This article first appeared on GuruFocus .
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Group Sales Growth:5% increase, outperforming IP.
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Adjusted Operating Profit Growth:6% increase.
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Group Margin:20%, up 30 basis points.
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STS Sales Growth:1% overall, 3% excluding large projects in China and Korea.
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STS Margin:23.5%.
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ETS Sales Growth:11% increase.
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Watson-Marlow Sales Growth:6% increase.
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Watson-Marlow Margin:26.2%, up 160 basis points.
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Annualized Savings from Restructuring:GBP40 million.
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Cash Conversion:Improved to 89%.
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Leverage:Reduced to 1.5 times.
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Return on Capital Employed:36%.
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Return on Invested Capital:13%.
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Net Financing Costs:GBP38 million.
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Effective Tax Rate:27.3%.
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Adjusted EPS:296.3p per share, 3% increase.
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Full Year Dividend:17p per share, 3% increase.
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Net Debt:GBP564.7 million.
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Warning! GuruFocus has detected 10 Warning Signs with SPXSY.
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Release Date: March 10, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Spirax Group PLC ( SPXSY ) achieved a 5% organic sales growth and a 6% increase in adjusted operating profit, outperforming industrial production (IP).
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The company maintained a strong group margin of 20%, up 30 basis points, by focusing on pricing and cost discipline.
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The restructuring program completed in 2025 resulted in annualized savings of GBP40 million, which are being reinvested in future growth.
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Watson-Marlow division saw a 6% sales growth with margins up 160 basis points to 26.2%, driven by strong demand in Biopharm and Process Industries.
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Cash conversion improved to 89%, with leverage reducing to 1.5 times, reflecting strong cash discipline.
Negative Points
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Geopolitical tensions and tariff volatility negatively impacted large project demand in China and Korea, leading to weak demand in these regions.
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Currency movements had a negative impact of 3% on sales and 4% on operating profit, posing a challenge to financial performance.
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The macroeconomic environment remained weak and volatile, with global IP excluding China at only 1.7%, below historic averages.
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The effective tax rate increased to 27.3%, reflecting a higher profit mix and the absence of one-off benefits from the prior year.
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The restructuring program incurred a GBP40 million cost, with GBP22 million spent in 2025 and the remaining GBP11 million expected to be spent in 2026.
Q & A Highlights
Q: Can you help us understand the base margin for the ETS division now, excluding legacy contracts? Also, how long will the tailwinds to margins last? A: (Louisa Burdett, CFO) We are confident about the journey to a 20% margin, though it won't be linear over the next two years. There are several factors, including volume demand, legacy project orders, operational improvements, and Semicon demand, that contribute to this. We won't disclose specific numbers for legacy margins, but these are the key elements to consider.
Q: Regarding China and STS, are you still on track for the aftermarket MRO catching up to neutral territory by the end of this year? A: (Nimesh Patel, CEO) We are seeing a moderation of headwinds in large projects. Combined with strong growth in MRO, we expect to reach neutral territory in China either in the second half of 2026 or during 2027. However, recent events like changing tariffs or Middle East conflicts might impact this.
Q: On the GBP40 million investment in growth, how much additional growth do you expect over five years compared to not investing? How are you tracking this growth? A: (Nimesh Patel, CEO) We expect mid-single-digit growth, with last year at 4% and this year at 5% organic growth. These investments will drive higher growth rates. (Louisa Burdett, CFO) Each business has value propositions for these investments, and we track them through planning and reviews. Some digital infrastructure costs are held centrally and will be recharged as commercial benefits come through.
Q: For ETS, can you break out how much of the 11% organic growth in 2025 was due to better execution in North American facilities? What contribution can we expect in 2026? A: (Louisa Burdett, CFO) The North American footprint's throughput increased by 20% year-over-year, contributing significantly to growth. We expect more progress in 2026. (Nimesh Patel, CEO) Strong underlying demand growth across all ETS divisions, including Semicon and Heat Trace, supports this.
Q: For Steam, you're guiding to low single-digit organic growth. Is this volume or price-driven? A: (Nimesh Patel, CEO) We don't disclose the split, but typically our pricing is in line with or slightly ahead of inflation. The focus on solution selling and pricing for value means that volume versus price can be misleading.
Q: Regarding Watson-Marlow, is the business now well-capitalized, and do we return to strong operational gearing in 2026? A: (Louisa Burdett, CFO) We are on track to return to 30% margins in the medium term. High single-digit growth in Watson-Marlow will support this, with ongoing investments in North American facilities being critical for 2026.
Q: How do customers typically respond to extreme energy price volatility, and are you seeing any trends currently? A: (Nimesh Patel, CEO) Customers tend to seek energy efficiency solutions, which benefits us due to our direct sales force and digital solutions. We anticipate increased demand for our solutions during energy price spikes, although capital conservation may impact large projects.
Q: On capital allocation, how comfortable are you with the balance sheet being below the lower end of the leverage range? A: (Nimesh Patel, CEO) Historically, leverage was well below 1x. The 1x mark is a trigger for decisions like buybacks. (Louisa Burdett, CFO) We would consider buybacks if there wasn't an alternative use of capital, but we don't feel constrained by the balance sheet.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
