Trading Update

RNS Number : 4068H
Spirax-Sarco Engineering PLC
15 November 2018



News Release


Thursday 15th November 2018


Good performance in the four months to October, 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 2018. 


Economic Environment

The global macro-economic environment for the Group remains positive with the latest forecast for Global Industrial Production (IP) growth for 2018 being 3.5%, marginally below the 3.6% forecast at the time of our Interim Report.  As in the first half of the year, IP growth is weighted towards the emerging economies where the increase is forecast to be 4.9%, compared with 2.4% in the developed economies, much of the differential coming from China. 



The Group's organic* sales growth rate in the four months to October increased modestly from that achieved in the first six months of the year, maintaining the good performance of the first half.


In EMEA, organic sales growth in the four months to October was slightly higher than in the first half of the year with the segment benefitting from a strong order book at the beginning of the period.  Organic growth in Asia Pacific has continued to be strong with notably good performances from China and Australasia although growth in Korea was flat in the period against a strong comparison in the prior year.  The good organic growth in the Americas has continued and was aided by a higher than anticipated devaluation of the Argentine peso in the period.  Growth in the Watson-Marlow Fluid Technology Group continues to be strong, in line with that seen in the first half of the year.


The integration of Gestra and Chromalox, which joined the Group last year, continues progressing well.  Their overall performance remains in line with our expectations and consistent with their performance in the first half of the year.  The effect of these acquisitions is anticipated to increase the Group's full-year sales by approximately 11%.


Consistent with the first half-year performance, 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.


Currency effects are more muted this year than in the previous two years, and consistent with what we reported at the half-year remain a headwind.  If spot rates at 31st October 2018 prevail for the remainder of the year, the negative impact of currency on sales and operating profit for the full year, compared with the full year 2017, would be slightly less than the 3% and 5% indicated at half-year.  Movements in exchange rates are often volatile and unpredictable, therefore the actual impact could be significantly different.


Financial position

Our business remains highly cash generative and we maintain a strong balance sheet.  At 31st October 2018 the net borrowings of the Group were £296 million.  The interim dividend for 2018 of 29.0p per share was paid on 9th November at a cash cost of £21 million. 



Industrial production growth rates are forecast to remain positive for the remainder of the year in both developed and emerging markets although predictions for 2019 are less clear, with forecasters indicating a slightly lower level of IP growth in 2019 than in 2018.   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 2018.


Spirax Sarco expects to publish its preliminary 2018 results on 7th March 2019.



Nicholas Anderson, Group Chief Executive

Kevin Boyd, Chief Financial Officer

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 exclude 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 7,400 people, of whom over 1,600 are direct sales and service engineers.  Its shares have been listed on the London Stock Exchange since 1959 (symbol: SPX).

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