Trading Statement

RNS Number : 7534P
Spirax-Sarco Engineering PLC
22 November 2016



News Release


Tuesday 22nd November 2016


Robust performance in challenging markets, overall expectations unchanged


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 31st October 2016. 



The global macro-economic environment for the Group remains in the low-to-no growth situation that characterised 2015 and the first half of 2016.  The latest Global Industrial Production (IP) forecasts for 2016 approximately match the overall IP growth rates achieved in 2015 (marginally positive at 0.5%).  The forecast for Developed economies has deteriorated to 0.2% since the outcome of the Brexit referendum although the IP forecast for Emerging nations strengthened slightly to 1.1%, as IP prospects for China, Korea and South America improved since July.  However, these are small changes to the IP forecasts, which remain overall at close to nil-growth levels.


As anticipated, Group organic* sales growth in the first ten months slowed modestly from that achieved in the first half of the year primarily due to the non-repeat of the large projects in the Steam Specialties business which were identified in our Half Year Report.


In EMEA, organic sales growth in the four months to October was lower than in the first half of the year but we have seen an encouraging growth in the order book which should result in a similar level of growth in the second  half of the year as was seen in the first six months.  As expected, due to the non-repeat of the large project sales in China and Korea reported in the first half, year to date organic growth in Asia Pacific has reduced.  In the Americas, organic growth has continued at a similar level to that seen in the first half of the year.  The Watson-Marlow Fluid Technology Group continues to deliver strong organic growth although as previously signalled, we would expect growth rates to moderate slightly in the fourth quarter of the year.


Following the UK's referendum to exit the European Union and the subsequent devaluation of sterling, the small currency tailwinds seen in the first half of the year have accelerated.  Overall, foreign currency effects have increased Group sales on translation in the first ten months of the year by 6.8% versus full-year 2015 average exchange rates.  If recent exchange rates prevail to the end of 2016, sales for the year would be increased on translation by approximately 8.0%.  The net effect of the Group's acquisitions and disposals in 2015 and 2016 is anticipated to add 0.8% to sales for the full-year. 


As at the half year, Group operating profit continues to be significantly ahead of the comparable ten-month period at constant currency.  This includes the pre-operating and start-up losses of Hiter, acquired in July, which is performing to expectations.  Favourable currency movements, translational and transactional, have positively impacted reported Group operating profit by 7.2% versus full-year 2015 average exchange rates and if recent exchange rates prevail to the end of 2016 we would expect the increase in operating profit for the year due to currency movements to be approximately 8.5% (translation and transaction). 


If recent foreign exchange rates continue into next year we would expect to see an uplift in sales and profits of 6.0% and 9.0% respectively in 2017.  If recent bond yields prevail into next year we would anticipate an increase in overall charges related to our defined benefit pension schemes of at least £3.5 million.


Financial position

Our business remains highly cash generative and we maintain a strong balance sheet, with a net cash balance of £81 million at 31st October 2016.  The interim dividend for 2016 of 22.5p per share was paid on 11th November at a cash cost of £16.5 million.  There has been no material change in the financial position of the Group during the period.



Industrial production growth rates have remained at close to nil-growth levels throughout the year, in both developed and emerging markets.  However, we have continued with the implementation of our strategy aimed at generating growth from our own actions to outperform our markets 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.  We continue with our investment programmes in support of future growth as well as seeking out acquisitions in industries related to those we currently operate in. 


Whilst we continue to have limited visibility, with short order books and markets that remain lacklustre, we have good diversification across market sectors and geographic regions and will 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 2016.


Spirax Sarco expects to publish its preliminary 2016 results on 9th March 2017.



Nicholas Anderson, 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 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 approximately 5,000 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)

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