Spirax Sarco to start direct operations in India
News Release
5th March 2015
Spirax Sarco to start direct operations in India and exit joint venture
Spirax-Sarco Engineering plc, the world leader in the control and efficient use of steam and in niche fluid technology, announces the establishment of a new wholly-owned operation through which it will commence direct selling into the Indian market, which has good medium and long-term opportunities for sales and profit growth. An agreement has also been signed on 1st March 2015 to exit the long-standing joint venture in India with Forbes Marshall Private Limited, with completion expected before the 31st March 2015.
Our new Indian management team are completing the preparatory actions of the last twelve months to start direct sales operations in India by mid-2015 through our new wholly-owned company Spirax-Sarco India Private Ltd. We will also be accelerating our investment to rapidly establish world class local manufacturing and training facilities at our recently purchased site in Chennai. We had a 49.3% interest in the Associate Company in India, Spirax Marshall Private Limited, which had been in operation since 1959 under the management control of our local partners. We have sold our interest in this joint venture to our former partners in India, at tangible asset value, for £6.5m in cash. The agreement also provides for both parties to trade inside and outside India under their respective names, while we retain exclusive rights to Spirax Sarco's brands and product nomenclature.
In the twelve month period ended 31st December 2014, the Group's 49.3% share of the adjusted after-tax profit of the Associate Company was £1.3m, having declined 32% from £1.9m in 2013. Over the last four years, profit contribution from this Associate Company has shown a steady decline to below 1% of the Group's pre-tax profits. We expect that our new operation will make a small negative contribution to earnings in 2015, as the business builds both sales and manufacturing activities, but with an increasing contribution thereafter. In the Group's 2014 accounts, this investment in Associate is designated as an asset held for sale. The 2014 statutory profit includes an impairment charge of £1.0m largely in relation to goodwill that arose in 2007 when the Group increased its shareholding from 40.0% to 49.3%.
In 2015, on completion of the sale of our 49.3% interest, there will also be a charge to statutory profit, which we currently estimate to be £1.7m, in respect of prior years' balance sheet translation exchange differences that, under IAS 21, are required to be recycled through the Profit & Loss account. Neither the 2014 nor the 2015 adjustments affects cash and neither are included within our reported adjusted profits.
Nicholas Anderson, commenting on the agreement, said "We have had a long association in India but the time has come to address the Indian market directly with our own wholly-owned business, which will create the flexibility required to take advantage of the good medium and long-term growth prospects for this developing economy."
Enquiries:
Nick Anderson, Chief Executive
David Meredith, Director Finance
Tel: 01242 535234
About Spirax Sarco
Spirax-Sarco Engineering plc is the world leader in both steam system management and niche peristaltic pumps and associated fluid path technologies. The Company provides a broad range of fluid control products, engineered packages, site services and systems expertise for its diverse range of over 100,000 industrial and institutional customers. The Company helps its customers to optimise production capacity, reduce energy costs and emissions, improve product quality and enhance the safety of their operations. Spirax Sarco is headquartered in Cheltenham, England, has strategically 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
This information is provided by RNS
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