Spirax-Sarco Engineering Hikes Payout Amid Strong 2017 Profit Growth

15th Mar 2018 09:21

LONDON (Alliance News) - FTSE 250-listed pump maker Spirax-Sarco Engineering PLC hiked its dividend Thursday after both profit and revenue grew strongly despite acquisition-related costs hitting earnings.

In 2017, pretax profit expanded 12% to GBP192.5 million from GBP171.4 million the year prior. Revenue rose 32% to GBP998.7 million from GBP757.4 million in 2016.

Profit performance was held back by a rise in exceptional costs in 2017. Exceptional costs rose to GBP36.6 million from GBP6.5 million the year prior. This was due to a mixture of acquisition-related costs and goodwill impairments.

On an adjusted basis, pretax profit rose 29% to GBP229.1 million from GBP177.9 million.

Spirax-Sarco proposed a 62.0 pence per share final dividend, up 16% from 53.5p the year before. For the full year, the dividend grew 15% to 87.5p from 76.0p the year before.

"I am very pleased with the results delivered in 2017, which again demonstrate the robustness of our strategy and strong direct sales business model," Spirax-Sarco Chief Executive Officer Nicholas Anderson said. "We achieved good organic growth and excluding currency and acquisition effects, maintained the organic margin.

"We are pleased to report that the two acquisitions that we made in the year have been successfully brought into the Spirax Sarco Group and are progressing to plan," Anderson added.

Spirax-Sarco acquired US-based heating and temperature management company Chromalox Inc for USD415 million in May. This followed, in April, its EUR186 million buy of Germany-based boiler control system firm Gestra AG.

"We increased investment in 2017 and, during 2018, we will again prioritise accelerating revenue and capital investments for growth over further margin expansion, to ensure that we continue delivering organic sales growth that outperforms our markets. Assuming no significant deterioration in trading conditions, the board expects to make further progress in 2018."

In 2018, Spirax-Sarco expects to face a currency headwind after two years of tailwinds. On an organic basis - excluding currency effects and acquisitions - revenue grew 6% as opposed to the reported 32%.

"Global industrial production growth rates, which are a good indicator of our market conditions, strengthened throughout the year resulting in growth of 3.4% in 2017 compared with 0.9% in 2016 and 0.3% in 2015," outgoing Spirax-Sarco Chairman Bill Whiteley said.

In February, Spirax-Sarco announced current Ibstock PLC Chairman Jamie Pike to replace Whiteley. The change will be effected in mid-May with Pike leaving Ibstock shortly after.

"Current indications for the industrial production growth rate in 2018 suggest that it will be at a similar level to that seen in 2017," Whiteley added. "We will remain focused on engineering opportunities for self-generated growth, through the rigorous implementation of our strategy. As we integrate and develop the recent acquisitions, we are also laying the foundations for their future organic growth."

Shares in Spirax-Sarco were 5.1% higher at 6,035.00 pence on Thursday.

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