Trading Update

RNS Number : 9064F

Spirax-Sarco Engineering PLC

17 November 2015

 

 

 

News Release

 

Tuesday 17^th November 2015

TRADING UPDATE

Good performance in 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 31^st October 2015.  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.

Trading

Global industrial production continued to grow, although at very low levels in both developed and emerging economies.  There are signs that our markets in Europe, Middle East and Africa (EMEA) have stabilised, with industrial production growth modestly picking up in some markets.  In the Americas, industrial production growth has continued to slow in North America and remains firmly negative in Latin America.  In Asia Pacific, industrial production growth has slowed further due to China, with Korea remaining in an industrial recession. 

Organic* sales growth in the first ten months slowed modestly, as expected, from the growth achieved in the first half.  In EMEA, organic growth has continued at nearly the same pace as during the first half year, with the majority of companies showing progress.  As anticipated, there has been a small improvement overall in Asia Pacific in the second half, although sales remained below the prior year, moderating slightly the sales decline in the ten months to October compared with that in the first half year.  Sales in China have continued broadly flat and the level of our order books in Korea and China remain a little above this time last year.  In the Americas, overall organic sales growth in the ten months to October has slowed a little compared to the first half, largely due to the anticipated deterioration in Brazil.  We continue to make progress in implementing our strategy in the USA, with some improvement in underlying business levels, although organic sales remain below the prior year.  As anticipated at the half year stage, the exceptional rate of organic sales growth in Watson-Marlow Fluid Technology Group (WMFTG) has been much reduced in the second half due to comparison with a period of very strong growth in the second half of 2014.  The integration of Asepco, acquired in April 2015, has progressed as planned and the business is performing ahead of our expectations.  Overall, currency headwinds in the second half year have continued to strengthen, reducing Group sales on translation in the first ten months by over 3% versus full-year 2014 average exchange rates.  The Group's acquisitions and disposals in 2015 are anticipated to add a net 0.5% to sales for the full-year. 

Group operating profit was slightly ahead of the comparable ten-month period at constant currency, despite the impact of start-up costs in India.  The impact on profit of the lower sales growth in the second half of this year has been offset by the benefit of cost reduction actions we took in the first half year, cost savings and improved efficiency.  Unfavourable currency movements have negatively impacted reported Group operating profit by 4% versus full-year 2014 average exchange rates.

Financial position

Our business remains highly cash generative and we maintain a strong balance sheet, with a cash neutral position at 31^st October 2015, having received proceeds of £7 million from the disposal of M&M International in August 2015 and paid the special dividend of £91 million in July 2015; the linked share consolidation of 27 existing shares for 28 new shares reduces the number of shares in issue for the second half by 3.6%, benefitting earnings per share.  The interim dividend for 2015 of 20.8p per share was paid in November at a cash cost of £15 million.  There has been no material change in the financial position of the Group during the period.

Outlook

Industrial production growth has continued to slow through the year, especially in emerging markets in Latin America and Asia.  However, we have continued with the implementation of our strategy aimed at generating more growth from our own actions by being more effective in identifying and generating 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.  If recent exchange rates prevail to the end of 2015, sales for the year would be reduced on translation by 4% and operating profit reduced by 5%.  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 remain focused on our strategy for growth, which, together with our fundamental strengths stand the Group in good stead.  We still have much to do in the remainder of this year but our expectations for the full-year are unchanged and the Board has confidence that the Group will make further progress in 2015.

Spirax Sarco expects to publish its preliminary 2015 results on 3^rd March 2016.

Enquiries:

Nick Anderson, Chief Executive

David Meredith, Director Finance

Tel:  [phone]

Note:  References to profit are to adjusted profit that excludes USA meter manufacturing facility closure costs, 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 4,800 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 

 

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