Trading Statement

RNS Number : 0224X
Spirax-Sarco Engineering PLC
21 November 2017



News Release


Tuesday 21st November 2017


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 31st 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. 



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 31st 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 31st October 2017 the net borrowings of the Group were £379 million.  The interim dividend for 2017 of 25.5p per share was paid on 10th November at a cash cost of £19 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 £7 million for the year.



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 15th March 2018.



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).

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