REG - Spirax-Sarco Engng - Trading Update

SpiraxAnnouncement

17/11/2021 07:05

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RNS Number : 5915S  Spirax-Sarco Engineering PLC  17 November 2021

 

News Release
 
Wednesday 17(th) November 2021
TRADING UPDATE

Continued strong growth, guidance unchanged

 

Thermal energy management and niche pumping specialist, Spirax‐Sarco
Engineering plc, issues the following trading update in respect of the four
months ended 31(st) October 2021.

 

Economic environment

In the third quarter, global Industrial Production (IP) recovered from
COVID-19 pandemic impacted levels in 2020, growing 4.9%.  However,
disruptions in the global supply chain leading to material shortages and
rising costs resulted in a slight quarter-on-quarter sequential contraction of
global IP.  Full-year forecasts for 2021 have been revised down to 7.4%,
compared to 8.6% forecasted at the time of our Half Year Results, while
full-year 2022 forecasts have also been reduced to 4.3% from 5.0%.

 

Trading

We continue to experience very strong demand across the Group, with order
books in all three businesses expanding in the four months to the end of
October above our expectations at the time of the Half Year Results.  Growth
in orders was highest in Watson-Marlow, driven by continued COVID-19 vaccine
related demand from its customers in the Pharmaceutical & Biotechnology
sector.  In Steam Specialties, demand growth was well ahead of IP growth and
orders received year-to-date are above the comparative period in 2019.
Demand for Electric Thermal Solutions has grown at an even faster rate than
Steam Specialties, after adjusting for the US Navy order secured in 2020, the
largest single order in our Group's history.

 

Although we have a diversified and resilient supply chain, we are not immune
to current disruptions being experienced globally and across all sectors.
While all three businesses were somewhat impacted by shipment delays, the
effects have been greater within Watson-Marlow and Electric Thermal
Solutions.  Within Electric Thermal Solutions we also experienced delays in
the delivery of operational performance improvements resulting in lower sales
growth than anticipated.  The adverse effect of rising material and freight
costs continues to be broadly offset by internal efficiencies and price
management practices.

 

Currency effects had an adverse impact on sales and operating profit, compared
to the same period of 2020, as sterling strengthened against our basket of
trade currencies.  If current exchange rates were to prevail for the
remainder of the year, we anticipate close to 4% adverse impact on full year
sales and profit, compared with the full year 2020.

 

Financial position

Our business remains highly cash generative and we maintain a strong balance
sheet.  Excluding leases, our net borrowings at 31(st) October 2021 were
£131 million, down from £193 million at 30(th) June 2021.  The interim
dividend of 38.5p per share was paid on 12(th) November 2021 with a cash
impact of £28 million.

 

 

Outlook

We are maintaining our overall guidance despite the supply chain challenges in
the second half of the year and expect record levels of revenue, profit and
operating margin for the full year 2021.

 

As anticipated, forecasted global IP growth for 2021 has continued to be
revised downward since our Half Year Results, partly reflecting the impact of
disruption to the global supply chain, with further risk of a slowing IP
growth rate in the fourth quarter and into next year.  Despite these
challenges, we expect to end the year with a record order book across all
three businesses.

 

For 2022, we expect growth in both sales and profit, underpinned by continuing
strong demand and our higher-than-normal order book.  The Group operating
margin is expected to be lower due to the full year impact of revenue
investments in 2021, as well as further investment planned in 2022 to support
our future growth and operating margins.

 

Spirax-Sarco Engineering plc expects to publish its preliminary 2021 results
on 10(th) March 2022.

 

Enquiries:

Nimesh Patel, Chief Financial Officer

Shaun Laubscher, Head of Investor Relations

Tel:  01242 535234

 

Note: Operating profit refers to adjusted operating profit and organic
performance measures are expressed at constant currency, excluding
contributions from acquisitions and disposals, as explained in Note 2 to the
Consolidated Financial Statements for the period ended 31(st) December 2020.

 

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 Fluid Technology Group 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 over 8,400 people, of whom
close to 2,000 are direct sales and service engineers.  Its 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)

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