Spirax-Sarco warns of coronavirus impact on 2020 growth

Spirax-Sarco warned the impact of the coronavirus and negative currency movements would offset underlying growth in 2020 as the industrial engineering company reported a 7% increase in adjusted profit for 2019.

Adjusted operating profit for the year to the end of December rose to £282.7m from £264.9m as revenue rose 8% to £1.24bn. Pretax profit fell 18% to £236.8m due to a non-recurring gain from a disposal in 2018.

Spirax-Sarco increased its final dividend by 10% to 78p a share. The annual dividend rose 10% to 110p a share.

The FTSE 100 company said it expected the COVID-19 coronavirus to reduce annual sales and profit by 2% to 4%. Combined with negative currency movements the virus's effect is likely to offset underlying growth in 2020, the company said.

Spirax-Sarco said its estimates assumed that the impact on global industrial production would be less than that suffered by China and that the full impact would be contained in the first half with global production recovering in the second half. It said the outcome could be significantly different with the situation changing quickly.

"Against a very uncertain macroeconomic backdrop, we currently estimate that the combination of the twin headwinds of currency and COVID-19 will offset the underlying organic growth in the business," Spirax-Sarco said.

Spirax-Sarco said trading in China was significantly below expectations in February but that its factories there were returning to normal levels by the end of the month. China makes up almost 11% of group sales and about 75% of what the company sells in China is made at its two factories in the country.

Profit in 2019 was boosted by strong performances at the company's steam specialties business, which increased organic sales by 6%, and a 12% increase in sales at the Watson-Marlow fluid technology division.

Nicholas Anderson, chief executive, said: "Both the steam specialties and Watson-Marlow businesses benefited from the successful implementation of our strategy, achieving strong organic sales and profit growth … Political and economic uncertainty, as well as COVID-19, continue to dampen global industrial production growth forecasts, although we currently assume that conditions will begin to improve during the second half of the year."

The company also announced that Kevin Boyd, chief financial officer, would retire by the end of 2020. He joined as CFO in 2016.