Spirax-Sarco rides weak markets

The loss of the profitable but ‘non-core’ HygroMatik division, along with currency headwinds, was also responsible for its overall margin drop. Spirax’s core steam specialities business, which accounted for nearly two-thirds of its overall turnover, succeeded in growing its operating margin by 40 basis points to 23.6 per cent. However, investment in fluid technology business Watson-Marlow held back the group margin, while electric thermal solutions – a new combination of Spirax’s troubled Chromalox business and its May acquisition Thermocoax – also experienced margin weakness. Overall margins fell to 22.8 per cent from 23 per cent.

Chromalox returned to form after operational issues in its first half, delivering a second-half operating margin of 15.1 per cent, representing a small improvement on last year. Spirax is reviewing its French Chromalox operations, which will include a cut to headcount, and hopes to bring the European arm section of the business back to a break-even position by the end of next year. All of the harm to profits took place in the first half, and management is hopeful that its US presence will help Thermocoax penetrate this market faster.  

Analyst consensus estimates put adjusted EPS at 273p for 2020, rising to 290p the following year.