Spirax buys firms as profits rise

SPIRAX SARCO, which makes components for machines that use steam, lifted pre-tax profits by 3 per cent for the year ended 31 December.

The company also announced two acquisitions, one in Italy and one in Spain, costing a total of pounds 14.5m.

Taxable profits were pounds 23m, up from pounds 22.5m. Tight cash management reduced debt, and the lower interest charge could have boosted profits. However, Spirax took losses on the disposal of a business into the pre-tax figure - in line with the new FRS3 accounting standard.

Four-fifths of Spirax's profits are generated overseas. But the global nature of the business gives rise to a problem with advance corporation tax. The total tax charge was 40 per cent, compared with 35 per cent last time.

The exceptional cost of closing the business, coupled with the larger tax bill, produced lower earnings per share of 17.1p against 18p.

Spirax, however, asked investors to note a 'normalised' earnings figure that strips out the exceptional item. On that basis earnings for 1992 were a little higher at 18.8p. Shares rose 8p to 357p yesterday.

Chris Tappin, chairman, said the image of the company as a leftover of the steam age is unfair. Steam is still important in many sectors, including textiles and plastics. It is also finding new uses in biotechnical applications. However, it admitted that the developing world holds more promise of sales than the developed world.

The two acquisitions bring Spirax's former trading agent in Italy, Jucker, into the group, costing pounds 5m in cash plus the assumption of pounds 8m of debt. It has also paid pounds 1m for a 25 per cent stake in its Spanish licensee.