If October's foreign exchange rates continue into next year we
would expect to see a reduction in sales and profits in 2018 due to
currency movements of just under 2% and 3% respectively.
Financial position
Our business remains highly cash generative and we maintain a
strong balance sheet. The Group financed the acquisitions of Gestra
in May and Chromalox in July from existing cash resources and new
debt facilities. At 31(st) October 2017 the net borrowings of the
Group were GBP379 million. The interim dividend for 2017 of 25.5p
per share was paid on 10th November at a cash cost of GBP19
million.
In line with the increased level of debt, interest costs will
increase and in total (cash and pension) are expected to be in the
region of GBP7 million for the year.
Outlook
Industrial production growth rates are forecast to remain
positive for the remainder of the year in both developed and
emerging markets although predictions for 2018 are less clear,
particularly with regard to China. We continue with our investment
programmes in support of future growth and the implementation of
our strategy to generate growth from our own actions to outperform
our markets. We achieve this by being more effective in identifying
and generating engineered solutions to help our customers with
energy efficiency, sustainability, productivity, quality, cost
reduction and compliance with ever increasing regulatory
requirements.
Whilst, as always, we have limited visibility due to the
short-term nature of our order book, we have good diversification
across market sectors and geographic regions and remain focused on
our strategies for growth, which, together with the Group's
fundamental strengths, stand us in good stead. We still have much
to do in the remainder of this year but our overall expectations
for the full-year are unchanged and the Board has confidence that
the Group will make further progress in 2017.
Spirax Sarco expects to publish its preliminary 2017 results on
15(th) March 2018.
Enquiries:
Nicholas Anderson, Group Chief Executive
Kevin Boyd, Group Finance Director
Tel: 01242 535234
Note: References to profit are to adjusted profit that excludes
the amortisation and impairment of acquisition-related intangible
assets and acquisition and disposal costs, together with the tax
effects of these items.
* References to organic changes are excluding acquisitions and
disposals, and are expressed at constant currency.
About Spirax Sarco
Spirax-Sarco Engineering plc comprises two world-leading
businesses, Spirax Sarco for steam and electrical thermal energy
solutions and Watson-Marlow Fluid Technology Group for niche
peristaltic pumps and associated fluid path technologies. Spirax
Sarco provides a broad range of fluid control and electrical
process heating products, engineered packages, site services and
systems expertise for a diverse range of industrial and
institutional customers. The business helps its end users to
improve production efficiency, reduce energy costs, water usage and
emissions, improve product quality and enhance the safety of their
operations. Watson-Marlow Fluid Technology Group offers the ideal
solution 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, England, has strategically located manufacturing plants
around the world and employs over 7,000 people, of whom
approximately 1,550 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
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