LONDON (ShareCast) - (Sharecast News) - Spirax-Sarco Engineering posted a jump in 2018 profit and revenue on Thursday thanks to strong organic growth and contributions from acquisitions.
Adjusted pre-tax profit rose 11% to £254.6m on revenue £1.15bn, up 15% on the year. On an organic basis, sales were up 7%, exceeding global industrial production growth of 3.3%.

Adjusted operating profit was up 12% to £264.9m and adjusted basic earnings per share increased 13% to 250p. The company lifted its dividend by 14% to 100p a share.

Spirax said its Watson-Marlow Fluid Technology business had another strong year, with organic sales up 9%. The Steam Specialties business also performed well, with organic sales up almost 7% and gains in all segments.

Gestra, which is reported within the Steam Specialties business, performed ahead of the group's expectations for sales growth, delivering a 10% increase in sales on a full year basis, while Chromalox, which is reported as a separate business, delivered year-on-year sales growth of 9%.

Chief executive Nicholas Anderson said: "We have seen strong organic sales growth across all three businesses, reflecting the benefits of the successful implementation of our strategies. The integration of the Gestra and Chromalox acquisitions progressed to schedule and their overall performance continues to be in line with our expectations."

The company sounded a cautious note on the outlook, noting a higher degree of uncertainty regarding industrial production growth rates in 2019, with the latest indications suggesting that global growth will be lower than seen in 2018, at around 2.6%.

Given the anticipated slowdown, Spirax expects organic sales growth for the group to moderate.

"We anticipate that the group adjusted operating profit margin in 2019 will be at a similar level to 2018 despite the absence of the higher margin HygroMatik and the devaluation-driven profit boost from Argentina," it said.

"Assuming no significant deterioration in trading conditions, the board expects to make further progress in 2019."

At 0945 GMT, the shares were down 1.5% to 6,750p.

Peel Hunt said adjusted pre-tax profit was ahead of its estimate of £246.2m but bang in lie with consensus forecasts. In addition, it said organic underlying revenue growth of 7% was "a very strong result for the year", especially as it was higher than the 6.4% seen in 2017, despite global industrial production growth being lower.

The broker reiterated its 'add' rating on the stock.

"SPX has been one of the most consistent deliverers of shareholder returns over the last 20 years and that is reflected in the rating, which we believe is entirely justified. Prior to any upgrades, the shares are trading on a PER of 27x FY19 and dividend yield of 1.6%."

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