Spirax-Sarco steams off to strong start

Spirax-Sarco Engineering said sales growth in the first four months of the year has been ahead of last year, helped by an improvement in general industrial production growth rates.

In a statement ahead of its annual general meeting, the FTSE 250 group said operating profit was ahead of the comparable four-month period in 2016 on an organic, constant currency basis.

If foreign exchange rates continue roughly as they are for the rest of the year Spirax expects to see a total uplift in sales and profits of 5% and 8% respectively versus last year.

All geographic segments of the steam specialties business were showing organic growth, with the Asia Pacific region "particularly good" but the US was flat.

Strong growth has been accentuated by the slow start seen in 2016 but management expect these to moderate by the half year, due to last year's strong second quarter.

Although the statement was as usual shorn of exact numbers, growth was said to be "strong" at the fluid technology business Watson-Marlow but, as expected, "not at the levels seen in 2016".

The engineer said it did not expect to see the same pattern as last year when a slow first quarter was followed by a stronger second.

Following the £160m acquisition of new steam specialities business Gestra earlier this month, Spirax said it "will continue to prioritise investments for growth over further margin expansion as the year progresses".

Gestra along with the acquisition of Aflex in late 2016 is expected to deliver high single-digit inorganic growth in the year.

There was net cash of £60m at 30 April.

On the outlook, the company said: "Increasing industrial production growth rates have, as expected, provided an improving operating environment in the first four months of the year, positively impacting the group's results.

"While, as normal, we continue to have limited visibility, with short order books, the group's fundamental strengths stand us in good stead to continue to deliver growth that outperforms our markets. Our overall expectations of organic growth for the full-year are unchanged and provided there is no material deterioration in trading conditions the board has confidence that the group will make further progress in 2017."