Spirax-Sarco Engineering PLC Trading Statement (7534P)
22 November 2016 - 6:00PM
UK Regulatory
TIDMSPX
RNS Number : 7534P
Spirax-Sarco Engineering PLC
22 November 2016
News Release
Tuesday 22(nd) November 2016
TRADING UPDATE
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 31(st) October 2016.
Trading
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 GBP3.5 million.
Financial position
Our business remains highly cash generative and we maintain a
strong balance sheet, with a net cash balance of GBP81 million at
31(st) October 2016. The interim dividend for 2016 of 22.5p per
share was paid on 11(th) November at a cash cost of GBP16.5
million. There has been no material change in the financial
position of the Group during the period.
Outlook
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
9(th) March 2017.
Enquiries:
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)
Further information can be found at
www.spiraxsarcoengineering.com
This information is provided by RNS
The company news service from the London Stock Exchange
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