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Spirax-Sarco Engineering PLC
13 November 2019
News Release
Wednesday 13(th) November 2019
TRADING UPDATE
Expectations unchanged despite slowing Industrial Production
growth
Spirax-Sarco Engineering plc, the world leader in the control
and efficient use of steam, peristaltic pumping and associated
fluid path technologies, and a leading provider of electric thermal
solutions, issues the following trading update in respect of the
four month period ended 31(st) October 2019.
Economic environment
The global macro-economic environment remains subdued with the
latest forecast for Global Industrial Production (IP) growth for
2019 at 1.0%, down from 1.6% at the time of our Interim results
announcement. As in the first half of the year, IP growth for the
full year is expected to be weighted towards the emerging economies
where the increase is forecast to be 2.9%, compared with -0.3% in
the developed economies, with much of the differential coming from
China. This continues the downward trend that we have seen since
the first quarter of 2018 although, on a more positive note,
economic forecasters are suggesting that the fourth quarter of 2019
will be the bottom of the cycle with growth expected to improve to
1.7% in 2020.
Trading
As expected, the Group's organic* sales growth rate in the four
months to October reduced from that achieved in the first six
months of the year, but continued to outperform IP growth.
Sales growth in the Steam Specialties business has softened as
expected, in response to slowing IP growth rates, with the slowdown
being more pronounced in EMEA than in the Americas and Asia
Pacific.
Growth in the Watson-Marlow Fluid Technology Group continues to
be strong, above that seen in the first half of the year.
Chromalox saw marginal growth in the four months to October
against a very strong comparable period in 2018, and reduced
forecasts for industrial production in its core USA market. As
expected, we have seen indications of operational performance
improvement resulting from actions initiated in the first half of
this year.
The integration of Thermocoax, which joined the Group in May,
continues to progress well and its overall performance remains in
line with our expectations. The net effect of this acquisition
combined with the disposal of HygroMatik in December last year will
increase the Group's full-year sales by approximately 1.5%. At the
Full Year, Thermocoax's results will be reported within the newly
renamed Electric Thermal Solutions business, encompassing
Thermocoax and Chromalox, which will continue trading under their
respective names.
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 acquisition and disposal are included.
Currency effects continue to be muted this year, consistent with
what we reported at the Half Year. If spot rates at 31(st) October
2019 prevail for the remainder of the year, there would be a
negligible impact to both sales and profit from foreign exchange
movements. Movements in exchange rates are often volatile and
unpredictable, therefore the actual impact could be quite
different.
Financial position
Our business remains highly cash generative and we maintain a
strong balance sheet. At 31(st) October 2019, the net borrowings of
the Group were GBP315.4 million. The interim dividend for 2019 of
32.0p per share was paid on 8(th) November at a cash cost of
GBP23.6 million.
People
As previously announced, Jay Whalen, President Watson-Marlow
Fluid Technology Group (WMFTG) and Executive Director, will retire
from WMFTG and the Board on 31(st) December 2019 after more than 28
years of service. We would again like to thank him for his huge
contribution to the Group.
We are pleased to announce that Jay's successor, Andrew Mines,
joined the Group on 11(th) November and will take over as Managing
Director WMFTG from 1(st) January 2020 and become a member of the
Group Executive Committee. Andrew, based at the Group Headquarters
in Cheltenham, UK, joins us from Illinois Tool Works (ITW), where
his most recent role was Global Executive Vice President of
Construction Products, a Division with 1,700 employees, revenues of
$1.7 billion and a profit margin similar to the Spirax Sarco
Group.
We are also pleased to announce that Dominique Mallet,
previously Head of Thermocoax, was promoted to the role of
President of the Electric Thermal Solutions business and became a
member of the Group Executive Committee, effective 1(st) September
2019.
Outlook
Industrial production growth rates are forecast to continue to
slow for the remainder of the year in both developed and emerging
markets and while predictions for 2020 are less clear, forecasters
are indicating a modestly improving trend through the next year.
Comparisons with previous cycles would lead us to suspect that any
macro-economic recovery may be slower than predicted.
Notwithstanding the economic backdrop, we continue with our
investment programmes to support 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. Our overall
expectations for the Full Year are unchanged and the Board has
confidence that the Group will make further progress in 2019.
Spirax Sarco expects to publish its preliminary 2019 results on
11(th) March 2020.
Enquiries:
Nicholas Anderson, Group Chief Executive
Kevin Boyd, Chief Financial Officer
Tel: 01242 535234
Note: References to profit are to adjusted operating 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 Engineering plc
Spirax--Sarco Engineering plc is a thermal energy management and
niche pumping specialist. It comprises three world--leading
businesses: Steam Specialties, for the control and management of
steam; Electric Thermal Solutions, for advanced electrical process
heating and temperature management solutions; and Watson-Marlow,
for peristaltic pumping and associated fluid path technologies. The
Steam Specialties and Electric Thermal Solutions businesses provide
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. Both
businesses help their end users to improve production efficiency,
meet their environmental sustainability targets, improve product
quality and enhance the safety of their operations. Watson--Marlow
Fluid Technology Group provides solutions 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, UK, has strategically
located manufacturing plants around the world and employs over
8,000 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) and it is a constituent of the FTSE 100
Index.
Further information can be found at
www.spiraxsarcoengineering.com
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END
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