The pound's post-referendum slump can sometimes mask the effective operating performance of those companies with substantial non-sterling-denominated sales. This is borne out by the solid organic growth and margin expansion that saw Spirax-Sarco Engineering (SPX) deliver a creditable 4 per cent rise in revenues before currency effects, acquisitions and disposals. The adjusted profit margin expanded by 80 basis points to a record 23.8 per cent "against a backdrop of very low global industrial production growth".
The mid-cap engineer, which markets products for the control and efficient use of steam and other industrial fluids, highlighted the efficacy of its 'direct sale business model' in the steam specialities and Watson-Marlow fluid technology businesses. Watson-Marlow delivered organic profit growth of 16 per cent, with the steam specialities business up 6 per cent, driven by the Europe, Middle East and Africa (EMEA) and Americas geographies.
With markets in downtrend, groups such as Spirax-Sarco have to work overtime for every extra dollar, so the emphasis is on the group's engineers "uncovering opportunities" to reduce costs and deliver environmental benefits for end users - upselling, for want of a better term. This proactive stance is helping to shore up performance despite the group's obvious exposure to cyclical trends.
Analysts at Numis upped their pre-tax profits forecast for Spirax-Sarco by 4 per cent to £198m, giving EPS of 193p (up from £178m and 172p in 2016).
| SPIRAX-SARCO ENGINEERING (SPX) | ||||
|---|---|---|---|---|
| ORD PRICE: | 4,592p | MARKET VALUE: | £3.38bn | |
| TOUCH: | 4,588-4,596p | 12-MONTH HIGH: | 4,745p | LOW: 3,250p |
| DIVIDEND YIELD: | 1.7% | PE RATIO: | 28 | |
| NET ASSET VALUE: | 711p* | NET CASH: | £27.4m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 662 | 124 | 112 | 53.0 |
| 2013 | 689 | 146 | 133 | 59.0 |
| 2014 | 678 | 145 | 133 | 64.5 |
| 2015 | 667 | 140 | 130 | 69.0 |
| 2016 | 757 | 171 | 165 | 76.0 |
| % change | +14 | +23 | +27 | +10 |
Ex-div: 27 Apr Payment: 26 May *Includes intangible assets of £170m, or 231p a share | ||||
