Spirax-Sarco (SPX) posted better-than-expected revenue and a 30 per cent increase in adjusted operating profit in 2017. But strip out currency effects, the impact of acquisitions, together with accounting adjustments, and you’re left with a 6 per cent growth rate – slightly more prosaic, but a solid enough return.
The FTSE 250 engineer, which manufactures steam traps and pumps, expanded its product offering through deals to acquire Chromalox (industrial heating) and Gestra (valves and heat control), leading to a cash outflow through the period of £484m, although net debt stands at a manageable 1.4 times cash profits.
The latter acquisition significantly enhances access to the German market at a time when the national economy is barrelling ahead, while industrial production growth in the wider EMEA region came in at 3.3 per cent – its highest rate in several years. However, management anticipates “a slight softening” in the Steam Specialties (EMEA) market (31 per cent of 2017 group revenue), although any fall-away in the region may well be mitigated by strengthening US demand if the Trump administration’s infrastructure bills gain Congressional support. The group might also realistically expect an uptick in sales from oil equipment markets now that Brent crude prices have firmed.
JPMorgan Cazenove gives adjusted EPS of 229p for the December year-end, rising to 245p in 2019.
| SPIRAX-SARCO ENGINEERING (SPX) | ||||
| ORD PRICE: | 6,090p | MARKET VALUE: | £4.48bn | |
| TOUCH: | 6,090-6,095p | 12-MONTH HIGH: | 6,155p | LOW: 4,681p |
| DIVIDEND YIELD: | 1.4% | PE RATIO: | 28 | |
| NET ASSET VALUE: | 827p* | NET DEBT: | 61% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2013 | 689 | 146 | 133 | 59.0 |
| 2014 | 678 | 145 | 133 | 64.5 |
| 2015 | 667 | 140 | 130 | 69.0 |
| 2016 | 757 | 171 | 165 | 76.0 |
| 2017 | 999 | 193 | 214 | 87.5 |
| % change | +32 | +13 | +30 | +15 |
| Ex-div: | 26 Apr | |||
| Payment: | 25 May | |||
| *Includes intangible assets of £631m, or 858p a share | ||||
