In March, with global industrial demand wavering, we ventured that “groups such as Spirax-Sarco (SPX) have to work overtime for every extra dollar”. Well, the FTSE 250 engineering group has been doing just that. It has reported half-year operating profit of £101m, a 31 per cent year-on-year increase on the back of acquisitions, positive currency translations and the strength of its overseas operations. Organic, constant-currency growth was still good at 8 per cent, thanks to a 50 basis point increase in the operating margin to 23.6 per cent.
Sales growth was evident the steam specialties business, which booked a 9 per cent increase in organic operating profit, helped along by improved trading in Europe, the Middle East and Africa. Performance was relatively subdued at specialist pump manufacturer Watson-Marlow, although this is understandable as the business is moving through a capital intensive phase to promote future growth.
Indeed, growth is in train through the recent acquisitions of Chromalox (industrial heating) and Gestra (valves and heat control). But the balance sheet remains in good shape; net debt is expected to be 1.5 times cash profits (Ebitda) by December, and 1.0 times by the end of 2018. The defined pension deficit came down slightly to £91.1m, while free cash flow was up 31 per cent to £58.8m.
Investec forecasts adjusted profit of £211m and EPS of 204p for 2017, against £178m and 171p in 2016.
| SPIRAX-SARCO ENGINEERING (SPX) | ||||
| ORD PRICE: | 5,730p | MARKET VALUE: | £4.22bn | |
| TOUCH: | 5,725-5,735p | 12-MONTH HIGH: | 5,815p | LOW: 4,076p |
| DIVIDEND YIELD: | 1.4% | PE RATIO: | 32 | |
| NET ASSET VALUE: | 746p* | NET DEBT: | 21% | |
| Half-year to | Turnover | Pre-tax | Earnings per | Dividend |
| 30 Jun | (£m) | profit (£m) | share (p) | per share (p) |
| 2016 | 344 | 73.4 | 70.2 | 22.5 |
| 2017 | 429 | 88.5 | 82.7 | 25.5 |
| % change | +25 | +21 | +18 | +13 |
| Ex-div: | 12 Oct | |||
| Payment: | 10 Nov | |||
| *Includes intangible assets of £318m, or 432p a share | ||||
