REG - Spirax-Sarco Engng - AGM Trading Update

SpiraxAnnouncement

11/05/2022 07:00

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RNS Number : 0125L  Spirax-Sarco Engineering PLC  11 May 2022

 

News Release
 
Wednesday 11(th) May 2022

AGM TRADING UPDATE

 

Strong start to the year despite headwinds; full year guidance maintained

 

 

Thermal energy and niche pumping specialist, Spirax-Sarco Engineering plc,
issues the following trading update in respect of the four months ended 30(th)
April 2022.

 

Economic Environment

Following strong global Industrial Production growth 1  (#_ftn1) (IP) in 2021,
supported by ongoing recovery from the COVID-19 pandemic, IP for the first
quarter of 2022 is forecasted to be 3.2% compared with the same period of
2021, while the full year IP forecast was lowered to 3.9%.  The conflict in
Ukraine, as well as the COVID-19 related shutdowns in China, had a limited
effect on IP in Q1 2022 with the impact likely to be more evident through the
rest of the year.

 

Trading

Organic sales growth in the four months to the end of April was in line with
our expectations, supported by all three Businesses expanding manufacturing
capacity and mitigating supply chain constraints.  Order books in all three
Businesses remain at all-time highs as demand continued to exceed sales.

 

In line with our expectations, Watson-Marlow's sales to the Pharmaceutical
& Biotechnology sector grew over 20%, with the remaining Group organic
revenue streams growing significantly above IP.

 

The first four months of the year were characterised by a challenging and
uncertain external operating environment.  Global supply chain disruptions
continue regarding both the availability and cost of raw materials and
components.  We remain focused on maintaining supply whilst successfully
addressing inflationary pressures through active price management.

 

Our Steam Specialties manufacturing facility in Shanghai has been subject to
local lockdown restrictions since 28(th) March and is currently running at
reduced capacity, impacting our sales within China, but with limited impact
beyond China.  If the current lockdown eases in the near-term and absent
further lockdowns, we expect sales in China to recover through the balance of
the year.

 

On 31(st) January, we completed the acquisition of Cotopaxi to accelerate
delivery of our Digital Strategy.  We expect Cotopaxi to deliver sales in
2022 close to the pre-pandemic level of £5 million, with no material
operating profit contribution as our increased revenue investments in digital
capabilities will more than offset Cotopaxi's operating profit.

 

Consistent with the strong sales performance, we continued accelerating
revenue investments in support of future organic growth.  As anticipated, the
effect of the new revenue investments combined with the full year impact of
the 2021 revenue investments, resulted in a lower Group operating profit
margin in the first four months of the year than for the full year 2021.

 

Currency did not have a meaningful impact on sales and operating profit,
compared to the same period of 2021. We now anticipate a small tailwind effect
for the full year of over 2% on both sales and profit.

 

Financial Position

Our balance sheet remains strong as a result of our continued strong financial
performance and cash generation. Excluding leases, our net borrowings on
30(th) April 2022 were £141 million, up from £131 million on 31(st) December
2021. The final dividend of 97.5 pence per share, a 15% increase over prior
year, will be paid on 20(th) May subject to shareholder approval, with a cash
impact of £72 million.

 

Outlook

Since the announcement of our full year results, the global macro-economic
outlook has weakened reflecting the combined impacts of ongoing global supply
chain constraints, geo-political uncertainty, COVID-19 related restrictions in
Asia, rising inflation and increasing interest rates.  As anticipated, the
latest global IP growth forecast was lowered to 3.9% from 4.2% at the time of
our full year results in March.

 

Based on our current expectations of trading conditions in the balance of the
year, our very strong order books and the resilience of our performance
through economic cycles, we are maintaining our full year guidance for the
Group.  We continue to anticipate around 20% growth for Watson-Marlow's sales
to the Pharmaceutical & Biotechnology sector, as well as organic sales
growth well above IP for the remainder of the Group's organic revenues.

 

Spirax-Sarco Engineering plc expects to publish its 2022 half year results on
11(th) August 2022.

 

Enquiries:

Nimesh Patel, Chief Financial Officer

Andrew Guthrie, Head of Investor Relations

Tel: 01242 535234

 

 

About Spirax‐Sarco Engineering plc

Spirax‐Sarco Engineering plc is a thermal energy management and niche
pumping specialist.  It comprises three world‐leading Businesses: Steam
Specialties, for the control and management of steam; Electric Thermal
Solutions, for advanced electrical process heating and temperature management
solutions; and Watson-Marlow, for peristaltic pumping and associated fluid
path technologies. The Steam Specialties and Electric Thermal Solutions
Businesses provide a broad range of fluid control and electrical process
heating products, engineered packages, site services and systems expertise for
a diverse range of industrial and institutional customers.  Both Businesses
help their end users to improve production efficiency, meet their
environmental sustainability targets, improve product quality and enhance the
safety of their operations.  Watson‐Marlow provides solutions for a wide
variety of demanding fluid path applications with highly accurate,
controllable and virtually maintenance-free pumps and associated technologies.

 

The Group is headquartered in Cheltenham, UK, has strategically located
manufacturing plants around the world and employs more than 8,700 people,
including almost 2,000 direct sales and service engineers.  The Company's
shares have been listed on the London Stock Exchange since 1959 (symbol: SPX)
and it is a constituent of the FTSE 100 and the FTSE4Good indices.

 

Further information can be found at www.spiraxsarcoengineering.com
(http://www.spiraxsarcoengineering.com)

RNS filter: Inside information prior to release

LEI 213800WFVZQMHOZP2W17

 1  (#_ftnref1) Source for Industrial Production data: Oxford Economics,
27(th) April 2022

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