Spirax-Sarco’s (SPX) plan to boost the effectiveness of its direct sales, broaden its global presence, better cater to customer needs, leverage its reseach and development investments and optimise supply chain efficiency continues to serve it well. The steam management system and pump supplier delivered a 7 per cent rise in organic revenues in the six months to June, led by strong performances in the US and Asia Pacific region. That increase was roughly double the reported rate of global industrial production growth in 2017.
Half-year figures were flattered slightly by a large depreciation of the Argentine currency in May. Prices in Argentina are US dollar-denominated, so the free-falling peso triggered a non-recurring profit of £2.6m. Nevertheless, even after excluding that particular benefit, organic profit grew by an impressive 12 per cent.
Strip out the one-off Argentine profit, adverse currency movements and the dilutionary effect of acquisitions, and Spirax's adjusted operating margin also widened, albeit slightly. Management reckons revenue investments will offset the positive operational gearing effect from higher sales again in the second half – and reiterated its previous guidance, despite anticipating a “slightly weaker” global industrial production growth rate in the second half.
S&P Capital IQ consensus forecasts are for adjusted EPS of 248p this year, rising to 262p in 2019.
| SPIRAX-SARCO ENGINEERING (SPX) | ||||
| ORD PRICE: | 6,805p | MARKET VALUE: | £5.01bn | |
| TOUCH: | 6,800-6,805p | 12-MONTH HIGH: | 6,970p | LOW: 5,370p |
| DIVIDEND YIELD: | 1.3% | PE RATIO: | 29 | |
| NET ASSET VALUE: | 875p* | NET DEBT: | 58% | |
| Half-year to 30 June | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 429 | 88.5 | 82.7 | 25.5 |
| 2018 | 548 | 106.8 | 105.1 | 29.0 |
| % change | +28 | +21 | +27 | +14 |
| Ex-div: | 11 Oct | |||
| Payment: | 9 Nov | |||
| *Includes intangible assets of £639m, or 869p a share | ||||
