AGM Statement - Trading Update

RNS Number : 7088X
Spirax-Sarco Engineering PLC
10 May 2016


News Release


Tuesday 10th May 2016

AGM Statement - Trading Update

Continued progress despite challenging markets


Spirax-Sarco Engineering plc, the world leader in the control and efficient use of steam and in peristaltic pumping and associated fluid path technologies, issues the following trading update in respect of the period ended 30th April 2016.  As previously indicated, the requirement for Interim Management Statements has been removed but it is our intention to provide directional guidance via a trading update at this time of the year and again in November.



Global industrial production growth* has remained at a very low level of around zero growth, with a continued small deterioration in developed (OECD) economies matched by a small overall improvement in emerging (non-OECD) economies.  Our markets in Europe, Middle East and Africa (EMEA) are overall stable, with industrial production growth of less than 1% but modestly picking up in some markets.  In the Americas, industrial production growth has turned negative in North America and remains firmly negative in Latin America.  In Asia Pacific, industrial production growth shows a small improvement due to an apparent modest recovery in China, with Korea flat. 


Total organic** sales growth in the four months ended 30th April 2016 was in line with the full year 2015.  There was a similar pattern of growth, with Watson-Marlow Fluid Technology Group (WMFTG) continuing to make strong organic sales progress in the first four months, supplemented by the good contribution from the three acquisitions made in 2015.  In our steam specialties business, organic sales were again broadly flat, with a continued pattern of lower levels of large projects, offset by increased sales of self-generated smaller projects and improved maintenance and repair business.  In EMEA, organic sales growth was modestly lower compared with a relatively strong start in the prior year, especially in our larger businesses in the UK and Italy.  In Asia Pacific, organic sales were slightly lower spread over a number of our smaller companies, largely offset by small gains in China and Korea.  Organic sales were modestly ahead in the Americas due to further gains in Latin America, which more than offset a small decline in North America driven by lower distributor business to the oil, gas and chemicals sectors.


Overall, currency movements have turned positive, increasing sales on translation in the first four months by less than 1% versus average exchange rates in the first half of 2015, with good gains from the stronger US dollar and euro, largely offset by weaker currencies versus sterling in most emerging markets.  Exchange rates deteriorated through 2015 and versus full-year 2015 average exchange rates, the gain on translation of sales was over 2%.  The Group's acquisitions and disposals in 2015 added a net 0.6% to sales for the first four months of 2016. 


Group operating profit was ahead of the comparable four-month period at constant currency*** due to continuing the performance levels of 2015 and the benefit of stable material input costs.  In addition, we benefited from the non-repeat of the headcount reduction costs in our UK steam specialties manufacturing business that were taken within operating profit in the first quarter of 2015.  As indicated in March, we increased our market development expenditure and increased training and development investment in line with our strategy for growth.  Underlying operating profit margin at constant currency*** was therefore modestly ahead of the comparable period.  Favourable currency movements increased reported Group operating profit by 1% versus first half 2015 average exchange rates and by 3% versus full-year 2015 average exchange rates.


Financial position

Our business remains highly cash generative and we maintain a strong balance sheet.  Net cash at 30th April 2016 was £31 million compared with £5 million at 31st December 2015.  If approved at the AGM, the final dividend for 2015 of 48.2p per share, totalling £35 million, will be paid on 27th May 2016.  There has been no material change in the financial position of the Group during the period.



Industrial production growth progressively slowed through 2015 but appears to have stabilised in the early months of 2016 showing no further overall deterioration.  However, the likely future path of industrial production growth continues to be uncertain and we remain vigilant, controlling cost closely.  Our strategy is focussed on self-generated growth to reduce reliance on the market and we are investing resources into our strategic priorities to increase the effectiveness of our highly trained direct sales force, broaden the Group's geographic presence, leverage new product development and optimise our supply chain, whilst developing a more sector-aligned organisation.


We have a robust business model that generates engineered solutions to meet our customers' needs for energy and CO2 reductions, water savings, increased productivity, enhanced quality, reduced costs and compliance with increasing regulatory requirements.  Whilst we continue to have limited visibility, with short order books, and markets remain lacklustre, we have good diversification across market sectors and geographic regions and will benefit from the cost saving actions taken in 2015.  Provided there is no material deterioration in trading conditions, the Board expects to make progress in 2016.


Spirax Sarco expects to publish its 2016 first half-year results on Tuesday 9th August 2016.



Nick Anderson, Chief Executive

David Meredith, Director Finance

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 Indutrial Production growth are as determined by CHR Economics in its Global Industrial Production Watch publication.

** References to organic changes are excluding acquisitions and disposals, and are expressed at constant currency.

*** References to profit changes at constant currency take account of both exchange translation and transaction effects.


About Spirax Sarco

Spirax-Sarco Engineering plc is the world leader in each of its two businesses, Spirax Sarco for steam specialties and Watson-Marlow Fluid Technology Group for niche peristaltic pumps and associated fluid path technologies.  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 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 4,800 people, of whom over 1,300 are direct sales and service engineers.  Its shares have been listed on the London Stock Exchange since 1959 (symbol: SPX).

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